About Charles Michael Schwab
He was an American steel magnate. Under his leadership, Bethlehem Steel became the second largest steel maker in the United States, and one of the most important heavy manufacturers in the world.
Schwab was born in Williamsburg, Pennsylvania, the son of Pauline (née Farabaugh) and John Anthony Schwab. Both his paternal and maternal grandparents were Catholic immigrants from Germany. Schwab was raised in Loretto, Pennsylvania, which he always considered his "home town". He attended Saint Francis College, now Saint Francis University, but left after two years to find work in Pittsburgh.
Schwab began his career as a stake driver in Andrew Carnegie's steelworks and in 1897, at only 35 years of age, became president of the Carnegie Steel Company. In 1901, he helped negotiate the secret sale of Carnegie Steel to a group of New York-based financiers led by J.P. Morgan. After the buyout, Schwab became the first president of the U.S. Steel Corporation, the company formed out of Carnegie's former holdings.
After several clashes with Morgan and fellow US Steel executive Elbert Gary, Schwab left USS in 1903 to run the Bethlehem Steel Company in Bethlehem, Pennsylvania. Under his leadership (and that of Eugene Grace), it became the largest independent steel producer in the world.
A major part of Bethlehem Steel's success was the development of the H-beam, a precursor of today's ubiquitous I-beam. Schwab was interested in mass producing the wideflange steel beam, but that was a risky venture that required raising capital and building a large new plant, all to make a product whose ability to sell was unproven.
"I've thought the whole thing over," Schwab told his secretary, "and if we are going bust, we will go bust big." It is his most famous remark.
In 1908, Bethlehem Steel began making the beam, which revolutionized building construction and made possible the age of the skyscraper. Its success helped make Bethlehem Steel the second-largest steel company in the world. Bethlehem, Pennsylvania was incorporated, virtually as a company town, by uniting four previous villages.
In 1910, Schwab broke the Bethlehem Steel strike by calling out the newly formed Pennsylvania State Police. Schwab kept labor unions out of Bethlehem Steel, which was not organized until 1941, two years after his death.
In 1911, Bethlehem Steel formed a company soccer team known as Bethlehem Steel F.C. In 1914 Schwab took the team professional. Until its demise in 1930, the team won 8 league championships, 6 American Cups and 5 National Challenge Cups. It was considered among the greatest soccer teams in U.S. history. The company disbanded the team as a result of financial losses incurred during the internecine 1928-1929 "Soccer Wars" between American Soccer League and United States Football Association and onset of the Great Depression in 1929.
On April 16, 1918, Schwab became Director General of the Emergency Fleet Corporation, a board granted by Congress with master authority over all shipbuilding in the United States. He was appointed over Charles Piez, the former General Manager of the corporation. President Wilson had specifically asked Schwab to assume this responsibility. Schwab's biggest change to the shipbuilding effort was to abandon the cost plus profit contracting system that had been in place up to that time and begin issuing fixed-price contracts.
In 1928, Schwab was awarded the Bessemer Gold Medal for "outstanding services to the steel industry".
Schwab was considered to be a risk taker and was highly controversial. Thomas Edison once famously called him the "master hustler". He circumvented American neutrality laws during the early years of World War I by funneling goods through Canada. After America's entry into the war, he was accused of profiteering but was later acquitted. His lucrative contract providing steel to the Trans-Siberian Railroad came after he provided a $200,000 "gift" to the mistress of the Grand Duke Alexis Aleksandrovich.
Schwab's innovative ways of dealing with his staff are given a mention in Dale Carnegie's most famous work, How to Win Friends and Influence People.
Schwab was inducted into the Junior Achievement U.S. Business Hall of Fame in 1982.
Schwab eventually became very wealthy. He moved to New York City, specifically the Upper West Side, which at the time was considered the "wrong" side of Central Park, and where he built "Riverside", the most ambitious private house ever built in New York. The US$7 million 75 room house combined details from three French chateaux on a full city block. After Schwab's death, New York mayor Fiorello La Guardia turned down a proposal to make Riverside the official mayoral residence, deeming it too grandiose. It was eventually torn down and replaced by a drab apartment block.
He also owned a 44 room summer estate on 1,000 acres (4 km²) in Loretto called "Immergrün" (German for "evergreen"). The house featured opulent gardens and a nine hole golf course. Rather than tear down the existing house, Schwab had the mansion raised on rollers and moved 200 feet to a new location to make room for the new mansion. Schwab's estate sold Immergrün after his death and it is now Mount Assisi Friary on the grounds of Saint Francis University.
Schwab became notorious for his "fast lane" lifestyle including opulent parties, high stakes gambling, and a string of extramarital affairs producing at least one illegitimate child. The affairs and the illegitimate child soured his relationship with his wife. He became an international celebrity when he "broke the bank" at Monte Carlo and traveled in a $100,000 private rail car named "Loretto". Even before the Great Depression, he had already spent most of his fortune estimated at between $25 million and $40 million. Adjusted for inflation, that equates to between $500 million and $800 million in the first decade of the 21st century.
The stock market crash of 1929 finished off what years of wanton spending had started. He spent his last years in a small apartment. He could no longer afford the taxes on "Riverside" and it was seized by creditors. He had offered to sell the mansion at a huge loss but there were no takers.
At his death ten years later, Schwab's holdings in Bethlehem Steel were virtually worthless, and he was over US$ 300,000 in debt. Had he lived a few more years, he probably would have seen his fortunes restored when Bethlehem Steel was flooded with orders for war material. He was buried in Loretto at Saint Michael's Cemetery in a private mausoleum with his wife.
A fine bust-length portrait of Schwab painted in 1903 by the Swiss-born American artist Adolfo Müller-Ury (1862–1947) was formerly in the Jessica Dragonette Collection at the American Heritage Center at the University of Wyoming at Laramie, but has recently been donated to the American National Portrait Gallery in Washington DC. Müller-Ury also painted his nephew and namesake Charles M Schwab (son of his brother Joseph) as a boy in a sailor-suit around the same date.
Schwab is not related to Charles R. Schwab, founder of the brokerage firm Charles Schwab Corporation.
Schwab had no children by Eurana, he had one daughter from a mistress. The Schwab family maintained ownership in the company in the late 1980s when it had to be sold in order to avoid bankruptcy. According to US public tax records, the nineteen heirs of this sale each grossed over $40 million. Charles Schwab himself died bankrupt, living on borrowed money for five years before his death.