0 
NOTE-SHAYING,
TEE GREAT CAUSE OF
f''aub,          |a|hrt            an^       Jinn:
STRINGENT USUBY LAWS,
T lt E
BEST     DEFENCE        OF  THE      PEOPLE   AGAINST
"HARD TIMES."
AN ANSWER TO JEREMY BENTHA3M
BY THE
FHON. JOHN WHIPPLE,
OF R HODE ISLAND.
Money is a labor-saving invention, authorized, and regulated by government for the
convenience of the people; and he who thrives by buying and selling it adds nothing to the
wealth of the state, but interferes with the industry of others.
BOSTON:
MOORE & CROSBY, PRINTERS,-1 WATER STREET.
1856.








STRINGENT USURY LAWS
THE BEST DEFENCE AGAINST
"HARD TIMES.")
THE following article on the Usury Laws was written by the HIon. John
Whipple, of Rhode Island, in 1836. It was first printed in New York,
and subsequently in the "American Jurist," and separately, and in the
"' Bankers' Magazine," in 1850.
Of the great ability of Mr. Whipple to master any subject which he
undertakes nothing need be said. His reputation as a powerful thinker,
an able and experienced lawyer and eloquent speaker, is fully established
and acknowledged. He is a gentleman of wealth; and it is certainly a
subject of congratulation that he is disposed to exert his splendid talents
in behalf of the people, - the laborer, the mechanic and the farmer.
It may not be improper to remark that this article was highly complimented as conclusive upon the subject by the late Judge Story, and by some
of the most distinguished statesmen of Great Britain.
As a certain portion of the citizens of this Commonwealth, and of other
states, are constantly endeavoring to induce legislators to try the experiment of repealing the usury laws, it has been thought that the republication of Mr. Whipple's article at the present time might accomplish much
good.
If the proposed experiment were to be tried at the expense of the rich,
for whose benefit it would inevitably tend, we might view the matter with
sufficient indifference to withhold all objections. But it is far otherwise.
The rich, or the possessors of money, propose to try an experiment, which
can cost them nothing, whatever may be the result; and the poor, or those
whose income depends upon industry and prudence, will be made to suffer
the accumulated penalties which are sure to come as the legitimate fruits
of error.
Besides, the people require no such experiment. The experiment has
been frequently and sufficiently tried throughout the civilized world. The
ultimate convictions of the people and the ultimate measures of government have been remarkably uniform; and hence we find usury laws in
every civilized nation* upon the face of the earth, and we find them in
every State of the American Union.t
* Holland may be excepted; but Holland has its peculiar history. (See page 5.)
t There are no usury laws in California, and enormous rates of interest prevail.
General and permanent prosperity cannot be realized there without such laws.
1




2                IMPORTANCE OF STRINGENT USURY LAWS.
Those citizens who petition for the repeal of the usury laws may be
divided into four classes, namely:
1st. Those who wish to increase their income by being permitted to tax
the borrower what they please; 2d. Those who act as agents, or brokers,
and desire to increase money negotiations for a commission; 3d. Those
who are borrowers, and are made to play a subservient part to the lenders;
and, 4th. Those who are made to believe -and this class is a very small
one -that such an experiment would really tend to benefit the people,
although they are at a loss to tell how or in what way such a result has
ever been reached by such means.*
We insert the following letter from the Hon. W. W. Wick, late member
of Congress from Indiana, and formerly a judge in that state.  It is brief
and to the point, and may be viewed as a complete answer to all petitioners
for experiments.
"Washington, D. C., March 7, 1849.
"SIR:    Your note of inquiry is before me.  I propose leaving for home
this evening, and my response must be brief.
" In Indiana, the usury laws were repealed twelve or fourteen years ago,
perhaps more, —and were not reinstated for three or four years.    The
frightful results of the repeal were not immediately developed. Many a' stricken deer' retired to die in secret, too proud to make known his ruin,
induced by his own imprudence and the absence of legal protection against
it.  Many were sold out of house and home, ere public attention was
directed to the subject; but no sooner had the effects of the repeal been
developed and become the subject of public discussion and conversation,
than an irresistible public opinion called for usury laws. The first step
was to fix the rate of legal interest at six per cent., and to sanction contracts for ten per cent. In two or three years the taking of more than six
per cent. was prohibited.
(" If I had time, I would be glad to make a sketch of the desolations
left in the track of the usurer, during his brief reign in' Hoosier land.'
I was judge of one of our circuits at the time, and was a shuddering witness to these desolations.
" I have rendered judgment upon contracts for the payment of fifty or
twenty cents per day, or per week, for a loan of fifty or a hundred dollars,
and in some instances the interest had become more than ten times the
~ We wrote a letter of inquiry to a highly respectable citizen of New York city
(Jan. 28, 1850), respecting the petitioners for the repeal in that place. We received
a reply (dated Feb. 4, 1851), from which we make the following extract:" Your first question is,' What class of citizens are petitioning for the repeal of the
usury laws?' The originators of the petitions (so far as I am able to judge) are capitalists,- such as brokers, wealthy merchants, &c.- who are lending money at higher
than the legal rates of interest. Another class who advocate this repeal are what are
called street-brokers, who negotiate loans for others at exorbitant rates of interest,
charging the borrower ^ per cent. for their services. There are, however, many others
who know little of the nature of finance, who are induced to sign these petitions because they are told that if the restrictions were taken off, the competition among lenders of money would reduce the rates of interest. If this class of citizens depended on
their own judgment, a little reflection would tell them that there is now no obstacle to
competition in interest at or below seven per cent.; and that the design of these petitions is to INCREASE instead of to diminish the rates of interest.'




IMPORTANCE OF STRINGENT USURY LAWS.              3
amount of the principal. It is worthy of remark that the usurer rarely
brought suit for his money until the accumulating interest had swelled the
debt to an amount approximating closely the value of the debtor's estate,
or until notified to do so by the surety, or endorser of the debtor. The
usurer, in the mean time, counted and gloated over his daily or weekly
accumulation of interest, and the debtor (poor fellow!) lived upon the hope
of extrication through some miraculous intervention. I am convinced that
in some instances they had a secret faith that the creditor could not find it
in his heart to demand the entire sum legally due, or relied upon private
assurances from the creditor to a like effect.
" Had the legislature not interfered and tied the hands of the spoiler, an
immense amount of property would have changed hands in a few years.
As it was, clerks in stores, venders of spirits by retail, &c., in many
instances, became wealthy, almost without capital of their own; and by the
use, at a limited interest, of the money of some friend, who knew them
well, and could watch over their operations; and, to make them wealthy, a
great number of small farmers, owning in fee land worth five to fifteen hundred dollars, were ruined. In many instances the ruin had not half done
its work when the estate of the borrower was engulfed. Discouraged,
shamed and indignant, he either fled to dissipation, or became a man-hater.
I know many men of excellent natural qualities, and much inclined to be
moral and gay, and who became hopelessly demoralized and misanthropical.
The moral desolations created by the absence of usury laws will tell upon
any community to an extent almost infinitely beyond the mere ruin of
estate.
" To show that it is not best to repeal usury laws as an experiment, it
is only necessary to say that the contracts made in one year of the absence
of such laws would not naturally develop their consequences during that
year to any considerable extent. As years pass away, the evil results will
develop themselves in a geometrical ratio. Long before'they develop
their full force and effects, the community will demand usury laws, and the
blighting curses of many a withered or aching heart will follow the advocates of their repeal to their graves.
" In haste, yours truly,  W.W.  WICK."
As the State of Wisconsin ventured to repeal the usury laws in 1849,
we had a desire to know whether the people of that Commonwealth were
beginning to reap the bitter fruits of such an experiment, and addressed,
the following year, a letter of inquiry to the Hon. I. P. Walker, United
States Senator from Wisconsin. We received an answer, dated Washington, Jan. 24, 1850, and from which we make the following extract. He
says, in speaking of the repeal:
" The argument in favor of this policy was, that competition in the loan
of money, the rate of interest being unrestricted, would produce a great
influx of capital to the state. It certainly has produced an influx of
money, but not of capital.
" The result is (and is to be), that money has been freely taken at an
interest from twenty to fifty per cent. The money loaned was that of non



4               IMPORTANCE OF STRINGENT USURY LAWS.
residents. Now, taking the average of interest to be twenty-five per cent.,
it is obvious that, at the end of four years, the amount loaned in the state
will again be sent out; and that, too, with an equal amount for the interest.
" This is a poor way, in my opinion, to increase the real capital of a
state. You will now appreciate the distinction I make above between
money and capital in this relation.
i" I have no doubt that the results to our state will be most disastrous."
The predictions of Senator Walker, and of others who had confidence in.
stringent usury laws, were fully verified.  Interest ranged from two to
ten per cent. per month, and loans were executed for long periods of time,
on speculation, as high as forty per cent. per annum. Although the experiment lasted but few months, it is the deliberate opinion of some of the
most intelligent and respectable citizens of Wisconsin that the enterprise
of the state received a check from which it cannot recover for twenty years.
After the experiment had been tried, and usury laws reenacted, we
addressed a letter of inquiry to R. W. Wright, Esq., of Waukesha, Wis.,
in regard to the practical results. The following is an extract from his
interesting reply, dated Dec. 16th, 1851:
" The results of the law (of repeal) were so disastrous to the best interests of the state, and so contrary to the expectations of its friends, in
increasing instead of diminishing the rates of interest, that the experiment
was very readily abandoned. Its bitter fruits were left behind. The high
rates of interest paid by borrowers had destroyed the confidence of lenders,
and the consequence was that money became scarcer than ever. Instead of
begetting a spirit of.industry and frugality, the borrowing of large sums of
money at these high rates of interest increased the prodigality and expenditures of those who were already involved in debt, and brought ruin upon
others who sought to traffic in money as an article of commerce. Men got
a passion for borrowing, and as the demand for money increased, and with
the demand the hazard or danger of losing it, the rate of interest advanced,;he rate being always in a ratio compounded of the inconvenience and
hazard. As the result of all this, we find nearly one third of the entire
improved real estate in Wisconsin under mortgage, a greater part of which
will have to be sold, sooner or later, at the end of a decree. Men are now
paying the most exorbitant rates of interest to rescue their farms from
destruction, when, had it not been for the law of 1849, and the spirit of
recklessness and extravagance which it inspired, not a dollar's encumbrance
would ever have been put upon them. Hundreds of persons are now
laboring in the mines of California to keep down the interest on the land
and mortgages hanging over their property in this state. Such, in my
judgment, has been the result of this great experiment to divert money
from its legitimate purposes,- the purposes of exchange in Wisconsin."
Allusions have been made to the experiment of England with respect to
commercial paper of twelve months and less. The objects of this experiment were to increase the demand and the rates for money, to encourage
business transactions, where capital was very plenty and very cheap,- the




IMPORTANCE OF STRINGENT USURY LAWS.                  5
very opposite of those professed by the repealers of the United States.
So far as the results can be traced to their sources, the experiment has
enriched the lender, and impoverished the borrower. It has induced forced
and ruinous transactions; and we may venture to predict with safety that
the experiment will prove in the end disastrous to the people. This remark
may also be applied to the more recent vote of Parliament to repeal the
usury laws of England. [Aug. 10, 1854.]
This experiment was tried in England, in the sixteenth century, and for
nineteen years the interest on money had no legal limit. In the reign of
Elizabeth usury laws were restored. Lord Burleigh remarked that " the
repeal of the statute against usury had not been attended with the hopedfor effect; but the high price for money on usury had more and more
abounded, to the undoing of many persons, and to the hurt of the realm."
A nation that can exist without usury laws has ceased to exist as a nation
of progress.
A law authorizing the discount of short paper at unlimited rates would
influence money-lenders in all cases to require short paper, to be made
under promises of renewal, and the obligations of our citizens would be
given subject to conditions wholly within their control.  Such an exception would prove a most dangerous trap to the borrower, and in many
respects would doubtless prove more fatal than a total repeal of all the
usury laws of every name and nature.
In all these plans of repeal the banks are to be excluded.*  This indeed
would be excellent. It would be equivalent to a guaranty from government against loss to speculators in money. It would be taken at
government cost, and sold at a merchandise price.   There could be no
risk in buying, and no risk in holding the currency, ancf the rich would be
the only competitors for purchase in the market. By such a process, the
great objects of a currency would be subverted. Monopoly and prostration
of business would follow as consequences.
The banks pay a heavy tax to the commonwealth for the privilege of
giving to the people a currency. They are subjected to expenses and risks
peculiar to their business. They are required to have -a specie basis, and
to conform to rigid requisitions of law. This is deemed necessary for the
protection of the currency, and for the protection of the commercial interests of the people.  Why exclude them?  The securities specified are' those
which the banks usually prefer to receive; and why should they be denied
* It is proposed that holders of mortgages shall not be permitted to make their bargains as to interest. This was done in England; but the money-lenders immediately
required two notes for the same loan. If the loan was ~5000, at 5 years, one note
was written for ~1000, at 12 months (the period fixed for paper that the law allowed
to be sold at any rate of interest), and one note for ~4000, at 5 years, at 5 per cent.
per annum. The bonus was taken out of the note for ~1000 forthe whole loan. Permit by law usury in any form, and that form will be seized upon by the money-lenders,
even if they have to make new notes every thirty days. It is estimated that three
fourths of all loans upon mortgage, in Massachusetts, are over due; and the holders
of these securities would demand a higher interest and new papers. Savings-banks and
other institutions would move in the same direction; and the new wants of Massachusetts alone for money would be beyond the capacity of all New England to supply. The
sufferings of the few who pay high rates now might not be increased, but the many
would be placed in new relations of distress.
1*




6                IMPORTANCE OF STRINGENT USURY LAWS.
the obvious rights which a system of competition if it secures to any should
secure to all? Is it that money would be made too plenty and too cheap,
or that the head sources would be cut off? Perhaps, if the banks were permitted to prefer to lend money for what interest they please, they might
ask the highest price for it, and thus give no chance to speculators.  The
officers and directors of country banks might esteem  it a duty to carry
their money to the great cities for sale.  It would be a good sort of merchandise to buy and sell.  It might be sent by mail to all parts of the country, at little expense and at no risk, even without insurance.  The banks,
of course, would speculate, and largely participate in the general ruin.
They would manufacture the dice, and then join the people in throwing
them.    Legalized gambling would supersede industry, and a currency
would be impossible.
The assumptions that money is merchandise, and that money is' made
scarce on account of the usury laws, are not only false positions, but they
are preposterous absurdities. To these assumptions may be traced many
of the singular errors of Bentham, McCulloch, Wayland, and others, who
have written upon this subject.
Money exists only by legislation; merchandise is the product of individual labor or of private enterprise. M3oney is the legal standard by which
value is measured; merchandise is that which is valued by the aid of this
standard.  Money, as such, has no intrinsic value; merchandise is sought
for only on account of its intrinsic value.  Money is perpetual in its nature,
and is designed for all time; merchandise is temporary, and adapted to
special wants, and made for wear or consumption. Money is concentrative
— centring in the keeping of the few; merchandise is diffusive, being
required and consunmed by the many. Money is a legal certificate of value,
and is transferable for what it represents; merchandise is the thing valued
for what it is, or its uses.  If money were merchandise as money, then a
yard-stick would be merchandise as a measure, and the cloth would measure the yard-stick as much as the yard-stick the cloth.  If money be merchandise, and a law be passed to make it so, then all merchandise should be
made by law money, which would be a literal destruction of the invention of
money.'    Money pays a debt at the will of the debtor; but law recognizes
* A great variety of commodities have been legally adopted to serve as money in
different countries and states of society, such as cattle, corn, tobacco, beaver-skins,
leather, pasteboard, iron, copper, silver, gold, &c. &c. &c. Whatever commodity be
selected to serve as money, is invested with a special power; and it is the greatest
power conferred by government.
In a letter from the Hon. John Whipple, dated Nov. 6, 1854, he thus states and
answers the free-trade argument in regard to money, — " That because a man possesses
the legal right to demand what he pleases for his land, his merchandise and all other
property, that therefore he ought to be authorized to ask and receive what he pleases
for his money; that because the free-trade principle prevails beneficially in relation to
all other subjects of property, therefore it would operate beneficially in relation to money.
"The proposition is to confer upon money all the privileges as to terms that belong
to merchandise. A owns horses, and houses, and money. By law he can let his
horses and his houses for the highest terms he can obtain. Why should he not have
the same power to get as much as he can for his money?
" The substance of the answer which I should give to this merely popular and plausible argument is this: If this argument, which proceeds from the creditor side of the
house, could be so modified as to place money on a level, in all respects, with merchandise, or other property, no rational man would object to the change. The free-traders




IMPORTANCE OF STRINGENT USURY LAWS.                     7
no such power in merchandise.      Money has a minimum      and maximum
power according to law, otherwise it could not be a standard of value with
any more consistency than government can authorize unlimited yard-sticks
or unlimited bushels; but prices of merchandise fluctuate, and, in relation
to the legal standard, according to demand and supply.    Money is the instrument of exchange -   of settlement among traders; merchandise is the
stock in trade to be exchanged.   Money is authorized by law for conven.
ience, not profit; merchandise is produced by the labor of the people, and
for profit.  Money as merchandise ceases to be money; merchandise as
money nowhere exists except by legislation. Money exists only as a relative agent for measuring the value of other things; merchandise is prized
for what it is in itself. Money is an agent to promote want; merchandise
supplies want. Money saves labor; merchandise sustains it. Mioney makes
the price; merchandise pays it.     Money is borrowed and loaned; merchandise is bought and sold.
Whatever may be said to the contrary, these fundamental distinctions
are universally acknowledged; for, while people are content to borrow
money on special terms of security, all are earnest to sell merchandise on
credit, and without such security.  Purchasers of merchandise are politely
and urgently solicited to buy; while borrowers of money are ceremoniously
permitted to make their propositions.
As all products designed for use, ornament, or consumption, are to be
weighed, measured, tested, or valued, the governments of all nations prescribe by law the means; and hence we have weights, measures, tests and
money, so ordered that all may understand their uses, and render them
available at the least possible expense.  Such instruments, designed by govdo not propose equality of function and power. They do not mean to equalize th:
powers of money and merchandise. The creditor says,' I ought to have the privileg(
of using my money as merchandise, and to obtain the most I can for its use.' Verj
well. But if money is to have all the privileges of merchandise, then merchandise
should have all the privileges of money. If they are put on a level as to the use of
the creditor, they should be put on a level as to the use of the debtor.
<" But will the creditor consent that land, or a bale of goods, shall be made a tender
in payment of his debt? Why not? If one is as much an article of trade as the other,
they should be treated alike in all respects. It was not the design of the law so to
treat them. The same law Which gives to the creditor the power of refusing everything
but gold and silver in payment of his debt, ought to fix the value of that gold and silver. But by this new theory the creditor is not only entitled to refuse everything but
gold and silver, but to be the judge of its value, or, in other words, to demand what he
pleases by way of interest. To be consistent, the law that confers greater privileges
upon money than upon merchandise should also impose upon it greater restraints.
If the free-traders, therefore, propose to destroy this preeminence of money so far as
its use by the creditor, they should destroy it so far as regards its use by the debtor. But
what they do propose is to extend the privileges of the creditor in fixing the value of his
money, but not to extend the privileges of the debtor in the use of his merchandise.
If money is to be treated as merchandise by the creditor, merchandise should be treated
as money by the debtor.
" But to treat money as merchandise, to give to the creditor the power of asking what
he pleases for its use, is a desecration of'its original and sole design. It was created
by government as a test of value, as a medium of exchange. It stands as a boundtree in the forest. Neither adjoining owner has a right to use it for any other purpose.
It derives all its value from government, and government alone ought to fix its
value."




8              IMPORTANCE OF STRINGENT USURY LAWS.
ernrGent for the convenience of the people, require the protecting power of
the most stringent laws.
Before 1837, the State of New York trusted to the fallacious policy, so
often demanded by money-lenders, and found out by sad experience that it
was fatal to the industry of the people. At that time, the Assembly applied a remedy, which continues to be the law of the state, and is the most
severe of any in the United States against usury. The usurer is made
liable to lose his whole debt, to be fined a thousand dollars, and to be inmprisoned six months.
It is with much satisfaction that we find, in the recent message of Gov.
Clark, of New York (Jan. 2, 1855), a clear and comprehensive view of
this subject. He says:
"It is already intimated that the efforts heretofore made to modify our
usury laws will be renewed with the present legislature. The idea of free
trade in money pervades the commercial community. Money, it is urged,
relieved from the restraints of usury laws, would become plentiful and
cheap. It is worthy of remark, however, that the argument proceeds generally from the lender rather than the borrower of money. And does not
this argument prove either too little or too much? If money is to be
made free, should there not be equal freedom on the part of those who
exchange their labor and the products of labor for money? If an arbitrary value is given by law to coin and bank paper, why not also fix by
law the standard value for labor, so that capital and labor may exist upon
an equality?  If you invest money by legislation with a power which,
unrestricted, enables capital to oppress labor, do you not, while enfranchising capital, enslave labor? If, then, money is to be relieved from legislative restraint, should it not also be divested of the power conferred by
legislation? While our laws stamp extrinsic values upon coin, may not
laws, with equal justice and propriety, declare what rate of interest may be
demanded and received for its use? And while legislation permits associations and individuals to circulate their paper promises to pay as money, is it
not clearly a duty to limit the rate of usance upon loans? Before declaring gold and silver and their paper representative free, it would, in my
judgment, be incumbent upon government to assimilate money to the products of labor by depriving gold, silver and bank notes, of their artificial
value. Then, and then only, may money be safely left, like the products
of labor, to be regulated by the laws of trade.
"The experience of other countries and older nations, where capital is
more abundant, and seeks investment at moderate rates of usance, is referred to for evidence that free trade in money is beneficial to the community. This argument may become applicable to our condition when capital
bears the same relation to enterprise and industry in this country that it
does in Europe. But while the laboring and producing classes predominate
so largely, it becomes us, instead of relaxing usury laws, to provide for
their more rigid execution. Indeed, the most valid objection to these laws
is found in their lax administration. While respected by law-abiding citizens and by cautious and timid usurers, they are disregarded by those who
either hope to evade them, or who rely upon the honor or necessity of bor



IMPORTANCE OF STRINGENT USURY LAWS.               9
rowers. A law either more or less stringent against usury, if its enforcement could be ensured, would be productive of salutary effects.' The argument relied upon by the advocates of repeal is, that it will
make money cheaper.  But, wherever this experiment has been tried in our
country, the opposite effect has been produced.. Even in our commercial
metropolis, where are found those who are most strenuous on this subject,
that description of paper supposed to be exempted from the taint of usury
can be negotiated only at rates of interest varying from twelve to twentyfour per cent. per annum.  Borrowing at this onerous rate leads to almost
certain ruin.  It may be answered that only in time of pressure are the
rates of interest so high. But what, if the power to regulate the whole
question resides with capitalists, is to bring down the rates?  What is to
make money more plentiful and cheap, when those who possess it have the
power to keep it scarce and dear?  There is a given amount of capital
among us seeking investment. If our laws rigidly prohibit the taking of
more than the legal rate of interest, that capital would be available for all
legitimate business purposes. If loans are made reluctantly at legal rates,
it is because usurious ones may be obtained through the violation or evasion of the laws."
If it be the object of the petitioners for repeal to make money plenty
and cheap, as they unreservedly assert, then the usury laws should be entirely abolished. Banks, corporations and holders of mortgages, should be
permitted to do as they please. If the principle assumed be true of a
part, it is true of the whole. If a portion of our citizens be authorized to
charge what interest they please on a certain class of securities for the
purpose of making money more abundant, there is no reason why all holders
of similar securities should not enjoy the same privilege. If the operation
of a portion serves to increase our means, the operations of the whole
would necessarily lead to still greater abundance. We find strange elements in the proposition of the petitioners. They unquestionably admit
the importance of having a good currency, and seriously desire that it
should be rendered by the acts of government safe, permanent and uniform.
They ask that the banks shall be compelled to take a limited interest under
forfeiture of charter. And, beyond this, they propose for themselves a
freedom not to be recognized or regulated by law! They ask the legislature to determine by law the rate which they are to pay, and then they
propose, by some legerdemain process which they do not explain, to produce
plenty by having the power of demanding an advance upon that rate according to their own good judgment! They require no lex scripta for themselves. This is only necessary for others.
If the legislator be called upon to decide whether he shall avert a pang
from the suffering poor, or add to the surplus means of the rich, we trust
that he will not long deliberate how to decide the question. The power
of money, chained as it is by the usury laws, is strong enough. It is too
strong for man's best good. If the poor must occasionally submit to the
lacerations of the "icy fangs " of unfeeling Shylocks, let it be as seldom
as possible, and let some fair Portia be at hand to weigh the flesh, if any be
found daring enough to cut it.




10             IMPORTANCE OF STRINGENT USURY LAWS.
We make no application of these remarks as due to petitioners for
repeal. We are willing to believe that many of them are influenced by
honorable but mistaken motives. We think them all in error. We think
them selfish, though, perhaps, not intending to be so. They ask for a law
which would benefit the few and oppress the many. They may deny this
as an assumption of the question at issue, but their denial will be of no
avail., We know what human nature is, - and we know that they are not
above it. That they have not examined the subject in its various bearings
is sufficiently obvious from the fact that all their views are centred in
State-street, and in Wall-street. They count a few merchants in the metropolis as the population of the whole country. They forget the farmer's
wants. Although they speak of the mechanic, it is but to impart to him
their own errors, and when allusion is made to the interests of the workingclasses, it is more a figure of speech than any substantial guaranty of good.
We do not speculate.  We speak from knowledge, and if it were necessary
we could give numerous facts linked with names to illustrate our views.
The heartless operations so frequently known to be made in State-street
and in Wall-street are no fictions of the brain:
" Where, with sad haste, through several ways they run,
Some to undo, and some to be undone."
In seasons of speculation faith becomes a passion. Most men become
blinded and self-deceived. All feel that they are rich, or indulge in expectations that soon they will be, Extravagant wants induce extravagant wants,
and general poverty is the usual result. What is one man's gain is another's
loss, and when purchasers are ruined, sellers become poor. The rapacious
money-lender deems all rates of interest too low, and the dreaming borrower fancies that he can afford to pay them, however high. Thus, mutual
deception is practised until all fall together, saving the few who grow in;iches, as vegetation thrives upon its own decay.
It is a remark of an intelligent English writer, that, " In times of speculation we hear much of the fortunate makers of fortunes; we hear little
of the numbers who suffer loss, except when some immense failure precipitates hundreds into distress and ruin, or when some pistol-shot reveals the
mental distraction of a gambler, not less one because he plays with cotton
or shares instead of dice."
We repeat it, money has too much power already, even under rigid
restrictions, without permitting its holders to exercise an unlimited power
of control.  If connected with labor and objects of industry, it may
prove a blessing; but, as an article of mere traffic, it becomes a curse to
society.
All laws are violated more or less. So are usury laws. Most money is
loaned within the legal rates, and if our penalties for violation are not sufficiently severe to protect the poor man, let their severity be increased.
Above all, let the laws be executed. The buyer of lottery tickets is fined
as well as the vender, and let the same law be applied to money-buyers as
to money-lenders at illegal rates.
Allusions have been made to the laws of Rhode Island, Vermont and Connecticut. In these and other states the penalties for violation are light, and




IMPORTANCE OF STRINGENT USURY LAWS.              11
hence it has been urged that their adoption would be an improvement upon
those of New York, Pennsylvania, &c. This recommendation discovers
clearly the motives of the repealers. The petitioners will not hesitate to
violate the law, provided the penalty be one which they can afford to pay!
WThat excellent citizens! Most people, we trust, obey laws from convictions
of duty. This may be said, certainly, of the small states to which we have
alluded, and to the country people of all the states. Those who are willing to violate the laws of their own state, or of other states, for gain,
employ Wall-street or State-street agents. They dislike to have their acts
known at home.
The usury laws have been opposed especially because  they are seldom executed."  It is said'that "they are useless."  And yet we have recently seen
enumerated among the "evils of the usury laws," so termed, expressions
of indignation because some of the violators of the laws have been compelled to pay the penalties of forfeiture.
Nothing can be more shameful, in our opinion, and more indicative of a
degraded moral condition, than a deliberate condemnation of the proper
and strict execution of the laws. It is the duty of every citizen to aid in
upholding the laws of l{is country, and, however great the penalty prescribed for violation, to allow no culprit to escape, whether he be a private
individual or the agent of a corporation. If this course were steadily
pursued, we should soon see an end to the ruinous and gambling practice
of paying and receiving illegal rates for money.' If a poor man wants
bread for his family, he is required to earn or to beg it,- not to steal it.
If a merchant wants money, let him make his propositions for it according
to law. If he has good security he will obtain it. If his securities are
doubtful, it is the worst species of gambling for any one to lead him into
engagements inconsistent with his ability, and which will deprive him, in
the end, of all means to pay his just debts.
If the people of the United States have a desire to secure for themselves
and posterity a permanent prosperity, based upon even justice, industry
and skilful enterprise, let them combine to establish a uniform rate of
interest throughout the Union, not more than six per cent.; and let them
so protect their currency by stringent usury laws, that speculators can have
no motive to use it, except in connection with objects of industry, and
traders can find no advantage in seeking long credit, for purposes foreign to
a legitimate business. We insert for reference, a brief sketch of the
USURY LAWS OF THE UNITED STATES.
MAINE, legal rate of interest, six per cent.; excess only recoverable by
law.
NEw HAMPSHIRE, six per cent.; and, if more be taken, the party forfeits
three times the excess.
VERMONT, six per cent.; and any excess recoverable by law.
MASSACHUSETTS, six per cent.; penalty for excess, three-fold the whole
interest taken.
RHODE ISLAND, six per cent.; any excess illegal.
CONNECTICUT, six per cent; penalty for usury, loss of the interest.




12               IMPORTANCE OF STRINGENT USURY LAWS.
NEW YORK, seven per cent.; usurious contracts void.    Usury a misdemeanor, punishable by a fine not exceeding one thousand dollars, and
imprisonment not exceeding six months.
NEW JERSEY, six per cent.; penalty for usury, forfeiture of debt and
interest.
PENNSYLVANIA, six per cent.; contract void for excess. If more than six
per cent. be demanded and paid, the party upon receiving it shall
forfeit the money and other things lent, one half to the state, and the
other half to the party who shall sue for the-same.
DELAWARE, six per cent.; penalty for usury, forfeiture of the money lent,
one half to the plaintiff, and one half to the state.
MARYLAND, six per cent.; penalty for usury, forfeiture of excess.
DISTRICT OF COLUMBIA, six per cent.; all notes, bonds, contracts, &c., for
more than six peir cent., void; penalty, forfeiture of treble amount
received.
VIRGINIA, six per cent.; usurious contracts void.
NORTH CAROLINA, six per cent.; usurious contracts void, and penalty for
usury, forfeiture of double the money or value of things lent.
GEORGIA, seven per cent.; penalty for usury, forfeiture of the whole
interest.
ALABAMA, eight per cent.; penalty for usury, loss of interest.
FLORIDA, six per cent., or eight per cent. by contract; penalty for usury,
loss of interest. Person convicted of usury cannot be a bank director.
MISSISSIPPI, ten per cent. by contract; a contract for more is void for the
excess.
LOUISIANA, five per cent., by contract eight; penalty for usury, loss of
interest.
TEXAS, eight per cent., by contract twelve; penalty for usury, loss of
interest.
ARKANSAS, six per cent., by contract ten per cent.; penalty for usury,
contract void.
TENNESSEE, six per cent.; penalties for usury, excess recoverable by law,
fine and imprisonment.
KENTUCKY, six per cent.
OHIO, six per cent., by contract ten per cent.; penalty for usury, loss
of excess above six.   Banks taking usurious interest forfeit the
debt.
MICHIGAN, seven per cent., by contract ten; excess illegal.
INDIANA, six per cent., and penalty for usury, ten per cent. damage thereon.
Usurious contracts with non-residents void.
ILLINOIS, six per cent., or, by contract, ten.
MISSOURI, six per cent.; penalty for usury, loss of interest.
IOWA, six per cent., by contract ten; penalty for usury, forfeiture of
interest.
WISCONSIN, seven per cent., by contract twelve; three times the excess
recoverable by law.
CALIFORNIA, no usury laws, and the most ruinous rates prevail.




THE USURY LAWS.
BY HON. JOHN WHIPPLE, PROVIDENCE, R. I.
THE object of the remarks which I mean to make upon this subject is, not to discuss
the subject of the currency, nor to say one half that may be said upon the subject
of the usury laws; but merely to make an attempt to remove the prejudices which
prevail (to a limited extent) among some men in trade, on account of the gross
misrepresentations which have been made by Mr. Bentham and others of his school.
I am satisfied that most men have not given themselves the trouble of investigating
the true policy and design of those laws, nor the principles upon which they are
founded.
IN 1787, Mr. Jeremy Bentham presented the world with a book which
he termed " A Defence of Usury, showing the Impolicy of the Present
Legal Restraints of the Terms of Pecuniary Bargains.". I presume that
Mr. Bentham   considered himself entitled to the sole credit of the views
then taken of the subject, for he begins by declaring that he does not recollect ever seeing anything yet offered in behalf of the liberty of making
one's own terms in money bargains.
-Ie then proceeds to state the general proposition which he means to
establish, which, he says, rather jeeringly, was the result of an odd notion
of his. It is in these terms: 
"' That no man of ripe years and of sound mind, acting freely, and with
his eyes open, ought to be hindered, with a view to his advantage, from
making such a bargain, in the way of obtaining money, as he thinks fit;
nor (what is a necessary consequence) anybody hindered from  supplying
him upon any terms he thinks proper to accede to.
"That contracts in general ought to be observed," he says, " is a rule
the propriety of which no man was ever yet found wrong-headed enough
to deny.  If this case is one of the exceptions (for some, doubtless, there
are) which the welfare and safety of society require should be taken out
of the general rule, in this case, as in all those others, it lies upon him
who alleges the necessity of the exception to produce a reason for it."
This would have been a fair statement of the question had the exception contended for been a new one. But after admitting, as he explicitly
does, that the exception is as old as the general rule, that'it had gone into
the legislation of almost all nations, ancient and modern, that it had
2




14                   IMPORTANCE OF USURY LAWS.
"taken hold of the imagination and passions of men," and "that custom
was the sole basis which either the moralist in his rules and principles, or
the legislator in his injunctions, can have to build upon," one would have
supposed that he who sought to overthrow an exception practised upon
through all time, by both moralists and legislators, would have had the diffidence to believe that the chance that all the world was right was tolerably
good, until he established the contrary. But Mr. Bentham was a theorist
in the largest sense of the term, and ought not to be severely censured for
believing all the world wrong in this particular instance, inasmuch as he
believed they were wrong in almost all others.
Mr. Bentham thus divides the subject.  "In favor of the restraint opposed to the species of liberty I contend for, I can imagine but five arguments:
"1. Prevention of usury.
2. Prevention of prodigality.
"3. Protection of indigence against extortion.
"4. Repression of the temerity of projectors.
"5. Protection of simplicity against imposition."
He then devotes several chapters of his book to the refutation of these
five reasons, which are all that he can " imagine " in favor of the restraints
proposed upon the loan of money.
The substance of the second chapter consists in a successful attempt to
show that there can be no such thing as usury in the absence of all previous legal restraint; — that usury is the excess over the rates established
by law. This proposition might have been taken for granted.
In the third letter, Mr. B. proceeds to demolish the second reason which
he " imagines" to be one of the reasons in favor of usury laws, the prevention of prodigality. He says, what in general is true, "that no man,
prodigal or not prodigal, will ever think of borrowing money to spend, so
long as he has ready money of his own, or effects which he can turn into
ready money without loss." That if he is a prodigal " the usury law will
not prevent him from spending what he has."  And that after he has spent
his all, " and has no security to offer, it will be as difficult to obtain money
at an extraordinary rate as at an ordinary rate," and thus, therefore, the
usury laws can be no protection to him.
In his fourth letter he undertakes to show that the indigent derives no
beneficial protection from these laws, because, supposing him of sound understanding, he is a better judge than the legislature what he can afford to
pay.
The protection of simplicity forms the subject of the fifth letter, and is
the only remaining reason upon which Mr. B. imagines the usury law to
rest.
He says, " Here, in the first place, I think I am by this time entitled to
observe that no simplicity short of absolute idiotism can cause the individual to make a more groundless judgment than the legislature, who, in
the circumstances above stated, should pretend to confine him to any given
rate of interest, would have made for him."
That even admitting the judgment of the legislature to be better than
that of the individual, still the usury laws can be no protection to him,




IMPORTANCE OF USURY LAWS.                  15
because there are many other ways by which a simple man may ruin
himself, which the legislature has not protected him from, such as buying goods at exorbitant prices, buying more than he wants, and other
similar cases.
This ends the work of demolishing the five reasons which Mr. Ben.
tham has imagined were the only reasons upon which the usury laws were
based.
Mr. Bentham then proceeds to an enumeration of the positive mischiefs
of the usury laws.
" The first I shall mention is that of precluding so many people
altogether from getting the money they stand in need of, to answer their
respective exigences. Think what a distress it would produce, were the
liberty of borrowing denied to everybody." I confess myself unable
clearly to understand what the author means by this mischief. I believe
it was never before pretended that usury laws lessened the quantity of
money or prevented any one from borrowing.
The second mischief is, that if any man is not permitted to borrow, he
must sell his property at a greater loss than the extra interest would occasion. Here, again, he imagines that the usury laws prevent men from
borrowing.
But the third and last mischief is somewhat extraordinary, and proves
not only how bold a man must be who opposes the deliberate verdict of mankind by novel and unfounded theories, but how deeply he
will plunge into error, who draws entirely upon his imagination for
information which can be nowhere found but in the practical business of
life. He says:
"The last article I have to mention in the history of mischief, is the
corruptive influence exercised by these laws on the morals of the people,
by the pains they take, and cannot but take, to give birth to treachery and
ingratitude.
"To purchase a possibility of being enforced, the law neither has
found, nor, what is very material, must it ever hope to find in this
case, any other expedient, than that of hiring a man to break his
engagement, and to crush the hand that has been reached out to help him."
This is too bad even for a writer who draws entirely upon his imagination. Had Mr. Bentham taken the pains to understand and state the
reasons upon which these laws really are founded, and to overthrow those
reasons as successfully as he has the cob-houses of his own imagination,
he might have been entitled to the indulgence of a little sentiment of this
sort. But to steer clear from. the beginning to the end of his book
of the sole questions upon which the policy or expediency of such
restraints depend, and then to end with a poetical triumph of this sort,
is a liberty which perhaps no other man but Jeremy Bentham would have
indulged in;-I say to end, because I have, given the substance of his
book. If it had been my object to attempt to overthrow the reasons given
to support the propositions advanced, a more detailed statement would
have been required in order to give a fair view of his side of the
question.
Buit with this reasoning (though I by no means assent to some of it) it




16                  IMPORTANCE OF USURY LAWS.
is unnecessary to consume time, because I shall endeavor to show that the
propositions, to support which that reasoning is employed, have but a
remote connection with the usury laws. If the men of Mr. Bentham's
days, either by their writings or conversations, induced him to believe that
the laws against usury were enacted only for the protection of the prodigal,
the indigent, the projector, or the simple, they must have abounded in
ignorance, and he in credulity.
The policy and expediency of usury laws must depend mainly, if not
entirely, upon two questions.
1st. Supposing the parties to stand on equal terms, and the bargains
which they make to be, in general, perfectly fair as between themselves, is
it, or is it not, for the interest of the public to allow money to be converted
into merchandise, and bought.and sold at'any price the parties may choose
to stipulate?
2d. Do the parties in general meet on equal terms, and are the bargains,
in the absence of usury laws, as fair as bargains usually are in relation to
merchandise?
These two questions involve substantially all the other questions
that relate' to the usury laws; for, if perfect freedom as to the price
of money neither injures the public nor individual borrowers, any
more than the same freedom in relation to merchandise, then Mr. Bentham
is right.
If, on the contrary, this freedom would be injurious to the public, or so
generally to borrowers, as to call for protection from the law, then it is
equally clear that he is wrong. I say it is equally clear that he is
wrong if the latter supposition is true, because no one admits the evils,
and complains of the remedy. The complaint is not that usury laws,
as they now exist in England, do not constitute the best remedy for the
supposed evils, but that the supposed evils have no existence. All that I
shall attempt to show, therefore, is, that these evils always have existed,
and probably always will, unless checked by some legislation, of some kind
or other. If any discovery of a better remedy than that resorted to by
nearly all the civilized nations of the world should be pointed out in this
inventive age, let the new remedy be applied.  Until such discovery
the old remedy must be deemed the best, if the evils complained of really
exist.
The little book of Mr. Bentham on this subject was one of the first, if
not the very first, that contains a systematical attack upon the whole policy
of the usury laws.
No reformer before his day was bold enough to recommend so wide a
departure from the legislation which ancient and modern nations have been.
obliged sooner or later to resort to. Adam Smith dealt pretty freely/with
many of the usages and much of the legislation of his own and other
countries. But, intelligent and fearless as he was, he expressly admits the
necessity of the laws in question. When Mr. Bentham, therefore, undertook the arduous task of showing that all mankind were wrong in the
conclusion to which they had arrived, one would have supposed that at
least he would, from a regard to his own reputation, have informed himself
upon what questions the policy of those laws depended. At the present




IMPORTANCE OF USURY LAWS.                  17
day, at least, it will be admitted that they mainly depend upon the two
which I have stated. Yet, from the beginning to the end, Mr. Bentham
nowhere states, formally or substantially, either of these questions. I have
given the substance of his book so far as it relates to the laws against usury.
In letter 10, he undertakes to ascertain the grounds of the prejudices against
usury. This attempt I shall remark upon by and by. The other letters
may have a bearing upon the subject, but so remote that, at my time of life
I am unable to discern it.
Still I hear the advocates of free trade in money matters exultingly
refer to Mr. Bentham's book, as settling all the difficulties which surround
this intricate and perplexing question. All I ask of the public is to read
this book, after first deciding in their own minds what the questions are
upon which the policy of those laws depend, and if they find those questions
anywhere stated or discussed, I have been unfortunate enough to overlook
the page which contains it.
I shall take but a brief view of the subject, because nothing but brief
views on any subject, in this busy age, stand a chance of being read, and
also because I hope to provoke a discussion of the important questions
which it involves, by those better informed than I pretend to be.
1st. I think I cannot be mistaken in saying that the first question upon
which the policy of these laws depends, is, whether it would or would not
be injurious to the public to allow money to become the subject of unrestrained traffic, like any other article. If such a traffic would not injure
the public, then one of the reasons which have been supposed to exist is
removed. If it would, then all will agree that they ought to be reenacted
with their original severity.
How is it to be decided that such a freedom would injure the public?
The answer is a very plain one. If such a freedom from restraint would
inevitably increase the average rates of interest, it would be a serious evil
to the community. If its tendency should be to reduce the rates below
what they formerly were when the usury'laws remained in force, it would
be a blessing. If, on the other hand, they neither increased nor diminished
the rates, then, so far as the public is concerned, the restraints ought to be
entirely withdrawn, because all penal laws are odious, and when they have
no effect of any kind are also useless.
The advocates of the free-trade principle, at least those with whom I
have conversed, agree that, so far as the public is concerned, the whole
policy of the laws depends upon the questions I have stated. They consequently contend very earnestly that interest would be lower, if the
restraints were all thrown off, than it now is under the partial restraints
that remain. Those who contend for this effect from a total repeal are
principally money-lenders, men who are interested in keeping up the rates
as high as possible. I have had some difficulty in discovering what should
induce men to wish for the repeal of a law which, as they say, is sure to
lessen the income or interest of their money; still, as I know many of
them to be conscientious and upright men, I have never questioned their
sincerity, although it is a sincerity very liable to be turned wrong end
foremost.
I cannot find that Mr. Bentham anywhere discusses this question but
29




18                  IMPORTANCE OF USURY LAWS.
he repeatedly states opinions from  which others of his school infer
that he thought that the usury laws have a tendency to increase the
rates of interest. I draw precisely a contrary inference from all that has
a bearing on the subject. For instance, in his second letter, page 13, he
states, "And in Hindostan, where -there is no rate limited by law, the
lowest customary rate is ten or -twelve."  "In Constantinople, in certain
cases, as I have been informed, thirty per cent. is a common rate. Now,
of all these widely different rates, what is there that is intrinsically more
proper than another? "
He had previously stated that in Ireland it was six, and in the West
Indies eight per cent. If Mr. Bentham contends that thirty per cent. is
intrinsically as proper as six, he does not agree with most other advocates of the free-trade system, that high rates are injurious to the public;
for if they are injurious to the public they are not proper.
But can it be seriously questioned by any practical man that high rates
are injurious to the public?
Mr. Bentham, in page 14, says: "For him who takes as much as he
can get for any other sort of thing, a house for instance, there is no particular appellation, nor any mark of disrepute; nobody is ashamed of
doing so, nor is it usual so much as to profess to do otherwise. Why a
man who takes as much as he can get, be it six, or seven, or eight, or ten
per cent., for the use of his money, should be called usurer, should be
loaded with an opprobrious name, any more than if he had bought a house
with it, and made a proportionable profit by the house, is more than I can
see."
Why a man always has been, and always will be, loaded with an opprobrious name, who takes as much as he can get for his money,, I will consider
when I come to remark on the fairness of the bargain between the lender
and the borrower. At present I cite this passage as the foundation of the
notion that money is to be treated like an article of merchandise, and that
in both cases it is right to take all that the lender or seller can get. My
view of the subject, both as it regards its effects upon the public and upon
the borrower, is, that money is unlike any other article, and so unlike it that
the possessor has neither the legal nor the moral right to take for it all that
he can get. Mr. Bentham seems never to have given a moment's attention
to the difference between money and merchandise. I will endeavor to point
out what he says he cannot see.
In the first place, all merchandise is, in some form or other, the product
of individual labor or skill. The farmer who produces a hundrdd bushels
of wheat, the manufacturer.who fabricates his bale of cloths, and the
mechanic who constructs a ship, become the absolute owners of the
products. Their right is unqualified, for.they are not produced for any
specific purpose, but, originating solely in individual labor, they are to be
used solely to gratify individual caprice or individual love of gain. When
the original producer sells them, he conveys all his right to dominion over
them, and all this right and dominion over them passes with the article into
whose hands soever it may come. The original or any subsecuent owner
may destroy them if he pleases, and neither the public nor any other individual has a right to complain. So absolute is his right that even the




IMPORTANCE OF USURY LAWS.                  19
government cannot take it from him for public use, without making an
adequate compensation.
Oa the other hand, money is not originally the product of individual
labor or skill, but is brought into existence by the government. The
metallic currency must pass through the mint, or receive in some other
way the sanction of the government, before the character of money is impressed upon it.  Our paper currency is the creature of state governments,
who authorize certain agents of theirs, called banks, to issue certain
amounts. Thus the origin of the metallic and paper currency is with the
government of the country.
2d. The object of these products of the government is as different from
the products of individual labor as is their origin. The object is a specific one, to benefit the common country at large by affording them  a
medium for facilitating the exchange of all the commodities in which men
usually deal. It is sent out as an instrument to represent the value of all
other articles.
Its main object was then for the public good, as a currency to which all
men might have access. It was never intended as an article of trade, as
an article possessing an inherent value of itself, any further than as a representative or test of the value of all other articles. It undoubtedly admits
of private ownership, but of an ownership that is not absolute, like the
product of individual industry, but qualified and limited by the special use
for which it was designed. The first purchaser from the mint or the bank
of a portion of this currency, purchased with a knowledge that it was the
currency of the country, and that it was designed for that particular purpose. All the title which'he acquired by the purchase was to use it for
his own benefit, provided he did not interfere with the main object of its
creation, to wit, a currency. It is analogous to the use which individuals
may make of any other property created for public purposes. A public or
navigable river is undoubtedly the property of the public, destined for
specific purposes and uses. An individual, one of the public for whose use
this public river or other highway was intended, may acquire a particular
kind of property in it. He may use it in any way that does not interfere
with the grand object of all highways; but if he exceed that object, and
undertake to prevent others from using it in the same manner, he exceeds
his right. The owners of the land adjoining a highway are the owners to
the centre. If a mine should be discovered under it, they alone could
claim it. But this private right must be so used as not to interfere with
the travel of the public. Many other modes of illustrating the limited nature
of individual title to the currency of the country will occur to every one.
Can an individual owner of a portion of the currency use it as he pleases
without regard to the object of its creation? The individual producer of
the one hundred bushels of wheat may throw it into the sea if he pleases,
and neither the government nor any individual has a right to complain.
But suppose forty or fifty capitalists should buy up all, or nearly all, the
metallic currency of the country (which it is in their power to do), so that
all the paper currency must of necessity be withdrawn from circulation,
and consequently all the business of the country come to a stand; suppose
they should insist upon their right to use it as merchandise, and keep it




20                  IMPORTANCE OF USURY LAWS.
locked up in their warehouses; would any lawyer among us say they had
either the legal or the moral right so to do?
In a general sense, the government has a right to prevent an individual
from using any property, over which, according to common parlance, hehas an absolute right, to the injury of the public. But this is a general
power, to be exercised by general laws, and in no other manner. It is
wholly unlike the case supposed, for until those general laws are enacted,
the individual may legally use his property in any way he pleases. But
the right which the government has to the currency is not a general right
to pass all laws required by the public good, but a specific interest in the
thing itself which constitutes the currency. The public is a partner with
the individual.  It has. a joint interest in the thing itself, and an undoubted
right to restrain the individual from using it, except for partnership purposes. The elder right is in the public, and the individual purchased
merely the power of using it, subject to the elder right.
Again, the inherent and inseparable qualities of money are different
from those of any other article. It possesses a power which no other commodity does or can possess. It is beyond the ability of individuals or of
the government to confer that power upon land or merchandise. The
government possesses the power of converting lead, or rags, or silks, into a
currency, but the moment that is done, the lead, or rags, or silks, become
money, and this superadded character, conferred upon it by the government, clothes it with a power, different in kind, and greater in degree, than
can exist in any other article without that character.,
This power is separate and distinct from its value. One hundred dollars.n land possesses as much value as one hundred dollars in gold, but much
less power. The land, though of the full value of one hundred dollars, will
not, like money, at all times, and in all places, command one hundred
dollars value, in any of the thousand different commodities which its owner
may want. This power to command everything else, does not exist in the
gold, or the silver, or the paper, constituting the materials of money, but
arises out of the act of the government, which impresses the character of
money upon it. Should the government ordain that certain peculiar shells
should constitute the currency, and be a lawful tender in payment of debts,
that currency would possess the same power, though probably not the same
value, as gold and silver. The power of money, then, over every other
article, arises out of the artificial character given to it by the state, and
not out of the qualities of the material of which it is composed. This
power consists mainly in its convertibility, in the facility with which it may
be exchanged for any other commodity. If an individual should invent a
machine capable of performing what no other machine could perform, not
only would the materials of which it might be composed be his property,
but its powers and capacities would also be his. The law would protect
him in the enjoyment of this latter species of property, and prevent any
other individual from constructing or using a similar one without his consent. This power and capacity, being the fruit of individual skill, becomes
the subject of individual right and property. In theory, therefore, it would
seem that the power of money, being the fruit of the industry and skill of
the government, would necessarily become the property of the government.




IMPORTANCE OF USURY LAWS.                    21
But, in point of fact, this power was conferred upon it for the benefit of the
public, and becomes the property and right of those for whose benefit it
was invented.
In the next place, it must be admitted that the power thus conferred
upon the currency by government is not only different in kind from the
power which the ownership of other commodities confers, but that it is
almost unlimited in extent and degree.  It being the representative of the
value of all other articles, it is indispensable to the business of all men,
because every man must deal in some one or other of those articles. When
I say indispensable, I do not mean useful, convenient, o0 desirable, but
indispensable in its strictest sense; for a man who is deprived of access to
money entirely must stop his business. Should he resort to a barter trade
he would find so much of his time consumed in making his exchanges, and
so many other obstacles to encounter, that a rival in the same business, who
could command a sufficiency of money, would undersell him.
Money, then, is the subject of want to every man in the community, and
of a want so pressing as to be indispensable.
Money is as indispensable to every man as a license would be in a given
case. Suppose, in a case of war or some other exigency, that the government, for purposes of revenue, should find it necessary to enact a law that
no business of any kind should be transacted without a license first obtained,
and that the price of this license should be governed by the amount of business to be transacted; suppose also that this law should. be rigidly en.
forced; it is easy to see, in the case supposed, that, without a license, no
man could continue his business; in other terms, that the license would be
indispensable.
The currency is this license, provided by the government (not for the
purpose of revenue, but) to enable all men to transact their business.
No other article can be named which is indispensable to the business of
every man, consequently, in this particular, money is totally unlike anything else. It is also unlike all other commodities in this, that there is no
one article, that is made the subject of trade, which every man has any
occasion for. On the contrary, select any one we please, and we shall find
that comparatively but few persons are in want of it. The variety of pursuits and occupations is almost as great as the variety of commodities.
Each man wants only that in which he deals. Even provisions and cloth,
ing consist of a great variety of kinds, and scarcely one can be selected
which all men want, and no one that is indispensable. In case of a scarcity
of one, others will be substituted. This difference between all other commodities and money is very material; for money being not only the subject
of want, but' indispensable to all men, a scarcity is felt by all men;
like diseases of the blood, it not only affects the heart and the other vital
organs, but the remotest extremities.  No portion of the system can escape
its contagious influence.
A scarcity, then, in any one of the subjects of trade, affects but a few,
and that few in but a slight degree, because other articles can be substituted.  If prices should rise considerably above the market value, in ninety
days importations from Europe would supply our wants at least, if not
reduce the price. There is always a physician at hand for the diseases of
trade. But a scarcity of money cannot be cured by substituting something




22                  IMPORTANCE OF USURY LAWS.
else. Money, and nothing but money, will supply the wants of individuals.
Nor will a supply from abroad cure a disease of the currency arising from
scarcity, as in the case of merchandise; for the owners of the latter articles
send it wherever prices are highest. But the owner of money is governed
by a different rule.  In general he keeps it under his own eye. He prefers loaning it to men, and upon security, well known to him. He may be
willing to invest it in the stocks, or lands of a foreign country, but very
rarely does a capitalist send his money to a foreign country to loan to individuals. He has to encounter the double risk of the solvency of his
agent, as well as that of the borrower. For many years money has commanded from twenty to thirty per cent. in many of the western states, upon
landed security, while it has been abundant in England and Holland at
three and four.
There is another point of view in which money is unlike other articles.
It is this, that a scarcity in the latter rarely ever occurs,- a general scarcity
never; I say never, because for the last forty years I never knew a general scarcity of all articles, and but a few instances in any one article. But
the scarcity of money has been the theme of general complaint. It has
existed teither real or artificial) as long as the oldest of us can remember,
and the reason is found in the fact before stated, that it is indispensable to
the business of every man.
Another essential difference between the two subjects under consideration consists in the facility of creating an artificial scarcity of the one, and
the difficulty, if not impossibility, of creating such a scarcity in relation to
the other.
Money is concentrative in its very nature. Its home is the pockets of the
few. Under the free-trade system this concentrative quality would naturally increase. Merchandise, on the other hand, is diffusive. The object
of its creation is distribution and consumption. Without this consumption
trade could not exist, and its natural effect is, that merchandise of all kinds
is found in great abundance all over the country.  When a sale of goods,
of any kind, takes place, they part from their owner never to return again.
They abide but a short period with no one but the ultimate consumer.
Money, on the other hand, is loaned, not sold, and it returns to its owner
invigorated with additional power by an increase in its amount. This
tendency in merchandise, of diffusion among the many, and in money, of
concentration among the few, prevents an artificial scarcity in the one case
and facilitates it in the other.
There are other facts which increase the difficulty on the one hand, and
entirely remove it on the other. The specie currency of the country, if I
mistake not, is estimated at about forty million dollars;. the paper at
about eight times that amount, or three hundred and twenty million dollars,
while the subjects of trade are supposed to be at least ten times the latter
amount, or thirty-two thousand millions of dollars. To attempt to create
an artificial scarcity in all the various subjects of trade, therefore, would be
little short of madness.
All that the most visionary would deem practicable would be to effect
an artificial scarcity in some one article. Suppose flour should be selected,
nId a few wealthy capitalists should buy up two or three millions in value




IMPORTANCE OF USURY LAWS.                   2S
of that article.  Two hundred thousand dollars in flour cannot well be
concealed in a pocket-book or in a vault. The attempt would of course become generally known, and probably never be repeated. Nine-tenths of the
people, rather than such a combination should succeed in raising the price,
would substitute some other article. If there should be a partial advance
the evil would be very limited in duration. But the fact that such combinations do not exist to any extent, and never have, is sufficient proof that
they will not exist in future. I suspect that the truth of the case is, that
there is more danger of loss, than chance of gain, by such experiments.
Flour is a perishable article. Almost all kinds of merchandise are subject
to great fluctuations in price. Importations, to supply the quantity hoarded
up by speculators, would soon follow, and prevent the occurrence of the
threatened evil.
The facilities, however, in the case of money, to produce an artificial
scarcity, are much greater. I do not mean to affirm that even in respect to
money such a scarcity has ever been produced. All I mean to say is, that
it may be produced with much more ease than in relation to any other
article. Thus, if a few large capitalists should control $10,000,000 of the
specie currency, the banks would be obliged to withdraw from circulation
say $80,000,000 of the public currency. This, of itself, would, under the
free-trade system, at once raise the rates of interest up to twenty or thirty
per cent. In fact, there seems to be no need of any action on the part of
the capitalists. All that is necessary is to pretend that a scarcity exists,
and what means have the public of ascertaining the truth? But, in the
case of merchandise, the fact of a real scarcity, or a pretended one, can be
much more easily ascertained.
But, in relation to the subject of scarcity, money differs essentially from
merchandise, not only as it regards the facility of creating it, but in its
consequences when created.
Suppose a stranger, upon entering a foreign country, should find a small
portion of the people afflicted with a slight disease, of short duration, and
which visited them every ten or twenty years - that this disease occasioned
but little pain and no deaths; would he consider it among the leading
calamities of life, or even as a very serious evil?
Suppose, however, that in the next country which he visited, he found
nearly every man, woman and child, in deep distress; all writhing under
severe pain, some in the agonies of death, and many gone to the tombs of
their fathers. Suppose that he should be told that the disease, which
caused all this suffering, was produced by want of food; that it visited
them nearly every year, and that the want of food was occasioned by the
government allowing individuals to buy up all the provisions which had
been deposited in the granaries for public use, and to impose such exorbitant prices, that few, if any, were able to supply themselves with the
necessaries of life; would he not be apt to rank this among the real calamities of life?
The difference between the, extent and degree of suffering in the two
imaginary cases is no greater than between that occasioned by a scarcity
(real or pretended) of any one of the articles of merchandise, and a scarcity
of money. In the case of a scarcity of merchandise, very few are affected




24                  IMPORTANCE OF USURY LAWS.
at all; that few in a very slight degree, for a short period, and the disease
happens once in ten or twenty years. But in the case of money, it goes
home to the business of every man, rich and poor. It pinches all - it ruins
many; and, what is its worst feature, it is of frequent occurrence. What
would be the opinion of any man of common intelligence of the wisdom of
that government, which, after providing,a supply of food for the wants of
the whole, and at the expense of the whole, should, instead of fixing a
reasonable price, which should enable all to command a portion, convert it
into an article of trade and speculation, and thereby defeat the whole object
of such an institution?  The currency was crehted by government, at the
expense of the whole, and for the good of the whole. It is as necessary to
the wants of business as food to our physical wants.  Once allow it to
become an article of merchandise, and you effectually starve the business
of the country.
It will be perceived that my object thus far has been not so much to
sustain the policy of the usury laws, as to show how totally unfounded is
the basis of the opposite reasoning, that money is like any other article of
merchandise, and, therefore, any lender has a right to take all that he
can get.
I have attempted to show that it is unlike merchandise in the following
essential features:
1st. That money is the creation of government; merchandise, of individual industry. Its origin is, therefore, different.
2d. That the object of government, in creating money, was as a currency
for the convenience of all; whereas the object of the product of individual
industry is the advantage of the individual alone.
3d. That the title of an individual to merchandise is absolute, the public
having no interest in it; but that his title to a portion of the currency, is
qualified, he having no legal, at least no moral right to pervert the object
of its cieation.
4th. That money differs from all merchandise in the power which is
inseparable from it. That this power was conferred upon it by government,
and that it is the right and duty of the government to see that a power
imparted for the general good shall not be perverted to the injury of the
public.
5th. That this power is the necessary consequence of the character imposed upon it by government, money being the only instrument of exchange,
and therefore indispensable to the business of all.
6th. That money being generally in the hands of the few, the facilities
for creating an artificial scarcity are much greater than for creating an
artificial scarcity of merchandise.
There is another argument, used by Say, quite as unusual as the one I
have already noticed. It is this, that usury laws have a tendency to keep
up the rates of interest, because the lender who violates those Jaws will
make the borrower pay for the additional risk he incurs. I should not have
noticed what I consider is not even a plausible argument, were it not for
the fact that I find it in the mouth of every free-trade man with whom I
converse. This, and the one already considered, are about all the weapons
which their armory contains. The easiest way to dispose of it is, to admit




IMP1ORTANCE OF USURY LAWS.                  25
the fact that when a lender does violate the law he indemnifies himself for
the risk of that violation. Does this prove that usury laws have a tendency
to increase the rates of interest?  What would not only that individual,
but all other individuals, have taken in the absence of usury laws; in the
absence of that salutary moral restraint, which comes powerfully to the aid
of those laws?  This argument makes it a matter of reasoning, whether
these laws had that effect or not. The free-trade reasoners seem to have a
slim opinion of facts and experience. All that the case put by Say proves,
is, that in that one case the lender indemnifies himself for the additional risk;
but he forgot to state that where there was in England one case of violation
of the law, there were ninety-nine of conformity to it. Suppose for a moment
that the fact is, not as I know, but as fiom my own experience under both
systems I believe it to be, that in England and in this country, under those
laws, take all the contracts for the loan of money together, there was not
one case in a hundred of an excess of the legal rate. In Rhode Island
banks are very numerous in town and country. Nearly all our loans were
from the banks at the legal rates. No bank, to my knowledge, ever dared
to exceed that rate, because a forfeiture of the debt might be the result, and
that forfeiture the directors who should have violated the law would have
had no right to have charged to the bank, but would have been obliged to
have shouldered themselves. They, therefore, run a great risk of detection,
and in case of escape, they would have made nothing but their portion of
the excess as stockholders. The law, therefore, was a perfect protection
for all borrowers from the bank. While those laws were in force, therefore,
and the banks were obliged to loan at the legal rate, few men borrowed at
all from out-door lenders, and none in good credit would give more than
six per cent., so long as he could hire of the banks at that rate. The consequence was, as I believe it always has been in England, that out of all
the contracts made, not one in a hundred exceeded the legal rate. Suppose,
then, that I am correct in this proportion, it follows, that if there were one
hundred loans, of one hundred dollars each, ninety-nine of them at six, and
one at twelve per cent., the average rates in Rhode Island under those
laws was six and one-sixteenth per cent. The question is wholly mis-stated
by Say, for, instead of inquiring the effect of usury laws upon lenders
generally, he inquires what their effect is upon the one man in a hundred
willing to incur the risk of their violation. A fair test of their effect is to
ascertain the rates in general; that is, the average rates upon the whole
capital loaned, in countries with, and in countries without, these laws.
Perhaps a still better test is the average rates in the same country under
the different systems. By that test, I am willing that the question shall
be decided.
In Rhode Island a virtual repeal of those laws took place ini 1817. -From
that period to the present time a gradual increase has taken place. Directors of banks, finding themselves free from the personal responsibility of a
forfeiture, btgan the free-trade music by shaving drafts. They were not
bold enough to take excessive interest upon notes for a considerable period;
but excessive interest by way of charging the difference of exchange upon
drafts was so pleasing an employment, that they had but little left for
notes.  Money became scarcer and scarcer upon notes, but generally
3




26                   IMPORTANCE OF USURY LAWS.
abundant upon drafts, till at length the exactions of some few of them
(there were several honorable exceptions) became the subject of universal
complaint, and the legislature interfered by a law, which I hope the good
sense of the people will second them in enforcing with the utmost strictness. This is the result of the free-trade system in Rhode Island. If I
have fallen into any error in this statement, there are those around me,
better informed than I am, able and willing to correct it. What the result
has been in Massachusetts I am unable to state, except from information
too vague to rely upon.
In New York, a loop-hole, just large enough to escape through, had
admitted all the evils of the free-trade system. No one pretends that since
the relaxation of these laws the rates are lower than formerly.
In these three instances of relaxation, New York, Massachusetts, and
Rhode Island,'I believe all business men will agree that for some reasons
or other interest has increased. No doubt the lenders will attribute it to
other causes.
Say informs us that in ancient times the more severe the penalties the
higher were the rates; but he furnishes no facts to justify his opinion. On
the contrary, the only fact he does state refutes the whole proposition.
He says that letters patent are still extant authorizing the Jews to loan at
eighty-six per cent. per annum. Here, then, is the customary rate in that
reign under the free-trade system. There was no indemnity for the risk of
violating the law, because those rates were authorized by law. Previous
to the reign of Henry VIII. the customary rates were forty per cent.
The taking any interest was then denominated usury. In the thirty-seventh
of Henry VIII. the rates were established at ten per cent. They were
reduced from time to time, until the reign of Anne, when they were established at five per cent., and so continued until the present day. An excess
of that rate subjects the lender to the forfeiture of the debt, and an additional forfeiture of three times the amount. These penalties are of great
severity, and, according to Say, ought to have increased the rates of interest.
But how is the fact? Why, that the people have conformed to those rates
as they were successively reduced, and instead of a general increase, in
what country in the world (except, perhaps, Holland) are the rates so low
as in England?
Hindostan, Mr. Bentham says, is a free-trade country; and he explicitly
admits that the lowest rates there are from ten to forty per cent. The
usual rate, I believe, is about twenty.
China is practically, and I believe legally, under a similar system. A,
very intelligent merchant, for many years a resident in that country, informs
me, " That in China the inhabitants may be classed into the very rich, the
middling, and the very lowest. The rich are very few compared to the
middling. They usually possess an ensign of office, but are not allowed to
exercise any of its duties, so long as they pursue other avocations. This
distinction protects them from the impositions of the petty officers of the
government. In China there are no laws limiting the interest of money,
or none that have any effect. The rate of interest is very high, varying
from twelve to thirty per cent. Those who are reputed rich, and can have
great influence with government, can borrow at a comparatively low rate;




IMPORTANCE OF USURY LAWS,                  27
whilst the middling class, comprehending the tradesmen, the mechanics, and
the manufacturers, pay a very high rate. A silk manufacturer, wishing to
execute an order for one thousand pieces of satin, must borrow in order to
pay for coloring, weaving, &c. This will consume about three months, and
it is very common to pay two per cent. a month for such operations. Mechanics and middling class merchants, in general, pay two per cent. a
month. For small sums three per cent. a month is very common. Money
shops, as they are called, are numerous. It is common for those who do
not own shops, to send their money to them to be loaned. There are many
lenders who come to Canton from other provinces, and lend money in large
sums. They live in a penurious manner, and are called'blood-suckers.'
"From   this description of their system, it may be perceived that the
middling class are always kept in a state of dependence, the profit of trade,
manufacturing and labor, being absorbed by the few who control the property."  Here, then, is another tendency of the free-trade system to lower
the rates of interest.
Mr. Bentham has written a chapter upon the grounds of the prejudices
against usury. These prejudices, according to him, originated in two facts,
one the saying of Aristotle, " that money is naturally barren;" and the
other the religious prejudices against the Jews. The supposed saying of
Aristotle he chooses to understand in a literal sense, "that notwithstanding
the great number of pieces of money that had passed through his (Aristotle's) hands, and notwithstanding the uncommon pains he had bestowed
on the subject of generation, he had never been able to discover in any
one piece of money any organs for generating any other such piece." Did
Mr. Bentham intend to impose upon his readers a belief that such was
Aristotle's meaning? He surely could not have believed it himself. Yet,
strange as it may seem, this construction has gone into the books of the freetrade writers, and some others, and the money-lenders profess to believe it.
The obvious meaning of this brief sentence is merely to express the common opinion then, and the common opinion now, that the lender of money
ought not to be encouraged, because he produces nothing; which is literally
and substantially true, notwithstanding the labor of the modern theorists
to prove the contrary. The hirer, by his own industry, aided by this instrument called money, may produce a ship, or a thousand bushels of wheat,
and thereby add to the previous stock. But the lender produces nothing.
His money was the instrument which assisted the hirer to produce the ship
or the wheat. So would the loan of a plough, a saw, or any other instrument, have been of service to the borrower; but that does not constitute
the plough the producer of the wheat, or the saw the producer of the ship.
Nor is the loaner of money any better entitled to the merit of being a producer, than would be the loaner of a plough or a saw. The plough is an
instrument that aids in but one purpose; the saw is an instrument that
aids in many purposes, and money an instrument that aids in all. Hence
its commanding power.
This was the meaning of the phrase of Aristotle, " that money is naturally barren."
IM. Bentham is quite as unfortunate in his next attempt, in which he




28                   IMPORTANCE OF USURY LAWS.
attributes the early usury laws to the prevailing prejudices against the
Jews.
Chesterfield informs us that there is but an inconsiderable few, even
among the intelligent, who think for themselves. This is undoubtedly true
in relation to what they are not immediately interested in. That but very
few men ever thought of this false and absurd statement of Bentham's, is
undoubtedly true.  It has been taken entirely upon trust. I hope the
community, before they take more of this Bentham paper, will require as
many endorsers as money-lenders usually do.
Mr. Bentham is obliged to admit that nearly all the civilized nations of
the'world, ancient and modern, have passed laws against usury.  The existence, then, of such laws is admitted, and the only question is why they
were enacted.  Mr. Bentham  says, on account of the prejudices against
the Jews. Now, in point of fact, in all or nearly all the nations that ever
resorted to such laws, the free-trade system prevailed centuries before usury
laws were thought of. What nation ever enacted a penal law until the
evil existed? Penal laws are among the last species of legislation resorted
to. The law of Athens, until a pretty late period, was, that "A  broker
shall demand no more interest money than what he agreed for at first."
(Lysias Orat. 1 Themnestum.)
"Let usurers' interest money be moderate."  (Ulpiemus.)
J. B. Say says, that marine interest in Athens was sixty per cent., when
in ordinary eases it was commonly not more than twelve. It is not my
purpose to do more, on this point, than to show how utterly groundless is
the assertion of Bentham that usury laws grew out of prejudices against
the Jews. This is accomplished by merely stating, what every man must
at once perceive the truth of, that the Grecian and Roman laws could not
have originated in a prejudice of that kind. They first tried the free-trade
system, as almost every other nation, ancient and modern, did; they found
that the money-lenders were exorbitant in their demands; that the power
of money at thirty and sixty- per cent. concentrated all the wealth in the
hands of a few, to the ruin of the industrious of every trade and profes-;ion. This was the experience of Rome and of Athens, and so severe
was that trial and experience, that in the former the state was convulsed
by the revolutions produced by the exactions of the usurers.
Try the same free-trade system in this country, and if we do not in
twenty years create a war against'property generally, then I shall conclude
that no reliance is to be placed upon history and experience.
It was not on account of prejudices against the Jews, then, that the
Greeks and Romans resorted to these restraining laws, for, if I am not
very much mistaken, they had few or no Jews among them.
In modern Europe, the Jews were to be found in almost every city, and
it is probably true that a considerable portion of the money was monopolized by them. But what but excessive interest enabled them to monopolize it?  What created the prejudice against them but the very practices
now attempted to be legalized in this country?
But upon what authority does the assertion of Mr. Bentham rest, that
these prejudices occasioned these laws?  Upon this point the opinions of
ancient judges vary, some of them contending that by the early laws the




IMPORTANCE OF USURY LAWS.                  29
Jews were permitted to take usury (all interest was then considered usury),
and that the prohibition extended only to the Christians. Some of the
ancient statutes refer to the Christian brokers.  Ord says, " In the time of
Edward I., Edward II., and Edward III., many commissions were granted
to inquire of Christian usurers, and many were indicated," and so forth.
But, be the object of the early statutes what it may, both the Jews and
Christians did take from forty to one hundred per cent., and the natural
question is, what enabled them to exact such unconscionable rates?  Was
it the power of the Jews personally? They were a proscribed sect. Even
to this sect the Christian did pay these unchristian rates. The reply is
too obvious; it was the power of the money — and the fact admitted by
Bentham proves incontestably that through all time' money has possessed
the power of dictating its own terms. Money was probably as plenty then,
in proportion to the amount of business, as at the present time. It was
not the scarcity, it was not the influence of the Jews, but it was the inherent and absorbing power of the money itself that governed and controlled the whole business of those early nations. All Mr. Bentham's
facts are directly opposed to his theory.
The statute of Anne, enacted about one hundred and thirty years ago,
and now in force, is, if I may use the expression, a perfect statute. Its
preamble bears upon this question: " Whereas the reducing of interest to
ten, and from thence to eight, and thence to six in the hundred, has, by experience, been found very beneficial to trade, and improvement of lands;
and whereas the heavy burden of the late long and expensive war hath
been chiefly borne by the owners of the land of this kingdom, by reason
whereof they have been necessitated to contract very large debts, and
thereby, and by the abatement in the value of their lands, are become
greatly impoverished; and whereas, by reason of the great interest and
profit of money made at home, the foreign trade has been neglected," &c.
The practical men of that day found, what we now find, that at six per
cent. the lenders of money, on the whole, become rich faster than any other
class.
Mr. B. frequently intimates that it was a prejudice against the rich
which in part occasioned these laws; Then they did get rich. But it is
somewhat unlucky as an argument. Have the kings and nobles of England, of France, of Russia, and of nearly all the despotic governments of
Europe, ever been accused of passing laws against the rich by any other
man than Jeremy Bentham? The real truth is, that this feeling, which he
calls prejudice, is the result of the moral instinct of mankind. It existed
in full force among rich and poor, learned and ignorant, republics and
monarchies, wherever human bosom was found endued with the knowledge
of right and wrong. It exists now, to this day, in this country, and in
every country on the globe. I appeal to the feelings of every man in the
community, whether any man who lives by habitually exacting excessive
rates of interest, is not considered an extortioner? Does he stand as well
with the community as men in general? Why? The reason is obvious.
The borrower is the slave of the lender. Advantage is taken of his
necessities. He has no will of his own. The terms are dictated by the
lender. It is the poverty or the necessities of the borrower that consents,
3*




30                  IMPORTANCE OF USURY LAWS.
and not his judgment.  So say all the statesmen of ancient and modern
days. So say the great mass of lawyers, doctors and clergymen, that ever
lived. So said the ploughman in the field, the mechanic in his shop, and
the merchant at his desk, all over Europe, Asia and Africa; and (with the
exception of the advocates of the new light) so say the same classes all
over the world to the present day. Let us pause, at least, before we
reverse the verdict of universal mankind.  Let us have diffidence enough
of our own judgment to examine the grounds of this feeling, before we
peril our interests on board this free-trade craft, which, upon every trial,
has lined the shore with its wrecks.
I will, therefore, proceed to examine the reason why mankind have thus
felt in relation to this interesting subject. If I mistake not, it will be
found that the old notion is the true one, that the lender takes advantage
of the necessities of the borrower. This brings me to a consideration of
the second question, whether the bargain, in the absence of any restraint,
is usuallyfair between the parties.
In the consideration of this question, I hope it will not be understood
that I mean to cast the slightest imputation upon the motives or the general moral character of the lender.  On the contrary, I have no doubt
that many of them really believe that it is right to take all that they can
get. They ought to be exempted from blame, because, if they are in
an error, they have been led into it by writers of acknowledged talent and
ability. I speak not of the motives of the men, but the tendency and
effect of the practice, if once sanctioned by the legislature.
In every case, and among all civilized nations, the law requires, as an
indispensable prerequisite to every valid contract, that the parties should
stand on equal grounds. If they do not, but one party (no matter to what
cause owing) has an undue advantage over the other, both common law and
common sense inform us that the bargain is void. A married woman can
make no contract with her husband, on account of the influence he has
over her. An infant is not bound, because he has not sufficient discretion.
A debtor, illegally imprisoned, cannot bind himself by a contract with his
creditor, on account of the influence of his desire to escape from prison.
Even if the imprisonment is legal, a Court of Equity will see that the
terms of the bargain were fair.  For the same reason a Court of Equity
will look with great jealousy upon a contract made by a ward, just after
arriving of age, with his guardian, on account of the influence of the latter
over the former. A female seduced, although she agrees to the dishonor,
is not left without protection, and heavy damages are generally given.
In all these cases the parties agree to the contract which the law pronounces void, because they do not meet on equal terms.    No matter
whether the subject of the contract is land, or merchandise, or money; all
are treated alike, and all set aside, because one party possesses an undue
advantage ever the other. That advantage may arise out of the subject
of the contract, or out of the existing relations of the parties; but arise
whence it may, if it'actually exists, the law supposes that it will be exercised,
because men generally use all the advantages which they possess. I say
generally, because there are some instances in which perfectly fair contracts
are made with wards, with minors,,married. women, and prisoners in jail.




IMPORTANCE OF USURY LAWS.                   31
There are also some instances of contracts perfectly just, above the legal
interest, between creditor and debtor. All legislation must look at the
state of things generally; and experience has proved, beyond all doubt,
that, in all these cases, if the party possessing the advantage was allowed
to use it, without restraint, in nine cases out of ten he would have been
governed by no other rules than the wants of a greedy avarice.  It is quite
a new doctrine to me that mankind have approached so near a state of perfectibility, that all restraints upon their lusts, their ambition and their
avarice, may safely be removed. If it is so, I am very grateful for the
information; but until I have a little experience that men in power, unless
curbed by constitutions and written laws, will overlook the interest of the
public for their own selfish purposes; that lust, unless checked by salutary
moral and legal restraints, will spread misery and havoc around it; and
that avarice, in the absence of similar restraints, will fill its insatiable maw
while millions around are suffering for food; I must be permitted to raise
my feeble voice in favor of treating all these selfish and extreme passions
alike. Are they not all equally strong?  Does avarice claim for itself a
milder character than belongs to the other two?  May we not reason as
plausibly in favor of abolishing all constitutions and laws restraining the
abuse of official power?  Is it not for the public good that power should
not be abused?  And does not the interest of the man in power, in a large
sense, consist in advancing the public good? And yet, does not experience prove that, when men acquire power, the passion called ambition
prevents their taking and pursuing this large view of the subject?  It is
equally easy to show, in a broad sense, that the free-trade doctrines are
the best for the public, if the possessors of money would use it only with a
view to the public good. But in comes this blind passion of avarice,
and urges its possessor to use all its magic power for its own aggrandizement. 
This I understand to be the principle upon which all usury laws are
founded, and not the visionary principle " imagined" by Jeremy Bentham.
They proceed upon the principle that money possesses a power which no
other article ever did or ever can possess. Is not that true in point of
fact?  That the avarice of the lender will urge him on to exact all that he
can get. Is not that true in point of fact? That the wants of the borrower
are in general, so great, that, in nine times out of ten, he must have the
money at all events. Is not that true in point of fact? That the avarice
of the lender will, in nine times out of ten, induce him to take advantage
of those wants.  Is that denied?  That the parties do not stand upon
equal grounds any more than a prisoner contracting with his creditor. Is
not that true? That in dealing for all other articles, men do stand on
equal grounds. That no man can deny.
If these ficts are denied, I can prove them by volumes of testimony. I
would take the depositions of the lenders themselves, all of whom know that
they are true.
Am I not correct, then, in saying that the usury laws do deal with
money precisely as the general law deals with all other similar cases?
That no law will permit one man to make a valid contract with another,




32                  IMPORTANCE OF USURY LAWS.
in relation to any article, unless the judgment and will of both are equally
free?
The advocates of the free-trade system must be driven to take their
ground.< They must admit that the borrower is, in general, a slave to the
lender, and under a necessity of complying with the terms dictated, and
still contend that the law ought to permit such a bargain to stand, or they
must deny the fact. I give them their choice. They must take one or
the other. Suppose they deny the fact; I will then bring the general voice
of.the legislators, writers, and the mass of society, in all civilized nations,
ancient and modern, against them. Bentham himself admits that this is
the unanimous verdict of the civilized nations of the world, and probably
that was the very reason that he contended that it was wrong.
Does not our daily observation demonstrate, its literal truth?
Why is the borrower of money the slave of the lender? and why is the
purchaser of every other article as free to judge for himself as the seller?
Why can the purchaser of goods always purchase upon his individual
credit, when the borrower of money is always obliged to give bond and
mortgage, or a string of endorsers? Why has money always commanded
this preference over every other article?  Because every man wants
money, and must have it. His wants make it indispensable. Because it is
generally confined to the pockets of the few, and always wanted by the
many. Because the constitution and laws render it (and it alone) a tender
in payment of debts. No other article can be substituted.
If we open our eyes we cannot avoid seeing the narrow quarters into
which the borrower of money is driven, and the freedom with which the
purchaser of every other article exercises his judgment. Go into any of
our crowded cities, and we see granaries, storehouses, shops, and other
spacious buildings'crowded with merchandise and goods of every possible
variety. In every street, lane or alley, for miles in extent, one uniform
abundance is presented to our view. This is always the case.
But the money of the city is confined to a single street or a narrow
alley. All other articles are abundant and in the hands of many. Money
is frequently scarce and in the hands of the few. In all the trading
streets we see the seller bowing to the buyer, and courting his custom by
the most enticing manners. In the money alleys we see the borrower bowing to the lender, with the servility of a French dancing-master. The
purchaser enters a store with the air of a free and independent man. The
borrower enters a bank with the subdued and sorrow-stricken countenance
of a beggar. This is the case now, always has been, and always must be,
because the one is urged on by an irresistible necessity, from which there is
no escape; the other is a free and independent man, consulting his fancy,
rather than gratifying his wants.
If the purchaser is really in want of an article, he goes from store to
store, perhaps from city to city. Wherever he goes he finds the seller
crowding off his goods upon him from a desire to obtain his custom. If,
however, the purchaser is not suited in the article or the price, he can substitute something else, wait a month or two, or forego his wants entirely.
In all this dealing the advantage is rather on the side of the purchaser.
On the other hand, the borrower of money has a note due




IMPORTANCE OF USURY LAWS.                   33
a given day and at a given time, of a thousand or ten thousand dollars. The
tender laws compel him to pay in money alone.  He must pay at the time,
or he must he ruined. He can substitute no other article; he cannot postpone the payment for a month, until it suits his convenience. It is not a
matter of choice or convenience, but of stern necessity. t-e cannot go to
another city where he is not known, nor perhaps to any other bank than
the one at which he usually deals.
This bank, or one of its kind.friends, will accommodate him at three per
cent. a month. His life and death, his bane and antidote, are both before
him.. On the one hand is thirty-six per cent. per year; on the other, bankruptcy, disgrace and ruin. I now ask any considerate man, who is not a
money-lender, upon whom does the distress operate with the most appalling power, the prisoner of the jail, or the prisoner of the bank?  Would. it
not be inconsistent in the law to -set aside a contract with the former, which
is only of occasional occurrence, and allow the latter evil to exist;- an evil
which happens more than a thousand times every day?
I affirm it as a fact, then, which cannot be denied, that the lender does
take advantage of the necessities of the borrower, that the lender generally
knows it at the time, anl that many of them do not pretend to deny it; on
the contrary, they justify it, and say that it was the folly of the borrower
to contract debts which he could' not pay. It is the folly of a man to get
drunk; but what is the scale of that man's moral feeling who takes advantage of his situation, and obtains from him a deed of the house which shelters his wife and children?
It makes the matter worse that many of these lenders have been deluded
into a belief that these practices are legal and just.  What is done conscientiously and sincerely is generally done with a corresponding zeal and
eagerness. The fanaticism of avarice defends itself with the same arguments as the fanaticism of religion. It inflicts its punishment of;fire and
fagot with the-same coolness and composure. While the puritans of old
believed that they were doing God service in hanging and burning the
witches, they would naturally look upon the tortures of their victims with
philosophy, if not with exultation; and while the puritans of the counter
believe that they are benefiting the state by establishing their favorite system, their tears will not fall very freely at the sight of the misery and distress which the exaction of thirty or forty per cent. is bringing upon some
of the most worthy and industrious among us.
In most other countries there exists a check- a moral restraint upon
these excesses, which, under a free-trade system, would be inefficacious
here. Individuals have some regard to public feeling, and dread the stigma
which such exactions, sooner or later, fasten upon their characters. To be
considered by all mankind an extortioner is what the moral sensibilities.of most men cannot endure. This silent and unseen influence upon individuals is very extensive and efficacious.
But in this country nearly all the money is loaned by the banks, and we
know that their moral sentiments are generally at low-water mark. A
corporation has no soul. No one is responsible for its conduct in a moral
view. A strong legal restraint is.the only one that will reach it, for it is
merely a legal being. This power of the creditor, therefore, will be exer



34                   IMPORTANCE OF USURY LAWS,
cised by the banks up to the hilt, upon their defenceless victims, in the
absence of usury laws. My propositions, then, are these: That nothing but
the severest usury laws can keep down the rates of interest; that whether
those laws tend to increase those rates is a matter of fact, and that the
experiment has been thoroughly tried by other nations, and the free-trade
system rejected; that this tendency to increase the general rates arises out
of the power of money itself, goaded on by the avarice of its possessors,
generally the few, taking advantage of the necessities of the borrowers,
generally the many; that the necessities of the borrower are generally so
great that he has no choice -is not a freeman, and takes no part in
fixing the terms of the contract.  Consequently, to permit such contracts
to be legal, is to allow the lender to make the contract himself; that, as
this is allowed in no other cases, relating to lands, merchandise,, or any
other article, it ought not to be allowed in the case of money.
These are the facts which I affirm to exist. The free-trade advocates
must either deny, or they must admit them. If they admit them, they
must justify the right of one man to impose his terms upon another.
Because these facts have been found to exist in other nations; because
they found, by experience, that one of the parties, being a slave, had no
will of his own to contract, the governments of those nations have found it
necessary to fix the rates for him.
If these facts are still denied, let a committee be appointed by the legislature of New York to ascertain them. In the course of the ensuing year,
let the committee ascertain the rates of interest in all the free-trade countries, ancient and modern, and compare those rates with those countries
that have lived under usury laws; let them compare the rates at the different periods of the same country, when that country had, and had not,
the benefit of these laws. This will test the free-trade doctrine. Let them
also take evidence and ascertain whether one party to the contract has any
will of his own. For one, I am willing that these much-misrepresented
laws shall stand the test of these facts. They may be easily ascertained.
I have a full conviction that they are as I have stated them. But I may
be wrong. Other men of great intelligence view the subject in a different
light, and therefore I am anxious for a test, by an enlightened committee,
to inquire into facts. Their report will satisfy the nation. Laws on this
subject ought to be uniform through the states, and what state so proper to
take the lead as the empire state of New York?
If the advocates of the free-trade doctrine, in case these facts should
be found against them, should still contend that money ought to regulate
itself, I should think their trade must have made great inroads upon their
moral perceptions. Is that free trade where one party is a slave and has
n.o will of his own?  I thought a contract, the result of free will and judgment, meant the free will of both parties.
But some of them say, notwithstanding all this, that the " laws of trade"
will regulate money without restraint, just as they regulate everything
else. The reason why the prices of everything else regulate themselves
is that in relation to everything else both parties are free. We have the
means of knowing where there is a scarcity of any other article. We
judge for ourselves. We take or we leave it. It is this equal power of




IMPORTANCE OF USURY LAWS.                   35
the buyer, to buy or not to buy, that regulates all other articles. When we
say, therefore, that trade (or prices) will regulate itself, we always mean
that both parties have an equal voice in the contract. But if, in fact, the
lender dictates his own terms, he regulates the price. If the borrower is in
general under a necessity of complying with the terms proposed, what
agency has he in regulating the rates of interest?
But, say the apostles of this new light, when money is scarce it will be
high, and so the reverse. But who is to judge when it is scarce? Is it
not the lender, who alone possesses it?  Then the power which is asked
for the lender is, to allow the rates to be high when there is a scarcity, and
to make him the sole judge whether there is a scarcity or not; that is,
in substance, the sole judge of the price. In other commodities we have
the means of judging for ourselves. If the seller says there is a scarcity,
and the purchaser opens his eyes and sees that there is not, he will not buy
at high prices, and the seller is obliged to come down, or the articles will
rot on his hands.  This equal liberty and equal means of judging on
both sides is all that is meant by prices regulating themselves. But
what means has the borrower of judging of the scarcity of money? Do
we not know that there is money enough now? That it requires no more
money to perform the business of society at one price than at another? If
there is enough at thirty-six per cent., is there not enough at six? Is not
the scarcity wholly artificial?  And is not the consequence of this artificial
scarcity simply this, that the whole profits of many industrious men for the
whole of the past year have been transferred to the money-lender by the
operation of an artificial scarcity?  Is this to be endured?  Will it be
endured without inquiring into facts?  If the free-trade writers are correct, that an absence of all usury laws does tend to lower the rates of
interest, for one I shall be glad to be convinced; but the fact that the
lenders themselves are so anxious for a free-trade system, in a jealous or
suspicious mind, would not go far to show that they thought so; for why
should they wish the rates reduced?
Let them, however, convince us by facts and experience. I object to the
whole mass of their theories. Scarcely any two of them agree in those
theories.  The writers denominate these artificial rules the science of
political (that is, national) economy. Why not furnish us with a science
of individual economy? The one is quite as necessary and quite as useful
as the other. The science of prudence, I suppose, would come next - a subject quite as reducible to rules as economy. The truth is, that literary
men of all ages have had some predominant hobby. At one time the
science of astrology ruled mankind. Next comes metaphysics, which
employed the pens of the ablest men of its age. That science is now
generally agreed to deal pretty much in moonshine, and has gone with its
fellow-science of astrology to the tombs of the Capulets. Next came political economy, which had its day, though a brief one. We now find it low
down in the western horizon, phrenology over our heads, and animal magnetism  about an hour high in the east. What will come next no one
can even guess. Come what will, for one, I shall not abandon the
experience and wisdom of mankind very hastily, especially in relation to a




8D6                 IIMPORTANCE OF USURY LAWS.
question so nearly touching the safety of property in general, as the one
before us.
Property-holders seem to forget that they are living under a republican
government, that the general feeling is already sufficiently radical, without
provoking it by exactions which even its best friends cannot justify. The
tenure of property is more frail than most men here imagine. It is inexpedient to exercise all its extreme rights, even if we admitted that this is
one of them. The moral feeling of the great mass of men is against
the right now claimed. That feeling, sooner or later, will prevail and go
into our legislation.  Is it not better to let it act now, rather than to
wait until the high rates shall sour and exasperate the mass of the community. Legislation, under such a feeling, might touch upon some of the
necessary and essential rights of property. For one, I had rather come
down voluntarily and gracefully from a position which cannot be maintained, than to be obliged to abandon it n a more awkward gait. Let the
rates be fixed now while the public mind is cool. Stop up all the little
cat-holes in your statute, just large enough for the money-lenders to escape
through.  Take the English statutes of Anne, which cover everything, and
we shall have no trouble about two per cent. per month.
If, however, the free-trade system is resorted to, give it a fair trial.
Remove all the present restraints, and try over again the experiments which
have so many times been tried and failed. I am very sure it would never be
tried but once; but I much fear that in that one trial the system of extortion, which would be the consequence, would hurry us fast and far down
towards that power which feels no attachment to property, and no sympathy
for the sufferings of its possessors.