Letter and Spirit

For the week ending 14 May 2022 / 13 Iyar 5782

Conflict of Interest

by Rabbi Yosef Hershman
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In our “money makes money” world, the prohibition against interest is difficult to understand. Both the borrower and lender recognize the time-value and investment-value of money. The borrower, in the primary situation contemplated by the Torah, borrows money for business purposes. He intends to, and hopefully does, turn the capital into something worth more than the principal. And the lender would not have had his money sit idle; if not for the loan, that money would have been invested, in turn making more money. It would seem only fair for the borrower to repay the lender — the growth he enjoyed comes at the expense of the growth the lender surrendered.

Yet, the Torah contains not one but two prohibitions: The lender is prohibited from charging interest, and the borrower is prohibited from giving it. The two words used in the Torah provide some insight. Interest from the standpoint of the borrower is called neshech, literally a “bite,” whereas tarbit (excess) is interest from the standpoint of the gain to the lender. If the reason for the prohibition were the immorality of interest, the Torah would not have prohibited, with equal severity, the paying of interest. Nor would it have limited the prohibition of interest to transactions among Jews. Rather, the two prohibitions of taking and paying interest reflect the truth that Hashem is the Master of our possessions. Just as He is Master of our landed property, as reflected in the proximate laws of Shemitah and Yovel in this parsha, He is Master of our movable possessions as well. Were we the true owners of our money, and were our loan acts deriving entirely from our own free will, then the business model would prevail. Interest would not be considered a “bite” from the borrower (as he expects to grow the principal) nor an “excess” to the lender (as he would have grown the capital if left in his possession). The transaction would merely compensate the lender’s loss with the borrower’s gain.

But the Torah teaches that our money is not absolutely our own. The right to exercise control over our money belongs to Hashem, and it is He Who commands us to place some of our assets — which are His, but which happen to be in our hands — into the hands of our brother, to enable him not only to subsist, but also to continue his business endeavors. As soon as the money is lent, it ceases to be the lender’s property and becomes the property of the borrower. The gain he realizes from the capital is his gain. Were the lender to demand any part of the borrower’s earning, he would be taking a “bite” from the borrower’s personal assets. The money is no longer the property of the lender, because he is duty-bound by the Torah to lend; any interest is in “excess” of what is his.

The Torah concludes this prohibition with the words and you shall fear Hashem. Charging interest would be justified as normative social and business practice were it not for the fear of Hashem, and the recognition that He is the true Owner of our assets. The duty to lend money without interest, writes Rav Hirsch, is the “granite rock foundation on which the society of the Jewish People is based.” It is a cardinal duty, through which we express our homage to Him through acts of sacrifice in daily life.

  • Sources: Commentary, Vayikra 25:35, Shemot 22:24

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