Spirituality and Interest Rates

January 27


The righteous man…does not lend at usury or takes excessive interest. He withholds his hand from doing wrong and judges fairly between man and man. (Ezekiel 18:8)
7The rich ruleth over the poor, and the borrower is servant to the lender.(Prov. 22:7)

Calvin: “When I permit some usury, I do not deem all usury lawful. And I disapprove if someone proposes to make a living by profiting from usury. Furthermore, I concede nothing except in setting forth certain exceptions. The first is that one not take usury from the poor, and that no one, being in a bad situation through indigence or afflicted by some calamity, be forced into it. The second exception is that he who lends not be so occupied with the gain that he neglects necessary duties; not wishing to keep his money secure, that he scorns his poor brothers. The third exception is…that we look closely at it with Christ’s rule: do as you wish others to do unto you. The fourth exception is that he who borrows make as much profit from the borrowed money. The fifth, that we not value things according to the world, but to the Word of God. In the sixth place, that we not only look at the private comfort of those with whom we do business, but also to the public good. In the seventh, that we not exceed the limits that the public laws of the land allow, even if they not be adequate laws… I now conclude that it is necessary to judge usuries… according to the rule of fairness.” (CR 10, 247-249)

Many would be surprised the Bible or Calvin say anything about interest rates. But the ability to loan and return the loan are important concepts that effect how we love our neighbor, and our own tendency toward greed and selfishness. Calvin lived in a time in which the old feudal system was in disarray with a rise of a money economy (replacing a barter economy), and a rise in industry and the middle class. Usury is excessive interest. At times it has meant charging any interest at all. The Council of Nicea had forbidden ministers from charging usury above one percent. Lending to another Israelite at high rates of interest (or at times with any interest) was forbidden, for lending to another believer was seen as a matter of philanthropy. By the time Calvin came along, short term interest rates ranged from 20-30%. Calvin’s openness to limited, fair interest helped lower the interest rates (Henry VIII’s edict did as well) to 9-10% (http://en.wikipedia.org/wiki/Usury).
One of the great problems of our society is interest rates, and the way we make loans. Some say the real estate collapse and rapid rise of foreclosures were caused by banks encouraging people to get loans beyond their means. Notably, people would put 0% down, and the house was bigger than they could afford. Bankers would get paid for each mortgage obtained, and the justification was that people who couldn’t afford housing could obtain housing. On top of this were the ever- insistent credit card offers with low cost beginning rates and high interest rates later. People would use easy credit. Then mortgage brokers would offer a lower interest rate on a second mortgage. If people could barely afford the first mortgage and were putting their house down as collateral on a second mortgage, eventually there was a collapse! The government was encouraging us to spend to help the economy- buy cars, buy tvs, buy computers. But this only led to more debt. Not many were saying we need to save or to be cautious. Now the government is going into debt to help us- $1.2 trillion now with another 800 billion looming. Eventually our government will run out of its ability to make loans. This happened with the USSR in 1989, and led to its collapse. To print money to pay loans leads to high inflation rates.
One other small point- South Carolina is one of the worst states for payday lenders- and car title lenders. These people have had interest rates as high as 500% mainly for the poor. Ironically, the Democratic candidate for governor in S.C. who lost his last election went to work for them. They have powerful lobbyists. But who lobbies for the poor?
My point is this- there is a balance. A balance for lending, and a balance for purchasing. Wanting more than you can afford is fueled by covetousness (a word not heard much today) or greed. It would be a good idea for us to look for ways to decrease our debt instead of adding to them especially right now. The people who were hurt the least by this last collapse were those who did not have huge debts, nor those who had huge investments in stocks. However, greed by even 10% causes problems for the other 90% (people were saying only 10% of the housing market was in trouble). Yes, interest can be a moral problem and a spiritual problem affecting our relationship to God.