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Trade Acceptances, Financial Reform, and the Culture of Commercial Credit, 1915-1920

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  • Myles, Jamieson

Abstract

In her seminal work on insider lending, Naomi Lamoreaux describes the shift to impersonal lending in late nineteenth century New England. Although orthodox banking theory prescribed investing in “real bills”, they were in short supply, so reformers focused instead on establishing new objective lending criteria. This article examines the nationwide campaign by financial reformers in the 1910s to do what banking reformers in New England had not: convince businesses across the U.S. to abandon prevailing commercial credit practices and adopt “trade acceptances”—the quintessential real bill—in their stead. To financial reformers, the Federal Reserve System offered an institutional means of reducing distributors’ dependence on mercantile credit and incentivizing banks to invest in real bills. Once underway, campaigners argued that trade acceptances would foster good business practices and stabilize the financial system and relied on trade associations and the federal government to disseminate this message. Some businesses obliged, but many opposed trade acceptances, casting them as contrary to the American culture of credit. The campaign did not eradicate established credit practices or supplant the promissory note and failed to incentivize non-member state banks to become Fed members. Instead, its significance lay in industrial finance companies’ use of trade acceptances as collateral to secure financing for the distribution and mass consumption of consumer durables.

Suggested Citation

  • Myles, Jamieson, 2022. "Trade Acceptances, Financial Reform, and the Culture of Commercial Credit, 1915-1920," Working Papers unige:164262, University of Geneva, Paul Bairoch Institute of Economic History.
  • Handle: RePEc:gnv:wpaper:unige:164262
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    References listed on IDEAS

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    5. Vanatta, Sean H., 2018. "Charge Account Banking: A Study of Financial Innovation in the 1950s," Enterprise & Society, Cambridge University Press, vol. 19(2), pages 352-390, June.
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    More about this item

    Keywords

    Impersonal lending; Bills of exchange; Money market; Culture of credit; Federal Reserve System.;
    All these keywords.

    JEL classification:

    • N00 - Economic History - - General - - - General
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-

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