Industrial Borrowing by the New England Textile Mills, 1840–1860, A Comment

Lance E. Davis, writing in the March 1960 issue of The Journal of Economic History, found that comparatively low interest rates were paid by eight “Massachusetts-type” cotton textile mills on loans from 1840 to 1860. These firms were voracious borrowers throughout the period, and the textile industry as a whole was a major user of credit. Davis attributed the continued low interest rates primarily to well-enforced usury laws and to the influence of nonprofit lending agencies, with occasional references to effects of the New York money market (not important before 1853). Many other factors—for example, the Tariff of 1846, removing protection from important classes of cotton textiles, die general business cycle, technological changes, alternative investments in railroads and other industries, the relation of increased savings to increased investment demands—should all be explored for an adequate explanation. Of these factors, only the general business cycle is taken up by Davis in a brief reference. The purpose of this note is to suggest that interlocking directorates between financial and textile firms rather than usury laws were probably chiefly responsible for the low rates paid.