Editor’s Note: Regarding a recent reply about usury, the following comments were sent by Dr. Anthony Santelli, a former professor of economics at George Mason University:
“I have been reading your excellent column Catholic Replies for countless years. The December 10, 2015, issue of The Wanderer is the first time you have made a grave error. Your response to a question on usury is incorrect on several levels, and I was hoping that you would take the time to deepen your understanding of this important issue by reading this e-mail and the attached article.
“The traditional definition of usury is the charging of any interest, not excessive interest. Fifteen years ago, I too believed that only excessive interest was disapproved of by the Church. After 15 years of exhaustive study, it is without debate that there is only one conclusion: The consistent teaching of the Church is that all interest is usury. See Deut. 23:20; Ezek. 18:8-9, 13; Council of Nicaea (325), Canon XVII; Third Lateran Council (1179), Canon 25; Council of Lyons II (1274), Constitution #26; Council of Vienne (1311-1312); Catechism of the Council of Trent, Question XI; Thomas Aquinas, Summa, 2.2 #78; encyclical Vix Pervenit by Pope Benedict XIV (1745). Usury is clearly defined by Aquinas and Trent, as well as the Old Testament, to be any interest.
“In fact, your citing of Fr. John Hardon, SJ, proves this point; it doesn’t disprove it. You seem to confuse ‘extrinsic titles’ with ‘interest.’ They are not the same! Interest is something earned above that which was lent. Every justifiable extrinsic title only makes the lender whole, never more than whole. Justice is due not only to the borrower but also to the lender, and a loss of a portion of the money lent would be an injustice to the lender.
“This is why the lender has the right to charge the borrower for the following extrinsic titles: 1) actual damages that the lender incurs as a result of making the loan; 2) any fee the lender must pay to insure the risk against the loan not being repaid (and so, if the loan is not repaid, then it is paid by the insurance company — and self-insurance is allowed, provided that the insurance premium conforms to a just price); 3) actual loss, or costs incurred, resulting from the delay of the repayment of the loan — but one is not allowed to charge simply for the danger of such loss, as your reply indicated (however, insuring against the danger of a loss is a real cost, and the lender has the right to pass that cost onto the borrower).
“All these extrinsic titles simply insure that the lender gets back what he lent and does not suffer a loss as a result of making the loan. They are not ‘interest,’ properly defined, nor do they give the lender a profit.
“You cite Hardon as listing a fourth extrinsic title, namely ‘loss of profit.’ You and he are not alone in citing this as a licit extrinsic title, but it is an illicit one. The modern rewriting of the Church’s doctrine on usury, which is exemplified in John T. Noonan’s book The Scholastic Analysis of Usury, claims that ‘loss of profit,’ or lucrum cessans, is a licit extrinsic title. Although this was heavily debated as to its validity, Pope Benedict XIV, in his encyclical Vix Pervenit, written in 1745, specifically rejects the loss of profit as a valid extrinsic title, and this rejection was in accord with prior magisterial teaching.
“In conjunction with the citations above, and many more that I can give, it is clearly the dogma of the Church that the taking of any interest is usury. Even Noonan agrees with that statement; he, however, believes that the Church has changed her teaching on usury, and, as such, can change on anything else as well.
“It is a grave theological danger to say that the nature of money has changed, and so now interest can licitly be charged. As a former economics professor and financier, I can assure you that the nature of money has not changed. Of course, this leaves me with the job of addressing why it appears that the Church has changed her teaching on usury. It is indeed true that the Church does not currently condemn the charging of some interest and no longer requires people to confess usury and make restitution before receiving Holy Eucharist.
“But it is not the nature of money that has changed; it is the economic system that has changed. In the infinite wisdom of Almighty God, the answer is revealed: ‘You may demand interest from a foreigner. . . .’ (Deut. 23:21), whereby ‘foreigner’ in the Hebrew in that passage is more accurately translated as ‘enemy,’ not ‘immigrant’ or ‘foreigner’ in the modern sense of the term. God, and the Church, have always allowed usury against one’s enemies or, more specifically, against those who have committed an injustice (including usury) against you.
“St. Ambrose, paraphrasing Deut. 23, said: Where there is justice in war, there is justice in usury. And, sadly, modern usurious capitalist economies with unbridled competition are indeed an economic war of all against all. And so, we each have the right to defend ourselves against, and to seek restitution for, the injustices that are systemic to the global capitalist system. Specifically, we all pay taxes higher than we should pay because the government is borrowing money with usury. Similarly, we all pay higher prices for nearly all products because businesses borrow money at interest and need to charge enough to cover those interest payments. What better way to obtain restitution for these excessive taxes and higher prices than to ourselves lend money to government and these businesses at interest?
“I address all of this and more in my writings on usury, including the fallacy of allowing the ‘loss of profit’…as a legitimate extrinsic title. I have attached an article — written as a critique of a book that concludes as you do — that hopefully contains sufficient proof for you that the Church has not changed her doctrine away from the understanding that any interest is usury. If that pamphlet-length article isn’t sufficiently convincing for you, I can send you others that address the issue from different angles, but I don’t want to overwhelm you.”
We thank Professor Santelli for his obviously well-researched comments on usury, but would like to offer another perspective, this from moral theologian Germain Grisez. In his book Living a Christian Life, pages 833-834, Professor Grisez says that “Church teaching condemned usury, and a superficial reading of economic history suggests that usury referred in earlier times to what today is called ‘interest.’ However, money itself no longer is what it once was. Thus, while the Church’s teaching of earlier times remains true, today it can be just to charge interest on a loan.”
He says that “the Church never taught that all charging of interest is wrong, but only that it is wrong to charge interest on a loan in virtue of the very making of the loan, rather than in virtue of some factor related to the loan which provides a basis for fair compensation. . . . Charging interest on a loan simply in virtue of making it takes advantage of the difference in need between lender and borrower. The assumption was that during the period of the loan, lenders can do without their money, for otherwise they would not lend it; but borrowers need the money, for otherwise they would not borrow it.”
Grisez continues by saying that “applying the general norm that surplus wealth should be used to satisfy others’ needs, people with extra money should lend it without charge to those who need it. However, those who deposit or lend money can fairly charge for various other factors: costs incurred in making and administering the loan, the risk of non-payment, probable inflation, taxes, the forgoing of other legitimate uses to which the money otherwise might be put, and so on.”
He says that “ ‘other legitimate uses’ refers to the possibility of productive investment. This is not the same thing as lending, since one who invests becomes a sharer in the productive enterprise and so is entitled to share in its profit. St. Thomas [Aquinas] already realized this (see S.t., 2-2, q. 78, a. 2, ad 5). Still, viewing the prospect of profit on an investment as too uncertain to deserve consideration (see ad 1), he held that the existence of this alternative did not justify charging interest by those who instead chose to lend their money.
“If that argument was sound in the 13th century, however, it no longer is today, for anyone can invest in productive enterprises (for example, by buying high-grade corporate bonds) with moral certainty of preserving the principal and making a profit.”
Grisez concludes that “in making personal loans to less wealthy people, however, one sometimes should lend at lower than market rates, just as one should moderate other prices, so that one’s surplus wealth will be put to use satisfying genuine needs.”
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