Outlawing Usury

The Rev. David Brawley of East Brooklyn Baptist described a preliminary statement of basic principles. “Reasonable interest rates,” he said. “In this financial culture, the nation will return to a time-honored, indeed ancient, practice: the law against usury. Financial institutions and mechanisms that participate in this culture will agree to a maximum of 9 percent interest or so. This was the usual state-mandated rate before the repeal.”

Brawley described other principles with radical implications. “The lender holds the loan,” he explained. “The financial institution that makes a loan holds the loan for its duration. The borrower and lender enter into a long-term relationship that ends when the loan is fully repaid. This is the fundamental starting point for any return to accountability.” That statement of principle challenges the market securitization of mortgages that falsely claimed to reduce risk by dispersing it among many investors. The process instead left no one responsible for sound lending and thus multiplied the costs of failure.

William Greider | CommonDreams.org