FURTHER ASPECTS OF THE VANDERBILT FORTUNE
The juggling of railroads and the virtual seizure of coal mines were
by no means the only accomplishments of the Vanderbilt family in the
years under consideration. Colorless as was the third generation,
undistinguished by any marked characteristic, extremely commonplace
in its conventions, it yet proved itself a worthy successor of
Commodore Vanderbilt. The lessons he had taught of how to appropriate
wealth were duly followed by his descendants, and all of the
ancestral methods were closely adhered to by the third generation.
Whatever might be its pretensions to a certain integrity and to a
profound respectability, there was really no difference between its
methods and those of the Commodore. Times had changed; that was all.
What had once been regarded as outright theft and piracy were now
cloaked under high-sounding phrases as "corporate extension" and
"high finance" and other catchwords calculated to lull public
suspicion and resentment. A refinement of phraseology had set in; and
it served its purpose.
Concomitantly, while executing the transactions already described,
the Vanderbilts of the third generation put through many others, both
large and small, which were converted into further heaps of wealth.
An enumeration of all of these diverse frauds would necessitate a
tiresome presentation. A few examples will suffice.
The small frauds were but lesser in relation to the larger. At this
period of the economic development of the country, when immense
thefts were being consummated, a fraud had to rise to the dignity of
at least fifty million dollars to be regarded a large one. The law,
it is true, proscribed any theft involving more than $25 as grand
larceny, but it was law applying to the poor only, and operative on
them exclusively. The inordinately rich were beyond all law, seeing
that they could either manufacture it, or its interpretation, at
will. Among the conspicuous, audacious capitalists the fraud of a few
paltry millions shrank to the modesty of a small, cursory, off-hand
operation. Yet, in the aggregate, these petty frauds constituted
great results, and for that reason were valued accordingly.
AN $8,000,000 AREA CONFISCATED.
Such a slight fraud was, for instance, the Vanderbilts' confiscation
of an entire section of New York City. In 1887 they decided that they
had urgent and particular need for railroad yard purposes of a sweep
of streets from Sixtieth street to Seventy-second street along the
Hudson River Railroad division. What if this property had been
bought, laid out and graded by the city at considerable expense? The
Vanderbilts resolved to have it and get it for nothing. Under special
forms of law dictated by them they thereupon took it. The method was
absurdly easy.
Ever compliant to their interests, and composed as usual of men
retained by them or responsive to their influences, the Legislature
of 1887 passed an act compelling the city authorities to close up the
required area of streets. Then the city officials, fully as
accommodating, turned the property over to the exclusive, and
practically perpetual, use of the New York Central and Hudson River
Railroad. With the profusest expressions of regard for the public
interests, the railroad officials did not in the slightest demur at
signing an agreement with the municipal authorities. In this paper
they pledged themselves to cooperate with the city in conferring upon
the Board of Street Openings the right to reopen any of the streets
at any time. This agreement was but a decoy for immediate popular
effect. No such reopening ordinance was ever passed; the streets
remained closed to the public which, theoretically at least, was left
with the title. In fact, the memorandum of the agreement strangely
disappeared from the Corporation Counsel's office, and did not turn
up until twenty years later, when it was accidentally and most
mysteriously discovered in the Lenox Library. Whence came it to this
curious repository? The query remains unanswered.
For seventeen and a half acres of this confiscated land, comprising
about three hundred and fifty city lots, now valued at a round
$8,000,000, the New York Central and Hudson River Railroad has not
paid a cent in rental or taxes since the act of 1887 was passed. On
the island of Manhattan alone 70,000 poor families are every year
evicted for inability to pay rent--a continuous and horribly tragic
event well worth comparing with the preposterous facility with which
the great possessing classes everywhere either buy or defy law, and
confiscate when it suits them. So cunningly drafted was the act of
1887 that while New York City was obliged to give the exclusive use
of this large stretch of property to the company, yet the title to
the property--the empty name--remained vested in the city. This being
so, a corporation counsel complaisantly decided that the railroad
company could not be taxed so long as the city owned the title.
[Footnote: Minutes of the New York City Board of Estimate and
Apportionment--Financial and Franchise Matters, 1907:1071-1085. "It
will thus be seen," reported Harry P. Nichols, Engineer-in-Charge of
the Franchise Bureau, "that the railroad is at present, and has been
for twenty years, occupying more than three hundred city lots, or
something less than twenty acres, without compensation to the city."]
Another of what may be called--for purposes of distinction--the
numerous small frauds at this time, was that foisting upon New York
City the cost of replacing the New York Central's masonry viaduct
approaches with a fine steel elevated system. This fraud cost the
public treasury about $1,200,000, quite a sizable sum, it will be
admitted, but one nevertheless of pitiful proportions in comparison
with previous and later transactions of the Vanderbilt family.
We have seen how, in 1872, Commodore Vanderbilt put through the
Legislature an act forcing New York City to pay $4,000,000 for
improving the railroad's roadway on Park avenue. His grandsons now
repeated his method. In 1892 the United States Government was engaged
in dredging a ship canal through the Harlem River. The Secretary of
War, having jurisdiction of all navigable waters, issued a mandate to
the New York Central to raise its bridge to a given height, so as to
permit the passing under of large vessels.
To comply with this order it was necessary to raise the track
structure both north and south of the Harlem River. Had an ordinary
citizen, upon receiving an order from the authorities to make
improvements or alterations in his property, attempted to compel the
city to pay all or any part of the cost, he would have been laughed
at or summarily dealt with. The Vanderbilts were not ordinary
property holders. Having the power to order legislatures to do their
bidding, they now proceeded to imitate their grandfather, and compel
the city to pay the greater portion of the cost of supplying them
with a splendid steel elevated structure.
PUBLIC TAXATION TO SUPPLY PRIVATE CAPITAL.
The Legislature of 1892 was thoroughly responsive. This was a
Legislature which was not merely corrupt, but brazenly and frankly
so, as was proved by the scandalous openness with which various
spoliative measures were rushed through.
An act was passed compelling New York City to pay one-half of the
cost of the projected elevated approaches up to the sum of
$1,600,000. New York City was thus forced to pay $800,000 for
constructing that portion south of the Harlem River. If, so the law
read on, the cost exceeded the estimate of $800,000, then the New
York Central was to pay the difference. Additional provision was made
for the compelling of New York City to pay for the building of the
section north of the Harlem River. But who did the work of
contracting and building, and who determined what the cost was? The
railroad company itself. It charged what it pleased for material and
work, and had complete control of the disbursing of the
appropriations. The city's supervising commissions had, perforce, to
accept its arbitrary demands, and lacked all power to question, or
even scrutinize, its reports of expenditures. Apart from the New York
Central's officials, no one to-day knows what the actual cost has
been, except as stated by the company.
South of the Harlem River this report cost has been $800,000, north
of the Harlem River $400,000. At practically no expense to
themselves, the Vanderbilts obtained a massive four-track elevated
structure, running for miles over the city streets. The people of the
city of New York were forced to bear a compulsory taxation of
$1,200,000 without getting the slightest equivalent for it. The
Vanderbilts own these elevated approaches absolutely; not a cent's
worth of claim or title have the people in them. Together with the
$4,000,000 of public money extorted by Commodore Vanderbilt in 1872,
this sum of $1,200,000 makes a total amount of $5,200,000 plucked
from the public treasury under form of law to make improvements in
which the people who have footed the bill have not a moiety of
ownership. [Footnote: The facts as to the expenses incurred under the
act of 1892 were stated to the author by Ernest Harvier, a member of
the Change of Grade Commission representing New York City in
supervising the work.] The Vanderbilts have capitalized these
terminal approaches as though they had been built with private money.
[Footnote: The New York Central has long compelled the New York, New
Haven and Hartford Railroad to pay seven cents toll for every
passenger transported south of Woodlawn, and also one-third of the
maintenance cost, including interest, of the terminal. In reporting
an effort of the New York, New Haven and Hartford Railroad to have
these terms modified, the New York "Times" stated in its financial
columns, issue of December 25, 1908: "As matters now stand the New
Haven, without its consent, is forced to bear one-third of the charge
arising from _the increased capital invested in the Central's
terminal"_]
[Illustration: CORNELIUS VANDERBILT Grandson of Commodore
Vanderbilt.]
At this point a significant note may be made in passing. While these
and other huge frauds were going on, Cornelius Vanderbilt was
conspicuously presenting himself as a most ardent "reformer" in
politics. He was, for instance, a distinguished member of the
Committee of Seventy, organized in 1894, to combat and overthrow
Tammany corruption! Such, as we have repeatedly observed, is the
quality of the men who compose the bourgeois reform movements. For
the most part great rogues, they win applause and respectability by
virtuously denouncing petty, vulgar political corruption which they
themselves often instigate, and thus they divert attention from their
own extensive rascality.
A MULTITUDE OF ACQUISITIONS
Why tempt exhaustion by lingering upon a multitude of other frauds
which went to increase the wealth and possessions of the Vanderbilt
family? One after another--often several simultaneously--they were
put through, sometimes surreptitiously, again with overt effrontery.
Legislative measures in New York and many other States were drafted
with such skill that sly provisions allowing the greatest frauds were
concealed in the enactments; and the first knowledge that the
plundered public frequently had of them was after they had already
been accomplished. These frauds comprised corrupt laws that gave, in
circumstances of notorious scandal, tracts of land in the Adirondack
Mountains to railroad companies now included in the Vanderbilt
system. They embraced laws, and still more laws, exempting this or
that stock or property from taxation, and laws making presents of
valuable franchises and allowing further consolidations. Laws were
enacted in New York State the effects of which were to destroy the
Erie Canal (which has cost the people of New York State $100,000,000)
as a competitor of the New York Central Railroad. All of these and
many other measures will be skimmed over by a simple reference, and
attention focussed on a particularly large and notable transaction by
which William K. Vanderbilt in 1898 added about $59,000,000 to his
fortune at one superb swoop.
The Vanderbilt ownership of various railroad systems has been of an
intricate, roundabout nature. A group of railroads, the majority of
the stock of which was actually owned by the Vanderbilt family, were
nominally put under the ownership of different, and apparently
distinct, railroad companies. This devious arrangement was intended
to conceal the real ownership, and to have a plausible claim in
counteracting the charge that many railroads were concentrated in one
ownership, and were combined in monopoly in restraint of trade. The
plan ran thus: The Vanderbilts owned the New York Central and Hudson
River Railroad. In turn this railroad, as a corporation, owned the
greater part of the $50,000,000 stock of the Lake Shore Railroad. The
Lake Shore, in turn, owned the control, or a chief share of the
control, of other railroads, and thus on.
In 1897, William K. Vanderbilt began clandestinely campaigning to
combine the New York Central and the Lake Shore under one definite,
centralized management. This plan was one in strict harmony with the
trend of the times, and it had the undoubted advantage of promising
to save large sums in managing expenses. But this anticipated
retrenchment was not the main incentive. A dazzling opportunity was
presented of checking in an immense amount in loot. The grandson
again followed his eminent grandfather's teachings; his plan was
nothing more than a repetition of what the old Commodore had done in
his consolidations.
During the summer and fall of 1897 the market gymnastics of Lake
Shore stock were cleverly manipulated. By the declaration of a seven
per cent. dividend the market price of the stock was run up from 115
to about 200. The object of this manipulation was to have a
justification for issuing $100,000,000 in three and one-half per
cent. New York Central bonds to buy $50,000,000 of Lake Shore seven
per cent. capital stock. By his personal manipulation, William K.
Vanderbilt at the same time ballooned the price of New York Central
stock.
The purpose was kept a secret until shortly before the plan was
consummated on February 4, 1898. On that day William K. Vanderbilt
and his subservient directors of the New York Central gathered their
corpulent and corporate persons about one table and voted to buy the
Lake Shore stock. With due formalities they then adjourned, and
moving over to another table, declared themselves in meeting as
directors of the Lake Shore Railroad, and solemnly voted to accept
the offer.
Presently, however, an awkward and slightly annoying defect was
discovered. It turned out that the Stock Corporation law of New York
State specifically prohibited the bonded indebtedness of any
corporation being more than the value of the capital stock. This
discovery was not disconcerting; the obstacle could be easily
overcome with some well-distributed generosity. A bill was quickly
drawn up to remedy the situation, and hurried to the Legislature then
in session at Albany. The Assembly balked and ostentatiously refused
to pass it. But after the lapse of a short time the Assembly saw a
great new light, and rushed it through on March 3, on which same day
it passed the Senate. It was at this precise time that a certain
noted lobbyist at Albany somehow showed up, it was alleged, with a
fund of $500,000, and members of the Assembly and Senate suddenly
revealed evidences of being unusually flush with money. [Footnote:
The author is so informed by an official who represented New York
City's legal interests at this session and successive Legislative
sessions, and who was thoroughly conversant with every move. See