Guest Post from Paul Thompson
Credit
unions were one of a number of American institutions that tackled the
credit problems of the urban working class in the early 20th Century.
Taken together, these institutions helped to demonstrate that
industrial and salaried workers were safe credit bets, opening the
door to consumer lending by commercial banks and helping to foster
our "consumer culture."
The
question of credit for Jane and Joe worker was bound up with the
issue of usury. "Usury" narrowly defined means the charging
of interest on a loan, but more broadly it can mean "excessive"
interest, illegal interest, or simply dishonest or abusive lending
practices.
The
Judea-Christian heritage frowned on the charging of interest,
particularly on loans to individuals in need. In Exodus (22:25 RSV)
we read: "If you lend money to any of my people with you who is
poor, you shall not be like a moneylender to him, and you shall not
exact interest."
Nehemiah
(5:1-6), hearing the complaints of the people of Israel in a time of
famine, scolds the nobles and says, "Let us abandon this
exacting of interest. Return to them this very day their fields,
their vineyards, their olive orchards, and their houses, and the
percentage of money, grain, wine, and oil you have been exacting from
them." As a result of such teachings, Jewish law forbade
charging interest on loans, except loans to non-Jews.
The New
Testament also encouraged generosity in lending without expectation
of gain and voiced suspicion of accumulated wealth. The Christian
church continued the ban on lending at interest, but, of course, such
bans could not prevent people from having to borrow, nor lenders from
getting around the bans in one way or another. One escape hatch was
the proviso in Jewish law that Jews could lend to non-Jews. This led
to some Jews, excluded from most occupations, becoming lenders to
Christians, ranging from pawnbroking to financing wars.
With
the Industrial Revolution, starting in England in the 18th Century,
it became more and more evident that credit was a necessary lubricant
for business and trade. Economists like Adam Smith saw interest as a
useful tool, although he advocated limits on how much could be
charged. The churches themselves, especially the Protestants, began
conceding that some interest was morally allowable. England
eventually abolished its usury limit of 6 percent in 1854, leaving
control to market forces. (Borrowers who feel an interest charge is
exorbitant can take the lender to court, but this obviously doesn't
happen often. In recent years, consumer advocates have pushed for
usury limits to protect borrowers.)
