Were I to be asked how I imagined the case stood in the particular in- stance referred to by Dr. Smith: judging from his account of it, as- sisted by general probabilities, I should answer thus: — The law, I should suppose, was not so penned as to be altogether proof against eva- sion. In many instances, of which it is impossible any account should have been taken, it was indeed conformed to: in some of those instances, people who would have lent otherwise, ab- stained from lending altogether; in others of those instances, people lent their money at the reduced legal rate. In other instances again, the law was broken: broken: the lenders trusting, partly to expedients recurred to for evading it, partly to the good faith and ho- nour of those whom they had to deal with: in this class of instances it was natural, for the two reasons above suggested, that those where the old kgal rate was adhered to, should have been the most numerous. From the circumstance, not only of their num- ber, but of their more direct repug- nancy to the particular recent law in question, they would naturally be the most taken notice of. And this, I should suppose, was the foundation in point of fact for the Doctor's general position above-mentioned, that " no " law can reduce the common rate of " interest below the lowest ordinary " market rate, at the time when that " law was made."
la England, as far as I can trust my 76 LETT.VII. Efficacy of my judgment and imperfect general recollection of the purport of the laws relative to this matter, I should not suppose that the above position would prove true. That there is no such thing as any palpable and uni- versally-notorious, as well as univer- sally-practicable receipt for that pur- pose, is manifest from the examples which, as I have already mentioned, every now and then occur, of convic- tions upon these statutes. Two such receipts, indeed, I shall have occasion to touch upon presently: but they are either not obvious enough in their nature, or too troublesome or not ex- tensive enough in their application, to have despoiled the law altogether of its terrors or of its preventive effi- cacy.
In the country in which I am writ- ing, the whole system of laws on this subject subject is perfectly, and very happily, inefficacious. The rate fixed by law is 5 per cent.: many people lend mo- ney; and nobody at that rate: the lowest ordinary rate, upon the very best real security, is 8 per cent.; 9> and even 10, upon such security, are common. Six> or seven may have place, now and then, between rela- tions or other particular friends: be- cause, now and then, a man may choose to make a present of one or two per cent, to a person whom he means to favour. The contract is re- newed from year to year: for a thou- sand roubles, the borrower, in his written contract, obliges himself to pay at the end of the year one thou- sand and fifty. Before witnesses, he receives his thousand roubles; and, without witnesses, he immediately pays back his 30 roubles, or his 40 roubles, 72 LETT. VII. Efficacy, &c.
roubles, or whatever the sum may be, that is necessary to bring the real rate of interest to the rate verbally agreed on.
This contrivance, I take it, would not do in England: but why it would not, is a question which it would be in vain for me to pretend, at this dis- tance from all authorities, to discuss.
LETT. VIII. Virtual Usury allowed. 73 LETTER VIII.
Virtual Usury allowed.
HAVING proved, as I hope, by this time, the utter impropriety of the law's limiting the rate of interest, in every case that can be conceived, it may be rather matter of curiosity, than any thing else, to inquire, how far the law, on this head, is consistent with itself, and with any principles upon which it can have built.
1. Drawing and re-drawing is a practice, which it will be sufficient here to hint at. It is perfectly well known to all merchants, and may be so to all who are not merchants, by consulting Dr. Smith. In this way, E he ft LETT. VIII. Virtual he has shewn how money may be, and has been, taken up, at so high a rate, as 13 or 14 per cent. 5 a rate nearly three times as high as the utmost which the law professes to allow. The extra in- terest is in this case masked under the names of commission, and price of ex- change. The commission is but small upon each loan, not more, I think, than one half per cent.: custom having stretched so far but no farther, it might be thought dangerous, perhaps, to venture upon any higher allowance under that name. The charge, being repeated a number of times in the course of the year, makes up in fre- quency what it wants in weight. The transaction is by this shift rendered more troublesome, indeed, but not less practicable, to such parties as are agreed about it. But if usury is good for merchants, I don't very well see what Usury allowed. 75 what should make it bad for every- body else.
2. At this distance from all the fountains of legal knowledge, I will not pretend to say, whether the prac- tice of selling accepted bills at an under value, would hold good against all at- tacks. It strikes my recollection as a pretty common one, and I think it could not be brought under any of the penal statutes against usury. The adequateness of the consideration might, for ought I know, be attacked with success, in a court of equity; or, perhaps, if there were sufficient evidence (which the agreement of the parties might easily prevent) by an action at common law, for money had and received. If the practice be really proof against all attacks, it seems to afford an effectual, and pretty com- modious method of evading the re- E 2 strictive 76 LETT. VIII. Virtual strictive laws. The only restraint is, that it requires the assistance of a third person, a friend of the borrower's, as for instance: J5, the real borrower, •wants 1001. and finds U, a usurer, who is willing to lend it to him, at 10 per cent. B. has F, a friend, who has not the money himself to lend him, but is willing to stand security for him to that amount. B. therefore draws upon F, and F. accepts, a bill of 1001. at 5 per cent, interest, pay- able at the end of a twelvemonth from the date. F. draws a like bill upon B.: each sells his bill to U. for fifty pound; and it is endorsed to U. accordingly. The 501. that F. re- ceives, he delivers over without any consideration to B. This transaction, if it be a valid one, and if a man can find such a friend, is evidently much less troublesome than the practice of drawing Usury allowed. 77 drawing and re-drawing. And this, if it be practicable at all, may be practised by persons of any descrip- tion concerned or not in trade. Should the effect of this page be to suggest an expedient, and that a safe and commodious one, for evading the laws against usury, to some, to whom such an expedient might not otherwise have occurred, it will not lie very heavy upon my conscience. The prayers of usurers, whatever effi- cacy they may have in lightening the burthen, I hope I may lay some claim to. And I think you will not now wonder at my saying, that in the effi- cacy of such prayers I have not a whit less confidence, than in that of the prayers of any other class of men.
One apology I shall have to plead at any rate, that in pointing out these flaws, to the individual who may be disposed t8 LETT. VIII. Virtual disposed to creep out at them, I point them out at the same time to the legis- lator, in whose power it is to stop them up, if in his opinion they re- quire it. If, notwithstanding such opinion, he should omit to do so, the blame will lie, not on my industry, but on his negligence.
These, it may be said, should they even be secure and effectual evasions, are still but evasions, and, if charge- able upon the law at all, are charge- able not as inconsistencies but as over- sights. Be it so. Setting these aside, then, as expedients practised or practi- cable, only behind its back, I will beg leave to remind you of two others, practised from the day of its birth, under its protection and before its face.
The first I shall mention is pawn- Iroking. In this case there is the less pretence Usury allowed. 79 pretence for more than ordinary in- terest, inasmuch as the security is, in this case, not only equal to, but bet- ter than, what it can be in any other: to wit, the present possession of a moveable thing, of easy sale, on which the creditor has the power, and cer- tainly does not want the inclination, to set such price as is most for his advantage. If there be a case in which the allowing of such extraor- dinary interest is attended with more danger than another, it must be this: which is so particularly adapted to the situation of the lowest poor, that is, of those who, on the score of in- digence or simplicity, or both, are most open to imposition. This trade however the law, by regulating, avow- edly protects. What the rate of in- terest is, which it allows to be taken in this way, I can not take upon me to 80 LETT. VIII. Virtual to remember: but I am much de- ceived, if it amounts to less than 12 per cent, in the year, and I believe it amounts to a good deal more. "Whe- ther if were 12 per cent, or 1200, I believe would make in practice but little difference. What commission is in the business of drawing and re-draw- ing, warehouse-room is, in that of pawnbroking. Whatever limits then are set to the profits of this trade, are set, I take it, not by the vigilancy of the law, but, as in the case of other trades, by the competition amongst the traders. Of the other regulations con- tained in the acts relative to this subject, I recollect no reason to doubt the use. The other instance is that of bot- tomry and respondentia: for the two transactions, being so nearly related, may be spoken of together. Bottomry is the usury of pawnbroking: respon- dentia Usury alloivfd. 81 Usury alloivfd. 81 dentia is usury at large, but com- bined in a manner with insurance, and employed in the assistance of a trade carried on by sea. If any spe- cies of usury is to be condemned, I see not on what grounds this particu- lar species can be screened from the condemnation. " Oil but" (says sir William Blackstone, or any body else who takes upon himself the task of finding a reason for the law) " this is " a maritime country, and the trade, " which it carries on by sea, is the " great bulwark of its defence." It is not necessary I should here inquire, whether that branch, which, as Dr. Smith has shewn, is, in every view but the mere one of defence, less beneficial to a nation, than two others out of the four branches which comprehend all trade, has any claim to be preferred to them in this or any other way. I £ 3 admit, 82 LETT. VIII. Virtual admit, that the liberty which this branch of trade enjoys, is no more than what it is perfectly right it should enjoy. What I want to know is, what there is in the class of men, embarked in this trade, that should render beneficial to them, a liberty, which would be ruinous to every body else. Is it that sea adventures have less hazard on them than land adven- tures? or that the sea teaches those, who have to deal with it, a degree of forecast and reflection which has been denied to land men?
It were easy enough to give farther and farther extension to this charge of inconsistency, by bringing under it the liberty given to insurance in all its branches, to the purchase and sale of annuities, and of post-obits, in a word to all cases where a man is per- mitted to take upon himself an unli- mited Usury allowed. S3 Usury allowed. S3 mited degree of risk, receiving for so- doing an unlimited compensation. Indeed I know not where the want ©f instances would stop me: for in what part of the magazine of events, about which human transactions are conversant, is certainty to be found? But to this head of argument, this argument ad hominem, as it may be called, the use of which is but subsi- diary, and winch has more of confuta- tion in it than of persuasion or instruc- tion, 1 willingly put an end.
84 LETT. IX. Blackstone considered.
LETTER IX.
Blackstone considered..
I Hope you are, by this time, at least, pretty much of my opinion, that there is just the same sort of harm, and no other, in making the best terms one can for one's self in a money loan, as there is in any other sort of bargain. If you are not, Blackstone however te, whose opinion I hope you will allow to be worth something. In speaking of the rate of interest*, he starts a pa- rallel between a bargain for the loan of money, and a bargain about a horse, and pronounces, without hesitation, that the harm of making too good a bargain, LETT. IX. Blackstone cons idercd. 85 bargain, is just as great in the one case, as in the other. As money-lending, and not horse-dealing, was, what you lawyers call, the principal case, he drops the horse-business, as soon as it has answered the purpose of illus- tration, which it was brought to serve. But as, in my conception, as well the reasoning by which he supports the decision, as that by which any body else could have supported it, is just as applicable to the one sort of bargain as to the other, I will carry on the parallel a little farther, and give the same extent to the reasoning, as to the position which it is made use of to support. This extension will not be without its use; for if the position, when thus extended, should be found just, a practical inference will arise; which is, that the benefits of these re- straints ought to be extended from the 86 LETT. IX. Blackstone considered.
the money-trade to the horse-trade. That my own opinion is not favour- able to such restraints in either case, has been sufficiently declared j but if more respectable opinions than mine are still to prevail, they will not be the less respectable for being consistent.
The sort of bargain which the learned commentator has happened to pitch upon for the illustration, is in- deed, in the case illustrating, as in the case illustrated, a loan: but as, to my apprehension, loan or sale makes, in point of reasoning, no sort of differ- ence, and as the utility of the conclu- sion will, in the latter case, be more extensive, I shall adapt the reasoning to the more important business of sell- ing horses, instead of the less import- ant one of lending them.
A circumstance^ that would render the extension of these restraints to the horse- LETT. IX. Blackstone considered. 87 horse-trade more smooth and easy, is, that in the one track, as well as in the other, the public has already got the length of calling names. Jockey- ship, a term of reproach not less frequently applied to the arts of those who sell horses than to the arts of those who ride them, sounds, I take it, to the ear of many a worthy gentleman, nearly as bad as usury: and it is well known to all those who put their trust in proverbs, and not less to those who put their trust in party, that when we have got a dog to hang, who is trou- blesome and keeps us at bay, whoever can contrive to fasten a bad name to his tail, has gained more than half the battle. I now proceed with my application. The words in italics are my own: all the rest are Sir William Blackstone's: and I restore, at bot- tom, 88 LETT. IX. Btackstone considered.
torn, the words I was obliged to dis- card, in order to make room for mine.
" To demand an exorbitant price " is equally contrary to conscience, " for the loan of a horse, or for the " loan of a sum of money: but a rea- " sonable equivalent for the tempo- " rary inconvenience, which the own- " er may feel by the want of it, and " for the hazard of his losing it en- " tirely, is not more immoral in one " case than in the other. * * * * " As to selling horses, a capital dis- " tinction must be made, between a " moderate and an exorbitant profit: " to the former of which we give the " name of horse-dealing*, to the latter "the truly odious appellation of joe- " key-ship^: the former is necessary " in every civil state, if it were but to * interest. f usury.
" exclude LETT. IX. Blackstone considered. 89 " exclude the latter. For, as the whole " of this matter is well summed up " by Grotius, if the compensation " allowed by law does not exceed " the proportion of the inconvenience " which it is to the seller of the horse to " part ivith it*, or the want which the " buyer has of z7f, its allowance is " neither repugnant to the revealed " law, nor to the natural law: but " if it exceeds these bounds, it is " then an oppressive jockey-ship\: and " though the municipal laws may give " it impunity, they never can make it " just.
" We see, that the exorbitance or " moderation of the price given for a ft horse§ depends upon two circum- " stances: upon the inconvenience of * hazard run. t felt by the loan. J usury, $ interest for the money lent.
" parting 90 LETT. IX. Blackstone considered.
" parting with the horse one has*, and " the hazard of not being able to meet " with such another^. The inconveni- " ence to individual sellers of horses^, " can never be estimated by laws; the " general price for horses^ must depend " therefore upon the usual or general " inconvenience. This results entirely " from the quantity of horses\[ in the " kingdom: for the more horses^ there tf are running about** in any nation, " the greater superfluity there will be " beyond what is necessary to carry on " the business of the mail coaches-\-\ and " the common concerns of life. In " every nation or public community " there is a certain quantity of horses^ " then necessary, which a person well " skilled in political arithmetic might * it for the present. -f losing it entirely.
$ lenders. § rate of general interest. || money. 5f specie. ** circulating. ft exchange, j! money.
" perhaps LETT. IX. Blackstone considered. 91 " perhaps calculate as exactly as a pri- " vate horse-dealer* can the demand " for running horses in his own stables -\: " all above this necessary quantity " may be spared, or lent, or sold, with* " out much inconvenience to the re- " spective lenders or sellers: and the " greater the national superfluity is, " the more numerous will be the sell' " ers^y and the lower ought the na- " tional price of horse-flesh § to be: " but where there are not enough, or " barely enough spare horses || to an- " swer the ordinary uses of the pub- «' lie, horse-flesh f will be proportion- " ably high: for sellers** will be " but few, as few can submit to the in- " convenience of setting^." — So far the learned commentator.
* banker, f cash in his own shop. J lenders.
§ the rate of the national interest.
i circulating cash. ^ interest. ** lenders.
ft lending.
I hope 92 LETT. IX. Blackstone considered.
I hope by this time you are worked up to a proper pitch of indignation, at the neglect and inconsistency be- trayed by the law, in not suppressing this species of jockey-ship, which it would be so easy to do, only by fixing the price of horses. Nobody is less disposed than I am, to be unchari- table:. but when one thinks of the 15001. taken for Eclipse, and 20001. for Rockingham, and so on, who can avoid being shocked, to think how little regard those who took such enormous prices must have had for " the law of revelation and the law " of nature?" Whoever it is that is to move for the municipal law, not long ago talked of, for reducing the rate of interest, whenever that motion is made, then would be the time for one of the Yorkshire members to get up, and move, by way of addition, for LETT. IX. Blackstone considered. 93 for a clause for fixing and reducing the price of horses. I need not expa- tiate on the usefulness of that valuable species of cattle, which might have been as cheap as asses before now, if our lawgivers had been as mindful of their duty in the suppression of joe 'key- ship, as they have been in the sup- pression of usury.
It may be said, against fixing the price of horse-flesh, that different horses may be of different values. I answer — and I think I shall shew you as much, when I come to touch upon the subject of champerty — not more different than the values which the use of the same sum of money may be of to different persons, on different occasions.
94 LETT. X. Grounds of the LETTER X.
Grounds of the Prejudices against Usury.
IT is one thing, to find reasons why it is Jit a law should have been made: it is another to find the reasons why it was made: in other words, it is one thing to justify a law: it is another thing to account for its existence. In the present instance, the former task, if the observations I have been trou- bling you with are just, is an impos- sible one. The other, though not necessary for conviction, may contri- bute something perhaps in the way of satisfaction. To trace an error to its fountain head, says lord Coke, is to refute Prejudices against Usury. 95 refute it; and many men there are who, till they have received this satisfaction, be the error what it may, cannot pre- vail upon themselves to part with it. " If our ancestors have been all along " under a mistake, how came they to t( have fallen into it?" is a question that naturally presents itself upon all such occasions. The case is, that in matters of law more especially, such is the dominion of authority over our minds, and such the prejudice it creates in favour of whatever institution it has taken under its wing, that, after all manner of reasons that can be thought of, in favour of the institution, hare been shewn to be insufficient, we still cannot forbear looking to some unas- signable and latent reason for its effi- cient cause. But if, instead of any such reason, we can find a cause for it in some notion, of the erroneousness of which 96 LETT. X. Grounds of the which we are already satisfied, then at last we are content to give it up with- out further struggle; and then, and not till then, our satisfaction is com- plete.
In the conceptions of the more con- siderable part of those through whom our religion has been handed down to us, virtue, or rather godliness, which was an improved substitute for virtue, consisted in self-denial: not in self-de- nial for the sake of society, but of self- denial for its own sake. One pretty general rule served for most occasions: not to do what you had a mind to do; or* in other words, not to do what would be for your advantage. By this of course was meant temporal ad- vantage: to which spiritual advantage was understood to be in constant and diametrical opposition. For, the proof of a resolution, on the part of a being of Prejudices against Usury. 97 of perfect power and benevolence, to make his few favourites happy in a state in which they were to be, was his determined pleasure, that they should keep themselves as much strangers to happiness as possible, in the state in which they were. Now to get money is what most men have a mind to do: because he who has money gets, as far as it goes, most other things that he has a mind for. Of course nobody was to get money: indeed why should he, when he was not so much as to keep -what he had got already? To lend money at interest, is to get mo- ney, or at least to try to get it: of course it was a bad thing to lend mo- ney upon such terms. The better the terms, the worse it was to lend upon them: but it was bad to lend upon any terms, by which any thing could F be 98 LETT. X. Grounds of the be got. What made it much the worse was, that it was acting like a Jew: for though all Christians at first were Jews, and continued to do as Jews did, after they had become Christians, yet, in process of time, it came to be discovered, that the distance between the mother and the daughter church could not be too wide.
By degrees, as old conceits gave place to new, nature so far prevailed, that the objections to getting money in general, were pretty well over-ruled: but still this Jewish way of getting it, was too odious to be endured. Chris- tians were too intent upon plaguing Jews, to listen to the suggestion of doing as Jews did, even though mo- ney were to be got by it. Indeed the easier method, and a method pretty much in vogue, was, to let the Jews get Prejudices against Usury. 99 get the money any how they could, and then squeeze it out of them as it was wanted.
In process of time, as questions of all sorts came under discussion, and this, not the least interesting, among the rest, the anti-Jewish side of it found no unopportune support in a passage of Aristotle: that celebrated heathen, who, in all matters wherein heathenism did not destroy his competence, had established a despotic empire over the Christian world. As fate would have it, that great philosopher, with all his industry, and all his penetration, not- withstanding the great number of pieces of money that had passed through his hands (more perhaps than ever passed through the hands of philosopher before or since), and notwithstanding the uncommon pains he had bestowed on the subject of ge- F2 neration, 100 LETT. X. Grounds of the