Jonathan Freedland today comments on an interesting turn of events in the City. Apparently there is a campaign brewing to revive usury laws, which would put a limit on the amount that can be charged by banks for lending money.

Some will say that we should save all this talk for the pulpit, that it’s all very well in the realm of moral exhortation but it has no place in the real world of hard-headed economics. But London Citizens’s Glasman has a good retort: “What the crash has revealed is that it’s the bankers who’ve been living in a fantasy world of virtual money, where money has no relation to assets and no connection to the real economy.” [...]

It is telling that the lead voices in this new effort are from mosques, inner-city churches and synagogues. The politicians have been left looking flummoxed by the financial crisis, apparently desperate for normal business to resume as soon as possible. It has been left to the Pope to offer the most comprehensive critique of our devastated economic landscape, in his latest encyclical. But those facing crippling debts will not be too bothered by that. When people are desperate, they will take leadership from wherever they can get it.

What Freedland seems to have missed in saying that “to charge too much interest is immoral” is that the Islamic texts prohibiting usury/interest do so absolutely, and do not merely put a cap on the rate. He provides a few scriptural quotes, and I do not get the impression that the Jewish and Christian position would be any less absolute, if based solely on these texts:

The Code of Hammurabi, written in Babylon 17 centuries before Jesus, barred excessive interest. The Book of Exodus is no less stringent: “If you lend money to my people, to the poor among you, do not act to them as a creditor, extract no interest from them.” Luke’s gospel insists we “lend without expecting any return“, while the Qur’an instructs believers to “fear Allah, and give up what remains of your demand for usury”.

There have been interesting developments in what is termed as Islamic banking, and even “halal (permissible) mortgages”, a term that many are uncomfortable with because it seems an oxymoron to describe something inherently usurious as religiously pure. However, there are complexities in how these transactions are designed, such that something that might look like interest is in fact something different.

While it is certainly devious and immoral to merely re-label something in order to make it seem acceptable, it is the case that two things can look the same while having a different ruling, such as two beef steaks, one of which came from a correctly slaughtered animal, and the other being incorrectly prepared.

To know the rulings on such loans, we need close consultation between the financial experts and the scholars of religious law.