Magazine article Business Credit

After the Ball

Magazine article Business Credit

After the Ball

Article excerpt

At the end of the 19th Century, the United States was struggling through one of the worst economic epochs in its history. The later half of the 1880s had been primarily a boom time with almost unparalleled expansion and seemingly everybody looking to get rich off the en vogue investment vehicle of the day: rail-roads. Investments quickly grew increasingly riskier. There was little hesitation as financiers raced to carve out their own slice of the railroad pie.

Then the bubble burst.

One-third of all railroads failed. By 1893, overbuilding and the loosening of lending and financing practices to railroad start-ups led to a cataclysm of failures. Banks and lenders found their feet wedged in quicksand and--with a push from the tumbling price of silver--a massive credit crunch rippled its way across the economy. Bankruptcies skyrocketed to historic levels, nearly 500 banks closed their doors and foreign investors dashed to pull their money out of U.S. interests.

Unemployment soared to above 18%. Millions of Americans lost their jobs, their life savings and their homes when they could no longer afford to keep up with their mortgages. The 1890 census had estimated that the minimum total amount of debt Americans shouldered was $11 trillion; an average of $800 per household during an era when the average household income struggled to top $475 a year.

There's little question as to why, during the 1890s, creditor groups pushed Congress to replace the tangled web of state debt collection laws with a uniform bankruptcy code. It was one of the darkest financial times in U.S. history, second only to the Great Depression.

In his final term, President Grover Cleveland was jeered for not doing enough to help struggling Americans. The economy and inflationary concerns took center stage in the 1896 presidential election. Ultimately, Republican William McKinley, Civil War veteran and governor of Ohio, became the 25th President of the United States after defeating William Jennings Bryan. Bryan's main platform tenet was to standardize the value of the dollar to silver instead of the internationally adopted, and McKinley-heralded, gold standard. Bryan espoused that a new silver standard would enable farmers and other debtors to pay off their debts more easily, though the price of silver had been largely deflated. "Goldbug" McKinley won by a landslide.


In response to the turbulent times, on June 23, 1896, in Toledo, OH, 62 businessmen, assisted by the Toledo Chamber of Commerce, formed the National Association of Credit Men, which would eventually become the National Association of Credit Management (NACM). With a vision steeled during the hardships of that era, founder O.G. McMechen sought to create a national organization driven by the motive to protect businesses against fraudulent debtors, to have credit men join forces to share information and to have those credit professionals work together to develop better credit practices. As debt and credit markets continued to be more relied on, he sought to make a stronger industry through unity and providing credit grantors safety in numbers.

Graduation Day

Whether or not the United States is currently in a recession won't likely receive an official label until a few more years down the road. The economic cycle is often one of boom-and-bust, and the downturns in U.S. history are plentiful, dating back to the collapse anchored to William Duer's over-speculation in 1792 in his attempt to take over the Bank of New York. In its short history, this country has survived three depressions--two of them "great"--at least eight recessions and has found its way through more "panics" then there are fingers to count.

Through it all, no matter what party has taken up residence in the White House, business continues and overdue bills still need collecting.

Though the political and economic challenges facing credit managers in today's marketplace may mirror those of more than a century ago, NACM is not the same organization. …

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