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³ The respective shares of each type of electronic payment as of 2008 are as follows: credit (26 percent of volume, 18 percent of transactions), debit (17 percent, 24 percent), prepaid (2 percent, 4 percent), and other preauthorized and remote payments (12 percent, 6 percent). The Nilson Report, no. 939 (Dec. 2009) and no. 729 (Dec. 2000).

⁴ D'Silva, Vijay, “Payments in Flux: Megatrends Reshape the Industry,” in Moving Money: The Future of Consumer Payments, Brooking Institution, ed. Litan, Robert E. and Baily, Martin N. (Washington, D.C., 2009)Google Scholar.

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⁸ Later amendments expanded disability coverage further. See a chronology of the Social Security Administration at http://www.ssa.gov/history/chrono.html (accessed Aug. 2010).

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¹⁵ Cohen, A Consumer's Republic, 195.

¹⁶ Federal Reserve Board, Survey of Consumer Finances (Washington, D.C., 1950)Google Scholar.

¹⁷ In short, capitalism needs consumers, and production-oriented institutions were poised to create demand however they could. Schor, Juliet B. and Holt, Douglas B., “Introduction: Do Americans Consume Too Much?” in The Consumer Society Reader, ed. Schor, Juliet B. and Holt, Douglas B. (New York, 2000)Google Scholar; Strasser, Susan, Satisfaction Guaranteed: The Making of the American Mass Market (New York, 1989)Google Scholar.

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²⁰ Schor and Holt, “Introduction: Do Americans Consume Too Much?”

²¹ Monti, The American City; Calder, Financing the American Dream; Cross, Gary S., An All-Consuming Century: Why Commercialism Won in Modern America (New York, 2000)Google Scholar; Martin, John Levi, “The Myth of the Consumption-Oriented Economy and the Rise of the Desiring Subject,” Theory and Society 28, no. 3 (1999): 425–53CrossRefGoogle Scholar, McCracken, Grant, Culture and Consumption: New Approaches to the Symbolic Character of Consumer Goods and Activities (Bloomington, Ind., 1988)Google Scholar; Trentmann, Frank, “Beyond Consumerism: New Historical Perspectives on Consumption,” Journal of Contemporary History 39, no. 3 (2004): 373–401CrossRefGoogle Scholar. See also Zelizer, Vivana, “Culture and Consumption,” in The Handbook of Economic Sociology, ed. Smelser, Neil J. and Swedberg, Richard (Princeton, 2005), 331–54Google Scholar.

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²³ Cohen, “From Town Center to Shopping Center.” See also Monti, The American City.

²⁴ Cohen, A Consumer's Republic; Ownby, Ted, American Dreams in Mississippi: Consumers, Poverty, and Culture, 1830–1998 (Chapel Hill, N.C., 1999)Google Scholar; Weems, Robert E. Jr., “The Revolution Will Be Marketed: American Corporations and Black Consumers during the 1960s,” in Consumer Society in American History: A Reader, ed. Glickman, Lawrence B. (Ithaca, N.Y., 1999)Google Scholar.

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²⁶ Bureau of Economic Analysis, Flow-of-Funds data. The savings rate, however, remained fairly steady during this time, averaging 8.90 percent between 1950 and 1986, after which it began to decline steadily.

²⁷ Cohen, A Consumer's Republic; Harrington, Pop Finance.

²⁸ Miller, Merton, Financial Innovations and Market Volatility (London, 1991)Google Scholar.

²⁹ The old adage “There's nothing new under the sun” has a strong element of truth. Merton writes about an innovation spiral, in which one innovation creates the platform on which others build so that little is truly original. Tufano provides examples of this spiral, and of forgotten innovations from earlier times that are uncannily like the newest of financial products. For example, the appendix from the first edition of Graham and Dodd's investing classic, Security Analysis, lists over two hundred security innovations, many of which resemble the complex securities designed in the 1980s and 1990s. Merton, Robert C., “Financial Innovation and Economic Performance,” Journal of Applied Corporate Finance 4, no. 4 (1992)CrossRefGoogle Scholar; Tufano, Peter, “Financial Innovation,” in Handbook of the Economics of Finance, ed. Constantinides, George, Harris, Milton, and Stulz, Rene (Amsterdam, 2003)Google Scholar; and Graham, Benjamin and Dodd, David, Security Analysis, 6th ed. (New York 2009, 1st ed. 1934)Google Scholar. Ferguson, in The Ascent of Money, likens developments in the financial sector to evolution in nature, where weaker institutions die out and new types of businesses, growing out of speculation as much as economic scale and scope, push their way in.

³⁰ The idea for an automated file transfer system came about in the early 1970s. The Federal Reserve helped to consolidate smaller programs into the nationwide clearinghouse, which formed in 1974. See the Federal Reserve Web site: http://www.newyorkfed.org/aboutthefed/fedpoint/fed31.html.

³¹ W. Scott Frame and Lawrence J. White, “Technological Change, Financial Innovation, and Diffusion in Banking,” Federal Reserve Bank of Atlanta working paper 2009–10 (2009).

³² Electronic Payments Network, “The Electronic Payments Network and the ACH: A History” (New York, n.d.)Google Scholar, on-line at http://www.epaynetwork.com/cms/documents/001743.pdf; Garcia-Swartz, Daniel D., Hain, Robert, and Layne-Farrar, Anne, “The Move toward a Cashless Society: A Closer Look at Payment Instrument Economics,” Review of Network Economics 5, no. 2 (2006)CrossRefGoogle Scholar.

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³⁴ “The Electronic Payments Network and the ACH.”

³⁵ Investment Company Institute, 2009.

³⁶ Data from http://www.nyxdata.com/factbook, visited 4 May 2010.

³⁷ Fink, Matthew, The Rise of Mutual Funds: An Insider's View (New York, 2008)CrossRefGoogle Scholar.

³⁸ Federal Reserve Board, “Flow of Funds Accounts of the United States,” series Z.1 (10 Mar. 2011). These figures include all assets of households and nonprofits.

³⁹ The fixed-rate, long-term, fully-amortizing mortgage was made possible through the Home Owner's Loan Corporation established in 1933 (and the precursor to Fannie Mae) and the National Housing Act of 1934 (which created the Federal Housing Administration). Prior to the Depression era, mortgages commonly were only available for a five-to-ten year term and required a large payment toward principal at the end of the term. Most also had variable rates. These loans all but required that they be refinanced at the end of the term. Green, Richard K. and Wachter, Susan M., “The American Mortgage in Historical and International Context,” Journal of Economic Perspectives 19, no. 4 (2005): 93–114CrossRefGoogle Scholar; Morris D. Crawford, “Types and Sources of Home-Mortgage Financing,” Analysts Journal (June 1955).

⁴⁰ Title VIII of the St. Germain Depository Institutions Act of 1982 made it possible for mortgage interest rates to be adjusted or renegotiated. Green and Wachter, “The American Mortgage.” See also William H. Lacy, “Innovation Is a Key to Banks' Meeting Home-Financing Needs,” ABA Banking Journal (May 1982): 118–21.

⁴¹ “Characteristics of Outstanding Residential Mortgage Debt: 2006,” Mortgage Bankers Association (MBA) Research DataNotes, Jan. 2007, available at: http://www.mortgagebankers.org/files/Bulletin/InternalResource/47210_DataNoteCharacteristicsofOuttandingResidentialMortgageDebtfor2006.pdf.

⁴² See Souphala Chomsisengphet and Anthony Pennington-Cross, “The Evolution of the Subprime Mortgage Market,” Federal Reserve Bank of St. Louis Review (Jan./Feb. 2006). Available at: http://research.stlouisfed.org/publications/review/06/01/ChomPennCross.pdf.

⁴³ Federal Reserve Bank of San Francisco, “The Subprime Mortgage Market: National and Twelfth District Developments,” Annual Report, 2007. Available at: http://www.frbsf.org/publications/federalreserve/annual/2007/subprime.pdf. See also Chomsisengphet and Pennington-Cross, “The Evolution of the Subprime Mortgage Market,” which reports slightly different numbers, stating that the subprime market share of all originations went from 10.2 percent in 1995 to a peak of 14.5 percent in 1997 and then down to 8.4 percent in 2001.

⁴⁴ Schlosser, Michel and Tardy, Gérard, Les cartes de crédit (Paris, 1971)Google Scholar.

⁴⁵ Recollections by Wallis B. Hocker, Retired Credit Manager, 1989, responses to clarifying questions, 6–7, JC Penney Corporate Records, Southern Methodist University, Dallas, Tex.

⁴⁶ Lelia Easson, “New Developments in Consumer Credit,” Journal of Home Economics (Dec. 1959): 847.

⁴⁷ E. J. Kersting, Credit Cards: Thirty Days to Reality (Aug. 1967), box 35, folder 4, R obert L. D. Morse Papers, Kansas State University, Manhattan, Kans. [hereafter Morse papers].

⁴⁸ Evans, David S. and Schmalensee, Richard, Paying with Plastic: The Digital Revolution in Buying and Borrowing (Cambridge, Mass., 1999)Google Scholar.

⁴⁹ Schlosser and Tardy, Les cartes de crédit, 13.

⁵⁰ Geoffrey R. Gerdes and Jack K. Walton II, “The Use of Checks and Other Noncash Payment Instruments in the United States,” Federal Reserve Bulletin (Aug. 2002); Federal Reserve Board, The 2004 Federal Reserve Payments Study, Analysis of Noncash Payments Trends in the United States: 2000–2003 (Washington, D.C., 2004)Google Scholar. The number of check payments is estimated to have peaked in 1995 at 49.5 billion. See Quinn, Stephen and Roberds, William, “The Evolution of the Check as a Means of Payment: A Historical Survey,” Economic Review 4 (2008): 23Google Scholar. Data provided by the Nilson Report no. 939 (Dec. 2009) show that check volume dropped below 50 percent of the total payment volume (including cash) as of 1999. Between 2000 and 2003, the fraction of check-based transactions dropped from 58 percent to 45 percent, and the volume of these payments dropped from 66 percent to 55 percent of total volume.

⁵¹ Richard Cantor and Frank Packer, “The Credit Rating Industry,” Federal Reserve Bank of New York Quarterly Review (Summer–Fall 1994); Hidy, Ralph W., “Credit Rating before Dun and Bradstreet,” Bulletin of the Business Historical Society 13, no. 6 (1939)CrossRefGoogle Scholar; Madison, James H., “The Evolution of Commercial Credit Reporting Agencies in Nineteenth Century America,” Business History Review 48, no. 2 (1974)CrossRefGoogle Scholar; Olegario, Rowena, “Credit Reporting Agencies: A Historical Perspective,” in Credit Reporting Systems and the International Economy, ed. Miller, Margaret J. (Cambridge, Mass., 2003)Google Scholar; and Wyatt-Brown, Bertram, “God and Dun & Bradstreet,” Business History Review 40, no. 4 (1966)Google Scholar.

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⁵⁶ Randall S. Krosner, “The Motivations Behind Banking Reform,” Regulation (2001): 36–41.

⁵⁷ Esty, Ben, Tufano, Peter, and Headley, Jonathan, “Bancone Corporation: Asset and Liability Management,” Journal of Applied Corporate Finance 7 (1994): 33–51CrossRefGoogle Scholar.

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⁵⁹ Smith, Barney & Co. merged with Harris, Upham & Co. in 1987; was acquired by Primerica, a public financial services company, in 1993; became a wholly owned subsidiary of Travelers Group, in 1997; was combined with Saloman, Inc.; and then in 1998 became part of Citigroup. See Citigroup Web site: http://www.citigroup.com/citi/corporate/history/smithbarney.htm.

⁶⁰ For an “obituary” of Sears-Allstate-Coldwell Banker-Dean Witter-Discover, see J. Feder Barnaby, “Sears, Returning to its Roots, is Giving up Allstate,” New York Times, 10 Nov. 1994.

⁶¹ For a brief summary of Fannie Mae's history, see the Funding Universe Web site: http://www.fundinguniverse.com/company-histories/Fannie-Mae-Company-History.html.

⁶² Loutskina, Elena and Strahan, Philip E., “Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Originations,” Journal of Finance 64, no. 2 (2009)CrossRefGoogle Scholar.

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⁶⁶ Ashcraft, Adam B. and Schuermann, Til, “Understanding the Securitization of Subprime Mortgage Credit,” in Staff Reports, Federal Reserve Bank of New York (New York, 2008)Google Scholar; Antje Berndt and Anurag Gupta, “Moral Hazard and Adverse Selection in the Originate-to-Distribute Model of Bank Credit” (2008), available at Social Science Research Network (SSRN): http://ssrn.com.ezp-prod1.hul.harvard.edu/abstract=1290312; Coval, Joshua, Jurek, Jakub, and Stafford, Eric, “The Economics of Structured Finance,” Journal of Economic Per spectives 23, no. 1 (2009)Google Scholar; Matias Hoffman and Thomas Nitschka, “Securitization of Mortgage Debt, Asset Prices, and International Risk Sharing,” Institute for Empirical Research in Economics, University of Zurich, Working Paper Series (2008); Loutskina and Strahan, “Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Originations”; Mayer, Christopher, Pence, Karen, and Sherlund, Shane M., “The Rise in Mortgage Defaults,” Journal of Economic Perspectives 23, no. 1 (2009)CrossRefGoogle Scholar; Atif Mian and Amir Sufi, “The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis,” National Bureau of Economic Research (NBER) working paper 13936 (2008); Amiyatosh Purnanandam, “Originate-to-Distribute Model and the Subprime Mortgage Crisis,” American Finance Association Atlanta Meetings Paper, 2010, available at SSRN: http://ssrn.com.ezp-prod1.hul.harvard.edu/abstract=1167786; Shiller, Robert J., The Sub prime Solution: How Today's Global Financial Crisis Happened and What to Do about It (Princeton, 2008)Google Scholar.

⁶⁷ Evans and Schmalensee, Paying with Plastic.

⁶⁸ Mann, Ronald J., Charging Ahead: The Growth and Regulation of Payment Card Markets (Cambridge, U.K., 2006), 25–27CrossRefGoogle Scholar.

⁶⁹ Richard L. D. Morse, statement before the Subcommittee of the Kansas Senate Committee on Financial Institutions, 18 Dec. 1969, 2, box 212, folder 12, Morse papers.

⁷⁰ Mandell, The Credit Card Industry.

⁷¹ Arthur Morris, founder of the Morris Plan consumer lending banks, claims to have coined this term. It was also used by Henry Wolff, an early advocate for the adoption of credit unions. Arthur J. Morris, “Fifty Years Creating and Developing the Morris Plan System of Consumer Bank,” speech to the Consumer Bankers Association, 25 Oct. 1956, box 17, speeches and writings file, 1918–60, Arthur J. Morris papers, Library of Congress, Washington, D.C.

⁷² The Survey of Consumer Finances was conducted in a different form prior to 1989. The data from these earlier years are not reliable for use in a time series and therefore are not included here.

⁷³ Federal Reserve Board, Survey of Consumer Finances, various years.

⁷⁴ Ibid.

⁷⁵ Cohen, A Consumer's Republic; U.S. Riot Commission (more commonly known as the Kerner Commission), Report of the National Advisory Commission on Civil Disorders (Washington, D.C., 1968)Google Scholar.

⁷⁶ Caplovitz, David, The Poor Pay More: Consumer Practices of Low Income Families (New York, 1963)Google Scholar; Kerner Commission, Report of the National Advisory Commission on Civil Disorders, 7.

⁷⁷ Kornbluh, Patricia Ann, “A Right to Welfare? Poor Women, Professionals, and Poverty Programs, 1935–1975,” PhD diss., Princeton University, 2000Google Scholar; Sachs, Andrea Jule, “The Politics of Poverty: Race, Class, Motherhood, and the National Welfare Rights Organization, 1965–1975,” PhD diss., University of Minnesota, 2001Google Scholar.

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⁸⁰ Zelon, Laurie D., “Equal Credit Promise or Reality?” Harvard–Civil Rights–Civil Liberties Law Review 11 (1976)Google Scholar; Davis, Flora, ed., Moving the Mountain: The Women's Movement in America since 1960 (Champaign, Ill., 1999)Google Scholar.

⁸¹ Coalition, The Urban, Consumer Credit and the Low Income Consumer: Preliminary Report (Rockville, Md., 1969)Google Scholar.

⁸² “Sistershares, Newsletter of the Massachusetts Feminist Federal Credit Union,” 2, no. 1–4 (1976–1977)Google Scholar.

⁸³ This was alleged to be the card companies' intention. Rummel, David, “Secret History of the Credit Card,” in Frontline (Public Broadcasting System, 2004)Google Scholar.

⁸⁴ Calder, Financing the American Dream.

⁸⁵ Moebs Services, Survey (2009).

⁸⁶ MBA, “The Residential Mortgage Market and Its Economic Context in 2007,” 30 Jan. 2007. Available at: http://www.mbaf.org/pdf/2007/Residential%20Mortgage%20Market%20Report%202007.pdf.

⁸⁷ Greenspan, Alan and Kennedy, James, “Sources and Uses of Equity Extracted from Homes,” Oxford Review of Economic Policy 24, no. 1 (2008): 120–44CrossRefGoogle Scholar, available at SSRN: http://ssrn.com/abstract=1154417 or doi:10.1093/oxrep/grn003 (2008).

⁸⁸ Based on LIMRA (a worldwide association of financial and service companies) estimates of U.S. individual life, annualized new premium market share by product, and LIMRA definitions.

⁸⁹ Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits 2007 Annual Survey” (Menlo Park, Calif., 2007)Google Scholar.

⁹⁰ Federal Reserve Board, “Flow of Funds Accounts of the United States,” series Z.1 (10 Mar.2011), supplementary tables L.118b and L.118c.

⁹¹ U.S. Supreme Court, Marquette Nat. Bank v. First of Omaha Svc. Corp., 439 U.S. 299 (1978), no. 77-1265.

⁹² Furletti, Mark, “The Debate Over the National Bank Act and the Preemption of State Efforts to Regulate Credit Cards,” Temple Law Review 77 (2004)Google Scholar.

⁹³ Hacker, Jacob, The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement—and How You Can Fight Back (New York, 2006)Google Scholar.

⁹⁴ The amount of risk consumers take on is also psychologically related, including the fact that we tend not to understand the probability of facing certain risks. See Shiller, The New Financial Order. Also, as our colleague Robert Merton has noted, consumers become comfortable with risks as they increase their (successful) experience with them.

⁹⁵ Rummel, “Secret History of the Credit Card.”

⁹⁶ Bureau of Economic Analysis, “Spendthrift Nation,” Federal Reserve Bank of San Francisco Economic Letter 2005–30 (2005).

⁹⁷ A historical narrative of this change is told by David Tucker in his 1991 book, The Decline of Thrift in America, and is an element of the story of increased household leverage as told in Manning, Robert D., Credit Card Nation: The Consequences of America's Addiction to Credit (New York, 2000)Google Scholar.

⁹⁸ For accounting purposes, appreciation of financial and housing assets does not constitute “savings.”

⁹⁹ Federal Reserve Board Data, Flow-of-Funds Accounts. Includes vacant land.

¹⁰⁰ Global Financial Data on-line database, “S&P 500 Total Return Index” (with GFD extension).

¹⁰¹ Federal Reserve Board, Survey of Consumer Finances, 1960, 1970, and 2007. There is no weighting documentation for these surveys. Data are assumed to be self-weighting.

¹⁰² Federal Reserve Board, Survey of Consumer Finances, 1989–2007.

¹⁰³ Bureau of Economic Analysis.

¹⁰⁴ Federal Reserve Board, “Flow of Funds.”

¹⁰⁵ Credit-card debt from “revolving” credit figures was taken from Bureau of Economic Analysis, Flow-of-Funds data.

¹⁰⁶ Federal Reserve Board, “Consumer Credit Data,” series G.19 (7 Mar. 2011).

¹⁰⁷ Ratio of liabilities to assets in 1950 (Q4) was .068 and in 2009 (Q3) it was .208. Federal Reserve Board, “Flow of Funds.”

¹⁰⁸ Federal Reserve Board, Survey of Consumer Finances, 1960 and 2007.

¹⁰⁹ Reed, Matthew and Cheng, Diane, Student Debt and the Class of 2008 (Berkeley, 2009)Google Scholar.

¹¹⁰ Lusardi, Annamaria, Schneider, Daniel, and Tufano, Peter, “Households @ Risk: A Cross Country Study of Household Financial Risk,” in Papers Presented to the 2010 American Economic Association Meeting (Denver, Colo., 2010)Google Scholar.

¹¹¹ Marianne A. Hilgert, Jeanne M. Hogarth, and Sondra Beverly, “Household Financial Management: The Connection between Knowledge and Behavior,” Federal Reserve Bulletin (July 2003); Annamaria Lusardi and Olivia S. Mitchell, “Financial Literacy and Planning: Implications for Retirement Wellbeing,” Michigan Retirement Resource Center working paper no. 2006-144, 2006; Moore, Danna, “Survey of Financial Literacy in Washington State: Knowledge, Behavior, Attitudes, and Experiences,” Technical Report no. 03-39, Social and Economic Sciences Research Center, Washington State University, 2003Google Scholar.

¹¹² Annamaria Lusardi and Olivia S. Mitchell, “Planning and Financial Literacy: How Do Women Fare?” American Economic Review (May 2008); Annamaria Lusardi and Peter Tufano, “Debt Literacy, Financial Experience, and Overindebtedness,” Harvard Business School working paper, 2008.

¹¹³ See also Ferguson, The Ascent of Money. On page 12 he states, “A society that expects most individuals to take responsibility for management of their own [finances, taxes, homeownership, retirement and health insurance] is surely storing up trouble for the future by leaving its citizens so ill-equipped to make wise financial decisions.”

¹¹⁴ U.S. Bureau of the Census.

¹¹⁵ Sumit Agarwal, John C. Driscoll, Xavier Gabaix, and David Laibson, “The Age of Reason: Financial Decisions over the Lifecycle,” NBER Working Paper no. 13191, 2007.