Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1870-02-22

states Of tic Union. Those States which
have not adopted a conventional rate Of
interest, are urging itwith all yigor and
rapidly sc clip The following from a
recent number Of the Cincinnati GugeHc
on The Trade in Money"
On laws limiting the rate Chat can be
collected ay their aid for the use OF
money area curious relic of the past,
which have Survived while they became
practically obsolete, and are only hind
rance without any regulation. Yet men
are afraid to llt go Of them and so they
cling 10 them from the force of tradition
and habit, and assume that they regulate
Che rate of interest in the face of their
knowledge that the business 0f lending
money pavs no heed 10 them.
Tie Ohio statute rate of interest is six
per cent. where no rate is specified, and
by an act passed last winter, the law viii
collect as high as eight per cent. when
specifically contracted for The general
rate Of discount of business paper in this
city is ten per cent, and from that to
twelve and fifteen and upward In an
easy time and On the most favored paper, it
may bedone at eight per cent. The statute
rate of interest has no more effect on the
market rate than the laws Of the Modes
and Persians. The rate Of interest on
money borrowed on mortgage of real es-
tate is from ten to twelve per cent. This
has to be done by roundabout process
of selling the mortgage through tAiid
party. In this the only effect of the lc-
gal rate is to make a hindrance, and to
subject the borrower to a brokers' COM
mission and to higher rate as penalty
for the risk III eyading the law.
Naturally the amount of money loaned
on bond and mortgage is smae, as capital
prefers TO seek other investments having
less crooked ways, or other States where
it does not meet this obstruction In all
this it is impossible to see any benefit in
the statute limitation of interest, and there
is visible much injury to the borrower by
this protective interference.
Our five-twenty public stocks draw six
per cent in gold, which, with the eXemp-
ton from taxation, is equivalent to about
ten per cent on private loans, besides the
advantage that these stocks can always be
turned into money, or can be used as cash
collaterals. In'the face of 1000 millions
to become 2, 500-Of such stocks the
statute limitation to eight per cent is sim
ply mockery. The only sign of the
effect of the limitation appears in the rate
Of six per cent on deferred payments, on
real estate, and on debts past due. But
is this the effect of legal limitation ? Have
not the terms of sale Of real estate con
tinued as before as to the interest, although
the legal limitation has been raised 10
eight per cent And in general, does not
the buyer as well as the borrower have to
pay in the principal for all the reduction
he gets in the rate of interest by any pro-
cess
The fact is, we ale clinging to our pro-
tective laws in the trade in money from
mere force of habit and tradition, while
we can not state with certainty any good
that they do, and we can state with Ger
tainty considerable evil that is done by
them. But this tradition cannot be over
thrown at once, no matter how absurd 1t
may be shown by reason. The practical
way is TO compromise with it. They who
are most rigidly for protection in trade in
money, must see that the rate allowed on
loans which promote trade and industry
ought to be at least equal to that which
capital can get in dead investments, which
only drain the country. It they provide
legal enforcement for contracts at ten per
cent, they viii allow no more than an
equivalent for the income and advantages
Of investment in public stocks Admit
ting the whole protective policy as wise,
the conditions require The raising Of the
legal limitation to ten per cent aad we
suppose that the Protectonists and free
traders il money can compromise on Ibis
rate.