10 Reasons the Vanderbilts Lost the World's Greatest Fortune
10 Reasons the Vanderbilts Lost the World’s Greatest Fortune

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune

Larry Holzwarth - August 3, 2018

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune
Socialite Grace Wilson Vanderbilt spent Vanderbilt money with enthusiasm and aplomb. Wikimedia

Cornelius Vanderbilt III

The son of Cornelius Vanderbilt II, Neily, as he was called by friends and family, earned the ire of his parents by eloping with Grace Wilson, a New York socialite whose two sisters had married into London society. Neily’s mother made clear that she regarded Grace as a social climber of no account, and his father cut Neily’s inheritance to just $1.5 million. Neily’s brother later gave him another $6 million, which came in handy, because Grace’s spending was profligate.

Grace and Neily remained married until his death, and Grace created a niche for herself in New York and Newport society, throwing lavish dinner parties in the mansion at 640 Fifth Avenue which Neily had also inherited. Grace promptly had the entire interior gutted and rebuilt, at a cost of $500,000, which Neily could ill afford. Though they had two children together, a son named Cornelius Vanderbilt IV, and a daughter named Grace Vanderbilt the following year, they paid them little attention.

Neily’s time was taken up by yachting and later military service in World War One; Grace’s time by entertaining and socializing, draining the millions bestowed upon them. By 1908 she had assumed the role of the Queen of New York society, based upon the spending of Vanderbilt money. She hosted two types of dinner parties, large gatherings of over 100 people, and smaller, intimate dinners of fifty or so guests, an invitation to which was a mark of social success.

Eventually, Neily’s mother grew to grudgingly accept her daughter-in-law to the point where she began to provide some financial assistance, largely to prevent the Vanderbilt name the shame of indebtedness. The gesture only encouraged Grace to spend yet more, demanding her husband purchase for her a steam yacht. Neily did so, after which he entered the army, mostly to escape his wife and family. He also began drinking heavily. He eventually became a general.

Neily disowned his son when he learned that the young man wanted to enter into a journalism career. He retreated to his other yacht, which was paid for by his mother, and avoided both his wife and the spotlight. In 1940 he sold the New York mansion, with the proviso that he and his wife be allowed to remain in residence until his death. Neily left behind the proceeds from the sale of the mansion following his death, about $4 million.

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune
New York’s Grand Central Station in 1893, when the railroads were at their peak. British Library

The Family’s Declining Business Fortunes

As the various Vanderbilts went about their business, spending the vast fortune accumulated by the Commodore and his eldest son, few of them paid close attention to the sources of that fortune. The New York Central began to decline in value in the 1920s, and the transportation business changed from one of all rail across country to automobiles, buses, and beginning in the 1930s, commercial aviation. Trucks began to cut into freight rates.

The sheer number of Vanderbilts who financed their spending through the existing fortune rather than through earning violated a cardinal rule of maintaining wealth. The practice of spending the interest and dividends earned from investments, rather than the capital itself, is a well-established premise that the family simply ignored, treating their shares of the fortune as if it were a bottomless well until the well inevitably ran dry.

The New York Central stock began to drop, and as it did it took the Vanderbilt fortune down with it, eventually, they lost control of the company to the Chesapeake and Ohio Railroad. The decline in Vanderbilt income coincided with the sales of many of the properties, including Vanderbilt Row, the strip along New York’s Fifth Avenue which once held the Manhattan mansions of several members of the clan.

Like his brother Neily, Reginald Claypoole Vanderbilt contributed nothing to the family coffers. At 21 Reginald came into his inheritance, that same night losing more than $70,000 dollars gambling. A devoted drinker, Reginald lived the life of a rake. He married and had a daughter, abandoned wife and child, remarried after he was divorced, had another daughter, and spent his days’ gambling, drinking, and spending his fortune.

When he died he left behind nothing besides the trust fund established for his daughters during the divorce proceedings. Neily and Reginald were the first of the Vanderbilts to squander their entire inheritance, though in fairness Neily had quite a bit of help spending the money from his wife Grace. The Vanderbilt name by the 1920s still carried the cachet of wealth, but the real wealth was being rapidly depleted.

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune
Alfred Gwynne Vanderbilt died in the sinking of RMS Lusitania in 1915. Wikimedia

Alfred Gwynne Vanderbilt

Alfred was the eldest son of Cornelius Vanderbilt II, and at the death of his father, he received the bulk of the estate, with his brothers Neily and Reginald receiving substantially smaller amounts. Cornelius believed his son to be much better prepared to handle the fortune, and was persuaded to give less to Neily by his wife, who believed that Grace Wilson had married Neily to get her hands on Vanderbilt money. Another brother, William, had died years earlier.

Alfred was educated at Yale and was on a world tour when he learned of his father’s death while in Japan. In his new status as head of his branch of the extended Vanderbilt family, Alfred began working at the New York Central, then the main source of the family’s income. He began, despite his social and financial status, as a clerk in order to learn all aspects of the business. It was Alfred who built the Vanderbilt Hotel at the corner of 34th and Park Avenue, where he chose to reside when in the city.

Alfred married Ellen French in 1901, only to be sued by her for divorce in 1908, under allegations of adultery on his part. Following the divorce, Alfred sought solace in London, and remarried there in 1911, to the heiress of the Bromo-Seltzer fortune, Margaret Emerson. In England, Vanderbilt enjoyed coaching (racing coaches of the old English style) and fox hunting. In 1915, again living in America, he left for a journey to England to purchase fox hounds, embarking on RMS Lusitania.

Alfred perished when Lusitania was torpedoed and sunk by a German U-boat on May Day, 1915. A myth that he was one of the scheduled passengers on Titanic three years earlier was disproven, it was George Washington Vanderbilt who was scheduled to make that fateful voyage before canceling his plans. Alfred’s death was reported by many who observed him assisting a young mother by giving her his own life jacket. His body was never found.

Alfred’s death transferred a large part of his fortune to his brothers Neily (whom he had assisted with funds earlier) and Raymond, which allowed them to squander it. The size of his estate was $15.5 million, and he left bequests for his wife Margaret and their children. She used part of the money to purchase a 47 room mansion in Massachusetts situated on 316 acres. Alfred didn’t squander the Vanderbilt fortune, but his early death allowed others of his family to do so.

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune
A view of Woodlea in 1905. Today the site is a country club. Wikimedia

Woodlea

In 1892 Elliott Fitch Shepard began construction of a 140 room mansion near what was then North Tarrytown (today’s Sleepy Hollow) New York. Shepard was the husband of Margaret Louisa Vanderbilt Shepard, sister of Cornelius Vanderbilt II and granddaughter of the Commodore. The house was constructed on a tract of over 500 acres of land, acquired by Shepard, a banker, publisher, attorney, and judge. Their New York home was part of the Vanderbilt row of mansions on Fifth Avenue.

The house was designed to include 70,000 square feet of living space, with an exterior in the Italian Renaissance style. Shepard envisioned the house as a means of expressing influence and political power, supporting his political ambitions, and though he was a man of considerable affluence, Margaret’s money too was poured into the construction. In March 1893, while Woodlea was still under construction, Shepard died suddenly.

Shepard’s estate was about $1.3 million, well below the costs of completing Woodlea, which fell to Margaret. While Woodlea was being built Margaret lived in another house on the property which had been completed several years earlier. The main house was completed in 1895-96. During the remaining construction period, Margaret lived at the property mostly during the spring and early summer months. Her visits to the property became less and less frequent.

In 1906 Margaret sold Woodlea to a New York businessman for the sum of $1.4 million, despite the property being valued at nearly $6 million. Margaret took up residence in her New York home, in the 900 block of Fifth Avenue, where she died in 1924, having never remarried. Her estate was just over $5 million, less than half of the fortune she had inherited from the Vanderbilt wealth from her father, William Vanderbilt.

Woodlea and the surrounding grounds were eventually taken over by a consortium who created the Sleepy Hollow Country Club. Among its founders was Cornelius Vanderbilt III. Another founder was John Jacob Astor IV, who did board the RMS Titanic in 1912 and died in the ship’s sinking. The country club retained much of the gardens and the house served as its clubhouse and event center. Much of its décor remains faithful to that selected by Margaret and her husband in the late 1890s.

10 Reasons the Vanderbilts Lost the World’s Greatest Fortune
Fifth Avenue home of Cornelius Vanderbilt II, circa 1893. Cornell University Library

The Vanderbilt legacy

The huge fortune built by Cornelius Vanderbilt and his son William did not survive the ministrations of their subsequent heirs. The temptations of living luxuriously and the rivalries between siblings, cousins, and their spouses led the family to outspend its income consistently over many years. The massive mansions which dominated Fifth Avenue, each more lavish than its predecessor, simply required too much money to maintain.

By the mid-1920s most of the mansions in Manhattan were gone, by the 1950s all were, at least as residences. One-half of the Marble Twins, built by George Washington Vanderbilt at 645 and 647 Fifth Avenue remains. It is a designated landmark and the site of the flagship store for Versace in New York. Several of the buildings were converted to other uses before demolition to make space for New York’s expansion upwards in the 1920s and 1930s.

The great country estates such as the Biltmore and Woodlea were converted to other uses, a museum and tourist attraction in the case of the former and a country club in the latter. The costs of maintaining such lavish structures and supporting the staff required to operate and maintain them were simply too prohibitive to allow them to remain private residences. The same is true of the so-called summer cottages in Newport, Bar Harbor, and the Berkshires.

While changes in tax laws, creating estate taxes and the income tax itself certainly had a part in the demise of the Vanderbilt fortune, the wealth of other great families survived. Philanthropy had a hand too, the Vanderbilts of different generations endowed Vanderbilt University, the YMCA, the arts, the sciences, medicine, and other charitable causes. But that does not explain the near extinction of Vanderbilt wealth.

The Vanderbilt fortune largely vanished because the Vanderbilt heirs spent it, on houses and estates, yachts and racing boats, limousines and luxury cars, antiques, art, clothes, parties, huge dinners, other entertainments, extensive travel, luxury cruises, and all of the trappings of the wealthy during the Gilded Age and beyond. It took four generations of Vanderbilts to erase what the Commodore created in one, but they managed.

 

Where do we find this stuff? Here are our sources:

“Fortune’s Children: The Fall of the House of Vanderbilt”, by Arthur T. Vanderbilt, 1989

“The Vanderbilt Women: Dynasty of Wealth, Glamour, and Tragedy”, by Clarice Stasz, 2000

“The Vanderbilts”, by Jerry E. Patterson, 1989

“Biltmore Estate”, by Ellen Erwin Rickman, 2005

“Queen of Golden Age: The Fabulous Story of Grace Wilson Vanderbilt”, by Cornelius Vanderbilt, 1956

“Alva Vanderbilt: All Gilt, No Guilt”, by SHEILA GIBSON STOODLEY, Boston Common, April 25, 2011

“The Vanderbilts: How American Royalty Lost Their Crown Jewels”, by Natalie Robehmed, Forbes Magazine, June 14, 2014

“Torpedoed! The Sinking of the Lusitania”, by Diane Preston, Smithsonian Magazine, May 2002

“The Nineteenth Hole: Architecture of the Golf Clubhouse”, by Richard Diedrich, 2008

“Commodore Vanderbilt and his family: a biographical account of the Descendants of Cornelius and Sophia Johnson Vanderbilt”, by Dorothy Kelly McDowell, 1989

“Are the Vanderbilt Heirs Being Forced Out of the Breakers?”, by SAM DANGREMOND, Town & Country, JAN 18, 2018

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