Examining the development of credit reporting in the United States, this article shows how new, formal methods of assessment of risk and trustworthiness came to mediate business reputations in the credit market over the past century and a half. It focuses on the conflicts over reputation provoked by the new means of assessment and how those conflicts were controlled through organizational procedures and routines as new methodologies were introduced. After World War II seemingly objective quantitative methodologies for evaluating credit worthiness were developed, but they did not eliminate the place of reputation in business decision-making.
1 Stiglitz, Joseph E., “Prize Lecture: Information and the Change in the Paradigm in Economics,” 20 11 2012, http://www.nobelprize.org/nobel_prizes/economics/laureates/2001/stiglitz-lecture.html; Shapiro, Carl and Varian, Hal, Information Rules: A Strategic Guide to the Network Economy (Boston, 1998). Anthony Giddens has noted that when money made possible anonymous transactions and exchange over long distances, it also meant that parties to exchange lost touch with each other, requiring new means of surveillance and verification in the economy. Giddens, Anthony, A Contemporary Critique of Historical Materialism. Vol. 1, Property, Power and the State (Berkeley, 1981), 115–17.
2 The literature on semiotics and symbols is vast. Some of the works I have found useful are Eagleton, Terry, Literary Theory: An Introduction (Oxford, 1983); Foucault, Michel, The Order of Things: Archaeology of the Human Sciences (London, 1970); Douglas, Mary, How Institutions Think (New York, 2006). Symbols may signal—that is, carry information as we commonly think of it—but obliquely, often by representing one thing as something else (a national leader as a father figure) or making claims of universality (about human nature, gender, race, or some other category of identity) or structuring how we understand and see the world (about what is true, just, beautiful).
3 On the history of credit reporting, see Cohen, Barry, “Constructing an Uncertain Economy: Credit Reporting and Credit Rating in the Nineteenth-Century United States,” Ph.D. diss., Northwestern University, 2012. Cohen examines the labor and practices of credit agencies in the nineteenth century as intermediaries who negotiated between constraints in legal, organizational, and market environments. Other major recent works are Olegario, Rowena, A Culture of Credit: Embedding Trust and Transparency in American Business (Cambridge, Mass., 2006); Lauer, Josh, “From Rumor to Written Record: Credit Reporting and the Invention of Financial Identity in Nineteenth Century America,” Technology and Culture 49 (04 2008): 301–24; Sandage, Scott, Born Losers: A History of Failure in America (Cambridge, Mass., 2005); Berghoff, Hartmut, “Civilizing Capitalism? The Beginnings of Credit Rating in the United States and Germany,” Bulletin of the German Historical Institute 45 (Fall 2009): 9–28.
4 Granovetter, Mark, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology 91 (11 1985): 481–510; Zelizer, Viviana, The Social Meaning of Money (New York, 1994).
5 See, for example, Klein, Daniel, ed., Reputation: Studies in the Voluntary Elicitation of Good Conduct (Ann Arbor, 1997); and Greif, Avner, “Reputation Coalitions in Medieval Trade: Evidence on the Maghribi Traders,” Journal of Economic History 49 (12 1989): 8576–82.
6 Mann, Bruce, Republic of Debtors: Bankruptcy in the Age of American Independence (Cambridge, Mass., 2002), 7, 19, 261.
7 Hidy, Ralph, “Credit Rating before Dun and Bradstreet,” Bulletin of the Business Historical Society 13, no. 6 (12 1939): 81–88. Atherton, Lewis, “The Problem of Credit Rating in the Ante-Bellum South,” Journal of Southern History 12, no. 4 (1946): 534–56. On the activities of Sheldon Church in this regard, see Foulke, Roy A., The Sinews of American Commerce (New York, 1941), 360–68.
8 Wyatt-Brown, Bertram, “God and Dun & Bradstreet, 1841–1851,” Business History Review 40 (Winter 1966): 433–37.
9 The general history of mercantile credit and credit reporting in the nineteenth century is well covered in Olegario, Culture of Credit; Norris, James, R. G. Dun & Co., 1841–1900: The Development of Credit-Reporting in the Nineteenth Century (Westport, Conn., 1978).
10 Wyatt-Brown, , “God and Dun & Bradstreet,” 437, 441.
11 Quoted in Lauer, , “From Rumor to Written Record,” 303.
12 “Mercantile Agency,” New-York City and Co-Partnership Directory for 1843 & 1844 (New York, ), n.p., quoted in Lauer, “From Rumor to Written Record.”
13 Agency, Mercantile, Reports of the Four Leading Cases against the Mercantile Agency for Slander and Libel: Beardsley vs. Tappan, U.S. Supreme Court, Billings vs. Russell, Supreme Jud., Court, Mass., Ormsby vs. Douglass, Court of Appeals, N.Y., the Commonwealth vs. Stacey, Court of C.P., Pa. (New York, 1873), 170.
14 See Sandage, Born Losers, on character.
15 Wyatt-Brown, , “God and Dun & Bradstreet,” 447.
16 There was also a fear that credit used to encourage sales would create competitive rounds of customer poaching. Hunt, Robert, “A Century of Consumer Credit Reporting in America,” Working Paper no. 5-13, Federal Reserve Bank of Philadelphia, 06 2005.
17 Miller, Margaret J., “Credit Reporting Systems around the Globe: The State of the Art in Public Credit Registries and Private Credit Reporting Firms,” in Credit Reporting Systems and the International Economy, ed. Miller, Margaret J. (Cambridge, Mass., 2003).
18 Wyatt-Brown, , “God and Dun & Bradstreet,” 441.
19 Research on Slander and Libel Cases, 1851–1925 v. 23, Subseries B: Legal records, 1851–1933, Collection, R. G. Dun, Baker Library Historical Collections, Harvard Business School, Boston, Mass. (hereafter, R. G. Dun Collection).
20 Research on Slander and Libel Cases, 1851–1925, R. G. Dun Collection.
21 Balleisen, Edward discusses the problems of nineteenth-century bankruptcy in Navigating Failure: Bankruptcy and Commercial Society in Antebellum America (Chapel Hill, 2001).
22 Olegario, , Culture of Credit, 167–68.
23 Madison, James, “The Evolution of Credit Reporting Agencies in Nineteenth-Century America,” Business History Review 48 (Summer 1974): 171.
24 Lauer, , “From Rumor to Written Record,” 311.
25 Ibid. See also Sandage, , Born Losers, 150.
26 Johnson v. Bradstreet Company (1886), 77 Georgia 172, quoted in Research on Slander and Libel cases, 1851–1925, 53, R. G. Dun Collection.
27 Madison, , “The Evolution of Credit Reporting Agencies,” 169.
28 Olegario, , Culture of Credit, 167–70.
29 Madison, , “The Evolution of Credit Reporting Agencies,” 170.
30 Lauer, , “From Rumor to Written Record,” 319–20.
31 Madison, , “The Evolution of Credit Reporting Agencies,” 25.
32 Ibid., 183.
33 Agency, Mercantile, Reports of Four Leading Cases, 30.
35 Ibid., 60–61.
36 On performativity in finance, see MacKenzie, Donald, An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, Mass., 2006), 16–25.
37 Ibid., 82–85.
38 Ibid., 127.
39 The reason was somewhat technical. Beardsley's attorney had been able to introduce testimony that Tappan had tried to “make good” on his claim that the Beardsleys were getting a divorce, importuning Mrs. Beardsley into filing for a divorce well after the original report had been issued. This, the High Court ruled, should not have been permitted at the trial. 77 U.S. 427.
40 Agency, Mercantile, Reports of Four Leading Cases, 109–110.
41 Ibid., 118.
42 Ormsby v. Douglass, 37 N.Y. 477. Madison, , “The Evolution of Credit Reporting Agencies,” 171.
43 Research on Slander and Libel Cases, 1851–1925, 486, R. G. Dun Collection.
44 Robbins, Charles, “Commercial Agencies,” American Law Register 37, no. 5 (05 1889): 259, quoting Bradstreet Co. v. Gill, Superior Court of Texas, 27 Nov. 1888.
45 Norris, , R. G. Dun, 133. In Gibson v. Dun, a client who lost money based on a rating of a borrower lost his case for negligence against Dun, the courts accepting that there was no guarantee or warranty in the reports, so long as standard reporting procedures had been followed. In Eaton v. Avery (1880) the court ruled that when a merchant deceived a reporter it was the merchant who was liable for any loss incurred by the lender or creditor not the reporting agency. See Madison, , “The Evolution of Credit Reporting Agencies,” 180; Olegario, , Culture of Credit, 153.
46 Norris, , R. G. Dun, 26.
47 Ibid., 44–46.
48 Tappan, Lewis quoted in Norris, , R. G. Dun, 22.
49 Quoted in Sandage, , Born Losers, 143. Olegario, , Culture of Credit, 128, 141.
50 The attorneys worked without pay in hopes that creditors would give them work collecting debts and handling bankruptcies, which led to charges that they had incentive to provide negative reports to encourage failure.
51 Madison, , “The Evolution of Credit Reporting Agencies,” 178–79.
52 Ormsby v. Douglass, 1858, is a key case in this respect, ruling that information conveyed in good faith with reasonable diligence was protected under privilege.
53 Megill, Allan, Historical Knowledge, Historical Error: A Contemporary Guide to Practice (Chicago, 2007), 78–103.
54 Ibid., 70. The continued reliance on narrative runs counter to predictions by theorists such as Walter Benjamin and Jean-François Lyotard that the age of instant information would negate or obviate narrative. In “A Message from Psychologists to Economists: Mere Predictability Doesn't Matter Like it Should (Without a Good Story Appended to it),” Journal of Economic Behavior & Organization 39 (1999): 29–40, Robyn M. Dawes argues for the independence of quantitative information and narrative. The role of narrative in the economy has recently become a topic of interest. See, for example, Akerlof, George and Schiller, Robert, Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism (Princeton, 2009); and John Kay, “The Map is Not the Territory: An Essay on the State of Economics,” http://www.johnkay.com/2011/10/04/the-map-is-not-the-territory-an-essay-on-the-state-of-economics. An older argument along similar lines appears in Harrison, J. Michael and Kreps, David, “Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations,” Quarterly Journal of Economics 92, no. 2 (1978): 323–36.
55 Dun, & Bradstreet, , Report Writers Guide, General Suggestions and Examples: Narrative Form Reports (New York, 1944). For other examples making the same point, see the Dun, & Bradstreet, house organ, The Wagon Wheel (04 1935), n.p.
56 Rabuzzi, Daniel, “Eighteenth-Century Commercial Mentalities as Reflected and Projected in Business Hand Books,” Eighteenth-Century Studies 29, no. 2 (1995–1996): 169–89; and Smail, John, “The Culture of Credit in Eighteenth-Century Commerce: The English Textile Industry,” Enterprise & Society 4, no. 2 (2003): 299–325. Finn, Margot, The Character of Credit: Personal Debt in English Culture, 1740–1914 (Cambridge, U.K., 2003).
57 Sandage, , Born Losers, 147.
58 Hunt's Merchant's Magazine, quoted in Sandage, , Born Losers, 143.
59 Prendergast, William, Credit and Its Uses (New York, 1914 [1906 copyright]), 151.
60 On narrative form, see White, Hayden, Metahistory: The Historical Imagination in Nineteenth Century Europe (Baltimore, 1973).
61 Norris, , R. G. Dun, 51–52.
62 Ibid., 86–93.
63 Zimmerman, T. J., “The Function and Work of the Commercial Agency,” in Credit and Collections: The Factors Involved and the Methods Pursued in Credit Operations, ed. Zimmerman, T. J. (Chicago, 1904), 47.
64 Norris, , R. G. Dun, 93–94; Lauer, , “From Rumor to Written Record,” 314; and Bruce G. Carruthers and Barry Cohen, “The Mechanization of Trust: Credit Rating in 19th-c. America” (unpublished manuscript). Nor did the ratings, even those for capital worth, reflect hard, standardized data. Many, indeed most of the firms that were rated kept either rudimentary books, or none at all. Without widely used and accepted standards of accounting, individual agents did calculations of net worth on a case-by-case basis. Instructions from the New York office provided general guidance on how to do this, but both the raw data and final figure reflected the judgment of the agent.
65 Patterson, Kelly, “Credit Evaluation and Organizational Context: Decision-Making and R. G. Dun & Co.” (unpublished working paper).
66 Prendergast, , Credit and Its Uses, 151.
67 Indeed, even simply listing a business in a rating book might imply a negative report, and hence be libelous. A subtle hint, intended or not, that received wide circulation could affect the commercial standing of a firm. Robbins, , “Commercial Agencies,” 257–64. A & B Moog v. R.G. Dun & Co., 1882, Folder 8, Box 3, Cases, 1851–1933, R. G. Dun Collection. Also Erber v. R. G. Dun (1882), 12 Fed Reporter, 526.
68 Olegario, , Culture of Credit, 175–79; 189.
69 Prendergast, , Credit and Its Uses, 183–84, 203. New York apparently passed a law that required merchants who obtained credit by representing that they kept books would be guilty of fraud if they defaulted and could not present the books to the creditor.
70 Ibid., 213.
71 Olegario, , Culture of Credit, 181, 187, 194.
72 Norris, , R. G. Dun, 129, 135. Agency, Mercantile, Detailed Instructions to Reporters and Report Writers on the Arrangement of Reports (New York, 1918), 5.
73 Agency, Mercantile, The Mercantile Agency Reporters' Manual, 2nd ed. (New York, 1902), 1, 7–8, 11.
74 Ibid., 23.
75 Ibid., 20.
76 Massarene, W. R., “How Can We Make Our Reports Shake Hands?” Wagon Wheel (11 1935): 8.
77 Keefe, G., “Reports on Individuals,” Wagon Wheel (12 1935–Jan. 1936): 13.
78 Lassiter, O. L., “The Complete Interview,” Wagon Wheel (08–Sept. 1935), 15.
79 Ibid., 9.
80 For more, see Kenneth Lipartito, “The Narrative and the Algorithm” (unpublished paper).
81 Nevin, John, “The Equal Credit Opportunity Act: An Evaluation,” Journal of Marketing 43 (Spring 1979): 95–104.
82 Hyman, Louis, Debtor Nation: The History of America in Red Ink (Princeton, N.J., 2011), 173–219, notes that feminists argued that shifting credit evaluation to credit histories rather than demographic characteristics was a cure for discrimination, and since women often had less credit history, it was also necessary to track individuals throughout their economic lives.
83 Rule, James, Private Lives and Public Surveillance (New York, 1974), discusses the shift of privacy discourse toward fairness, accuracy and security, and away from the type, amount, or control and ownership of personal information.
84 Privacy Study Group Trip Report Memo, 31 May 1972, Willis Ware Collection, Box 1, Folder 17, Credit Reporting, Charles Babbage Institute, University of Minnesota, Minneapolis, Minn.
85 Capon, Noel, “Credit Scoring Systems: A Critical Analysis,” Journal of Marketing 46 (Spring 1982): 82–91. In 1979 testimony, William Fair argued that race, gender, and religion should be included if they were shown to be valid predictors.
86 Indeed, certain other legislation actually mandated the collection of just this sort of data. For example, the 1968 Consumer Credit Protection Act's Regulation Z required capturing of certain information about open-ended credit—date, amount, brief description of goods or services bought, name, city, and state of vendor.
87 Although the legacy of discrimination and poverty still worked against those with little or no credit history, expanding the availability of credit would, presumably, correct that problem in time. As everyone got access to credit, everyone would have a behavioral pattern of credit use that could serve as the basis for his or her score.
88 See, for example, Kelly, Jeanne, “Your Employer Is Pulling Your Credit! Are You Ready?” 20 11 2012, http://www.huffingtonpost.com/jeanne-kelly/credit-check_b_2161027.html; and “Use of Credit Information in Employment 2012 Legislation,” 6 Mar. 2013, http://www.ncsl.org/issues-research/banking/use-of-credit-info-in-employ-2012-legis.aspx.
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