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Debtor NationThe History of America in Red Ink$
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Louis Hyman

Print publication date: 2011

Print ISBN-13: 9780691140681

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691140681.001.0001

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How Commercial Bankers Discovered Consumer Credit

How Commercial Bankers Discovered Consumer Credit

The Federal Housing Administration and Personal Loan Departments, 1934–1938

(p.73) Chapter Three How Commercial Bankers Discovered Consumer Credit
Debtor Nation

Louis Hyman

Princeton University Press

This chapter focuses on personal loan departments. On May 4, 1928, National City Bank opened the nation's first personal loan department. Curiously, despite the popularity of the department and despite the prominence of National City Bank—one of the country's largest commercial banks—few other banks opened their own personal loan departments in the late 1920s. Nonetheless, by the end of the 1930s, personal loans were a standard part of commercial banks' offerings. The chapter then asks why banks would begin to loan to consumers in the middle of the 1930s when jobs were so precarious, rather than in the 1920s when prosperity reigned. In answering this question, one can see how powerful federal policy can be in transforming the most basic practices of capitalism, since it was through a previously overlooked federal program—the FHA's Title I loan program—that bankers learned consumer lending could be a good idea.

Keywords:   personal loan departments, National City Bank, personal loans, commercial banks, federal policy, capitalism, Title I loan program, consumer lending

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