Absolutely. I use the nonstandard terms “asset recourse” and “person recourse” (as opposed to “non recourse” and “recourse”) to make this very point as clear as possible. Indeed it is the central point, the key to understanding what is usury and what is not usury: that when the contract unwinds, only explicitly named assets are available to the non-usurious creditor for recovery of principal and interest. Beyond the value of those specific named assets the creditor has no moral or legal right to additional profit or compensation for loss.

A modern corporation is itself an aggregate asset, not a person, so “full recourse” to a corporation (or more generally a “kind of society” created for some business purpose, as Aquinas terms it) is still recourse to specific named assets.

Furthermore, as I said somewhere in the other thread, lots of times we use the term “asset” to refer to another level of contract. That is fine too, as long as the “search for assets” for compensation of a creditor terminates at actually existing, real, specific, named assets and not at general obligations of persons to produce creditor compensation.

If there is – anywhere in the contract web – a general obligation for a borrower to return principal to the lender, independent of or in addition to specific named collateral, what we have is what the medievals called a mutuum. Charging profitable interest on a mutuum is a violation of justice because it involves selling what does not exist: opportunity cost, time independent of content rather than as a convenient proxy for specific work, etc. (That doesn’t make mutuum morally wrong: it makes taking profitable interest from a mutuum morally wrong.)

At the level of enforcement this is really rather simple: if there are real named collateral assets in the contracts you can go after them for recovery of principal and profitable interest. Interest-bearing contracts which assert a general obligation on the part of a borrower to return the principal amount to the lender with profitable interest will not be enforced. They are like contracts to sell onesself into slavery: whether mutually consensual or not the government has no business enforcing such contracts.

Footnote:
Someone might – but would have no business motivation to do so, only charitable motivation, like the medieval Franciscans who lived in vowed poverty and lent money to the poor to help them escape the usurers – enter into a mutuum contract which did not charge interest, yet still did contractually require return of principal. In such a contract the lender might attempt to recover any actual, demonstrable, real losses in addition to principal – not to include ‘opportunity costs’ or ‘time value of money’ or other sophistry which appeals to ontological unreality – when the contract unwinds. This is where the “extrinsic titles” (lucram cessans, damnum emergens, etc) of the medievals apply: to mutuum lending which by its nature cannot justly have a business purpose. This doesn’t apply to much of any lending that is done today, and as a practical matter there is probably no need for the law to address it.

Zippy, under your “no government enforcement” rubric, may we assume you are exempting non-usurious collateral? That is, supposing a debt instrument is secured by real assets, courts would certainly be necessary to enforce those covenants regarding collateral, right?

Who is paying whom for that-which-does-not-exist? The borrower is paying profitable interest to the lender.

D’oh! Of course. Like I said in the blogpost above …

I think we agree on “gentlemen’s agreement”, after the various clarifications.

Follow the money.

The thing that does not exist is the opportunity cost: profits independent of the project. As Aquinas puts it, “But the lender cannot enter an agreement for compensation, through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having.”

Who is paying whom for that-which-does-not-exist? The borrower is paying profitable interest to the lender.

The lender who demands full recourse profitable interest, independent of the the borrower’s project (which is where the money actually goes, distinct from incompossible opportunity cost), is the usurer.

This follows reason and is also the tradition. Nowhere in the tradition is the borrower considered a usurer.

If I understand Aquinas correctly (Article 2, especially Reply to Objection 2), that kind of arrangement is only licit if the parties do not view the cup of coffee as an actual obligation of any sort.

This is what I was getting at, in treating the gentleman’s agreement as an exchange of gifts. St. Thomas says (loc. cit.):

On another way a man’s obligation to repayment for favor received is based on a debt of friendship, and the nature of this debt depends more on the feeling with which the favor was conferred than on the greatness of the favor itself. This debt does not carry with it a civil obligation, involving a kind of necessity that would exclude the spontaneous nature of such a repayment.

Zippy: I may of course have this all backwards. But I’m pretty sure I don’t. It is the borrower who has sold the lender on the notion that he can have his money and lend it, too, no? The lender has exchanged something that does exist – his money – for something that does not – the continued enjoyment of the use of that money. It is the borrower who has sold something that does not exist, while the lender has sold something that does.

What am I missing?