July 11, 2017 § 15 Comments
John Noonan’s basic thesis is that Church doctrine prohibiting usury doesn’t categorically prohibit anything at all: that the doctrine boils down to the idea that charging interest is either licit or illicit depending on circumstances and subjective intentions extrinsic to the contract itself. The putative coup de grace in reaching this conclusion for Noonan is what is called the triple contract.
The triple contract is an agreement between two parties, but in order to understand it you have to first consider a contract between three parties: lets call them the investor, the managing partner, and the insurance provider.
The managing partner proposes (say) to undertake a risky but potentially very profitable sea voyage. The investor provides funds to finance the voyage in return for a fixed profit. The insurance provider, for a fee, provides security to the investor: a guarantee that the investor will receive his money back and a fixed profit, even if the voyage fails.
In the triple contract the managing partner is also the insurance provider, and he imputes his fee as the insurance provider to himself. In effect he agrees to provide an insurance bond as an inducement to get the investor to invest, and then underwrites the insurance bond himself.
As with most attempts to turn the moral prohibition of usury into a decorative accessory which doesn’t actually prohibit any well defined objective behaviors, the part you aren’t supposed to notice is the whole matter of security for contracts. In this case the fact that insurance bonds (understood equivocally) were accepted as morally licit is supposed to make Noonan’s readers fail to notice the difference between actual property staked as security and a personal IOU.
A personal guarantee is not a licit “insurance bond”. Rent charged against a collection of property, set aside and held in escrow as a contingency if things don’t go according to plans, is licit.
Of course, if you game the scenario forward this raises the question of why a managing partner with the resources to fully insure the investor and his profit would bother with an investor in the first place. But it might make sense if, say, the managing partner had illiquid property like farms or estates to post as security: property he doesn’t want to sell unless the enterprise fails.
So if you encounter the triple contract as something supposedly problemmatic when you are reading about usury, you can rest assured that it is a nothingburger. The sleight of hand involved rests on all of the usual equivocations.
 Note that in insurance underwriting it is not typically the case for an insurance bond to cover even 100% of the possible loss, let alone the entire loss plus a profit, because of the perverse incentives this creates to destroy economic value.
June 23, 2017 § 11 Comments
“But let your speech be yea, yea: no, no: and that which is over and above these, is of evil.” – Matthew 5:37
“Fungible” means interchangeable for use: one cup of sugar is fungible with another (assuming similar enough qualities) because when we put that sugar to use, we are indifferent as to which particular cup of similar-quality sugar we use.
“Recourse” (or “full recourse“) means that when some property is transferred into an individual’s (or group’s) possession, that individual (or group) personally guarantees to return, not the actual property, but some property with equivalent use. In short, recourse means that what secures contractual performance is a personal guarantee to restore the equivalent of what was borrowed.
Once one grasps that in a mutuum loan “fungible thing” means “treated as fungible by the contract”, fungible thing and recourse become convertible into each other. Fungible and recourse are fungible contract terms, if that isn’t too confusing a way to put it.
Now the security on a contract is whatever it is that secures the contractual performance of the contracting parties: whatever it is that ensures that the contracting parties each hold up their end of the bargain.
If a contract intended to produce profits is to be morally licit, the thing(s) which secure the contract cannot be treated as fungible (alienable) by the contract. The collateral which secures a bank loan may not (as per the contract) be sold until the loan is fully discharged, because once the collateral has been sold by the borrower it can no longer act as security on the loan.
If the agreement is that certain property bound to the contract may be consumed or alienated without discharging the borrower’s obligation to repay, that specific property cannot act as what ultimately secures contractual performance. A complex contract (a societas or census) may include other property which acts as security; but property which the contract treats as fungible cannot act as security.
A recourse contract – even if it also includes collateral as partial security – is ultimately secured by a mere personal guarantee or IOU. If the collateral is completely consumed or alienated the borrower remains personally obligated to repay the loan in full; so the collateral on any recourse loan is treated by the contract as fungible in the pertinent sense.
This is reflected in Pius V’s words in Cum Onus where he insists that any licit census contract must be secured by “a fixed immobile good”: by some property which the contract does not treat as fungible/alienable from the borrower or managing partner.
A non recourse contract is a contract which by definition does not involve making promises which the parties may not be able to keep. And a recourse contract by definition involves the parties making promises they most certainly might not be able to keep. This in my view is why St. Francis Xavier admonishes confessors to:
Ask [penitents] what profits they make, how, and whence? What is the system that they follow in barter, in loans, and in the whole matter of security for contracts?
You will generally find that everything is defiled with usurious contracts, …’
And this is yet another way, in addition to all the prior ways discussed, in which we might intuit the wickedness of usury: it involves profiting by deliberately insisting that borrowers make promises which they may not be able to keep.
June 19, 2017 § 13 Comments
Discussing usury in a previous post, Wood asks:
Why are we so susceptible to this particular sin, or at least why did the Enemy choose to attack here? Why do we “want” to be so blind here?
The idea that wealth can be conjured out of nothing, that we can create wealth ex nihilo, is very alluring. Look at the appeal of lotteries, “who wants to be a millionaire” game shows, and other kinds of gambling. Wealth is even more appealing than sex: in fact most people assume that wealth is fungible with sex, and other things besides. So wealth is better than sex. Wealth is a superset of sex: greed consumes lust.
Usury creates the illusion that wealth can be conjured ex nihilo by making an incantation, by speaking a magic spell: the personal IOU. Usury empowers us to speak into the void and say “let there be money!”; and there was money, and also sex, because those with money get sex as a concomitant.
June 12, 2017 § 34 Comments
The distinction between recourse contracts and nonrecourse contracts as central to understanding usury – the conclusion that personal loans charging any profit whatsoever are usurious, whereas corporate bonds are not usurious – is obviously something I just pulled out of that wacky traditionalist tinfoil hat I was insanely doffing to the King.
Or maybe not.
We do in this our perpetual decree, reprobate and condemn all contracts, pacts, and conventions whatever, to be celebrated in the future, whereby it will be provided on the part of persons putting into company money, animals, or any other things whatever, that if, even by mere accidence, any injury, loss, or damage, follow, the very principal, or capital be always safe and restored [fully by] the managing partner … Fellowships of this nature … are to be entered into honestly, sincerely and with good faith, with fair and just conditions, … so that the managing partner be not [personally] obligated to pay as gain a certain sum, or quantity, free, as aforesaid, from all risk or danger; nor to restore the capital, if, by any casualty, it should perish. But if the capital, at the dissolution of the partnership, be extant, let it be restored to him, who had contributed it to the company, unless it is to be shared with the manager, or otherwise distributed, according to law, between the contractors. …
— Pope Sixtus V, Detestabilis avarita ingluvies, 1586, cited in Usury, Funds, and Banks by Rev. Jeremiah O’Callaghan, 1834
Emphasis and [annotation] mine.
And of course it is sheer coincidence that the medieval Popes who were clearest in their condemnation of abortion, contraception, and the like are the very same popes who were clear in their condemnation of usury.
May 13, 2017 § 122 Comments
In the case of usury this failure to perceive the difference between real things and mere ideas shows up in how contracts for profit are secured: as St. Francis Xavier put it, “in the whole matter of security for contracts”. A non-usurious contract for profit is secured by property which actually exists, and only that specifed property. A usurious contract for profit is secured by (sometimes in addition to some actual property) the mere idea of property: by a personal IOU.
A pledge to give an investor a cow next year is not — the pledge is not — an actual cow. It is not usurious to pledge to give an investor a cow next year as part of a contract for profit; but only so long as that pledge is secured by some property which actually does exist, which fully discharges the obligation. The pledge is not to hand over a cow next year simpliciter, but to hand over either the actually existent security or a cow, thereby fully discharging the borrower’s obligation. A well structured contract will incentivise but not guarantee the latter.
The term ‘right’ is (like many terms) multivocal, kind of like the term ‘cow’. A right which actually has teeth is a particular right: a specific exercise of discriminating authority which trumps all other claims in a particular instance, treating one specific claim as superior to all other claims. Bob is the owner and Fred is the trespasser, so Fred must depart Bob’s property or be dragged off to jail.
Other uses of the term ‘right’ include talking about abstract categories of rights as opposed to actual rights. Again, kind of like cows. The idea that everyone has an equal right to (e.g) property is like (indeed is a superset of) the idea that everyone has an equal right to cows.
If this right is actual as opposed to abstract then it pertains to a particular cow or cows; and no particular cow is equal to any other particular cow. If Fred slaughters and eats Bob’s beef, he goes to jail.
Furthermore, many people don’t have a cow (other than metaphorically, when all of this is pointed out). The mere idea of beef is not a meal equivalent to actual beef.
There is nothing more authoritative and discriminatory than an actual right; nothing more empty and unreal than an abstract right with no instantiation. Owning a hypothetical cow is categorically distinct from owning an actual cow. Reality is categorically distinct from fiction.
It is sometimes suggested that my understanding of liberalism is flawed because it relies on a concept of rights which is “absolute”. But what critics see as “absolute” in my criticism of liberalism is simply recognition that the difference between reality and fiction is a categorical distinction, not a matter of gradiation. The difference between the idea of a cow and an actual cow is not a matter of moving along some continuum of compromise with a possible happy medium. Being and non-being are absolutely distinct.
The liberal war on authoritative particularity arises from its commitment to political liberty framed in terms of rights: arises from the fact that nothing discriminates (contra equality) and constrains (contra liberty) like actual, real, existent particular things. And conservative liberalism, as the more sane and commonsensical sphere of liberal societies, makes the mistake of believing that a happy medium is possible between reality and the void.
May 10, 2017 § 34 Comments
In this post I will argue that usury is worse than adultery in an important sense.
First we need some background.
We distinguish between what we call venial matter and grave matter (mortally sinful kinds of behavior). White lies, for example, are the former. We should never commit any sin (by definition), but for the purposes of this post we will set aside venial sin and consider only grave matter.
Choice of grave matter justly deserves the punishment of Hell. Without Christ’s freely given grace (ordinarily received through participation in the sacraments He instituted), mortal sin brings the judgment of justly deserved eternal condemnation.
Contracepted sex, adultery, sodomy, masturbation, and skipping Mass on Sunday without good reason are all grave matter. (Skipping Mass is grave matter because it involves disobedience of rightful authority in an important matter).
This list is, needless to say, nonexhaustive. And particular instances of other kinds of sins (e.g. theft, lying, usury) may be grave or venial depending on content: stealing a cookie from the cookie jar is probably venial, but stealing an old couples’ life savings is certainly grave matter.
We can consider the relative gravity of kinds of mortal sins under three modes by asking three distinct questions.
1) What are the most grave sins for you?
These are the mortally sinful behaviors which you are most likely to commit. You are most likely to commit mortal sins when you have a strong temptation to them, when the means to do so are easily available, and when you don’t personally intuit (for whatever reason) the moral gravity of the offense. These are the most grave and dangerous sins for you.
2) What are the most grave sins corporately?
This follows a similar pattern but for communities as opposed to individuals. It depends in part upon what kinds of grave sins the community does not, qua community, treat as grave sins. If in a particular community contraception is considered generally acceptable, adultery is not considered acceptable, and many more people contracept than commit adultery, then contraception is a more grave sin than adultery corporately.
3) What are the most grave sins abstractly?
Without disparaging the possibility of addressing this question philosophically, I would suggest that it is rare for people to take an interest in this mode of gravity except as a means of avoiding the discomfort of addressing the other two modes: harlots dancing on the head of a pin, if you will.
Now for the argument:
Gravity in the first mode depends upon the particular person and his circumstances, of course, and so any argument about the relative gravity of sins generally speaking will not apply. It is worth noting though that the gravity of kinds of sins in the individual relation will have significant dependence upon the corporate relation, because man is a social animal with all that implies. (We might think of this as a ‘moral theory of special relativity’).
Gravity in the third mode is of abstract interest, but purely abstract relations between species of sin in a Platonic sense is not the sort of gravity the argument will address. (We might think of this as asking the question ‘what was moral gravity like before the Big Bang?’) The argument is that usury is concretely, as instantiated in our actual present reality, more grave than adultery.
Corporately, in our society in general, there remains some resistance to the idea that adultery is a perfectly normal and acceptable thing. Resistance to the idea that usury is a perfectly normal and acceptable thing is immaterial; in fact even basic comprehension of what usury actually means (and doesn’t mean) is extremely thin on the ground.
There is still a pretty clear understanding, in more orthodox communities, of what adultery actually is and is not; and there remains strong moral disapproval in those communities. The same cannot be said of usury. Even in the most orthodox communities there is confusion over what ‘usury’ actually means, despite the ultimate simplicity of the subject matter and numerous Magisterial statements over the course of millennia. Even in the most orthodox communities there is controversy where there should not be controversy: there is rejection of the Tradition of the Church and the Magisterium (not to mention a lack of financial competence) in favor of an intrinsically uncharitable, modernist, subjective approach to usury.
In short, the most orthodox of communities are not corrupted by confusion and dissent over the grave moral wrong of adultery to the same extent these same communities are corrupted by confusion and dissent over the grave moral wrong of usury.
And an important figure in Christianity once said:
Thou hypocrite, cast out first the beam in thy own eye, and then shalt thou see to cast out the mote out of thy brother’s eye.
 The traditional conjecture that different sinners have different experiences of Hell, depending upon their particular sins, may be worth a mention.
 We also have the concept of extraordinary grace, which is our way of acknowledging that, while God has promised to us the efficacy of His sacraments and always keeps His promises, He is not limited to dispensing grace in only this way. However it is also worth noting that the presumption that one will onesself personally receive extraordinary grace is, itself, grave matter.
May 8, 2017 § 29 Comments
Following Denzinger, The Summa Theologiae, and De Malo, one of the most useful resources on the subject of usury is John Noonan’s book The Scholastic Analysis of Usury. The reason it is useful is because it collects in one place a large number of sources, citing all sorts of different medieval and later scholars and quoting various arguments on the subject.
Unfortunately, the author’s own words tend to dilute the usefulness of the text rather than enhancing it. With all the usual caveats associated with paraphrase, I’ll sum it up as follows for those who don’t want to buy their own copy:
Pre-modern people were very ignorant about property, contracts, and finance. They simply didn’t see all the holes in their theories; holes through which creative financial engineers could and eventually did drive trucks. Modern financial technology has made the traditional prohibition of usury obsolete in practice. Those sweet preciously naive little devout medieval hearts were in the right place, and making sure our hearts are in the right place is the lesson we can still learn from the Church’s millennium of full-throated condemnation of usury. But that business about never profiting from mutuum loans is embarrassingly passé.
Noonan had the virtue of consistency in his approach to moral theology. He also wrote a book entitled Contraception, which follows the same basic structure and narrative. Pre-modern people were very ignorant about biology and medicine. Modern medical technology has made the traditional prohibition of contraception obsolete in practice. Those sweet preciously naive little medieval hearts were in the right place, and making sure our hearts are in the right place is the lesson we can still learn from the Church’s millennium of full-throated condemnation of contraception. But that business about never choosing deliberately mutilated sexual behaviors is embarrassingly passé.
But consistency, it is said, is the hobgoblin of small minds. The beauty of inconsistency is that it empowers us to impose our own narrative on moral reality, rather than conforming our will to an objective moral reality which exists prior to our wishes. Not everyone feels the need to live within the constraints of consistency (at least not, uh, consistently); let alone within the constraints of objective moral truth.
One of the popular sub-narratives in the Current Year is that Pope Francis’ ‘pastoral’ initiatives are unique and special. Never before (and especially not before Vatican II) has a Supreme Pontiff suggested that absolution may be granted to penitents who don’t understand or don’t agree that their behaviors are gravely immoral. Never before has a Supreme Pontiff made it official policy to absolve penitents who do not intend to cease choosing objectively immoral, gravely wrong behaviors. Never before have those who commit manifest grave sin been given backstage passes by the Vicar of Christ to skate past the bouncers and turnstiles, and receive Holy Communion.