Tuesday, September 30, 2008

Dropping the Fresno Drop

Since I live in Fresno, I have been amazed that hardly anyone in town even knows about the world-changing "Fresno Drop."

It seems that not even a 50th anniversary of the Drop, let alone the current Wall Street-Main Street news, merits a mention in local press..

..So why is it news in the Poughkeepsie Journal and beyond?

The basic story :

"America began to change on a mid-September day in 1958," writes Joseph Nocera in his fascinating book, A Piece of the Action. He is referring to the day when the Bank of America 'dropped' 60,000 credit cards in Fresno, California, thereby creating the all-purpose credit card.It was a novel idea, in effect offering anyone who wanted it a general line of credit, unsecured by collateral. In the 1950s Americans were just getting used to taking out loans to buy ... products—cars, refrigerators, televisions.

But debt was still disreputable. If you could not afford something, you squirreled away money until you could buy it. Besides, it was not easy to get a loan Most banks thought that making small loans to the average family was not worth the time and effort. Except for the Bank of America. Its founder, AP Giannini, the son of an immigrant, wanted to make money available for “his people.” His bank, founded in 1904 in a converted saloon, was initially called the Bank of Italy and in 1928 renamed the Bank of America. Whereas other banks passed off consumer loans to finance companies, Bank of America embraced the role of serving the broad middle class... As a result it grew to become America's largest bank by the 1970s .

Credit cards opened up the world of credit to the masses, allowing ordinary people to take out an advance on their future earnings, as the rich had always done. It is difficult today to imagine life without credit cards. And yet they were almost unknown forty years ago. What happened over those forty years, and most especially in the last twenty-five, is in many ways more is in many ways more revolutionary than in any comparable period in modern financial history. Capitalism was transformed into democratic capitalism. (pp. 202-203, Fareed Zakaria (articulate editor of Newseek International)'s "The Future of Freedom: Illiberal Democracy at Home and Abroad ." whole chapter here)

-from my post called: Fresno: something to do with money

Credit lured Americans into spending more

1 comment:

  1. hey Dave, I gotta give you "credit", pardon the pun. the visa card mentality grew to people buying houses well beyond their reach, with the help of an accommodating mortgage industry.

    If we are leading the nation in anything, it is being in the top 5 or so regions with highest foreclosure rates. Too bad.


Hey, thanks for engaging the conversation!