The Charleston daily news. [volume] (Charleston, S.C.) 1865-1873, 1873-01-18
The Usury Laws.


eral Assembly repealed the Usury Laws ln
this State. Ohio, Georgia, Mississippi and
New York are moving in the same direction.
Where the Usury Laws remain on the
| statute book, they ipjure the borrower with
out affecting uniavorably the lender oil capt.
tai. This fact is as plain as that two and
two are four. Yet it is again proposed in
the State Legislature to re-establish the
Usury Laws; the proposition coming, as in
1870, from Conservative member. The de-
tenders of this childish and ruinous measure
dare not deny that Usury Laws are unsound
in principle. They say that they deal with
facts and not with principles. They justify
their conduct by the general declaration (I
that experience proves that the repeal OF
the Usury Laws has not brought capital
into the State; (2) that money is dearer
now than it was when the Usury Laws were
in force; (3) that the planters and merchants
are made bankrupt by the rates which they
are forced to pay for money; and az that
money can be borrowed in New York and
elsewhere for per cent. a year, while in
South Carolina the rate is l, l! and per
cent. month. This is the quadrilateral,
or rather the pasteboard castle, occupied by
the defenders OF the Usury Laws in the
lower House OF the General Assembly. We
propose to test the strength OF the position
by the light OF hard and incontestable
truths.
l. There is more banking capital now in
South Carolina than at any previous period
since the war closed. Whether the rate
fixed by law, as the interest on money, be
per cent. or 10 per cent, the lenders OF
money will charge, and will obtain, just as
much as their money is worth, whether it
be 10 per cent, or 20 per cent. But when
Usury Laws are in force the difference be-
tween the legal rate and the market value
must be made up in indirect ways-in the
shape OF commissions, brokerage, and 80
on. The lenders Of money now in the State
may be willing to keep here what they now
employ; but they will not increase their
lending capital with the penalties OF
Usury Law staring them In the face. We
know, moreover, that the revival OF the
Usury Laws will cause the immediate with
drawal OF certain large sums Of money now
employed a. the regular banking rate. We
repeat, then, that free trade In money has
brought capital into the State which would
not otherwise have come. And the con-
verse OF the proposition is as easily demon
strated. Massachusetts, to take one in
stance only, found that while the Usury
Laws prevailed, the capital OF the Massa-
chusetts banks was sent to New York and
there lent out at higher rates than the Mas.
sachusetts law allowed, while the people OF
Massachusetts, were forced to go to New
York and borrow there the very capital
which the Usury Law had driven out OF
their State. Massachusetts at once repealed
her Usury Laws.
2. Money is not dearer nov than it was
before the Usury Law was repealed. In
1866 money was snapped up at and 2a
per cent. month. When the Usury Law
was repealed capital began to flow in, the
price steadily declined, and now money is
freely lent at per cent. month.
3. The planters and merchants who bor-
row money at high rates, do 80 with their
eyes open. They believe that they can
use the borrowed capital at o profit. II
they do not ia ke the money, some one
else will surely do 30. There is no rhyme or
reason in making the rate OF interest re-
sponsible for "bad luck" which is only an
other name for bad management. The
lender OF money fixes his price. The money
is there to take or to leave. 1t is for the
borrower to say whether he can afford to
pay the price. When he has once taken it,
there is no sense in saying that his opera
tions failed because Of the cost OF his bor-
rowed capital. Perhaps it Is desired to pre-
vent farmers and planters from borrowing
money at all. The1, the simpler way would
be to pass an act to that effect. This would
be as practicable as to make banker take
7 per cent for what is worth IL.
4. Money sometimes can be borrowed in
New York at and 6 per cent, but this is
upon the security Of gold notes, or OF gov
ernment bonds, which the lender can sell at
any moment II the loan be not returned
when called for. Commercial paper in New
York ranges from 10 to 20 per cent, and
the paper OF planters and others, such as
we have here, would not be discounted at
any price. But, as New York has Usury
Law, how is it that money cannot be bor-
rowed at the legal rate 2 The answer is,
Because the money is worth more. How is
the law evaded? There are several ways.
One is to sell the note desired to he dis
counted for what it will bring. Another is
to charge commission in addition to the
legal interest. Another is to borrow $40, 900,
allow $4,000 to remain in the bank and pay
interest on the whole $4,000. In one way
and another, in spite Of the Usury Law,
borrower C. money in New York pays lit
tie more than the market price OF the money.
He pays more because the lender charges
the usury rlsk-the risk OF detection. Our
sister State, Georgia, is o striking example.