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Bringing "Honest Capital" to Poor Borrowers: The Passage of the Uniform Small Loan Law, 1907-1930

Author

Listed:
  • Caruthers, Bruce G.

    (Northwestern University)

  • Guinnane, Timothy W.

    (Yale University)

  • Lee, Yoonseok

    (University of Michigan)

Abstract
The Uniform Small Loan Law (USLL) was the Russell Sage Foundation's primary device for fighting what it viewed as the scourge of high-rate lending to poor people in the first half of the twentieth century. The USLL created a new class of lenders who could make small loans at interest rates exceeding those allowed for banks under the normal usury laws. About two-thirds of the states had passed the USLL by 1930. This paper describes the USLL and then uses econometric models to investigate the state characteristics that influenced the law's passage. We find that urbanization and state-level economic characteristics played significant roles. So did measures of the state's banking system. We find no evidence that party-political affiliations had any effect, which is consistent with the USLL's "progressive" character. Finally, we find little evidence that the passage of the USLL in one state made passage more likely in neighboring or similar states. If anything, the cross-state influences were negative. Our findings suggest that the Russell Sage Foundation only imperfectly understood the political economy of the USLL, and that a different overall approach might have produced a result closer to their aims.

Suggested Citation

  • Caruthers, Bruce G. & Guinnane, Timothy W. & Lee, Yoonseok, 2009. "Bringing "Honest Capital" to Poor Borrowers: The Passage of the Uniform Small Loan Law, 1907-1930," Working Papers 63, Yale University, Department of Economics.
    • Handle: RePEc:ecl:yaleco:63
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Mary Eschelbach Hansen, 2014. "Sources of Credit and the Extent of the Credit Market: A View from Bankruptcy Records, Mississippi 1929-1936," Working Papers 2014-09, American University, Department of Economics.
    2. Hansen, Mary Eschelbach & Hansen, Bradley A., 2012. "Crisis and Bankruptcy: The Mediating Role of State Law, 1920–1932," The Journal of Economic History, Cambridge University Press, vol. 72(2), pages 448-468, May.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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