The Constitution’s Arguments Against High Interest Loans


I wonder: what would Timothy Howe, a Reconstruction-era congressman who opposed slavery, have done with the Raedell Piaso story?

A few years ago, Piaso was making just under $ 23,000 a year as a receptionist in Albuquerque when she couldn’t pay the rent on her apartment.

Faced with the eviction, she took out a loan. She gave title to her family’s 2004 Ford F-150 as collateral and agreed to an annual interest rate of 300%. She thought she could make it work by reducing, from macaroni and cheese to, say, ramen noodles.

Her payment history shows that she is trying to keep up. Over 13 months, she gave more than a quarter of her take-home pay to the lender, or $ 5,617, on a loan of $ 1,971. But the lender applied less than $ 2 of that amount to the loan principal; the rest was vaporized in fees and interest.

She was late and the lender threatened to seize her truck. She drove west and left her with her parents on the Navajo reservation, where the lender couldn’t reach her. And after that, she took the bus to work.

Piaso is among the millions of low-income Americans who use high-cost loans to bridge the gap between stagnant wages and the cost of living, and who live months or years trying to pay off loans they can’t afford – and therefore remain in debt.

The condition of their lives begs the question: are these Americans fundamentally free?

Howe and his colleagues in the Reconstruction Congress addressed this issue after the Civil War. Howe was a Whig Cum Republican, educated in a Methodist seminary and trained in law. He served as a judge on the Supreme Court of Wisconsin before winning a seat in the United States Senate in 1860. He was one of the Senate leaders who voted for the Thirteenth Amendment even before Abraham Lincoln got there. be engaged. And he was there for the rich consequences of the enactment of the Amendment: when the Reconstruction Congress objected to what it meant to ban slavery, and did so by defining its opposite: freedom .

Like the historian Eric Foner and others have described it, the Reconstruction Congress adopted a fundamental vision of the new Republican Party: that the central element of freedom is the right to enjoy the fruits of one’s own labor. In his last debate against Stephen A. Douglas, Lincoln presented the idea of ​​free labor as “the common right of mankind” versus “the divine right of kings… I will eat it.

For many northern Republicans like Howe, this aspect of freedom was intertwined with other fundamental principles of freedom: the ability to come and go as you please, to own property, and to be educated.

So how do you define the work part of freedom, especially for people whose only property was their own body and what that body could produce through work?

One of the first efforts of Congress to answer this question was the Civil Rights Act of 1866. It declared that “all persons” born in the United States had the right to be citizens, with all the rights of white citizens. The first right to enumerate was the right to enter into and perform contracts, which is essential in order to be able to freely use or sell one’s work.

Even so, contractual freedom can be a hollow thing, if one side has the bargaining power and the other only its labor.

In 1867, Congress expressly recognized that it was possible to to agree to work and remain a slave. With its Anti-Peonage Act, Congress banned debt peonage – contracts that force someone to work to pay off a debt, whether it is “voluntary” or not.

This law and others reveal how Congress of Reconstruction viewed the labor part of freedom as “not just the right to participate in the market, but the right to participate in a way that frees you from undue coercion,” says Rebecca. Zietlow, one of the founders of the Thirteenth Amendment Project, a group of academics exploring the history and “untapped potential” of the Amendment.

“It’s no exaggeration,” she says, to assert that this view of freedom protects against usurious debt contracts, just as it protects against traditional debt peonage. And it is no exaggeration to imagine a Reconstruction senator like Howe thinking of Raedell Piaso’s usurious loan in terms of freedom. Because what is really at the heart of contracts like the one signed by Piaso? This is close to what Howe established in 1866.

At the time, Howe was debating a law on the books that allowed railways and other employers to hire European immigrants on work contracts and pay for their passage to America. Enacted in 1864, amid the labor shortage created by the civil war, the law legalized contracts that require an immigrant to commit up to one year’s salary in order to pay off his transportation debt. .

Two years later, the House wanted to expand the powers of the law to enforce contracts against immigrants. Howe and other Republicans wanted to kill the law instead. For them, overseas employment contracts were “a kind of slavery,” as one congressman put it.

The Senate debate in July sparked profoundly different visions of what work and debt should mean in America. Reading this debate now is piercing, because it represents the same gulf that exists today: between the vision that won, that of the lenders, and the vision that lost, the one that would protect the Raedell Piasos of the country.

A spokesperson for the Winners’ Vision was Senator Reverdy Johnson, a conservative Democrat from Maryland. Johnson was a complicated soul. He had represented the slave owner who claimed to own Dred Scott, but voted for the Thirteenth Amendment.

Johnson called the immigration law a “very wise act” and said there was nothing wrong with applying it to immigrants who had not paid their transport debts. There was no slavery about it, Johnson said, “except the slavery which exists in the case of any man who goes into debt for any money.”

When Howe started speaking he said he believed Johnson had misunderstood the nature of the law and what its application meant.

Mr. Howe: My understanding is that the main effect of these contracts is to create a mortgage on the man himself.

Mr. Johnson: Oh no. It only says that the contract must be lawful. It is no more a mortgage on the man than a debt that you or I owe to a mortgage on …

Mr. Howe: It says it has to be enforced.

Mr. Johnson: Of course, applied like any other contract. Executed how? By costume.

Mr. Howe:I understand that it is the purpose of the second section of the law of 1864 to authorize our courts to apply it specifically against the immigrant. If it’s not a human mortgage, so far I’d like to know what it is.

Mr. Johnson: It gives anyone who may be entitled to the benefit of the contract the right to receive their salary; that’s all-a pledge on his salary, not on the man.

Mr. Howe: And allow the courts to enforce that promise.

Mr. Johnson: Sure.

Mr. Howe: There is only one way to enforce it, and that is precisely against man.

Mr. Johnson: To make him work?

Mr. Howe: Yes; make it work. It means that or it doesn’t mean anything.

In this debate, Howe has pinpointed a problem that resonates in today’s world of high-cost debt contracts for people like Piaso, who have little property or wealth to lean on. It is the relationship between debt, work and freedom.

As an expert on the Thirteenth Amendment, Lea VanderVelde writing: “What is the difference between owning a man and owning his services”, if his services – his work – are all he has? to seize the salary of a woman who cannot meet a loan at 300% interest?

Certainly, this modern form of debt peonage does not restrict his body, his physical freedom to move from place to place. But in the eyes of Howe and his fellow Republicans, his power is over something fundamental to freedom: the right to his future income.

Two years after Howe and Johnson trained, Congress repealed the Immigration Act. By now lawmakers were well aware that banning slavery and debt peonage was one thing; to abolish them was another.

They saw him not only in the South, where states worked to create substitutes for slavery– with black codes, a convict’s lease, laws on vagrancy and debt peonage – but elsewhere throughout the country. For example, a year after the passage of the Anti-Peonage Act, Congress called on the military to “recover from peonage the women and children of Navajo Indians, now held in slavery” on and around the reservation. where Piaso grew up over a century later. .

The world Piaso faces is different from that of his ancestors. But hers still asks real questions about freedom. Piaso had only one alternative to borrowing money at a usurious rate: becoming homeless.

Her story is rare, in that she found a good lawyer who challenged the lender and got some of her money back. But the millions of other borrowers who turn to loans in the United States ruthless credit landscape, are they really free?

“It’s like sharecropping, it was apparently a choice”, Mehrsa Baradaran, who is writing on this topic, told me. “You could say that not every sharecropper was forced into this arrangement. But when you get by, you look at the whole system of the post-Reconstruction South, it’s coercion. It is absolute slavery again.


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