Bad Credit, No Credit?

BRIAN: From the Virginia Foundation for the Humanities, this is BackStory with the American Backstory hosts.

ED: Welcome to the show. I’m Ed Ayers, and I’m here with Brian Balogh.

BRIAN: Hey, Ed. And Peter Onuf.

PETER: Hey, Ed.

ED: In 1855, a New York City office received a tip from rural Virginia. It concerned a local fellow named Robert Brown.

SCOTT SANDAGE: October 16, 1855. Brown is one of nature’s best sons that takes things as they are and does not push about anything. We do not mean that he is a lazy or slovenly man– no. He is a nice, good gentlemen– a little liable to be imposed on by sorry men that profess to be gentleman.

ED: This trip was duly noted in tiny handwriting on one of the pages of an enormous folio volume. Six months later, there was another tip.

SCOTT SANDAGE: They report that he has a large land and Negro holder– meaning he owns a lot of land and he owns a lot of slaves. He’s an extravagant liver, much in debt– considered very good for debts, indeed. He is considered rich, high-minded, and honorable, but spends more than he makes.

ED: Every six months, another update would arrive concerning the personal and business dealings of Robert Brown. A little over two years after that first report, the central office received this notice.

SCOTT SANDAGE: To my surprise, he has failed. I knew he was in debt, but I had no idea he owed one fourth as much as he does.

ED: Now, this reports dry up during the Civil War, but a few years later, they pick up again.

By the 1980s, it seems business had turned very much south for Robert Brown.

SCOTT SANDAGE: In business some two years, no capital known of, has always been unsuccessful. Character very good, capacity moderate. Caution advised. And then the final report in 1880– no means. Advise caution.

ED: Our reader here is Scott Sandage, an historian who has spent many hours combing through records like these. You see, Robert Brown was hardly the only American whose profile was being carefully compiled in six-month installments.

Many miles away, tens of thousands of Americans were also being closely watched by people in their communities. People in the employ of an outfit called Tappan’s Mercantile Agency. It was the nation’s first credit rating company.

SCOTT SANDAGE: And this is the origin of what we all live in terror of– this is going into your permanent record, young man. And Robert Brown’s permanent record shows that although he has a great approach to life and is a gentleman in 19th century terms, he’s just not a good businessman.

BRIAN: In June of this year, Americans learned about two previously secret National Security Agency programs– programs that collect and store massive amounts of data about our cellphone and internet communications.

Ever since, there’s been a lot of debate about whether these sorts of surveillance programs are necessary for our well-being or whether they cross a line.

PETER: And so today on the show, we’re going to push this question back through time. How did earlier generations keep tabs on one another, and how much resistance was there? We’ve got stories about a census showdown, vigilante spies, and a data miner in Virgina who made it his mission to separate black from white.

ED: We’ll begin with the story of Lewis Tappan. Now, Tappan was a New York merchant and a prominent abolitionist who lost his business the panic of 1837. He discovered that the people who owed him weren’t good for the money because the people who owed them couldn’t collect their debts, and so on.

And so Tappan got to thinking. If he could somehow figure out who was likely to be a deadbeat, he could sell that information to other businessmen and they would all be less likely to fail in a future panic.

Scott Sandage explained how this idea would become the business model for that mercantile agency we were hearing about a few minutes ago. Tappan started out by relying on eyewitness testimonies from a few abolitionist friends in a handful of cities.

SCOTT SANDAGE: By 1850, nine years into his business, he has 2,000 correspondence in just about every town in America. And their job was to send in reports on particular inquiries about particular people.

ED: Now, this is very genteel language– his correspondence with inquiries.

SCOTT SANDAGE: Yeah. Eventually they’re called agents, but initially he refers to them as correspondents in a journalistic sense. These are correspondents reporting from the field.

ED: And they really are doing investigations of their neighbors, right?

SCOTT SANDAGE: To whatever degree they are inclined to do so. There are, at the beginning, no guidelines for them what is relevant and what is not relevant. You get a real mixture of local gossip, inside information, personal habits.

ED: Let’s say you were a subscriber to this. How would you actually find out what you paid for?

SCOTT SANDAGE: You had to go to the offices of the Mercantile Agency, which were behind Wall Street in New York City. And you went in and what you saw was a long row of very high 19th century Ebenezer Scrooge type desks.

And behind each of those desks was a clerk. And when you came to the head of the line, you would fill out what was called an agency ticket of inquiry. And the clerk would hand it to a page boy, who would then skedaddle into the stacks, which you could see row upon row, shelf upon shelf, of these immense red leather books, that the page boy would then bring and plop it down on the Ebenezer Scrooge desk, and it would thump like a family Bible.

And it would be opened to the precise page where the information on the person you were seeking could be found. They did not provide written copies of the report. They were, from the very beginning, leery of libel.

So they would read you the information, and you were permitted to take notes, if you wished.

ED: So this sounds even scarier than reading your credit report on freecreditreport.com, then. You’re being read with sort of Charles Dickens like glee as your character is failing.

SCOTT SANDAGE: And the thing is, it could be read to others, but not to you. You had no right to know what information there was about you. You had no way of knowing whether it was correct or incorrect. And if it proved to be incorrect, you had no way of forcing the company to change what it had written about you.

ED: So what might one of these reports sound like, Scott?

SCOTT SANDAGE: This is a report from J. M. Phelps in Oak Grove, Virginia, who, in 1855, is a large land and Negro holder, again. And the reporter says, I suppose he is good for what he owes and perhaps a good deal more, but any man that gambles and drinks– you know how far he ought to be trusted.

A few years later, the reporter is clearly annoyed that he has not yet failed since morally he is bound to fail. July, 1857. Generally drunk and gambles, it is said. Credits sinks, but he is yet good for his debts. Better make him pay lest he fail without doing so.

ED: So business had been going on for centuries without this system. What happened in America in the 1830s that made this come about?

SCOTT SANDAGE: Well, we’re in the time of American history when people began to know what a stranger was. People began to encounter strangers on railroad cars, in cities, on steamboats.

And strangers were people that didn’t really enter your mind in earlier times of American history. The transportation revolution, the communications revolution, and the various financial and business revolutions that were happening made it more and more likely that you would not only meet or encounter strangers, but that you would have to get involved with strangers, particularly if you were a businessman.

If you were a wholesaler in New York City, you’ve got to sell to retailers in Wisconsin, and you do not have any of the traditional ways of sizing that person up as trustworthy or not trustworthy. So–

ED: And they certainly can’t ask a friend what do you think?

SCOTT SANDAGE: Right, because they don’t know any friends.

ED: Exactly.

SCOTT SANDAGE: So business has moved beyond the realm of kith and kin and community. We were now seeing confidence men and forgers and swindlers of all types, and so there really needed to be a middle man who would collect and vet to the degree possible information and make it available in a systematic fashion.

ED: And yet we know there was a lot of people, for pretty obvious reasons, who pushed back against this system, right? Can you tell us what that reaction was like?

SCOTT SANDAGE: Many people– probably most people– were quite happy about it. Others, including people who felt injured by the system or feel wronged by the system spoke out against it, wrote editorials, filed lawsuits.

The editorial that I thought might interest you the most is from a Cincinnati, Ohio paper called The Penny Press. And this was published on September 15, 1859.

The headline is Espionage at Home and Abroad. “A statement has been going the circuit of the newspapers that since Napoleon III has declared a general amnesty to all political offenders, the system of espionage is as rife as ever in France.”

“In short, that there is a policeman in almost every house and people here are correspondingly shocked at this fact. Do they not know that a system of espionage just as despotic and perhaps more potent is exercised at our own doors of which they never think of complaining?”

“By means of the mercantile agencies, the spy system is ramified throughout the whole country. The most secret actions of men– not alone in mercantile matters– but in the private life of the merchant himself are recorded on the books of those agencies and open to the inspection of whoever pays for the privilege.”

“The espionage of the mercantile agencies can blast the prospects of a merchant and ruin his character forever. The espionage of the French emperor cannot do more.”

ED: Wow. That’s amazing.

SCOTT SANDAGE: The response of the company to the push back was essentially to say, our correspondents are the finest men in every community in America. We take a very great care to ensure the confidentiality and control of the information that we collect.

And essentially they were saying trust us. We have a good purpose in mind to make doing business safer for everyone, and we are a responsible business getting information from responsible people. And we will be treat it accordingly.

ED: Scott Sandage is a professor of history at Carnegie Mellon University. His book is Born Losers, a history of failure in America.

BRIAN: It’s time for quick break. When we get back, how J. Edgar Hoover’s passion for the card catalog reshaped the FBI.

ED: You’re listening to BackStory. We’ll be back in a minute.