Mary O’Sullivan A Fine Failure: Relationship Lending, Moses Taylor, and the Joliet Iron & Steel Company, 1869–1888 In this study of lending in the emergence of a modern steel indus- try in the United States, I analyze the evolving interaction between borrowers and lenders in historical context. I show how “relationship lending” (that is, credit allocation in which personal contacts play a major role) can go wrong, despite good intentions at the outset, and that institutional conditions exert an important influence on how lenders and borrowers ne- gotiate conflicts. Particularly important in the case of Moses Taylor and Joliet Iron & Steel Company were the uncertain juris- dictions and political maneuvering that stemmed from structural peculiarities of the U.S. legal system, peculiarities that belie claims of its efficacy for protecting creditor interests. Although this failure of relationship lending might seem to imply negative consequences for economic development, I show that, at least in this case, the opposite interpretation is more compelling. O ver the last twenty-five years, economists and historians have renewed their interest in the long-standing question of the relation- ship between finance and economic development. While some research has focused on the role of securities markets in providing “arm’s- length” finance, scholars have also addressed “relationship lending” in which personal contacts play an important role in the allocation of credit. Some economists emphasize that relationship lending allows The author would like to acknowledge the excellent suggestions and criticism she received on this article from Patrick Fridenson, Ed Balleisen, Walter Friedman, and two anonymous re- viewers for this journal. She also appreciates the helpful comments she received at seminars where earlier versions of this article were presented and, in particular, from David Chambers, Bill Janeway, Brian Cheffins, and other participants in Cambridge University’s Financial History Seminar Series; attendees of the Journée Suisse d’Histoire Economique et Sociale in June 2013; and her colleagues and Masters’ students at the Paul Bairoch Institute of Economic History at the University of Geneva. Business History Review 88 (Winter 2014): 647–679. doi:10.1017/S0007680514000701 © 2014 The President and Fellows of Harvard College. ISSN 0007-6805; 2044-768X (Web). terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0007680514000701 Downloaded from https://www.cambridge.org/core. IP address: 54.162.69.248, on 02 Jun 2020 at 00:42:15, subject to the Cambridge Core