Bringing the Banks Back in: Credit Cards, Consumer Debt, and the Origins of Financialization

Conrad Jacober, Johns Hopkins University

The drastic rise in household debt over the past half century is a central element of financialization, and American commercial banks have been at the center of this development. However, banks were not always in the business of consumer lending. American commercial banks entered the consumer credit business in the 1920s, but it was not until the late 1950s that consumer credit was found to be a pivotal source of profits. At the forefront of this development was an innovative financial product: the credit card. A form of unsecured consumer debt, the credit card was far riskier than other forms of consumer loans but came with added benefits: high profitability and a lack of regulation. Throughout the 1960s, banks mass-mailed credit cards beyond their strictly-regulated intra- and inter-state boundaries, routing banking regulations and intensifying bank competition. Through the financial innovation of the credit card, banks broke the regulatory straight-jacket of the New Deal era and set off a cascade of transformations to the political and economic system, laying the foundation for what we today call financialization. Prevailing accounts of the origins of financialization focus on either macro-economic shifts or federal-level financial deregulation; most, however, ignore the agency of commercial banks in the origins of financialization. Using archival materials on major American commercial bankers and banking trade journals, I argue that American commercial banks are the primary economic agents driving the process of financialization. The financial innovations, lobbying efforts, and routing of regulations by banks pressured the state to deregulate finance, leading to a merger and acquisition wave and a concentration of finance capital. By considering the active role of banks in financialization, I demonstrate how banks built a new regime of accumulation centered on the growth of household indebtedness, one which began with the unlikely rise of the credit card.

No extended abstract or paper available

 Presented in Session 211. Rise and Trajectories of Financial Capital