The National Register.
London, England, 1816-04-29 00:00:00

'bt4l

No. 433.—V0r.. IX.

ON TILE EXPEDIENCY OP
RAISING the LEGAL RATE, of INTEREST.

Iraox A rAacruLET JUST PUBLISH= HT IL B. =GOV Nr, (SQ.)

The war is now at an end. A re-action has ensued,
which has involved all in one common distress. It will
not be suptassed that much money is afloat in the market,
and even if there were, yet under the depressed state of
'agriculture, the lauded interest, generally speaking,
could not afford to pay even the legal rate of interest tar
the loan of it. It is deeply the interest of all to consi-
der what measures it were proper to adopt, in order to
relieve the country under the existing difficulties.
If it should be thought too lea u measure to allow
snore than 5 per cent., to be taken on good security, yet
as money may now be burrowed at any rate, however
exorbitant, by way annuity, some measure ought to
be adopted to prevent the clashing consequences arising
out of this system. For instance, let it be made legal to
take 7 or 8 per cent., on such securities as annuities are
new generally granted upon, viz. life interests, and rever-
pions, and leasehold estates ; and at the same time render
,it illegal to grant a redeemable annuity. This would at
once open the market to fitir bidders : the extra interest
would compensate for the risk, more especially when re-
payment of the money could he compelled, and borrowers
with inferior securities would be saved from great oppres-
sion. The borrower where he had a determinable inter-
est, for example, a life estate, would still have to insure
his life ; but, subject to the money borrowed, the assur-
ance would belong to himself; he might keep the assur-
ance on foot after the money was paid off for his own be-
nefit, or he might sell it ; whereas an assurance for money
lent on an annuity is ulways effected by the lender, al-
though paid for by the borrower, and naturally falls to
the ground when the annuity is paid off.—To this plan it
may be objected, that irredeemable annuities would l:e
granted in order to evade the law. This objection, and
the mode of obviating it, require great consideration.
It would hardly be endured that the sale of an irredeem-
able annuity should be prohibited, nor clues it seem ne-
emery to resort to so violent a measure. It is a well
known fact, that very few life annuities are ever granted,
without being. subject to redemption. Where an irre-
deemable anuuity is granted, it is generally a family trans-
action, and wholly free from fraud. It would not there-
titre be attended with any practical inconvenience to fix
the rates at which such annuities shall be bought accord-
ing to the plan proposed in the bill so often referred to,
which was dropped. This measure, I am persuaded,
would never affect the persons whose conduct it would
seem to regulate, and It would facilitate the state plan
now in action of raising money by the grant of ab-
solute life nnnuites, although even in regard to this
limited traffic, individuals should be allowed to
give considerably more than Government offers. It
would at the same time prevent lenders from flying to
this scheme in order to evade the law, urf Ing the
borrower rely upon the honour in granting a redemp-
tion.

_
It may perhaps still further he objected, that this
measure would open a door for all classes to borrow at
the increased rate. A man having a fee simple estate,
and also a life estate, might pledge the life rate as a se-
curity for a loan at the highest rate of interest, the
lender relying on his other property, or on a lien on it
by means of a judgment, as a better security. This, it
must be admitted, might be done. But still no new
evil would be introduced; for a man in the same circum-
stances, or with fee simple (..a:...tes only, mar, as matters
now stand, under colour of an annuity, borrow money
at 4.0 per cent.; and the greater the amount of the an-
nuity that is taken, the more it assumes the shape of a
loan, Om it becomes the more certain drat the annuity
will be paid oft' in a reasonable time.
The bast, however, although the boldest me..isure,
would be at once to sweep fret a the statute book all the
laws against usury. This would leave money like other
commodities, to find its level; and would essentially be-
nefit those upon whom it would seem to have the harsh-
est operation.
Conflicting opinions, however, upon this great question
must necessarily exist. It is thought by some that the
rate of interest should be reduced. The objection to
such a measure has been already stated, that the law,
although made, would be inoperative, and would sub-
ject borrowers to harsher terms than would be imposed
on them without a proteetiog law. The story cf Don
quixote's interference on behalf of the peasant whom his
master was beating, should not be lost on ma:Mad. If