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Citibank, Credit Cards, and the Local Politics of National Consumer Finance, 1968–1991

  • Sean H. Vanatta


Within the postwar financial regulatory system, state-level regulations—particularly interest rate limits—constrained the profitability of bank credit card plans. But differences in law among the states allowed motivated institutions to circumvent local laws using these mobile financial instruments. Eventually, banks themselves became mobile, placing irresistible pressure on states to eliminate local restrictions on consumer finance. The critical moment came when Citibank relocated its credit card business to Sioux Falls, South Dakota, in 1981. By examining this move in its longer context, this essay provides a new perspective on the rise of consumer finance in the late twentieth century, one that emphasizes strategic manipulation of local law by firms pursuing a national customer base.

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1 My argument contrasts with works that emphasize the ways ideas reshaped federal regulatory policy; see Martha Derthick and Paul Quirk, The Politics of Deregulation (Washington, D.C., 1985); and Greta Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge, Mass., 2011). For recent studies of the political origins of expanding consumer finance in the United States, see Louis Hyman, Debtor Nation: The History of America in Red Ink (Princeton, 2011); Krippner, Capitalizing on Crisis; and Özgür Orhangazi, Financialization and the U.S. Economy (Cheltenham, U.K., 2008). For the politics of state-level economic development, see Elizabeth Shermer, Sunbelt Capitalism: Phoenix and the Transformation of American Politics (Philadelphia, 2013). Related regulatory competition or so-called “race to the bottom” literature emphasizes internal state outcomes, whereas here, building on the work of sociologists, I focus on the projection of local regulation outward. For the former, see Radaelli, Claudio, “The Puzzle of Regulatory Competition,Journal of Public Policy 24 (Jan. 2004): 123; and Rodriguez, Daniel, “Turning Federalism Inside Out: Intrastate Aspects of Interstate Regulatory Competition,Yale Law & Policy Review 14 (Jan. 1996): 149–76; for the latter, see Saskia Sassen, Territory, Authority, Rights: From Medieval to Global Assemblages (Princeton, 2006); and Manuel Castells, The Informational City: Information Technology, Economic Restructuring, and the Urban-Regional Process (New York, 1989). Mobile financial instruments challenged regulators earlier, but not with the consequences documented here; see Fleming, Anne, “The Borrower's Tale: A History of Poor Debtors in Lochner Era New York City,Law and History Review 30 (Nov. 2012): 1053–98.

2 For overviews of these broad and deep literatures, see Fred Block and Peter Evans, “The State and the Economy,” and Laura B. Edelman and Robin Stryker, “A Sociological Approach to Law and the Economy,” in The Handbook of Economic Sociology, ed. Neil Smelser and Richard Swedberg, 2nd ed. (Princeton, 2010), 505–26, 527–51; Nelson, Caleb, “Preemption,Virginia Law Review 86 (Mar. 2000): 225305; Donncha Marron, Consumer Credit in the United States: A Sociological Perspective from the Nineteenth Century to the Present (New York, 2009); and Gunnar Trumbull, Consumer Lending in France and America (New York, 2014).

3 Martin Wolfson, Financial Crises: Understanding the Postwar U.S. Experience, 2nd ed. (New York, 1994), 219–21; Charles Calomiris and Stephen Haber, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (Princeton, 2014), 189–95; Bank Holding Company Act of 1956: Hearings on H.R. 7927, Amendments to S. 2557, Before the Comm. on Banking and Currency, Executive Session, 84th Cong. 19 (1956) (statement of Sen. A. Willis Robertson).

4 Wolfson, Financial Crises, 212–32; Harold Cleveland and Thomas Huertas, Citibank, 1812–1970 (Cambridge, Mass., 1985), 276.

5 Cleveland and Huertas, Citibank, 260–65, 325; Philip Zweig, Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy (New York, 1995), 185–90.

6 Frederic Vesperman, The History of Charge Account Banking (St. Louis, 1968).

7 “Credit Cards—The Barclaycard,” memorandum, 10 Jan. 1966, file 415–488, Barclaycard, 1966–1989, Barclays Group Archives, Manchester, U.K.; Andrew Brimmer, “Statement to Congress,” Federal Reserve Bulletin 56 (June 1970): 499; U.S. Department of the Treasury, Comptroller of the Currency, “Outstanding Balances, Credit Cards and Related Plans,” Annual Report of the Comptroller of the Currency (Washington, D.C., 1970–1980); “Everything Up but Delinquencies,” Banking, Aug. 1976, 50.

8 A. Ray Einsel, quoted in Robert Bennett, “Citibank's Credit Card Blitz: Citibank Pushes Nationwide Credit,” New York Times, 23 July 1978. Rigid usury limits were unique to the United States, at least vis-à-vis Western Europe. Great Britain, Department of Trade and Industry, Consumer Credit: Report of the Committee (London, 1971), 1:274–77; Trumbull, Consumer Lending, 158–66.

9 On interest rate risk, see Henry Kaufman, Interest Rates, the Markets, and the New Financial World (New York, 1986), 21; for Citi's policy in particular, see David Leinsdorf and Donald Etra, Citibank: Ralph Nader's Study Group Report on First National City Bank (New York, 1973), 26–27; for politics of usury, see Trumbull, Consumer Lending, 146–58; for Americans' long use of credit, see Lendol Calder, Financing the American Dream: A Cultural History of Consumer Credit (Princeton, 2001); and for cost-of-living concerns, see Meg Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth Century America (Princeton, 2007).

10 “Banks Edging Toward Card Service Charges,” Banking, Aug. 1976, 58.

11 Zumello, Christine, “The ‘Everything Card’ and Consumer Credit in the United States in the 1960s,Business History Review 85 (Autumn 2011): 551–75; Will Lissner, “Citibank Imposes Credit Card Fee,” New York Times, 13 Apr. 1976; John Reed, quoted in James White, “Consumers Are Charging through a Credit-Card Blizzard,” Chicago Tribune, 22 Jan. 1978.

12 Zweig, Wriston, 550–51; Roy Silver, “Citibank's Card Fee Ruled Illegal,” New York Times, 14 June 1978.

13 Fisher v. First National Bank of Omaha, 548 F.2d 255, 256 (8th Cir. 1977); Fisher v. First National Bank of Chicago, 538 F.2d 1284, 1284 (7th Cir. 1976), cert. denied, 97 S.Ct. 786 (1977).

14 Fisher v. First National Bank of Omaha, 338 F. Supp. 525 (S.D. Iowa 1972); Fisher, 548 F.2d, 253; Fisher, 538 F.2d, 1284.

15 Brief of the Minnesota AFL-CIO, as Amicus Curiae Supporting Petitioner Minnesota, at 5, Marquette National Bank of Minneapolis v. First of Omaha Service Corp., 439 U.S. 299 (1978) (Nos. 77–1265, 77–1258), 1978 WL 223582; Minn. Stat. §48.185 (1976); Marquette, 439 U.S., at 304; Marquette National Bank of Minneapolis v. First of Omaha Service Corp., 262 N.W.2d 358 (1977), at 366n2.

16 Marquette, 262 N.W.2d, at 365.

17 State of Iowa ex rel. Richard Turner v. First of Omaha Service Corp., 269 N.W.2d 409 (1978); Harry Blackmun to William Brennan, 28 Nov. 1978, box I:479, William J. Brennan Jr. Papers, Manuscript Division, Library of Congress, Washington, D.C. (hereafter LC).

18 Justice Blackmun, dissent draft memorandum, 10 May 1978, box 284, Harry A. Blackmun Papers, Manuscript Division, LC (emphasis original); Robert Bork, oral argument, Supreme Court Oral Argument Recordings, National Archives, College Park. Md.; Robert Bork to William Morrow, 12 Sept. 1978, box I:27, Robert Bork Papers, Manuscript Division, LC.

19 Marquette, 439 U.S., at 312. Brennan invited Marquette to look to Congress for clarification, since “the protection of state usury laws is an issue of legislative policy . . . better addressed to the wisdom of Congress.” Congressional policy regarding state usury rates are beyond the scope of this article, except to say that while Congress preempted state usury laws on mortgages as part of the Depository Institution Deregulation and Monetary Control Act (1980), the act also allowed states to override this preemption and retain local control over interest rates (Pub. L. No. 96–221, §5).

20 Carol Loomis, “Citicorp's Rocky Affair with the Consumer,” Fortune, 24 Mar. 1980; Cleveland and Huertas, Citibank, 276, 294–95; Zweig, Wriston, 534; Reed, quoted in Roger Smith, “Citibank Blitz: Credit Cards Dealt in Game for Big Money,” Los Angeles Times, 3 Sept. 1978. Some evidence suggests Citibank pursued this strategy with knowledge of the Fisher rulings. Hugh McPheeters to Paul Ross, 3 Aug. 1977, folder SB 317, Gov. Patrick Teasdale Papers, Missouri State Archives, Jefferson City, Mo.

21 Brad Knickerbocker, “Credit Card Decides on a New Name,” Christian Science Monitor, 25 Jan. 1977; Dee Hock, One from Many: VISA and the Rise of Chaordic Organization (San Francisco, 2005), 213–31; Joseph Nocera, A Piece of the Action: How the Middle Class Joined the Money Class (New York, 1994), 144–45.

22 Smith, “Citibank Blitz”; Bennett, “Citibank's Credit Card Blitz”; Zweig, Wriston, 553.

23 Consumer Credit Protection Act Amendments of 1977: Hearings Before the Subcomm. on Banking, Finance, and Urban Affairs, Part 1, 95th Cong. 365 (1977) (statement of David Phillips, Senior Vice President, Card Product Division, Citibank).

24 Visa USA Inc., “Credit Controls and Bank Credit Cards: Analysis and Proposals,” 794.01 (L) Voluntary Credit Restraint, March 1980, Federal Reserve Bank of New York Archives, New York, N.Y.

25 Dan Dorfman, “Grim Citibank View of Interest Rates,” Washington Post, 25 Oct. 1978; Citicorp, Citicorp Annual Report and Form 10-K 1979, 32, 40. ProQuest (Document ID 88205999).

26 Robert Hetzel, The Monetary Policy of the Federal Reserve: A History (New York, 2008), 152–55; Federal Reserve Bank of New York, “Historical Changes of the Target Federal Funds and Discount Rates,” last modified 19 Feb. 2010,

27 Walter Wriston, “Outsmarting Inflation,” Washington Post, 13 Mar. 1980; Walter Wriston, interview, “Secret History of the Credit Card,” Frontline, PBS, 24 Apr. 2004,; Federal Reserve Board, “Meeting of Federal Open Market Committee,” transcript, 7 Mar. 1980,

28 Zweig, Wriston, 676–78; Neill S. Rosenfeld, “Banking Bills Unresolved in Albany,” Newsday, 10 June 1980; “Budget Report on Bills,” memorandum, Bill Jacket, L. 198, ch. 883 (1980), New York State Archives, Albany, N.Y.

29 For an alternate account, see Wright, Robert, “Wall Street on the Prairie: Citibank, South Dakota and the Origins of Financial Deregulation,Financial History 106 (Spring 2012): 2426.

30 Zweig, Wriston, 553, 678–81.

31 “Still Last in Salary Scale,” Pierre Daily Capital Journal, 24 Jan. 1980; William Janklow, interview, “Secret History of the Credit Card,” Frontline, PBS, 24 Apr. 2004,

32 Douglas Hayek, “South Dakota Takes Center Stage: Remembering the Father of the ‘Citibank Bill,’” North Western Financial Review 189 (Sept. 2004): 13–14, 16; Reardon, Thomas, “T. M. Reardon's First-Hand Account of Citibank's Move to South Dakota,North Western Financial Review 189 (Sept. 2004): 15.

33 South Dakota Bankers Association, “Executive Council Minutes,” 3 Mar. 1980, South Dakota Bankers Association, Pierre, S.Dak.; Jon Walker, “Citibank Could Bring 300–2,000 Jobs to S.D.,” Sioux Falls Argus Leader (hereafter SFAL), 5 Mar. 1980.

34 Houston Haugo to William Janklow, 5 Mar. 1980, and William Janklow to Charles Long, 12 Mar. 1980, “Citibank 1980–1982 (1 of 2),” William Janklow Papers, Archives and Special Collections, University of South Dakota, Vermillion, S.Dak. (hereafter, WJP); South Dakota Bankers Association, “Executive Council Minutes”; 1980 S.D. Sess. Laws, 536; Hayek, “South Dakota Takes Center Stage.”

35 Citicorp, “Application to Organize a National Bank,” Citibank 1979, WJP.

36 SEC and Citicorp: Hearings Before the Subcomm. on Oversight and Investigations of the Committee on Energy and Commerce, 97th Cong. (1982); Richard Dale, The Regulation of International Banking (Cambridge, 1984), 195–204.

37 Curtis Kuehn to Theodore Allison, “Citicorp Application for a National Bank Charter in Sioux Falls, South Dakota,” 19 Mar. 1980, Citibank Correspondence Binder, Sioux Falls Area Chamber of Commerce, Sioux Falls, S.Dak. (hereafter, SFCC).

38 63 Del. Laws 2 (1981); “Why Is Plastic So Costly,” Time, 4 Apr. 1983; Terry Branstad to C. W. Strong Jr., 29 June 1984, Office of Program Research, Financial Institutions and Insurance Committee, House of Representatives, Washington State Archives, Olympia, Wash.

39 Citibank's acquisition of Travelers Group, which gained congressional approval with the Gramm-Leach-Bliley Act (1999), has here an important antecedent. Office of the Governor, Bureau of Industrial and Agricultural Development, “South Dakota: The Frontier of Modern Banking,” memorandum, Banking Laws, SFCC; “Janklow Defends Legislation that Attracts Banks to State,” SFAL, 20 Sept. 1983; “Fed Dims the Luster of South Dakota Inc.,” SFAL, 4 Aug. 1985; Zweig, Wriston, 810–12.

40 Jerry Lammers, quoted in Terry Woster, “Bill Puts Citibank on Sliding Tax Scale,” SFAL, 1 Feb. 1991; Terry Woster, “Governor Defends Tax-Hike Plans,” SFAL, 17 Jan. 1991.

41 Citigroup, Citibank South Dakota N.A., A State of Dreams. A World of Difference (2006); Citigroup, Citigroup Annual Report 2006, sec. 1, 3, accessed 4 Sept. 2015,

42 The Federal Reserve defines revolving debt as short- to intermediate-term debt held by individuals, excluding loans such as those for automobiles, education, and mobile homes and those secured by real estate. Federal Reserve, “G. 19, Consumer Credit, Historical Data,” accessed 24 Sept. 2015,

43 Brief of the Minnesota AFL-CIO, supra note 15, at iii.

44 Walter Wriston to Charles Percy, 23 Apr. 1976, box 33, Walter B. Wriston Papers, Tufts University Library, Medford, Mass.

45 Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735; Kroszner, Randall and Strahan, Philip, “What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions,Quarterly Journal of Economics 114 (Nov. 1999): 1460–62.

This essay has been greatly improved by many generous and thoughtful comments from friends, colleagues, and anonymous reviewers. The author would like to specifically thank two advisors, Stephen Mihm and Julian Zelizer, and to acknowledge grant support from the University of Georgia Graduate School, the History Project and Institute for New Economic Thinking, and the Princeton Program in American Studies. The usual caveats apply.

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