With a mutuum the borrower is personally obligated under the contract to repay the full amount of the principal, no matter what is done with the proceeds or with other specific assets tied up in the contract.
“Lending” to an institution is not a mutuum loan, as long as the lender cannot go after individuals for recovery of the principal. An institution is not a person: it is a thing – a societas – an objective bundle of transferrable assets or property which can change hands and in which various parties can have various kinds of stake independent of any specific person or persons. So an institution can itself act as security on non recourse debt.
St. Thomas Aquinas explains that usurious lending involves selling something which does not exist. This is very counterintuitive to people indoctrinated in modernity, and yet obvious once you’ve set aside modern anti-realism about property and economic value pawn shop FL. Aquinas compares it to attempting to sell wine and the consumption of the wine as two separate things.
Imagine that Bob lends Harry $100, Harry lends Fred $100, and Fred lends Bob $100. They each spend the money on beer, and charge 10% interest in the form of a deferred fee. The contracts attempt to entitle each of them to an additional $10 – for a total of $30. This $30 worth of new financial entitlements on the books is not connected to anything ontologically real. All usurious lending involves the creation of fake wealth.
Another way to see that what is bought-and-sold in a mutuum does not exist is to observe that, under the terms of the contract, it is possible for the lender to fail to recover everything he is entitled to recover under the contract. Under what are (these days) called non recourse contracts the “lender” is always, by definition, able to recover everything that he is entitled to under the terms of the contract: once the underlying assets have been divvied up there is nowhere else to go to recover his investment, and that is precisely what the parties agreed would be the case. If the borrower stops making payments on a non recourse home mortgage, for example, the lender forecloses on the house to recover his investment, and is not entitled to any claims extending beyond the house itself.
Licit investment – or even purchase for consumption – always involves the purchase or sale of a property interest in (that is, some sort of economic claim upon) some specific property which actually exists. Usurious contracts pretend to be a property interest in something – in some thing – but the property over which they assert a claim doesn’t actually exist at the time it is “sold”. If the property actually existed then the borrower would not have to take any action in order to produce or acquire it: if and when the borrower stopped making payments, the lender could simply claim his economic share in the actual property, because the actual property exists. That is how non recourse “lending” works, as well as all sorts of other non-usurious investment contracts.
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