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IN PLASTIC WE TRUST

The world changed radically in September, 1958, when Bank of America mailed its first BankAmericards--forerunners of Visa cards--to 60,000 customers in Fresno, Calif. No one had asked for the cards, and no one was quite sure what to do with them. They were such an oddity that people would crowd around a cash register to see someone use one.

The credit cards gave the citizens of Fresno an option they never had: With every purchase--not just those from a few card-issuing department stores--they could choose to pay up at the end of the month or pay in installments, with interest. That choice, which millions mf us now face monthly, was the first shot in the money revolution--the beginning of sweeping changes that have given ordinary Americans credit on demand, high rates of interest on savings, and unending investment opportunities.

In his richly detailed and thoroughly documented A Piece of the Action: How the Middle Class Joined the Money Class, Joseph Nocera chronicles the transformation of personal finance through the stories of the innovators who fomented it. There's John Reed, chairman and CEO of Citicorp, who holds that position--and was able to hold on through tough times--because he led the bank into the highly profitable credit-card business in the '70s and '80s. There's Charles Schwab, whose discount stock brokerage was so appealing to investors that it succeeded despite chronic chaos. There's Edward C. "Ned" Johnson, who built Fidelity Investments into the nation's largest mutual-fund company, and Peter Lynch, his star portfolio manager.

Nocera turns up enough tidbits about these figures to keep his narrative fresh. But even more fascinating are the people who wrought profound changes yet remain relatively obscure. Among them are Joseph Williams of Bank of America, who developed the all-purpose bank-issued credit card, and Dee Ward Hock, who wove the interbank network that made the card as good as cash--and who for years ruled Visa like an emperor.

One of Nocera's quirkiest characters is Andrew Kahr, a stringy-haired management consultant who comes closest of anyone in the money revolution to being a bomb-thrower. Kahr, writes Nocera, "considered the traditions and regulations of American finance irrelevant, since his mind instinctively rearranged things in patterns he found more meaningful." So Kahr, consulting for Merrill Lynch & Co. in the mid-1970s, rethought the custom of organizing people's finances into separate banking and brokerage accounts. He created the cash management account, which encompassed investments, checking, and credit cards.

Looking back, the phenomenally successful CMA seems an obvious development. But to make it work, Kahr had to not only find holes in the regulatory fences separating banking and brokerage but also find banks and brokers willing to challenge the status quo. Nocera tells of an unnamed Merrill higher-up who ordered the young executive charged with promoting it to "sink it in the Atlantic" by spring. But the product prevailed because of its merits and because of the enthusiastic support of then-Chairman--and later U.S. Treasury Secretary--Donald Regan.

Sweeping social and economic changes, Nocera acknowledges, had as much to do with the new order of personal finance as these pathbreakers. The money-market mutual fund, which gave savers access to far higher rates of return than those offered by local banks, might not have caught on had inflation and interest rates not soared in the 1970s. And for credit cards to take hold, Americans had to shake off their aversion to debt.

While Nocera terms the money revolution a "force for good," he doesn't regard all the players as heroes. For instance, he chides Marshall Loeb, former managing editor of Money magazine, for featuring stories that promised ways to, say, turn $50,000 into $250,000 in five years without detailing the risks. While Loeb was hardly the only bullish journalist around, he had perhaps the least sophisticated readers. "The money revolution," notes Nocera, "did not promise...that middle-class Americans would get rich."

What exactly, then, did the revolution achieve? Yes, members of the middle class gained more control of their financial lives. But in his conclusion, Nocera says the new options are more of a burden than a joy, a further complication in already complicated lives. Even when people prosper, he argues, they're worried--that the market will turn, or that someone else is doing better.

Perhaps we haven't lived with the new order long enough to make that judgment. Sure, it's easy to get lost in the world of investments or max out all your credit cards. But would anyone really want to trade today's choices for a passbook savings account with an interest rate set by regulators? My guess is that, as our expertise and ingenuity in handling financial products improves with time, most of us will be better off for having embraced them. And when the next history of personal finance is written, there will be no question: The money revolution was worth the angst.JEFFREY M. LADERMAN


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