Zippy Catholic is Back in the Saddle, Talking about Usury

Zippy Catholic is Back in the Saddle, Talking about Usury December 15, 2014

Sez he:

Given the Pope’s relatively recent strong public denouncement of usury, I thought your readers might be interested in my recently published (and even more recently polished) Usury FAQ.

Reminds me of a piece I wrote one time after reading Dante on the surprising connection medievals made between the sins of sodomy and usury.

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  • Zippy

    Thanks for the linkage, Mark. Sin is always trying to pass itself off as hopelessly complicated and impossible to understand, as no longer relevant to our enlightened circumstances, or as an impossibly difficult thing to avoid. In reality it is usually banally simple, pervasive, and avoidable. But imply that it is not morally OK to do whatever you want with money and listen to the wailing and gnashing of teeth.

    • Jared B.

      Some try to pass it off as hopelessly complicated or hard to understand, but in other cases, some pass it off as relatively easy to understand…only drawing opposite conclusions. There are many articles published over the years such as this one http://www.crisismagazine.com/2014/church-change-doctrine-usury for example, all of which are variants on an apologetics for the claim (if I understand them correctly) that lending money and expecting principle + interest back is not in fact usury, and that the Church no longer teaches that it is usury. It looks like a very simple & straightforward explanation of development of doctrine…but Zippy’s FAQ (once I re-read a couple parts to make sure I understood the terms) also looks like a pretty easy to understand explanation of Church doctrine.

      Both camps agree that there has not been any *change* in doctrine (so everyone’s “I am faithful to the Magisterium & Tradition of the Church card gets stamped) but seem to draw irreconcilable conclusions while both appearing to simply present Church teaching as-is, no spin. And this disagreement over an issue of mortal sin no less! Now I don’t lend money at interest ever so this is a little distant from my own life, but I do find this issue fascinating and wonder who correctly interpreting Church doctrine and who’s not.

      • Zippy

        Just look at who actually cites the Magisterium. I had to type in many of my citations of the Magisterium, from sources like Denzinger, because none of the folks who preceded me seem to have bothered to actually look at what the Magisterium has said on the subject. So a number of my citations, which are central to understanding the subject, were not on line before I typed them in.

        I think most of the Crisis-type articles out there are just surface reactions to Charles Curren’s contention (in the 1970’s) that the doctrine on usury changed, so therefore the doctrine on sex can change. The issue comes up every now and then as a club for sexual libertines to beat conservatives.

        But few people really want the doctrine of usury to actually mean anything, and the few fringe cases who do want to use it as some sort of polemical attack on capitalism overall rather than a straightforward moral doctrine.

        Someone might find it suggestive that the folks who claim that the doctrine hasn’t changed, but nevertheless now it is fine to charge interest on loans, seem to have turned a major, infallible, millennia old moral doctrine of the Church into a kind of decoration that has no implications for how people live. In my understanding the prohibition of usury does have implications for how we live, but it also does not constitute a comprehensive criticism of capitalism. It is really quite specific, and applies more than most people think but less than the ‘rad trad’ or distributist take proposes.

        • ArkansasReactionary

          Zippy, you never actually explained how it is that usury can never be committed against corporations, you simply asserted that

          A. The magisterium states that it can only be committed against natural persons, even though the magisterium does not say that.

          B. Money automatically becomes fruitful when it’s owned by a corporation.

          • Zippy

            ArkansasReactionary:
            I notice that your capacity to understand and accurately paraphrase what I’ve actually said has not improved.

            • ArkansasReactionary

              How are my paraphrases wrong?

        • Jared B.

          Distributism is exactly what I was thinking about. The question of what is & is not usury today is often wrapped up in that, because many (not all) of the “usury is still a live doctrine” proponents are on the distributist side, and the “usury is a doctrine but with zero modern application” proponents tend to lean more capitalist. And if the people actually making these well-reasoned argument like Zippy & Crisis don’t intend a political axe to grind, then plenty combox commenters defending / attacking them do! 😛

        • Jared B.

          Me, I don’t have any distributist vs. capitalist or pro- or anti-banking axe to grind, but I am a bit squeamish with the idea that student loans are unjust, owing my own university education mostly to them.

          I can gripe about paying them back with the best of ’em, but in all honesty I have never felt that a real injustice was done against me. If I lived in a world where there were no such loans, and lower-middle class families like the one I grew up in (that nasty middle that’s not rich enough to actually pay for college, but not poor enough to qualify for many scholarships or grants) therefore could not have the opportunity to go to college, I’d think that is an injustice as well.

          And yeah I know that using words like “squeamish” & “feel” does not make for moral theology, and that a hypothetical world w/o student loans could just have more & better scholarships & grants. My point is, is it still unjust if a person *sought out* a loan like a student loan, on those terms? Is the borrower committing a sin by seeking out such a loan? (I suspect not). Is the lender still guilty of Usury if they accept those terms, even when the borrower 100% freely consents to them (I suspect so).

          • Zippy

            Usurious student loans drive the price of higher education through the roof.

          • Zippy

            Re: the borrower/student, see question 23 of the FAQ.

    • Paul Stilwell

      “In reality it is usually banally simple, pervasive, and avoidable. But
      imply that it is not morally OK to do whatever you want with money and
      listen to the wailing and gnashing of teeth.”

      You mean like when someone says that a top-down pyramid scheme of debt is created when a government “borrows” the bulk of its country’s money into existence at compounding interest, when it could simply avoid this by directly issuing its money debt-free and controlling the quantity in circulation? You mean like that?

      But you think that when a Sovereign enslaves its country to debt it is not usury per se, or strictly speaking, or whatever. When in fact it is usury: it is usury wedded in unholy matrimony to the constitutional power of a Sovereign, which by definition must protect and foster the common good of its country, which can only be so if we accept that the Sovereign is in some way intrinsically connected with the outcome of its people, which can only be so if a Sovereign is a representative of some kind of its people.

      A Sovereign sells its sovereignty the minute it links its power to issue money with usury by selling government bonds to private banks.

      Usury is at the fountainhead of the issuance of money. More and more debt must be created in order for this “system” to keeping going.

      Anyone expressing what I have just written above will frequently come across a response like this: “hopelessly complicated and impossible to understand, as no longer relevant to our enlightened circumstances…”

      • Zippy

        Thank you for providing an example of exactly what I mean when I say that often the few people who do take usury seriously tend to try to recast it as an assault on whatever their political monomania happens to be (fiat currency, sovereign debt, or whatever), rather than a straightforward moral matter; thereby muddying the waters and insuring that ever fewer people bother to even try to understand the subject.

  • Usury, whether the soft version of not charging ‘excessive’ interest or the hard version of not having any assignment of a time value to money will have zero effect in a deflationary environment because you can’t justify significant interest anyway.

    We shouldn’t pretend, however, that in other economic environments, we aren’t going to give up a significant amount of economic growth by adopting these interpretations. I’m reasonably sure that the soft version of usury came about by an appreciation of how badly the economy distorted and how much extra misery was created by too strict an interpretation.

    Sometimes the faith demands sacrifice. In the case of usury, the sacrifice demanded is mostly of the poor and middle class who can no longer borrow.

    • Zippy

      TMLutas:
      whether the soft version of not charging ‘excessive’ interest or the hard version of not having any assignment of a time value to money

      That’s a false dichotomy. The key distinction between usurious ‘loans’ and non-usurious ‘loans’ is the difference between what today is called non recourse and full recourse ‘lending’.

      Many people put forth opinions about usury without first understanding what it actually is — and is not.

      It is perfectly fine to make a profit from licit – that is to say non recourse – investment. It is always immoral to make a profit from full recourse ‘investment’, which isn’t really investment.

      St. Thomas Aquinas explicitly defines a ‘loan’ – as the sort of contract on which it is immoral to charge interest – as what today we would call a ‘full recourse loan’: “the borrower holds the money at his own [personal] risk and is bound to pay it all back”.

      Non recourse debt is not usury (I cite the Magisterium on the point in a number of places, as well as Aquinas himself).

      • It might help to make clear what loans would be invalidated. Let me know if I’ve gone astray here.

        The US mortgage market would go. Those are all recourse loans. So would car loans. You don’t make payments and they seize your car. Education loans aren’t even dischargeable in bankruptcy so they’re out the window.

        These are three of the largest lending sectors in the US. Life would radically change, and mostly by downward mobility for the middle class and working class if you could not borrow at the present low terms on these three items.

        It’s a Wonderful Life must look very different to you, Zippy, than it does to most people.

        • Hezekiah Garrett

          So you don’t dispute Zippy’s contentions, you merely point out the sacrifice involved in thinking with the Church on the issue?

          • At present, I’m not disputing his contentions. I simply don’t know enough on the subject to know whether he’s right or wrong on his distinction of non-recourse and recourse loans. I only go on the attack on well trod roads to stupidity and evil. New paths deserve (and usually get) a more cautious approach.

            This is a novel concept for me (that usury is defined on these lines) and thus I’m in information gathering mode at present. Mapping out how big this change is gives me a sense of where I should put it in my personal research priority list is all.

            • Zippy

              You could start by reading my FAQ.

        • Zippy

          TMLutas:
          You should educate yourself on what the terms mean, because you are drawing conclusions (e.g. “the US mortgage market would go”) which do not follow.

          • The US mortgage market so far as I can tell is dominated by full recourse loans. Is that correct or not correct? We probably would have a mortgage market without recourse loans but they are unlikely to be the same loans.

            Do we at least agree that student loans fit your definition of usurious? They have no collateral in general and are nasty beasts that survive even bankruptcy.

            • Zippy

              Student loans are definitely usury.

              The loan to value ratios of US mortgages are in much better shape than they were several years ago, and de-facto deficiency judgements are rare. So declining to enforce rare contingency may have some effect, but it isn’t clear that it would be material.

              • What does loan to value ratios have to do with whether something is usurious or not?

                My first reaction was that non-recourse probably puts home ownership out of reach for people living at the margin due to higher interest rates based on recourse bans. Higher interest rates would disproportionately affect the less well off. Does the ban on usury really strike the poor heaviest?

                A seeming contradictory tension is created which I’m sure is resolved somehow (I have faith anyway) but I don’t see how off the top of my head. Contradiction is usually a sign for me that I’ve not studied the situation enough or someone’s fed me bad information.

                • Zippy

                  It is true enough that if usury were not enforced by the government, people would not be able to buy things with the proceeds of usurious loans that they objectively cannot afford.

                  • You seem to be endorsing the villain’s position in It’s a Wonderful Life. Affordability is irrelevant to usury status. I thought that came through pretty clear that it was recourse/non recourse that was the marker. Since recourse improves affordability by lowering rates, you seem to be in favor of reducing affordability on the one hand and adopting a paternalist pose to save debtors from overspending on the other.

                    It is for their own good that they will need higher down payments?

                    • Zippy

                      You seem to be endorsing the villain’s position in It’s a Wonderful Life.

                      That’s right, I’m the bad guy.

                      Since recourse improves affordability by lowering rates, you seem to be in favor of reducing affordability…

                      I know, right? I’m against easy access to companionship for johns and chemical comfort for junkies too. I’m thinking of growing a Hitler ‘stache.

                      The contention that recourse improves affordability only looks at one side of the curve, by the way. Do you think higher education, cars, and homes would be as expensive as they are now if their prices weren’t hopped up on usurious loans?

                      Not, again, that those practical considerations have any bearing on matters of intrinsic morality. It is intrinsically wrong to make usurious loans, and it is intrinsically wrong for the sovereign to act as enforcer of usurious loans, whatever the consequences.

                      It is for their own good that they will need higher down payments?

                      Not just their own good, but everyone’s good. For example, people buying houses they could not afford on the back of usurious loans led to the 2008 financial crisis, which – if you hadn’t noticed – didn’t just affect the usurers and their clients.

                    • If you desire to actually effect policy change, you cannot ignore that there is a significant amount of social pressure on the other side. Capra is not God. He is just influential.

                    • Jared B.

                      If you desire to actually effect policy change…
                      Well there’s a false premise right there. Read more of Zippy’s blog, and it’s pretty clear the intent is simply to articulate the truth. I think his FAQ succeeds pretty well in doing that (tho I am still open to listening to other sides of the debate). TMLutas, whether one can “effect” anything, or what social pressures there are, or even what other sides there are, all that is completely separate and irrelevant to the first and primary question, which is whether or not it is true. Though it does obviously have repercussions in the financial & economic world, this is not a pragmatic/consequentialist/utilitarian question.

                    • At this point, I think that Zippy doesn’t have a real grasp on the truth. He’s tripped up on the time value of money which he claims does not exist. Vix Pervenit does not engage with the concept at all. With the time value of money, the modern theory of usury as avoiding excess interest is perfectly consistent with Vix Pervenit as at contract, what is being offered is not what is being repaid if the sums are exactly the same. Future money is always discounted in contrast to money here and now which is valued at its face value.

                      The equality which Pope Benedict envisions is correct, morally. It’s just not achieved by the remedy of no interest at all which, absent any economics trained advisors on the subject, sounds like a reasonable solution and the one that Benedict XIV proposed.

                    • Jared B.

                      I think Zippy has an extremely good grasp on the truth, even if TMLutas turns out to be right about the importance of the “time value of money”. If you’re right, then Zippy is still right about everything he has said about the teaching of the Church…but there may be a legitimate development of the doctrine of usury (i.e. taking newer economic realities into account), which Zippy isn’t concerned about and TMLutas is.

                      With a development of doctrine, the older way of articulating a doctrine doesn’t suddenly become wrong overnight, it just becomes a less-than-totally-complete way of expressing it.

                    • It’s not accurate to say that ‘Zippy isn’t concerned about’ the time value of money. He’s demonstrated his concern repeatedly on thread.

                      If he were to call his FAQ the ‘Usury 1390 FAQ’ I would have zero objections. But he’s calling it the Usury FAQ which implies that it’s an accurate document describing widely agreed upon statements regarding usury in the year 2014. This is simply wrong as it’s more of a manifesto in FAQ format.

                      As I was educated in the art of FAQ creation, FAQs were for uncontroversial questions that had one widely accepted answer, in order to save space and time. Sticking an issue of controversy into a FAQ was a guarantee to pick the scab off the perennial dispute for another go around and thus revive a subject that everybody was already sick of no matter which hardened camp an individual participant in the group fell into.

                    • Jared B.

                      See my other comments about development of doctrine. By ‘isn’t concerned about’ I meant that he has asserted that the time value of money, no matter which economists say what about it, is wholly irrelevant to the Church’s doctrines about usury.

                    • I’m asserting that the Church doesn’t act like that is true and hasn’t for quite a long time. I’m always uncomfortable starting out with the Church is institutionally filled with a huge band of hypocrites who can’t be bothered to update doctrine but have been cheerfully denying it for over a century. That’s just not the way to bet.

                      The originator of the time value of money was apparently a Catholic. Not only was he a Catholic but a canonist and theologian. Not only that but he was apparently celebrated in his day so it wasn’t like he was an obscure monk planting veggies at a monastery like Mendel was.

                      This smells like we’re missing something, that the Church has dealt with it post Aquinas and maybe/maybe not post Benedict XIV. If they did and Vix Pervenit was a misfire because nobody invited an economically trained churchman to the table for input (thus yielding a true, yet woefully incomplete encyclical) it would explain why nobody cites the thing.

                    • Jared B.

                      Yeah I also am uncomfortable with the idea that the Church (while supernaturally preserved from teaching error) is so neglectful in its actual teaching duties, but on the subject of usury, one ends up there no matter what. As I noted in an earlier comment, all of the post-Vix Pervenit statements that I have seen quoted / cited are compatible with, but not conclusively for or against, both the traditional Scholastic understanding of usury and the newer economic understanding of it. (Again, if anyone has a single Church statement or document that so much as acknowledges that time-value-of-money thing, please link to it!) So, given the fact that the prevailing, popular understanding of usury is one thing but the last-known official understanding is something else entirely, it means that no matter who is right, some update/clarification is necessary, and the Church just hasn’t gotten around to it yet. That does make me sad.

                    • Research seems to yield a pointer to something called the School of Salamanca. No specific work found yet.

                    • Jared B.

                      If the actual effect of lower (or no) down payments, multiplied, are recessions like our recent one, then yeah, it’s for everyone’s good that higher down payments are needed; in the long term it is even better for the poor.

                      And it could be argued that inventing financial fictions just to allow more people to e.g. buy houses (keep in mind that for most of civilized history it is usurious contracts, and not the concept that usury is sinful, that is a ‘new path’, in TMLutas wording) is paternalistic as well, to save lenders from having to obey the moral law in order to stay in business.

                    • Liar loans are never ok whether they are usury or not. There is a great temptation to toss in extraneous issues.

                    • Jared B.

                      Wow. I don’t think you see eye-to-eye with others about what is an extraneous issue vis-a-vis usury and what is not. I was not even referring to “liar loans”, I was referring to stuff like collateralized debt obligations (I couldn’t remember the exact term in my previous comment; looked it up at http://en.wikipedia.org/wiki/Causes_of_the_Great_Recession#Financial_product_innovation )

                      If the telltale sign of usury is trying to sell something that does not in fact exist, then CDOs and indeed almost the entire “debt market” may be usurious. My point at any rate is that after the Great Recession, the “medieval” prohibitions against usury suddenly look very relevant, very practical, and a lot more beneficial for the economy than business as usual. Hardly on Mr. Potter’s side.

                    • I was using ‘liar loans’ in a broader sense than usual so you’re probably right to call me out a bit on that.

                      The causes of the 2008 crash were somewhat complex in that we had been lessening the truth telling capability of the ratings system (since the mid ’70s actually) and had been pushing on the other side with the CRA to increase the incentive to lie by forcing the production of bad loans. We had also declined to collect several years of deposit insurance premiums from banks which weakened our national insurance reserves against bank failures. None of these, or many of the other, unlisted factors that went into the events of 2008 are issues of usury.

                      Banks will not lend when there’s a realistic pathway for the lender to escape with their money. Scammers will not leave alone an exploitable pathway to steal from a bank. Between the two, either the effect is very small of recourse/non-recourse in which case it wouldn’t have made a difference to the Great Recession, or the mortgage market in the non-recourse states is very different than the market in the recourse ones in which case there’s a lot of math to be done .

                      Nobody’s ventured to actually lay out the difference in behavior between the two categories of states. I tried to find data but was not successful in the limited time I will devote to one of these threads.

                      I looked up the Jimmy Stewart speech I was thinking of:
                      http://www.imdb.com/title/tt0038650/quotes?item=qt0461014

                      “what’d you say a minute ago? They had to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they’re so old and broken down that they… Do you know how long it takes a working man to save $5,000?”

                      Potter’s later sin of hiding the lost money makes him the villain but in usury terms, non-recourse makes us more like Potter than Bailey. That’s not a snide shot at anybody. I still believe that.

                    • Zippy

                      The causes of the 2008 crash were somewhat complex in that we had been lessening the truth telling capability of the ratings system (since the mid ’70s actually) and had been pushing on the other side with the CRA to increase the incentive to lie by forcing the production of bad loans. We had also declined to collect several years of deposit insurance premiums from banks which weakened our national insurance reserves against bank failures. None of these, or many of the other, unlisted factors that went into the events of 2008 are issues of usury.

                      Those were very much the result of usury. Those bad loans – their high loan-to-value ratios and ambiguous ratings – are directly the result of being able to count open ended obligations of persons as “assets” on the books.

                      Non recourse lending doesn’t suffer from the problem of being unable to collect, because everything to which the contract entitles the lender can be collected by definition.

                    • Jared B.

                      Exactly. Economic upturns & downturns including recessions wouldn’t be completely avoidable even if recourse loans were eliminated, but when large assets, investments, and entire markets collapse overnight (as many of us watched our 401-ks halve in value), that’s usually a telltale sign that those “assets” were never truly worth that much to begin with. It is a lot harder to outright lie about the value of investments, loans, assets etc. when you only have real assets to work from, eh.

                    • You say “Non recourse lending doesn’t suffer from the problem of being unable to collect, because everything to which the contract entitles the lender can be collected by definition.” This is simply wrong.

                      I loan Bob $1000 and expect $1050 back at the end of the year. We contracted for that. As a backup, some property is used as collateral. It’s valued at $1500 at time of signing. I do not have recourse to any other assets. I am not entitled to the property by the contract. I’m entitled to $1050. In the failure of Bob to pay what he owes, I can collect the property. So Bob runs off to Brazil with my money. I get the collateral property which, after all the expenses are said and done yields me $800. You say I don’t have a collection problem. Of course I have a collections problem. I don’t have my $1050.

                    • Zippy

                      Your expectations are not property. If the loan is non recourse nobody has to run off to Brazil to leave you with your property. It is already yours, and if he cannot or will not continue to rent it then it reverts to you.

                      You still have not grasped the concept of a non recourse loan. If you gave him money with insufficient loan capitalization, that’s your bad as a lender. Suck it up. That’s what you agreed to in the non recourse contract.

                    • Collections aren’t property either unless you factor them.

                      I was about to edit the response to add in some more issues with your response. Those high loan to value loans were very much the result of the Clinton era CRA reforms that threatened bank charters if they did not offer enough lending to the right sort of clients, customers who couldn’t afford 20% down. So the standards were loosened and we were off to the races because US law doesn’t allow for ‘hey you’re [insert race here] so you get a 0% loan, unlike [insert race here] people who get charged a higher rate’.

                      Those political pressures would have been identical with the identical results of accumulating bad loans in the system. We know this because California is a non-recourse state and also one of the major epicenters of our bad loan troubles.

                      I haven’t made up my mind about the merit to your definition of usury. When you just make stuff up about events I have studied, it makes me less inclined to believe you’re not being a fabulist about what the Church says.

                    • Zippy

                      The collateral is property. If you paid more for that property than it is worth, well, that’s life. In a non recourse loan you are by definition not entitled to more than the collateral.

                    • You are simply being economically illiterate at this point. You are entitled to your contractual payment if you lend money. This may exceed the market value of the collateral. That the collateral is reduced in value does not reduce your contractual obligations.

                    • Zippy

                      You are entitled to your contractual payment if you lend money.

                      Not in a non recourse loan, you aren’t. In a non recourse loan you are entitled to specified payments or as much of the balance as you can extract by foreclosing on the property.

                      That’s what “non recourse” means. That’s why a non recourse lender can always, by definition, recover everything that he is entitled to recover under the terms of the contract.

                      If you make too big a loan collateralized by not enough property, you agreed in the contract that you are not entitled to collect any more than you can recover by foreclosing on that actual property.

                    • Sorry, you are entitled to your payment. You are simply wrong on this point. If you walk away from the loan payments, “mail in the keys” as it were, the bank cannot come after you to collect other assets. You will, however, have a ruined credit rating for years afterwards. If you really had no obligation beyond the collateral, you would be able to successfully sue for the trashing of your credit rating.

                      The dominant situation is when the collateral covers the loan value at contract signing but subsequently falls below loan value during the contract term. To avoid this situation, non-recourse loans will tend to have a bigger cushion and thus you need a bigger down payment to get them.

                      You are claiming things that are not true. I just don’t know how many of your claims are not true. This is not a good strategy if you want people to believe you on matters of Church teaching that don’t come up very frequently.

                    • Zippy

                      Sorry, you are entitled to your payment.

                      Then the loan is a mutuum, and it is usury.

                      If it is understood to be a violation of the contract to cease payments and leave the lender in possession of the collateral, then it is a mutuum loan and any interest charges are usury.

                    • No skin off my nose, the assertion that non recourse loans were not mutuum was yours. In a non recourse regime, the major consequence of that failure to pay is reputational. If you want to assert that this has usury implications, that is your call. I am just poking at the economics in hope of better understanding your theological claims.

                    • Zippy

                      The fact that the term “non recourse” is used by different people in different senses doesn’t really add anything to the substantive discussion. Many terms are used by different people in different senses.

                      If the lender is entitled to payment (your words) in any sense independent of the collateral property, it is a mutuum. If the lender’s property interest terminates fully in the property under the terms of the contract, it isn’t a mutuum.

                      “Non recourse” is the best succinct modern term we have to describe this, and that people at times use it in a different sense is really neither here nor there.

                      Still, it is worth clarifying the point for readers of the FAQ, so I added a footnote for that purpose. I appreciate the feedback.

                    • Zippy

                      In a non recourse regime, the major consequence of that failure to pay is reputational. If you want to assert that this has usury implications, that is your call.

                      If your contention is that the debtor is in fact entitled to walk away under the contract – which is different from what you contended upthread, when you said that independent of the collateral the lender was “entitled to payment” – but that people make frowny faces when he does so, then it seems to me that the frowny faces are extrinsic to the contract.

                      At issue is what property claims are asserted and agreed in the contract. And you seem to be equivocating on what those claims are.

                    • People do not just make frowny faces. Your ability to contract in future is impaired. You may find it harder to rent an apartment, for example, with a 400 FICO score than your previous 680 FICO score. Auto insurance may be more expensive to acquire. Your employability may be affected as these scores are marketed to employers.

                      This is only legal because, in fact, your contention that all that is owed is the collateral is simply not true. You fork over the collateral instead of the money owed, you’ve screwed the lender and everybody else would like to know it so they deal with you as little as possible going forward.

                    • Jared B.

                      Sorry, you are entitled to your payment. You are simply wrong on this point.

                      Morally, TMLutas is wrong on this point. That attitude is almost certainly the source of usury in the first place: it’s like taking a “total war” stance in regard to recovering what is rightfully yours. Yes, a lender is rightfully entitled to get back what a contract says he is entitled to get back: it does not follow, logically or ethically, that any & all means necessary can justifiably be employed to get it back. Sorry, but sometimes the lender can and will lose out on the deal.

                      If you walk away from the loan payments, “mail in the keys” as it were,
                      the bank cannot come after you to collect other assets. You will,
                      however, have a ruined credit rating for years afterwards. If you really
                      had no obligation beyond the collateral, you would be able to
                      successfully sue for the trashing of your credit rating.

                      Yeah, pretty much everything about that statement is demonstrably false. Yes, financial institutions (and/or government institutions) can & do come after people in those situations: everyone knows bankruptcy isn’t always a cure-all. And TMLucas conflates legal, ethical, and charitable understandings of the word “obligation” to arrive at the second statement.

                      TMLucas is claiming things that are not true: not logically, not theologically, not morally, not ethically, not historically, not factually.

                    • Not paying all that is due is the very definition of default. Collateral is something that gets handed over in the case of a loan default. It is a penalty for default, not a substitute for payment.

                      If you ding somebody’s credit score that they defaulted on a loan and they did not, in fact, default on the loan, that’s legally actionable. Mistakes are tolerated but lying about someone as part of a “total war” campaign is not legal in the US.

                      Now, you say that all this is “demonstrably false”. Well, demonstrate it.

                    • Are you aware that if you force a bank to foreclose, you ruin your credit score? Are you aware that this happens in all 50 states whether they are recourse or non-recourse states? Are you aware that if foreclosure gives the bank all that is owed, it would be illegal to report a score lowering event to the major credit bureaus?

                      Banks regularly ding customers who hand over their houses in non-recourse states. Nobody sues over that. Your economic model simply does not exist in reality. This also makes me doubt your theological model.

                    • Zippy

                      That the Clinton administration forced banks to make undercapitalized usurious loans doesn’t undermine my contention that usurious loans were foundational to the 2008 crisis.

                    • The Clinton administration forced banks to make undercapitalized loans, period. In the 11 (or is it 12) non-recourse states they were forcing the banks to make non-recourse loans. In the remaining states, the loans were recourse. If the problem were usury, we would have seen the state loan markets of the non-recourse states not be in crisis.

                      One of the non-recourse states is California. It’s hard to find a state that was worse hit by the 2008 financial crisis than California.

                      We’ve already tested your theory back in 2008. It doesn’t work as a bar to that sort of financial crisis.

                    • Zippy

                      The derivative securities held by Bear Stearns and Lehman that led to their collapse were at the root of the ’08 crisis. Understanding the structure of those securities is central to understanding the ’08 crisis. The fact that a small number of US states are non recourse states, and that California is non recourse and was hit hard, is irrelevant.

                    • You are right that California’s status as non recourse is irrelevant because usury as you define it is irrelevant to the 2008 crisis. The derivatives were all corp 2 corp agreements and the underlying securities proceeded independent of the CDO they were in and its fate.

                    • Zippy

                      The derivatives were all corp 2 corp agreements …

                      Are you unaware that the “debt obligations” in the term “collateralized debt obligations” were mortgages?

                    • Reread your own FAQ. You directly cover this in point 44.

                    • Sorry, you don’t get to just say ignore California. That’s entering crazytown. There might be a legitimate case to put aside California but you’ve not made it and you frankly don’t have the credibility to just say ‘trust me’ on a matter of economics that has nothing to do with the Church.

                    • Zippy

                      That a few states have non recourse mortgages – which you are busily arguing are usurious anyway in other parts of the thread (I really detest how unreadable these Discus threads are) – is not really material to the massive crisis of 2008.

                      You do have a point that if the government forces lenders to make even non recourse loans with lousy loan-to-value ratios, that can lead to unreliable revenue streams from those mortgages. Basically if the government insists that investors make stupid investments it creates the same sort of problems as if the investors had made those choices themselves.

                      So I’ll give you that. It has never been my contention that eliminating usury would eliminate all economic problems. But it would certainly eliminate many, and usurious lending unquestionably was a major factor in the events of ’08.

                      The larger point is that it is simply false to suggest that usury does no harm just because someone is under the impression that it ‘worked out’ for himself.

                    • I am not arguing that any mortgages are usurious, you are. Please do not misstate my position.

                      I’ve been trying to figure out whether, at least from an economics perspective, your position is internally consistent and is externally consistent with reality. I’ve come to the conclusion that it does not and therefore, it is unlikely that the documents (your usury FAQ) you are purporting to be the Church’s position on usury are actually the Church’s position on usury.

                      What the Church’s actual position on usury is, I am less certain of. This uncertainty makes it impossible for me to judge if you’re in error in one, small, easily corrected instance and the FAQ is salvageable or there’s a deeper problem which would argue for a blank sheet of paper approach.

                      As to the government’s forcing actions, glad we have come to agree that usury/non-usury doesn’t provide enough of a difference to have saved us from the unfortunate decisions leading up to the Great Recession.

                      I actually agree with you that it is possible for someone to be deluded as to whether a financial arrangement was beneficial or harmful. But that can be said for anyone. I can be deluded as to the beneficial consequences of someone’s financial arrangements just as much as the person himself. In fact, as an outsider I’m more likely to be deluded because I will tend to have less information relevant to the decision.

                    • Zippy

                      I am not arguing that any mortgages are usurious, you are.

                      To state the case more accurately still, you are arguing that all mortgages – including those in non recourse states – meet the criteria I have set forth for usury.

                      Which may or may not be the case, but if you are right about it that supports rather than undermines the proposition that the ’08 crisis was founded in usury — as I have articulated usury.

                    • First of all correlation does not equal causation. There might be a causative link but it might equally well be just a coincidence because there are so few loans out there you would not call usurious.

                      Any economic crisis would have a spurious correlation with usury if nearly all loans are defined as usury and loaning money is a significant economic activity. There is no causative mechanism that you’ve demonstrated so the linkage is in the might/might not be true stage.

                    • Zippy

                      I am not arguing that any mortgages are usurious, you are.

                      More accurately still, you are arguing that all mortgages, even those in non recourse states, are usurious as I have articulated usury.

                      If that were stipulated to be true it supports rather than undermining the proposition that the 2008 crisis was the result of usury as I have articulated it.

                    • Zippy

                      … glad we have come to agree that usury/non-usury doesn’t provide enough of a difference to have saved us from the unfortunate decisions leading up to the Great Recession.

                      Sadly that overstates the extent of our agreement. All I’ve agreed to is that usury was not the only factor.

                    • In the non-recourse states, they were forcing the making of non-usurious loans (at least by your definition). A natural experiment took place and the results were, so far as I can tell, exactly zero difference. So, yes, the CRA reforms do undermine your contention.

                    • Zippy

                      So, yes, the CRA reforms do undermine your contention.

                      Not really. Eliminating usury eliminates the incentive for investors to make usurious loans. But if the government forces investors to make stupid investments, that has the same effect as if the investors were making those stupid investments themselves.

                      So now that I understand your point — that the government ‘washed out’ incentives even in non recourse states by basically forcing irrational investment — I grant it as a factor.

                      But it has never been my contention that usury was the only factor in 2008. Just that it was a major factor, and more generally that it is economically harmful. As with most contentions about events in large and complex economies, this is infinitely debatable. So folks will have to make up their own minds, as ever, what they think is credible.

                    • You would think that if they’re a major factor, you’d have a detectable difference. You don’t.

                    • Zippy

                      There are all sorts of priors wrapped up in that, of which you seem blissfully unaware.

                    • Jared B.

                      Yeah you have a collections problem, but the expectation that you have a right to have no collections problems, under any circumstance, seems to me to be the essence of “have your cake and eat it too” usury. You give a loan, you take a risk: you can’t take that risk and at the same time expect to have some right to any 100% guarantees of safety nets against the risk you chose to take. The possibility of ending up with $800 instead of $1050 is precisely that risk. Measures taken, economic or legal, to artificially safeguard the lender against that risk, is usury.

                    • We actually agree on collections. It’s Zippy going around saying that non-recourse loans have no collections problems.

                      I’m not sure what you mean by “artificially safeguard”. That’s a term so wide and devoid of intrinsic meaning that I hesitate to say anymore until you define the term.

                    • Jared B.

                      Yeah you have a collections problem, but the expectation that you have a right to have no collections problems, under any circumstance, seems to me to be the essence of “have your cake and eat it too” usury. You give a loan, you take a risk: you can’t take that risk and at the same time expect to have some right to any 100% guarantees of safety nets against the risk you chose to take. The possibility of ending up with $800 instead of $1050 is precisely that risk. Measures taken, economic or legal, to artificially safeguard the lender against that risk, is usury.

                    • I thought you said that usury doesn’t apply to corporations. So let’s try this again, how does usury apply to corporations?

                    • Zippy

                      This has been covered before. “Usury doesn’t apply to corporations” is wrong as a general statement. A corporation can – and many do – have usurious loans on their books.

                      That a corporate bond is not an intrinsically usurious contract does not imply that (some) corporations do not (at times) make – and trade in – usurious loans to individuals.

                    • CDOs aren’t loans. They are agreements on how to divide up loan proceeds which might or might not be usurious depending on which state the underlying loan pool is drawn from. The CDOs from non-recourse states crashed just as badly as the recourse state ones did.

                    • Zippy

                      agreements on how to divide up loan proceeds

                      So we agree, at least, that the underlying assets in the CDO’s were loans. Specifically home loans.

                      That’s a start. You’ll get there, unless you don’t want to get there.

                    • Your usury FAQ covers this in point 44. Remoteness applies with the CDO just as it does with a checking account. In neither case can you identify any particular home loan.

                    • Zippy

                      In neither case can you identify any particular home loan.

                      Sure you can. If a CDO did not incorporate tranches from specific home loans it would have no “DO” part. There are personally identifiable human beings who are required under the contract terms to be making those payments, else there would be no money flowing at all. If they were not there, the CDO instrument could not exist.

                      The case of a bank account is different. It is true that some of the bank’s operating income (if it has consumer credit products) comes from usurious loans. But not all of it does, and there are no specific contractual ties between particular usurious loans and the depositor. The bank could (and should, for that matter) stop making usurious loans entirely and that would have no effect on the terms of its contract with the depositor.

                    • There has been a lot of litigation on the subject of who owns what. In fact, it is incredibly difficult to do, and with the level of document fraud in the creation of these instruments, it’s practically impossible in a surprising number of cases to establish who, exactly, holds your mortgage.

                      Since part of your difficulty is that you don’t understand what a CDO is, here’s a link to a Forbes article that hashes out the issue:
                      http://www.forbes.com/2010/05/17/what-are-collateralized-debt-obligations-personal-finance-cdos.html

                      Note that a CDO might have 0% mortgages, 100% mortgages, or any amount of mortgages in between. The chance of you figuring out what percentage of the income stream is usurious is pretty much zero. If anything, it would be easier to figure out the portion of usurious income from a savings account than it would be from a CDO. There are fewer variables involved, fewer players, and more regulation mandating information release.

                    • My mistake on your position regarding usury and corporations.

                      You’re still wrong on other grounds but I withdraw the idea that you’re not being consistent on this point.

                    • You seem to be persisting in an error that the debt varies with the market value of the collateral. This is simply false as any banking officer would be able to tell you. You’re on the hook for the full amount of the loan. There simply is no judicial recourse once foreclosure takes place. The deficiency can and generally does get sold off to a collection agency and you will get legal calls to collect the debt post foreclosure.

                      Some people even pay further amounts to zero out the debt in a negotiated settlement.

                • Zippy

                  What does loan to value ratios have to do with whether something is usurious

                  Nothing. I was addressing the issue of what the practical effect of the government declining to enforce deficiency judgments on those loans might have.

                  • By declining to enforce existing agreements you add political risk to the US. This reduces one of our major competitive advantages. That is not good as it is a tax on all legal agreements.

                    • Zippy

                      The government declines to enforce all sorts of existing agreements. Like the ones between prostitites and johns, and the ones between drug dealers and junkies, for example.

                    • Could you actually address the issue of political risk?

                    • Zippy

                      What policy changes don’t involve political risk?

                      Eliminating usury — by having the government decline to enforce deficiency judgments against individual persons — is probably no riskier politically than was, say, invading Iraq or torturing prisoners.

                      Folks always seem willing to take political risks in what they support, and only become squishy about it when it comes to things they don’t support.

                    • We do not share a common definition of political risk. Political risk is the risk that the rules change during the term of an agreement.

                    • Zippy

                      Political risk is the risk that the rules change during the term of an agreement.

                      You mean agreements like this one?

                      http://en.wikipedia.org/wiki/United_Nations_Convention_against_Torture

                    • Commercial agreements were under discussion. I wasn’t aware of the commercial nature of the convention on torture.

        • Heather

          If I understood the article correctly, car loans and house loans don’t fall into that category. The loan is guaranteed by the car or house itself. You miss your payments, they own the car (or house) and take it back. The loans where usury would apply are ones where there isn’t a specific thing guaranteeing the loan other than the debtor him or herself.

          • Zippy

            That is almost right, Heather. Suppose though that the bank auctions off the house and it does not fully cover the loan balance. If the contract allows the bank to pursue you individually at that point for the balance – this is called a ‘deficiency judgment’ – then the loan is usury. If the loan is tied up only in the property, it is not usury.

            One way to think about why usury is wrong is because it involves purchasing a property share in persons, as opposed to specific assets. That is why it is related, morally, to slavery.

            • egosumscotus

              http://www.forecloseddreams.com/recourse_states

              See the above link. Not all states allow recourse, at least for purchase money mortgages. Some that may not allow recourse for purchase money mortgages might allow it for second mortgages.

              • Zippy

                Correct. A small number of states do not enforce full recourse mortgages, and in those states a mortgage cannot be usurious.

            • egosumscotus

              But since a creditor can’t seize a person for debts in the US (and I assume most countries nowadays) isn’t the difference just a question of specific vs. non-specific assets. Is that a significant enough hook to hang a distinction?

              • Zippy

                isn’t the difference just a question of specific vs. non-specific assets

                No. Personal loans lay claim to a person’s future earnings and assets in addition to any property he has now; so the lender is not purchasing a share in real finite defined assets that actually exist, he is attempting to purchase a share in the potentialities of a person – which he can only accomplish by purchasing an economic share in the actual person. See question 16, among others.

                • egosumscotus

                  Two points: (1) The creditor isn’t purchasing a “share” of the person’s future earnings. If there is a default on the loan, the creditor is entitled to a judgment for a finite amount which can be collected from a person’s future earnings or from whatever other assets the person may in the future acquire. The creditor doesn’t get, say, 20% of a person’s earnings ad infinitum in the way that a person buying a 20% share of a corporation will get 20% of its profits as long as he owns the shares. (2) A creditor holding a judgment against a person doesn’t have any power to force that person to do anything to earn money or acquire assets to pay the judgment. A debtor can’t be put into debtor’s prison or forced into labor for the benefit of the creditor, at least in any country I am familiar with.

                  • Zippy

                    The creditor isn’t purchasing a “share” of the person’s future earnings.

                    Yes he is. He gets regular payments from the person, and – by the definition of a full recourse loan – the contract is completely agnostic as to where they come from.

                    A creditor holding a judgment against a person doesn’t have any power to force that person to do anything to earn money or acquire assets to pay the judgment. A debtor can’t be put into debtor’s prison or forced into labor for the benefit of the creditor, at least in any country I am familiar with.

                    Sure: he can stop working entirely and live as a bum, thereby destroying his own future potential to which the usurer has laid claim, but which does not actually exist at the time of sale. The astute will realize that that actually demonstrates that what the usurer asserts a property interest in – the future economic potential of the person – does not actually exist. If it actually existed, he would be able to collect it.

                    In non recourse loans a creditor can always collect precisely and entirely what he is entitled to under the contract, because what he is entitled to under the contract always actually exists — if it doesn’t exist, then by definition he is not entitled to it, since his recourse is only to things that actually exist. That full recourse creditors are not always able to collect precisely and entirely what they are entitled to under the contract demonstrates Aquinas’ point that usury involves selling what does not exist.

                    • egosumscotus

                      “Yes he is. He gets regular payments from the person, and – by the definition of a full recourse loan – the contract is completely agnostic as to where they come from.”

                      –> I assume you are talking after there has been a default and judgment entered for the creditor? I define a share as a fixed percentage, as in a share of a corporation. So a judgment creditor doesn’t get a fixed percentage of a debtor’s future earnings forever, he simply gets X dollars representing his judgment.

                      “Sure: he can stop working entirely and live as a bum, thereby destroying his own future potential to which the usurer has laid claim, but which does not actually exist at the time of sale. The astute will realize that that actually demonstrates that what the usurer asserts a property interest in – the future economic potential of the person – does not actually exist. If it actually existed, he would be able to collect it.”

                      –> But wouldn’t this be equally true even if the creditor was not a usurer (i.e. not charging interest)? I could make a loan to you of $100 no interest and if you didn’t pay it back I could go to court and get a judgment which, assuming you did not presently have $100 to re-pay me, I could enforce against your future earnings, the same as would a usurer. So in that sense I am still asserting a property interest in your future economic potential.

                      In full recourse loans a creditor can always collect precisely and entirely what he is entitled to under the contract, because what he is entitled to under the contract always actually exists. That non recourse creditors are not always able to collect precisely and entirely what they are entitled to under the contract demonstrate’s Aquinas’ point that usury involves selling what does not exist.

                      –> I think you have that reversed. The non-recourse (i.e. secured) creditor has a specific asset to go after, the full recourse creditor may or may not (depending on whether his loan is secured). Neither are guaranteed to cover the value of the debt, since the value of securitized property could change. But again, what does this have to do with charging interest? Even if no interest is charged on the loan the debtor is still promising in the future to pay back the loan with earning he has not realized yet.

                    • Zippy

                      But wouldn’t this be equally true even if the creditor was not a usurer (i.e. not charging interest)

                      Yes. That is why mutuum loans are only ever morally licit as acts of charity. Only non recourse contracts are morally licit as investment for gain.

                    • Zippy

                      Neither are guaranteed to cover the value of the debt, …

                      The collateral is guaranteed to cover what the lender is entitled to under a non recourse contract, because he is not entitled to anything if the collateral’s value goes to zero. That’s what he agrees to when he agrees to a full recourse contract.

                      Here is the Magisterium, describing a licit contract as contrasted to usurious (Pope Callistus III (1455-1458), Usury and Contract for Rent) (full citation is at my site):

                      But the [lender], 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.

                      Non recourse contracts represent the purchase of a property interest in something that really exists; as such, it is licit (generally speaking, though it is always possible to do moral wrong even in contracts which are not intrinsically immoral) to make a profit. It is always possible to collect what the non recourse lender is entitled to — although it is possible for what the contract entitles him to to go to zero (say the house burns down and there was no insurance bond).

                      Full recourse contracts represent an attempt to purchase an economic interest in something that does not exist. That is why it is possible to fail to collect what the contract terms assert as the entitlement of the lender.

                      Mutuum (unsecured) loans are only ever morally licit as acts of charity toward the needy, or toward a friend. They are not a purchase of anything.

                    • Look at the 70s inflation bout for a situation where it pays to gather assets and pay as late as possible. That meant that people like my parents could have paid down their loans but were profiting several percent by sticking to the schedule. A contract failure would therefore not necessarily encumber future earnings. Economic life is more complex than that.

          • From what I have read and Zippy himself has said, recourse car and house loans are the dominant US forms of lending in those two sectors.

            • Zippy

              It is true that car prices would probably go down if they were not artificially propped up by usurious debt. Whether home prices would adjust downward is doubtful, as the incidence of actual deficiency judgments is quite low.

              None of these practical considerations affect the intrinsic morality of usurious and non usurious contracts, of course.

              • The prices would go down as a result of lower demand as fewer could afford them. That has no bearing on the sinfulness of a loan but does matter in how this will hit the poorer end of the market.

  • Meles

    And I thought economy was *already* too complicated for me to wrap my head around it (and the fact I’m probably scrupulous and live in a non-English-speaking country doesn’t help a bit).

    Now I’ll probably never take any loan, buy anything on hire purchase, or own a credit card.

  • egosumscotus

    Zippy writes: “A mutuum secured by collateral is still usury, because if the collateral is destroyed the lender can still pursue the borrower for return of the principal amount of the loan. If the lender’s recourse under the terms of the contract is only to the collateral and not to the person of the borrower, it is not a mutuum loan and is not usury.

    The difference between a mutuum and other contracts comes strongly into play when the loan goes into default. If the lender can (under the terms of the contract) go after the person of the borrower to recover principal, it is a mutuum loan. If the lender has recourse only to ontologically real assets to recover principal and any profits, the contract is not a mutuum and the prohibition of usury does not apply.”

    —> But in a legal system like America’s (and I assume all developed countries) what does it mean to have “recourse to the person of the borrower?” Since we don’t have debtor’s prisons or the like, the only recourse that the creditor has is the debtor’s assets. The only difference is that in an unsecured loan the creditor can go after any asset, instead of specified ones.

    • Jared B.

      But that only is a big difference, when creditors going after any/all assets can have a domino effect on the borrower’s ability to have enough money left to pay for their other financial obligations (rent/mortgage, utilities, etc.) It is in effect having recourse to the person of the borrower.

      • egosumscotus

        True, but that’s why we have bankruptcy to act as a backstop to that. Plus, there’s nothing to say a person can’t offer as collateral any or all of their assets, even ones they might need to survive. So a person who offered everything they have as collateral for a loan would be worse off than a person who took out an unsecured loan, because bankruptcy would be no help to the former in guarding their assets (at least I don’t think it would).

    • Zippy

      Question 34.

    • Zippy

      Even with a backstop of personal bankruptcy, the usurer is attempting to purchase something that does not exist at the time of purchase: the future labor or other income of the person, whatever it happens to be. By definition if the person lost all of his assets, say to a flood, he would still be liable to pay the note; and this is frequently true even under bankruptcy law as long as he has the personal income to make payments (bankruptcy is a restructuring of debt, not a total elimination of it); so as Vix Pervenit affirms, it doesn’t matter if the borrower actually happens to be rich.

      It is morally licit to purchase things, and thereby acquire the potentialities (which do not yet exist) of those things. But it is not morally licit to acquire a person, or a share in a person, as a means to harvesting the potentialities which inhere in that person and become actual in the future.

      • egosumscotus

        So it seems your argument is not so much directed at charging interest on a loan but upon any loan that is not secured by sufficient assets to cover the value of the loan. Correct or no?

        • Zippy

          In order to understand usury, you have to first understand the difference between full recourse (mutuum) loans and non recourse (societas) loans. That difference is precisely what makes the difference between usury and non usurious investment, precisely because usurious contracts involve selling what does not exist. When you purchase a non recourse note you can always, by definition, collect everything that you are entitled to collect under the terms of the contract — because it actually exists. When you purchase a full recourse note it is possible that you will not be able to collect all that you are entitled to collect under the terms of the contract — because it doesn’t actually exist.

          See my FAQ or my comment to Heather in this thread for a quick description of the difference.

          • egosumscotus

            I understand the difference, though I hadn’t understood the term societas to refer to a non-recourse loan (I thought it was a term used by medieval writers to refer to joint ventures or partnerships). But that’s unimportant. What I don’t understand and what is not addressed in your FAQ or in your comments here is that you seem to hang your hat on the fact that a non-recourse loan would be limited to collection of a specific pledged asset vs. a recourse loan which is not so limited, but that what is wrong is charging interest on a recourse loan, not on making a recourse loan per se. I also don’t understand that if it is wrong to purchase something that doesn’t exist (i.e. future payments derived from a person’s future labor) how this does not preclude any kind of recourse loan, even those that do not charge interest. So, basically, why is usury = “charging interest on a recourse loan” and not also “charging interest on a non-recourse loan” and “making an interest-free recourse loan?”

            • Zippy

              What I don’t understand and what is not addressed in your FAQ or in your comments here is that you seem to hang your hat on the fact that a non-recourse loan would be limited to collection of a specific pledged asset vs. a recourse loan which is not so limited, but that what is wrong is charging interest on a recourse loan, not on making a recourse loan per se

              This is at least the third time in this thread, let alone in my FAQ, that I have said that mutuum loans are only licit as gifts — as acts of charity.

              When you make a non recourse loan you are purchasing a property interest in something real (the underlying specific assets), and it can thus be a commercial venture for profit.

              When you make a mutuum loan you are by definition not purchasing a property interest anything real — and it cannot therefore be an investment of any sort. It can only be a kind of gift.

              • egosumscotus

                So the problem is not so much usury as it is loaning altogether, unless it is either non-recourse lending or lending as a gift (in which I case, I presume, one is not entitled to legal remedy if the debtor fails to repay)?

                • Zippy

                  So the problem is not so much usury as it is loaning altogether …

                  When “loaning” is understood to be a personally guaranteed loan (mutuum), that is correct. The prohibition of usury forbids making mutuum (personally guaranteed) loans for profit.

                  • egosumscotus

                    Are we to also understand that if one makes a personally guaranteed loan out of charity, rather than for profit, that one is prohibited from using legal means to coerce repayment?

                    • Jared B.

                      I don’t know what early- or late-scholastics have said, but I think common sense says that if one uses legal means to coerce repayment, then it was never truly charity to begin with. egosumscotus’ scenario is self-contradictory, so the question is meaningless.

                    • egosumscotus

                      The fact that the person is willing to loan money in the first place when they don’t have to and when they are not going to get anything for it (i.e. interest) makes it charitable. It might be even more charitable to just give them the money, but that doesn’t make it non-chariable to loan without interest. I know many people who out of charity have lent money to loved ones without interest, but have also taken legal steps to secure repayment.

                    • Jared B.

                      Well, now the question is straying outside of usury & economics and into personal opinions about what we consider “charitable.” I was taking a stricter, sermon-on-the-mount, “lend, expecting nothing in return” definition of the term. Yes I would concede that what you’re egosumscotus is talking about is a kind of charity too.

                    • Zippy

                      See questions 13 and 14 of the FAQ.

                    • egosumscotus

                      But what I am asking is “why.” If, as you say, that it is wrong to acquire a property interest in the unrealized future earnings/assets of a person, why is it not wrong outright to try to collect the principle of even a charitable loan, which is doing precisely that?

                    • Zippy

                      I answered “why” in Q13 and 14.

                      why is it not wrong outright to try to collect the principal of even a charitable loan

                      If Bob was on Skid Row and the Franciscans helped him get back on his feet – he now has the means to repay what he borrowed – then the kind of debt he owes is different in kind from a commercial, property based debt. He owes a debt of gratitude and a debt of justice: the former to those who helped him, and the latter to the poor who are still on Skid Row and now need his help.

                      If he is ungrateful and stingy and refuses to pay the loan back, even though he has the means to do so, he has committed an injustice. But it isn’t an injustice rooted in property, it is an injustice rooted in charity.

                      Whether legal action is or is not warranted in such a case was controversial. The Dominicans thought not, and accused the Franciscans of usury. The Pope intervened on the side of the Franciscans.

                    • Zippy

                      Thanks for the help clarifying that point. I added it to the FAQ.

                    • Jared B.

                      The Pope intervened on the side of the Franciscans.
                      Meaning that the Franciscan creditor retains the right to sue Skid Row Bob for all or part of the amount of the principle of the loan, or whatever other legal equivalent to “suing him” would be, depending on time & place.

                      I was thinking about lawsuits, collections etc. in connection with loans as one way of understanding this issue. An usurious loan is like one in which the creditor isn’t only entitled to principle + interest w/o collateral, but doesn’t always even have to go to the trouble of suing a borrower; the contract terms of the loan are such that the creditor automatically wins such a “suit”.

      • You seem to be making a larger point than mere usury. Futures markets exist explicitly to purchase what does not exist at the time of purchase. Are you saying that futures markets are sinful?

        • Zippy

          Re: futures contracts, see question 46 in my FAQ.

          • Futures contracts are not the same as futures markets. Why did you switch?

            • Zippy

              Futures markets are made up of futures contracts and trades in futures contracts. To understand how non usurious futures markets are possible one has to understand how non usurious futures contracts are possible.

              In practice – to the best of my knowledge – almost all present day futures contracts terminate in institutions and their balance sheets not personal pledges, so there is probably no usury problem there.

              • So usury stops being a live issue if you incorporate?

                The variability of futures contracts in your proposed system makes it much more difficult to generate a secondary market.

                • Zippy

                  So usury stops being a live issue if you incorporate?

                  Correct. The claims involved in non recourse contracts terminate in a finite inventory of real assets, as opposed to open ended claims against persons. The balance sheet of a limited liability corporation is an example of a finite inventory of real assets (to the extent that none of its “assets” are themselves usurious loans).

                  This is precisely the distinction between a licit societas and an illicit mutuum as business ventures.

                  If there are no personal guarantees independent of the balance sheet, and the balance sheet itself does not have any personally guaranteed contracts in its inventory, then there is no usury.

                  (Sorry about the multiple edits of this comment. I wanted to be sure to state the case precisely).

                  • egosumscotus

                    But if one has a judgment against an artificial person (corporation, LLC, etc.) the judgment is not limited to its “finite inventory of real assets” anymore than a judgment against a natural person is. You can enforce that judgment against future earnings or assets not yet realized by the entity, the same as you could against a person.

                    • Jared B.

                      Yeah, the FAQ says “In non recourse (societas) loans a creditor can always collect
                      precisely and entirely what he is entitled to under the contract,
                      because what he is entitled to under the contract always actually exists.”

                      I take that as an assertion of fact rather than a definition of a societas loan. But that fact is not always the case; our modern markets are full of financial instruments that seem to count as societas (they certainly aren’t mutuum) but that are selling nothing that has ontological existence.
                      So videtur quod there could be an usurious loan made to a corporation, and usury is not limited to loans in which individual persons are holding the bag.

                    • Zippy

                      our modern markets are full of financial instruments that seem to count as societas (they certainly aren’t mutuum) but that are selling nothing that has ontological existence.

                      Whatever may be the case, the claims of those contracts (many of which are derivative, that is, the assets to which they entitle the holder are themselves contracts) terminate in the actual assets on the balance sheets of those institutions. Those assets may or may not have the potentialities that various contract holders hope, but they are where the ‘metal meets the meat”.

                      See Q17.

                      Potentialities are (by definition) not actual. Potentialities are not something which in themselves can be bought and sold.

                      We can economically ‘access’ potentialities (as they unfold and become actual, or not as the case may be based on our business fortunes) either by owning a property stake in actual objects in which they inhere, or in actual persons in which they inhere.

                      But it is not morally licit to own a property stake in persons.

                    • Jared B.

                      Oh I think I see. So the asset in question may be e.g. a contract, which isn’t a physical thing but at least is a real thing and not just a potentiality, so such an arrangement is not [necessarily] usurious, only if that contract (that is of a contract, of a…however many layers deep) is written in such a way that it somehow entitles the creditor to assets that don’t really belong to the contract because they didn’t even exist (or didn’t belong to the borrower) at the time the contract was formed.
                      Whew! I think I’m getting the hang of this, minus any real economic/financial/business education 😛

                    • Zippy

                      You can enforce that judgment against future earnings or assets not yet realized by the entity, the same as you could against a person.

                      Questions 35-39 and 46.

                    • egosumscotus

                      It’s not apparent to me how these sections answer my question. I think you are conflating the concepts of recourse and securitization. Not all loans to corporations are non-recourse. A lender could loan money to a corporation that is secured by a real asset the company owns, but also have recourse to a judgment against the corporation itself, which would then be collectable against the inchoate future earnings/assets of the company, not only specified assets existing at the time of contract. Also, as an aside, I think you are misusing the concept of societas. Again, my understanding is based upon some research I did in graduate school and so if I am wrong I welcome you pointing me in the right direction, but a societas is when two people agree to share the risks of a joint venture or partnership, not when a lender takes a secured interest in an asset as a guarantee for a loan.

                    • Zippy

                      Not all loans to corporations are non-recourse.

                      Yes they are, in the sense that matters here. If you cannot identify a particular person or persons who guarantee the loan personally, it is non recourse: it is not a mutuum.

                      A lender could loan money to a corporation that is secured by a real asset the company owns, but also have recourse to a judgment against the corporation itself, which would then be collectable against the inchoate future earnings/assets of the company, not only specified assets existing at the time of contract.

                      The lender’s claims are property claims on the corporation, which is an object, not a person. In the limit case the lender ends up owning the corporation entirely, washing out the property claims of common shareholders and such.

                      To the extent that owning an object entails “owning” its potentialities the owners of a corporation “own” its potentialities. But potentialities by definition are not actual. They are not things-in-themselves which can be bought and sold independent of property stakes in actual things.

                    • egosumscotus

                      You don’t get to own a company because it owes you money. There could, in some cases, be a situation in which a creditor accepts ownership of the company (or part of it) in lieu of payment for the debt, but it does not automatically follow that one attains ownership of a company by virtue of being it’s creditor.

                      Zippy writes: “Yes they are, in the sense that matters here. If you cannot identify a particular person or persons who guarantees the loan personally, it is non recourse: it is not a mutuum.”

                      —> Again, you might know more than I about how scholastic writers used these terms, but this is not the way the terms are used in modern legal parlance, and so your FAQ and your analysis on this page might be unnecessarily confusing. Recourse and personal guarantee are not the same thing, just as societas (i.e. mutual risk) and securitization are not the same thing.

                    • Zippy

                      You don’t get to own a company because it owes you money.

                      Yes you do. That is exactly what happens in the limit case. When the corporation cannot meet its nominal obligations, equity holders are wiped out and the corporation is handed over to the creditors.

                    • egosumscotus

                      No, a bankruptcy trustee or receiver could make such a deal with creditors (or the owners of the corporation could make such a deal with them) as a way of satisfying the debt but it does not automatically follow that a creditor becomes an owner of the corporation. Many corporations that are insolvent just die off — they have judgments against them, no assets, and the owners just let them go defunct by not renewing them with the chartering jurisdiction.

                    • Zippy

                      You don’t seem to know how cap tables work, equity interests work, or debt interests work: what kinds of claims are intrinsic to those different kinds of contracts. But the real world calls, and I don’t have time to continue the education at this point. Thanks for the discussion.

                    • egosumscotus

                      I didn’t say that there couldn’t be a kind of contract in which a creditor’s claim is converted into an equity interest, but it is not inherent in the fact of a corporation being a judgment debtor. And likewise, I don’t agree with everything you say here, but I think you raise some interesting issues.

                    • Zippy

                      Look, you just don’t seem to grasp the central and essential distinction between a corporate bond (or other non recourse debt) and a personally guaranteed note. That’s OK, because the distinction is wildly counterintuitive to modern people; but that doesn’t make it any less objectively clear.

                      When you own a corporate bond, you own a property interest in the corporation – an objective thing. Corporations are things, generally aggregates of things, and can be owned and sold as property. (If they weren’t things – if they were persons – it would be immoral to own them, trade shares in them, and the like). That’s why it is always possible to foreclose on the corporation and claim your property: because the thing you own actually exists. (That its value may have been reduced to nothing by business misfortune is irrelevant: a house can burn down, but the fact that it can burn down doesn’t mean it is not a thing).

                      A personally guaranteed note looks, superficially, like the same sort of contract; but it isn’t. It isn’t a property interest in a thing. It attempts to assert a property interest in no thing: nothing. The fact that you cannot foreclose and collect your property demonstrates Aquinas’ point: the thing to which the contract asserts an ownership interest is no thing at all: nothing. The apples have been eaten, the wine has been drunk, and the borrower has to take action to acquire new, different apples or wine precisely because the thing to which the mutuum lender lays claim does not exist.

                    • egosumscotus

                      Zippy – Not all debts that a corporation may undertake are via corporate bonds, which is a type of securities offering. Corporations, like persons, also borrow money under other modalities, both loans secured by assets and as well as unsecured loans. In the secured type of loan, the lender’s position may be non-recourse, meaning that his sole remedy in the event of default is foreclosure on the securitized asset the corporation owns, or it may be recourse, meaning that it can seek a deficiency judgment against the corporation itself if the secured asset does not cover the amount of the loan. In unsecured loans, the lender’s only remedy is to seek a general judgment against the corporation itself. What you seem to be suggesting is that when a party has a judgment for a debt against a corporation that one is entitled by this fact to “foreclose” on a corporation and obtain ownership of the company, making it in effect that all debts held against corporations are securitized. This is not the case. The owners(shareholders) of the corporation are separate from the corporation (except in those cases where the corporation owns its own shares). The shareholders are not debtors to the judgment creditor (that’s what shields shareholders from personal liability for the corporations debts ‘s the first place), and one is not entitled to wrest ownership of the company from them involuntarily since they are not party to the contract with the creditor. Rather, a judgment creditor of a corporation has basically the same methods for collecting on the debt as he would if the debt were owed by a person. He can try to identify assets owned by the corporation and seize them. He can attempt to garnish debts or payment owed to the corporation. He can also wait until such time as the corporation obtains assets or income in the future and then try to seize them. He cannot, however, “foreclose on the corporation” because the owners (shareholders) of the corporation are not his debtors. You seem to want to believe that all corporate debt is, in effect, securitized by the corporation itself because the ultimate right of the creditor is to seize ownership of the company. Not true. It’s possible for that to be set out as a contract term (with consent of the shareholders), but it does not happen by operation of law just because one has a judgment against a corporation. A judgment creditor has a right to claim future inchoate earnings/assets of the corporation and thus he has an interest in something that does not yet exist, just a creditor would against a human debtor. Thus, this is not a difference between corporate and person debtors, in both cases the creditor has a claim against what assets in the future the person or the corporation might obtain.

                    • Zippy

                      You seem to want to believe that all corporate debt is, in effect, securitized by the corporation itself because the ultimate right of the creditor is to seize ownership of the company.

                      That overstates it, though it is possible that I myself made or implied the overstatement.

                      Every corporate bond – or other corporate debt – is a property interest in a thing – the corporation – the claims of which terminate in that actual thing. This is categorically distinct from personal notes, which look like the same or similar kind of claim but in fact terminate in no thing: in nothing.

                      It is possible for someone to deny that, because human beings can assert denial of pretty much anything. But it is not possible to have a coherent conversation on the subject with someone who denies it.

                    • egosumscotus

                      Zippy writes: “Every corporate bond – or other corporate debt – is a property interest in a thing – the corporation – the claims of which terminate in that actual thing. This is categorically distinct from personal notes, which look like the same or similar kind of claim but in fact terminate in no thing: in nothing.”

                      No, that’s not the case. Some types of corporate bonds (convertible bonds) allow the bondholder to convert the bond into shares of stock. Not all bonds are convertible. Similarly, some bonds are secured by specific assets the corporation own, others are unsecured. Unsecured, non-convertible bondholders and other unsecured creditors of the corporation have claims that do not terminate in any particular thing that can be seized or foreclosed. They cannot seize ownership of the corporation itself, which belongs to the shareholders. Thus, their recovery is limited to non-secured assets that the company has now, or that the corporation acquires in the future. The same as if you had an unsecured judgment against me, you could recover it against un-secured assets I have now or that I obtain in the future. Thus, both types of claims can terminate in no presently existing property.

                    • Zippy

                      No, that’s not the case. Some types of corporate bonds (convertible bonds) allow the bondholder to convert the bond into shares of stock.

                      Sure: lots of different corporate securities have lots of different structures. But that has no bearing on the fact that every kind of corporate debt is a kind of property interest in the corporation. Common stock is not the only kind of property interest. A property interest is, generally speaking, a claim on property. The alternative to it being a claim on property is being a claim on a person, or a claim on nothing whatsoever (in which case it is not a claim).

                    • egosumscotus

                      One of the misconceptions that I think you are laboring under is that a judgment creditor of a corporation obtains a property interest in the corporation. But that is not the case (unless the corporation owns some of its own shares). A judgment creditor, whether of a person or a corporation, obtains a property interest in the assets of the corporation or person, whether owned now or acquired in the future, until the judgment is paid off. They can seize via legal process assets owned now, or they can seize assets later acquired. They cannot seize the corporation or person.

                    • Zippy

                      You seem to think that the distinction between “a property interest in a corporation” and “a property interest in a corporation’s assets” makes some kind of important difference.

                    • egosumscotus

                      Absolutely, it is an important distinction. It’s the fundamental basis of corporate law, that the corporate entity has a persona distinct from its shareholders. The shareholders own the corporation, the corporation, in turn, owns its assets.

                    • Zippy

                      My own view is that labeling property a “legal person” is a pernicious lie. If a corporation were a person rather than property it would be intrinsically immoral to own it, buy and sell shares in it, etc. It is no surprise that people who think of property as ‘legal persons’ have a hard time grasping the essentials of usury.

                      But my arguments aren’t about legal doctrines, theories, or jargon. Following the scholastic tradition in at least this sense, they are about the actual relationships between persons and property in fact, and the actual terms of contracts in fact, not about what various people label various things, how they feel about various things, or what there expectations with respect to various things happen to be.

                      Corporate debt securities – all kinds of corporate securities, or entries in the capitalization table of the corporation if you prefer – are a kind of property. If someone contends that they are not, then by that contention they assert the intrinsic immorality of buying, selling, and owning corporate securities.

                    • egosumscotus

                      Zippy, I think your analysis suffers in two respects. First,
                      I strongly suspect (but do not know for certain, not having studied the materials in detail) that you are over-extrapolating generalized theories about what is or isn’t usury from what were very specific pronouncements by medieval popes and scholastic theologians who were merely making specific approvals or disapprovals of particular types of financial transactions or lending
                      arrangements. Part of this may stem from the fact that it seems to me that you are understanding terms like societas and mutuum in ways that are broader or different than the way those terms were understood at the time of these pronouncements (or at least the way they were being used by the author in a particular document). Second, you are compounding this problem by then grafting your understanding of the Church’s teaching on usury drawn from a medieval legal framework onto our modern legal framework, creating the problem that the distinctions you draw (or fail to draw) do not align with the way things actually are in the present.
                      Being a lawyer myself, I can tell for certain that you do not understand modern law with regards corporations, contract law, creditor-debtor law, judgment enforcement, securitization, recourse, bonds, etc. That’s not to say that I
                      defend our modern legal framework as superior to the medieval legal framework, only that I suspect you do not understand the latter and I know you do not
                      understand the former.

                      P.S. If you think that labeling property a person is a pernicious lie, do you have a problem the Church’s concept of juridic personhood? See canon 113 et seq.

                      P.P.S. As to your last paragraph above, yes, corporate securities (i.e. stock) are ownership shares of the corporation itself. Legally, a corporation is both a person (having certain legal rights and recognition in itself) while also being the legal property of some other person or entity. Just because it is considered a legal person does not make it equivalent to a natural person, and thus it doesn’t enjoy the right to not be bought or sold. It’s not formed in the image of God. Other types of debt instruments are not shares of the corporation itself (though convertible bonds might be exchanged for shares) but rather claims against the corporation that can satisfied from the corporation’s assets, which (like with natural persons) are distinct from the corporate person itself.

                    • Zippy

                      Second, you are compounding this problem by then grafting your understanding of the Church’s teaching on usury drawn from a medieval legal framework onto our modern legal framework

                      That is an especially odd criticism, since my understanding of usury doctrine (as drawn from reading lots of different material, under a hermeneutic that treats Magisterial pronouncements as more authoritative than the theories of private theologians or others) is entirely distinct from any positive law legal framework, and I am not asserting anything about any positive law legal framework. To the extent I draw on concepts and vocabulary from modern commerce at all, it is just to pedagogically help people understand (at least people who want to understand).

                      Perhaps that partly explains the difficulties you as a lawyer have had understanding it. The prohibition of usury, as a matter of natural law, would apply (and does apply) – like concepts of ownership, theft, etc – in the complete absence of (positive law) legal frameworks or theories.

                      Usury is as morally wrong on the surface of the moon as it is in California. Positive law jurisdiction and the positive law frameworks that apply in particular times and places have nothing to do with it. Does moral doctrine on sodomy change with legal jurisdiction?

                    • Paul Stilwell

                      “Does moral doctrine on sodomy change with legal jurisdiction?”

                      Exactly. Does moral doctrine on usury change when a government forfeits its constitutional right of issuing money over to private banks, who then “lend” the bulk of the country’s money supply into existence at compounding interest?

                      Just as money must be given and received for something actual, so likewise it must come into existence. The printing and issuing of money is not to be a source of profit. That is making money from money and selling something which does not exist. It is usury.

                      But Zippy is unwilling to recognize that.

                    • egosumscotus

                      You are asserting a lot of (erroneous) things about the positive (civil) law. Positive law cannot make what is immoral moral, but it can make what would otherwise be moral immoral, so long as the positive law is based upon just and rational legislation directed to the common good.

                      The problem that you are not seeming to grasp, however, is that a corporation is an artifice of the positive law. Thus, in order to apply natural law to it, one has to understand what it is according to the terms of the positive law that created it. Just as one could not understand or apply natural law to a situation if you didn’t start from a proper philosophical anthropology that defined what a human being is, and in what ways, say, a human being differs from a dog or cat.

                      Under the natural law, only human persons can own property. Dogs cannot. Thus, it is not against natural law for a human being to take something “possessed” by a wild dog such as a wild bird it killed. Corporations, unlike humans and dogs, do not exist in nature. One could argue that the positive law should not allow the creation of corporate entities or that they should have different properties than they do. But as they do exist per the civil law in a certain configuration, your attempts to apply the natural law regarding usury to them are incoherent for want of understanding how corporate ownership and related civil concepts such as judgment enforcement actually operate.

                      If a debt judgment against a person is immoral because it does not terminate in a claim on an actually existing piece of property as opposed to possible future property later acquired by the person, then the same fault is present in a debt judgment against a corporation. Thus, I am not trying to minimize the application of usury teaching – rather you are. By saying that usury only applies to lending at interest to natural persons, not to artificial entities like corporation. One could possible come up with a theory that justified that distinction, but from the rationale you have presented here, you have not done so.

                    • Zippy

                      I’m not asserting anything about the positive law. It isn’t clear why you keep pretending that I am, when you’ve been told the contrary several times. Usury is immoral in all times and places, not just under the laws of Delaware in 2014.

                      My various business partners might find it amusing that a lawyer thinks that our ventures were artifices of the law though.

                      Companies are property: that is, they are not persons but rather are things that can be owned and sold. Thus claims against them are claims against property: property claims.

                    • egosumscotus

                      Corporations have no existence apart from the positive law. They neither consist of nor inhere in any corporeal thing. This is what is meant by the expression “artifices of the law.” They are regarded by the law that created them as both property (of their owners) as well as legal persons (having rights and obligations apart from their owners).

                      Go back through your posts and you will see that you have made any number of assertions about the positive law (e.g. what a bond is, how a judgment may be enforced), most of them quite wrong.

                    • Zippy

                      People have formed business partnerships, joint ventures, etc since humanity has been in existence. Contracts involving regular payments structured as debt (census, to the medievals) long predate modern corporate law. None of my central contentions depend on positive law in some particular time or place, and what terms to use pedagogically, to give folks a conceptual “hook” on what I’m saying, is an editorial choice.

                      Morally licit claims in the context of any business venture terminate in property, distinct from persons: in property claims.

                      Why all the effort to obscure the point of what I am actually saying? Is it a problem for you if folks start understanding what I am actually saying? Because plenty of folks seem to understand fine. The incomprehension seems to be on your end.

                    • egosumscotus

                      I’m not trying to obscure anything, I’m trying to elucidate the fact that you are teaching people to understand usury is present in some transactions or not present for others based upon incoherent distinctions drawn between different types of debt.

                      It’s like you’re saying that capital punishment is wrong because it is immoral to throw a person to be eaten alive by ravenous dogs, ignoring the fact that there are many other ways to effectuate capital punishment besides throwing someone to ravenous dogs. And at the same time you’re saying it’s not a violation of the prohibition on capital punishment to punish a criminal by throwing him to be eaten to death by ravenous dogs as long as we don’t call it capital punishment.

                      Since trying to educate on what a corporation is and how debts against corporations are conceived is getting no where, I’m going to post on a new thread a fresh question attacking the issue from the other end. I’d be interested to see your response.

                    • Zippy

                      Is that you, Josiah? You are cute when you pretend not to be able to tell the difference between people and things.

                    • Zippy

                      Other types of debt instruments are not shares of the corporation itself …

                      I didn’t say that securities structured as debt (like corporate bonds or the medieval census) were equivalent to common stock. I said that they represent a property interest in the corporation. Every financial security represents a property interest in something (or, in the case of usury, represents a property interest in nothing masquerading as a property interest in something).

                      If it were not a property interest in some thing, it would entitle the owner to no thing.

                    • egosumscotus

                      A general unsecured judgment, whether against a corporation or against an individual, entitles the judgment creditor to seize the present assets of the individual or corporation. It also allows the judgment creditor to seize the assets acquired in the future by the corporation or individual. Thus, in both cases, the judgment represents a property interest in what is owned or what in the future may come to be owned by the corporation or individual. It does not represent a property interest in the individual or in the corporation. Just as people are not their assets, corporations are not their assets.

                    • Jared B.

                      But a corporation (regardless of how the U.S. Supreme Court decides things, lol) is not a person, it is an asset, so that doesn’t seem to present much of a problem.

                    • egosumscotus

                      You must have a big problem then with canon law, which allows for the creation of juridic persons, which are the canonical equivalent of civil corporations. A corporation is a creature of the law, having no existence or reality apart from it, thus it cannot be metaphysically analyzed apart from the properties the law gives it. It is a legal (not natural) person that can own property in its own right while also being an asset of the persons (shareholders) who own it.

                    • Jared B.

                      I don’t have a problem with that at all (or with U.S. law regarding legal “persons”, either) because they don’t change the fact a legal person can still be an asset in reality. Only a real person is a person in the moral law, to whit a person cannot be owned. Legalese can describe a corporation as a person for convenience, but a corporation can be owned, ergo it is an asset. The idea of a corporation “owning” things is also just a convenience of legal language; in reality, one or more actual persons are the real owners, who unlike fictional corporate persons will ultimately have to answer to God for what use they made of the things they owned.

                      If positive law has been written in such a way that there are some assets such that no real persons can be identified as the real owners, and only a corporate “person” is the asset’s owner, well, that’s just too bad for positive law; it was badly written.
                      Lack of correlation between what is legal and what is true happens all the time; the natural law is not threatened by that fact.

                    • Zippy

                      societas is when two people agree to share the risks of a joint venture or partnership, not when a lender takes a secured interest in an asset as a guarantee for a loan.

                      The problem may not be with your understanding of societas. It may be with your understanding of non recourse investments.

                      A corporation is a kind of partnership, and a corporate bond is a partner’s well-defined stake in that partnership which shares the risk of that partnership. A home purchase with a non recourse loan is a kind of partnership between the lender and the borrower, and each holds a well defined stake in the partnership which shares the risk of the partnership. Etc, etc.

                      Any contractual slot in the cap table of a limited liability (which is to say, non recourse) institution is a stake in a societas.

                    • egosumscotus

                      No, because intrinsic to a partnership or joint venture is an agreement to share gains and losses according to some ratio. As in, we each own 50% of this house, or we split it 70/30 to me or 60/40 to you. If it is gains in value, we share the proceeds in proportion to our respective interests, and if it loses in value, we share the loss. A non-recourse mortgage lender is only concerned if the loss of value in the home insofar as it goes below the outstanding loan amount (and assuming the homeowner then fails to continue making mortgage payments, triggering default). The lender gains nothing out of the increased value of the home, as his mortgage interest is based upon the amount loaned. The lender has no shared stake with the homeowner in the sense of a societas. The lender is a creditor, not a co-venturer.

                    • Zippy

                      No, because intrinsic to a partnership or joint venture is an agreement to share gains and losses according to some ratio.

                      You’ve identified your error right there.

                      See Question 31.

                    • egosumscotus

                      It’s certainly not an error according to the current legal definition of a joint venture of partnership. If it is an error according to the way medieval thinkers understood the concept of societas, I’d like to see evidence of that. Again, it was not my finding when I researched the concept (admittedly this was not the main focus of my research so perhaps I missed something).

                    • Zippy

                      If it is an error according to the way medieval thinkers understood the concept of societas, I’d like to see evidence of that.

                      Again, see Q31 — and argue it over with Pope Pius V and John de Lugo.

                    • Zippy

                      the judgment is not limited to its “finite inventory of real assets”

                      Yes it is. The most that the creditor can do is end up owning the actual thing entire.

                • Zippy

                  The variability of futures contracts in your proposed system makes it much more difficult to generate a secondary market.

                  It is hard to see how that could be the case, since it seems to me that the current futures markets and derivatives therefrom are not usurious (because the contracts and their derivatives terminate in claims against balance sheets of corporations, not claims against persons).

                  IOW, in my understanding of usury, and my limited understanding of the futures markets, there aren’t any fundamental changes necessary in futures markets.

                  • So now usury does not apply to corporations.

                    • Zippy

                      Usury does not apply when all claims terminate in actually existing property. The prohibition of interest as usury applies to mutuum loans; and contracts which are not mutuum loans do not, in the words of that silly old ignorant man Benedict XIV in his defective encyclical, “fall under the precise rubric of usury”.

  • ivan_the_mad

    I read this article by one Thomas Storck some time ago, and found it an excellent exposition (and well researched).

  • Elaine S.

    So if we take what Zippy says seriously, does this mean that a faithful Catholic striving to avoid sinful cooperation in evil cannot 1) take out a personal loan or use credit cards, 2) work for a bank or credit union or anywhere in the financial sector (because that would be equivalent to taking a job with Planned Parenthood or an abortion clinic), or 3) hold a 401k or any type of retirement account that derives income from usurious lending ? Does it also mean that any Catholic who is currently making payments on an usurious loan is living in mortal sin (equivalent to, say, being divorced without an annulment and remarried or cohabiting with a same-sex partner) and should not receive the sacraments? How do they get out of that situation?

    • Zippy

      Elaine S:
      See questions 23 and 44 of the FAQ.

      • Obpoet

        After looking at this for a while, it seems the confusion begins with FAQ #1. Perhaps it should read: Usury is lending money for profitable interest, except……

        • Zippy

          Well, I am sure that my presentation could be improved, and I appreciate the feedback. But when folks only read the first question and none of the follow up questions it is hard to design a first question that will not leave them lacking in an understanding of some essential aspect of the subject or other.

          • Obpoet

            It is a prodigious effort, and one to be applauded. It wasn’t until I clicked the hypertext link of FAQ #1 that I began to understand your statements. #1 on its own is confusing to financially simple minds like mine. Best to state clearly where lending for financial gain is morally acceptable.

  • Elaine S.

    Also, if student loans are usurious and sinful, would that also be another argument in favor of turning Catholic colleges into work colleges like this one:

    http://www.heritage.org/research/commentary/2014/5/what-hard-work-u-can-teach-elite-schools

  • Zippy

    Finance types who are interested in a discussion of the effects of eliminating usury – by having the government decline to enforce deficiency judgments in personally guaranteed contracts -might be interested in this article by a finance professional:

    http://orthosphere.org/2012/12/21/usury-versus-reality/

  • norcalrunner

    Oh, him. Shrug. Whatever…

  • iamlucky13

    I have to note that while both Pope Francis and Pope Benedict condemned usury, as far as I have seen, neither of them gave any indication of challenging the modern definition of excessive interest rates or similarly abusive terms, which is the overwhelming accepted definition today, and one which has evolved as financial systems have shifted from mixed bartering to almost entirely monetary.

    While Zippy reasonably points out that silence on a matter is not acceptance of it, given the near complete pervasiveness of this definition, it would be unbelievable to argue that the Pope was using an obsolete definition of a word without at least mention that he’s using uncommon understanding of it.

    Thus, I will have to give the topic a lot more study before I can reasonably conclude that I induced another person to sin by taking out a loan on my home, an inducement made worse by the fact that I did it for my own personal gain, as the calculated value to me of the money loaned was greater than the interest I am paying.

    I’m particularly confused by the frequent reference in usury discussions to Aquinas’s concept of double use, as if money is consumed when it is loaned just like wine is. To be blunt, this doesn’t make any sense to me at all.

    • Zippy

      which is the overwhelming accepted definition today, and one which has evolved as financial systems have shifted from mixed bartering to almost entirely monetary.

      “We exhort you not to listen to those who say that today the issue of usury is present in name only, since gain is almost always obtained from money given to another. How false is this opinion and how far removed from the truth! We can easily understand this if we consider that the nature of one contract differs from the nature of another.” – Vix Pervenit

      • iamlucky13

        You’re still referencing the encyclical that predates the massive changes in economic practices that led to where we are today. The types of lending it responds to were not necessarily equivalent.

        Furthermore, much more obvious usury does still exist today to be worth worrying about. In fact, there is a payday loan office about 3 blocks from my home parish…I don’t even have to experience the corruption Pope Francis saw during most of his ministry in Argentina to grant that exhortations against usury still have real meaning. I can see quite clearly the disadvantaged position people are in when they take loans from such places on such expensive terms.

        In contrast, I took a mortgage out at a rate barely higher than savings would lose value to inflation while I otherwise spend the next 15+ years saving to buy a home with cash, hindered by the simultaneous costs of rent and paying for the future home I hoped to buy. The mutual benefit to me and the lender in my case is not conjecture, but mathematically proven, so the case against this kind of lending has no basis on harm done to the borrower. Therefore, it seems what I’m looking for to understand your case is the absolute moral principles that make this wrong even in the face of mutual worldly gain.

        Yet, because Mark recommended your site, I will give this matter further study.

        • Zippy

          You’re still referencing the encyclical that predates the massive changes in economic practices …

          Vix Pervenit directly addressed your point about a money economy as opposed to a barter economy. It also happens to be the most recent authoritative doctrinal statement on usury by the Magisterium. People who claim that it has been superseded are therefore not appealing to any actual authoritative documents of the Magisterium as support of their contentions. Rather than trying to make sense of what the Magisterium has taught, they prefer to make nonsense of it.

          • iamlucky13

            For the record, I am trying to make sense of this, not nonsense. I haven’t been able to get the topic off my mind all evening, because I don’t take lightly a suggestion that I’m rejecting a doctrine.

            So here I am on the one hand with a person I don’t know arguing on the internet that nearly all forms of interest are usury and an “execrable mortal sin,” which would then make it one of the most common mortal sins of the last century (there’s probably been more mortgages than abortions, and almost certainly more credit cards, even if adultery has all of them handily beat), and that the economic changes since Vix Pervenit are irrelevant. On the other hand, that the Catholic Encyclopedia, which while it may not be irreproachably better than unknown people on the internet, does at least have a Nihil Obstat and Imprimatur, suggests the changes are relevant is only the start. More bewilderingly, the last dozen or so popes and countless other pastors seem to have declined to correct any fallacies in our interpretation of the prohibition on usury based on the modern secular definition of the term, thus turning a blind eye to presumably millions of souls driving that particular vehicle down the wide rode to hell.

            Thus, making sense of this appears to necessitate either a gift of revelation or a lot more study on my part.

            • Zippy

              You aren’t pitting the word of a group of New York publishers against me. You are taking their side against Pope Benedict XIV, Pope Pius V, Pope Callistus III, the Second Lateran Council, etc etc. Or at the very least, you seem quite reluctant to take the side of Popes and Councils over an article written by the early 20th century version of Commonweal or Catholic Answers.

              • Jared B.

                iamlucky13 nonetheless has a valid objection to Zippy’s interpretation of Denzinger et al.: If Pope Benedict XVI, Pope Francis and other recent magisterial authorities have referred to usurious practices in such a manner that, on the face of it, assumes a contemporary [thus presumably erroneous] definition of usury, than why are they not wrong to do so, but we shlubbing laymen are wrong to do so?
                In other words, maybe the question “When the **** was the last time Vix Pervenit was cited by the Magisterium?” has relevance after all.
                If some *evidence* of a *recent* pope [or at least a significant magisterial authority] can be found, then we need to see it. Otherwise, while silence does not imply approval, neither does it imply disapproval, especially in light of the fact that there has not been utter silence on this issue, rather there have been statements that don’t jibe with Zippy’s historically correct, but *possibly* inaccurate definition of usury.

                • Zippy

                  Otherwise, while silence does not imply approval, neither does it imply disapproval, …

                  Does silence undermine the authority of actual existing authoritative documents (canons of ecumenical councils, encyclicals, papal bulls, etc)?

                  there have been statements that don’t jibe with Zippy’s…

                  What statement has any Pope made suggesting that the understanding of usury articulated in the existing body of Magisterial documents is wrong?

                  • Does the fact that Pope Benedict XIV had zero advisors on this encyclical that were educated in economics give you any pause at all? Does Vix Pervenit’s non-engagement of the time value of money give you any pause at all?

                    Vix Pervenit should be a good case study of how the Holy Spirit saves the Pope from error. Pope Benedict XIV made a mistake in his pool of advisors used to draw information to inform Vix Pervenit. He simply did not engage a pretty revolutionary theory (the time value of money) that had been around for about a century and a half. He could easily have used words that would preclude the simple addition of that concept to re-analyze the document in a better way. The Pope did not do that so even though the genesis of the encyclical is flawed and could have gone so very wrong, the problems with it are all based on an error of omission and not one that impacts faith or morals.

                    • Jared B.

                      While I disagree with many of your premises TMLutas, I heartily respect your view on papal & magisterial infallibility: the willingness to face the *prospect* (not assumed to be true, or untrue, at the outset) that some documents—which are confirmed in containing at least some infallible teachings—do contain logical flaws and/or factually false statements…and that this fact does not in any way damage or threaten our faith, because that is the way it’s always been, throughout the history of the Church.

                      Too often, Catholics fall into one or the other error; to find one flaw and presume that the whole thing can be safely ignored, or to [correctly] read truth and assume that there therefore can be no taint of error in the whole thing. And then, predictably, one side accuses the other of “dissenting”.

                    • Thank you for your respect. I don’t really understand what I did to deserve it in this case but I’ll take it where I can get it. I would think that either of the two positions you outlined is just nuts. I wasn’t aware that either of them was a big problem among Catholics.

                    • Jared B.

                      LOL yeah I also never ceased to be amazed at how many Catholics—and I’m talking about practicing, Mass-going ones—are gripped by the lingering fear that just around the corner, some Pope will pronounce a false doctrine and the whole of Catholicism will come crashing round their heads…and at how many others are gripped by the lingering hope of exactly the same.

                    • Zippy

                      The theory of the time value of money may or may not be academically valuable in academic economics, understood as something distinct from morality. But it is simply false that money has a time value in any sense that pertains to usury. Usury is akin to theft, and as a core matter of faith and morals it is right in the epicenter of the Church’s charism.

                    • You have made a statement on the faith that you have provided exactly zero support for, “it is simply false that money has a time value in any sense that pertains to usury”. Please provide something beyond “because Zippy says so” to support why an invention that came from a well respected 16th century canonist and theologian is not permissible. So far, Martín de Azpilcueta is winning the credibility war and he’s not even here to defend himself.

                    • Zippy

                      You have made a statement on the faith that you have provided exactly zero support for, “it is simply false that money has a time value in any sense that pertains to usury”.

                      Perhaps you think I’ve forgotten, or perhaps you have forgotten yourself, that it was you who contended that Vix Pervenit was a “source of mischief” because Leo did not in your own view adequately take into consideration theories – well established at the time – of the time value of money. You wrote:

                      Actually, Vix Pervenit seems to post-date the discovery of the time value of money by about a century and a half. It’s a pretty short document and seems defective more by having been informed solely by legal experts (both civil and canon) without the advice of any economics experts. Thus it is not mistaken about theology, but ends up being more a source of mischief than help because it ignores completely the time value of money, a matter which is not one of faith and morals.

                      So in your stated view, the Magisterium’s authoritative teaching on usury is “more a source of mischief than help because it ignores completely the time value of money”.

                      We can attach all sorts of meanings to “the time value of money”, some of which may be true and others of which will be definitely false. Certainly theories of the time value of money do not carry the doctrinal weight of the magisterial condemnation of usury. But in addressing your contentions in particular, I reject the idea that Pope Leo was an economic ignoramus and was decoratively right about doctrine but wrong in every way that might actually require something of people in practice because he was an ignoramus about theories of the time value of money.

                      One thing that the Charles Currans of the world are right about is that if the authority of the magisterium doesn’t apply to things like usury and theft then it doesn’t apply to any moral doctrine: all moral doctrines are open to ‘questioning’.

                    • A small correction, Leo XIII did not write Vix Pervenit. That was Benedict XIV.

                      What I suspect is that the time value of money has been addressed subsequent to Vix Pervenit but I do not know it, much as I did not know of the existence of Vix Pervenit prior to this thread. The Church certainly acts as if it acknowledges the time value of money.

                      I certainly believe that I might be mistaken on a doctrinal point. When I look around and all the bishops seem to accept the time value of money, I start thinking that my fault is in simply not knowing the name and the specific doctrinal text. It’s a fault of ignorance, not error.

                      Go have a look at Aquinas and the Immaculate Conception for a more famous version of the sort of mischief that I’m talking about with Vix Pervenit. It’s a mischief that is created in the mind of the reader who comes to the text without a broader understanding of the issues.

                    • Zippy

                      What I suspect is that the time value of money has been addressed subsequent to Vix Pervenit but I do not know it.

                      Let me know when you find the magisterial proclamations revising or ‘developing’ the usury doctrine to take into consideration the ‘time value of money’. I’ve been looking for them for years in all sorts of nooks and crannies, and I’ve read quite a lot of material from folks arguing vehemently in favor of a more ‘modern’ conception of usury that (e.g.) takes into consideration the ‘time value of money’, putative changes in the nature of currency, etc etc.

                      None of those folks have ever actually produced a doctrinal statement by the Magisterium, despite their resources and high level of motivation to do so. It is the dog that never barks.

                      I find it suggestive though that the quest for such a thing, the insistence that it simply must exist (or even that it actually does exist, without ever actually concretely producing it — does this sound familiar?) is shared by folks who think that the prohibition of usury itself is just a decorative doctrine that is “true” but doesn’t place any requirements on us and by folks who think that contraception is just a decorative doctrine that is “true” but doesn’t place any important requirements on us. (Canonical examples are Charles Curran and John Noonan).

                      And none of that is really necessary as long as we don’t take the medieval Popes to be morons who didn’t know what they were talking about.

                    • Jared B.

                      I wouldn’t impute too much culpability on the part of those who try to make the case for development of doctrine on usury viz. time value of money, even when their arguments are often historically or theologically lacking. The release of a Magisterial document is the finish line in a Newmanesque development of doctrine, not the starting pistol.

                      I think a legitimate development of doctrine in this matter, along those well-argued lines of the time value of money, is still a live possibility. But as Zippy has amply pointed out, it is a future possibility, and we are bound by what the Church teaches now, not any imaginary Vatican III.

                      Another example: I think a development of Just War doctrine, to allow a pre-emptive strike in some “they’re about to launch a WMD” scenario is possible, but that didn’t justify the Iraq War! It did, however, justify making one’s best argument for it, if that’s what ya sincerely believed. So not everyone making these arguments, about usury or just war or even contraception (maybe; I’m not really familiar with Curran or Noonan) is necessarily a dissenter who’s faking their fidelity to the Church while in fact undermining it at every turn. Then again, yeah obviously some people are just that.

                    • Zippy

                      I think a legitimate development of doctrine in this matter, along those well-argued lines of the time value of money, is still a live possibility. But as Zippy has amply pointed out, it is a future possibility, and we are bound by what the Church teaches now, not any imaginary Vatican III.

                      I agree that a future Vatican III might say all sorts of things that would contradict or revise my understanding of any moral doctrine.

                      On the other hand, a big part of what makes people think that it is a live possibility is their lack of understanding of the simple consistency – not to mention coherence with a moral understanding that it is always wrong to treat people as things – of what has already been taught.

                    • Jared B.

                      A more interesting Scholastic question is whether anyone could use those
                      arguments and not merely speak out in favor of them, which I think we
                      can do without sin, to acting on them. I think so, but only in the case
                      of an individual who has looked at all the data (economic and doctrinal)
                      and is absolutely convinced beyond any shadow of a
                      doubt
                      that this time-value-of-money thing holds water.
                      But in practice, even a cursory reading of the back-and-forth arguments
                      (such as I have made via my participation in this thread, the reading of
                      Zippy’s FAQ, skimming Vix Pervenit, and deciding that right now I will
                      not buy my own copy of Denzinger than runs between $49-$69) demonstrates
                      at least one thing without doubt: that there is doubt on that question.
                      Papal statements on usury (and financial/economic sins in general) from
                      Leo XIII up to the present all seem to be, at most,
                      compatible with this newer understanding of usury (If
                      there is any magisterial statement that seems to reject or even mention this time-value-of-money idea, please let us know! Thx)…but neither are they conclusively incompatible with Zippy / Vix Pervenit’s understanding on the other hand. That is exactly the kind of ambiguous area that is the starting pistol for a development of doctrine. So the discussion will continue and allow a lot of arguments, until some clarification does finally decide the question; but because it is equally likely that a future magisterial statement will go against and not for it, that’s exactly why it’s a good idea that the Church teaches that our consciences in action are bound by what has already been articulated, and not the changing winds of an open debate.

                      So we can’t in good conscience act on a definition of usury, or any other grave matter, that differs from the last-clarified definition from the Church, even if it was centuries ago.

                    • Zippy

                      So we can’t in good conscience act on a definition of usury, or any other grave matter, that differs from the last-clarified definition from the Church, even if it was centuries ago.

                      Bingo. And as TMLutas pointed out, Vix Pervenit was issued a century and a half later than the theory of the time value of money was postulated in economic theory.

                      So that’s like someone arguing that Humanae Vitae didn’t properly take into consideration the development of the birth control pill because it was issued just after that development, and the Pope who issued it wasn’t a medical doctor and was ignorant about medicine.

                      I can point you to websites written by Catholics making that very argument about the Pill, by the way. Oddly enough they almost always mention usury. See e.g. here:

                      http://socialpathology.blogspot.com/2013/09/the-teleology-of-coitus.html

                    • Jared B.

                      Huh, yeah I have never heard any arguments like what’s in that link before; I’ve only ever heard people claim that H.V. was just flat-out wrong (and usually add that almost everything JPII ever said was wrong too, for good measure). I think I see the flaw in that contraception argument though: it’s based on the claim that one or more of the reasons underlying a Church teaching was a claim of fact, not a claim of philosophy or theology as such, ergo if that fact is found to be other than what the Church thought it was, it casts the Church’s teaching in a different light without per se denying the teaching itself.

                      That’s actually fairly good theology, even if it reached the wrong conclusion. If I say “The Church only teaches X because of Y, and Y is false therefore X doesn’t mean what you or even the Church thinks it means”, then there is a burden to demonstrate “Wait, the Church had other good reasons besides Y alone”, or “It is *you* who have misunderstood what the Church means by Y. So the teaching of X is fine & dandy, thankyouverymuch.”

                      The argument for the revision of usury with regard to the time value of money, as best as I understand it (sans economic jargon), is that the loss of the use of an asset, temporary or permanent, while not a “thing”, is a nonetheless a reality that has real effects upon the lender, *to such a degree* that this loss merits being treated like a real thing. And if it can be agreed to be treated like a real thing (which is already the case in positive law) then it’s not usury.

                      But whether that loss or risk ought to be ontologically treated like a real thing is a philosophical question, not a finding of fact. So no amount of economic theory, practice, or history in the world can ever take the place of some conclusive teaching from the Church: either the Church comes right out and confirms the time value of money and concedes its implications for usury, or else we have to rest with the current definitions.

                    • Zippy

                      I’ve set out my own understanding of (e.g.) NFP vs contraception in any number of places, e.g. here:

                      http://zippycatholic.wordpress.com/2013/09/09/nfp-vs-contraception/

                      On that subject, as here, my interlocutors always seem to depend on conflating objective things with subjective ‘things’ in order to unclarify the subject matter.

                    • Jared B.

                      The way I see it, the Church could actually end up agreeing that “loss/risk/promises are ‘things'”, revise what counts as usury & what doesn’t in practice, and still reconcile that with the tradition of the doctrine. They of course have not actually done so as of 2014. As it is with the contraception issue, I don’t see how anyone can weasel out of that, but I guess that doesn’t stop people from trying.

                    • Well I would expect that the Vatican of the day would do a decent job policing its theologians. I would also expect that it would have come up in the several centuries since that it is a theory invented by a celebrated Catholic.

                    • You are attempting to make the case that promises are valueless. You keep baldly asserting that they have no value but you don’t actually demonstrate it or cite authority that they are valueless. In fact, promises hold an intermediate value between cash now and nothing, depending on circumstances. The skydiver’s promise is worth less than the accountant’s promise because he might pancake next weekend because of a bad jump. No moral judgment is necessarily implied by this intermediate valuation though the promise of someone who has recently broken faith is predictably worth less.

                      You can do the math regarding the value of a promise in terms of diplomatic negotiations or any other subject other than money, but suddenly, and without explanation, the calculations don’t work or aren’t permissible when there is money at stake. Suddenly, promises aren’t real and have no value. It makes no sense.

                    • Zippy

                      You are attempting to make the case that promises are valueless.

                      Promises are in fact not property.

                    • Evasion does not help. Are promises valueless?

                  • Jared B.

                    Well, this looks like a case in which silence implies…silence. No, there has certainly not been any papal/magisterial statement suggestion that previous magisterium was *wrong* per se (nor did I ever expect there to be). But if the common understandings of the term is wrong, even among Catholics [such as iamlucky13] who evidently make every best effort to follow the Church’s teachings, then that constitutes an even larger misunderstanding and/or rejection of Church teaching than the contraception issue! You’d think that at some point since 1745 that would have hit one pope’s radar. It has not.

                    So, at best, a victory for Zippy’s interpretation of usury (which I personally am convinced is correct) amounts to “Technically he’s right, but not even the Magisterium cares anymore.”

              • iamlucky13

                That you are again misconstruing my words deeply undermines your apparent value as a source on this matter.

                I explicitly stated that Catholic Encyclopedia’s article on the topic is only a start, but you try to draw me into defending or rejecting it as an authoritative interpretation as if that were my case.

                I’m not reluctant to take the side of Popes and Councils. I’m reluctant to believe their teachings on this specific matter apply in the modern context. It is my sincere hope that if they do, the Popes and Councils and other’s far better able to address this question than myself would have in the intervening time recognized how widespread this particular “execrable mortal sin” has become and addressed it unambiguously – meaning with a similar degree of clarity about what usury is or even what they might call a “usurous mentality” as they have addressed the issue of contraception and contraceptive mentality.

                I guess that wasn’t enough, so then you snuck in a subtle ad hominem about “New York Publishers.” Yet their archbishop also formally decreed that the volume should be printed.

                “Your personal financial calculations are irrelevant.”

                With this non-sequitur, it appears we are finished attempting to discuss this matter. I tried to steer the conversation to foundational moral principles that might illuminate supernatural harm, since a case based on the worldly harm of low-interest loans falls apart if there is no harm, but instead of trying to help me learn, you reject this angle of discussion. In doing so, it seems to me you base your case on worldly harm and decree in defiance of the facts that this harm is universal.

                • Zippy

                  That’s probably for the best. I shouldn’t be treated as a source or authority on the subject at all. The Magisterial sources I cite and arguments I present should be judged on their own merits.

            • Jared B.

              Here here, iamlucky13. Few of us on this thread are in any position to issue an usurious loan to anyone, so we’re not the ones on the line. If Zippy’s interpretation of Church teaching is correct, a solid handful of centuries of popes are on the line, for not uttering one word of correction or clarification on this matter. It makes the Traditionalist complaints [about the last few pope’s acquiescence to the Novus Ordo Mass] look like small potatoes in comparison!

              I think that in no small part is the drive behind the emotional charge of this question: it’s not like the contraceptive question where the person you’re talking to may very well be guilty of mortal sin, and has a vested reason not to believe it. The average Joe Plumber has nothing to lose and perhaps much to gain personally from this teaching (being validated that some of their debts are unjust), but that’s weighted against the prospect that the magisterial Church has been too stupid or too negligent to bother informing them of this, and it took (no offense to Zippy) some random blogger to clue them in?! For anyone who sincerely loves the Church, that is a hard pill to swallow.

              • iamlucky13

                “The average Joe Plumber has nothing to lose and perhaps much to gain personally from this teaching”

                As I see it, the average Joe Plumber has much to lose from a rejection of any interest-bearing loan as usury. Being stuck renting long term not only is generally a poor position to be in financially, but it restricts one’s freedom as well, when their “home” is actually somebody else’s property.

                This is part of why I’m taking this topic so seriously. I won’t reject Zippy’s arguments out of hand because I recognize that I have a personal interest in access to loans with reasonable terms that influences my instinctive reaction. I despised both paying out money futilely in rent that could otherwise be going partially towards ownership and living under the rule of a landlord. I also have a personal spiritual interest because I personally and deliberately solicited such loans, so I have ostensibly led another to sin.

                In fact, I have also done this to family members, and one of them is now deceased. Hopefully, if God really does judge such actions as an “execrable mortal sin,” either they recognized and repented or their culpability was mitigated by this same near-universal ignorance I’ve pointed out, but the thought that I could have contributed to the corruption of a family member when I asked for modest loan is still a deeply painful idea.

                On the flip side, the average Joe Plumber does still even in the US face the prospect of usurious payday lenders, and I’m not fully convinced that even credit card lenders fall short of usury.

                • Zippy

                  Being stuck renting long term not only is generally a poor position to be in financially, but it restricts one’s freedom as well, when their “home” is actually somebody else’s property.

                  Then there are those people who bought homes – homes the prices of which were inflated by too much full recourse credit – that they could not afford via usurious loans, who ended up under water and either financially ruined or tied to an underwater mortgage they could not escape.

                  Folks who think renting is a bad deal don’t know the half of it.

                  Anything can be spun as a good thing if you carve away its dark side, I guess. Even the worst of evils would not appeal to anyone if it did not hold out the carrot of some proximate good. But usurious loans are not a good thing — something that western Christendom acknowledged full-throatedly up until about last tuesday in historical terms.

                  • iamlucky13

                    You are conflating the possibility of harm with actual harm.

                    Either way, I need to set this discussion aside and actually study. I will be referring to your site when I do so, but it obviously will not be the only source.

                    • Zippy

                      iamlucky13:
                      My apologies if I approached your initial comments with less patience than they (and you) deserved.

                      The way Internet discussions with me usually proceed is that some group of folks start out getting upset with me because they do not understand what I am saying. Then after discussion proceeds for a while and mutual clarifications are made, folks move on to the stage where they are upset with me because they do understand what I am saying.

                      But it isn’t about me. Nobody should just take my word on any of this. The arguments and citations should be judged on their own merits.

                      Anyway, all the best to you and to everyone else who took the time to participate.

            • Zippy

              On the other hand, that the Catholic Encyclopedia, which while it may not be irreproachably better than unknown people on the internet, does at least have a Nihil Obstat and Imprimatur, suggests the changes are relevant is only the start.

              That a bishop gave the CE in general a pass for publication is something, but it isn’t much. It should be kept in mind that (e.g.) Walter Kasper is a bishop, and Cardinal Dolan marshaled the Gay St Patrick’s Day Parade in NY.

              Weighing that sort of evidence against encyclicals, bulls, and ecumenical councils is at best very weak tea indeed.

        • Zippy

          “so the case against this kind of lending has no basis on harm done to the borrower”

          “What they do in the privacy of their own vaults doesn’t hurt anyone.”

          Even if that were true, which it isn’t, it would be a rather obvious fallacy.

          • iamlucky13

            “What they do in the privacy of their own vaults doesn’t hurt anyone.”

            I was hoping I was talking with someone who would not impute arguments I did not make. Perhaps you misunderstood, but I thought my followup about absolute moral principles made it clear clear. I recognize, for example, that when consenting adults commit adultery, while there is no worldly harm done, the supernatural harm is real. I was grasping to understand the supernatural harm of representing a time-value of money.

            “Even if that were true, which it isn’t”

            My personal financial calculations are my private business, so I won’t dig them up to share with you, but the math is relatively straightforward and quite clear.

            • Zippy

              Your personal financial calculations are irrelevant. The 2008 financial crisis, for example, was caused by usurious loans.

              And there is plenty of worldly harm done when consenting adults commit adultery.

              • The 2008 financial crisis was not caused by usurious loans, at least so far as your definition of usury goes where usury is exclusively recourse loans against individuals and not against corporations.

                The CDOs were notoriously not attached to any person with ease and a significant number of mortgage contracts were modified on that basis.

                • Zippy

                  The CDO’s were multiple layers of derivative contract on top of securitized, usurious mortgages. That’s what the “DO” refers to.

                  • You haven’t proven that they were usurious, and I suspect in a significant minority of cases where the CDOs hit the wall, the underlying mortgages were not usurious as they were drawn from non-recourse states.

                    • Zippy

                      Yes, well “prove it” can be repeated ad nauseum. But that the supposed value of the loans far exceeded the market value of the homes, and that that was specifically the problem, might be a hint for someone who wants to understand the problem as opposed to obscure it.

                    • You made a distinction between recourse and non-recourse loans and claimed that non-recourse loans would have assisted in the 2008 financial crisis. In fact, we know that there were CDOs that were non-recourse based and that California, which is non-recourse had a huge portion of the problematic loans and therefore CDOs.

                      You don’t get to just make up the historical record in a manner that assists your case. I was certainly willing to listen to your theological presentation with an open mind. That kind of rested on you being careful with your facts and not failing any fact checks on things I already knew.

                      Anybody can make an honest mistake but to persist in it means that what can’t be checked shouldn’t be trusted.

                    • Zippy

                      Anybody can make an honest mistake but to persist in it means that what can’t be checked shouldn’t be trusted.

                      People should do their own due diligence on any question that is personally important to them, for whatever reason. If my writing style encourages that, so much the better.

                    • Your writing style is encouraging me to suspect you are lying, or more charitably, stupidly obstinate in error.

                      ‘so much the better’ does not apply in this case.

                    • Zippy

                      Your writing style is encouraging me to suspect you are lying

                      Have a nice day!

                  • Derivative contracts that divide up the expected future income streams of non-usurious loans are not, themselves, usurious. I’m not even sure that derivative contracts of usurious loans are any more unacceptable than opening up a savings account. Why would a like remoteness not apply to the CDOs?

        • Actually, Vix Pervenit seems to post-date the discovery of the time value of money by about a century and a half. It’s a pretty short document and seems defective more by having been informed solely by legal experts (both civil and canon) without the advice of any economics experts. Thus it is not mistaken about theology, but ends up being more a source of mischief than help because it ignores completely the time value of money, a matter which is not one of faith and morals.

          Martín de Azpilcueta seems to be credited with the theory of the time value of money and suffered no persecution for it. On the contrary, according to his Wikipedia page, he was celebrated by several popes and was a well respected canonist and theologian. I fully support the idea that the Pope can override a canonist or theologian but Pope Benedict XIV simply does not engage the concept and thus did not condemn it. I suspect nobody ever mentioned it to him. Toss in the time value of money concept and Vix Prevenit turns into a quite reasonable document that few modern economists would find fault with.

          • Zippy

            Money doesn’t have a time value though. Some kinds of property do have a time value of sorts (though even then what can be bought and sold is only the actual property); but money in a mattress does not multiply. You can buy up as much money as you want, put it in a mattress, and when you come back a year later there won’t be any more there.

            Vix Pervenit may not be very complete, and it assumes any number of priors that modern people find difficult to grasp; but it is rather telling that folks always seem to feel compelled to try to undermine its authority.

            • Sorry, that’s just wrong as a matter of economics and since the concept was discovered by a Catholic theologian and canonist, I’d expect that the Church has pronounced on the concept at some point. Citation, please that money has no time value.

              • Zippy

                that’s just wrong as a matter of economics

                Lets do an experiment.

                Put some money in a flower pot. Leave it there for a year. See how much money you can harvest from the flower pot after the year has passed.

                The amount of your harvest in excess of the original deposit into the flower pot is the time value of money.

                • Jared B.

                  This question gets to the heart of the other side of the debate that I commented on earlier (viz. Crisis magazine et al.), namely that it is a matter of factual discovery and philosophical development that money *does* have a time value…and that this newer discover requires a reevaluation of what is and is not usury.

                  The economic/philosophical argument, tho I’m sure I’m wording it badly, is that a lost opportunity—I loaned you $1000 when I could have done something else with the money—ought to be considered a “real thing”, in terms of claims made about compensation. Or in other words, if I could buy $1000 worth of land or cattle or some tangible asset, there’s no calculable risk because I receive exactly what I’m looking at. But going to the trouble of using that $1000 for a risk, in itself, is deserving of additional compensation. Thus interest on a loan.

                  I find that line of reasoning very convincing, and actually thought it to be the final word on the matter (and a reliable, faithful, obedient interpretive guide to the Church’s teaching on usury)…until I stumbled upon this FAQ of Zippy’s which throws the whole issue back into question! :-O

                  • Zippy

                    Whether “money has a time value” is true or not in some sense in some economic theory, Leo was right that it is false in every sense that applies to usury. The “try to grow money in a flower pot” test demonstrates this in a way that ought to satisfy the modern scientific mindset.

                    “Leo be dumb” is not really a tenable proposition. But I think it is telling that that is the approach his critics must take.

                    • I’m missing the thread here. “Leo was right” is too much shorthand for a citation. Please be more specific about who was right about what.

                      EDIT: Upon a bit of guessed research I think what is being referred to here is Leo XIII’s encyclical Rerum Novarum, specifically “The mischief has been increased by rapacious usury, which, although more than once condemned by the Church, is nevertheless, under a different guise, but with like injustice, still practiced by covetous and grasping men.” I agree that usury existed in Pope Leo XIII’s time but this citation does not engage with the time value of money any more than Vix Pervenit. The truth value of the quotation is completely unaffected whether or not the time value of money is correct. Thus the reference is simply not on point.

                      Your flower pot analogy still doesn’t work. Future money is discounted. Money does not grow over time (unless we’re talking a deflationary designed fiat currency like Bitcoin).

                    • Zippy

                      Future money is discounted.

                      Future money doesn’t exist. Various expected sums of money probably will (but might not) exist in the future. But expected or hoped-for future things do not exist right now and therefore cannot be bought and sold right now as property. The only things which can be bought and sold as property right now are real things which actually exist right now.

                      Grasp this and you begin to have a hope of grasping the doctrine on usury. Because the doctrine on usury is fundamentally about the moral wrongness of selling “things” which are not actually things: which are no thing, nothing — and how this sale-of-nothing is tantamount to selling a piece of a person into slavery.

                    • I was shorthanding ‘the promised payment of currently existing money at a set future date’ down to ‘future money’. If you’re going to be pedantic enough to disallow that, this conversation is going to go downhill pretty fast.

                      I believe that your position can be accurately paraphrased as ‘your promises are worthless’ or ‘your word is worth nothing’. That’s usually considered fighting words.

                      You keep simply assuming that you have usury doctrine correct. I think you don’t and that you’re leading people astray, most of all, Mark Shea who is promoting you on the subject.

                    • Zippy

                      I believe that your position can be accurately paraphrased as ‘your promises are worthless’ or ‘your word is worth nothing’. That’s usually considered fighting words.

                      No.

                      Promises are not things: they are not pieces of property, independent of particular persons, which can be bought and sold commercially.

                    • Bearer bonds, promissory notes, and a multitude of other contracts are, in fact, bought and sold daily.

                    • Jared B.

                      Yeah I had that question too. It appears that you could buy & sell a contract, and even have a contract in which one or more of the assets in question is another contract, so long as at rock bottom, there is something real that could be handed over right there & then. (So there could even be a CDO that isn’t usurious, provided that none of the underlying financial instruments of which it’s made are.) The levels of abstraction or complexity, can make it more difficult to determine the nature of the financial agreement, but in reality it is either usurious or it isn’t.

                    • The standard of ‘none’ seems to be more strict than the FAQ. Bye bye savings accounts.

                    • Jared B.

                      If a contract/agreement/promise includes many assets, and one of them is usury, then the whole deal is usury until the bad apple is removed. That doesn’t go further than what the FAQ says. If usury is intrinsically wrong, that means that you can’t do it “just a little bit” and be OK.

                      Re. savings accounts, see Q. #44.

                    • There’s an inconsistency in Zippy’s condemnation of CDOs and giving a pass to savings accounts. It’s generally not possible to unpack a CDO to identify specific people who are on the hook. In fact, it’s more likely to have a non-usurious CDO income stream than a non-usurious savings account income stream.

                • You have the slope of the line wrong and you’re using time incorrectly. You don’t get to just make up what the time value of money is. It’s a phenomenon that’s been studied since at least the 1500s and has a well understood meaning.

                  Are you familiar with the phrase “a bird in the hand is worth two in the bush”? Money today is worth more than money tomorrow. I give you money today that has value X. You promise to give me money tomorrow that, at time of contract, has value of X-Y. To maintain the equality that is called for by Pope Benedict XIV in his encyclical, you should promise to pay X+Y which yields an appropriate equality of
                  X = X – Y + Y

                  Y is conventionally called the interest. How large Y should properly be is calculated by the time value of money.

                  • Zippy

                    I give you money today that has value X. You promise to give me money tomorrow that, at time of contract, has value of X-Y.

                    When you give me money today, what exactly do you get in return (or retain, as the case may be) at the time you give it to me? Is it a property interest in something real, an open ended claim on a person, or nothing at all?

                    If the first, it is a societas and charging interest is not usury.

                    If the second – if what you receive is “a promise of money tomorrow” – it is a mutuum and charging interest is usury.

                    If it is the third, it is an outright gift.

                    In no case is any theory of time value of money relevant.

                    My impression is that you are very committed to making something rather simple to understand into something difficult to understand.

                    • What you get as a lender is a promise, of various certainty and thus value. The question under discussion is what is the value of the promise. Is a promise of the same value as cold, hard cash on the barrelhead? Nobody believes that. The value of the promise to be performed in the future is discounted, almost always, except in the very odd situation of deflation.

                      You get no property interest. If you had a property interest, you would be on the hook for a portion of the property tax. As a homeowner, I assure you that the bank does not pay a sliding scale of my property taxes. I pay it all because I own it all but the bank holds a lien on the property. You seem to be fuzzy on what a lien is. It is not ownership. It is a security interest in the disposition of the property.

                      If I secure a loan with my property, I do not have to consult with the lender to do anything with it except dispose of it and then lienholders, in order, are first in line for the proceeds of the sale. They cannot stop the sale. They can only ask for their money back at time of sale and ding your credit rating if they’re short in a non-recourse state or go after your other assets if you are in a recourse state.

                      Ownership is the right of control in how a property is used. Lienholders do not control property, thus you can’t be getting a property interest. They only get an entry in the county property registry that the new ownership can’t register the property without satisfying all the previous lienholders.

                    • Zippy

                      What you get as a lender is a promise … You get no property interest.

                      You make Aquinas’ point for him: that the sin of usury consists in the purchase and sale of what does not exist.

                      If you had a property interest, you would be on the hook for a portion of the property tax.

                      Even if that were true, which it isn’t, you’d be conflating positive law with the natural law. But you don’t get charged property tax on(e.g.) common stock or the furniture in your house, so the ‘if you aren’t charged property tax it isn’t property’ test doesn’t work even as a matter of positive law. Furniture doesn’t cease to be property in cases where a property tax is not levied against it.

                      Ownership is the right of control in how a property is used.

                      No it isn’t. As a limited partner in any number of partnerships, there are all sorts of things in which I hold a property interest but have no management control. Do class C common shares in Google (the ones with no voting rights) represent ownership of – a property interest in – Google? Are the people who own them just stupid for valuing them at all, let alone trading them at a price very close to the price of the voting shares? Are shares in a hedge fund a kind of property interest, or does the owner’s lack of management control turn those shares into a claim on nothing (no thing), thereby making them worthless?

                      If these are not property interests – claims on some thing, that is the property – then they must be a claim on no thing.

                    • Hmph, reply got eaten by Disqus. There is a difference between a property interest and a security interest. A security interest, which is what happens with collateral, means that if the property with a lien on it is disposed of, the lienholder must be satisfied before transfer can take place and be registered. That’s it. There is zero difference between a $100 mechanic’s lien that’s put on your house because you didn’t pay the plumber on the net 30 terms you agreed to and the $1,000,000 bank lien put on the same property.

                      So you pay the plumber $100 plus the late payment penalties and the lien is satisfied. At closing, nobody calls the plumber because there is no more security interest. The banker, well, that’s the sort of debt that gets paid back in small installments over time in the overwhelming majority of cases. So in your model, with each payment, the property interest should also lessen to maintain the equality Pope Benedict talked about in his encyclical. Every month the bank would have to re-register with the county recorder the new balance of ownership. This simply does not happen and it would be daft if it were to happen.

                      Loan liens are a security interest, not a property interest. This is also a real thing, in this case provided by the state, which you buy with your filing fee.

                      You’re trying to create a model of non-usurious mortgages. That’s fine as far as it goes so long as it comports with reality. The model simply doesn’t work and to make it appear to work, you are persistently misstating how mortgages and property transfers actually work. Please stop.

                    • Zippy

                      So you pay the plumber $100 plus the late payment penalties and the lien is satisfied. At closing, nobody calls the plumber because there is no more security interest.

                      That fact that you can’t sell the house until the plumber’s claims are satisfied demonstrates that the plumber’s security is a kind of property interest in the house – an objective thing.

                      You can use whatever vocabulary you want, but by now the crucial distinction should be clear to anyone who actually wants to understand it. (Although the atrocious commenting system no doubt lends itself to a certain amount of obscurity).

                      What can be licitly bought and sold in commerce are property claims in things which actually exist, independent of persons. Promises to come up with something in the future are not property claims in things which actually exist, independent of persons. So commercial trade in the latter is immoral.

                    • No, *you* can use whatever vocabulary you please. I’m limiting myself to the truth as best I can say it. A property interest must be registered and adjusted as the interest adjusts. A security interest is a service provided by the recorder of deeds (or county clerk or whatever official is in charge) that halts property transfer unless the lien is first satisfied. Just defining one thing as sort of the other confuses instead of illuminates.

                      My problem with your construction is it seems to be of the ‘make stuff up as I go along’ kind. I am active in the IT field. We specialize in the ephemeral and in alternate ways of looking at the same thing. While you *can* construct matters in terms that are real, physical processes, the virtual processes are usually easier to grasp and quicker to manipulate. So are they real or not real? It’s not a very easy question back in the 13th century but people are pretty convinced that it’s all real in the 21st century.

                    • You have used the phrase open ended claim on a person several times in this thread. It seems to be a term of art but I can’t find a definition for it easily. What does it mean because I’ve lost confidence that I understand your usage of it.

                      I’m also not sure we’d agree on the definition of a mutuum. The back and forth loaning of sugar between housewives is apparently a mutuum but I do not see how that is usury.
                      http://legal-dictionary.thefreedictionary.com/mutuum

                    • Zippy

                      You have used the phrase open ended claim on a person several times in this thread.

                      See Question 35 in my FAQ.

                      The back and forth loaning of sugar between housewives is apparently a mutuum but I do not see how that is usury.

                      Correct that it is a mutuum. It is usury if interest is charged.

                      If she lends her neighbor a cup of sugar today with the understanding that the neighbor owes her two cups of sugar tomorrow, in virtue of her having given her neighbor one cup today — and the transaction is not secured or intermediated through ownership interests in other specific real assets which define its finite extent — then the extra cup of sugar is usury.

            • Just realized I double answered this.

          • Zippy

            Here is an explicit Magisterial condemnation of the idea that the time value of money justifies charging interest on a mutuum loan (usury):

            [The following proposition is condemned as erroneous:] Since ready cash is more valuable than that to be paid, and since there is no one who does not consider ready cash of greater worth than future cash, a creditor can demand something beyond the principal from the borrower, and for this reason be excused from usury. – Various Errors on Moral Subjects (II), Pope Innocent XI by decree of the Holy Office, March 4, 1679

            • That’s new to me. I did find the thing as you said and absent a subsequent overturning that I also am unaware of this does create a difficulty for my position. Usually I’m able to follow along with the logic of a decision but not here.

              Time to pull in my horns on the issue and research for now.

              EDIT:
              At the bottom of the copy I read was the following text:
              “All condemned and prohibited, as they are here expressed, at least as scandalous and in practice pernicious.

              The Holy Pontiff concludes the decree with these words:

              2167 Dz 1216 Finally, in order that doctors, whether scholastics or any others whatsoever, may refrain from injurious contentions in the future, and that there be deliberations for peace and charity, the same Holy Pontiff commands them in virtue of holy obedience, to be on their guard in printing books and manuscripts, as well as theses, disputations, and sermons against any censure and note, and likewise violent railings against such propositions which are still being carried on among Catholics here and there, until the matter has been considered, and a judgment is rendered * by the Holy See upon these same propositions.”

              This text seems to be saying that the errors condemned are limited to the particular formulation of the idea and that future discussion and judgment more generally is to be rendered elsewhere. Did I read that wrong?

              http://www.clerus.org/bibliaclerusonline/en/dqm.htm#cgw

  • egosumscotus

    Zippy: Since you say that what is wrong in a mutuum contract is the fact that the usurer’s recourse is “against the person of the debtor” rather than some specific piece of property, I wonder how do you deal with the whole field of money damages for negligence? Let’s imagine, God forbid, I ran over you with my car and you suffered horrible injuries. You sue my in court for negligence and the jury finds in your favor for $1,000,000 as the proper measure of your injuries. I have neither assets nor insurance coverage anywhere near $1 million. So you have an unsatisfied judgment against me, not against only currently existing asset of mine. At this point, your property interest in my person (as you have termed it) is no different than would be a usurer’s who pursued a breach of contract action against me for not paying back a loan. Is the whole field of tort law damages improper than? In action ex delicto, rather than ex contractu, damages are always going to be assessed against the person generally not against a specific piece of property.

    • Zippy

      You can’t purchase and sell negligence either. Torts and crimes are not assets which are traded, they are damage inflicted.

      It isn’t a tort or negligence for someone to spend money that you voluntarily give him (a mutuum loan). He hasn’t been negligent when he eats the apple which you gave him for the very purpose of eating. So it isn’t licit to try to charge him money in the form of interest – “damages” – as if he had run over your cat.

      But you can purchase and sell corporations, partnerships, medical practices, farms, butcher shops, hunting grounds, etc. So it is licit to buy and sell property interests in them, including those that take the form of a debt-like payment (like the medieval census or a corporate bond) — as long as those property interests are bound to and bounded by the actual property.

      • egosumscotus

        But my question is, if usury is wrong because the gravamen of usury lies in the fact that it is “not morally licit to acquire a person, or a share in a person, as a means to harvesting the potentialities which inhere in that person and become actual in the future” [your words] does this not also apply when someone obtains a legal judgment against another for personal injury? A judgment compensating a person for injuries suffered by negligence does not terminate in any existing piece of the defendant’s property but in whatever the defendant may own or may come to own in the future. Any thoughts about why the Church has not condemned seeking a judgment against someone for personal injury if it occasions the same harm as usury?

        • Zippy

          I could engage this further, but instead I’ll merely point out that bafflement on one moral question is not transitive to other moral questions. In fact that approach to casuistry was rejected in Veritatis Splendour.

          • egosumscotus

            I hope that you think about the apparent disconnect though, instead of merely resting contentment in your bafflement. And I hope that there is in that at least the teeniest, tiniest openness to the fact that your rationale of what usury is and and why it is wrong as set forth in your FAQ and in what you have said here might be a house of cards of your own construction rather than what the Church actually teaches on the subject.

            • Zippy

              I’m not baffled. Your bafflement on a question the Magisterium has not specifically addressed does not cast doubt on a question the Magisterium has addressed specifically.

    • Zippy

      It is true that usury intrinsically treats the borrower like a criminal or a slave.

      • egosumscotus

        If so, then any civil judgment for general monetary damages against a person (as opposed to foreclosure/seizure of specified property as in a non-recourse mortgage) treats the defendant as a criminal or a slave. Why hasn’t the magisterium condemned this?

        • Zippy

          Even if there were no flaws in your syllogism, silence is not evidence of approval.

          In fact taking silence as evidence of approval is condemned.

          • egosumscotus

            What flaws in my syllogism? Don’t be shy.

            I’m not taking silence as approval per se.

            But I do find it curious that the Church would not condemn personal injury/tort lawsuits if they accomplish the same harm as full recourse lending. We are not talking about an insignificant or recent phenomenon — personal injury and others types of tort lawsuits have existed throughout Christendom and together with contract law form the two major divisions of the civil (non-criminal) legal system.

            It’s possible the Church has been silent over the millennia on the moral evil of suing someone for damages ex delicto for some reason. Or it’s possible that Zippy’s understanding of how the Church defines and understands usury is erroneous in some respect. I know which possibility I find more likely.

            • Zippy

              Or it is possible that you are just confused.

  • Zippy

    In filling out some of the references in my FAQ, I found one of the Magisterial proclamations specifically condemning charging interest based on ‘opportunity cost’ or the ‘time value of money’:

    [The following proposition is condemned as erroneous:] Since ready cash is more valuable than that to be paid, and since there is no one who does not consider ready cash of greater worth than future cash, a creditor can demand something beyond the principal from the borrower, and for this reason be excused from usury. – Various Errors on Moral Subjects (II), Pope Innocent XI by decree of the Holy Office, March 4, 1679

    This is cited in Denzinger.

  • egosumscotus

    Zippy: Another question I have for you. You say that a loan contract
    is not usurious if the lender’s recourse is limited to a specified piece of
    property. So, for example, you agree to lend me $100 at the astronomical rate
    of 10,000% interest per year, payable within one year. But the loan is
    non-recourse and the pledge of security is my car which is worth $10,000.

    After one year, I am unable to pay you the principal and
    accrued interest which now amount to, voila, $10,000. So you have the sheriff
    seize my car, sell it at auction for $10,000, and you keep 100% of that. In one
    year, you’ve made $9,900 off of a $100 loan at my expense.

    Would the Church not call this usury?

    • Zippy

      Question 11.

      “… 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 …” – Vix Pervenit.

      • egosumscotus

        According to the same Encyclical: “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.”

        It says nothing about the fact that the lender’s recourse under a loan contract is not limited to a particular asset (which, as I said previously, is a fact that befalls any kind of civil monetary remedy, not just loan contracts).

        Thus, I think the Church would say the example I have given about the car is usury.

        ((I agree over course that there can be other types of contracts that are not usurious, but are unjust in other ways.))

        • Zippy

          “Loan” in Vix Pervenit is a translation of “mutuum”. See question 35.

          • egosumscotus

            The contract is not for the car, the car is pledged as security. The loan is of money and is paid back in money — principal plus interest — with the car serving only as recourse for the lender if the debtor does not pay in cash.

            • Zippy

              Question 31.

              • egosumscotus

                You’re saying that the above example is equivalent to a census contract?