HOUSE OF REPRESENTATIVES
REPORTED BY ARIEL DRAPIER.
WEDNESDAY, JANUARY 26, 1859.USURY LAWS.
The SPEAKER announced the special order viz: the consideration of the several bills on the subject of usury and a conventional rate of interest, which was to be considered in Committee of the Whole, and thereupon the House resolved into Committee of the Whole - Mr. Edwards in the Chair - and took up the consideration of Mr Stanfield's bill [65] to amend the 4th section of the usury statute, so as to allow the recovery o principal and interest on contracts for more than legal interest. The bills numbered 7, 22, and 75 were also read.
Mr. HALL, of Rush, proposed to amend Mr Stanfield's bill by adding a provision, "that if over ten per cent, is so taken or received, it shall be forfeited," which was rejected.
Mr. NEBEKER, of Warren, said he occupied conservative ground. There ought to be restriction upon money, such as belongs not to prop City. It would not do to say, a horse shall not be sold for more than a given sum. A standard of value could be fixed on money, and therefore it could be made a legal tender the rate of interest should be graduated to the necessities of trade. Most men know that money was loaned at ten per cent, in violation of the usury statute. It became the interest of men to violate the law. He declared no war against banks, but desired to bring up individuals to a position where they might compete with the banks in the business of loaning money. The banks could violate the usury laws with impunity They could loan on bills of exchange at 90 days and one per cent, per quarter exchange - which makes ten per cent, per annum. But he had been told that if ten per cent, were legalized the banks would come in for ten per cent, and the exchange besides - so realizing 14 to 18 per cent, per annum. But he would provide against this, and thereupon he expected the opposition of bankers to this proposed interest law. The banks violated the Constitution, in this provision which prohibits them from "taking a greater rate of interest, either directly or indirectly, than that which is allowed by law to individuals," So long as the law allowed no more than 6 per cent, the money of the people of the State would be seeking investment in other States where ten per cent is legal; and he reasoned at length in favor of increasing the rate. He moved to strike out after the enacting clause, and insert the substitute for his bill [No. 22] heretofore recommended by the Committee on Rights and Privileges; but -
The CHAIRMAN decided the motion out of order.
Mr. NEBEKER proceeded to show that Mr. Stanfield's bill did not repeal one statutory provision, which he read, and which favored the banks. His proposition was to amend the first section of the law in first volume of the Revised Statutes, page 343, so as to allow ten per cent, on contract.
Mr. WHETZEL. The gentleman's proposition would lead farmers to mortgage their farms and lose them. Some 23 or 24 years ago we had the very law he proposes, and before that we had for a while the repeal of all usury laws; but the people were tired of these experiments, and fell back on the old system of six per cent.; and he believed it was our wisdom now to adhere to that.
Mr. DURHAM proposed to amend, by adding in the proper place: "The banks shall not receive a larger rate of interest than six per cent, per annum.
Which was adopted.
Mr. GRIFFIN took ground against Mr. Stanfield's bill, and reasoned at length in favor of a conventional rate as high as ten per cent., applicable alike to all persons. A man of honor would pay his contract, &c.
Mr. HARNEY rehearsed the old argument against usurious interest, which he derived from examples in the history of Rome, Lombardy and Jewry. Whatever the use of capital was worth should be allowed; but more than that was a tax or labor. The great interests of the people should not be sacrificed to the wants of the present. What is money worth? That was the question. Just as interest rose, labor became depressed. A modern writer (Mr. Whipple) had demonstrated that money was worth about 3 per cent in this country not more than 3 1/2 per cent. How was it that manufacturing and railroad stock was worth nothing, while bank stock was at a premium? It was the effect of usury. Usury had ever been the prop of thrones, but it was dangerous to republics. Because the banks charged exorbitant interest, was that an argument to turn loose all moneyed men to exact as much interest as they? He then looked at the class of men who were petitioning for this high rate of interest. It was demanded by the mercantile and money-leading class. It was not desired by one man in ten. Legislation, instead of extending should curtail the evils of usury. Pleading usury was no more dishonorable than to demand usurious interest, &c.
Mr. STANFIELD explained the provisions of his bill. It was equity that a man should receive the value of the use of his money. His bill left the party demanding more than a legal rate, to be proceeded against under the usury laws.
Mr. HALL, of Rush, proposed to amend "so that interest contracted for or received shall not exceed ten percent.," and spoke to this amendment. It was doubtful whether any regular business would justify borrowing at any rate above six per cent.
The Rights and Privileges Committee's substitute for Mr. Nebeker, of Warren's bill [22] being also referred to the Committee of the Whole, was now again read, and the Chairman said he waited for a motion.
Mr. NEBEKER, of Warren, moved to adopt the Committee's amendment to his bill, which was precisely as he himself should have fixed it , at his leisure. It was simply shortening the original bill.
Mr. Speaker GORDON moved to report the bill back, and recommended its indefinite postponement. He was opposed to changing the law, without a clear expression of the will of the page: 83[View Page 83] people of the State in its favor, in connection with good reasons for the change. He replied to the argument of Mr. Nebeker, of Warren, who had shadowed forth several reasons for the proposed change.
1. That gentleman had maintained that it was unreasonable to fix a rate of interest on money; because money was constantly fluctuating in value. Now, grant that this is true, what follows? Simply this,that as interest is received in kind with the principal - is a part of the principal - the per cent, will always bear the same proportion to the principal. It must necessarily rise and fall in the same ratio as the principal. This may be illustrated thus: Say, A. loans B. $100, at 6 per cent, per annum. Now, if we grant that $100 will to-day purchase 100 bushels of wheat, $6, the interest reserved, will purchase 6 bushels. The wheat bought with the interest, will thus bear the same proportion to that bought by the principal, that the interest bears to the principal. Suppose that on account of the abundance of wheat in the market to morrow, $100 will purchase 200 bushels, the interest will purchase 12 bushels, which sustains the same relation to the quantity bought with the principal as before. Again, on the day after to-morrow, wheat has become so scarce, that $100 will only purchase 50 bushels, and $6, the interest, will purchase 3 bushels, which still sustains the same proportion as before. And so it is in regard to every article of value in the market.
2. It is urged that the present law is constantly violated. It is so of others. The law against larceny is constantly violated. But does any man therefore propose to enlarge the privileges of thieves. It is only an additional reason for greater stringency, severer penalties against those who violate the law. I can not listen with the least forbearance to arguments resting upon such a moral basis.
3. It is said the banks continually violate the usury laws. If that be so, then let us do our duty; and see to it, that greater restrictions are thrown around them, to keep them in the same bounds as private lenders. I am for making it penal for any bank officer to violate the law on this subject, as it is penal for private individuals.
4. But the gentlemen say they desire to bring private lenders into the field as competitors of banks, whereas they now deposit with the banks at 4 per cent. Why do they deposit now instead of loan? For this reason: Their money is safer in the banks - so much safer - than in the hands of private borrowers, that they prefer the greater safety and less interest, to the less safety and greater interest. Therefore they deposit. Increase the rate of interest, and the banks can afford to give six or eight per cent, for deposits as well as they now can give four. This greater rate of interest will be given; and the greater safety still existing will secure the deposits of moneys now deposited.
5. It is said finally, that the money of the State will be driven out of the State in order to secure ten per cent, where that is allowed. If that is so it only proves that money can not be invested in the State at a profit equal to ten per cent. If that is the case, it is clear that if it should be loaned out here at that interest, the borrower must either be ruined, or ruin those with whom he deals. It is better that we should become lenders to other States, than borrowers from them, even at six per cent. But, if you increase the rate percent" to ten, and become borrowers from other States at that rate, how long will it be before all your wealth will be transferred to aliens? How long will it be before the people of Indiana will he devoured by foreign usurers? If we should borrow $100,000,000 for thirty years at ten per cent., it would beggar us all, and reduce us to the condition of slaves. But, if the bringing of money into the State was so desirable as it would seem to be, from arguments of gentlemen, we ought to take off all restriction whatever. That would flood us with foreign capital. But it would be a flood of ruin.
Mr. SHULL. The value of money like other things, was regulated by demand and supply. When we stop the inlets of money we make it worth more. Would the people pay a greater interest under the legal rate of ten per cent.? No sir: but the supply would come in, and the rate of interest would go down. With a plentiful supply, we would get it at a low rate. Ohio, Illinois and Michigan admitted this rate, and the necessity of the case demanded a conventional interest in the State of Indiana. This four per cent, against us amounted to a prohibition of the investment of money in our State.
Mr. GRIFFIN replied to the Speaker and Mr. Harney. The practice of business men showed that public opinion was already prepared for a high rate of interest. Money was conventional, and he saw not the wisdom of the restraints of law as against the will of the masses. That will, as far as the people act at all in the case, was in favor of this bill. The value of money would regulate itself; and if ten per cent, were legal, he believed there would be less violation of the law. Did capitalists in Ohio and Illinois eat the people up through usury? Was it not rather true, that both of those States were commercially really far in advance of us? There was no answer coming to sustain the argument of gentlemen. No sir, the effect of our six per cent, law was to stint ourselves - to keep capital away and leave our State without improvement. Perhaps nine-tenths of the goods consumed in Indiana were purchased in Cincinnati and Chicago. He would legalize what public opinion had already fastened upon, us in practice.
Mr. GIFFORD said he remained yet without instruction on this question: from all he had heard he could not perceive that the State would be benefitted by the change proposed in this bill. It was admitted that our capitalists were getting ben per cent, without the State, and if that were better than investment at home, he was content. Again, if it were ever morally wrong to receive ten per cent., could it be made right by law? As for his people, they were taking ten per cent., and he supposed they would not kick at a law to that effect.
Mr. DOUGHERTY moved also, to postpone indefinitely Mr. Stanfield's bill. That was a proposition to encourage the taking of illegal interest. He believed the House had determined not to advance the rate, and therefore he would maintain the old ground.
page: 84[View Page 84]The motion was agreed to - affirmative 40, negative 38.
Mr. TURPIE made an ineffectual motion that the committee rise, and the question recurred on the motion of Mr. Speaker Gordon, as amended now, to postpone both bills.
The motion was rejected.
Mr.STANFIELD moved that the committee recommend his bill [68] to the House.
Mr. GOLGROVE proposed to amend, by striking out all after the enacting clause, and inserting: "That in any written contract for the payment of money loaned, it shall be lawful for the parties to contract for the payment of any rate of interest not exceeding ten per cent."
He reasoned against the bill of Mr. Stanfield, and rehearsed the argument for ten per cent. He believed, as a result of such a legal rate or contract, the borrower would generally get money at a cheaper rate than at present. He would not legalize ten per cent except on contract.
Mr. USREY proposed to amend the amendment by adding
"Sec. And all loans made by banks shall be upon notes payable at the banking-house of the bank, or if it is to be paid upon bills payable in any other place, the bank shall not be permitted to receive any exchange on the notes or bills.''
Which was agreed to; and then Mr. Colgrove's amendment as amended was also agreed to.
Mr. GRIFFIN moved that the committee recommend that the bill [No. 22] be laid on the table, which was adopted.
Mr. DAVIS. And the bill [No. 65] as amended.
The latter motion was rejected.
Mr. DAVIS. The banks have now no right to take more than 6 per cent., and this pretence about exchange and imaginary shipments was in violation of law. No business ever was founded on capital borrowed at 10 percent. The arguments for this high rate were conflicting. It was better to loan to aliens at 10 per cent., than to eat up our own substance by usury. Usury was a bleeding of the poor - a depleting of the life-blood of labor. If it were possible for horses to become a legal tender, and colts change, then there might be force in these arguments for a high conventional rate of interest. He was willing to compromise on the bill of the gentlemen from St. Joseph. If you put the rate at 10 per cent, the banks will still receive their advance on that, by a thousand contrivances known to the initiated. He was not here to represent the interests of the banks, though himself concerned in that business. He represented the interests of his constituents. The effect of this resolution would be to let the sharks loose upon the labor of the State. Let Ohio and Illinois borrow at 10 per cent, if they will, but let us not eat up one another here in Indiana.
Mr. COLGROVE was glad to hear a banker on the side of the people. He insisted that the banks were restrained in the terms of the amendment.
Mr. DAVIS said he would go with the gentleman to tie up and restrain the hands of the banks from exacting illegal interest.
Mr. COLGROVE. This, then, prohibits the banks from taking exchange on bills. He alleged that under the present law, what money was not loaned out of the State, went on deposit into the banks, to be loaned again to our people at four per cent, more than the law allows an individual to take on a direct loan.
Mr. DAVIS hoped the gentleman would not deny to him the possibility of faithfully representing the interests of his constituents, though he might own a little bank stock. He hoped that he would not attempt to pass a measure under the cry of a cat in the meal, when it was patent that his own argument was that of banking interest on this question, &c.
Mr. AUSTIN spoke in favor of an increase of the rate of interest to prevent the investment of our capital without the State, which was calculated to cripple every home interest. The present usury law was violated more frequently than any other statute, and he reasoned at length in favor of its amendment, as in the pending bill.
Mr. HAMILTON, of Boone. The amendment of Mr. Usrey did not restrict banks inre-gard to loans except in the case of bills. To extend the rate of interest takes money from the man compelled to borrow. Who makes the money ? The man that has the money to loan, or the man that borrows? The money-leader, certainly. Then who are gentlemen legislating for? He might, but for one thing, favor Mr. Usrey's amendment. He was in favor of restricting the banks from their usurious profits. He was opposed to the bill and every amendment. It was legislating for the capitalist and against the poor man. It was no relief to compel men to pay a higher rate of interest. The last amendment was a plaster over the first.
On motion by Mr. Speaker GORDON, the committee now rose and the chairman reported progress, and asked leave to sit again on Wednesday next, at 2 o'clock, P. M.
The report was concurred in.
SWAMP LAND FRAUDS.
On motion by Mr. HAMILTON, of Boone, (the order of business being suspended for the purpose,) the concurrent resolution of the Senate to appoint a joint select committee on Swamp Land Frauds, was taken up and concurred in; and the SPEAKER, on the part of the House of Representative, makes said committee to consist of Messrs. Hamilton of Boone, and Harney.
The House then (at 5:15 o'clock) adjourned.
