Abstract: The Ties that Bind: Mutual Building and Loans and the Problem of Agency, 1880-1920

David L. Mason


I examine how immigrants used ethnic building and loans (B&Ls) to establish personal networks and overcome the problem of asymmetrical information flows in home finance. American B&Ls were cooperative institutions whose main purpose was to encourage home ownership by promoting thrift and mutual cooperation among its members. First appearing in 1831, B&Ls were very popular with ethnic Americans by the end of the century, in part because they worked to build confidence and trust among their members through the use of formal and informal personal networks. These networks appeared in part because ethnic B&Ls were neighborhood associations that held meetings and printed documents in the native language of the immigrant members. Similarly, as mutual organizations, the members had a direct voice in selecting and overseeing management. While these networks increased the degree of agency for thrift members, managers also used them to help evaluate credit risks; in fact, the character of a potential borrower was an important criterion in the loan approval process.

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