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You know that, when I first came prevent an offer of this kind being here, I had the house almost to my- made; and, if the lender had implicit self; now, however, it is almost com confidence in the secrecy, punctuality, pletely packed, and every day brings and solvency of the borrower, he new squadrons of carriages and ladies, might accommodate him with the sum and old gentlemen and children. wanted, without requiring any addiSuch a hubbub, you perhaps imagine, tional interest, or premium of insurmust be very disagreeable, yet it is ance, for the risk he runs in entering the pleasantest thing that can be ; the into what the law declares to be a people are all as familiar as if they fraudulent transaction. But this can had been acquainted all their lives. hardly ever be the case. Gratitude, The house, too, is every body's and and a sense of benefits received, are, nobody's; and whatever may be their unfortunately, when they come in rank, all here are on a level. What a contact with self interest, but slender treat it would be for you to see our security for honourable conduct. meals. At breakfast there are upon Numberless unforeseen events occur a table, which seems to be half a mile to weaken and dissolve the best celong, innumerable tea-trays, each sur mented friendships; and an additionrounded with their proportion of but- al source of jealousies and heart-burntered toast, &c. While some parties ings would certainly be found in a are finishing their breakfast, other transaction of this kind. In such parties are just coming down stairs to matters, indeed, men are more than begin. Every party, you must ob- usually sharp-sighted, and are very serve, breakfast by themselves ; but little disposed to trust to moral guaconversation is promiscuous and loud; rantees for the security of their properand we never want some droll crea- ty. This feeling, however, does not ture who keeps the table in a roar. put an end to the under-hand species At dinner we dine all together. It is of bargains between capitalists and like a mason lodge, only there is here borrowers; it only obliges the former the highest breeding, and the most to demand, and the latter to promise, perfect order. Ladies and lords, and a higher rate of interest. Such transgenerals, and clergymen, are mingled actions being illegal, the lender is ex. with old wives and children, and mis- posed to the risk of losing his capital. ses and beaux. Rank is forgotten, This risk must be compensated. No and restraint banished, and all is person will voluntarily place his forfreedom, and jollity, and good-breed- tune in a state of jeopardy; and, acing.
cording as the risk of its being lost is greater or less, so will the sum that must be paid to cover this risk be in
creased or diminished. Thus, a capiBy nothing, perhaps, has the per- talist might be inclined to lend a manicious consequences of restrictive nufacturer a given sum at six or seven laws been rendered more clear and per cent., but as the law declares the palpable, than by the effects which stipulating for interest above five per have resulted from the attempts made cent, to be illegal, were the capitalist to regulate and limit the natural rate to enter openly into a bargain of this of interest. All the efforts that have kind, his whole property would in ever been made to lower the rate of fact be trusted to the honour of the interest by authority, have had a pre- borrower. If the debtor refused paycisely opposite effect. Instead of re- ment either of the principal or inteducing, they have uniformly contri- rest, the creditor could not prosecute. buted to increase its amount. Nor is He could not apply for redress to that this any thing but what might have law whose enactments he had already been foreseen and expected. If the violated; but, on the contrary, he ordinary rate of profit is at ten or would be exposed to a prosecution on twelve per cent. and if the law enacts the part of his debtor. If there was that only five or six per cent. interest no method of defeating this law, there shall be exacted, it is obvious that a would obviously be an end of all borperson might be inclined to borrow, rowing, except when the statutory and to offer privately a considerably rate of interest was above the market greater rate of interest than what was Whenever it was below that declared to be legal. No law could rate, no person would be able to bor
PRINCIPLES OF THE USURY LAWS.
row a single farthing. There would took interest for the use of money was be no circulation of capital. It would so violent, that they were obliged to for ever be locked up in the same charge it much higher than the natuhands; and the national prosperity ral price, which, if it had been let aand welfare would suffer severely. lone, would have found its level, in
Fortunately, however, the mutual order to compensate for the opprointerest and ingenuity of borrowers brium, and frequently the plunder, and lenders, have always proved an which they suffered ; and hence the overmatch for the threatenings of the usual rate of interest was what we law. Their sole effect has been to should now call most exorbitant and render the acquisition of capital by scandalous usury." The risks to the industrious a more difficult task, which lenders were exposed rendered and to compel them to pay a higher the premium of insurance on all sorts rate of interest for it. What might of capital enormously high ; for, of have been borrowed at 6 per cent. the 50, and even 100, per cent., which had there been no hazard from anti- borrowers then frequently engaged to usurious statutes, is, on account of pay as interest, not more than 5 or 6 that hazard, raised to perhaps 10 per per cent. can properly be said to have cent.; and what is nearly as bad, a been given for the productive services habit of carrying on business in a se- of capital. The rest must be consicret and underhand manner is spread dered as a bonus to compensate the abroad in society; and that spirit of lender for the risk he encountered of frankness, open-heartedness, and sin- losing the capital itself. cerity, which, wherever it predomi Legal interest,” says Mr Birknates, is so highly valuable, either in beck, in his late publication on Ameindividuals or states, is cramped in its rica," is 6 per cent., but it is worth developement, or altogether supplant- 12} to put in trade, and, some how or ed by duplicity, extortion, and cun- other, this, like other articles, finds ning.
its value in spite of the maximum esThese conclusions do not rest on tablished by law. theory only, but are supported by a “Efforts are now making in some constant and uniform experience. At parts of the Union, particularly in Rome, during the period of the Re- Virginia and North Carolina, to do public, the ordinary rate of interest away the restraints on usury, which was excessively high. The debtors operate merely as a tax on the needy or plebeians were every now and then borrower ;-should this liberal printhreatening to deprive their creditors, ciple succeed here, I think it will be who were generally of the patrician generally adopted, and will afford a order, not only of the interest of their new instance of the plain Americans capital, but of the principal itself. doing right, while the philosophers of Repeated outrages proved that these Europe are reasoning about it." + were not mere empty threats; and But it is not necessary to refer to a the patricians were, therefore, obliged distant country, or a remote period, to indemnify themselves, by means of for an exemplification of the pernia corresponding premium for the risks cious effects resulting from laws limitto which they were exposed. The ing the rate of interest. In Great same is the case among the Mahome- Britain, during the latter years of the tans. Mahomet prohibited the in- war, and when the market rate of interest of money altogether; and not- terest was considerably higher than withstanding, the rate of interest in the statutory rate, almost no money Asiatic countries amounts to ten or could be borrowed unless from banktwenty times the ordinary rate in ers in discount of bills, except in the Europe.*
way of redeemable annuities, or loans During the middle ages, the average at i2, 15, and 20 per cent. That this rate of profit was not, perhaps, so high, was neither more nor less than a certainly not higher, than at present scheme to defeat the law limiting the But, to use the words of a learned and rate of interest, is sufficiently notoaccurate historian, “ the clamour and rious; and the extraordinary extent persecution raised against those who
• Macpherson's History of Commerce, Say, Traité d'Economie Politique, Vol. I. p. 400. Tom. II. p. 108.
of Letters from Illinois, p. 36.
to which the practice was carried, and stock to embark in the same concern? the very great additional expence and Why should not the greater risk of charges which it imposed on the bore the one as well as of the other be rowers, shows, at once, the utter ina- compensated ? The loss of capital dequacy of such statutes to effect their would equally affect both. Each object, and the injury which they are would have the same insurance to pay sure to inflict on the public.
to cover his capital, and, therefore, If it were possible, and unquestion- each should have the same power to ably it is not, for laws regulating the secure to himself a proportionable prorate of interest to accommodate them- fit. selves to the variations in the ordinary It is somewhat surprising that the rate of profit, still these laws would sagacious framers of the present code be highly injurious. The rate of in- of usury laws did not think of extend. terest must fuctuate, not only as the ing their uniform scale to policies of ordinary rate of profit fluctuates, but insurance; and of compelling the unit must also fluctuate according to the derwriters to insure a gunpowder greater or less security of the princi- magazine and a salt warehouse on the pal sum for the use of which it is same terms. This would not be more paid. What can be more absurd than absurd than to enact that one uniform to attempt to compel a capitalist to rate of interest should be paid for the lend, suppose L. 10,000, on the per- capital employed in such opposite desonal security of ‘a gunpowder manu- partments of industry. facturer, and as a mortgage on a valu The laws of the moderns, respectable estate, at the same rate of inte- ing interest, are less judicious than rest? In the one case there could be those of the Athenians. These anno risk of losing the principal. The cient republicans did not attempt to owner of the estate might become force a capitalist to lend to persons bankrupt, but the estate itself would engaged in employments of different remain, and might be taken posses- degrees of hazard, at the same rate of sion of by the creditor. With the interest. While the sum paid by the manufacturer, however, the case is merchant for capital embarked in a extremely different. The extraordi- voyage to the Black Sea, as maritime nary hazard of the gunpowder trade interest, amounted, on account of the exposes all the capital invested in it greater risk of losing the principal, to to an extreme degree of risk, It may about 60 per cent., the territorial ine be dissipated in a moment, and the terest, or that paid by the occupiers power of the borrower to replace the of land, did not exceed 12 per cent. * capital he had borrowed, as well as Nothing can be more unreasonable, the capital itself, may be destroyed and more entirely unfounded, than
The gross profit derived the clamour that has been set up as from the capital invested in this, and gainst usurers, as money-lenders are every other employment of more than sometimes termed, because of their ordinary hazard, 'must, therefore, be exacting a higher rate of interest than greater than that derived from capital ordinary from prodigals and spendinvested in the more common and thrifts. This surely is the most proless dangerous employments. The per and efficient check that can be former must yield an equal nett profit put upon the thoughtless or unprinwith the latter, and they must, be- cipled extravagance of such persons. sides, yield a sum sufficient to cover Supposing the security of a prodigal the irigher premium of insurance ne and of an industrious person to be ecessity to guarantee the capital itself. qually good, and this can scarcely ever If this were not the case, no capitalist be the case, does not the capitalist would voluntarily expose his property who would lend to the latter, at a to such imminent danger, and no una lower rate of interest than he would dertakings of a comparatively hazard- lend to the former, confer a real serous nature would ever be entered vice on his country? Does he not upon. But, if this is the case with prevent those funds which ought to the master manufacturer, who invests be employed in supporting useful lahis stock in a concern conducted un- bour, and in adding to the real wealth der his own superintendence, why should it not also be the case with the capitalist, who furnishes him with
* Voyage D'Anacharse, Cap. 55.
of the nation, from being squandered a very material disadvantage. It is in ridiculous extravagances ?
to this feeling that the comparatively Neither is the outcry raised against low rate, at which governments, capitalists for taking advantage of the whose circumstances are perfectly necessities of the industrious one whit desperate, are able to borrrow, is to be better founded. According as a per- ascribed. A stockholder's mortgage, son has a character for sobriety, and -his claim on the revenue of the for punctuality in discharging his en- country,—can be immediately congagements, and according to the pre- verted into cash at the current prices. sumed state of his affairs at the time, And although the generality of the so will he be able to borrow. To say creditors of the state are perfectly that a capitalist took advantage of the aware of the worthless nature of the sea necessities of any individual, is only curity they have for their debts, every saying that he refused to lend to a particular individual, confident in his person in suspicious or necessitous own good fortune, foresight, and acircumstances, at the same rate of in- cuteness, Aatters himself with the terest he would have done had no comfortable idea, that he at least will such suspicion existed,—had there be able to predict the coming tempest, been no risk of the principal sum being and that he will be able to sell out béo lost; and if he had not acted in this fore the bursting of the bubble. manner, should we not have consider If usury laws are to have any exed him a fool or a madman?
istence, they ought certainly to be But, as we have already remarked, made operative on the greatest of all the usury laws afford no check what- borrowers,ấon those who do not borever on such transactions ;-they only row for themselves, but for others. render the acquisition of capital more Is it not the extreme of folly, that difficult, by forcing the borrower to while an industrious manufacturer or pay a premium of insurance in addi- agriculturist is prevented from bortion to the interest ;-they attempt to rowing from a capitalist at more than remedy what is not an evil, and what 5 per cent., the government of the consequently ought not to be inter- country should be allowed to transact fered with ; and in doing this, they with him at 6, 8, 10, or even 20 per create a real grievance.
cent.? What is this but holding out There are many other circumstan- a bait to loanmongers ? and causing ces, besides the fluctuations in the the capital of the country to flow with ordinary rate of profit, and the differ an accelerated and unnatural velocity ent degrees of hazard to which bor- into the Treasury? Surely nothing rowed capital is exposed, that must can be more absurd than this. If we of themselves produce very consider are to have usury laws, they ought to able variations in the rate of interest. operate alike on every class of borCapital lent for short intervals, or ca rowers; and considering the superior pital lent in such a manner as that attractions which the facility of rethe lender may obtain possession of it possessing the principal gives to the at pleasure, will, provided the securi- investment of capital in the funds, the ty is nearly as good, always bring a rate of interest at which governinent lower rate of interest than capital should be allowed to borrow should lent for any definite and considerable be less than the rate at which private period. We naturally wish to be individuals might borrow. able to command our capital when we We trust, however, that we have please, and to make what use of it we said enough to show the impropriety please. No mercantile man would and the pernicious tendency of an ever think of locking up his funds on such regulations. If a landlord is to a mortgage. If he did, he would no be allowed to take the highest rent he longer be able to take advantage of a can get offered for his land, a farmer good bargain when it occurred. He the highest price for his wheat, a ma would be cut off from all power of nufacturer for his goods,—why should speculating ; and although this might, a capitalist be restricted and fettered in many instances, be for his advan- in the employment of his stock? tage, still the flattering opinion which Every principle of natural justice, every one entertains of his own abili- and, we may add, of political expeties and good fortune, would but sel- diency, is outraged by such a distincdom allow him to doubt of its being tion.
“Les loix de ce genre,” says M. Say, of commerce as at present carried on, have " sont si mauvaises, qu'il est heureux been attended with much uncertainty as to qu'elles soient violées. Elle le sont the legality of many transactions of frepresque toujours; le besoin d'ene quent occurrence, and consequently been prunter, et le besoin de prêter s'en productive of much embarrassment and litendent pour les eluder, ce qui de
tigation. vient facile en stipulant des avan
3. Resolved, --That it is the opinion of
this Committee, that the present period, tages qui ne porte pas le nom d' when the market rate of interest is below interet, mais qui ne sont au fond the legal rate, affords an opportunity pequ'une portion des interêts.”
culiarly proper for the repeal of the said But this miserable anomaly,--this laws. fixing of a maximum on the rate of interest, while every thing else is allowed to find its own level in the market, – SPECIMENS OF TRANSLATION FROM will, we should hope, be ere long put an end to. The market rate of interest is now fallen below the statutory rate,
No. I. and the application of a sponge to the To every lover of Italian poetry it whole batch of antiusorious statutes must long have afforded matter of inficould not, therefore, be attended with nite regret, that the writings of its great any inconvenience to the pecuniary masters should have been so completeaffairs either of the state or of indivi- ly shut up from the greater proportion duals. The following Report on the of readers in our own country, by the Usury Laws was presented to Parlia- general poverty, as well as fewness of ment at the close of the last session; our translations.
With the excepand we are happy in being able to tion, perhaps, of Fairfax's version of support the view now given of their the Jerusalem Delivered, there is not effects, by the authority of the Com one translation of any of the greater mittee of the House of Commons ap- works of the Italian poets that is worth pointed to inquire into this subject. reading; and even this has long been
M. supplanted by the more modern, but
infinitely inferior, work of Hoole, to Report on the Usury Laws.
the extensive circulation of whose The Select Committee appointed to con
translations, as much, perhaps, as to sider of the effects of the laws which regu- any other cause, may be attributed late or restrain the interest of money, and the neglect into which Italian poetry to report their opinion thereupon to the has of late years fallen amongst us. House ; and who were empowered to re- Nothing, indeed, could have been port the minutes of the evidence taken be more unpropitious to its growth in fore them, have, pursuant to the order of our soil, than that the transplanting the House, examined the matters referred of it should have fallen into such mito them, and have agreed upon the follow- serable hands as those of Mr Hoole. ing resolutions :
He has no poetry in himself, and, of 1. Resolved,- That it is the opinion of this Committee, that the laws regulating beauties of his author. "He cuts and
course, no true perception of the or restraining the rate of interest have been extensively evaded, and have failed of the mangles the finest thoughts and most effect of imposing a maximum on such glowing images for the sake of a rate ; and that of late years from the con rhyme,—and there is, withal, a destant excess of the market rate of interest gree of awkwardness and constraint above the rate limited by law, they have in his language and versification, added to the expence incurred by borrow. which destroys at once all the bolders on real security, and that such bor- ness, vivacity, and freshness of corowers have been compelled to resort to louring, which are so characteristic of the mode of granting annuities on lives ; a
the originals. Who that has read the mode which has been made a cover for ob- Orlando Furioso in the Italian could täining a higher interest than the rate limited by law, and has farther subjected of Hoole, the poet whom he had been
recognize, in the contemptible version the borrowers to enormous charges, or forced them to make very disadvantageous the warm glow of sunshine which he
accustomed to admire, not more for sales of their estates.
2. Resolved,—That it is the opinion of has thrown over the scenes and this Committee, that the construction of thoughts of this our every-day existsuch laws, as applicable to the transactions ence, than for the graceful ease of his