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thern? No; such money never paid The case, therefore, stands thus :more than the rate they fixed upon it. The Usury Laws had always effectualBut they fixed no rate on money bor- ly imposed a maximum on the rate rowed on annuity; and because from of interest throughout commerce, this such money obtained a high rate, manufactures, and domestic -trade; they were charged by the committee they had done this in regard to all with not producing their intended ef- the money borrowed on mortgage in fect. It might just as truly have pro- the ordinary manner; they had done nounced there non-effective, because it to the whole community, with the they did not prevent the pawnbroker exception of a comparatively small from obtaining twenty or fifteen per number of individuals; and they had cent. Laws of any kind may as well done it in the whole lending and borexpressly sanctiou a thing as tolerate rowing of the country, saving such it; for that is lawful which is not only as were expressly exempted from contrary to law. Lenders were allow their operation. In the teeth of all ed by law to lend at five per cent, ac- this, and because they had not precording to the common mode of morte vented usury where it was actually gaging, or to lend at a high rate in the lawful, the committee solemnly dea way of annuity; and they naturally clared that they had failed of the efpreferred the latter. This proves pre fect of imposing a maximum on the cisely the reverse of what the com- rate of interest. That such a declamittee in its wisdom imagined ; it ration was put forth, and was put forth proves, not the want of efficacy, but as a reason for making a gigantic the great efficacy of the Usury Laws; change of law, by a body of British it proves that usury is only restrained legislators, is a certain fact, however to the point prescribed by these laws; incredible it may appear. Alas! it is and that when it is free from their pro- far from being the only fact which will hibition, it exacts a rate of interest dye the cheeks of the man of common ruinous to borrowers.
sense with shame, as he looks at the But who were those who thus, du- modern history of Parliament. ring the war, borrowed at a high rate That the Usury Laws have always on annuity? They consisted in a con- effectually imposed a maximum on the siderable degree of profligate spend rate of interest, except where usury thrifts, gamesters overwhelmed with was lawful, is thus à truth wholly debts, men who, from some cause or above question. They have been perother, had lost their credit, or indi. haps much less violated and evaded, vidpals who had only a life-interest in according to the judicial construction their estates, and therefore could not of their letter, than any other laws of mortgage. A man may offer a first- equal operation. If a law ought to be rate security in vain when money is abolished, because it does not wholly plentiful, if it be probable that he will prevent what it is intended to prevent, not pay the interest punctually, or that or because it is frequently violated and his estate will be sold or involved in evaded, the House of Commons ought litigation. Borrowers like those had forthwith to abolish the laws against RO resource but the annuity system, theft and murder. they made this system familiar to lendo The usurers urge, that these laws, ers, they took a large amount of mo- during the war, imposed great hardney from the market, and they made ships on the mortgage-borrowers, by it necessary for many of the best cha- increasing to them the difficulty and racter to borrow in the same manner. cost of obtaining money. We deny Through the option which they gave it. There was then, as every one to lenders, many men of high credit knows, a great scarcity of money did and ample estates were compelled to the laws produce it? No; it was proborrow on their system ; but never- duced by the enormous wants of the theless, even then a great portion of State, and it would have been as great the borrowers obtained money at five had they not existed. If there had per cent. The evil was confined to been no such laws, how would these the individuals who at that time were borrowers have been circumstanced ? constrained to borrow; the rate was The wants of the State would have not raised on money which had been been the same, and it would still have borrowed previously; and the vast outbid competitors; if to them the body of those who had mortgage rate had risen to fifteen per cent, it never paid more than five per cent. would have given-twenty in case, it could not otherwise háre procured they were a cause of expense to partie money. The scarcity, the high rate, cular individuals, this is below notices and chance for a large increase in the when weighed against the vast bene value of the principal, given by the fits they yielded to the body. State, and the liberty enjoyed by every As to many of those who borrowed lender, of demanding any rate whate on annuity at a high rate during the ever, would in all probability have war, they were people who could not raised the rate in the first instance to have borrowed in any other manner, ten per cent; this would have been had no Usury Laws existed. Such the rate paid, not only by those who must ever be the resource of spend borrowed at the moment, but by all thrifts, who are overwhelmed with who had previously borrowed. Every debts, and who have only a life inteman whose property was encumbered rest in, or who cannot, from some other would have been called on for the cause, give a satisfactory mortgage on, market rate of the day, and refusal their property. Such imen must alwould have been out of the question. ways pay a far higher rate than other The rate on trading money would have people ; and they would have had to risen to the same point, and the funds pay a much higher one during the would have fallen until they paid a war than they did, if these laws had higher one, for the borrowing of the not kept the rate down to other bore State was a matter of imperious neces- rowers. Mr Thompson, in the House sity. No matter what rate might have of Commons, alluded, in support of been paid by other borrowers, the State his case, to what was disclosed by the would have been compelled to pay one bankruptcy of Howard and Gibbs.' still higher; and it was because the He could not, we think, have given a laws kept the rate down to them, that more striking proof of his utter init was enabled to borrow so cheaply. competency as a changer of law. He The difficulty of borrowing would not spoke as though the Usury Laws were have been in the least diminished, in the sole cause why men destitute of respect of scarcity and competition. credit and property could not borrow Higher offers would have been neces- as readily and cheaply, as men amply sary, lenders with a rising market endowed with both. What he thus would have kept back, and the rate cited in his favour, formed, in reality, would have risen to a height on infe- a decisive argument against him. It rior securities perfectly ruinous. Our proved to what a ruinous extent imconviction is, that borrowers would providence and need on the one hand, have had to pay a considerably higher and rapacity and power on the other, one, than that which was paid by those will go, when they have not these laws who borrowed on annuity. This would to restrain them. not have been the worst. The high The argument, that the Usury rate would have greatly diminished Laws prevent the necessitous traders the value of land, and the magnitude from borrowing in times of commerof securities; rents must have been cial distress, now claims our attention. not raised, but lowered; and the same It is alleged, that the evils they pro.. quantity of land would scarcely have duced in this way, during the late paformed a security for half the money. nic, prove conclusively, that they Then, in consequence of the high rate ought not to exist; and have even paid by the State, the taxes would have wrought wonderful conversions to their been greatly raised.
disadvantage. The political changes When this is looked at in connexion of opinion in these days frequently with the fact, that a large portion of excite our disgust, but they are rare those whose estates were encumbered, ly of a kind to effect our conviction. were never put to the expense of a Our opinion of these laws is not to be penny by the scarcity of money, that a shaken, because a banker, that is, a great number of those who borrowed money-lender, changes his, to assist during the scarcity did so at 5 per cent, in their destruction. Far be it from and the ordinary expenses, and that us to say, that such a man must nethe body of those whose property was cessarily do this from interested momortgaged never paid more than 5 per tives; but we will say that he is too cent, it will, we think, be readily ace much interested in the matter to be knowledged, that the Usury Laws did taken as an example. Now, according anything rather than injure the mort, to probability, what would have hapgage-borrowers. If we concede that pened, if po Usury Laws had existe
ed previously to and during the pa« course offers of high interest would nic?
not have tempted them to let it reWhen the pressure for money was main. They hoarded it, because they first felt, which was some time before believed that it would be safe only the panic commenced, the lenders in their own keeping, and that,-no would naturally have advanced large matter what interest might be,-it ly the rate of interest. If a scarcity would be the most profitable to hoard take place in corn, cotton, or any other it. Now what temptations could borcommodity, the sellers in the first rowers have offered them? Our read. moment make a large addition to the ers must bear in mind, that the loans price; and what they do would always were only wanted for short periods ; be done by money-lenders in similar the generality of them were only want circumstances. This advance would ed for two and three months. Suphave been made to nearly the whole pose a man had wanted to borrow, on trading world ; and it would inevita bill or otherwise, L.1000 for three bly have added greatly to the difficulty months; the interest of this, for the of procuring discounts and loans, to term, at 5 per cent, would have been the embarrassments, to the bankrupt. L.12, 10s. at 10 per cent L.25; and at cies, and to the general losses. It 20 per cent L.50. If this man had would have been, from its tendency to been in danger of bankruptcy, who destroy the credit of borrowers on the would have lent him the money for one hand, and that of Banks on the the sake of even the 20 per cent? 'Who other, precisely the thing to create a would risk L.1000 to gain L.50, with panic.
the probability before him, that by But then it is said, that many would so doing, he would lose the chief part have been able to borrow money, who of his principal ? When the borrower were ruined, because they could not is in such danger, the price of the loan do so. Where are the proofs? The loses its character of interest, and asBank of England rejected many bills, sumes in some degree that of the prewhich were offered it for discounting mium of insurance. It must be pro-would it have done differently, had portioned to the risk. In such a case, the rate of discount been higher? No! L.250 would have been scarcely sufWould a higher rate of interest have ficient to tempt the lender, although made it more liberal in its loans ? No! it would have been at the rate of 100 In so far as it is concerned, there would per cent per annum. The peedy borhave been the same difficulty in ob- rowers, who, as it is alleged, would taining money.
have been saved from ruin, were men · Why did not the London and Coun- whose credit was gone ; and from this try Banks lend more liberally? Did cause, prudent people would not have they refuse necessitous borrowers, lent them money on any terms. The merely because the rate of interest truth is, the individuals who had mowas too low? No, they refused be- ney, would not part with it, because cause they had not money to lend. In they thought it would not be safe in any general they did lend to the utmost of hands but their own; many of them their ability-money which they ow. held it for the sake of holding the ed was called from them on all hands gold of which it consisted; the offer of --they could scarcely meet their obli, 10 or 20 per cent for it would have gations-many of them were compel- been disproportioned to the risk, and led to borrow-and not a few lent be would have had no weight with them; yond their means and became bank and the needy borrowers were people, rupt. It cannot be doubted that, upon who, from the want of credit, could the whole, they accommodated bore not have borrowed on any terms. rowers to the farthest point which We may observe farther, that many their means and safety would permit; of the individuals and trading houses and that from the sheer want of mo- possessed of money, would not have ney, they could not have gone farther, been tempted by any rate of interest no matter what interest might have to part with it on loan ; because they been offered them.
conceived their most profitable plan With regard to individuals, did they would be, to take advantage of the hoard their money because they could forced sales and low prices, and ema not obtain sufficient interest? No! ploy it in purchases. They drew it from the banks from When the Bank of England, the the fear that these should fail, and of London Banks, and the Country ones, tent all the money they could part may easily avoid violating them. But with-when individuals hoarded their if they even were obscure, and were money, regardless of interest, from the frequently violated unintentionally, idea that it would be safe in no hands this would form a reason for amending but their own-when borrowers cole them, but not for their abolition. As lectively were accommodated with all to litigation, they produce infinitely the money at 5 per cent, which, under less of it than any other laws of any rate of interest, could have been equally comprehensive and incessant expected to be lent-when the credit operation. That which is founded of needy borrowers was destroyed upon them, arises chiefly from delibe and when the offer of 10, 15, or 20 rate efforts to evade them ; and a large per cent, would have been no tempta- part of it may be easily prevented by tion in the eyes of the possessor of making in them amendments. All money, we ask, where is the evidence effective laws are the parents of emthat the Usury Laws produced evil? barrassment and litigation; and if We ask in vain, for the usurers do their value is to be estimated by the not deal in evidence. Assuming that small portion of these they produce the offer of exorbitant interest might in proportion to the magnitude of their have induced the Banks to lend some effects, the Usury Laws are more va what more than they did, what would luable than any other. have followed ? It is notorious that We have, we think, said sufficient many of them lent beyond their means to convince our readers, that if the and became bankrupt, and that the Usury Laws be abolished, these conremainder generally only retained sequences must follow—there will be what was barely sufficient to preserve constantly great variation in the rate them from the same fate ; it may of interest; the rich will borrow at a therefore be regarded as certain, that comparatively low rate, while the poor if they had been more liberal in lend- will have to pay an excessively high ing, the failures among them would one-in time of peace, a large portion have been much more numerous. Of of the borrowers must be always, and course a few individuals might have the whole trading and manufacturing been benefited, but the community at world must be very frequently, at the large would have suffered far more mercy of the lenders; there must be than it did. If there had been no always to many, and frequently to all, Usury Laws, a few individuals might a great scarcity of money; and the have saved themselves from ruin, by rate of interest must undergo contie borrowing at high interest ; but then nual and violent fluctuations. In time the whole trading world would have of war there will be a constant scarcie been compelled to pay an exorbitant ty of money, which will keep all bora tate for several months; and in conse- rowers more or less at the mercy of quence, the loss on one side would lenders ; the whole body of the morte have greatly outweighed the gain on gage-borrowers will have to pay an the other. To the mass, the difficulty extremely high rate of interest; all of procuring money would have been other borrowers, including the State, much greater, and, on the aggregate, will have to pay a much higher one the failures would have been far more than they paid heretofore; and during numerous. The Usury Laws yield- war, as well as during peace, the rate ed to the community during the pa- will fluctuate continually and violenta nic, not evils, but benefits of the highe ly. We will now inquire how this est order.
will operate on the individual and The evils then prevented by these collective interests of the community. laws will assuredly, after the abolia : When a man begins business, he tion, always be experienced on simie always greatly overrates his chances lar occasions.
of success. He is weary of a masterThen it is asserted by the usurers, he wishes to marry-he is ambitious that the Usury Laws are a prolific of rising in the world-he estimates source of embarrassment and litiga- his qualifications to be far greater than tion. A more groundless assertion was they really are—he magnifies profits, never made use of to delude a blind and overlooks losses and if he have and infatuated country. As to embar- not capital to begin with, he thinks he rassment, they are free from ambigui- could afford to pay almost any intety, and every man, if he think good, rest for borrowed money. He will
agree to pay almost any rate that may which disqualifies them for being good be asked, provided a Bank or an indie men of business ; they seldom possess vidual will accommodate him. When much ability; and they more frehe gets fairly commenced, he must quently diminish their capital than then borrow from necessity; he must incrcase it. The most eminent and retain the money, have his bills dis- wealthy traders and manufacturers counted, and have frequent further are, and generally have been, men loans for a short term, to save his cre- who began the world with very little dit, or escape utter ruin. A vast porcapital, and in many cases with none, tion, we may say the chief portion, of exclusive of borrowed money. He the merchants, manufacturers, and who has little or no fortune, is bound tradesmen, begin business partly with to good instruction and discipline, borrowed money, which they obtain while he is a clerk or an apprentice; from the Banks or individuals. The when he commences business, the capital of many of them, when they smallness of his capital binds him for begin, consists in a great degree of some years to a further course of good such money. As to their borrowing instruction and discipline ; the double at a certain rate for a tèrm of years, it apprenticeship confirms his habits, is out of the question : no man, when and brings out his powers to the uthe lends money on personal security, most. How much the commerce and will bind himself to that which would manufactures of this country depend prevent him from attempting to re- on the ability, skill, and enterprise of gain it, should the borrower be likely the merchants and manufacturers, into become bankrupt. Beginners will dependently of capital, is a matter on borrow at an exorbitant rate when which we need not dilate ; and nothey commence; and when they get thing could be more fatal to them the money fastened so that they can- than to place them under the mononot repay it, they will be sponged for poly of capitalists by birth. The abohigher interest until they are ruined. lition of the Usury Laws, by fettering,
The smaller merchants, manufac- ruining, and annihilating the middling turers, and tradesmen, will generally and small men of business, will in vahave to pay a much higher rate of ine rious ways injure the State in the most terest than the richer ones. If they serious manner. have not a farthing of capital borrow- We have shewn that every second ed in any other way, they must al. or third year may be expected to bring most daily, particularly the merchants a fit of distress, and a scarcity of moand manufacturers, have their bills ney. At the beginning of such scare discounted, or, which amounts to the city, the lenders will not only push up sarpe, taken in account by their banke interest, but they will refuse to lend, ers. While they will have to pay this in the hope, that by holding their mohigher rate of interest, they will be ney for a week or two, they will make compelled to sell their goods at the much more of it. Now, the whole prices taken by the richer ones. They trading and manufacturing world has are so circumstanced, that it is impose at all times to borrow almost daily sible for them to be successful, or to from necessity; the rich, as well as maintain themselves in business, if the poor, must have their loans, and loans of money cannot be generally their bills discounted or passed to acwithin their reach, at a moderate and count. In such a fit, this necessity unvarying rate of interest ; therefore for borrowing is rendered far more they must reap the most bitter evils general and imperious. In the first from the abolition of the Usury Laws. moment many will be refused, to their
The middling and small traders ruin, merely from the wish of lenders and manufacturers have hitherto been to make the most of their money ; of the highest value to the state, not while, to the remainder, interest will only on account of their numbers, in- be made destructively high just at the dustry, and good conduct, but be time when they are all sustaining cause they have formed the nursery grievous losses. Whenever the whole of talent, enterprise, and opulent trading and manufacturing world houses. Those who have a large ca- shall be plunged into loss and dispital of their own to begin business tress, its loss and distress will be fearwith, are, in comparison, few in num. fully augmented, by the refusal to ber; they are reared in a manner lend, and the exorbitant interest of Vol. XXIV.