Art. VI. THE USURY LAWS.

PUBLIC sentiment throughout the country has of late been directed more generally than ever before to the subject of a repeal or modification of the usury laws, and scarcely a leading journal, North or South, East or West, reaches us that does not urge a change in these superannuated enactments, and this, too, at a time when money has been commanding a high rate of interest. In all our commercial and industrial towns, the borrower and the lender, the capitalist and the customer, alike demand the entire abolition, or a radical modification of statutes so adverse to the principles of untrameled trade.

The usury laws in Great Britain have been for years gradually yielding to the requirements of industry and the demands of commercial and business men, until at the recent session of Parliament an act has been passed -known as chapter 90, 17, and 18 Victoria-and now in operation, by which it is lawful in the United Kingdom "to loan money at any rate of interest, and on any description of property, either real estate or otherwise." The bill passed the House of Lords on the 27th of July, 1854, was immediately brought forward in the House of Commons, and finally passed that body on the 5th of August, 1854, and, receiving the royal assent, it is now the law of the land.

Regarding this as one of the most important commercial measures of the age, we give the remarks made in the House of Lords on the second reading of the bill, as we find them reported in the London journals:-

The Marquis of Lansdowne moved the second reading of this bill. The inconveniences which had been found to result from the operation of the laws against usury had been so many and so great that, notwithstanding strong prejudices on the subject of usury and usurers, it had been found necessary to re lax those laws from time to time. At the time of the commercial failures in the years 1836 and 1837, it was found that the greatest relief which was experienced was the result of a provision which had been introduced not long previously into the act for the renewal of the Bank Charter, enabling the Bank of England to dispense with the usury laws.

In consequence of this he (the Marquis of Lansdowne) had been induced to take charge of a bill in that house, by which, with respect to bills of exchange, and other securities of that description, the rate of interest was to be indefinitely extended. Considerable apprehension, however, was expressed as to the proba ble effect of such a law; and it was only passed at that time as a temporary measure. Nor were those apprehensions altogether removed for many years, although the difficulties and inconveniences which had been anticipated were not found to result from it. People could not be brought to believe that money was as much a commodity as any ordinary article of produce; that its value must be regulated, like the value of any other commodity, by the ordinary prin ciples of demand and supply; and that it was as impossible to fix the rate of interest at which it should be lent as to fix the price at which corn and butter should be sold.

This prejudice, however, had gradually disappeared, and the object of this bill was, as the same considerations applied to land and other property as applied to bills of exchange, to apply to them the same legislation. People were not deterred from raising money upon such securities at a higher rate of interest than five per cent by the present state of the law; but they had recourse to collusive practices and fraudulent proceedings in order to evade its operation. The inconveniences to which this led were very seriously felt in England, but they were much more seriously felt in Ireland, where the circumstances of many estates

were such that it was impossible to borrow money upon them within the limits which the usury laws present. The result was that annuities were granted, and various subterfuges and contrivances were resorted to, and, in the end, a much higher rate was paid than if the money could have been had, at its market value, upon a mortgage in the usual way. The usury laws, in fact, did no good whatever, but they produced great inconvenience; they affected to do what all the powers of the legislature could not do--to apply a different principle to one description of commodity from that which was applied to every other, and they interfered with the principle of supply and demand.

Having referred to Calvin as among the distinguished men who had doubted their policy, and to Jeremy Bentham as having dealt the first great blow against them, the noble marquis concluded by expressing an earnest hope that their lordships would consent to the second reading of the bill.

Lord Campbell expressed his great satisfaction that the usury laws were about to be entirely swept away. From his long experience in courts of justice, he could bear testimony to the mischievous effects which they produced. They had been practically swept away in all cases except where real security was given; but in the cases in which they were retained, they led to a good deal of litigation, and proved most disastrous, and even ruinous to those whom they were avowedly intended to protect. They had given a great deal of employment to the Encumbered Estates Court in Ireland, and he believed that many estates in Ireland which might otherwise have been disencumbered, had been brought to the hammer through the operation of those laws.

Lord Brougham supported the bill, both on mercantile and moral grounds. The Lord Chancellor also supported the bill. The usury laws could always be defeated by a person who was willing to resort to something which bordered upon fraud. Building societies had been exempted from their operation in order to encourage the industrious classes to make small weekly or monthly investments out of their earnings. But the exemption had been taken advantage of by people who had capital to lay out, and who found that by making use of these societies, they could obtain real security for their money without being subject to the restrictions which the usury laws imposed. This fact had been brought prominently before him in a case which had occupied his attention in the Court of Chancery during the last two or three days, and he thought it was a strong reason for placing these laws upon a rational footing, and for enabling people to do openly and directly what they could now accomplish by indirect and crooked means.

Lord Redesdale would not oppose the second reading of the bill, but thought it ought to have been introduced earlier in the session, that there might have been more time for consideration.

The Marquis of Lansdowne said every matter of detail had been omitted from the bill, and the principle was one which did not require any long discussion.

On the 5th of October, 1854, Caleb Barstow, Esq., chairman of a committee of the New York Chamber of Commerce, made a report to that body, embracing a most able argument in favor of a repeal or radical change in our usury laws, in adopting which the Chamber were unanimous as to abolishing these laws on all commercial paper, and on all ordinary business contracts, and were also unanimous as to the entire ground covered by the report.*

Subsequently the Chamber of Commerce recommended, without a dissenting vote, (at their meeting November 2d,) the subjoined memorial to the Legislature of the State of New York. As this memorial will be preseted to the next Legislature, we publish it entire, with the earnest hope that the prayer of the memorialists may be granted, or that the Legisla

• See pamphlet report of Mr. Barstow, page 15.

VOL. XXXI.-NO. VI.

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ture will give us a law in keeping with the generally wise and exemplary commercial legislation of the Empire State.

To the Honorable the Legislature of the State of New York, in Senate and Assembly convened :

The memorial of the undersigned, citizens of the State of New York, respectfully represents,

That the present laws of this State regulating the rate of interest are undoubtedly the most severe of any usury laws in the commercial world. That this severity has utterly failed of producing the end for which it was intended, or any other useful end, all experience having shown that any increased restriction, or attempted restriction, has never failed to enhance the price for the use of money during the existence of any money pressure, to which all commercial communities are occasionally liable.

That in addition to this increase in the rates of interest, the provisions of our present usury laws lead to circuitous devices and discreditable subterfuges and stratagems to evade them.

And these evasions are attempted by persons unmindful of the fact, that inasmuch as both parties can be made to testify in an action under this law, they cannot evade the penalty without a false oath, provided a prosecutor does his duty. All this has a demoralizing tendency, and can only result in evil.

Your memorialists, therefore, humbly pray that all the usury laws of this State may be abolished, retaining only a fair maximum rate to govern in the absence of a contract between borrower and lender, also a fair rate to accrue on a judgment in law, after its rendition.

Your memorialists would, at this point, respectfully suggest that this freedom can be extended to our banks with great benefit to our business community.

Those institutions, blended as they are with all the leading interests of society, are pre-eminently serviceable in the encouragement of eredit and in the promotion of all the useful enterprises of the day. They are managed by men whose interest, as a general rule, must of necessity harmonize with the pecuniary interests of the community at large.

Even those who have favored restrictive usury laws, admit that banks are subjected to expenses and risks peculiar to that business. They are required to have a specie basis, and to conform to rigid requisitions of law in a way deemed necessary for the protection of the currency and for the protection of the commercial interests of the people. Hence, they argue that in any relaxation granted, banks ought not to be excluded.

Loans secured by mortgages of real estate should also, in the opinion of your memorialists, be allowed to enjoy the benefit of the wholesome competition among lenders that would immediately ensue from the relaxation now sought for.

Your memorialists, in conclusion, most respectfully advance the opinion that no matter whether money be called a commodity or not a commodity, parties owning it should be as entirely free from legal restraint in paying it away, or receiving it for the use of other money, as they are in parting with it or receiving it for any other service, or for any commodity or any gratuity whatever.

Thus entertaining the fall opinion that our usury laws, as they now stand, have disappointed all hopes of their useful operation, your memorialists would humbly pray that a law may be enacted like the one herewith submitted:

AN ACT REGULATING THE RATE OF INTEREST ON THE LOAN OR FORBEARANCE OF MONEY.

The People of the State of New York, represented in Senate and Assembly, do enact as follows:

SECTION 1. No grant, transfer, bond, note, bill of exchange, contract, or agreement, or lean, or forbearance of any money, goods, or things in action, shall be

void by reason of any paying or receiving, or agreement to pay or allow such rate of interest as the parties may agree upon.

SEC. 2. In all cases where the rate of interest is not specified, the interest shall continue to be at the rate of seven dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time.

SEC. 3. No greater rate of interest than is specified in the second section of this act shall be charged on any judgment after the date of the rendition thereof, entered in any of the courts of this State, although such judgment may have been founded upon a writing stipulating a higher rate of interest.

SEC. 4. So much of title third, chapter fourth, and part second of the Revised Statutes, and so much of the laws of 1837, chapter 430, as are inconsistent with the provisions of this act, are hereby repealed. SEC. 5. This act shall take effect immediately.

Art. VII. THE COTTON TRADE.

THE events of the past year have shown the utter insignificance of Russia as a commercial power. With all her ports blockaded on the Baltic, the White and the Black seas, the prices of merchandise have been scarcely disturbed. The demand for cotton, that great barometer of Commerce, has been undiminished. Though the peace of Germany, Sweden, Greece, and Italy had been threatened, no falling off in the English exports has been experienced. All the operations of Commerce move on undisturbed, just as they did in our war with Mexico. The price of hemp, tallow, sheetiron, and a few unimportant articles, has been affected, but no great important interest in the commercial world has been seriously injured.

The consumption of cotton has, indeed, slightly declined in England, France, and on the continent; but so small is this decline, that it is fully explained by other causes well known and understood. The deliveries to the trade at Liverpool have only fallen off from 1,430,000 bales to 1,424,000 bales, up to the 7th of October. At Havre, the consumption was 27,000 bales less than it had been in 1853 at the end of the first half of the year, but part of this loss has since been regained; the exports from the United States and England to the continent of Europe have decreased more than either of these amounts; but this decrease is not over 100,000 bales.

If war, the deficient harvests in England, France, and Germany, and the consequent high prices of provisions, be considered, the wonder is that the decline in the consumption of cotton has not been larger from this cause alone than has been really experienced.

Russia may be a great country in territory, or population, or agricultural resources, but as a commercial power she is utterly insignificant.

The events of the past year have also shown the immense benefits which have already been received from the mines of California and Australia, and go far to establish the fact that a sensible appreciation in prices is already observable, from the large supply of the precious metals.

In former wars, the extra demand for specie for the military chests of the armies disturbed very much the currency of the war-making powers, and while it depreciated property generally, raised the price of wheat and

flour and other articles of this kind. The present war, though not less expensive, has hardly been felt in the monetary world. The extra expenditures of England have exceeded fifty millions of dollars; of France, about the same; of Austria, a large sum; and both Russia and Turkey have had heavy outlays of an extraordinary character. Amidst all, the price of English consols has not fallen over five or six per cent, the circulation of the Bank of England has not materially declined, the specie in her vaults has decreased only four millions sterling, and the demand for money has not largely increased either in Europe or America.

The rate of interest was, indeed, raised considerably in England, but this was due mainly to their deficient harvests. The stringency in their money market produced its effect in the United States, on account of our close connection with Liverpool and London, and of our large over-trading and borrowing in the preceding year.

The extra demand for coin for the support of distant, large, and expensive armies, has thus had but a slight influence on Commerce, and this can only be explained by the large supply of gold from the new fields which America and Australia have opened to the world.

The two facts that have now been referred to are of great importance in considering the demand and supply of cotton. If Russia is of small influence as a commercial power, the slight decline in the consumption of cotton during the past year is not due to the war; and if the extraordinary supply of the precious metals suffices to meet the extra demands made by distant and expensive armies, the fair and steady prices we have received for our exports have been due to the regular and legitimate demands of trade to meet the actual wants of the world. And if the war only affects, in the slightest degree, both the demand and the rate for cotton, our expectations for the coming year may be based on the usual circumstances that have heretofore influenced the consumption and the price of cotton.

In the United States, the purchases made by the Northern manufacturers have declined in 1854, if we compare them with 1853. This falling off is over 60,000 bales. But the amounts used by the factories have not probably been much less than during the preceding year. The tightness in our money market this summer compared with last, has made the Northern manufacturers lay in but small supplies, so that the stocks in their hands are very low. The prosperity, North and South, of all branches of the cotton manufacture, forbids the belief that the wants of 1855 will decline.

The average consumption for the three years ended 1845, were..... ....bales 354,000

1848

1851

1854

461,000

469,000

628,000

650,000 bales will be needed for 1855, against 611,000 and 671,000 for the last two years.

The deliveries to the trade at Liverpool, which constitute over 95 per cent of the English consumption, have suffered no decline for the present year. In the earlier part of the season they were less than in 1853, but this loss has been entirely recovered.

On the 30th of June these deliveries were 904,000 bales, against 989,000 of the year before. During the months of July and August this deficiency remained about the same. On the 14th of July it was 90,000 bales; on