They wanted to know if I'd be willing to meet with them, and so I said sure. We had a phone conversation, and a couple of days later a couple of people came to South Dakota. One of them was a gentleman named Charlie Long [former vice chairman of Citicorp]. And they came, and they explained to me what condition their bank was in. I don't quite remember exactly the numbers, but it was something like the cost of money for them was like 15 percent. That's what they had to pay to get capital. There was a New York state law that said that if you bought goods and services, you could charge 15 or 18 percent, but if you had a cash advance, it was 12, so it cost the bank more money to borrow money to loan you money than you were paying in interest. ...

I'd never heard of all this credit card stuff. I'd like to take credit for it, but I had nothing to do with it. I received four communications in one day. A former governor, Frank Farrar, who served as governor for two years and then went into banking interest and had a lot of banks that he was involved in, he called me, and he had been contacted through banking circles. The state Economic Development Department contacted me and told me they had been contacted by Citibank, and Citibank wanted to meet with me. I received contact from a guy employed in Citibank, a gentleman employed in Citibank who was from Aberdeen, S.D. He was the head of human resources for Citibank. He made a call to South Dakota, and I received a direct call from Citibank in my office, all in one day.

The marketplace exceeded all of those numbers at that point in time, and what I'm trying to say is, we may have a law that said you could charge 9 percent, but money cost 11 percent, so banks weren't loaning money. It stopped credit. In this city, in Sioux Falls, there were only five houses, seven houses built in 1981. That's all. There were only seven housing permits, because nobody could afford the financing for a home. That's the context where we found ourselves.

Let me set the time for you, all right, because I think that puts it in perspective. Interest rates were going into orbit. They were climbing all the time. The cost of money was getting more and more expensive. South Dakota had laws -- when I came to the governor's office, South Dakota had very tight historical laws on what you could charge to borrow. In other words, there was one interest rate by law that they could charge for new cars, another one for used cars less than five years old, another one for used cars more than five years old. If you went to a bank, if you went to the consumer-loan department, they could by law charge you rates of interest that couldn't be charged by the mortgage department or another department at the bank, and it was highly regulated, what interest rates people could pay.

Bill Janklow was governor of South Dakota from 1979 to 1987 and from 1994 to 2003. He and his state played a key role in helping the credit card industry take off in the 1980s. In this interview, Janklow tells the story of how South Dakota lifted its cap on interest rates so it could draw capital and jobs, and how soon after, Citibank moved its credit card operation from New York, because by making South Dakota its home state, it could then charge higher interest rates. Many other credit card banks followed suit, moving to other states where the cap on rates were lifted. Today, however, Janklow has mixed feelings about making his state the first credit card capital of America. "It's unbelievable, the lack of sophistication that we have as a society to deal with what I'll call consumer credit," he says. "It really is unbelievable. Do I think I helped foster some of that? The answer is yes, I do." This interview was conducted on Aug. 24, 2004.