Abstract: The "very fibre of personal finance": Changing Beliefs about Regulation and the Small-Sum Lending Industry in New York, 1900-1940

Anne Fleming


This paper explores the confluence of ideas that reshaped regulation of the small-sum lending industry in the first decades of the twentieth century. At the turn of the century, Gotham's small loan business was booming, but it operated in the shadows of the law. To make a profit, lenders devised elaborate schemes to evade state lending regulations. These maneuvers allowed them to provide loans to working-class households at interest rates well above the legal limit. But the growth of the industry and its impact on the urban poor captured the attention of reformers, who launched a campaign to combat the "loan shark evil." Many histories of the Progressive Era highlight reformers' desire to expand the role of the state in the marketplace and industry's aversion to regulation. Complicating the dominant narrative, this paper argues that lending reformers were not strong proponents of state action and that lenders were not, ultimately, averse to state control. Indeed, many lenders eventually came to see regulation as a boon to their business. By the early 1930s, industry leaders deemed legal constraints "the very breath of life to our business." Belief in the benefits of regulation was "woven into the very fibre of personal finance."