What IS usury, anyway?
Yesterday we reported that Pope Francis denounced usury during his Wednesday general audience. Of course, our reporter did not deign to explain what usury is, and that is just another demonstration of the wisdom of the Catholic World News team. Because in modern commercial societies, usury is a very difficult concept to grasp.
Usury has to do with lending money at interest. The condemnation of usury by the highest authorities of the Catholic Church goes back at least to the Middle Ages. For example, the Second Lateran Council under Pope Innocent II condemned “the detestable and shameful and…insatiable rapacity of money lenders” and commanded that they be separated “from all ecclesiastical consolation”, including Christian burial (Canon 13). Since money-lending was denied by law to Christians, Jews in Christian territories tended to take on this role, creating the stereotype of “Shylock”, who demanded his pound of flesh. Unfortunately, it is hard to find an authoritative document which explains precisely what it was about money-lending which the Church condemned. We understand that money lenders profit from interest on loans, and that what the Church condemns is the rapacity of this practice. But in what sense is rapacity actually built into the lending process?
This was a less complicated question in a culture possessing little or no experience with capital investments, and that is precisely why the medieval condemnations tend to make insufficient distinctions for modern ears. But within a few hundred years, beginning in the more commercial culture of the Renaissance, moral theologians began to work out the differences between legitimate investment and rapacious money-lending.
The nub of the problem lies in the disordered human desire to profit from the misery of another. After all, if someone is temporarily short of cash to cover his basic needs, then ideally someone else will step forward either to give him some money or at least to loan him some money without interest. That is what we would do for family members or friends even today, and that is obviously how Christians should treat each other as brothers and sisters in Christ. There is something about loving our neighbor that is supposed to come into play here.
But grave moral dangers arise when lending at interest becomes a business in itself. It is one thing—a morally unobjectionable thing—to share risk by putting up funds for a business venture or even a major purchase with long-term value, the costs of which the principals must clearly spread out over time. For such investments, one has every right to specify a reasonable rate of return. But it is quite another to look actively for people who are desperate so that you can loan them money at considerable profit to yourself—which they can scarcely refuse—complete with potential seizure of significant collateral. There is a strong element here of making money by exploiting the misery of others, especially given the certainty that many “customers” will be getting themselves into deeper trouble as a result of the loan.
Crossing the Moral Line
It is not always clear when the moral line is crossed, but there is a line. Consider, for example, the widespread ads on television that encourage people to use their car titles as security for loans. The ads show delighted people with big wads of cash. A lot of them are foolish, and are going to lose their cars. Somebody should be working with them to help them learn to live within their means, if possible, but in any case, it is clearly wrong to deliberately stimulate unrealistic desires in order to get another person “on the hook”. There may be some good done here, but it is a business model which preys on—that is, which tries to inflate and then benefit from—human weakness and misery.
In our massively commercial culture, we find this difficult to see. Everything is reduced to amoral transactions. For example, we take it for granted that credit card companies will routinely do the same thing, and mostly without criticism. They operate within a higher wage bracket, but they often promote a hedonist lifestyle, stimulating desires which people feel they must find more money to fulfill. Well, rack it up on the credit card! Trouble follows, but the credit card companies grow rich.
The moral disorder in this is even harder for us to see because it has a firm basis in our entire advertising culture. Too often everything from clothing to automobiles, from beer to perfume, is marketed not by calmly explaining product value but by linking products to sensual delights which become temptations. This reminds me of Pope Francis’ very contemporary cautions against such excesses in his recent Message for the 48th World Day of Communication:
Whenever communication is primarily aimed at promoting consumption or manipulating others, we are dealing with a form of violent aggression like that suffered by the man in the parable, who was beaten by robbers and left abandoned on the road. The Levite and the priest do not regard him as a neighbor, but as a stranger to be kept at a distance. In those days, it was rules of ritual purity which conditioned their response. Nowadays there is a danger that certain media so condition our responses that we fail to see our real neighbor.
Like slave owners two centuries ago, we tend to imagine that practices so deeply embedded in our economy are inescapable, and therefore acceptable.
The question of usury, then, is a little complicated; usury arises wherever a certain line is crossed. At some point—and that point varies with the lender, the borrower, the terms, and the purposes at work—a moral line can be crossed, from performing a service which includes compensation for legitimate risk to actually promoting and preying upon the weaknesses of one’s neighbors, and exploiting their real needs. It is financial predation in this specific form which constitutes usury.
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Posted by: FredC -
Feb. 02, 2014 10:49 AM ET USA
In Luke 19:23, in the Gospel of the Talents, Jesus did not condemn charging interest (the interest that the bank would pay the depositor).
Posted by: 1Jn416 -
Feb. 01, 2014 6:53 PM ET USA
Regarding DrJazz's comment: Economists define interest as "the cost of renting money." In a mortgage, if the rate is 5% and the principle is $100,000, then $5,000 is the cost of renting it for one year. This is fair. As you pay down the principle, the cost of rent decreases. One must also consider the "real" interest rate is the interest rate minus the rate of inflation, so, say, 5% interest rate minus 3% inflation = 2% real interest rate. Today's mortage rates are quite fair.
Posted by: stpetric -
Feb. 01, 2014 12:59 AM ET USA
Aristotle taught that "the most hated sort [of wealth-getting] is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural." (Politics, Bk 1, Part 10)
Posted by: Victoria -
Jan. 31, 2014 9:40 PM ET USA
Wow! What a great topic to bring to the fore! I am not sure I understand the "line" that divides acceptable lending from usury yet but your essay gets the ball rolling. I have often wondered about the biblical passages forbidding lending on interest. Thank God the Pope is courageous enough to take on commonly accepted practices like predatory lending and manipulative advertising.
Posted by: Dutch01 -
Jan. 31, 2014 1:20 PM ET USA
Spend a few moments perusing your banks overdraft fee schedule and you will quickly grasp the concept of usury.
Posted by: Defender -
Jan. 31, 2014 12:44 PM ET USA
I wonder if usury is even part of business law anymore? Looking at what credit card rates are anymore and the fact that the federal government did away with subtracting credit card and auto loan interest years ago from income taxes, there is virtually nothing a family who can't afford a home can use. Of course, you could always try one of those TV loans where you're charged 100% interest in less than a year!
Posted by: Jeff Mirus -
Jan. 31, 2014 9:16 AM ET USA
DrJazz raises an interesting point. On the one hand, as investments, mortgages will not be available unless they can get a return comparable to other potential investments of similar risk. On the other, what lines are crossed when lending institutions, with government support (all in the name of doing good, of course), encourage homeowners to take on more risk than a dispassionate analysis suggests is reasonable? Also, why is the homeowner liable, after the lender forecloses, if the gamble a lender takes on the collateral of the house doesn't pay off? Finally, a much deeper social question: Must we live in homes that take 30 years to purchase? It is often hard to find places to live in the US where you are not effectively required to do that by neighborhood standards and codes! What does this say about our materialism as a culture? Talk about endemic problems....
Posted by: DrJazz -
Jan. 31, 2014 12:14 AM ET USA
Not sure where the line is between compensation for legitimate risk and preying upon the weaknesses of one's neighbors in this case, but I've often thought that the compounding & front-loading of interest in 30-year mortgages might be considered usurious. By the time a home is paid off, a buyer could have paid double the original purchase price to the bank (5.3%/yr. = 100% over 30 yrs.). Granted, it's paid over 30 years, and the bank is entitled to compensation for legitimate risk, but how much?
Posted by: nix898049 -
Jan. 30, 2014 5:56 PM ET USA
One of the most beautiful works by the artist Giotto, the frescoes of Arena Chapel in Padua, came to be as a means of restitution for the sin of usury. I was privileged to see it years after studying it for an art history minor. Once again, I was captivated! The guide and guests snickered as the connection with this 'sin' was explained to the group. The art world would be a poorer place had not the patron of that day taken it seriously. Would that those guilty today could so enrich the world.
Posted by: bruno.cicconi7491 -
Jan. 30, 2014 4:25 PM ET USA
Seeing the neighbour as means to make cash, thinking first of the profit to be made and only afterwards about the quality and utility of the service/product sold, seems like usurious behaviour to me. It goes beyond interest rates.