per cent. B. has F. a friend, who is willing to stand security for him to that amount. B. therefore draws upon F., and F. accepts a bill of 100%. at five per cent. interest, payable at the end of a twelvemonth from the date. F. draws a like bill upon B.; each sells his bill to U. for 50/., and it is endorsed to U. accordingly: the 50%. that F. receives, he delivers over without any consideration to B. Pawnbroking is a third way of conducting usurious dealings, which, if it were not legalized, and of course somewhat moderated by competition, would be the most oppressive of the whole; and we heartily agree with our author in thinking that if there is a case in which the allowing of such extraordinary interest is attended with more danger than another, it must be this, which is so particularly adapted to the situation of the lowest poor, that is, of those who on the score of indigence or simplicity, or both, are most open to imposition.

The only remedy for all these evils is to annul the statute against usury, and thereby to grant to the subject the same liberty in giving out money on hire, as he enjoys in the letting of land, horses, houses, or ships. It will indeed be admitted that such a change could not be introduced, all at once, without creating considerable inconvenience. We are ourselves aware of several practical difficulties that would infallibly attend a sudden throwing open of the money market, and there are no doubt many more which will suggest themselves to the practical merchant and the capitalist; but before we proceed to mention any of the impediments now alluded to, we will endeavour to estimate the force of an objection to the measure just recommended, an objection which was originally urged by Dr. Smith, and which has been repeatedly brought forward by more modern authorities. We allude to the injury which he imagined would be entailed upon the community at large, were capital to be too freely entrusted to speculative and enterprising characters, who, in order to prosecute their schemes, might be inclined to give a very high interest for money; but who, in nine cases out of ten, would, in consequence of failure in the projects, be unable to pay either principal or interest. In the cases already considered, the object of the law was to protect the borrower from the wiles of the lender; in this case, it extends its guardianship to the lender against the borrower; and as the paternal care of the legislator in the former was discovered to have no other effect than to encumber the man who needed money and to aggravate his misfortunes, so there is every reason to believe that the anxiety now displayed for the capitalist will do him as little service. The passage in the Wealth of Nations, in reference to which we have made these remarks, is to be found in the fourth chapter of the second book, and is as follows: The legal rate it is to be observed, though it ought to be somewhat above, ought not to be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, were fixed so high as eight or ten per cent, the greater part of the money which was to be lent would be lent to prodigals and projectors, who alone would be willing to give this high inter

เ

est. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers to prodigals and projectors. The person who lends money gets nearly as much from the former as he dares to take from the latter, and his money is much safer in the hands of one set of people than in those of the other. A great part of the capital of the country is thrown into the hands in which it is most likely to be employed with advantage.'

We must rest satisfied with merely referring to Mr. Bentham's admirable letter, addressed to Dr. Smith, on the discouragements opposed by usury laws to the progress of inventive industry. We may remark, however, in passing, that like the word usury, the word projector carries something in its very sound extremely unfavourable to a candid estimate of the innumerable advantages which have arisen from the enterprizes of ingenious men; and Adam Smith, accordingly, in the above passage quoted from him, always couples together projectors and prodigals.' We may likewise observe, in the spirit of our author, that the greater number of our manufactures, and even those trades which are now esteemed the safest, were at one time mere projects, that is to say, they were begun by people who did not know, who, in fact, could not possibly know for certain, whether they would, or would not, succeed. It might, however, be deemed enough, as far as the community at large are concerned, to leave the safety of the national capital to the good sense or self-interest of those who own it; for if a man of common understanding cannot judge correctly as to the best use to be made of his spare money, he will derive very little aid from all the wisdom that can be embodied in an act of parliament. Before he trusts his property into the hands of a person of the description now in view, he will, we may believe, spare no inquiry with regard to the means of being repaid; and, in calculating chances, he will be more inclined to over-rate, than to fall short of, the degree of risk upon which he ought to ground his claims for indemnification. But we repeat once more, the direct tendency of the law against usury, is not by suggesting suitable precautions, to assist a monied man in guarding his property from the effects of fraud or casualty; it is to prevent the hazard altogether, by forbidding him to listen to any such terms as might induce him to lend it, without having the most perfect security. This being the case, and satisfied that the world, and particularly this part of the world, owes its greatness and its refinement to the success which has attended inventive industry, Mr. Bentham boldly recommends the application of a sponge to all the existing statutes against usury and the establishment of the utmost freedom and facility in conducting money transactions.

Viewing the question in relation to general principles, and to the most approved maxims of political economy, there can be no room for hesitation in pronouncing, that the dealer in money ought to be left as free as any other dealer whatsoever, and that the terms of every loan should be settled on no other ground than the respective circumstances of the borrower and lender. But when we call to mind that this freedom in money dealings has never been acted upon in this country, and that the present distribution of property throughout the kingdom is regulated in a great measure by the restrictive system which has so long prevailed, we cannot give our assent to a measure which would all at once dissolve engagements so essentially important. In this case, as in that of the poor laws, there is little difficulty in proving that we have long been acting upon principles radically unsound, or even in discovering the remedy which, theoretically considered, would soonest remove the evils resulting from the error; but in both cases when regarded in connexion with the habits which have grown upon the public mind, and with the effects which they have had upon the actual value of real property in many parts of the country, the duty of the legislator must appear extremely delicate. Without venturing to say that the interest of money would, in the event of the laws against usury being annulled, rise generally over the kingdom, we may hazard the assertion that it would rise in certain situations; and as many persons, who at present receive only five per cent. would yield to the inducement of eight per cent. which, upon a less complete security, perhaps, some would be ready to offer them, they would of course use means to recover their capital from their present debtors, and thus occasion much inconvenience and distress. When, therefore, we add that one half at least of the landholders in Great Britain are answerable for borrowed money with which they have burdened their estates, either to discharge former claims, or for the purposes of improvement, and that in making all their arrangements they, no doubt, guided their calculations by a reference to the present rate of interest, what would be the disappointment and positive loss were they compelled either to refund the loans, or to make new bargains with their creditors on higher terms! The mere transfer and change of so much capital from one hand to another, and from one investment of it to another, could not fail of itself to produce much inconvenience; and there can be no doubt that many lenders, who, at present, rest satisfied with five per cent. would take advantage of the change to distress their debtors, by exacting higher terms, or would even insist upon having their money paid up, from the mere chance of laying it out to better purposes. In these times, any movement of this nature would prove full of hazard to the holders of real property. A great number of them would find it next to impracticable to arrange anew their various incumbrances; and the rest would be exposed to much trouble and expense.

A second objection occurs to us against a sudden repeal of the usury laws, namely, the derangement and uncertainty which such a

repeal would introduce into mercantile affairs, and more particularly into the actual practice of bankers. As matters stand at present, there is no difficulty whatever in settling an account current between merchants at any instance of time or place; for, as the legal interest does not vary from month to month, and is the same at London as at Inverness, the balance due at any period can be immediately ascertained, together with the proportion of interest due upon that balance. This facility of transacting business would, however, be greatly impaired, were the rate of interest to be thrown entirely loose, and no means left of establishing a maximum in every particular case which might be open to dispute; and it is very obvious that, as soon as interest would be found varying to any great extent in different parts of the same kingdom, and in different portions of the same year, disputes would be inevitable. If the merchant in London could get six per cent. for his money, whilst the merchant in Inverness could get no more than four per cent., the former would consider himself a loser, when, at the end of any given period, he should find that the latter allowed him only the lower of the two rates just mentioned, on all the balances which happened to be in his hands, during the lapse of any specified time. Nay, the northern merchant might choose to maintain that, for several months of a particular year, the rate of interest at Inverness did not exceed three per cent., whereas the southern might possibly have heard from some other correspondent that interest, at that place, had never been under five per cent. What a source of disagreement and dispute would be thus opened up! With regard, again, to the discounting of bills in banks, the terms would be found to vary according to the name and supposed credit of the persons who accept or present them; and merchants would have a new bargain to make, as to the rate of discount, every time they wished to convert bills into money. According to the law now existing, a bill must either be discounted or refused; it is either as good as the legal tender of the kingdom to the man who holds it, or is good for nothing: but as soon as bankers should be allowed to estimate the credit of endorsers, and to charge for discount accordingly, the value of a bill would vary with circumstances, from fifty to ninetyfive per cent. This, it may be retorted, is the only fair premium required for the risk which is thus incurred by the banker, and is, of course, as allowable in this case as in that of a loan granted upon imperfect security. True, but as bills are constantly passing through the hands of merchants and constitute, in fact, their circulating medium, it must be extremely vexatious to have their value so arbitrarily fixed, and so frequently called in question, as they must be, whensoever the banker shall have it in his power to raise his terms, by lowering the credit of the acceptor. In Hamburgh, accordingly, where there is no legal rate of interest established, and where all bills are discounted by private merchants; no man who holds a bill knows its actual value, as he may have to pay six, eight, ten, or even fifteen per cent., for an advance of money upon it. this country, we are aware an understanding would soon take place

In

between the mercantile and banking interests for the regulation of their intercourse, and, for this purpose, it is by no means unlikely that a maximum would be fixed, as at present, both for the rate of discount and for the charge of interest on running transactions. Still we have said enough to suggest to persons better acquainted than ourselves with the detail of trade a variety of cases in which the change recommended by Mr. Bentham would be no improvement; and we may venture to add, that to such as have but small capitals, and are just entering into business, the change would be even disadvantageous. It would compel individuals in these circumstances to pay highest for credit, at the very time when they could least afford to pay; and it would accumulate advantages in the hands of old commercial houses, who would thus be enabled to command, to a greater extent than they can do at present, the markets both of money and of saleable commodities.

In the third place, the repeal of the laws against usury would materially increase the responsibility of those who act, upon trusts, for absentees and minors. At present, such persons are only answerable for the sums which come into their hands, together with the legal interest on such sums; but in the circumstances anticipated under Mr. Bentham's reformation, it will become extremely difficult, and not less delicate, both to act in such a way as to satisfy their principals; and, in some instances, to explain the motives upon which they may have acted. The absentee returning home, or the minor coming of age, may insinuate that his money might have been more advantageously employed, that it might have been accumulated at six per cent. instead of four or five per cent.; and in some cases, after a lapse of years, it would not be an easy matter to convince even impartial persons that the trustees had done all they might have done, on behalf of their wards or clients. The security which they had declined as insufficient may have turned out to be good; and their caution in refusing to advance money upon it at a high interest may be only regarded as indifference to the welfare of their constituents.

We mention these things, not as insuperable bars to a repeal of the laws against usury, but merely as circumstances which ought to be kept in view, and allowed due weight, in all estimates of the comparative advantages of the two systems, the restricted and the free. The subject has already been under the consideration of parliament, and it is likely that it may soon again be submitted to their attention; on which account, we regard every attempt to throw light on its tendency, immediate and remote, as praiseworthy, whatever be the views which the several writers may choose to recommend. There can be no doubt, however, that Mr. Bentham has on his side the full force of enlightened principle, and even the practice of the constitution and of the country at large, in every other article except that of money; whilst his antagonists draw all their arguments from the evils of change, from the settled habits of trade and commerce, and more particularly from the present condition and distribution of property. The regimen recommended by the former is admit