652 POPULAR SCIENCE MONTHLY. 



The transaction would be governed by the same immutable, inflexi- 

 ble law of trade by reason of which import duties on articles for 

 consumption are ultimately paid by the consumer, and not by the 

 importer. The rate of interest on money loaned is regulated by the 

 supply and demand which govern all articles of commerce; and 

 the burdens imposed by law in the form of a tax on the transaction, 

 which would thereby diminish the profits of the lender, if paid by 

 him, will prompt him to compensate for the loss by increasing to 

 that extent the rate of interest demanded. If his money would 

 command a given rate of interest without the burden, he will be 

 vigilant to see that the borrower assumes the burden, either by ex- 

 press stipulation, or in the form of increased interest. This is 

 the law of human nature, which statute laws are powerless to sup- 

 press, and which pervades the whole of trade governed by the law 

 of supply and demand. Nor would the enactment of the most 

 stringent usury laws produce a different practical result. Human 

 ingenuity has hitherto proved inadequate to the task of devising 

 usury laws which were incapable of easy evasion; and wherever 

 they exist they are, and will continue to be, subordinate to that 

 higher law of trade which ordains that money, like other articles 

 of commercial value, will command just what it is worth in the 

 market, no more and no less. Assuming these premises to be cor- 

 rect, and I am convinced that they are, it results that it is the 

 borrower, and not the lender, who pays the tax on borrowed money, 

 whether secured by mortgage or not; but if secured by mortgage, 

 he is taxed not only on the mortgage and property, but on the debt 

 which the property represents and which is held as a security for 

 the debt." * 



Subsequently the Hibernia Savings Society of San Francisco 

 having resisted under the provisions of the Constitution of Cali- 

 fornia the taxation of mortgages given to secure the loan of prop- 

 erty, the Supreme Court again met the case fairly and squarely — 

 its language by Justice Wallace being reported as follows: "Mere 



* Of the soundness of this decision there could probably be no more convincing illus- 

 tration than the statement that upon its announcement the savings banks of San Francisco 

 gave notice that they would immediately reduce the rate of interest on their loans secured 

 by mortgages by the amount of the tax on the mortgage. And the Alta-California of May 

 Oth, in commenting upon the decision, says : " When the news arrived here yesterday morn- 

 ing" (that the Supreme Court had given a decision) " it was not unexpected ; and the idea 

 conveyed by the false rumors set afloat, that the decision was adverse to the savings 

 banks, was accepted as a decision measured by expediency, and not based on sound legal 

 principles. Special dispatches received changed the result ; and when it became evident 

 that the banks and the mercantile community had triumphed, a general feeling of satisfac- 

 tion was everywhere noticeable. Merchants, bankers, and taxpayers generally received the 

 news with the feelings of men who felt relieved from a terrible incubus." 



