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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (328)	10/4/1998 5:42:00 PM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

The usury laws were not de facto suspended. There was a lot of political manuevering going on and eventually the usury laws were changed, but they were never 'de facto suspended'. Ralph Nader would have had a field day with that. BTW one of the results of the political manuevering re usury laws is the location of Citibank's credit card operations. They were moved to South Dakota to avoid New York's usury laws before they were changed.

To: ahhaha who wrote (328)	10/4/1998 9:09:00 PM
From: Tundra	Read Replies (1) \| Respond to of 2794

ahhaha, "Usury laws were de facto suspended back in those days." Interesting comment. One in which I would somewhat differ. While a bit off the topic that Clark has very interestingly raised, I will take a minute to respond. Usury laws were clearly of concern during that period and high transactional type of costs were incurred as a result. Several area of concern existed; a few were 1) Enforceability of choice of law provisions. In the following sense, many states laws (or courts) were more lenient during this period of a choice of law other than the law in which the loan was primarily ecured (e.g. Fl real estate).Others were not as responsive; i.e. my earlier Arkansas example. The test evolved into more of a rational connection test rather than a contact counting test in which one jurisdiction would always trump another. I spent a good deal of that time closing loans in New York of branches of financial institutions authorized to lend in Florida. Typically, New york law would apply solely to the usury determination to avoid application of fla. usury law ; and Florida law (in my instance would apply otherwise). Care was utilized to establish numerous contacts with New York so that its law could be reasonably argued to apply. Opinions were required which raised the cost of the transaction; the consequence of being wrong in Florida could be quite severe;penalties in excess of the interest paid on the loan in certain cases. 2. The documentation of rather mundane small residential or commercial loan programs within the state and clearly subject to the states' usury law vagaries took on considerable added risk b/c the rate being charge were at or near the limits; little margin for error. Of course, financial institutions would look to lawyers in my field to provide opinions as to the efficacy of the program type loans. This risks were again quite large; overlook some quirk in the documentation and a mistake could be multiplied a thousand times if caught after the program was in effect. 3. The actual monitoring of the loans (be they large commercial or program type of loans) posed another type of risk; actual practice could conflict with the terms of the documentation. This happens more than one would think; and resulted in large hits from time to time. I gave many a in-house seminar in this area; and would often, despite the best intentions of those attending, see faces glaze over. It was dry material to say the least. In any event, the foregoing pose only a very partial list of issues with respect to usury that came to the fore during that period. For these reasons I disagree a bit with your assessment but enjoyed reading your take on it. Regards, Tundra.