Turning Wages into Capital Differentiation on the Market for Unsecured Loans in the United States, 1900-1945.

In this article, we show how interpretive battles about compliance can lead to regulatory differentiation and, in turn, market segmentation. To do so, we study the evolution of unsecured lending in the United States, between 1900 and 1945. In the early 20th century, a large segment of the workforce relied on their wages to access credit: this required the "legal coding" of labor income into capital, where lenders would offer advances in exchange for a lien over future revenues. Regulating these transactions raised conflicts between Progressive reformers, lenders and, after 1929, federal regulators, which spanned over five decades. The historical comparison of three states—Illinois, New York and Georgia—, shows that local discussions revolved around three outcomes—legal status, pricing method and collateralization—, the issue of which led to distinct regulatory paths and market configurations at the state level. Finally, the New Deal policies created an additional strand of federal coding, furthering market divides between unregulated payday lenders, non-bank credit companies, and commercial banks. On financial markets, discussions about compliance often revolve around calculative technologies, and we suggest this as a possible crossing point between STS analyses of capitalization devices and Pistor's theory of capital modulation. [ABSTRACT FROM AUTHOR]