Citizen Savers: Family Economy, Financial Institutions, and Public Policy in the Nineteenth-Century Northeast

In the early nineteenth century, few ordinary Americans in the northeastern United States used financial institutions to save and borrow, and account and security holding in these intermediaries was skewed toward the wealthy.¹ By the early twentieth century, a host of financial institutions served small savers and borrowers, and households in all segments of the social structure depended on them in managing the family economy.

This dissertation examines the nineteenth-century origins, development, and regulation of financial institutions that served the needs of ordinary Americans and explores how the emergence of new opportunities to save and borrow reshaped the family economy. It focuses in particular on a group of savings institutions that were established and regulated specifically for smaller savers. These mutual benefit societies, savings banks, and building and loan associations were the first movers to actively develop the organizational capabilities to serve ordinary households, and they laid the foundations for the eventual entry of commercial banks and other intermediaries into personal finance in the late nineteenth century. In the industrializing northeast, ordinary Americans relied on the reserves that they accumulated in mutual savings banks to weather periods ofunemployment and to prepare for old age. They joined benefit societies to insure themselves in case of sickness and death. They used postal savings banks, along with mutual savings banks, to finance migration. They looked to building and loan associations for credit to purchase their homes. And they began to expect their government to regulate these institutions and stabilize them against the uncertainties of the market. In short, savings institutions became an integral part of how ordinary Americans dealt with the risks and pursued the opportunities of the industrial economy.

Despite their importance to the family economy in the industrial era, as well as to the long-term development of personal finance, savings institutions have largely slipped through the disciplinary cracks between economic and social history. Though work in financial history has flourished, business and economic historians have devoted little recent attention to savings institutions or to the broader questions they raise about the novel organizational, political, and economic arrangements that drove the expansion in access to financial institutions for ordinary citizens.² One of the reasons for the lack of attention by business historians likely lies in the limited role of savings institutions in nineteenth-century enterprise finance— hence, their peripheral position in the framework through which historians usually conceive the role of the financial system in economic development.³ Yet, to the extent to which the history of financial systems raises a different set of developmental concerns—specifically, how access to opportunities for personal saving and borrowing expanded household capacity to manage risks and pursue opportunities—an appreciation of the role of savings institutions is central to our understanding of long-term changes in standards of living.

Social historians, of course, have long focused attention on institutional responses to the novel uncertainties and opportunities of the market economy and to the effects of these institutions on household welfare. They have chronicled the emergence in the nineteenth century of what Michael Katz has aptly called "the institutional state"— the wave of organization building (including schools, asylums, hospitals, poorhouses, etc.) designed in part to help ordinary citizens manage the disruptions created by the quickening pace of economic development.⁴ Yet social historians have paid relatively little attention to the contemporaneous development of savings institutions, despite the fact that the organizational innovations and legal supports that allowed for the creation of new opportunities for personal saving and borrowing constituted one of the most important forms of organized provision for the nondependent population.⁵ For the many who lived between dependent indigence and relative affluence, savings institutions provided an important new way to manage the personal risks and opportunities one encountered in the industrial economy.

I argue that historians should understand savings institutions as an integral part of the broader development of nineteenth-century public policies and institutions that sought to promote household welfare while discouraging public dependence. Policymakers and political economists reasoned that the creation of stable, well...