RATE OF INTEREST.
The convention accordingly proceeded to
the consideration of the section reported by
the committee on usury, which was read the
second time as follows :
'Sec. —. The legal rate of interest in
this State shall be six per centum per annum,
except in cases where a different rate may be
agreed upon between contracting parties;
and in all cases of private contract, the rate
of interest agreed on, or contracted for, shall
be recoverable; and the general assembly
shall pass all laws that may be necessary to
carry this section into effect."
Mr. DANIEL. I move to amend by striking
out "six" in the first line, and inserting
"seven." I make this motion simply be-
cause I think it will be greatly to the interest
of the State of Maryland to adopt the rate of
interest which is allowed in New York. It
is still higher in some other States; and
business men, large financial operators tell
me that the effect has been to drive a good
deal of capital out of the State of Maryland,
simply because by the provision in our constitution
the rate of interest has been confined
to six per cent. I know that at the principal
banks in the city of Baltimore they are dis-
counting more New York paper at the New
York rate than of Baltimore paper. They
prefer it because, they get a larger rate of in-
terest; and thus our money is going out
into other States, and the State of Maryland
is drained of its capital.
I very heartily agree in the subsequent pro-
vision, that money ought to be like any other
commodity in the market, open to contract-
ing parties. Whether you prescribe it in the
constitution or not, money will range accord-
ing to its value; and the effect of attempting
to control it is to prevent honest men from
bringing their money into the market, and to
enable another class of men who are sharp-
ers, to take advantage of the high rates, and
to charge a higher rate than would be charged
if money was free. If the market is left open,
as soon as the rate of interest gets a little
higher than usual, money would be thrown
into the market to such an extent that the rate
of interest would immediately go down again;
and thus it would regulate itself like any
other commodity in the market, according to
its value.
According to the law now upon the subject,
that is nearly the proposition upon the stat-
ute book, that the rate shall be as agreed
upon by the contracting parties, the law
being that if a party is sued for an excess of
interest, and the party does not come in and
plead usury, and tender the amount with
simple interest, you can recover the whole
amount, no matter what rate of interest is
agreed upon. That is the law as decided in
the courts, it amounts therefore simply to
this, that a party must plead usury, to avoid |
the payment, and there is scarcely a man will-
ing so to injure his character, for he could
never go into the market again. As the law
now stands therefore it amounts to this, that
in nearly every case where the interest agreed
upon is above the legal rate, the party can
recover it.
1 tried a case in the superior court of Balti-
more city in which this question came direct-
ly in issue. The rate of interest agreed upon
was some eight or nine per cent. The party
pled that we could not recover that rate of
interest; but he did not plead usury and ten-
der the amount with the legal rate of inter-
est; and we recovered the whole amount of
interest.
I think the legal rate of interest should be
seven per cent. and that contracting parties
should be allowed to fix the rate higher or
lower in particular cases as they think proper,
according to the condition of the money mar-
ket. I think it will work greatly to the ad-
vantage of our State to adopt seven per cent.,
the rule in New York, instead of six per cent.
Mr. CLARKE, "1 move to add to the section
the following: " provided that the said rate
of interest shall only apply to contracts for
the loan of money made after the adoption of
this constitution." I do not know that it is
necessary to Bay anything except a mere state-
ment of the case. A number of contracting
parties have made large loans of money five
or ten years ago, and a great deal of money
is now seeking investment, and the parties
are making their arrangements in reference to
the present rate of interest. These contracts
are existing contracts; and I think it may be
fairly contended that any contract made
when the law limited the rate of interest to
six per cent. could not be subjected to a high-
er rate It is no more than just that the
change of rate should apply only to future
contracts.
Mr. SANDS. I must say I have listened
with surprise to the amendment offered by
the gentleman from Baltimore city (Mr Dan-
iel,) and with still greater surprise to the re-
marks made in support of it. What should
be the object of all just legislation? Should
it be to protect those who need protection, or
should it be to confer upon those already in
power? So far as this question is concern-
ed, it affects two classes of people. I do hope
the members of this convention will give
this matter their careful and serious consider-
ation. This question affects, I say, two
classes of people; and who are they? Money-
kings, who have at present power enough in
their hands. Money is power everywhere.
And it affects, secondly, the honest, enter-
prising, industrious, working classes of the
people. • It was said by a man who was a 1
very close observer of men and things that
the most powerful sovereign on earth was the
head of the house of Rothschilds.
Mr. STIRLING. Will the gentleman allow |
