In effect, when a person dies his full recourse debt (sometimes) converts to non recourse debt, with his estate as the assets. But it no longer exists as full recourse debt: there is no longer any particular person that the creditor can pursue for recovery of principal and interest; only assets.
Most institutional borrowing and lending is non recourse, so the point that the Catholic Encyclopedia article on usury makes about ecclesiastical properties is irrelevant to the question of usury. On the other hand I think there were ATM machines in Vatican City when I was there, so there is probably at least close business done with usurers. Almost everyone does close business with usurers in the modern first world.
Stipulating all that though wouldn’t have any bearing on the moral issue. The Church has been quite explicit not just that silence on a question is not evidence of approval, but that the actual secular practices of the Church have been wrong at times. See CCC 2298 for example. The fact that the Church does something institutionally (stipulated, though in this case that is not established) does not constitute moral approval of it.
The point it makes about mortgaged ecclesial properties is irrelevant, for example, because the Church is an institution not a person and ecclesial mortgages are not financed via personal loans or loans secured by personal guarantees
The CE article fails to distinguish between full recourse (mutuum) loans and non recourse (societas) loans; a distinction central to some of the authoritative Magisterial pronouncements on usury (e.g. see Questions 36 and 31) and central to Aquinas’ understanding of a “loan”. The best that can be said is that failure to distinguish between mutuum loans and other kinds of contracts creates ambiguity in the article.
Without that inventory of bad loans at the bottom of the pyramid the whole ‘real estate bonds with ratings “enhanced” by a self-referential circular network of credit default swaps’ scheme would never have ‘worked’
The fact that the CE article attempts to undermine the authority of a papal encyclical (Vix Pervenit), and considers undermining the authority of that encyclical central to its thesis, should also be considered. Defenders of the article frequently assert without evidence that this article by a group of New York publishers reflects the mind of the Holy See at the time. The most that can be said about that is that the CE passed the review of Catholic censors under the local ordinary; but that hardly makes the views expressed in it unambiguous, let alone magisterial.
Usury was not the only kind of morally fraudulent financial activity involved, however. See this post for my gloss on the circular securitization which was layered on top of the pyramid of usurious loans.
Without enforcement of usurious (that is, full recourse) contracts, sane lenders interested in their own financial survival would not make (non recourse, which would be the only sort enforced by the government) loans with shaky-to-ludicrous loan-to-value ratios. That wouldn’t solve all of the world’s problems, of course, but it would make it harder to engage in many of the Ponzi-like schemes which arise in highly abstracted financial markets.
The reason usury ‘works’ is because usurers can buy ‘slavery shares’ in individuals (as opposed to property shares in assets); and individuals of little means are tempted into it because selling a part of themselves into slavery makes them feel (and spend) as if they were wealthier than they really are.
Not necessarily. There are probably plenty of times when it makes perfect sense for a “lender” and “borrower” to, say, collaboratively purchase a house or a car together for the borrower to occupy or use.