I was watching a PBS special on money, and they said the bible keeps Jews from lending money at interest to other Jews, but not Christians. And that Christians could not loan money at interest to anybody. Then the Medicis invented the ruse of lending at one currency and getting paid back in another and charging a conversion fee instead of interest. Then Italian municipalities issued bonds to pay for their armies, requiring people buy them, and returning interest on the premise that if the program wasn’t optional then it wasn’t a sin.
So, what is that part of the bible, and is it still there? How do people get around it?
Generally speaking, Orthodox Jews will not lend/borrow money at interest with other Jews (Orthodox or not). There is no restriction regarding borrowing/lending with non-Jews.
Here is the one allowing Jews to charge non-Jews interest.
On the other hand, Jesus tells a parable where it seems He accepts that interest on business transactions is not only allowed, but laudable -
ISTM that the distinction is between a personal loan and a business loan. It is acceptable to loan at interest in a business context, but not to take advantage of a personal relationship to exploit. I don’t think they had any concept of bankruptcy in the modern sense - debtors could be sold as slaves.
The allowability of the “business loan” is that it’s seen as a form of investment rather than of loan - one lends the businessman money in the hopes that the borrower will invest it well on his behalf in the business. The terms of the transaction must reflect this. Any actual loan between Jews, whether for business or personal reasons, must be interest free.
Since this has been answered, I’m wondering about this. How can the Bible say anything about what Christians can do, or what Jews can do to Christians? Didn’t Christianity not exist at the time the Bible was written?
Well, Christianity existed at the time that the New Testament was written, and Christians would also interpret passages in the Old Testament (which was written before Christianity came around), and apply certain moral standards to them.
As for the bible itself saying what Jews can do to Christians, obviously it doesn’t, but there are parts that talk about how Jews should treat non-Jews, and Christians are part of the general category of “non-Jews”.
My understanding is that in some Islamic societies the prohibition against lending with interest is still taken quite seriously. They have banking practices that don’t explicitly involve lending for interest, but in effect do. Somebody wants to buy a car that sells for $15,000. The bank buys the car (for $15k) and sells it to them for $20,000, but lets them pay it off over the course of five years, “interest-free”.
The bank doesn’t follow Jewish law (it’s not required in Israel)
It is viewed as a from of investment, as cmkeller mentioned above*.
Zev Steinhardt
Note: The laws of lending with interest and heter iska (which is what Chaim is referring to above) are very complex and my familiarity with them is minimal at best. I’m not really equipped to answer question such as how it works halachically.
I imagine back in the day, every “lender” was a loan shark. Today we’re more civilized, such as having the concept of bankruptcy for example (ie, screw you, that’s your cost of doing business). Yet lending can still be unfair. For example, mortgages. If you default on your mortgage, you don’t just owe the bank money, or the money plus reasonable penalty. You have to give up the whole house, including any money you’ve already paid off for the thing. That certainly is a bonus, and a big reason the banks were so eager to hand out mortgages to people who couldn’t pay them.
Today we also have credit cards, which start off by offering reasonable rates but then, upon certain triggers meant to convince you that “it’s your fault,” quickly switch into loan shark mode. A less known example is perhaps the buzzy concept of “microlending.” It is hailed as empowering the third world with small-business loans, but practitioners are being accused of charging excessive rates – upwards of 100%.
Despite all our progress, the rub of lending for interest hasn’t gone away. On the one hand, it is an absolutely vital economic activity. On the other, it is so easy to exploit it unfairly.
You don’t seem to understand how foreclosure works. The bank forces a sale of the home so that the mortgage can be paid that way (since it would appear that the borrower isn’t going to repay it himself). If the house sells for more money than the amount owed on the mortgage, the homeowner gets that money.
In addition, saving that you give up “any money you’ve already paid off for the thing” is a very odd way of phrasing things. You paid off part of the mortgage, so the bank has reduced the amount of the mortgage due. They’re not keeping anything that is yours. If you borrow $200,000 on a house, pay $20,000 and then sell the house in foreclosure for $190,000 you will get $10,000 in your pocket.
Banks in Israel operate the same way as banks everywhere else. If you’re interested, here’s the website to Bank Leumi, which is Israel’s largest commercial bank:
If the house is worth more than you owe on it, you wouldn’t be in foreclosure - you’d just sell it.
Except that, as soon as you borrow $200,000, you owe more like $400,000 according to the terms of the loan. Once you pay $20,000, you probably still owe pretty close to what you borrowed - in some cases you’ll still owe exactly what you borrowed, in some cases you’ll owe more. We made over $60,000 in payments on our last mortgage and still owed every dime of the original loan amount when we sold. How much money do you think they spent “servicing” that loan? A couple dollars in payroll, total, maybe. It was essentially free money for them. Multiply that times most homeowners nationwide. It’s no wonder the system collapsed. The scary thing is that it’s rebuilding itself as essentially the same system, but with far less competition.