The Morality of Moneylending: A Short History (Part 3)

Part 1 defined key terms and traced the moral history of moneylending in ancient Greece and the Dark and Middle Ages. Part 2 brought the narrative through the Renaissance, Reformation and Enlightenment.

The Nineteenth and Twentieth Centuries

Despite their flaws, the thinkers of the Enlightenment had created sufficient economic understanding to fuel the Industrial Revolution throughout the nineteenth century. Economically and politically, facts and reason had triumphed over faith; a sense of individualism had taken hold; the practicality of the profit motive had become clear; and, relative to eras past, the West was thriving.

Morally and philosophically, however, big trouble was brewing. As capitalism neared a glorious maturity, a new, more consistent brand of altruism, created by Kant, Hegel, and their followers, was sweeping Europe. At the political-economic level, this movement manifested itself in the ideas of Karl Marx (1818–1883).

Marx, exploiting the errors of the Classical economists, professed the medieval notion that all production is a result of manual labor; but he also elaborated, claiming that laborers do not retain the wealth they create. The capitalists, he said, take advantage of their control over the means of production — secured to them by private property — and “loot” the laborers’ work. According to Marx, moneylending and other financial activities are not productive, but exploitative; moneylenders exert no effort, do no productive work, and yet reap the rewards of production through usury.¹ As one twentieth-century Marxist put it: “The major argument against usury is that labor constitutes the true source of wealth.”² Marx adopted all the medieval clichés, including the notion that Jews are devious, conniving money-grubbers.

What is the profane basis of Judaism? Practical need, self-interest. What is the worldly cult of the Jew? Huckstering. What is his worldly god? Money.

Money is the jealous god of Israel, beside which no other god may exist. Money abases all the gods of mankind and changes them into commodities.³

Marx believed that the Jews were evil — not because of their religion, as others were clamoring at the time — but because they pursued their own selfish interests and sought to make money. And Marxists were not alone in their contempt for these qualities.

Artists who, like Marx, resented capitalists in general and moneylenders in particular, dominated Western culture in the nineteenth century. In Dickens’s A Christmas Carol, we see the moneygrubbing Ebenezer Scrooge. In Dostoyevsky’s Crime and Punishment, the disgusting old lady whom Raskolnikov murders is a usurer. And in The Brothers Karamazov, Dostoyevsky writes:

It was known too that the young person had . . . been given to what is called “speculation,” and that she had shown marked abilities in the direction, so that many people began to say that she was no better than a Jew. It was not that she lent money on interest, but it was known, for instance, that she had for some time past, in partnership with old Karamazov, actually invested in the purchase of bad debts for a trifle, a tenth of their nominal value, and afterwards had made out of them ten times their value.⁴

In other words, she was what in the 1980s became known as a “vulture” capitalist buying up distressed debt.

Under Marx’s influential ideas, and given the culture-wide contempt for moneylenders, the great era of capitalism — of thriving banks and general financial success — was petering out. Popular sentiment concerning usury was reverting to a Dark Ages-type of hatred. Marx and company put the moneylenders back into Dante’s Inferno, and to this day they have not been able to escape.

The need for capital, however, would not be suppressed by the label “immoral.” People still sought to start businesses and purchase homes; thus usury was still seen as practical. Like the Church of the Middle Ages, people found themselves simultaneously condemning the practice and engaging in it.

Consequently, just as the term “interest” had been coined in the Middle Ages to facilitate the Church’s selective opposition to usury and to avoid the stigma associated with the practice, so modern man employed the term for the same purpose. The concept of moneylending was again split into two allegedly different concepts: the charging of “interest” and the practice of “usury.” Lending at “interest” came to designate lower-premium, lower-risk, less-greedy lending, while “usury” came to mean specifically higher-premium, higher-risk, more-greedy lending. This artificial division enabled the wealthier, more powerful, more influential people to freely engage in moneylending with the one hand, while continuing to condemn the practice with the other. Loans made to lower-risk, higher-income borrowers would be treated as morally acceptable, while those made to higher-risk, lower-income borrowers would remain morally contemptible. (The term “usury” is now almost universally taken to mean “excessive” or illegal premium on loans, while the term “interest” designates tolerable or legal premium.)

From the nineteenth century onward, in the United States and in most other countries, usury laws would restrict the rates of interest that could be charged on loans, and there would be an ongoing battle between businessmen and legislators over what those rates should be. These laws, too, are still with us.

As Bentham predicted, such laws harm not only lenders but also borrowers, who are driven into the shadows where they procure shady and often illegal loans in order to acquire the capital they need for their endeavors. And given the extra risk posed by potential legal complications for the lenders, these loans are sold at substantially higher interest rates than they would be if moneylending were fully legal and unregulated. In the United States, demand for high-risk loans has always existed, and entrepreneurs have always arisen to service the demand for funds. They have been scorned, condemned to Hell, assaulted, jailed, and generally treated like the usurers of the Middle Ages — but they have relentlessly supplied the capital that has enabled Americans to achieve unprecedented levels of productiveness and prosperity.

The earliest known advertisement for a small-loan service in an American newspaper appeared in the Chicago Tribune in November 1869. By 1872, the industry was prospering. Loans collateralized by furniture, diamonds, warehouse receipts, houses, and pianos were available (called “chattel” loans). The first salary-loan office (offering loans made in advance of a paycheck) was opened by John Mulholland in Kansas City in 1893. Within fifteen years he had offices all across the country. The going rate on a chattel loan was 10 percent a month for loans under $50, and 5–7 percent a month for larger loans. Some loans were made at very high rates, occasionally over 100 percent a month.⁵

The reason rates were so high is because of the number of defaults. With high rates in play, the losses on loans in default could ordinarily be absorbed as a cost of doing business. In this respect, the nineteenth-century small-loan business was a precursor of the twentieth-century “junk” bond business or the twenty-first-century subprime mortgage lender. However, unlike the “junk” bond salesman, who had recourse to the law in cases of default or bankruptcy, these small-loan men operated on the fringes of society — and often outside the law. Because of the social stigmatization and legal isolation of the creditors, legal recourse against a defaulting borrower was generally unavailable to a usurer. Yet these back-alley loans provided a valuable service — one for which there was great demand — and they enabled many people to start their own businesses or improve their lives in other ways.

Of course, whereas most of these borrowers paid off their loans and succeeded in their endeavors, many of them got into financial trouble — and the latter cases, not the former, were widely publicized. The moneylenders were blamed, and restrictions were multiplied and tightened.

In spite of all the restrictions, laws, and persecutions, the market found ways to continue. In 1910, Arthur Morris set up the first bank in America with the express purpose of providing small loans to individuals at interest rates based on the borrower’s “character and earning power.” In spite of the usury limit of 6 percent that existed in Virginia at the time, Morris’s bank found ways, as did usurers in the Middle Ages, to make loans at what appeared to be a 6 percent interest rate while the actual rates were much higher and more appropriate. For instance, a loan for $100 might be made as follows: A commission of 2 percent plus the 6 percent legal rate would be taken off the top in advance; thus the borrower would receive $92. Then he would repay the loan at $2 a week over fifty weeks. The effective compound annual interest rate on such a loan was in excess of 18 percent. And penalties would be assessed for any delinquent payments.⁶ Such camouflaged interest rates were a throwback to the Middle Ages, when bankers developed innovative ways to circumvent the restrictions on usury established by the Church. And, as in the Middle Ages, such lending became common as the demand for capital was widespread. Consequently, these banks multiplied and thrived — for a while.

(Today’s credit card industry is the successor to such institutions. Credit card lenders charge high interest rates to high-risk customers, and penalties for delinquency. And borrowers use these loans for consumption as well as to start or fund small businesses. And, of course, the credit card industry is regularly attacked for its high rates of interest and its “exploitation” of customers. To this day, credit card interest rates are restricted by usury laws, and legislation attempting to further restrict these rates is periodically introduced.)

In 1913, in New York, a moneylender who issued loans to people who could not get them at conventional banks appeared before a court on the charge of usury. In the decision, the judge wrote:

You are one of the most contemptible usurers in your unspeakable business. The poor people must be protected from such sharks as you, and we must trust that your conviction and sentence will be a notice to you and all your kind that the courts have found a way to put a stop to usury. Men of your type are a curse to the community, and the money they gain is blood money.⁷

This ruling is indicative of the general attitude toward usurers at the time. The moral-practical dichotomy was alive and kicking, and the moneylenders were taking the blows. Although their practical value to the economy was now clear, their moral status as evil was still common “sense.” And the intellectuals of the day would only exacerbate the problem.

The most influential economist of the twentieth century was John Maynard Keynes (1883–1946), whose ideas not only shaped the theoretical field of modern economics but also played a major role in shaping government policies in the United States and around the world. Although Keynes allegedly rejected Marx’s ideas, he shared Marx’s hatred of the profit motive and usury. He also agreed with Adam Smith that government must control interest rates; otherwise investment and thus society would suffer. And he revived the old Reformation idea that usury is a necessary evil:

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. . . . But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.⁸

Although Keynes and other economists and intellectuals of the day recognized the need of usury, they universally condemned the practice and its practitioners as foul and unfair. Thus, regardless of widespread recognition of the fact that usury is a boon to the economy, when the Great Depression occurred in the United States, the moneylenders on Wall Street were blamed. As Franklin Delano Roosevelt put it:

The rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men . . . [We must] apply social values more noble than mere monetary profit.⁹

And so the “solution” to the problems of the Great Depression was greater government intervention throughout the economy — especially in the regulation of interest and the institutions that deal in it. After 1933, banks were restricted in all aspects of their activity: the interest rates they could pay their clients, the rates they could charge, and to whom they could lend. In 1934, the greatest bank in American history, J. P. Morgan, was broken up by the government into several companies. The massive regulations and coercive restructurings of the 1930s illustrate the continuing contempt for the practice of taking interest on loans and the continuing distrust of those — now mainly bankers — who engage in this activity. (We paid a dear price for those regulations with the savings and loan crisis of the 1970s and 1980s, which cost American taxpayers hundreds of billions of dollars.¹⁰ And we continue to pay the price of these regulations in higher taxes, greater financial costs, lost innovation, and stifled economic growth.)

The Twenty-First Century

From ancient Greece and Rome to the Dark and Middle Ages, to the Renaissance and Reformation, to the nineteenth and twentieth centuries, moneylending has been morally condemned and legally restrained. Today, at the dawn of the twenty-first century, moneylending remains a pariah.

One of the latest victims of this moral antagonism is the business of providing payday loans. This highly popular and beneficial service has been branded with the scarlet letter “U”; consequently, despite the great demand for these loans, the practice has been relegated to the fringes of society and the edge of the law. These loans carry annualized interest rates as high as 1000 percent, because they are typically very short term (i.e., to be paid back on payday). By some estimates there are 25,000 payday stores across America, and it is “a $6 billion dollar industry serving fifteen million people every month.”¹¹ The institutions issuing these loans have found ways, just as banks always have, to circumvent state usury laws. Bank regulators have severely restricted the ability of community banks to offer payday loans or even to work with payday loan offices, more than thirteen states have banned them altogether, and Congress is currently looking at ways to ban all payday loans.¹² This is in spite of the fact that demand for these loans is soaring and that they serve a genuine economic need, that they are a real value for low-income households. As the Wall Street Journal reports: “Georgia outlawed payday loans in 2004, and thousands of workers have since taken to traveling over the border to find payday stores in Tennessee, Florida and South Carolina. So the effect of the ban has been to increase consumer credit costs and inconvenience for Georgia consumers.”¹³

A story in the LA Weekly, titled “Shylock 2000” — ignoring the great demand for payday loans, ignoring the economic value they provide to countless borrowers, and ignoring the fact that the loans are made by mutual consent to mutual advantage — proceeded to describe horrific stories of borrowers who have gone bankrupt. The article concluded: “What’s astonishing about this story is that, 400 years after Shakespeare created the avaricious lender Shylock, such usury may be perfectly legal.”¹⁴

What is truly astonishing is that after centuries of moneylenders providing capital and opportunities to billions of willing people on mutually agreed-upon terms, the image of these persistent businessmen has not advanced beyond that of Shylock.

The “Shylocks” du jour, of course, are the subprime mortgage lenders, with whom this article began. These lenders provided mortgages designed to enable low-income borrowers to buy homes. Because the default rate among these borrowers is relatively high, the loans are recognized as high-risk transactions and are sold at correspondingly high rates of interest. Although it is common knowledge that many of these loans are now in default, and although it is widely believed that the lenders are to blame for the situation, what is not well known is, as Paul Harvey would say, “the rest of the story.”

The tremendous growth in this industry is a direct consequence of government policy. Since the 1930s, the U.S. government has encouraged home ownership among all Americans — but especially among those in lower income brackets. To this end, the government created the Federal Home Loan Banks (which are exempt from state and local income taxes) to provide incentives for smaller banks to make mortgage loans to low-income Americans. Congress passed the Community Reinvestment Act, which requires banks to invest in their local communities, including by providing mortgage loans to people in low-income brackets. The government created Fannie Mae and Freddie Mac, both of which have a mandate to issue and guarantee mortgage loans to low-income borrowers.

In recent years, all these government schemes and more (e.g., artificially low interest rates orchestrated by the Fed) led to a frenzy of borrowing and lending. The bottom line is that the government has artificially mitigated lenders’ risk, and it has done so on the perverse, altruistic premise that “society” has a moral duty to increase home ownership among low-income Americans. The consequence of this folly has been a significant increase in delinquent loans and foreclosures, which has led to wider financial problems at banks and at other institutions that purchased the mortgages in the secondary markets.

Any objective evaluation of the facts would place the blame for this disaster on the government policies that caused it. But no — just as in the past, the lenders are being blamed and scapegoated. Although some of these lenders clearly did take irrational risks on many of these loans, that should be their own problem, and they should have to suffer the consequences of their irrational actions — whether significant financial loss or bankruptcy. (The government most certainly should not bail them out.) However, without the perception of reduced risk provided by government meddling in the economy, far fewer lenders would have been so frivolous.

Further, the number of people benefiting from subprime mortgage loans, which make it possible for many people to purchase a home for the first time, is in the millions — and the vast majority of these borrowers are not delinquent or in default; rather, they are paying off their loans and enjoying their homes, a fact never mentioned by the media.

It should also be noted that, whereas the mortgage companies are blamed for all the defaulting loans, no blame is placed on the irresponsible borrowers who took upon themselves debt that they knew — or should have known — they could not handle.

After four hundred years of markets proving the incredible benefits generated by moneylending, intellectuals, journalists, and politicians still rail against lenders and their institutions. And, in spite of all the damage done by legal restrictions on interest, regulation of moneylenders, and government interference in financial markets, whenever there is an economic “crisis,” there is invariably a wave of demand for more of these controls, not less.

Moneylenders are still blamed for recessions; they are still accused of being greedy and of taking advantage of the poor; they are still portrayed on TV and in movies as slick, murderous villains; and they are still distrusted by almost everyone. (According to a recent poll, only 16 percent of Americans have substantial confidence in the American financial industry.¹⁵) Thus, it should come as no surprise that the financial sector is the most regulated, most controlled industry in America today.

But what explains the ongoing antipathy toward, distrust of, and coercion against these bearers of capital and opportunity? What explains the modern anti-moneylending mentality? Why are moneylenders today held in essentially the same ill repute as they were in the Middle Ages?

The explanation for this lies in the fact that, fundamentally, twenty-first-century ethics is no different from the ethics of the Middle Ages.

All parties in the assault on usury share a common ethical root: altruism — belief in the notion that self-sacrifice is moral and self-interest is evil. This is the source of the problem. So long as self-interest is condemned, neither usury in particular, nor profit in general, can be seen as good — both will be seen as evil.

Moneylending cannot be defended by reference to its economic practicality alone. If moneylending is to be recognized as a fully legitimate practice and defended accordingly, then its defenders must discover and embrace a new code of ethics, one that upholds self-interest — and thus personal profit — as moral.

Conclusion

Although serious economists today uniformly recognize the economic benefits of charging interest or usury on loans, they rarely, if ever, attempt a philosophical or moral defense of this position. Today’s economists either reject philosophy completely or adopt the moral-practical split, accepting the notion that although usury is practical, it is either immoral or, at best, amoral.

Modern philosophers, for the most part, have no interest in the topic at all, partly because it requires them to deal with reality, and partly because they believe self-interest, capitalism, and everything they entail, to be evil. Today’s philosophers, almost to a man, accept self-sacrifice as the standard of morality and physical labor as the source of wealth. Thus, to the extent that they refer to moneylending at all, they consider it unquestionably unjust, and positions to the contrary unworthy of debate.

It is time to set the record straight.

Whereas Aristotle united productiveness with morality and thereby condemned usury as immoral based on his mistaken belief that the practice is unproductive — and whereas everyone since Aristotle (including contemporary economists and philosophers) has severed productiveness from morality and condemned usury on biblical or altruistic grounds as immoral (or at best amoral) — what is needed is a view that again unifies productiveness and morality, but that also sees usury as productive, and morality as the means to practical success on earth. What is needed is the economic knowledge of the last millennium combined with a new moral theory — one that upholds the morality of self-interest and thus the virtue of personal profit.

Let us first condense the key economic points; then we will turn to a brief indication of the morality of self-interest.

The crucial economic knowledge necessary to a proper defense of usury includes an understanding of why lenders charge interest on money — and why they would do so even in a risk-free, noninflationary environment. Lenders charge interest because their money has alternative uses — uses they temporarily forego by lending the money to borrowers. When a lender lends money, he is thereby unable to use that money toward some benefit or profit for himself. Had he not lent it, he could have spent it on consumer goods that he would have enjoyed, or he could have invested it in alternative moneymaking ventures. And the longer the term of the loan, the longer the lender must postpone his alternative use of the money. Thus interest is charged because the lender views the loan as a better, more profitable use of his money over the period of the loan than any of his alternative uses of the same funds over the same time; he estimates that, given the interest charged, the benefit to him is greater from making the loan than from any other use of his capital.¹⁶

A lender tries to calculate in advance the likelihood or unlikelihood that he will be repaid all his capital plus the interest. The less convinced he is that a loan will be repaid, the higher the interest rate he will charge. Higher rates enable lenders to profit for their willingness to take greater risks. The practice of charging interest is therefore an expression of the human ability to project the future, to plan, to analyze, to calculate risk, and to act in the face of uncertainty. In a word, it is an expression of man’s ability to reason. The better a lender’s thinking, the more money he will make.

Another economic principle that is essential to a proper defense of usury is recognition of the fact that moneylending is productive. This fact was made increasingly clear over the centuries, and today it is incontrovertible. By choosing to whom he will lend money, the moneylender determines which projects he will help bring into existence and which individuals he will provide with opportunities to improve the quality of their lives and his. Thus, lenders make themselves money by rewarding people for the virtues of innovation, productiveness, personal responsibility, and entrepreneurial talent; and they withhold their sanction, thus minimizing their losses, from people who exhibit signs of stagnation, laziness, irresponsibility, and inefficiency. The lender, in seeking profit, does not consider the well-being of society or of the borrower. Rather, he assesses his alternatives, evaluates the risk, and seeks the greatest return on his investment.

And, of course, lent money is not “barren”; it is fruitful: It enables borrowers to improve their lives or produce new goods or services. Nor is moneylending a zero-sum game: Both the borrower and the lender benefit from the exchange (as ultimately does everyone involved in the economy). The lender makes a profit, and the borrower gets to use capital — whether for consumption or investment purposes — that he otherwise would not be able to use.¹⁷

An understanding of these and other economic principles is necessary to defend the practice of usury. But such an understanding is not sufficient to defend the practice. From the brief history we have recounted, it is evident that all commentators on usury from the beginning of time have known that those who charge interest are self-interested, that the very nature of their activity is motivated by personal profit. Thus, in order to defend moneylenders, their institutions, and the kind of world they make possible, one must be armed with a moral code that recognizes rational self-interest and therefore the pursuit of profit as moral, and that consequently regards productivity as a virtue and upholds man’s right to his property and to his time.

There is such a morality: It is Ayn Rand’s Objectivist ethics, or rational egoism, and it is the missing link in the defense of usury (and capitalism in general). According to rational egoism, man’s life — the life of each individual man — is the standard of moral value, and his reasoning mind is his basic means of living. Being moral, on this view, consists in thinking and producing the values on which one’s life and happiness depend — while leaving others free to think and act on their own judgment for their own sake. The Objectivist ethics holds that people should act rationally, in their own long-term best interest; that each person is the proper beneficiary of his own actions; that each person has a moral right to keep, use, and dispose of the product of his efforts; and that each individual is capable of thinking for himself, of producing values, and of deciding whether, with whom, and on what terms he will trade. It is a morality of self-interest, individual rights, and personal responsibility. And it is grounded in the fundamental fact of human nature: the fact that man’s basic means of living is his ability to reason.

Ayn Rand identified the principle that the greatest productive, life-serving power on earth is not human muscle but the human mind. Consequently, she regarded profit-seeking — the use of the mind to identify, produce, and trade life-serving values — as the essence of being moral.¹⁸

Ayn Rand’s Objectivist ethics is essential to the defense of moneylending. It provides the moral foundation without which economic arguments in defense of usury cannot prevail. It demonstrates why moneylending is supremely moral.

The Objectivist ethics frees moneylenders from the shackles of Dante’s inferno, enables them to brush off Shakespeare’s ridicule, and empowers them to take an irrefutable moral stand against persecution and regulation by the state. The day that this moral code becomes widely embraced will be the day that moneylenders — and every other producer of value — will be completely free to charge whatever rates their customers will pay and to reap the rewards righteously and proudly.

If this moral ideal were made a political reality, then, for the first time in history, moneylenders, bankers, and their institutions would be legally permitted and morally encouraged to work to their fullest potential, making profits by providing the lifeblood of capital to our economy. Given what these heroes have achieved while scorned and shackled, it is hard to imagine what their productive achievements would be if they were revered and freed.

Originally published in The Objective Standard, Fall 2007.

Author’s note: This essay is partially based on my lecture “Money-Lending: Its History and Philosophy,” delivered at Second Renaissance Conferences, Anaheim, California, July 2001.

Acknowledgments: The author would like to thank the following people for their assistance and comments on this article: Elan Journo, Onkar Ghate, Sean Green, John D. Lewis, John P. McCaskey, and Craig Biddle.

Bibliography

Böhm-Bawerk, Eugen von. Capital and Interest: A Critical History of Economical Theory. Books I–III. Trans. William A. Smart. London: Macmillan and Co., 1890.

Buchan, James. Frozen Desire: The Meaning of Money. New York: Farrar, Straus & Giroux, 1997.

Cohen, Edward E. Athenian Economy and Society. Princeton: Princeton University Press, 1992.

Davies, Glyn. A History of Money. Cardiff: University of Wales Press, 1994.

Ferguson, Niall. The Cash Nexus. New York: Basic Books, 2001.

Grant, James. Money of the Mind. New York: The Noonday Press, 1994.

Homer, Sidney. A History of Interest Rates. New Brunswick: Rutgers University Press, 1963.

Le Goff, Jacques. Your Money or Your Life. Trans. Patricia Ranum. New York: Zone Books, 1988.

Lewis, Michael. The Money Culture. New York: W. W. Norton & Company, 1991.

Lockman, Vic. Money, Banking, and Usury (pamphlet). Grants Pass, OR: Westminster Teaching Materials, 1991.

Murray, J. B. C. The History of Usury. Philadelphia: J. B. Lippincott & Co., 1866.

Sobel, Robert. Dangerous Dreamers. New York: John Wiley & Sons, Inc., 1993.

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1. For a thorough rebuttal of Marx’s view, see Böhm-Bawerk, Capital and Interest, book I, chapter XII.
2. Gabriel Le Bras, quoted in Le Goff, Your Money or Your Life, p. 43.
3. Johnson, A History of the Jews, p. 351.
4. Fyodor M. Dostoevsky, The Brothers Karamazov, trans. Constance Garnett (Spark Publishing, 2004), p. 316.
5. James Grant, Money of the Mind (New York: Noonday Press, 1994), p. 79.
6. Grant, Money of the Mind, pp. 91–95.
7. Grant, Money of the Mind, p. 83.
8. John Maynard Keynes, “Economic Possibilities for our Grandchildren,” in Essays in Persuasion (New York: W. W. Norton & Company, 1963), pp. 359, 362. Online: http://www.econ.yale.edu/smith/econ116a/keynes1.pdf.
9. Franklin D. Roosevelt, First Inaugural Address, March 4, 1933, https://avalon.law.yale.edu/20th_century/froos1.asp.
10. To understand the link between 1930s regulations and the S&L crisis, see Edward J. Kane, The S&L Insurance Mess: How Did It Happen? (Washington, D.C.: The Urban Institute Press, 1989), and Richard M. Salsman, The Collapse of Deposit Insurance — and the Case for Abolition (Great Barrington, MA: American Institute for Economic Research, 1993).
11. “Mayday for Payday Loans,” Wall Street Journal, April 2, 2007, http://online.wsj.com/article/SB117546964173756271.html.
12. “U.S. Moves Against Payday Loans, Which Critics Charge Are Usurious,” Wall Street Journal, January 4, 2002, http://online.wsj.com/article/SB1010098721429807840.html.
13. “Mayday for Payday Loans,” Wall Street Journal.
14. Christine Pelisek, “Shylock 2000,” LA Weekly, February 16, 2000, https://www.laweekly.com/shylock-2000/.
15. Wall Street Journal, August 2, 2007, p. A4.
16. For an excellent presentation of this theory of interest, see Böhm-Bawerk, Capital and Interest, book 2.
17. For a discussion of the productive nature of financial activity, see my taped course “In Defense of Financial Markets,” https://estore.aynrand.org/products/in-defense-of-financial-markets-mp3-download?_pos=1&_sid=e9380c353&_ss=r.
18. For more on Objectivism, see Leonard Peikoff, Objectivism: The Philosophy of Ayn Rand (New York: Dutton, 1991); and Ayn Rand, Atlas Shrugged (New York: Random House, 1957) and Capitalism: The Unknown Ideal (New York: New American Library 1966).