The record-union., 1893-02-17
PERNICIOUS BILL-BITTER WRONG
TO THE POOR.

Assembly Bill No. 143 has passed that
body. 1t is a usury law, and bad in
principle, relic OF prejudice and error,
an oppressor of the poor and di-
rect blow at the men who need to
borrow. 1t will. if it becomes law. be
evaded, as all such laws are, butin evasion
it will stimulate cheating and encourage
corruption, and prove premium upon
extortion.
The bill of the Assembly, which is con-
demned by all economists as of per-
nicious class of legislation. fixes the rate
of interest at per cent. after the debt is
due, and on judgments and DEGREES. and
on money due upon settlement of ma
tured accounts, etc. But by express con-
tract in writing different rate may be
fixed, but it shall not exceed 9 per cent,
and if greater it shall be deemed usurious
and work a forfeiture of the interest so
contracted to the school fund, and beside,
the offending party can be fined or Jailed,
or both.
This economic principle we assert to be
sound and irrefutable: That usury laws
are in restraint of competition, and there
fore bad, as preventing financial elas-
ITCHY. AS an instance, the mortgage tax
law provision in the Constitution tends
to prevent the incoming of capital into
the State.
Many economists now hold that judg-
ment should not bear interest except
where it is payable solely out of the Sc
curity in the hands of the lender. For
real estate and collaterals, they contend,
the loan should run only as long as the
margin is broad enough to meet principal
and accrued interest. Unsecured loans
and book accounts would draw no inter-
est, but the credits be discounted and
usually be in negotiable form and COM
mand the lowest current rates. They
hold also that the custom now in exist
ence is bad that interest shall accumu-
late upon the loan when the borrower
cannot pay the principal. OF course,
under this objection, the interest accumu-
alton on the judgment into which the
loan is transposed is bad.
That competition has reduced interest
to its lowest possible terms in California
under present conditions is a fact that
cannot be successfully denied.
All usury laws always have been use
less because they compel the borrower by
reason of his need to pay for all risk of
evasion.
Evasion may be effected in many ways;
rs by drawing an acceptance on dis
tant bank, which is discounted at home.
and then when it falls due drawing a bill
10 meet it and paying for exchange and
service more than if the parties were
free to contract in the first instance; and
so, through brokerage, gift, discount and
other devices. the law may be evaded, and
thus the spirit of contempt for laws be
stimulated.
The opinion has been gaining ground
everywhere that money should be Dor
rowed and repaid, bought and sold upon
whatever agreement of terms the parties
to the transaction may settle upon, like
any other property. England in the 18th
year of the reign of Victoria repealed all
the usury laws, after that nation had
striven to enforce them from the time of
Henry VIII.
In New York, when the Herman in
terest law abolishing penalties for usury
as far as call loans were concerned
was passed, the effect desired was in
Simultaneous. 1t put an end to the trac-
tional commissions charged in stock
transactions in times of active specula-
ton and tight money market, says Ros-
sitter johnson. Before that the commits
sions raised the rate of interest in sud-
den leaps to IL, 10, 2S, 81 and sometimes
96 per cent, thus greatly favoring the ma
pipulation of the money market.
Jeremy Bentham. says Professor Perry,
by a grand induction of particulars
reached the truth and statement that
usury laws are economically wrong. In