Usury

Ronald Wallace summarizes John Calvin’s view of usury:

“For centuries before Calvin’s day, the Church and most other authorities had applied the Biblical condemnation of usury quite directly to commercial practices, and had prohibited loans at interest. Exceptions had been allowed. Interest had been deemed payable, for example, when the loan could be shown to have caused loss to the lender or made him miss opportunities of otherwise profiting from the possession of it.

But Holy Scripture seemed to draw no such distinctions in its prohibition of “usury”. To Luther it did not seem right for men to profit merely from lending money without working or taking any personal risks. However, the practice of taking interest on loans had been growing, and governments were busy trying to regulate the rate at which the interest was to be taken.

Calvin was the first to question the older method of interpreting the Bible on this matter. He insisted that “usury” in the context of the Biblical world was not entirely the same as in that of the sixteenth century. In Biblical times, he argued, business enterprises required little capital and it is obvious from the contexts that the loans there referred to were purely loans given to people in necessity. It was only in relation to such unproductive loans given for relief and consumption that usury was forbidden, but the most common in the 16th century was of another type. It was the loan given for production so that the borrowers could profit from the use of it in his business or commercial enterprise. Even though man might not like this kind of usury there was, Calvin argued, no ground for suggesting that it is forbidden in the word of God.

He denied the teaching of Aristotle that money is sterile and cannot therefore beget more of its kind. He argued that it was wrong that a rich and monied man who has borrowed in order to buy a piece of land should be allowed to profit from the proceeds of the farm without paying to the lender some part of the revenues as interest till the principal is repaid. The usury forbidden in the Bible “is only as to the poor, and consequently if we have to do with the rich … usury is freely permitted”. Calvin thus gave a clear and bold alternative to the traditional teaching, and people found his arguments much more convincing than the sophistries by which exceptions were allowed against what seemed a straightforward blunt prohibition. In place of the arguments for such complicated, casuistical exceptions he laid down one simple rule: “how far it may be lawful to receive usury upon loans, the law of equity will better prescribe than any lengthened discussions.”

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I would argue that Calvin’s view of usury is the biblical one. The Torah distinguishes between loans given to the poor in need and loans given for other reasons, particularly business investment. The Christian Reconstructionists did quite a bit of work on this, and their arguments are conclusive in my view. See Gary North’s discussion here: https://www.garynorth.com/public/4007.cfm

I wonder how many people who argue that the Bible forbids usury have savings accounts from which they draw interest? Do they know where that interest comes from? Economic illiteracy is rampant. Too many have relied on Aristotle rather than sound biblical exegesis.

Jesus clearly thought it was not wrong to expect a return on investment, as seen in the parable of the talents in Matthew 25. Note that in that parable, the servant who did NOT give his master a return on the talent by, at the very least, giving it to the bankers to draw interest, is the one who is condemned.

And by the way, Scripture nowhere authorizes the civil magistrate to set the interest rate on loans any more than it authorizes the civil magistrate to fix prices for other commodities. A just interest rate is the one agreed to by the loaner and the borrower, just like just prices are set by the buyer and seller.

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Interestingly, in the 16th century, inflation was a huge issue, due to opening up trade with the Americas and a dramatic increase in the supply of gold. Roman Catholics tended to blame the merchants. Calvin saw a better way forward.

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“In the parable of the talents, which dealt with the Final Judgment, Jesus told of three stewards. A rich man puts them in charge of his money. Then he leaves town. On his return, he requires an accounting. One steward had multiplied his five talents by two to one. The second had multiplied his two talents by two to one. The third had buried his coin in the ground, which he returned to the owner. Here was the response of the owner, who is symbolic of God on judgment day. “Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury. Take therefore the talent from him, and give it unto him which hath ten talents. For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. And cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth” (Matthew 25:27-30). If charging interest were not legitimate, why would Jesus have used the example of money-lending as a legitimate way to increase capital? Why would He have attributed to God such words of condemnation for not having lent at interest? Those Christian commentators who say that usury is prohibited, meaning all interest on loans, prefer not to mention the existence of this passage, let alone explain it. The Mosaic law prohibited interest on a narrow class of loans: charitable loans to fellow Israelites and resident aliens. It did not prohibit interest on all other loans. Charitable loans were to be annulled in the seventh year, at one time. Loans collateralized by rural land were to end in the seventh seventh year, or Jubilee year. The land reverted to the heirs of the conquest generation. The sabbatical year and the Jubilee year system were annulled by Jesus and ended when Israel ceased to exist as a nation. Jesus authorized interest-bearing loans.”

— Gary North (https://garynorth.com/public/4007.cfm)

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One problem with capping interest rates on credit cards is it will likely mean many poor people will then not be able to get credit cards at all. And navigating modern life without a credit card can be difficult (just as navigating modern life without a phone can be difficult). So a proposal aimed at helping the poor could end up hurting them. Government has been know to do that kind of thing, The Calvinistic wing of the Reformation was right (exegetically and ethically) to distinguish poor loans from what we might call business or consumer loans. The poor are not to be charged interest. In a welfare state, where even the poorest of the poor have programs available to keep them above the poverty line, it’s hard to know how the rule prohibiting usury to the poor should be applied. But charging interest on all other loans is nowhere forbidden in Scripture.

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When a citizenry acts like irresponsible children, they inevitably need (and/or get) laws that treat them like irresponsible children. Limiting interest rates will mean a lot of people won’t be able to get credit, just like minimum wage laws mean a lot of people don’t get jobs. It’s sad when people have to be protected from themselves.