So is it unnatural and un-artful to charge any interest or to charge exorbitant interest?

So what is Rome doing about credit cards being above 21%?  Is Rome silent beyond a once yearly comment?  The truth is that now not even Rome has a clue as to what is right or wrong here since a good stock trader can take a cash advance from his credit card at 20 plus percent…invest in Atmel for the last 3 months, hedge with a put, and make 100% and pay back his credit card handily which for 3 months was 5%.  Aquinas allowed the risk payment made by the trader at a time when percentages were not so extreme.
  Bottom line:  Popes are totally bewildered by modern finance and should have a group of Phd’s in finance and others to advise them and advise moral theologians…rather than the Pope and the theologians pretending the ethics of the world of leverage and of shorting and of options are crystal clear to them.  Rome needs a number of specialized think tanks…including the physical sciences and finance… which could be funded by a one time tax on all Catholics of $2.  Half will pay….that’s a billion dollars….have ten Catholic finance profs manage it.  Build over the Castel Gandalfo hedges a building just for think tanks.  $2 each….a Wendy’s value meal bought by a Trappist.

Bill:

Could you point to where this blog entry said a word about Rome or the Vatican?

I have a question, but the question requires that I first articulate a common-form moral argument.

The moral argument is syllogistic, and takes the form: “A is moral; B is a species of A; therefore, B is moral.”

This is the Moral Argument:

Premise 1:
It is morally permissible to rent one’s property out to one’s neighbor for a fee. (Example: You may rent my snowmobile for a week, provided you pay me $50 for the privilege.)

Premise 2:
Lending at interest (whether it is 1% or 5% or 25%) is a type of rental: You may rent my dollar for a year provided you pay me a penny or a nickel or a quarter for the privilege.

Conclusion:
Lending at interest is moral.

This is my Question:
If lending at interest is not, in fact, moral, then which part of the above argument is incorrect, Premise 1, or Premise 2?

Because I watched the EcoLand video at the top I couldn’t help reading this post with the voice of the narrator in mind. There needs to be a video explaining the Inferno with a polite, British accent.

R.C. is correct, and just to add some other thoughts to piggyback:

Interest is just the price paid for the benefit of using someone’s money, the same as $1 is the price paid for the benefit of eating a Twix bar. The Twix company makes a bar and wants to earn a return on it (say, $1); I have $1 and want to make a return on it (say, by eating a Twix); we voluntarily exchange and are both better off afterwards.

Bob “makes” savings equal to $1000 and wants to earn a return on it (say, by earning 5% interest; I want to borrow $1000 now to buy a car and am willing to pay 5% later; we both voluntarily exchange and are both better off afterwards.

If lending at any positive interest rate is immoral, it seems equally immoral to be forced to lend at zero interest (say, by a price ceiling on interest). Indeed, this would increase the demand for borrowing and reduce the supply of loans, so you would have 1) more people buying things they otherwise would not be able to afford, and 2) more people who might be able to afford the increased buying would not be able to find financing.

In other words, an artificially low interest rate would cause a misallocation of investment dollars.

I’m not exactly sure how the video above proves anything; sure Cynthia is a female with glasses so she’s good and Bob is a balding banker so he’s evil. Should we sympathize with Cynthia because she doesn’t understand the difference between a fixed rate mortgage and an ARM?

Okay, so the first time I used “Bob” I was just coming up with a random name; I hadn’t yet watched the video in which there is actually a character named Bob.

So, consider Bob in my paragraph 3 to be a different guy, perhaps still balding and evil but not necessarily.

Mark
  “Catholic Tradition”...in your title…led us to think this is a Catholic Tradition post first…Dante second.

It is a Catholic tradition post.  What it is not is a post about Rome or some sort of Vatican policy or initiative.  Distrust of usury is found all over the place in both Scripture and the Fathers.  Dante gives a small snapshot into *why* it was regarded with distrust.  That doesn’t close the book on the matter.  There may be very good reasons why modern practices of usury are compatible with the Christian tradition.  I’m not an economist.  I simply write to point out that something which our civilization takes for granted as no big deal was seen as a very big deal for our ancestors in the faith and to suggest that should at least give us pause.

I appreciate Tim’s comment that “R.C. is correct,” but the comment betrays a misunderstanding.

I am willing to consider the notion that lending with interest is immoral.

On the one hand, the moral argument I presented seems entirely sound.

On the other hand, Jesus (and other moral teachers, but a Dominical utterance is obviously most important by far) taught against usury.

These must be reconciled. They can be reconciled either…

1. ...by saying that the moral argument is incorrect; or,

2. ...by saying that Jesus’ teaching against usury is not to be taken in a hard-core and universally mandated way, but in a more nuanced way, as we do with such teachings as those seeming to advocate “hating your father and mother” or “chopping off your right hand if it cause you to sin” or “refusing to save any money against a rainy day.”

I have always supposed, until now, that #2 is correct.

But what if it’s not? What if #1 is the truth? That is to say: What if my moral argument justifying lending with interest is wrong somehow? That would be bad: I would be guilty of watering down Jesus’ teaching.

To guard against that, it is morally obligatory that I examine the moral argument justifying lending with interest, to make sure it is sound.

And because my own intellect is limited, it is wise to ask the assistance of others. They might see a flaw in the argument which I missed.

That is the spirit in which I asked my question. I want to know what is true.

So, to reiterate: Given the moral syllogism that:

P1: It is moral to rent one’s property to one’s neighbor for a fee; and,
P2: Lending at interest is a form of renting one’s property for a fee; therefore,
Conclusion: Lending at interest is moral;

Is the syllogism true, or is there a flaw in the argument?

@R.C.
The argument is logically valid.  There are two tempting ways to reformulate it:

Major Premise:
It is immoral to rent one’s property to one’s neighbor for an exorbitant fee.
Minor Premise:
Lending at exorbitant interest is a form of renting one’s property for an exorbitant fee.
Conclusion: Lending at exorbitant interest is immoral.

An alternative reformulation:

Major Premise:
It is moral to rent one’s property to one’s neighbor for a fair fee.
Minor Premise:
Lending at fair interest is a form of renting one’s property for an fair fee.
Conclusion: Lending at fair interest is moral.

Unfortunately, these reformulations don’t get us all the way there.  Authoritative Church teaching on usury was promulgated in 1745 by Pope Benedict XIV, in the encyclical Vix Pervenit.  The subject has not been formally revisited since, so this teaching is the best we have.  It pulls no punches about usury:

I. The nature of the sin called usury has its proper place and origin in a loan contract. This financial contract between consenting parties demands, by its very nature, that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious.

II. One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle, but is spent usefully, either to increase one’s fortune, to purchase new estates, or to engage in business transactions. The law governing loans consists necessarily in the equality of what is given and returned; once the equality has been established, whoever demands more than that violates the terms of the loan. Therefore if one receives interest, he must make restitution according to the commutative bond of justice; its function in human contracts is to assure equality for each one. This law is to be observed in a holy manner. If not observed exactly, reparation must be made.

III. By these remarks, however, We do not deny that at times together with the loan contract certain other titles-which are not at all intrinsic to the contract-may run parallel with it. From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract. Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made.

IV. There are many different contracts of this kind. In these contracts, if equality is not maintained, whatever is received over and above what is fair is a real injustice. Even though it may not fall under the precise rubric of usury (since all reciprocity, both open and hidden, is absent), restitution is obligated. Thus if everything is done correctly and weighed in the scales of justice, these same legitimate contracts suffice to provide a standard and a principle for engaging in commerce and fruitful business for the common good. Christian minds should not think that gainful commerce can flourish by usuries or other similar injustices. On the contrary We learn from divine Revelation that justice raises up nations; sin, however, makes nations miserable.

V. But you must diligently consider this, that some will falsely and rashly persuade themselves-and such people can be found anywhere-that together with loan contracts there are other legitimate titles or, excepting loan contracts, they might convince themselves that other just contracts exist, for which it is permissible to receive a moderate amount of interest. Should any one think like this, he will oppose not only the judgment of the Catholic Church on usury, but also common human sense and natural reason. Everyone knows that man is obliged in many instances to help his fellows with a simple, plain loan. Christ Himself teaches this: “Do not refuse to lend to him who asks you.” In many circumstances, no other true and just contract may be possible except for a loan. Whoever therefore wishes to follow his conscience must first diligently inquire if, along with the loan, another category exists by means of which the gain he seeks may be lawfully attained.

***
We can imagine the language about “parallel contracts” being elaborated in a more Catholic society to create a form of risk-insurance payment that looks like interest but isn’t, which would be analogous to the sorts of interest-like-but-not-interest payments that Islamic banking uses to get around Quranic injunctions on usury.
*
Another way to think about it is that the time value of money—the price of the opportunity cost I pay by letting you have my money when I could be out investing it myself—is part of the money.  So in that sense, we could think of “fair interest” as being a payment for no more than what has been lent:  both the money, and its time value.  Any interest charged above the money’s time value would be usurious.

The subject is vexed:  the Church, as I said, has not formally promulgated any teachings on usury since Vix Pervenit.  But the Code of Canon Law contemplates a Church living in the modern world of interest. 
Canon 1284 §2(5) requires administrators of the Church’s temporal wealth to “pay at the stated time the interest due on a loan or mortgage and take care that the capital debt itself is repaid in a timely manner” while §2(6) requires them to “invest the money which is left over after expenses….” So presumably, the Church has made some kind of reluctant peace with this.

On the one hand, you have the Scourging of the Money Changers. On the other, the Parable of the Talents.  It’s confusing.  Makes me grateful I’m just a layman.

But Mark’s (and Dante’s) sentiments are still those of a Catholic Christian in the mainstream of our Tradition.  Good for them.

I remember the place I was working at in the 1990’s when companies were starting to switch from pensions to 401k plans.  At that time, I believe, banks were still paying 5-1/4% interest on standard accounts.  My boss was very gung-ho about the new 401k and was talking about the returns on the 401k.  Sometime later, the 401k wasn’t doing so well, so I told him, that it made one yearn for the days of 5-1/4% interest.  I’m not sure he found my comment very amusing, and in fact I wondered if I had perhaps stepped over the line a bit.  Bosses like to be right. Well, it may have been a modest level of interest, but it was much better than what the 401k was doing at the time, and of course is there even an account right now that is paying 5-1/4%?

I just realized that I messed up, in the above.

There is no absolutely clear Dominical Utterance against lending with interest; that is, Jesus does not say “do not lend money at interest” specifically.

There is however Luke 6:32-36: “If you love those who love you, what credit is that to you? Even sinners love those who love them. And if you do good to those who are good to you, what credit is that to you? Even sinners do that. And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them without expecting to get anything back.”

This ought to be taken in context with the Old Testament teachings forbidding usury to one’s fellow Israelites, especially the poor (found everywhere, especially Exodus 22:25, Leviticus 25:35-37,Deuteronomy 23:19,20, Psalm 15:5, and Ezekiel 18), but permitting usury to be charged to foreigners.

In Luke 6, Jesus is saying repeatedly that everyone treats their friends and family well; but you must treat even your enemies well. Everyone loans to his friends without interest; you must loan to your enemies expecting not even to get the principal back!

In the Old Testament, one was not permitted to charge interest to a fellow Israelite. How much more then, must Jesus’ teaching in Luke 6 be construed to forbid interest? And He certainly seems not to have anywhere contradicted the earlier teachings.

So to be perfectly accurate, I should have categorized Jesus’ teaching against usury as an implied teaching, rather than an “utterance.” The teaching follows pretty obviously from what He said, but it isn’t word-for-word what He said.

@Tom:

I grant that a reformulation of the moral argument along the lines you specify would solve the problem if...

(a.) ...one could be sure that “usury” means “charging excessive interest” rather than “charging any interest at all”; and,

(b.) ...one could through some objective criterion determine a correct dividing-line between an exorbitant/excessive rental fee and a fair rental fee (and apply this same dividing-line to the interest rate on the “renting” of money).

But as you correctly note, the history of Catholic (and before that, of Jewish) teaching seems to justify defining “usury” as “charging any interest at all” rather than “charging interest exceeding some permissible amount.” So it looks like (a.) is dubious.

And it looks as if (b.) is dubious, also. Upon what objective, authoritative criteria could one base such a distinction between fair/not-fair “rental fees” for any kind of property, let alone money?

I don’t mean that you and I can’t, on our own, imagine some criteria which will seem reasonable to us.

Let me see: For rented property in general, we might imagine that the fee should be equivalent to the drop in value of the property over time (as any item is worth less when it is used than when it is new). For money, I suppose the equivalent would track the drop in value of the money over time; that is to say, it would be a fee sufficient to “keep up with inflation” so that the amount of money you got back had the same buying-power as the amount of money you originally lent.

Sound plausible? It sounds plausible to me.

But that’s just it: You and I might come up with any number of criteria between us, but what has that to do with authoritative teachings?

If we’re looking for something morally binding, it seems to me we must find it in authoritative sources. But the farther back we look, the more we find that authoritative sources reject interest altogether. They do not normally bother to distinguish between the morality of lending at a low interest rate and the morality of lending at a high interest rate except to firmly state: “Do neither.”

So we’re back where we started. It seems that the question is not “is there any way we can regard the money-lending business to be permissible, just like other rental businesses?” but rather, “is there any way we can regard the car-rental and house-rental and boat-rental industries to be permissible, since we already know that money-lending isn’t?”

But that can’t be right…or can it?

I’ll do what Jesus wants me to do…provided I can figure it out! But, “aye, there’s the rub.”

@RC:
You said:
I’ll do what Jesus wants me to do…provided I can figure it out! But, “aye, there’s the rub.”
I say:
Yeah, that’s it alright. I share your frusturation. I think we’re struggling because this isn’t something the Magisterium has had too much to say about (since 1745, anyway).
***
Supposedly, Zhou Enlai, a Chinese Communist leader, was asked what he thought about the French Revolution.  He replied: “Too soon to tell.”
***
The Church has been through two millennia of agriculture, including two centuries of industrialism.  Maybe the Magisterium is waiting to see how this whole new-fangled “capitalism” thing shakes out.
***
In the meantime, I just follow the Church as best I can by my limited lights, and remain pleased that I don’t work in finance and don’t have to think about this one too much.

To begin with, the concept of the usage of time and opportunity cost are somewhat, philosophically speaking, new.  There is some discussion in this matter, and I’m perhaps not the best person to answer it.  Perhaps someone like Prof. Edward Feser would deign to discuss the matter at greater length and depth.  Suffice to say, if there is an objective value for the quantity of time lent, then perhaps there is an argument, but I’m not sure.

Also, keep in mind that older texts assume that an ounce of gold will be worth an ounce of gold in the future.  As we do not index our monetary policy to gold reserves, such cannot be said for the dollar or euro.  The current assumptions of inflation and fiat currency would be considered ridiculous, if not outright evil, in the past.  As such, today it might not be impossible to charge interest based upon inflation, as the dollar that is lent has greater value than the dollar repaid.

Now, from what I do remember, usury is particularly nasty because it is first and abstraction of an actual good, and it is a consumable commodity.  That is, the good of money cannot be realized until it is spent, whereas the good of say, a lawnmower, is that it mows lawns.  Consider if instead of dollars, we replaced them with apples.  I give you ten apples and expect twelve to be returned.

Now not all investment (parable of the talents) is in the form of usury.  Taking a share of ownership within a business venture, for instance, can lead to an increase of wealth, depending upon the prevailing fortunes of the venture. 

I hope I was at least of some help,
Patrick

I have a notion in my gut, not very theologically helpfull, that lending at interest is wrong.  That seems to be the teaching of the Gospel.  However, just to be clear, Jesus did not scourge the money changers because they were changing money, but because they were doing it in the place of the Temple that was supposed to be reserved for the non-jews!

Mark
  What is odd is how many Scriptures were ignored or quickly brushed aside….Scriptures that argued on behalf of interest in the case of Luke 19.  I know that Christ used self involved men within parables but they were doing neutral or good actions: the unjust judge finally giving in to a widow…..the king with a very strict wedding garment policy…..the man in bed who was loathe to loan three loaves.  Men not perfect but main actions legitimate.  But here is Luke 19 which Aquinas brushed aside with one quikie….metaphor only of spiritual gain…..because he liked Aristotle’s money is barren theory.

But when he returned after obtaining the kingship, he had the servants called, to whom he had given the money, to learn what they had gained by trading.
16
The first came forward and said, ‘Sir, your gold coin has earned ten additional ones.’
17
He replied, ‘Well done, good servant! You have been faithful in this very small matter; take charge of ten cities.’
18
Then the second came and reported, ‘Your gold coin, sir, has earned five more.’
19
And to this servant too he said, ‘You, take charge of five cities.’
20
Then the other servant came and said, ‘Sir, here is your gold coin; I kept it stored away in a handkerchief,
21
for I was afraid of you, because you are a demanding person; you take up what you did not lay down and you harvest what you did not plant.’
22
He said to him, ‘With your own words I shall condemn you, you wicked servant. You knew I was a demanding person, taking up what I did not lay down and harvesting what I did not plant;
23
why did you not put my money in a bank? Then on my return I would have collected it with interest.’
.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,..,
,.,.,.,.,.,.,.,..,.,.,.,.,.,.,.,..,.,.,.,.,.,.,.,.,.,.,.,.,.,.,.,..,..

    Here again the main character is brusque and severe but if Christ saw his expectations about commercial gain as normal and He seems to…..it is odd that I never came across a Catholic main figure that dealt with this appropo usury.  Christ would not have used a pimping situation or mugging situation or a gambling situation as a metaphor of the spiritual world.

Trying to use this parable as an argument for the legitimacy of usury is like trying to use the parable of the dishonest steward as an argument for cooking the books or trying to use the parable of the unmerciful steward as an argument for the legitimacy of torture or trying to use the parable of the mustard seed as the basis for a botanical argument that mustard seeds are, in fact, smaller than all other seeds.  All dreadful misreadings of the parable’s intent.  There may be sound arguments for the legitimacy of usury in the modern world, but that ain’t it.

Mark
    Errrrr…..no…..all the three above actions in the parable I cited would find no opposition from the current Magisterium: making ten fold on a gold stock is not opposed…..making 5 fold on a stock or a gold investment is not opposed…...and Rome mandated in the 20th century that religious orders had to bank their money for interest according to my old pastor years ago.  The actions of the dishonest steward on the other hand would be opposed by any sane priest or Rome.

As I say, I’m not making any claims about how a modern theologian might tackle the issue of usury.  I’m merely saying that using the parable of the talents as a basis for a Catholic approach to the question is dodgy.  The parables are not meant as guides to some economic theory.

I have to say, when I put money in the bank I am not “charging interest” in the strictest sense of the word; more accurately I’m receiving interest.  “What’s the difference?”, one might ask.  Well it is precisely this, as this sinner sees things: when a person charges interest he is setting the rate, while if I receive interest it is being payed at a rate that is set by the payee.

Splitting hairs?

Blake et alia,

In the synoptics, the scourging of the money changers is a criticism of hypocrisy. When Jesus says they have turned the Temple into a Den of Thieves, he is quoting Jeremiah 7:11. The objection is to those who go through the motions of piety and think they are “square” with God. A den of thieves, after all, is not a place where thieving goes on, but a place that thieves go to be safe. Those driven from the Temple are not profiting from their sales or their money-changing, but are serving a legitimate religious function. However, this function enables others to live unjustly but believe themselves righteous because they do the prescribed sacrifices.  The implication is clear: people think they are safe when they enter the house of God but still go on sinning. The Gospel of John, however, does not carry the charge of den of thieves, but the charge of turning the Temple into a marketplace (Jn 2:13-17). As for teachings against usury, I always thought it was simply a case that when someone asks you for money, you should just give it to them. Why should I profit from someone else’s need? Really, can anyone imagine the Lord, or a saint, calculating interest?

This footnote to Psalm 15 from the USCCB site may be helpful: 

“Lending money in the Old Testament was often seen as assistance to the poor in their distress, not as an investment;  making money off the poor by charging interest was thus forbidden.” 
- http://www.usccb.org/nab/bible/psalms/psalm15.htm

The terms ‘usury’ and ‘interest’ are not synonyms.  The concept of lending as a vehicle for investment or mutual commerce is very different from using lending to exploit the poor or helpless.  I’m no expert but it seems the term ‘usury’ is truly intended to describe only the latter. (but of course in real life there will always be a huge overlap between the two that gives great cause for pause, moral reflection, etc).

I would say modern finance (i.e. growing the whole pie) is ‘fruitful’.  It’s a pretty recent thing, and after Dante’s time.  But in the context of true ‘usury’ I think Dante’s connection of it and sodomy is very interesting and clever, as is the Nature/Art outlook.  MS thanks for bringing it to light and unpacking it a little.

My memory is fuzzy on this, but didn’t modern usury have something to do with Italians buying wool from England?

mike, you nailed it.  I’ve always understood usury as the intent to make a profit at the expense of someone else.  Examples that spring to mind are price-gouging, and credit cards.  In both, the cost of the good/service far exceeds “natural” limits, and the sole end is simply profit.  The modern concept of lending arose organically as trading took on a greater and greater role in European economics.  The concept of charging interest in this setting arose as a means of offsetting the risks of lending your cash to someone else.

Of course, this doesn’t let everyone off the hook. As with most human actions, intent and motivation can make a previous morally neutral action immoral.  I find it hard to justify the charging of 21% interest to kids right out of college.

I’m obviously not the smartest guy in the room, but isn’t the difference between “renting” a physical object (such as a snow mobile in RC’s comment) and “renting money the nature of what is being “rented”?                                              A physical object has a finite life - where’s the finite life of money? One could argue inflation could pay a role, but even then - that limits the “rent”, doesn’t it?                                                      I just read Pope Benedict IVX’s encylical (yes, the 14th!) on usury, but it isn’t specific.

Usury - Not many understand money today.  Charging a fee for something you own is not wrong.  But what if I lend something that I do not own and charge a fee for that?  That cannot be moral.  Banks lend money that thay do not own.  It is called fractional banking.  Banks used to have deposits from members of their bank and did lend this money out at interest and paid interest to the depositor.  That is not usury.  Today only Credit Unions lend in this manner by law.  Banks are allowed to lend 10x and more based on their deposits.  That is usury.  Fractional banking is the usury.

Mark, as a matter of historical fact, Dante’s Florence grew prosperous as a result of the rising practice of loaning money at interest.  All the great artists, poets, and philosphers of Florence benefited from that prosperity.  Without “usury” we would not have Michaelangelo’s David, the Duomo, or… the poetry of Dante!  Properly done, Banking is a fruitful enterprise, if the borrowers use the money they borow to create some new good or service that benefits the world.  I agree that charging twenty to thirty percent interest on credit card loans is usury, and I do not advise anyone to keep a monthly balance on their credit cards, but ordinary banking is an honorable and fruitful enterprise, if done properly.

“Some men wrest a living from nature. This is called work. Some men wrest a living from those who wrest a living from nature. This is called trade. Some men wrest a living from those who wrest a living from those who wrest a living from nature. This is called finance.” ~ Fr. Vincent McNabb

What a lovely a.m. chat on the ways of the world vs. the ways of heaven. I will put my trust in God’s way and if a mans heart is with that of the Lord what is just will be clear. Banks have always been in the business to make money, a assumed place of safety with a fraction of the profit made returned to the depositor. Having said that Bob the bank had no intention of helping Cindy?- he simply gave hear more than she ever could repay. The bank still made profit on the interest charged to Cindy, the value they held with the lien- ect. Cindy was an instant gratification idiot who spent more than she made and couldn’t possible pay off the debt in her life time.To me the gold parable reads God is the gold that can never be taken away, but freely given will be of the most prophet(haha). The investors gave all they had, multiplying what they gained on Earth(ie. saving a soul for God in heaven). Those who have God and don’t share gain nothing, what Christian is stingy with the word of God? The den if thieves was safe as stated above because the traders over charged due to necessity, the money changers gave less since the temple wouldn’t take Caesars coins. The temple took the over priced offering, failed to sacrifice it at the alter and walked out the back door to be sold again. Due to the fact everyone except the worshiper benefited, it was a safe scam. Whoops those who knew God knew all, forgot He saw all too. Yes the wedding feast covers those who are square fillers will be tossed out the door of Gods kingdom for He knows their heart, and fails to be perceived by their outer garments. The bride groom does demand His fathers commandments be kept, but also has mercy and compassion where as the temple or the banks have failed to do. Yes, Americans worship the almighty dollar and we are paying for it- for those still working and able to pay are being charged double to make up for those who can’t pay. The banks in not keeping people in their homes( no compassion) dropped the value of the property they held the lien to- whoops. Back to the star attraction, Jesus lead a very simple life, owned nothing, lived day to day, gained everything (for us) yet lost his life in the process or did He? I believe He still lives today and lives in all we meet, even if it isn’t obvious. So I made a very wise investment in the Way, the Word, and the Truth of God the Father and I do trust that we the proverbial son will be welcomed home with a feast. Our fore-founders even wrote In God We Trust on the almighty dollar so we couldn’t forget what is almighty.

I think the entire topic of usury is null-and-void. The reason I say this is simple: whenever you exploit something to unbelieveable levels, you’re bound to get hurt by it sooner rather than later. And I think it’s fair of me to say that what we’re are witnessing IS usury gone completely awry, which probably is one of the reasons the Church has warned of its (ab)use. Nonetheless, the fact of the matter remains that millions upon millions of individuals were made to feel safe with their loans, mortgages, credit cards, money-lending, etc…whilst neglecting to read the fine-print on these transactions. As a result, they were not aware of what they’re getting themselves into, and became, understandably, overburdened when it came time for repayment. Also, whenever you have a business that, litterally, can write their own rules and are allowed to continue with their practices in an unregulated manner, you’re almost certain to get into problems, which is precisely what has happened.
  However, this was not always the case merely 20-30yrs ago. It’s actually thanks to, what I call, “rational-usury” that many countries still exist; are thriving; and are able to continue to survive—whether for better or worst. As CARL SOMMER made, fairly clear, we wouldn’t have the many treasures we do without money-lending. Heck, the first international banking system was created by a Catholic organization—the Knights Templar: it just so happens that it was for this very reason, aside from rumours of blasphemy, that led to their downfall. Regardless, and getting back to the topic, there needs to be a complete overhaul of the finance sector; and this, unfortunately, won’t happen anytime soon. As Thomas Jefferson once said, “I sincerely believe that banking institutions are more dangerous to our liberties than standing armies.” And there’s no reason this shouldn’t remain true to this day, nore for future generations. Peace and God bless! ~Michael W.

Compendium of the Social Doctrine of the Church:

341. Although the quest for equitable profit is acceptable in economic and financial activity, recourse to usury is to be morally condemned: “Those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them”.[714] This condemnation extends also to international economic relations, especially with regard to the situation in less advanced countries, which must never be made to suffer “abusive if not usurious financial systems”.[715] More recently, the Magisterium used strong and clear words against this practice, which is still tragically widespread, describing usury as “a scourge that is also a reality in our time and that has a stranglehold on many peoples’ lives”.[716]

That is authoritative teaching. No more needs to be said on whether usury is immoral.  What constitutes usury? That cannot be adequately addressed in a blog.

Thomas Aquinas notes that the sin in usury comes from the fact that money is “consumed” in its use; that is, you can’t both have it and spend it. An apartment or a snowmobile is something you can both have and use; but not money, or food, or any such thing. Charging a “use” fee for money is like charging a “use” fee for food; you’re essentially making someone pay twice. That’s not fair, according to the Common Doctor of the Universal Church.

This is not to say that there are no circumstances under which money can be used to make more money, but it has to recognize the “consumable” or “fungible” property of money.

http://newadvent.org/summa/3078.htm

Why has the church been suspicious of usury?  Perhaps because people are greedy.  Plain and simple I think, and it cuts both ways. The lenders have been beat up one side and down the other, and rightly so, but at the same time, people who make $11.00 an hour KNOW they can’t sustain tens of thousands of dollars of charges on their credit cards and they KNOW they can’t afford $350,000, 3,000 sf. houses, yet they took on the debt anyway, quite often actually, 5-10 years ago.  I just remember, in my little town, being shocked at the homes that were being built back in 2003 and 2004, and even more so at who was buying them.

From the lenders to the borrowers, and from the boardroom to the factory floor, people are the same.  They want more.

I knew reading this post, Mark, that the comments would be both way off base and utterly smug.  Most folks won’t mind you knocking sodomy, but Mammon gets mad when you mess with usury. 

So, with a bow to Belloc, here we go:

INTEREST is a stake in profit.  We use the word in normal parlance this way as well.  “I have an interest in this enterprise”.  “I am a disinterested party”.  You can not claim INTEREST when there is no profit.  Thus any charge for a non-productive loan (beyond origination fees and the like) are usury.  Usury is staking a claim in an increase where there is no increase - it is getting a buzz off of a non-productive activity (like sodomy).

Usury may also be understood as charging for the use of a thing separate from the possesson of the thing itself, when the use is included in its possession.  Thus, you can not both charge for the use of a Twix bar and for the Twix bar, for its use consists not in letting it sit, but in consuming it.  Therefore, a loan for consumption that charges for the “use” of the money, when the money is not put to productive use but consumed is “usury”.

There’s a lot more to be said on the subject, and perhaps the folks at the Distributist Review will take a whack at it.

Meanwhile, Mark is entirely in line with Catholic tradition and common sense when he sides with Dante in seeing the connection between sodomy and usury.  But he’ll find more resistance to the condemnation of usury than he’s found to the condemnation of torture.  And it will get nasty. 

I blogged a bit on this at the Ink Desk here http://www.staustinreview.com/ink_desk/archives/the_rich_the_poor_ham_sandwiches_and_usury

Psalm 15 doesn’t say anything about usury; it says happy the man who takes “no interest” on a loan. 

Luke 12 can’t be any clearer: “You fool!  Don’t you know this very night your life will be demanded of you?”

Totally agree with the usury/sodomy parallel, and Kevin O’ Brien’s description of what usury is.

The video isn’t really right about what caused the collapse of 2008 though.  It wasn’t just mortgages and increasing real estate prices.  (A non-recourse mortgage, where the bank can recover principal and interest only from the house not from the borrower in a case of default, wouldn’t be usury at all: see here). 

You can’t understand 2008 without understanding credit default swaps, mortgage backed securities, and the reasons why banks were lending willy nilly to anyone with a pulse.

“I knew reading this post, Mark, that the comments would be both way off base and utterly smug.”

Kevin, unless that is some dry humor that is lost on me, your comment above seems to be the most smug of any I’ve read here.  I’ve really enjoyed the discussion otherwise.

Here is an article on New Advent. It is taken from The Catholic Encyclopedia (1912): http://www.newadvent.org/cathen/15235c.htm

I just find it slightly interesting that there ar so many comments talking about usury, and very little said about the relationship between usury and sodomy, which I thought was the entire point of the article

We are asked to choose between sodomy and usury and we get both.  Either way, we’re screwed.

http://www.culturewars.com/Podcasts.html

Carl wrote:  “Mark, as a matter of historical fact, Dante’s Florence grew prosperous as a result of the rising practice of loaning money at interest.  All the great artists, poets, and philosphers of Florence benefited from that prosperity.”

Doubtful, at least in Dante’s case.  Not only does he rebuke the practice of usury in the passage Mark wrote about, but he denounces Florence specifically and repeatedly for its prosperity - both the way it achieved that prosperity and the way the prosperity changed the city for the worst, swelling its population and creating a less stable, more vicious atmosphere. 

Nor did Dante personally benefit from Florence’s changes - he was, as you may recall, exiled from the city.  You may be right that we wouldn’t have Dante’s Commedia without Florence’s prosperity, at least in its present form; but that’s because the Commedia is in part a harsh criticism of the contemporary practices of Florence and other Italian cities, not because the prosperity was good for Dante.

Catholics posting here may try any thin means or rationalizations they want to to justify usury, but the fact remains that it is against Church teaching, period. You are putting yourself against the centuries’-old teaching of the Magisterium if you support usury, same as if you support torture.

http://bit.ly/dQmj1c

[I’ve been posting as “Tom” hereabouts for a while, but it looks like there’s some competition for that one from the fellow with the “either way we’re screwed” comment, so I’ll give it up.]
@Sean P. Dailey:
Yes, you’re right.  It’s just that it seems like the Church itself might be okay with some forms of interest, so that’s confusing.  But clearly “usury,” however the Magisterium precisely defines it, is to be avoided.  But how do they precisely define it?  Any loan at interest?  That’s what “Vix Pervenit” and the selection from Aquinas that Robert King linked to seem to be telling us:  no lending money at interest.
@Kevin O’Brien:
It sounds like on your reading, one cannot loan money for consumption, but one can loan money for productive investment.  Since “Vix Pervenit” seems to restrict the latter as well, perhaps your position is that loans in general are forbidden, but not investments?  So I can’t loan you money and expect interest, but I can join your new business and expect dividends?
***
This is a really fascinating discussion.  Thanks to Mark and all the very informative commenters hereabouts.

Irenist:

Usury is any lending at profitable interest where the lender has recourse to the person of the borrower for principal and interest. 

This excludes two types of lending at interest:  unprofitable lending done for charity where certain defined costs (just titles) are recovered in addition to principal (Franciscan credit organizations did this for the poor in the middle
ages to protect them from the usurers: if your banker lives under vowed poverty, he might not be a usurer); and profitable lending at interest where the lender has recourse only to specified assets, not persons, for recovery of principal and interest (so-called “non recourse” loans).  Unsecured personal loans and all full-recourse loans for profitable interest are usury.

By the way, a Magisterial clarification on profitable loans for interest where recourse is to specific assets, as opposed to persons, is here.

When a lender can foreclose on specific contracted assets only, it is not usury for him (the lender) to charge profitable interest.

So non-recourse home mortgages[*]: not usury.  Credit cards and unsecured personal loans: usury.

[*] In most states, unfortunately, mortgages are full-recourse: when the lender forecloses, he can pursue the borrower for a deficiency judgment on the difference between what the borrower owes and the proceeds from selling the house.  That is usury.

Irenist,

Loans for consumption are not loans of capital and can not by their nature generate interest, since interest is a claim on increase, and the money lent for consumption does not generate increase. 

I apologize for being snarky when I first posted, and Brian was right to call me out on it.  I was reacting not so much to these comments as to the pattern I’ve experienced when dealing with this issue.  As with the torture debate, people are willing to let their politics or vested interest dictate their religious principles, and any attack on the fundamentals of capitalism (such as usury) typically generates more heat than light.

The key here really is the Church focusing on wealth, not air.  When an economy is fueled by the notion that money in and of itself is always productive, we lose the connection between money and wealth - wealth being art applied to nature in such a way to be valuable to man.  When financial speculation is divorced from the production of wealth, you get what we have - bursting bubbles of air, effecting the poor and middle class most severely. 

Keeping money and investment tied to the production of wealth is sanity.  And keeping sex tied to procreation and marital love is likewise sanity.  And maybe sanctity!

“Loans for consumption are not loans of capital and can not by their nature generate interest, since interest is a claim on increase, and the money lent for consumption does not generate increase.”

That would put the “payday advance” kind of moneylenders in an interesting moral light.  what were we saying about those who lend money to take advantage of the poor?

> interest is a claim on increase

This is precisely what is under debate: is interest a claim on increase as Belloc thought, or is it compensation for risk undertaken by the lender and missed opportunity on the lender’s part and loan servicing and other extrinsic titles as modern bankers think?

After we’ve answered this, we can ask “what then does the Church forbid as ‘usury’”? I have provided a link above that might help.

    t

This is one of my favorite scenes from the Inferno.  I remember the college days, the Professor said the Inferno was easiest to understand and look how difficult it can be.  Sodomy goes against nature.  It takes an action that is by nature to be creative and sterilizes it, hence their punishment of barreness.  Usury goes against art.  God created nature (in a poetic sense, his child) and art is to imitate nature (hence his grand child).  Usury takes money (which of itself does not reproduce) and tries to make it get pregnant.  I love Peter Kreeft’s explanation of this in one his talks.  Funny how we struggle against similar notions today: liberal morals and economics.  Today’s drum beat, “Any sex goes, any way to make money goes.”  I have been trying to find what is meant by usury, but it is hard to find and rather confusing.  Distributist review and “Vir Pervenit” and St. Austin’s Review will be the next things to read.

Tom Leith,

There’s a big difference between “compensation for risk undertaken and loan servicing” and “missed opportunity on the lender’s part”.  It is legitimate to charge a borrower for the cost of producing a loan, and to include a risk assessment of default in that cost.  However there is no “missed opportunity on the lender’s part”, except hypothetically.

This is the crux of the confusion these days about money.  We all think that money in and of itself is productive, and that there are opportunities everywhere to gain interest, which opportunites are lost if you don’t invest in them.  This is crazy.  Money does not by its nature produce “interest”, even money used as capital.

For instance, if I started a new business today with capital either borrowed or saved, there is a greater chance the capital will be lost and the business will be unprofitable than that it will succeed.  Therefore to demand more than the return of principle plus cost on a non-productive loan is immoral, and “lost opportunity” is fiction, not cost.

Heck, Tom, ever since I’ve married Karen there’s been a whole lot of “lost opportunity” out there.  And every day I watch a “Judge Judy” marathon instead of going to work, there’s “lost opportunity” there too.

If you are a lender and you want to take advantage of “opportunity”, then put your money where your mouth is and take advantage of it and quit trying to recoup profit you didn’t make.  If I invest in your Figgy Pudding factory, Tom, which goes belly up, I would be a lout to charge you the 5% I could have made had I instead invested in Mark Shea’s Figgy Restaurant and Drive-Thru.  The profit my money could have earned elsewhere is not a cost of doing business, unless you buy into the fiction that money has a magical power of always making more of itself.

The REAL solution is for America to issue its own sovereign, DEBT FREE money rather buying money from a private cartel (the Fed).  It’s not “conspiracy theory” - it just math & accounting.

Whether it classical neo-classical, neo-liberalism, Austrian theory, or Monetarism it doesn’t matter - none of them talk about the real problem which is our private capital debt based monetary system. Until that is fixed, it doesn’t matter who is elected - nothing will change until money is issued as credit rather than a debt owed to the private capital holders (the richest privately owned banks.) The power of the nation state has been undermined by the mechanisms of monetary and financial institutions.

Debunking Money (#1): Money, Myth, and Machiavelli

This video reveals the hidden problem with the monetary system that nobody wants you to know—the fact that our money is 1) 100% debt and 2) it sits on privately held balance sheets. It also discusses some of the implications of those 2 facts.

http://www.youtube.com/watch?v=3uWCOvnOtTI

Debunking Money (#2): The US Monetary System and Orwell’s Animal Farm

This digs into the specific structure of the US monetary system—a global banking cartel controlled by global capital holders who effectively farm the US population to build the multi-national corporate empire that transcends nation-states.

Lesson 1 was necessary as a prereq to explain debt, balance sheets, and the power that comes from how the system is setup. It was not a description of the system itself.

http://www.youtube.com/watch?v=bGTBJI1ZO6Q

Debunking Money (#3) - Financial Power and the question “End the Fed?”

This lesson revisits the power of corporations and banking institutions in particular given their financial leverage over the entire system. It then evaluates a few political movements that are trying to pass for solutions to this problem:
- end the fed
- breakdown government, go “free market,” and anarchism
- putting the banks through bankruptcy

http://www.youtube.com/watch?v=T5o6WTVFi18

Debunking Money (#4): 20th Century - Where We’ve Been

This lesson provides a different strategic perspective on the latter half of the 20th century that helps make better sense of that history and the day-to-day events we see in the media.

http://www.youtube.com/watch?v=3Va7IqJexzY

Debunking Money (#5): 21st Century - Where We’re Going

The lesson describes where globalization is taking the world in the 21st century over the course of the next several decades. Understanding the strategic direction helps eliminate the stress and confusion of the daily noise we get from the media that doesn’t help at all.

http://www.youtube.com/watch?v=Iz6FzrGz410

> We all think that money in and of itself is productive,
> and that there are opportunities everywhere to gain interest,
> which opportunites are lost if you don’t invest in them.

No, Kevin, we don’t all think these things.

> If I invest in your Figgy Pudding factory

Proof by repeated cute story? This whole line presumes that a loan is an investment and interest is a claim on increase, it doesn’t prove it.

Bracketing that, you have also misunderstood the concept of opportunity cost. You can loan me money at X% with a probability of total unrecoverability of .01 or you can invest with Mark with a probability of 15% return being .2, a probability of a 10% return being .5, a probability of a 5% return being .2 and a probability of a total loss being .1, giving you an expected return of 9% extending “forever”. Presuming you are risk-neutral and simplifying somewhat, I have to bid (offer to pay) at least 9.09% for the term of the loan in order to get the loan from you. You’d be nuts to loan me money at 5% when you can buy equity from Mark at an expected return of 9%.

If you don’t have any other opportunity and I bid only 5%, you might well sit on your cash and consider your foregone income the price of an option to invest next year in something more lucrative like Mark’s Drive-Thru.

That’s what is meant by opportunity cost. Here: http://bit.ly/fV9RrY

    t

Tom,

Your example of “opportunity cost” assumes the moral legitimacy of usury.  Your math gives examples of comparing one usurious situation with another.  And it validates what I said, the consideration of variable rates of default is a legitimate cost.  But earlier you said it was right to charge for the lost opportunity of investment, which it is not.

You seem to have fallen into thinking of money as having a magical quality of producing return.  Only effort applied to resources produces return.  Money can represent that, or it can represent things to be consumed or wasted.  Money is not magic.  Thus loans for consumption can not by their nature produce interest; neither can loans of capital, unless the enterprise for which the capital is applied is profitable.

I was wrong.  Your example compares one loan at a guaranteed rate of interest (usury) with an investment.  Mea culpa.

Kevin, you’re still wrong. In the hypothetical, the rate of interest on the loan is not guaranteed—there is a 1% chance the loan won’t be repaid. I am glad we agree now that loans are not investments. Do we agree that the opportunity cost of capital is real and not fictional?

    t

@RC:

Your syllogism is silly, and flawed.  Consider the following syllogism:

Vaginal intercourse between a married couple is moral
Marital rape is a species of such,
Therefore, marital rape is moral.

Obviously, there is a flaw here, since the conclusion is in error.  Your errors just compound after that.

@all:  you should realize that Vix Pervenit is NOT an encyclical.  It was written only to italians, so does not meet the criteria for an infallible teaching.  That doesn’t mean it’s wrong, but we should be clear on the terms involved.

Speaking of terms, no one has explained in this forum the difference betwee intrinsic interest and extrinsic interest.  The first is usurious, the second is not.  Vix Pervenit and Aquinas both explain it pretty clearly.

Where it gets fuzzy is when you ask if, in a capitalist economy, is any interest intrinsic, or is it all inherently extrinsic?  It’s much harder to draw the line now than it was in the 15th century.

Tom, when you say “the rate of interest on the loan is not guaranteed—there is a 1% chance the loan won’t be repaid,” you’re confusing things.  The lender has factored the potential default rate into the cost of the loan.  If the loan maintainance and origination costs are 2% and the default rate is 1% and the “interest rate” on the loan (which includes these costs) is 10%, then that’s 7% of “interest” above and beyond cost to the lender, or 7% that the money is expected to earn without reagard to whether or not it was earned.

Loans for consumption are not investments.  Loans for business endeavors should be.  That’s the crux of the Catholic message.

And Del, it’s not as confusing as it seems.  It’s only confusing if you assign to money the magic power of increase that on its own it does not have.

...you should realize that Vix Pervenit is NOT an encyclical.  It was written only to italians, so does not meet the criteria for an infallible teaching.

IIRC, the Holy Office did later affirm its universal applicability.  (Mind you, even encyclicals are not infallible).  Vix Pervenit is authoritative over the universal Church, assuming I remember the due diligence I did at one point correctly, even though it was initially issued to a certain geographic region.

@Nobody, there’s also Scripture and the history of the condemnation of usury in the Mosaic Law. 

In the same way contraception was universally condemned by all Christians until the Anglican Lambeth Congress in 1930, so usury has been universally condemned in Western culture since the time of Moses, until rather recently. 

It is very hard for modern man to get his mind around why contraception is wrong - even though it was self-evident not that long ago.  The typical liberal Catholic thinks, “The Church really is behind the times when it comes to contraception.”  The typical conservative Cathoic thinks, “The Church is really behind the times when it comes to usury.”  But the latter is not said.  The trick is to claim that ususry is not usury.  Mark has been hearing for years the cry, “Oh, but who can say what torture is anyway!”  And in the same manner we hear, “Oh, but what is usury really?  Surely in this sophisticated modern economy such a notion is outmoded.  And anyway, I want stuff, so shut up about it.”

None of this has to do with banking—that’s another discussion.
.
Kevin, you’re right, I was confused.
.
Antionio the Lender could buy equity in Mark’s Drive-Thru with an expected payout to him of 9%. To get him to buy debt from me instead, I have to match that price and convince him I really can service the debt at that level. If he forgoes the opportunity with Mark, that is a real cost to him and he’s entitled in the Thomistic sense to be compensated for it because he was not obligated to lend to me at all. Or do you still deny the foregone opportunity is a real cost to him? You never answered that. It is a very important question.
.
I think everyone here agrees that what is today popularly styled “predatory lending” is strictly forbidden by the Church and condemned as usury. The civil laws concerning debt must not be used to trap the poor (or the silly) in a condition of perpetual personal debt—this constitutes an abuse.
.
Extending this idea to the commercial realm; if the lender is not reasonably convinced I can service the debt I’m asking him to buy, but he buys it anyway because he wants me bankrupt in order to take the land my figgy-pudding factory is on, THAT certainly makes him a dirty usurer on the same principle as the case above.
.
But we still have not answered the question of whether Antonio behaves rightly when he permits me to match Mark’s bid for the use of his funds.
.
> That’s the crux of the Catholic message.
.
You say. Fr. Coulter says the crux of the Catholic message is that you mustn’t take something for nothing (in this context, enter into an agreement for an unreasonable exchange of value). The practice of the whole Church seems to agree. Where exactly do you think Fr. Coulter has gone wrong? (here’s his paper again: http://bit.ly/dQmj1c )
.
    t

I think it is clear that “opportunity cost” is hypothetical, not real.  A man is entitled to a share of real profits which result from what is really done with his money.  He is not entitled to _real_ profits from a _hypothetical_ investment that he could have made, but chose not to make.

> He is not entitled to _real_ profits from a _hypothetical_
> investment that he could have made, but chose not to make.

Nobody says he is. The only questions here are “what financial instrument will he buy; equity from Mark, or a bond from me? How do you account for that?”.

      t

Nobody says he is.

As far as I can tell, you have been suggesting that he is; though perhaps I am misinterpreting you.  “Opportunity cost” is a hypothetical profit which might in theory have been produced if he had invested his money into something other than what he actually invested it in.  If the thing he actually does with his money - say issue a loan to a consumer who uses it to buy groceries - does not produce a non-hypothetical profit, he is not entitled to a share of non-hypothetical profit.  (Labeling such a usurious loan a “bond” doesn’t magically transform reality such that a non-hypothetical real profit was actually produced, by the way).

And again, the way a loan is kept justly limited to actual profits produced, rather than usurious “profits” which were not actually produced, is to keep recourse in a case of default limited to the actual assets into which the loan was invested.  To wit, Pope Callistus III, Usury and Contract for Rent, from the Constitution “Regimini universalis” May 6, 1455 (quoted in Denzinger):

:<b>

  A petition recently addressed to us proposed the following matter: For a very long time, and with nothing in memory running to the contrary, in various parts of Germany, for the common advantage of society, there has been implanted among the inhabitants of those parts and maintained up to this time through constant observance, a certain custom. By this custom, these inhabitants—or, at least, those among them, who in the light of their condition and indemnities, seemed likely to profit from the arrangement—encumber their goods, their houses, their fields, their farms, their possessions, and inheritances, selling the revenues or annual rents in marks, or florins, or groats (according as this or that coin is current in those particular regions), and for each mark, florin, or groat in question, from those who have bought these coins, whether as revenues or as rents, have been in the habit of receiving a certain price appropriately fixed as to size according to the character of the particular circumstances, in conformity with the agreements made in respect of the relevant properties between themselves and the buyers. As guarantee for the payment of the aforeseaid revenues and rents they mortgage those of the aforesaid houses, lands, fields, farms, possessions, and inheritances that have been expressly named in the relevant contracts. In the favor of the sellers it is added to the contract that in proportion as they have, in whole or in part, returned to the said buyers the money just received, they are entirely quit and free of the obligation to pay the revenues and rents corresponding to the sum returned. But the buyers, on the other hand, even though the said goods, houses, lands, fields, possessions, and inheritances might by the passage of time be reduced to utter destruction and desolation, would not be empowered to recover even in respect of the price paid. [Note: the lender has recourse, not to the person of the borrower, but the actual assets purchased and only the actual assets purchased, for recovery of principal and interest.]

  Now, by some a certain doubt and hesitation is entertained as to whether contracts of this kind are to be considered licit. Consequently, certain debtors, pretending these contracts would be usurious, seek to find thereby an occasion for the nonpayment of revenues and rents owed by them in this way… We therefore, ... in order to remove every doubt springing from these hesitations, by our Apostolic authority, do declare by these present letters that the aforesaid contracts are licit and in agreement with law, and that said sellers, yielding all opposition, are effectively bound to the payment of the rents and revenues in conformity with the terms of the said contracts. [Ellipses in original.]</b<

@Nobody—here’s how I read your passage:

Loans with no prepayment penalty were customarily made whereby a mortgage lender accepts “goods, houses, fields, farms, possessions, and inheritances” as collateral on a loan of money. There is no mention of what is to be done with the loan proceeds. For all we know, the loans were used to buy fine clothing.

Notwithstanding, the mortgage lender has reasonable assurance the borrower can pay because of rents customarily paid by tenant farmers (foresters, hunters, whatever) to landowners. But should the borrower default, the lender takes the property in whatever condition he finds it, even if it is worth less than it was when the loan was made.

This was not an appeal to the pope whereby debtors are saying “these awful lenders are trying to sell us into slavery because the barn burned down and our tenant farmers can’t pay their rent. Save us papa!” The non-recourse nature of the loan was customary already in this locale.

Rather, certain of the debtors claimed that this sort of financing arrangement is usurious—they wanted to keep the money, stop paying the mortgage and keep the property even if the barn didn’t burn down. The lenders wanted a ruling. Pope Callistus says the arrangement isn’t usurious and that the debtors are obligated to pay as agreed.

I don’t think this proves what you think it proves.

  t

Pope Callistus says the arrangement isn’t usurious and that the debtors are obligated to pay as agreed.

Right: precisely, and clearly, and explicitly, because the loans were non-recourse.  That is what makes them non-usurious.  It isn’t usury to sell a share in your property to someone (the “lender”, who Callistus calls the “buyer”), rent it back from him, and use the proceeds however you will.  That is what a non-recourse loan amounts to: the term “lender” rather than “buyer”, and “interest” rather than “rent”, is purely semantics.  An asset-recourse “loan” is just not the kind of lending at interest that the medievals were talking about in condemning usury.

Full-recourse personal loans at profitable interest are usury: always have been, always willbe.  Asset-secured non-recourse loans are not usury: never have been, never will be.  (The latter might or might not be unjust in some circumstances; but it isn’t usury).

Now, the Franciscans ran credit agencies which made person-recourse loans in the middle ages, specifically as a way to protect the poor from the userers.  From this activity there arose the concept of “just titles”, which allowed the Franciscan credit agencies to collect, assuming the borrow could afford to pay it, some of the actual expenses associated with lending over and above the principal amount.  The Franciscans who ran these institutions lived under vows of poverty, and the loans were by no means profitable.  The “just titles” were permitted only to the extent they did not introduce any profit motive into this inherently altruistic activity.

The notion that the theory of “just titles” justifies modern practices, though, is risible.  If there is any profit motive involved in a loan, the theory of just titles doesn’t apply.

Making person-recourse (as opposed to non-recourse or asset-recourse) loans for profitable interest is usury, and always morally wrong.

In short, there is a lot of what we today call “lending at interest” which is perfectly morally licit, contra what some of the more distributist-leaning among us might say. Most (but not all) business lending is of this sort, since the recourse in loans to corporations is to the assets on the corporation’s books, not to persons.

At the same time, there is a whole lot of actual usury taking place out there.  Each side thinks the other is just crazy, and that is because each side is failing to acknowledge the truths seen by the other side.

Mammon couldn’t be more pleased at this economic equivalent to his triumph in getting birth control and sodomy widely accepted.  Wherever full-recourse personal loans are being issued for profitable interest, usury is being committed; and as with birth control and sodomy, nobody cares anymore.

@Nobody is way too narrow in his reading of the Church’s teaching on usury and way too dismissive of distributism.  I’ll overlook the latter, but Nobody, try reading more than the document you keep quoting over and over again.  There’s a ton of stuff out there on usury, and you’re misleading people by claiming that secured assets alone define usury.  If your definition of usury were true, then usury has no connection whatsoever to sodomy nor is usury a violation of natural law.

> That is what makes them non-usurious

This is neither clear not explicit in the passage you quoted, but I’m moving on.

> Full-recourse personal loans at profitable
> interest are usury: always have been, always will be

OK, in the USA with bankruptcy protection, what is a full-recourse loan? To my mind, the notion of “protection” nullifies “full” and bankruptcy protection in the USA is fairly protective. Recourse is to your assets (which may include expected future income but might well be discounted to pennies on the dollar). Even then recourse is often not to ALL your assets: homes (for example) might be protected by state homestead laws. If you borrow from a loan shark, you may need another kind of protection, but in our formal financial markets I can think of only one loan you might call “full recourse”: a student loan. These are not dischargeable in bankruptcy. There may be others, I don’t know. But even if you never pay your student loan, you don’t get sold into slavery or go to jail or get your knees broken as you might without bankruptcy protection.

So: do bankruptcy laws change the calculus for you?

  t

There’s a ton of stuff out there on usury, and you’re misleading people by claiming that secured assets alone define usury.

It isn’t that secured assets alone define usury.  It is that selling (a share in) your property to someone and renting it back from him is not usury.  Using the word “interest” instead of “rent” and “lender” instead of “buyer” doesn’t change the nature of what is done.

Usury is (again) a person-recourse loan for profitable interest.

Tom:

Bankruptcy protection certainly mitigates against the gravity of the evil of usury; but it doesn’t solve the problem.  As I said to Kevin O’Brien above, selling and leasing back specific assets is a fundamentally different kind of contract, whatever semantics one wraps around it.

One might claim that “all of my assets and future earnings” makes a usurious loan into the same sort of thing; but that is a specious argument, much like claiming that sodomy and intercourse are the same kind of thing.  Everything authoritative I’ve ever read has been clear that the assets need to be specified in particular. 

I do think it is important for folks interested in the subject to research what sorts of contracts Aquinas and the Magisterium have said are permissible, in addition to what is impermissible.  That was how I came to the understanding I have right now.  For example, (I don’t have time to go document this whole thing and write a book on it right now, so I’m just going by memory) there is a section in the Summa where Aquinas condemns usury; and there is a different section where he describes the sorts of contracts which are permissible.  In my experience discussing this over the last couple of years, folks have a tendency to invoke the one or the other, but not both.  The one side seems loosely analogous to how radical traditionalists view NFP; the other to how progressive Catholics view birth control.

Nobody:

Are you calling Pius XII and John Paul II radical traditionalists for their “views” on NFP?

http://www.audiosancto.org/sermon/20071014-Series-on-Marriage-Part-4-Periodic-Abstinence-and-NFP.html

http://www.sensustraditionis.org/webaudio/Sermons/Life/life2.mp3

@Buzz

I think you missed the point of nobody’s comparison.  There are “radical traditionalists” who hold that NFP is immoral birth control.  There are “radical traditionalists” who hold that even extrinsic interest is usurious.  Both have misunderstood the tradition.

Buzz—no idea where you got that idea.

There is a strain of radical traditionalism which views NFP as morally wrong.  Just as there is a strain of progressive Catholicism which views contraception as morally acceptable.  All I was suggesting is that the truth here, as there, is also assailed by rigorist tendencies on one side and laxist tendencies on the other.

My dear Nobody, it is not a question of semantics.  Security is NOT selling your property to someone else and leasing it back.  Your bizarre notion of security having anything to do with the intrisic nature of what usury is is very peculiar.  You are using a document that is very tangential to this discussion.

My house is security for my mortgage.  If I had sold my house to the bank and were leasing it back (which is whay you say security amounts to), I would not be allowed to sell it to a third party; also I could leave at the termination of the lease with no penalty.  In addition, the bank, as owner of the home, would be responsible for property taxes and major repairs.  Your argument, Nobody, is foolish.  You misunderstand both usury and security.  And semantics.

And it’s low of you, my Nobody friend, low indeed to suggest that people who understand what usury is are akin to the traddies who reject NFP.  The truth is not the “middle ground” here (in your case the “muddle ground”).  The truth is not conveniently between crunchy cons who hate commerce and the libs who hate the Magisterium.  The truth is not about a political spectrum, it’s about what usury is and why it’s immoral.

This is what I had feared getting into this spat.  No one wants to look the giant in the eye and deal with what our economy is.  Either people claim that our modern economy is so much more complex than that dreadful economy of the middle ages that Church teaching no longer applies, or they go off on bizarre tangents like Nobody’s-business, or they shrug their shoulders like the guy Kirt at Mark’s site who says, “Since usury has never been explained to me before, it must not exist.”

At the root of it all we close our eyes to the main assumption about money in our current economy: that it must always by its nature produce more of itself, and that a person lending money is like a person lending rabbits.  He may always demand both rabbits and bunnies in return.  But a dollar is not a demigod; it’s not even a bunny; it is inert in and of itself, beyond the effort and the resources it can purchase; it can do no more than what its user puts it to.

Well, I don’t do the internet on Fridays, so I’m out of here.  Thank you all for your patience and for a fun, though frustrating, discussion.

If I had sold my house to the bank and were leasing it back (which is whay you say security amounts to), I would not be allowed to sell it to a third party;

And you aren’t allowed to do so, unless you first settle the loan - that is, buy back the bank’s share of your house; are you?

The bank does not own a “share” of the house.  I’m glad I’m off the internet tomorrow, you’re driving me crazy!  If the bank owns a house that’s mortgaged, why do they have to bother foreclosing on it if you don’t make payments?  If they own it, there’s no need to foreclose.  If they own and you lease, they simply evict, not foreclose.  And it ain’t just semantics.  Why don’t they pay the taxes and maintain it if they own it and you’re simply leasing it from them?  Nobody, if you can’t grasp this simple financial relationship, and how security differs from leasing, you have no business trying to teach others about usury.  To say that the bank in effect owns the house and the mortgage relationship is just semantics is simply showing that you don’t know the difference between words and reality.  Oh, well, Merry Christmas.  If I don’t stop reading your comments, I’ll become the Grinch.

The bank does not own a “share” of the house.

Well, if you say it loud enough, maybe it will become true.  But you still won’t be able to sell the house without buying back the share that the bank owns.

If the Pope exercising his Apostolic authority can call the mortgage holder a “buyer”, and the payments the homeowner makes to the mortgage holder “rents”, I think I can feel pretty comfortable using that language myself.

I do think that a lot of the mischief in understanding usury has to do with how we use the language.  The concepts involved are not difficult; but by labeling radically different kinds of contracts “loans” and the rents generated by them “interest”, plenty of confusion has been sown.

> the main assumption about money in our current economy:
> that it must always by its nature produce more of itself

Brother Kevin, this is not the main assumption about money in our current economy. Knocking down straw men is fun, but not very enlightening. The main assumption about money in our current economy is that you value money today more than you value the same amount of money in the future. So do I. If you want me to sacrifice my pleasure now, you must credibly promise reward me in the future. This has been the main assumption about money in every economy.

It seems to me the new-ish idea or insight about money is that the only difference between money and debt is the time horizon involved. Roughly, money is a claim on current goods and services. Debt is a claim on future goods and services. A corollary is that the value of money is in principle certain, and the value of debt is uncertain. The term of art in economics for this uncertainty is “risk”.

It seems to me the new-ish assumption about assets is that one’s expected future wage income is an asset that may be borrowed against. This is hinted at by the term “human capital”. Commenter Nobody apparently finds a pledge of a share of one’s expected future wage income identical with “recourse against a person”. I find myself in *some* sympathy with this view, especially with respect to a man whose expected future earnings are quite modest with respect to his duties. But Chesterton thought a man should be free to bind himself, another view I find myself in sympathy with. At the moment I don’t understand why he should not be free to bind himself with respect to money, at least within the limits of modern bankruptcy laws. A vassal bound himself quite a lot more tightly.

As for the rest of the discussion, I think Fr. Coulter probably has it right: http://bit.ly/dQmj1c.

  t

@Nobody—I think what Kevin’s getting at is the following: if he owns his house and its value rises, he can sell and keep the increase in value. If the bank owns it and its value rises, the bank keeps the increase. So offering a home as security against a loan is absolutely not the same as a sell & lease back arrangement. The colloquialism “the bank owns my house” is not really true. You’re right that he must deliver a clear title to his buyer, but there is a very well-known mechanism for doing that. It is quick, cheap, and protects the interests of everyone involved. Thank the English.

> If the Pope exercising his Apostolic authority
> can call the mortgage holder a “buyer”

The mortgage holder is a “buyer”—but he bought the note, not the property. The landowner expected to pay the mortgage holder out of the rents he received from his tenants, and those rents are what gave the mortgage holder the confidence to make the loan. If the landowner fails somehow, the mortgage holder can take the property as agreed, but he does not own it unless the borrower defaults.

Look, I’ve run several companies and have an MBA.  I know a thing or two about capital structure.

Debt is a senior ownership interest, with first claim to assets in a liquidation.  That is what it _is_, at least in a non-usurious capital structure like a corporation.  The fact that its risk/return structure is different from equity doesn’t make it any less an ownership interest than equity.

I mean, I do get it, guys: there is no such thing as usury, on the one hand, and every kind of contract which we choose to label “loan” that pays what we choose to label “interest” is usury: those are the only choices.

Good luck with that.

@Nobody, now that you’ve revealed you have an MBA, we know why you’re so messed up.  (That’s a joke).

Brother Tom, no one is arguing that the borrower is not free to bind himself to any kind of debt, even by pledging future earnings.  Of course a borrower is free to say, “If you lend me $100 for a consumable good, I will pay you back $200.”  And the lender is free to bind himself as well.  But freedom does not equal morality.  Is such a contract just and is it licit, both from the point of view of contract law and from the point of view of natural law?  That’s the question.

This is not simply a question of contract, for a number of reasons - including what is almost always an unjust advantage by the lender over a borrower who borrows for consumption.  The two parties are not on equal footing in almost every case of usury (particularly usury as popularly understood - payday loans, credit card debt, etc.)  A rather full examination of this can be found here: http://works.bepress.com/brian_mccall/6/  This is why I can’t legally enter into a contract to become your slave; the government has recognized the unjust advantage of master to slave and prohibits even consenting parties from making such an arrangement.

My suggestion: we all research this more thoroughly and hash it out on my blog sometime after Christmas.  www.thwordinc.blogspot.com .

I must go as I turn into a pumpkin at midnight.  @Nobody, you have said some worthwhile things mixed in with some not worthwhile things IMHO.  Brother Tom, you’re always a pain, but a smart one.  That’s why we say something “smarts”.

> But freedom does not equal morality.

Then, Brother Kevin, it isn’t freedom. One of the worst aspects of modernism is that it inverts the hierarchy of goods, first claiming that that freedom is the highest good, and then claiming that freedom and truth are separable. The Christian tradition links the two concepts very tightly owing to The Word in Jn 8:32. This is one of Chesterton’s great themes.

@Nobody, According to Kevin I’m just as messed up as you are. Maybe more. I point out that when one owns debt, one’s ownership interest in assets is conditional only. I think you are oversimplifying, not a very Scholastic thing to do ;-)

Kevin has pointed us to a terrific law review article which I highly recommend, although it is not easy reading. It traces the development of the doctrine of usury over many centuries and points towards a way to use the classical principles concerning usury in the modern context. A practical example is provided: Islamic Finance. Maybe we can learn something from heretics after all.

I point out that when one owns debt, one’s ownership interest in assets is conditional only.

All ownership of all assets is conditional, always.

What matters here is that I cited Magisterial Apostolic authority that when tangible specific property is mortgaged in a non-recourse “loan”, the “lender” has bought an interest in that property and can licitly charge rent (which can be labeled “interest”) for it. 

Usury is perfectly understandable, and perfectly understandable as intrinsically unjust.  The fact that modern people have a language “impedance mismatch” with the medievals is what makes it confusing.  Once we start labeling things the right way, it all makes perfect sense.

I think you are oversimplifying, not a very Scholastic thing to do ;-)

I am perfectly capable of discussing finance at whatever level of complexity you desire, though I may or may not have the time for it.

FWIW, I am personally familiar with the investment practices of large Islamic venture capital firms.  As with just about everything Islamic, their financial practices involve partial truth grossly oversimplified and distorted beyond all reason.  In particular, they make no distinction between buying “interest-bearing” (rent-paying) “debt” (ownership) rights in assets, on the one hand, and making usurious full-recourse personal loans for interest on the other.

Yeah, you’re right. When one owns debt secured by property, one owns along with the risk of the borrower’s default downside risk in the underlying asset value, but not upside risk. Neither owns unilateral right of disposal so long as debt remains and the payments are current. It is right therefore to say “I share ownership of my house with the bank” and so the banker can charge a “just price” for rental of his property (which is not the money per se). In non-recourse states, there is no problem in principle on 13th century Scholastic understandings with a mortgage secured by property, even though that property does not produce income. QED This is easier for me to see after reading McCall’s paper.

> As with just about everything Islamic

OK, so it isn’t LIKELY we’ll learn anything from heretics, but we might ;-) Seriously though, I’ll take your word for it they haven’t quite got a counter example, but don’t their practices, howsoever imperfect, point to the possibility of low-friction financial markets without resort to subjectivism?

...don’t their practices, howsoever imperfect, point to the possibility of low-friction financial markets without resort to subjectivism?

Well, I’ll use a real semi-public example of how Islamic investors’ brittle understanding of usury is batty.  (It would be fine if what they were refusing to permit was actually usury and actually immoral; but it isn’t).  Disclaimer: my knowledge of Islamic finance practices is purely street knowledge—I haven’t read any academic papers on it at all, as far as I can recall at least.

An Islamic venture capital firm invested in a small, private US airplane manufacturer which was in rather desperate need of capital to expand and update its manufacturing capacity to meet demand.  The VC’s purchased a controlling interest in the company.  Because the board of directors were now required by the majority shareholders to follow Sharia financing practices, the company was (1) not permitted to drop below 51% equity ownership by Sharia-compliant firms, in order to insure perpetual Sharia-compliant management control at least until the VC firm made a complete exit from the business; and were (2) not permitted to use any “debt” - where what is meant by “debt” in this particular case is a fixed-rent asset ownership contract of the sort that Pope Callistus III recognized to be non-usurious all the way back in the 14th century; and that today we would call a “corporate bond”.  As far as I am able to tell, they were not permitted to do it simply because we happen to label the rent payments “interest” and the ownership interest “debt”, as a matter of modern language conventions.

That is just fracking crazy.  The founding CEO ultimately resigned after he was unable to raise further financing to complete their most recent aircraft project.

More generally, fixation on what things are labeled is nuts.  What matters is the nature of the particular contracts in question, not what various things are labeled.

I am firmly in the opposed-to-usury always-and-everywhere camp when usury is properly understood: that is, when it is recognized that usury is any and every profitable full-recourse-to-persons loan for interest.  And there is plenty of that going on—even most mortgages today are formally person-recourse, and thus usury (else there would be no such thing as a deficiency judgment enforced by the government).  But it doesn’t have to be that way; and there are states with non-recourse mortgage laws, which work just fine.  We should encourage more of that: ultimately every loan for profitable interest should be non-recourse, because any recourse to persons for profitable interest on a loan is usury.

I just don’t think Islamic practice is a particularly good guide here.  Our own non-usurious practices, like non-recourse mortgage states, are a better guide.  As with most everything in Islam, the Islamic understanding of usury is a brittle misreading of the Tradition which jumps from an idealistic desire to stand on principle to crazyville in a very short hop.

> usury is any and every profitable full-recourse-to-persons
> loan for interest.

We’ll have to unpack this another time, starting with “profitable” and “full”. 

It is too bad our Muslim cousins focus on labels instead of substance—it reminds me of a riddle:

q: If you call a tail a leg, how many legs has a dog?
a: Four. Calling a tail a leg don’t make it one.
—attributed to Abraham Lincoln

But thanks be to Allah the The Beneficent, they still have an idealistic desire to stand on principle. In our neck of the woods this is sorely lacking.

This has been good: I have run into contrarians who say that a mortgage on a home is usurious because there are no profits to share from the use of a home. Now I know how to answer: the mortgage might be usurious, but not for that reason. Belloc was wrong. <gasp!>

Belloc was only partly right, might be a more charitable way to put it.

If you want a very simple test: wherever there is the possibility of a deficiency judgment or it’s equivalent, what you have is a case of usury.

(There are, of course, other ways than usury to do economic injustice).

There is a very straightforward, laissez-faire way to get rid of usury too: just have the government stop enforcing deficiency judgments and their equivalent against individuals.

That won’t get rid of all sorts of other evil practices, like unjust rents, price-gouging, failure to pay a just wage, etc.  But it would get rid of usury - except the already illegal kind - in one laissez-faire step.

For those few still watching at home:
—
Unsecured profitable loans like credit cards, with no specified collateral property at all, are always usury.
—
A deficiency judgment is when the bank forecloses on the collateral property, sells it, and doesn’t get enough money from the sale to cover the balance of loan, interest, and penalties.  The bank then goes after the individual for the remainder - a “deficiency judgment” enforced by the government in favor of the bank against the borrower.
—
Foreclosure on and sale of the property is fine, or, that is to say, is not usury. (It might be not-fine because the “rent” [interest] charged by the bank is too high or whatever; but that is not technically usury, it is unjust rent). It becomes usury when the bank goes after the individual for the remaining balance (that remaining balance is what makes it usury).  (With credit cards, there is no specified property to foreclose on: there is only a deficiency judgment.  Credit cards debt is always usury).
—
Pope Callistus III again, describing what makes the contracts not usury:
—
But the buyers [lenders], on the other hand, even though the said goods, houses, lands, fields, possessions, and inheritances might by the passage of time be reduced to utter destruction and desolation, would not be empowered to recover even in respect of the price paid.

@Nobody, the day off was good for me.  I’m better now.  And your latest post is the clearest you’ve been.  I’ll go this far, accepting your definitions you’re right.

Certainly, if the bank indeed fully owned the home I live in and were leasing it to me, that would not be usury at all, though the rent charged may be just or unjust.

The problem here is the bank does not fully own my home.  It can not be said that they bank even partially owns my home, or owns a share in my home.  This is where we disagree.  You think this is a matter of semantics only, but it’s obviously more than just semantics.  As Brother Tom pointed out, if I sell my home for a profit, the bank does not share in that profit.  However if I can not break even selling my home, the bank may be forced to share in my loss, if there is no personal recourse and if the home can not be sold for the remaining amount owed on the mortgage.  What kind of ownership is this, then, from the bank’s point of view?  It’s not ownership at all but simply security.

And a security interest is not an ownership interest except if the borrower defaults.  This is an important distinction and not just a semantic one.  By your reasoning (and your definitions) you are correct; only personal recourse mortgages which generate profitable interest would be usurious.  But you’re the one relying on semantics, I’m afraid, dear Nobody - and for this reason.

Look how much easier it would be for homeowners if in fact it were a real leasor / leasee relationship and not just a semantic one.  First, the “rent” would be fixed by contract for the term of the lease.  If the borrower could not pay the rent, the leasee could move and break the lease but could only be sued by leasor for whatever damages the leasor could not make up by renting the house to another tenant as soon as possible.  This is because leasing deals are always personal recourse, but damages are mitigated by the relative ease of finding new tenants.

So if Wells Fargo wants to take full ownership of my house and lease it back to me - in the real world and not just in the world of definitions and semantics - I’d go for it.  They’d perform major repairs, pay all taxes, assume all risk of making or losing money if they sell the house, and I’d be guaranteed to pay a fixed rent for a term that would almost certainly be shorter than thirty years.  I’d be building no equity, but I would not be the owner.  They could not evict me during the term of the lease as long as I paid the full rent in a timely manner.  If I broke the lease their recourse against me would be limited to the time the house was vacant (and any damage I may have done to the house during my tenancy).

The problem is your mixed metaphor of ownership.  Having a clear title to something is not the only way to own it.  And banks do not want to own homes; foreclosure is a last ditch effort to mitigate loss.

So a non-recourse mortage may still be usury, for the profit the bank hopes to make is “interest” not “rent”.  I see your point, but the difference is not merely one of words.

Kevin:

What else can I say, given that I’ve already cited where the Magisterium, explicitly exercising Apostolic authority, disagrees with you?  The mortgage lender in a non-recourse contract is taking a kind of ownership interest in the property, and is entitled to rent for his share of the property, so the contract is not usury.

I am all in favor of a new counterrevolution against the userers and sodomites.  But we have to be right, and that means that when we claim that a certain kind of contract is usury, it bloody well better actually be usury.

Brother Kevin, read the McCall paper here:
http://works.bepress.com/brian_mccall/6/
and we’ll talk later. Chesterton & Belloc were not the last word on this subject.

Nobody, you are twisting the words of the document you quote.  You are wrong and you won’t admit it. 

I’ve read the McCall paper, Tom, I’m the one who passed it on to you.

It’s really a shame when people won’t follow an argument, gentlemen.  This is not about Chesterton and Belloc.  It’s about common sense.  And the only source Nobody keeps citing does not apply to home mortgages, as any idiot can see.  The weight of the magisterium is certainly nothing to invoke when it comes to a quote pulled out of context and applied out of syntax.

...the only source Nobody keeps citing does not apply to home mortgages, as any idiot can see.
.
My Magisterial citation applies to - and I quote - “...their goods, their houses, their fields, their farms, their possessions, and inheritances…” [Boldface added].

I think it is important, for the sake of a real and necessary counterrevolution against usury, for those who would uphold the Tradition and the natural law to wrap their minds around the fact that a non-recourse home mortgage is not usury, for all of the reasons given, and as supported by Magisterial authority.

Aquinas says something very similar, IIRC, by the way, though I haven’t had the time to hunt down the citation.

If you sell a share in some of your specific possessions (whatever they may be) to someone, and use the proceeds for whatever you choose (which might be consumption), while at the same time renting that share-of-possessions back from the party you sold it to, that is not usury.  It is a straight up sale and then rental of property, which can be non-usuriously profitable for the owner (of the share, that is, the lender).

Credit cards, on the other hand—and all full-recourse personal loans for profitable interest, which includes most mortgages as they are actually contracted today - are always usury, no matter what interest rate is charged, what security is held, etc.  And there is plenty of that to go after.

Oh, and the obsession over the fact that different kinds of ownership shares have different responsibilities, risks, etc is just silly.  All kinds of mutual ownership arrangements (whatever they are labeled) involve different levels of risk, responsibility, control, etc for different types of shares.

The Tradition, the Magisterium, and Aquinas understood this long ago.  It is time we reclaimed that understanding.