History of Credit in America

CHAPTER 1, LESSON 2

NAME DATE
Kai Walters 08-29-2023

DIRECTIONS
Follow the instructions for each section below.

HISTORY
1. Write a paragraph summarizing the history of credit and debt in America.
In the 1920's, banks only loaned money by charging huge interest rates, which was illegal so most
stayed out of credit. Loan sharks were small groups of people who would loan money to people
who were desperate and needed money, but this practice wasn't socially acceptable. After the first
world war, there was a 10-year old economic increase. Everyone wanted the new products but
didn't have the money to purchase them. Since the demand for these products were in such high
demand, credit laws were softened and anyone could get credit. Then, the stock market crashed
which lead to the Great Depression, leaving millions of people jobless. After World War II, it created
a lot of jobs and people got back on their feet and the economy strengthened. Once again people
became comfortable with borrowing money and debt.

RECALL
2. What legislative program established during the Great Depression helped shape
consumer lending policies and convinced commercial banks that consumer credit
could be a profitable industry? How was the program intended to help consumers?
The New Deal was the legislative program established during the Great Depression that helped
shape consumer leasing policies and convinced commercial banks that consumer credit could be a
profitable history. It was intended to help Americans regain their financial footing for their mortgage
and home loans.

EXPLAIN
3. Explain why using credit to buy products and services wasn’t common before 1920.
Using credit to buy products and services wasn't common before 1920 because it was illegal for
loan sharks to charge high interest rates to make a profit.

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 History of Credit in America
CHAPTER 1, LESSON 2

DRAW CONCLUSIONS
4. What was the major financial difference between post-World War II borrowers and
borrowers after 1970?
The majoy financial difference between post-World War II borrowers and borrowers after 1970 is
that post-WWII borrowers borrowed when the economy rose again. Loan sharks loaned more cash
and borrowers took care of it. After 1970, borrowers continued to borrow as their parents had, with
the exception that they were not required to work well-paying jobs in the postwar period.

CAUSE AND EFFECT

5. What effects did the government response to the Great Depression have on the credit
industry?
The government's response to the Great Depression had a long-lasting and positive impact on the
credit industry. It created home loans and mortgages and persuaded commercial banks that
consumer credit could be profitable.

6. What effect did the post-war era have on consumer borrowing habits?
The effect the post-war era had on consumer borrowing habits are that it made the American
Dream and Americans borrowed in light of the fact that they accepted their salaries would grow in
the future and they were correct. After World War II, borrowing became common as financial
institutions extended more loans and borrowers returned those loans.

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 History of Credit in America
CHAPTER 1, LESSON 2

RESEARCH
7. Conduct research on and write summaries for the following New Deal policies.
Remember:
» Be sure to use three reputable, reliable, and recent sources in your research.
» The focus of your research is to summarize the purpose of each policy.
» Your research should also evaluate the common focus of each agency.

FEDERAL DEPOSIT HOME OWNERS’ FEDERAL HOUSING ELECTRIC HOME

INSURANCE LOAN CORPORATION ADMINISTRATION AND FARM
CORPORATION (FDIC) (HOLC) (FHA) AUTHORITY (EHFA)

The Financial The Home Owners The Federal Housing The EHFA was a
Demonstration of Loan Act laid out a Administration federally owned
1933 was endorsed company that (FHA), an office corporation that was
into regulation by renegotiated one of inside the U.S. established in
President Franklin D. each and every five Department of Delaware (and later
Roosevelt. This home loans on urban Housing and Urban Washington, D.C.) to
regulation makes the private homes. In Development (HUD) boost sales of large
Government Store addition, other bills that was laid out by electrical appliances
Protection that were enacted the National Housing like refrigerators,
Partnership (FDIC), after the Hundred Act on June 27, stoves, and hot water
by a wide margin the Days addressed 1934, to work with heaters to low and
most dubious agricultural issues home funding, further moderate-income
component of the and offered develop home Americans. It offered
rule. The law set up assistance to the finance, and increase financing backed by
a Transitory Asset working poor and the work in the the government that
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