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. Ihe present laws because of the protection they afford to ignorance and simplicity. The first supposition is contradicted,by the voice of history, by the experience of the passing hour, by the very nature of money itself, which is of too subtle a quality to endure the restraints of municipal policy ; and the second is if possible even less tenable. With equal experience to evince its futility, it militates against the degrading conviction it is impossible to escape, that the seeds of evil are sown so deeply in the human mind, or in the rank soil of the common habits of society, as to ensure the luxuriance of vice, while the passions that foster it remain unextinguished. Simplicity and ignorance ever were and ever will be the dupes of superior craft, from whose toils no law can in the present state of society ever hope to save them. Notwithstanding the boasted strength of our usury laws, which Sir Edward Coke declares no man could ever hope to violate with impunity, nothing has been more easy for modern ingenuity than to devise means to evade them. Private honor has been marshalled against them, thus bringing back usury to the original state of total prohibition; insurances, bargains and sales, mortgages, annuities, transfers of merchandise at an enormous price, to be repurchased at a lesser, letting the difference be the amount of the usury required, are among the easy devices now in full practice for destroying their force, as far as the advantages of the usurer are concerned, while the borrower by such indirect dealings is subjected to the most ruinous and oppressive burdens. Should a gentleman possessed of real property find himself in immediate want of a sum of money for the purposes of agriculture, the paymentof an incumbrance, the settlement of children in life, or any other equally interesting and pressing object, he offers good security to a capitalist for a temporary accommodation of this sum at the legal rate of interest. From the state of the public funds, from the profits of commerce, or many other circumstances, stock probably has risen in value one or two per cent, higher. He is willing to meet the advance in the market, but in consequence of the strict severity of the usury laws, he can meet no respectable capitalist who would compromise his own honor or his safety by acting in opposition to their provisions. These laws he is told are framed to protect him from fraud and oppression; but in the mean time he will be compelled by their cruel kindness to sell or mortgage his property to a ruinous disadvantage Should he from necessity or inexperience apply to professed usurers of blasted reputation ; with such persons business must be transacted in secret, no eye being present to detect the grossness of their impositions, nor ear to catch the whisperings of their avarice; in this case, if he chance to be unpractised in the ways of the world, how can the law protect his simplicity? will he bring his action of usury? The laws cannot rescind a legal assignment, when the
only question is the exact sufficiency of the consideration; nor can it disencumber an estate of annuities for lives, granted with the necessary legal precision. The artifices of secret usury long practised in such scenes, have been notunfrequently found too strong for the courts of justice; they are aided by the anxious necessities of the borrower, who is compelled by the usury laws to fling himself into the haunts of fraud and avarice ; they are framed by the caution of experience opposed to the thoughtlessness of youth, by the combined cunning of partners in the deceit who are to share its profits, against the indifference or ignorance of an individual borrower, who acts with necessity as his adviser, and who is thrown off his guard by the tempting bait of the much-wishedfor money. It is idle then, with such facilities to deceive with impunity, to talk of the usury laws as affording any protection to the inconsiderate or weak. Their framers and supporters seem so ardently anxious for the preservation of youth and inexperience from one obvious evil, that they have overlooked the thousand ills of much greater magnitude that beset them on every quarter. To complete their purpose, they should have set a price upon every man's property, and upon every article of use or luxury, which a man might have occasion to purchase. Their prohibition respecting the borrowing of money at a certain rate, under pretence of protecting a man from fraud and avarice, is perfectly nugatory unless they proceed a step further, and prevent him from selling his property, or from charging it with mortgages and annuities. They have stopped one hole in the sieve, while the water passes through a thousand others. , '.
Such is the nature of the protection that is in reality to be found in the present usury laws of this country. In the event of their repeal, let us see how the matter would stand. The capitalist indeed may in that case demand whatever sum he pleases for the use of his money; but in this country, or to make the argument more general, in this age, when capital has been so wonderfully accumulated, and so easily transferred from one country to another, there will be no other capitalists in the market equally willing to dispose of their property to the best advantage. Capital then becomes a direct article of trade, whereof the value must be proportionate to the supply and the demand, and be restrained by the competition of the holders. We may trust to the ordinary discretion of any individual requiring to borrow money, that he will not give a higher price for the article to one proprietor than that for which another will be ready to accommodate him ; and this price must ultimately be regulated by the profits generally to be derived from the employment of money.
Indeed among commercial men and capitalists, or, technically speaking, in the money market, the price of money, or the rate of interest, can be ascertained as accurately as the price of any other article of trade. But there is also in the value of money something that renders a free trade in it as an article of commerce, less liable to exception than almost any other commodity whatever, namely, its singleness of quality, which, in offering it for hire, prevents the possibility of deception. In houses, or manufactures, or cattle, or corn, an article of inferior value might be palmed upon an ignorant or simple person at the price of the best; but in money such an imposition is impossible. Its price can never be unknown to any person who takes the trouble of inquiry; like that of the public funds, it may vary with the circumstances of trade, but never suddenly or to a great extent; but like them too it might by obvious means be communicated to every part of the empire, and by the facility of commercial correspondence, preserve something of an equality even at the remotest extremities.
By removing the restrictions we might naturally expect, that no inconsiderable part of the money trade would fall into the hands of respectable individuals; nor can we overlook the probability, that the conduct of all persons engaged in it would be essentially corrected by the necessary publicity of their proceedings, on which their rivals, their competitors, and the public at large, would be enabled to pass their judgment. Indeed no small part of the mischief that has ever attended usury in its worst acceptation, arose from the privacy of all its transactions. The scrutiny of public observation being removed, there was no regard for public opinion to correct the grossness of oppressive fraud; and the persons deceived, either from the nature of their engagement, could not punish their oppressors, or from a sense of false shame, would not make known the transaction lest they should expose themselves to the derision of the world, as having committed themselves to sharpers without possessing the wit to protect their properties.
So far then are the usury laws from protecting simplicity or ignorance against the devices of avarice or fraud, that they only act the part of traitors, and under the guise of friendship betray them into the toils of the enemy; and under the pretence of saving a man from the ruinous consequences of his own prodigality, merely compel him to change his route, and accelerate his progress through one more expensive and circuitous. Should they succeed in preventing him from borrowing, they cannot prevent him from selling every thing he possesses, no matter with what inconvenience and disadvantage, and probably will realise Lord Bacon's remark, that "Usury doth but gnaw, while bad markets swallow it up." These considerations might also allay the fears expressed by those who oppose the measure of a repeal, lest the capital of the country should, from an easy access to the money market, fall into the hands of prodigals and projectors, who would dissipate it in extravagance or fruitless expedients. This argument in favor of an established rate of interest derives its origin from Adam Smith, who in his Wealth of Nations, (Vol. II. p. 121.) speaking in favor of a maximum, says, " if the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent., the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest." This opinion, proceeding from such high authority as that of Adam Smith, to whose enlarged views of policy society is so much indebted, was calculated to make a deep impression upon the public mind, particularly as it was quite in unison with the prevailing prejudices of the great majority of society.
But its principle and tendency are so diametrically opposed to the whole spirit of his work, many passages of which indeed almost in direct terms contradict it, as to induce a suspicion that the sentence had crept in without his concurrence. 1 shall not here dwell upon the manifest injustice of his classing projectors with prodigals, and thus taunting them as pernicious members of society, nor upon the impolicy of laying an interdict on commercial or other speculation, which would be synonymous with interrupting the progress of national prosperity. But admitting its propriety to the utmost extent, let us consider how far the access of these proscribed and dangerous characters to the money market, would be facilitated by a repeal of the laws that affect to regulate the rate of interest. Should the projector or the prodigal be a man of fortune, and so enamored of his project or extravagance as to persevere in it in despite of the suggestions of prudence, we have already seen that the existing laws cannot prevent him from raising money for the indulgence of his propensities, by selling, mortgaging, or otherwise charging his property. But should he be devoid of the means of affording security to the lender, what capitalist will be tempted, byeven an extravagant rate of interest, to hazard the safety of the principal ? Monied men are not often found very deficient in ordinary prudence, or extremely ready to entrust their property to men of little credit, so that the legislature may safely relax its generous care for their concerns, and confidently trust to their general discretion for the protection of their own money. On this point it is highly satisfactory to have an opinion of Adam Smith himself, and one that is consistent with the general tenor of his writings, to support an argument in opposition to another, wherein he seems to have forgotten his own principles. The quotation refers to prodigals only, but it must necessarily embrace the kind of projectors with whom prodigals are associated : " the man, he says, who borrows in order to spend will soon be ruined, and he who lends to him will generally have occasion to repent of his folly. To borrow or to lend for such a purpose, therefore, is, in all cases where gross usury is out of the question, contrary to the interests of both parties; and though it no doubt happens sometimes, that people do both the one and the other, yet from the regard that all men have to their own interest, we may be assured that it cannot happen so very frequently as we are sometimes apt to imagine. Ask any rich man of common prudence, to which of the two sorts of people he has lent the greater part of his stock, to those who he thinks will employ it profitably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle." If then a projector or a prodigal, generally speaking, should, from the apprehensions of monied men, encounter difficulties in procuring pecuniary accommodation, what chance of being provided could he entertain who is altogether without means of offering security for his loan? In the sentence already quoted it is indeed suggested, thatthe hopes of great interest might induce some capitalist to meet his wishes; but let it be observed, that the greatness of the interest tends only to render the payment of the principal more doubtful, and that should any capitalist be thereby induced to hazard his money, in some project, he in fact becomes the projector and speculator over whose conduct even the present laws do not pretend to arrogate the slightest control.
The latter case, however, of a borrower not possessed of the means of offering security for the loan of money, ought in fairness to be excluded from the consideration of his question. To such a person it matters little what laws respecting the rate of interest are in existence, he can never be within the contemplation of any. His object can be obtained solely by his own address, or through the friendship of others, and these means must be equally operative under every system. But where a man is capable of giving security for a loan sufficient to satisfy the cautious doubts of the lender, I cannot imagine how the terms of his agreement could possibly be affected by the circumstance of his being either a prodigal or a projector. If the lender be satisfied, he will hardly give himself any trouble to inquire about the manner in which the borrower intends to employ his money. At all events, the real intention might be easily concealed, and in such a case even a prodigal, the most re