Did the Church Change its Mind on Usury?

In modern times usury is thought of as lending at excessive interest. However for the history of the church it meant at any interest.

For the first 1500 years of the church usury was viewed as theft and dishonesty, and was condemned by church fathers, popes, and church councils in the east and west. Usury was denounced in the councils of Arles (314), Nicea (325), Carthage (348) and the first council of Aix (789).

Usury was viewed as a mortal sin, and not removed by penance. If you believed in usury you would be condemned as a heretic, excommunicated and not given a Christian burial.

The only exception was for Jews, who were permitted to lend to Gentiles at interest, but to each other interest free. In the Middle Ages this was the main reason (probably) for anti-semitism, as banking was viewed as making profit for doing no work.

Lending at interest was accepted FIRST by protestant reformers, and then by the catholic church. Does this mean that the church changed its mind? and that Holy Tradition was modified to suit the times? Or that the Church caved in under pressure from secular leaders?

Interested to learn the facts on this. Thanks & God Bless

First Council of Nicea (325AD) Canon 17 “Forasmuch as many enrolled among the Clergy, following covetousness and lust of gain, have forgotten the divine Scripture, which says, He has not given his money upon usury, and in lending money ask the hundredth of the sum [as monthly interest], the holy and great Synod thinks it just that if after this decree any one be found to receive usury, whether he accomplish it by secret transaction or otherwise, as by demanding the whole and one half, or by using any other contrivance whatever for filthy lucre’s sake, he shall be deposed from the clergy and his name stricken from the list.”

I’m not really sure about the historical aspect of it, but economically speaking, charging interest can not be a mortal sin.

Interest was originally perceived throughout Europe as a way lenders exploited the poor. Eventually, this idea became less popular as the existence of interest rates was explained by economists. The Salamanca economic school-of-thought for instance - which, mind you, was a Catholic school-of-thought - revolutionized the cultural perception on interest rates by explaining it economically. Interest rates originate from people’s time preferences. Generally speaking, people prefer to have things sooner rather than later. Lenders would rather have their money further in the future, and borrowers would rather than money sooner (i.e. “now”). The lender charges an interest rate to reflect his/her time preference. A higher interest rate (let’s say 90% as an example) shows that the lender really wants his/her money, but will decide to lend it anyway on the grounds the borrower pays 90% in interest. A lower interest rate (let’s say 1%) reflects that the lender doesn’t really want his/her money so urgently, and so charges the borrower less. And because interest rates are a price, and that two parties acted voluntarily in the transaction, charging interest can not be a sin. The Austrian School later took this idea and explained it on a macroeconomic scale.

That’s the economic side of it. I’ll be interested to hear the historical side of it…I found this link useful: catholic.com/thisrock/2006/0607uan.asp

Thank you,
Eugen von Böhm-Bawerk

Wow, nice to see a fellow Austrian economist!

About usury: two main points:

  • yes, it was forbidden, and it was seen as immoral. This changed because we now understand better what charging interest is charging for (a good in the present is worth more than the same good 10 years from now. When you pay interest for a loan, you are paying for the benefit of having money right away instead of having to wait until you saved the whole amount the usual way).

  • HOWEVER, from the beginning there were many exceptions to the rule. One could, for instance, receive extra if the loaned money was not given back on time. Or the debtor could pay back the loan plus an extra as a gift of gratitude. Or the lender could receive more than what he lent to make up for the profits he could have made with that money. There was also a complex monetary market in the Middle Ages (trading in the different coins), and merchants and bankers used something called a “bill of exchange” (which is a contract agreeing on a future selling or buying of different coins) to lend money at interest while masquerading the interest as a currency transaction.

This is all very well explained in a book by John T. Noonan.

In short, interest was seen as wrong but there were many licit ways to charge it; and this is why there were many Christian bankers and lenders, especially from the 12th century on. Jews also lent at interest; but they were not the only ones. In fact, as the Christian banks (they managed both money transactions and business like the production of cloth) grew, they became ever more prominent.

This is patent nonsense.

The Templar Knights were the moneylenders of the Church. They charged interest on some loans and simply recouped their costs on others. On yet other occasions, they charged no fees.

By the 13th century moneylending was a signioficant part of the Templars financial activities.

Let me quote to you a passage from a book called The Templars in the Corona de Aragon, page 349,by A.J Forey, Oxford University press 1973 -

"…early in 1307 the Templars set up an attorney to recover from a certain inhabitant of Peñíscola not only the sum of 2,000s. which they had deposited with him but also the
“share due to us of the profit which he made with the aforesaid money on the journeys which he made by sea and elsewhere with his ships.” "

From The Templars: The Dramatic History Of The Knights Templar, The Most Powerful Military Order Of The Crusades, page 183, by Piers Read, 1999, -

The Templars also lent money to individuals and institutions, including the Jews, but their principal clients were Kings and their loans frequently staved off the collapse of royal finances…On some loans they charged interest of ten percent which was the maximum allowed to Christian moneylenders in Aragon and half of the Jewish rate…"

For the first 1500 years of the church usury was viewed as theft and dishonesty, and was condemned by church fathers, popes, and church councils in the east and west. Usury was denounced in the councils of Arles (314), Nicea (325), Carthage (348) and the first council of Aix (789).

You must first define what Usury actually is!

What constitutes usury is still debated today. In Roman times it was interest without risk and was illegal. They called it Foenus , which they got from Aristotle, which stemmed from foetus and meant “to bring forth”. Foenus Nauticum referred to charging interest on large projects, particularly sea voyages, where the risk was high. Interest actually referred to “an interest” and was legal when recovering a share of profits, or making good losses eventuating from such a financed venture. Usam, on the otherhand, was used interchangeably with Foenus and referred to excessive profits, as in charging interest, or declaring “an interest” where there was no risk, or demanding interest up front, from which practice Foenus derived. Julius Ceaser set the maximum interest chargeable at 12%, in line with a Senate ruling of 88BC. This was the Centisima Usura and referred to charging a maximum of one hundredth of the principal per month for one hundred months.

The Byzantine Emperor Justinian, who codified musch of ancient and Christian Roman Law into a system that was handed down through the western European nation states, set interest rates according to a sliding scale, with the highest rate being 12% and apllying only to Foenus Naticum and rates of 8%, 6% and 4% for other classes of people (borrowers).

Usury was viewed as a mortal sin, and not removed by penance. If you believed in usury you would be condemned as a heretic, excommunicated and not given a Christian burial.

From the earliest Biblical references, Christianity has viewed Usury, that is, making money from money, as in the old Roman form of Foenus as an evil. After all, Christ said as quoted in Luke 6:35 “Lend, hoping for nothing in return.” However, making good the losses from money lent, from ventures financed and for late repayments of borrowed monies could be claimed under canon Law as interesse

The only exception was for Jews, who were permitted to lend to Gentiles at interest, but to each other interest free. In the Middle Ages this was the main reason (probably) for anti-semitism, as banking was viewed as making profit for doing no work.

Common sense should tell us that the Jews were outside Canon Law. They were free to do as they pleased! Strangely, Jewish law condemns usery also.

Obviously they had plenty of customers, or borrowers, because they thrived as financiers. However, it was deemed that the loaning of money to poor people and charging interest was usurias.The catholic encyclopedia tells us that Mons Pietatus, or charitable institutions, were set up to give relief to the “industrious poor” and to counter the excessive interest rates charged by Jews, sometimes up to 60%, and frowned upon by Christians. However, the money lending Jews were seen as a necessary evil because money was usually in short supply and in those situations where Christians lent money for no interest, the money supply was tied up.

Cont.d

Cont.d

Lending at interest was accepted FIRST by protestant reformers, and then by the catholic church. Does this mean that the church changed its mind? and that Holy Tradition was modified to suit the times? Or that the Church caved in under pressure from secular leaders?

From A History of Interest Rates it is obvious that the Church was familiar with and accepted the notion of “interest rates” in accordance with the ancient ideas of a fair return for money lent for mercantile ventures and bona fide business development where there was an interest generated by the risk involved. The Church had accepted the charging of interest long before the protestant reformers surfaced. The Catholic Encyclopedia states -

“…no canon law which takes into consideration the question of moderate interest; and canon law nowhere states distinctly that interest is, under any circumstances whatsoever, contrary to justice.”

As for Protestant reformers, Martin Luther argued that the old mosaic notions no longer held sway and people must take note of temporal rulers. He did, however, condemn exhorbitant interest rates as charged by some as. It becomes obvious that as the nation states of western Europe grew, so too did secular banking. The nation states took greater control of temporal matters, fincancing included and the Catholic Church wqas no longer the mainstay of support for royal finances. The charging of interest according to market forces, or by private agreement, became the norm after Utilitarian Jeremy Bentham advocated a laissez-faire approach to finance in the 1700s. Since then, Christians and non Christians alike have been mulling over what constitutes ‘usury’, particularly in the context of deregulated financial markets. The Catholic notion of “Justice” would seem to be the deciding factor when noting what constitutes “usury”, but, again, private agreements should indicate that an agreement accepted is considered “just”. In this regard, the Catjholic Church has never waivered from its underlying principles of Justice and Charity.

In the middle of the debate over laissez-faire borrowing and lending and the role of private agreements, Pope XIV promulgated an encyclical in 1745 called Vix Pervenit - On Usury and Other Dishonest Profit. He elucidates a modern notion of contract law and reiterates the notions of Justice and fairness which the Church from earliest times was determined to uphold. Benedict XIV wrote -

The nature of the sin called usury has its proper place and origin in a loan contract…The law governing loans consists necessarily in the equality of what is given and returned; once the equality has been established, whoever demands more than that violates the terms of the loan. Therefore if one receives interest, he must make restitution according to the commutative bond of justice; its function in human contracts is to assure equality for each one. This law is to be observed in a holy manner. If not observed exactly, reparation must be made…Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made… Christian minds should not think that gainful commerce can flourish by usuries or other similar injustices. On the contrary We learn from divine Revelation that justice raises up nations; sin, however, makes nations miserable…But you must diligently consider this, that some will falsely and rashly persuade themselves-and such people can be found anywhere-that together with loan contracts there are other legitimate titles or, excepting loan contracts, they might convince themselves that other just contracts exist, for which it is permissible to receive a moderate amount of interest. Should any one think like this, he will oppose not only the judgment of the Catholic Church on usury, but also common human sense and natural reason…if they desire to invest their money, let them exercise diligent care lest they be snatched by cupidity, the source of all evil; to this end, let them be guided by those who excel in doctrine and the glory of virtue…But it is essential for these people, also, to avoid extremes, which are always evil. For instance, there are some who judge these matters with such severity that they hold any profit derived from money to be illegal and usurious; in contrast to them, there are some so indulgent and so remiss that they hold any gain whatsoever to be free of usury. Let them not adhere too much to their private opinions…those who desire to keep themselves free and untouched by the contamination of usury and to give their money to another in such a manner that they may receive only legitimate gain should be admonished to make a contract beforehand. In the contract they should explain the conditions and what gain they expect from their money. This will not only greatly help to avoid concern and anxiety, but will also confirm the contract in the realm of public business. This approach also closes the door on controversies-which have arisen more than once-since it clarifies whether the money, which has been loaned without apparent interest, may actually contain concealed usury."

It doesn’t come any plainer than that!

You are confusing interest with joint-venture. If I lend you money and get, besides the principal, a share of the profits, that is not interest, because that extra depends on you having profits, and how large they are. I am actually investing in your enterprise. When money is lent at interest the debtor owes something above the principal no matter how much profit he makes, or even if he takes a loss in his investment.

St. Thomas distinguished between investing and getting a share of the returns and charging interest, which was always a sin no matter how low the interest rate. That was the usual and most common position (except for a few very daring thinkers who were able to see the fallacies in most, if not all, arguments against interest, even though they couldn’t provide a positive explanation of why it was just to charge interest) in the Church. And yes, it was wrong.

The plus side is that the scholastics, both medieval and modern, were the ones who helped with the development of the ideas that would in the next centuries reduce the prohibition on usury to dead letter, so many were the exceptions to it.

Did the Catholic Church change its teaching on usury?
No.
Scripture, the Fathers of the Church, the decrees of councils and popes condemn the taking of interest on loans to the poor and the greed of usurers, but say nothing about the charging of interest in general.

Deuteronomy 23:20: “You may charge interest to a foreigner,” indicating that interest-taking is not presented as inherently evil or sinful. The larger ethical issue of the morality of interest-taking is not addressed in the Old Testament. Rather, interest was viewed only as a problem of social justice. The problem of commutative justice, i.e., of equivalence of value in an exchange of present for future goods, remained quite untouched (Thomas F. Divine, S.J., Interest, 10).

With free enterprise as developed by the Catholic Late Scholastics, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: “For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.”
Consequently, as loaning money did involve loss of profit to the lender and further risk of loss from delay in returning the money loaned, this did justify interest that is just and justifiable.

The Franciscan St. Bernardine of Siena (1380-1444) was perhaps the first theologian to recognize that time of use had an economic value and, at least in certain cases, might be licitly compensated. St. Antoninus (1389-1459), a Dominican of Florence, seems to have questioned whether Aristotle was correct in saying that money is naturally sterile. Money alone, he said, is sterile, but, combined with knowledge and enterprise, it is fruitful. His Summa Moralis examined commerce and banking, and prepared the way for modern notions of interest, which generally regard proper returns on loans taken with just title as fair.

Today, the term “usury” is usually reserved for taking excessive (i.e., unusually high for the economic conditions) interest on a loan because of someone’s circumstances: The greed of the lender takes unjust advantage of the weakness or ignorance of the borrower. [See *Encyclopedia of Catholic Doctrine, Our Sunday Visitor].

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