Change Agents: Early Days and Firsts

88. Arthur J. Morris 1901

The Man With the Plan

You may know Arthur J. Morris 1901 as the namesake of the UVA Law Library. But did you know Morris was the first to extend widespread consumer credit in the United States via a system of banks?

Morris Plan Banks, established in 1910, provided an alternative to pawnbrokers and loan sharks for low- and moderate-income individuals. The noncollateralized loans helped many borrowers establish themselves or get through tough times. The plan also pioneered automotive financing and credit life insurance.

“Every day I meet people who say my father and my grandfather got started with the Morris Plan,” Morris told The New York Times in 1971, at age 90.

Three out of five people in the U.S. borrowed from a participating bank during the Great Depression, Morris told the newspaper.

At the plan’s peak, just before World War II, 176 lenders participated in the network.

The idea of installment credit was nothing new. For decades, companies had sold their products to buyers who couldn’t pay in one lump sum. Yet higher-ticket items, such as houses and cars, were harder to come by for the economically challenged. Likewise for them, the cost of starting a business could be daunting, the impact of a catastrophic family illness too much to bear financially.

Morris provided a solution in the absence of collateral. Requiring a steady job and co-signers of similar earning power, along with satisfactory answers to some questions concerning stability and character, proved to be a successful formula.

While there were early critics of the credit plan, just as there are of credit today, relatively few borrowers defaulted, according to the Law School’s Special Collections, which houses Morris’ papers. Morris argued that most people in the early century were eager to be debt-free, in contrast to the modern maxed-out consumer.

When he applied to the Virginia Corporation Commission to charter his first bank, Morris’ idea was strange and rife for rejection.

“I have carefully considered your application for a charter for your hybrid and mongrel institution,” Judge Robert R. Prentiss, the chairman of the commission, wrote in response to the charter request. “Frankly, I don’t know what it is. It isn’t a savings bank; it isn’t a state or national bank; it isn’t a charity. It isn’t anything I ever heard of before. Its principles seem sound however, and its purpose admirable. But the real reason that I am going to grant a charter is because I believe in you.”

On April 1, 1910, the bank opened, backed by $20,000 of Morris’ own money and additional funds from associates, according to the Law Library.

The credit boom was born.

90. Stanley Forman Reed 1908

The New Deal Defender’s Ascent to the Supreme Court

Stanley Forman Reed 1908, who studied law at the University of Virginia but did not obtain a law degree, was an associate justice at the Supreme Court from 1938-57. In that capacity, he played a key role in numerous cases, including those affecting racial justice. He wrote the majority opinion in Smith v. Allwright, which struck down a Texas law requiring would-be voters in Democratic primaries to be white in order to cast a ballot.

Lesser known are his efforts that helped pull the nation out of the Great Depression.

As general counsel of the Reconstruction Finance Corp. under President Franklin D. Roosevelt, Reed supported the adminis­tration’s monetary policies following the Crash of 1929.

The ability to redeem deflated paper money for gold at its pre-Depression value was causing a run on U.S. gold reserves. Roosevelt pulled the nation off the gold standard, and asked the Reconstruction Finance Corp. to purchase gold at an inflated cost.

Congress, in tandem, voided clauses in public and private contracts that permitted gold to be redeemed.

Creditors sued, and Reed assisted the attorney general with written and oral arguments in Norman v. Baltimore & Ohio Rail­road Co., defending the legality of the government’s actions.

The successful outcome resulted in Reed’s subsequent ap­pointment as solicitor general, where he continued to defend New Deal policy, and in his later nomination to the Supreme Court.

“In 1935, Reed became solicitor general of the United States at a time when several of FDR’s New Deal programs were being challenged in the high courts,” according to a UVA Law Library biography of Reed. “As a result, Reed once argued six major cases before the Supreme Court in a two-week period. Although Reed lost several of these early cases, by 1937 he secured major victories in several cases, including the Supreme Court’s uphold­ing of minimum wage laws, the National Labor Relations Act and the taxation power of the Social Security Act.”

Virginia educated two future justices of the U.S. Supreme Court. The other, James Clark McReynolds 1884, wrote the dis­sent in the Gold Clause Cases, and was part of the “Four Horse­men” bloc that worked to strike down New Deal programs. McReynolds was nicknamed “Scrooge” by a journalist because of his infamous temperament.

Current Alumni Members of the Federal Bench