Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1869-11-05
THE UsURY LAWS.
Speech of II. b. Cheatham,
In the House OF Representatives,
Thursday, Nov. 4, 1869, ON the Bill
90 Change the Usury Laws.

ton is one of the most important that VII
come before this body. 1t is a measure tt
change the usury laws of the State.
proposes to legalize conventional rate o
interest between contracting parties, stipu
lating that tie rate be expressed in writing
and be made part of the obligation L
provides that in all other cases, except
these described in the first section, the rate
of interest shall remain unchanged The
third section projects all contracts made
previous to such an act as is now proposed,
and describes the status they shall occupy.
1t is brief bill, but, in my judgment, to the
point and what shall say will be in adj
vocacy of the general principle involved,
and of the bill as it stands.
As one identified with the commercial in
terest of the people-one knowing some
thing of the operations of banks as they
are now eonducted-one familiar with the
| hardships which the mass of the active,
working people are enduring-one who
| feels himself obligated to assist in devising
measures for the general good-one who in
a former General Assembly in which he
had the honor to sit, had occasion to in
vestigate this question, feel it a duty to
state briefly the reasons which impel me
| to urge the passage of this act. Sir, /
am deeply impressed with the conviction
that this is a most salutary act.
Mr.. Speaker-Money is commodity. 1t
is worth its value in trade No rule, except
such as you cannot control by legislation,
| can affect its value. You cannot raise or
depress it. Governments, federal or State.
may make whatever currency regulations
they will They may say that gold and sill
yer is the only constitutional currency or
that National Bank currency, or treasury
notes, are a legal tender. They may make
anything they see fit medium of exchange
of values, and establish it as a currency.
But, when so accepted, it becomes conn.,
modify. Men use it, and deal in it. L
will come to have price that will fiuctuate
according to the needs of the community,
and this value will be determined
by the contingencies of the commerce
whichsgoes on between individuals COM
posing the community. This is a law
higher than any legislators may enact.
Political economists for the last % years
have been satisfied of this fact, and daily
experience confirms the theory. Money is
worth in the market whatever it will bring.
Laws saying it shall only be worth six per
cent. do not fix its price; and no licensing
or penal regulations can govern the price,
or restrain the sale at whatever price it
may bring. No gentleman on this floor
at all cognizant of business transactions
among the people he represents, can be
ignorant of this great fact Every commu-
nifty in the State of Tennessee, however
limited its business, affords evidence that
money, like water, seeks its level 1t is
the standard of values, but it passes from
hand to hand, and it will be dear or cheap,
just as any product or-speeies of property
for which it is representative of value may
become under the laws ofplenty orscarcity.
This is the great principle, and it should be
kept in view by us as legislators.
1t is evident that our laws prohibiting
money to be loaned, and contracts to be
made at any higher rate of interest than
six per cent. has been for years, and is
still, not only preventing foreign capital
! from coming into Tennessee, but has driven
out, aud il continually driving millions
of cur capital into other States VITA more
! liberal laws and forcing it into investments
which are noE producing. Money today
in our own midst, and IN every State 81
rounding us, is worth from s to IL per cent.
per annum, and is so recognized by all
| classes. The farmer, the trader, the manu-
ldCluiGl NtllAAOI SCl IL at V BGA OCllAY NAlC
price fixed by law. They have ceased to
| expect it. They do not ask it. Being I'M
able to borrow it from private individuals
or from estates Of any kind on any kind of
security, on account of the usury laws as
| they exist, they are forced to go into bank
| on paper inconveniently short, or to go to
| shavers who are compelled, on account of
| these same laws, to exact exorbitant
| rates. The risk, with threatened usury
| suits at the hands of the latter, makes
money higher than it should be. 1t gives
it an artificial value, which is injurious to
the general interest.
Bank loans, as everybody knows, are
really under the best collaterals, at from nine
to u per cent. The result Of the six per
cent law Is, that the capital to be loaned
seeks other investments than loans to in
| diYiduals, under the law. 1t is either sent
to other States where greater interest can
| be had, or is invested in stocks and in
| bonds, State or Federal, or in real estate.
In any case, the vitalizing and ener-
| giving influence of capital is diverted
| from individual enterprise II every
] vocation. There are thousands of mechan-
| les, manufacturers, traders, and farmers
who would willingly borrow money at from
s to 10 per cent. on good personal or real
estate security if they could secure loans
on time But banks, as they are compelled
to be conducted, cannot accommodate in
that way; and private capitalists are afraid
| of the inconvenience and litigation which
may ensue if they ask the current price for
their money From the investigation |
have been able to make, l hazard nothing
in saying that the average rate of inter
est on all the money now at loan In
this State, is over 10 per cent. Some
estimate it much higher; and In
some localities it is as high as - or 20
per cent. A conventional rate of interest,
such as is proposed by this bill, would
remedy this matter. If all the money In
Tennessee now in, or seeking other invest
ments, than good real estate or personal
security loans, were kept out of bonds and
at home, and put at an agreed rate within
the control of borrowers, the supply would
be increased, and this average rate, which
is an enormous, artificial and unhealthy
value, would be correspondingly reduced.
The cent-per-cent shaver would cease tC
Cypress. The banks would be forced to be
more liberal. There would be an equali
cation and uniformity in the genera
drift of business-regulated as money
would be by the laws of supply and de
maDd-which could not fail TO be of public
benefit 1t is a plain proposition that the
individual or the corporation now sending
money out of the State to be loaned at say
10 per cent. interest, or investing it il
bank stock to secure that sum, or in Othel
stocks speculatively deemed equal, would
if no usuary law interviewed, prefer to loaI
it at home, and thus avoid agents, officer
and LAWYERS fees A law allowing a con
tract or conventional rate of interest vii
invite and allow capital to be thus employed
and the beneficial results cannot fail to b.
quickly seen in every department of bust
ness.
Mr.. Speaker am aware that SOM
plausible arguments have in times pas
been used against law of conventional in
terest. At any time-even 10 years ago
they were specious. A full report on tn
subject, substantiated by facts from tn
Comptroller of the State on the note
/ shaving privilege; by statistics in regard t
| the matter from States with such laws a
/ that now proposed and with an exhibition
of the reasons, cogently and forcibly eI
, pressed in favor of the law passed at tha
= time, contains matter worthy of perusal b
| every member of this House. Every fac
? | and every argument there offered is doubly
t trebly, forcible at the present time. A
r these, however, refer merely to the questio
of expediency, while, as 1 have stated
the outset of these remarks, the gref
e principle that money has its value and WI
f seek it and secure it in some way, despit
= of usuary laws, however stringent, II
1 mains.
Since 1859, we have passed though
revolution, that has wrought wonderfl
e changes. 1t is neither pertinent or propt
f in a discussion of such a measure {
C now ponds, that these should be Oh
s cussed. The entire currency and bankin
, system has been radically altered by FEEDER
n law. which State legislation cann'
n | oba,oa A general nublic debt has bee