their sovereign capacity, enact laws for limiting the rate of inte

rest.

Such considerations might afford a satisfactory reason for the enactment of usury laws in popular states, where temporary convenience is the sole principle of action, without attributing to the legislators much political foresight, or very profound thoughts on the expediency of such measures;-nay, on the contrary, they must evidently justify a suspicion of their prudence. Unfortunately for the usury laws, it is among such societies, and on such principles founded, that we first find any distinct record of their existence. In ancient Rome the usury laws, in concert with the cognate measures of Agrarian laws, and suppression of debts, formed the incessant subjects of clamor and dispute between the senate and the people; and we find from Livy, that whenever a tribune was desirous of rendering himself particularly acceptable to the latter, he proposed either an abolition of debts, or a reduction of interest, until at length, after many hard struggles, in which the rate had been successively brought down from twelve per cent. to six, and three, interest or usury, which were synonymous, was in the year U. C. 413, by law entirely abolished.'

2

If law then could avail any thing towards repressing the mischief of usury, the point had been here decided; but as in every society there will be found persons requiring to borrow, and very few willing to lend, on the mere motion of friendship or charity, without compensation for the inconvenience or risk of parting with their money, this law was soon felt extremely irksome, and principally by those whom it affected to serve. Means therefore were readily devised for evading it, though attended with some danger, which, with the necessity of resorting to underhand projects and indirect measures, gave a fictitious value to money, and usury florished more than ever. We find from Cicero's letters to Atticus, that Brutus-the virtuous Brutus, lent money to the people of Salamis, under a fictitious name, to meet the provisions of the Gabinian law, at forty-eight per cent., and that Pompey lent King Ariobarzanes six hundred talents, for which he was to be remunerated by an interest of thirty-three Attic talents every thirty days, or at something about sixty per cent. These incidents, which are not mentioned as occurrences of a very extraordinary nature, will afford us some idea of the efficacy of laws for keeping down the value of money, and of the exorbitant rate of interest, extorted by the capitalists at Rome in their underhand pecuniary transactions.

1 Tit. Liv. Lib. 7. and Taciti Annal. Lib. 6.

VOL. XIII.

2 Tacit. Tit. Liv.

Pam.

NO. XXV.

K

Effects precisely similar have in more modern times been found to flow from similar laws, in whatever countries an illiberal policy or false notions of religion had brought them into existence. During the early and middle ages of Christianity, the churchmen, misled by the meteor gleam of superstition, or actuated by the delusive witchery of a self-denying spirit, propounded certain scruples of conscience concerning the moral rectitude of looking after the means of worldly prosperity, of converting present wealth to purposes of future gain; and assisted by an erroneous interpretation of that passage of the Mosaic law already mentioned, and a quaint, unmeaning apophthegm of Aristotle, respecting the barrenness of money, they especially denounced the taking of any interest whatever. Such sentiments, independent of the veneration in which every oracle of the church was at that period held, even unquestioned, by all good Catholics, were particularly acceptable to the princes and feudal barons of Europe, who, despising every profession save that of arms, held commerce in peculiar contempt, and regarded merchants, who were the only capitalists, as persons formed for no purpose but that of being plundered at their high discretion. By a singular coincidence, the early Moslem doctors propounded similar notions, and, as in Christendom, the power of the law supported the principles of the sanctuary. Among the Mohammedans these laws still exist in their original strength, and with them the most unbounded usury;' but fortunately in Christendom, they partly yielded to the force of commerce and the light of superior wisdom. A relic indeed was suffered to remain, which has become inveterate by time, and has acquired from long usage a kind of prescriptive sanctity, as in the human character we find our early frailties become at length our favorite passions, most cherished by the fond and credulous possessor, who, in despite of reason, the admonitions of friendship, and the harshness of rebuke, still perseveres and calls them virtues.

The cause of this ultimate diversity between the practice of the eastern and western worlds, can be traced only in the different pursuits of the respective people. While they each continued nations of soldiers, or mere agriculturists, or slaves, the many holding their property by the precarious title of the will of the few, the occasional necessities of individuals were not of a description to cause the pressure of the laws forbidding usury to be felt as a general grievance; but, as commerce arose, the demands for capital became more frequent, and the impolicy and hardships of the usury laws were proportionably manifest. A few cities of Italy were the con

! Montesquieu, chap. xix. book 22.

fined sphere of its early operations, and as from them it extended itself throughout Europe; its influence was discernible in the improved condition of every people, and in the altered tone of the political state of all Christendom.

We now read with an astonishment bordering on incredulity, that, on the revival of commerce, capital was secretly borrowed by Italian merchants for commercial purposes at the enormous interest of forty per cent. The profits of stock, or of the employment of money, must have been wonderfully great, when so large a premium was given for the use of it. On the revival of commerce capital was in the hands of few, and consequently in trade there could have been but little competition; it therefore to a certain extent might be regarded as a monopoly. The commerce carried on by the Pisaus, Genoese, and Venetians, with the east, was like the first opening of a rich vein of virgin gold, or rather seemed to realise the vision of alchymy, and in their hands converted into gold all meaner substances. The flattering hopes inspired by successful enterprise, created a greater competition among the borrowers than the lenders; which, aided by religious scruples and the restraints of law, ensured the triumph of secret usury. The only industrious persons at that time in Europe were the Jews, who consequently were the principal or only capitalists. They were marked out by the prejudices of fanaticism as objects for "the slow moving finger of scorn to point at ;" and by a general proscription were in some measure compelled to merit the infamy that was indiscriminately affixed to their character. They suffered nothing in public estimation by undertaking those professions and practices, at which men of good repute in society would have spurned; and in becoming the general money-lenders of Europe, retorted upon their persecutors by severely taxing the wants of individuals. From the nature of their pecuniary transactions, they avoided the light, and "being done in a corner," avarice and fraud were not restrained by the corrective eye of public observation. The amount of the interest they extorted was therefore compounded of the profits of stock, of a compensation for the inconvenience and risk of lending their money upon the insecure title of private credit, or personal honor, together with a bribe for encountering the danger and undergoing the infamy, as it was reputed, of the whole transaction; and among these component parts we may fairly calculate, that the two latter were esteemed the most prominent, and were indeed the items that swelled the account to its enormous magnitude.

This extravagant rate of interest, however, prevented the extension of trade, and thereby retarded the progress of society. The cause could not fail among practical commercial people of being

soon discovered; and as Lord Bacon remarks, that "it is better to mitigate usury by declaration than to suffer it to rage by connivance;" the usury laws were at length permitted to relax their vigor. The example seems to have been set by James I. of Arragon, who, about the middle of the thirteenth century, premitted a premium of 18 per cent. to be taken for money within his kingdom. This was followed in 1311, by Philip IV. of France, who issued a royal ordinance, fixing 20 per cent. as the rate of interest that might be exacted at the fairs of Champagne. In the sixteenth century Charles V. established the rate of interest in his dominions in the Netherlands at 12 per cent.; but this appears to have been too low; for Guicciardini mentions that much higher interest had been subsequently exacted there in the same secret and indirect manner as had been previously practised; so that a partial relaxation of the total prohibition was attended with no good effects. In the same century we find the parliament of England, under the auspices of Henry VIII. fixing the rate of interest at 10 per cent., which was the first relaxation of the laws that took place in this kingdom.. Here perhaps some persons will exclaim that a rate of interest so exorbitant must prove an insuperable bar to the employment of capital in merchandise, manufacture or agriculture. To which I answer, that the establishment of a maximum does not imply the necessity of its being also a minimum, nor prevent the formation of pecuniary contracts at a much lower rate; that the value of money must depend upon the quantity of disposable capital in the mar ket, upon the competition of the proprietors, the profits of stock, and the nature of security; and that if this value thus estimated can be legally, publicly and reputably acquired, the premium upon lending it, on the rate of interest, must of necessity be much less than when to the same considerations were also added, those of compensation for the loss of character, and the danger of ultimate forfeiture, should the borrower become an informer.

From the first relaxation of the usury laws, the process of legislation has been similar in every country in Europe, and we find the legal rate of interest gradually and uniformly lessening in proportion to the decrease in the market rate of the value of money, which from its nature of course followed that of the profits of employing capital. In England the act 37 of Henry VIII. had fixed ten per cent. as the legal rate of interest. In the reign of his son and successor Edward VI. the fanatical opinions of his parliament prohibited the taking of interest altogether. "This prohibition, however," says Dr. Adam Smith, "like all others of the same kind, is said to have produced no effect, and probably rather increased than diminished the evil of usury." The prohibition seems to have con

tinued in force during the reign of Queen Mary; but the statute of Henry VIII. was revived by the thirteenth of Elizabeth, and ten per cent. was again established as the lawful interest. This was reduced to eight per cent. by the twenty-first of James, to six soon after the restoration of Charles II., and again to five by the twelfth of Queen Anne. It would be unnecessary to trace the process in other countries; it is sufficient to observe, generally, that it has been for the most part similar to what has taken place in England. On the several reductions in England, Dr. Adam Smith, in his inestimable treatise on the Wealth of Nations, remarks, that "all these different statutory regulations seem to have been made with great propriety. They seem to have followed, and not to have gone before the market rate of interest, or the rate at which people of good credit generally borrowed;" and in the subsequent paragraph he adds, that "since the time of Henry VIII. the profits of stock have been continually diminishing."

On this passage I may with great humility be permitted to observe, that this species of legislation, which, under the pretence of preventing usury, merely waited on the diminishing profits of stock, and the necessary decrease in the value and market interest of money, seem to have been ludicrously unnecessary. "These statutory regulations made with" such "great propriety," do not pretend to regulate the market, or to decrease the rate of interest; they merely follow at an humble distance, rather observing the retreat of the enemy than attempting to press it, and unable on any sudden revulsion to withstand the violence or skill of the attack. They appear like an attempt on the part of the legislature to return as nearly as possible to, the original total prohibition; and as no doubt can now be entertained of the absurdity and impolicy of such a state of things, every step towards its attainment must proportionably share the character of the result. Should this legal rate exceed that in the market, the laws permitting it are manifestly useless; and should it on the contrary be lower than that of the market, which must ever be regulated by the profits of stock, such laws must operate to the same extent as if they contained a total prohibition, and by rendering pecuniary transactions sect, must give an impulse to usury of the most objectionable nature.

How then could the repeal of these very obsequious laws afford a more liberal indulgence to the schemes of corrupt money-lenders, than they might enjoy under the present system, or how could it be supposed, in the words of those who oppose Mr. Serjeant Onslow's bill, to "legalise fraud, rapine, and oppression ?" Such an assertion can be supported only on the supposition that laws are of sufficient power to regulate and restrict the value of money; and that "fraud, rapine, and oppression," are never committed under