Evening star. [volume] (Washington, D.C.) 1854-1972, 1870-02-19

The Senate yesterday passed a bill amending
the usury laws Of the District of Columbia, and
which provides that the legal rate of interest
shall be six per cent, but authorizes parties by
contract in writing to stipulate for a rate of in
terest not exceeding eight per cent; the for
feiture for taking more than eight per cent
being the entire interest The law now in force
IN the District fixes six per cent as the legal
rate, and the penalty for exceeding that amount
Is the forfeiture OF the entire contract.
The bill was opposed by Mr.. Wilson on the
ground that it favored capital, and was against
the business interests of the District and he ex-
pressed the belief that in his own State the re-
suit of a change in the law had been to increase
the rate of interest at least one per cent.
1t would undoubtedly be the case IL all re-
strictions were removed, that the rate of interest
charged would be the market value of money.
whether that happened to be six, or seven, or
eight per cent. In some cases il might cause An
increase Of interest, but in most instances IL
would undoubtedly reduce the rate. II any,
thing is settled, it il that the present law is
utterly Intellectual to protect the borrower or to
prevent the lender from taking more than six
per cent 1t is understood on both sides that
money is worth more in the market than six Der
cent, and the borrower is perfectly willing to
give more. But having got it at the market
rates, he can, If dishonest, afterwards turn
around and repudiate, not only the excess of
interest, but also the entire principal. The re-
suit is, first, to drive respectable, abiding
men out Of the business of money-lending, and
cause them to invest their money in other WAYS
where it can earn its legitimate value; second,
1t serves to throw the borrowers into the hands
OF the brokers, who, to insure themselves against
loss from customers pleading the usury law,
charge from twenty to fifty per cent, instead
of seven or eight, the market price for money if
there were no restrictions. 1t works precisely
as the credit system does in trade-the cash
customer has to pay for the losses sustained
from the delinquent credit customers.
In this way the usury law works directly to
the disadvantage of the poor borrower. But it
tends not only to his prejudice but to that OF the
entire community, by driving money to other
quarters, where there are no such restrictions
upon its legitimate use. Money has a market
able value, and is affected by the law of supply
and demand. If by law the price is fixed at 6
Per cent here, and it brings a higher rate in the
states north and south Of us, it will certainly
desert us and seek its price elsewhere. In vir-
ginia, for instance, within a stones throw of
Washington, the new constitution permits as
high as II per cent. to be legal; in Ten
nessee contracts on loans up to 10 per cent are
allowed. We believe that there is no State south
OF Washington in which the law is not sufficient
ly liberal to draw capital from this District for
investment. Maryland has a more liberal
law than this District, but she is now moving
TO amend her law still further, somewhat
after the model of the law in Virginia or
Tennessee. Baltimore, with better law
than Washington, yet finds that law a serious
drawback to her business by inducing South
ern producers who sell in Baltimore to
transfer their balances to other points where
higher rates of interest are allowed by law The
state OF Maine finds the usury laws of her State
so preJudicial to her business interests that she
Is about to modernize them; and vet the usury
laws Of that State are vastly more liberal than
those in force here. Her usury law like that of
Maryland, simply forfeits the interest, and net
the principal, as here, in case the lender takes
more than SIX per cent Probably there is no
State or Territory in the country that suffers
from so antiquated and illiberal a law as that in
force in the District Of Columbia. The amend
ment passed by the Senate yesterday is a great
improvement upon the present law but better
amendment yet would be to allow parties to
make legal contract for any rate thew NAV
agree upon, but in the absence of such contract
the legal rate to be six per cent, as now.