Year: 1870

REMARKS on rHE RKPKAL OF TEE UsURT LAWS


CONTINUED.


In the course of the few past years,
numerous petitions have been presented to
the legislature Of the State Of New York,
praying for the repeal of the Usury Laws
1t is proposed that in loaning money the
rate of interest should be agreed upon be,
tween borrowers and lenders, as the prices
Of merchandise are agreed upon between
buyers and sellers. The position assumed
by those in favor of abolishing the Usury
Laws is, that the competition between the
lenders Of money would lie 70 great as to
reduce the rate of interest below seven per
cent. But such would not be the result
There is now no law against competition at,
or below, seven per cent. /; therefore the
competition at seven per cent and under this
rate, could not be increased by annulling the
restriction.


Another argument for the abolition of a
legal rate of interest is, that the laws against
usury are continually violated. In large
cities, money ID often loaned at from one to
three per cent. a month, at q quarter and q
half per cent n day. and the legal rate Of
seven per cent. per annum does not govern
the money-market it Is, therefore argued
that the law must be wrong; and that if the
price to be paid for the use Of money were
left open to competitor, the demand and sup
ply would equitably regulate the rate Of in
terest.


The idea commonly held out is, that the
rates of interest would be lower if the Usury
Laws were abolished and anticipating this
result, many are induced to sign the peti-
tons. There is reason to believe that the
principal OriginatOrs of these petitions are
those who are now infringing the laws by
exacting extra rates Of interest, and who
would like to have their extortions legalized.
They do not advocate the chartering of
banks without restrictions upon the rates of
interest. Banks should lend oDey at the
legal rates. Then few capitalists would
borrow large sums from them, and dis
counts would be refused to business men,
who would be compelled to borrow money
from these capitalists at the rates of interest
for which they would agree to lend it. The
necessity of the borrower. and the avarice Of
the lender, would fix the rate Of interest If
a capitalist could borrow from bank $1O,-
600 for ninety days, at six per cent. per an
mum, and reloan it at three per cent. month
to man who must have the money or break,
be would make by the operation q clear
gain of $3.50. Annul the laws against
usury, and this kind Of business would be
far more extensive than it now is but un-
der the existing laws, more Of it is done than
is for the benefit of the public.


Other arguments advanced in favor Of
abOlishing the Usury Laws, are such as
these. 1t is said when goods are sold on
credit, greater difference is made in their
price than the interest at seven per cent.
per annum for the time of the credit, and it
is therefore right that lenders should receive
higher rates of interest for their money.
People are not aware that the high and fiuc-
tuating rates Of interest on money are the
cause of the extra prices charged for credits
on sales Of goods. Suppose merchant is
obliged to turn bis goods into money to pay
debt. He sells them on six months credit,
taking the purchasers note, on which he
pays two and half per cent. q month dis
count to obtain the cash. He could as well
afford to take fifteen per cent from the
goods as fifteen per cent from the note. The
purchaser Of the goods who cannot pay the
money even when offered this large discount
off bis note, is not rs safe for the payment
Of bis note as be would be If others could
not get so large a discount BY paying cash.
1t gives n man who can pay the money
great advantage over one who cannot, for If
the latter pay fifteen per cent. on the cost
OF his goods for six months posseeuicn, the
buyer for cash can undersell him. IT.