The Worthington advance. [volume] (Worthington, Minn.) 1874-1908, 1891-04-02
VIEWS Of A POLITICAL EcoNo.
MIST ON THE PENDING U6U.
~ AND TAX LAWS. r.

VIEWS or A POLITICAL EcoNo.
MIST ON THE PENDING u6U.
~ AND TAX LAWS. r.
W1LLMAR, Minn., March q, 1891.
DEAR SIR: You request me to give you my
views on the proposed usury laws now pend.
Ing before the Minnesota LEGISLATURE The
subject has been one of long and careful
study on my part and the following are my
CONCLUSIONS:
Usury laws cannot and do not decrease the
interest upon MONEY, but can. and do, and
alwaye will, increase rates. This il So per
fectly plain on principle, and is so un:ver'
sally attested by practical experience. that
the man who will Q Their think or Observe can.
hot avoid thu Conclusion.
Money is the most cautious Of all kinds oil
property: 1t flies at the least approach of
dnnger. 1t is not obliged to remain in any
locality, as is real property Its transporta-
ton and removal costs nothing. az does that
of other forms of personal property. When,
therefore, IT'D owner is alarmed or dissatisfied
with its present place of investment, he can.
with but very little trouble Or expense, re-
move 1t to other places. Quite AZ true Is it,
that the great bulk of loanable funds seeks
absolute safety, rather than high rates of in.
terest Witness the vast sums invested in
government ana other undoubted secu titles,
mum.
The question for US Ia do the penalties and
forfeitures OF usury laws compel men to
loan their money cheaper or do they drive
money out OF the State, and thereby make 1t
scarcer ana harder to get? If usury laws do
make Interest lower, then surely we ought to
have them, and make them good and strong
30 that they may be az effective as possible.
Let us see how they Work.
unu 0pr ri ~
HERE.
The money loaned in Minnesota comes very
largely from the East. Some people seem to
think it comes here voluntarily, and indeed
10 really thrust upon us by eastern people.
The fact Is it is procured only by the most
persistent efforts of the various agencies,
If money were being pushed upon us, bor-
rowers could get it FOR themselves, and
would not have to pay agents to get it for
them. 1t may be safely said that no eastern
man, company or corporation ever asked or
induced people in this state to borrow their
money, but on the other hand we have con-
tinually beggol and besteged them to send
their money here. and have made all sorts of
pledges and promises to furnish them first
class securities and honest borrowers, and
yet it has always been exceedingly difficult to
get them started. Is it to be wondered then,
that every time hostile legislation Is threat
ened, they at once begin to clamor for their
money, and forecose their mortgages if they
can't get 1t? Suppose all our properly, be
1t little or much. was in the shape OF money,
and you had been induced by all sorts of as
surances to loan it through agents in Idaho,
Nevada or Washington. After a while their
brawling polite; ans begin to denOunce these
Minnesota lenders rs sharks. harpes and
plunderers, and their legislators begin to
seriously talk OF confscat ng part OF your
property By taxation. Now what would you
do? Go on dealing with such people, or
would YOU get that money back ont OF their
clutches ut the very eurli ,st possible moment2
This is our tuat; % to-day. Now, If under
these circumstances you would get your
money back as soon as possible, will not
these people do the same thing? And when
they have pulled twenty or thirty millions Of
dollars out of this state, what will Minnesota
property be worth?
WHEN THE RATE FIXED IS LESS THAN MONEY
WILL BRING ELSEWHERE.
Now, if the rate Of interest fixed by a usury
law is less than money will bring in other
places on the same elias ses of securities. it
will certainly lie removed to those other
places as soon as possible, and new money
will not come into the country affected by
such a usury law so long as it can DO loaned
to better advantage elsewhere. There would
be no object for eastern people to keep or
send their monev here, when they could get
better rates elsewhere, and every intelligent
man knows that they would not. and it is
from them Ne have always got the cheapest
money loaned in the state.
Such law, then, drives out money already
invested here and prevents other money
from coming in. This must. in short time,
make lOanable funds worry scarce and the
demand for the money that romains will be
80 great that the price will be forced up in
spite of ull the penalties and forfeiturcs that
can be piled on top of each other. Nor is
this the worst OF it. The pr.ce OF the dimin-
ished funds will not be enhanced by the
greater demand alone. Such lenders as COLI
tiuue in the business will invariably add a
further per cen1um as an insurance premium
for the risk they are taking. This they must
do, and the borrowers must pay it. All sorts
of methods will be resOrted to in order to
evade the usury law, and the greater trouble
and expense of doing business will make
it necessary to adj a still higher per cent.
Respectable loan agencies will be driven out.
Their efficiency in procuring outs de money
at low rates W IL be utterly destroyed and
their cred with eastern capital SITS, which is
worth something tn the state is well as to
themselves will be ruined.
Can any rational man doubt that these are
some Of the results that must inevitably fol-
low the enactment Of such laws? Is it even
possi bic to be otherwise?
But there is another phase of the question
that may be even more effectual in drv. ng
away money than the rate OF interest, aud
that is
UNREASONABLE PEN ALTIES AND FORFEITURES.
Take the proposed usury bills in our legis-
lature to-day. They provide that if any more
than certain rate Is taken by any agent the
whole amount OF principal and interest is
forfeited. 1t makes no difference that the
lender himself knows nothing about the taxi
Ing of more than the legal rate-it makes no
difference that he in every way III his power
guards against the taking of more than the
legal rate, nevertheless, if any agent takes
from the borrower commission which, W tn
the interest agreed to be paid, amounts to
more than the prescr. bed rite, the lender,
who has not been in any way to blame, loses
the whole sum loaned, while tho borrower,
who must have boon know ngiy party to
the wrong doing. is rewarded by having his
entire debt cancelled Could any thing be
more unfair and wickedly unjust?
What eastern man would send his money
out hero to be loaned under such a law:
Would not any man of common sense rather
lock his money up in the vaults, where it
would at least be safe. even If it brought him
nothing, than to send it to place whore he
might be plundered in tn 8 manner The
lender, the only honest and innocent person
connected with the transaction, is the only
person pun shed. The rascals rewarded. the
honest, upright man punished!
USURY LAWS ALWAYS MAKE MONEY SCARCE.
Can there be any doubt. then. that the
whole tendency of usury laws is to make
money scarcer, either by reducing the rate
below what monev will bring in other places
or forcing it out by the hazards and dangers
which such penalties and fOrfeitureS imposed
And does any sane man believe a thing can
be made cheap by making 1t scarce! He car
As easily believe thing may be made white
BY making it black. There is only one way on
earth by which anything can be made cheap
, and that is by making it plentiful. and on the
other hand, it is just as certain you viii! make
1t dear when you make it scarce. These arc
, commercial laws that are just as fxed, certain
and lmmutable as the laws Of gravitation. !,
. Is just as sure that any commodity will be
come ch.a:, when it is plentiful, and dear
, when it Is scarce, rs that an unsupportcd
body will fall to the earth. These are nstura
laws, that cannot be changed by legislatures
An act of the legislature sitting that hence
forth all rivers should flow back from the
seas to the mountains, wou d be no NOR;
senseless and ineffective than an act decree