Sarah Quinn’s monograph American Bonds. How Credit Markets Shaped a Nation is one of a number of books written in the aftermath of the financial crisis of 2007–08 which explore how the mechanisms of finance and securitization have historically shaped American politics and social life. In particular, Quinn’s study bears resemblance to recent projects by Lawrence Glickman, Free Enterprise. An American History1, and even more so Ian Wray’s No Little Plans: How Government Built America’s Wealth and Infrastructure2, which challenge the myth that in the U.S., due to its cultural commitment to market norms, the government does not actively interfere with the social distribution of wealth. These books show that the official endorsement of free markets and laissez-faire politics should be more properly understood as an effective rhetorical device that coexists with and even glosses over extensive government involvement in economic matters. They thereby call into question dominant narratives about the limited role of government in American society, and the alleged greater effectiveness of market mechanisms. Under their close scrutiny, governments and markets hardly appear as the polar opposites as they are often pictured (particularly by conservatives) in American political discourse.

American Bonds makes its case by tracing the historical evolution of securitization and federal credit programs from the founding era of the United States into the 1960s in order to show how landownership, housing markets, and easy credit have historically driven U.S. public policy in a very effective fashion. For U.S. governments, Quinn argues, credit programs have functioned as “a multipurpose political tool” (p. 2) to ensure economic opportunity for many, while simultaneously avoiding the redistribution of wealth. Credit programs have great advantages over other forms of government action, because they can generate big results at little cost: housing loan guarantees, for instance, do not require any expenditures when issued, and will result in a charge only when a borrower defaults. Yet such guarantees can have great effect by providing a stimulus for the building industry and consumer culture. Extending credit, rather than redistributing wealth through taxation, also appears as a way to effectively govern in a fragmented political system. By tracing the emergence and operation of federal credit programs on different levels, American Bonds shows how government has made modern capitalist markets possible. It makes the case that federal credit programs “have long served as America’s functional equivalent of a European welfare state” (p. 16) while also perpetuating social inequalities, in particular racial inequalities, since they have tended to serve the interest of white Americans and inscribed structural racisms. The book makes visible the bureaucratic, under-the-radar mechanisms by which policymakers resolved political conflicts and established entitlements for specific social groups that often are not recognized as government support, but tend to be framed in terms of “self-help.”

Over the course of ten chapters, Quinn moves from the Revolutionary Era to the 1960s, stopping short of the most recent instantiation of mortgage-backed securities that led to the housing bubble and financial crisis of 2007–08. Setting up the book as a study of the “pre-history of that crisis” (p. 20), it traces almost two centuries of government experimentation with credit instruments, most notably securities, which were instituted to solve political issues, but often unwittingly served as catalysts for new crises. Quinn’s first chapters concentrate on eighteenth- and nineteenth-century government efforts to move credit. In the first decades after the nation’s founding, as the U.S. expanded all over the continent, land grants were a major resource: land could be sold to pay off debts accumulated during the Revolutionary War against Britain; it could also be given in lieu of other payments, e.g. to soldiers for their service. Land grants to railroad companies and settlers helped to foster economic development. Though the Antebellum Period already saw experiments with mortgage bond markets in the South – where complex financial markets were inscribed into the slavery system, including the option to put mortgages on enslaved people – a national credit market and a federal policy of credit distribution did not yet exist.

In the late nineteenth century, during the Gilded Age, the question of how credit and lending should operate became more pressing. As Quinn shows, farmers in the south and west were particularly vulnerable to market fluctuations and were demanding new methods of organizing property and risk, as they were often at the mercy of powerful investors and lenders. The economic problems of the era gave rise to a large populist movement, which pressed for a centralization of political power and ultimately spurred the federal government to get involved in credit markets. In 1916, the government passed the Federal Farm Loan Act, “a policy that overhauled the nation’s system of farm credit distribution and created a completely new network of lending organizations” (p. 69). The program inaugurated the institutionalization of American credit programs, paving the way for the New Deal of the 1930s.

Most influentially in the twentieth century, “residential housing finance became an important strand of the U.S. political economy, not just by moving credit, but also by helping to link homeownership with people’s deepest sense of what it meant to be a successful American” (p. 89). During World War I, the government focused mainly on supporting the symbolic construction of homeownership, e.g. through a national Own-Your-Own-Home campaign. With the New Deal, housing credit programs emerged as a central policy tool. Moreover, the securitization of mortgages – usually imagined today as part of predatory lending schemes by banks during the recent financial crisis – became a cornerstone of the federal housing program through the Federal National Mortgage Association, also popularly known as “Fannie Mae,” which in the 1960s was separated from the government and authorized to finance itself through a kind of government-guaranteed mortgage-backed security. By the 1970s, the contemporary structures of federal credit and securitization had been put into place.

Quinn situates her study in the field of historical sociology, drawing mainly on existing research of individual credit programs in order to synthetize their results and theorize larger social processes, which she traces over an extensive historical period. As she notes, this long view “necessarily trades depth for historical breadth” (p. 19), but provides us with the bigger picture of the relationship between American political institutions and credit markets, and an understanding of the evolution of modern-day credit instruments. Because Quinn covers so much ground, and the book focuses on rather abstract technical details and bureaucratic mechanisms that become more complex as the programs multiply in the twentieth-century, American Bonds is not necessarily an easy read. As a reader interested in political and ideological debates, one may wish at times for more extensive treatment of the political discussions about these programs. Yet a central point of the book is to precisely lay out how the technical logic of bureaucratic mechanisms that are hardly discussed has profound political, social, and economic consequences. By turning our attention to these details, Quinn’s book thus provides us with an important and valuable perspective.

Notes:
1 Lawrence Glickman, Free Enterprise. An American History, London 2019.
2 Ian Wray, No Little Plans. How Government Built America’s Wealth and Infrastructure, London 2020.