Jewish Law in Transition: How Economic Forces Overcame the Prohibition Against Lending on Interest 0878204628, 9780878204625

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Jewish Law in Transition How Economic Forces Overcame the Prohibition against Lending on Interest

Jewish Law in Transition How Economic Forces Overcame the Prohibition against Lending on Interest

Hillel Gamoran

Alumni Series of the Hebrew Union College Press Cincinnati

 2008 by the Hebrew Union College Press Hebrew Union College-Jewish Institute of Religion

Library of Congress Cataloging-in-Publication Data Gamoran, Hillel, 1929– How economic forces overcame the prohibition against lending on interest / Hillel Gamoran. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-87820-462-5 (hardcover : alk. paper) ISBN-10: 0-87820-462-8 (hardcover : alk. Paper) 1. Interest (Jewish law)—Economic aspects. 2. Jews—Economic conditions. I. Title. 2. KBM955.4. G36 2008 3. 296.1’883328—dc22 2008022729 Printed on acid-free paper in the United States of America Typeset by Posner and Sons Ltd., Jerusalem, Israel Distributed by Wayne State University Press 4809 Woodward Avenue, Detroit, MI 48201 Toll-free 1-800-978-7323

To my parents, Emanuel and Mamie G. Gamoran of blessed memory, who first taught me Torah. To my wife, Judith, whose love, companionship, and encouragement have sustained me along the way. To our children, Adam, Marla, Saul, Reuben, Sherry, Miriam and Bruce, who have always made us proud. To our grandchildren, Joel, Daniel, Naomi, Shauna, Joel, Alex, Erin, Jesse, Isaac, Sarah, Leah, Mia and Akiva, our hope for the future.

Contents Acknowledgments

ix

Introduction

1

1. The Biblical Law against Lending on Interest

4

2. Usury in the Business World in the Talmudic Period

15

3. Loans of Produce

39

4. Advance Payment for the Purchase of Goods

52

5. Buying on Credit

62

6. Mortgages

94

7. Investments

132

Conclusions

176

Bibliography

181

Glossary

189

Index

191

Acknowledgments I wish to express my debt to Dr. Judah Rosenthal, of blessed memory, librarian at the College of Jewish Studies in Chicago. More than a mentor in my studies toward my doctorate, he introduced me to the subject of usury in the Bible and in the talmudic literature. He invited me into his home for the study of rabbinic texts, and he guided me in my dissertation. My research over the years and the production of this book are largely due to his influence. My sincere gratitude to Dan Sharon, librarian at the Spertus Institute in Chicago. He not only responded to my scores of requests, but was pro-active in finding additional useful material for me. The energy and skill he expended on my behalf is greatly appreciated. My thanks to Ruth Ziegler of blessed memory and to Lucy Howell. Both typed and retyped parts of this work, and their friendship and conscientiousness were essential elements in its production. I have been fortunate over the years to reside in environments conducive to Judaic learning. For over three decades, as the pulpit rabbi of Beth Tikvah Congregation in Hoffman Estates, Illinois, I found the time and encouragement to pursue my studies. And for the past fourteen years I have been privileged to be part of a community of scholars in the Jewish Studies program at the University of Washington in Seattle. I especially want to credit the staff of Interlibrary Loan at the University of Washington Library. They never lost patience with my requests, and their help was invaluable in my research. I am grateful also to my academic children Adam and Miriam, who read portions of the manuscript and made valuable suggestions, and to my son Saul, who came up with its title. My sincere thanks to Michael Meyer, chair of the Publication Committee of the Hebrew Union College Press. His experience and sage counsel were essential ingredients in assuring that my work would see the light of day. Also kudos to Barbara Selya, my superb copy editor, who combined superior language skills with a large dose of patience and good humor to help bring about a successful result in the final copy. My appreciation also to Raphael Posner, typesetter and scholar, whose careful reading saved me from a number of mistakes. ix

x

Acknowledgments

Over the years I have published a series of articles on the subject of this book. My thanks to the journals that have generously granted permission to use material from those articles in this book: “The Talmudic Law of Mortgages in View of the Prohibition against Lending on Interest,” Hebrew Union College Annual 52 (1981): 153–62; “Mortgages in Geonic Times in Light of the Law against Usury,” Hebrew Union College Annual 68 (1997): 97–108; “Investing for Profit: A Study of Iska up to the Time of Rabbi Abraham ben David of Posquieres,” Hebrew Union College Annual 70–71 (1999–2000): 153-65; “How the Rabbis Interpreted Halakhah to Meet the Needs of the People: A Study of Mortgages during the Period of the Rishonim,” Hebrew Union College Annual 73 (2002): 227–47; “Lending – No, Investing – Yes: Development of the Iska Law from the 12th to the 15th Centuries,” Jewish Law Association Studies 12 (2000): 79–93; “How the Rishonim Met the Clash between Credit Sales and the Law against Usury,” Jewish Law Association Studies 14 (2004): 111–25; “The Biblical Law against Loans on Interest” Journal of Near Eastern Studies 30: 2 (April 1971): 127–34; “Talmudic Controls on the Purchase of Futures” Jewish Quarterly Review 64 (1976): 48–66; “Talmudic Usury Laws and Business Loans,” Journal for the Study of Judaism 7 (1976): 129-42. “Credit Transactions in Geonic Times in the Light of the Law against Usury,” Jewish Law Annual 11 (1994): 63–84.

Introduction A well-known biblical prohibition strictly forbids Israelites from lending to each other on interest. As formulated in Exodus 22: 24, “If you lend to any of my people with you who is poor, you shall not be to him as a creditor, and you shall not exact interest from him.” The biblical words are simple and direct: it is unfair to take advantage of a poor person by charging him interest. A loan should be an act of kindness, motivated by a desire to help one’s fellow through a difficult period; it should not be offered in order to make a profit. When I first began to study this subject, I was intrigued by the biblical injunction because of its ethical mandate; it represented the highest form of morality, the rich caring for the poor, forbidding the exploitation of the unfortunate. But I soon became aware that the halakhah has changed drastically since biblical days. Interest charges, completely forbidden in Scriptures, are now openly allowed by the rabbinic authorities. How did a law of such high moral standing collapse and fall over the course of the centuries? This was my question and this is what I have set out to answer in this book. No other writers have traced the history of the law against lending on interest from biblical times to our own day. Ben Zion Eliash has examined the subject of interest mostly in the period of the Talmud and the Geonim.1 Haym Soloveitchik has dealt with the subject of usury in the middle ages.2 Jacob Katz has touched on the subject in his writings on Jewish law3 in the early modern 1. Ben Zion Eliash, Yesodot be-dinei ribit ba-mishpat ha-ivri (Jerusalem: Hebrew University, 1977); idem, “Shorosheha ha-ra’ayoniyim shel ha-halakhah: Perek be-hilkhot ribit ba-mishnah u-va-talmud,” Shenaton ha-mishpat ha-ivri 5 (1978); idem, “Kol she-yesh lo goren kotsets imo ke-sha’ar ha-goren, ve-kol she-ein lo goren kotsets imo kol zeman she-yirtseh,” Tarbiz. 51 (1982); idem, “Iskot se’ah be-se’ah u-pesikah al perot: Masoret ve-hidush be-tekufat ha-geonim,” Dine yisra’el 18 (1997). . 2. Haym Soloveitchik, “Pawnbroking, A Study in Ribit and of the Halakah in Exile,” American Academy for Jewish Research 38–39 (1970–1971); Halakhah, kalkalah ve-dimui-atsmi (Jerusalem: Magnes Press, 1985). 3. Jacob Katz, The “Shabbes Goy:” A Study in Halakhic Flexibility (Philadelphia, Jerusalem: The Jewish Publication Society, 1989); Tradition and Crisis (New York: Free Press of Glencoe, 1961).

1

2

Jewish Law in Transition

period, as has Edward Fram4 in the sixteenth and seventeenth centuries. Joseph Rivlin has published an important article showing how the Conditional Sale was used to circumvent the interest ban.5 A number of scholars have written complete books on the subject of usury, but not from a historical perspective; they are meant as guides for observant Jews.6 The present work is the first attempt to cover the subject of usury in its historical context in the way that Katz has done in reference to hiring non-Jews to work for Jews on the Sabbath7 and as Soloveitchik has done in showing how legal restrictions were loosened, allowing Jews to participate in the wine trade.8 In modern parlance, interest usually refers to a moderate rate while usury means an excessive rate of interest. The Bible, however, makes no such distinction. Any profit made by a lender for his loan is forbidden. We will use these words interchangeably; they both refer to a profit resulting from a loan. Although the Bible is consistent in its prohibition of usury among Israelites, it does allow interest to be taken from foreigners. This exception to the law became the center of legal questions throughout the ages as Jews living in nonJewish communities became dependent on money-lending to Gentiles as a livelihood. The ramifications of this question were broad, as, for example, when non-Jewish intermediaries were used by some in order to pursue usurious activities. While such practices clearly raise important issues, they are beyond the scope of this study. The focus of this book is exclusively on interest loans between Jews, which are strictly forbidden in the Torah. I have concentrated on five major areas in which the talmudic Rabbis believed that business agreements violated the biblical ban on usury: 1. Loans of produce. 2. Advance payment for the purchase of goods, which amounted to lending money to a vendor. 4. Edward Fram, Ideals Face Reality: Jewish Law and Life in Poland 1550–1655 (Cincinnati: Hebrew Union College Press, 1997). 5. Joseph Rivlin, “Al kalkalah ve-halakhah: ha-mashkanta ve-ha-mekher ha-hozer,” . Dine yisrael 20–21 (2001): 353–95. 6. Jacob Bloi, Berit yehudah, likutim u-veurim le-halakhah be-hilkhot ribit ve-iska (Jerusalem: 1979); Moshe Hirshler and Eliyahu Heishrik, Torat ribit: Dine u-pesike ribit ve-heter iska (Jerusalem, 1989); Moshe Peniri, Ribit le-or ha-halakhah (Jerusalem, 1987); Yisroel Reisman, The Laws of Ribbis (Brooklyn: Mesorah Publications, 1995). 7. Katz, The `“Shabbes Goy.”´ 8. Haym Soloveitchik, Principles and Pressures: Jewish Trade in Gentile Wine in the Middle Ages (Hebrew) (Tel Aviv: Am Oved Publishers, 2003).

Introduction

3

3. Buying on credit, where the seller lends his goods to a buyer who delays payment. 4. Mortgages, where the lender receives the property of the borrower as security for his loan. 5. Investments, where money given to the recipient is used to engage in a business enterprise. In the Bible, consideration is not given to any of these activities. Scriptures, after all, deal only with loans to the poor. But in postbiblical times, these issues all arise. How was the biblical law to be applied to situations that had not occurred in biblical times and were not imagined by the biblical authors? And how could the Rabbis allow these activities when they were hampered from doing so by the law against lending on interest? The first part of this book lays the foundation for addressing these concerns. I examine the biblical law, when it was written, why it was written, and to whom it applied. I then consider the world of the Tannaim and Amoraim who expanded discussion of the ban in light of various business activities. I distinguish between the period of the Tannaim (ca. 70–200 c.e.) and that of the Amoraim (ca. 200–500 c.e.), seeking to avoid the pitfall of interpreting tannaitic literature in light of amoraic commentary. I then take up each of the five activities and explore how the tannaitic prescription was upheld or relaxed over the centuries. Each activity is considered in the period of the Geonim (ca. 650–1050), the Rishonim (ca. 1000–1500), and the Aharonim (ca. 1500–2000). . Basically, this book recounts how a biblical law, clear, simple, and direct, became engulfed in controversy over the centuries. A law to protect the poor was applied to business transactions. If followed exactly, it could have brought commercial activities to a standstill. But the Rabbis did not allow such an end result. Instead, through inventive interpretation, they essentially annulled the biblical ban and gave permission for business life to flourish.

1

The Biblical Law against Lending on Interest Every time lending on interest is mentioned in the Bible, it is spoken of with disapproval. The Pentateuch contains three statements of the law prohibiting interest,1 and Ezekiel, Psalms, and Proverbs all contain passages that describe as wicked the man who lends on interest and as righteous the one who refrains from this practice.2 This attitude contrasts sharply with that of other nations of the ancient Near East. No other legal code of the ancient world contains laws proscribing lending on interest.3 Two codes, the Laws of Eshnuna4 and 1. Exod. 22:24; Deut. 23:20–21 and Lev. 26:35–37. 2. Ezek. 18:8, 15, 17; 22:12; Ps. 15:5 and Prov. 28:8. 3. There is “no trace of any attempt to prohibit the charging of interest in Accadian law.” G. R. Driver and John C. Miles, The Babylonian Laws I (Oxford: Clarendon Press, 1952), 174. “The religious feeling against usury was entirely absent from the Sumero-Babylonian world where payment of interest upon a loan is regarded as a normal and respectable phenomenon.” H. W. F. Saggs, The Greatness that Was Babylon (New York: Praeger, 1962), 290. See also Robert P. Maloney, “Usury and Restrictions on Interest-Taking in the Ancient Near East,” The Catholic Biblical Quarterly 36 (1974) 1–20; J .N. Postgate, Early Mesopotamia, Society and Economy at the Dawn of History (London: Routledge, 1994), 193 and Edward Neufeld, “The Prohibition Against Loans at Interest in Ancient Hebrew Laws,” Hebrew Union College Annual 26 (1955):359 and idem., “The Rate of Interest and the Text of Nehemiah 5:11,” Jewish Quarterly Review 44 (1953): 194–95. See also Judah Rosenthal, “Ribit min ha-nokhri,” Talpiyot 5 (1948): 475–76. As for whether borrowers in the ancient Near East were actually charged interest, “Innumerable Babylonian and Assyrian documents prove [that the charging of interest was] the universal practice.” (Driver and Miles, op. cit.) The contention (Victor A. Tcherikover and Alexader Fuks in Corpus Papyrorum Judaicarum I [Cambridge: Harvard University Press, 1957], 35–36) that interest-free loans were commonplace does not stand up against the array of evidence to the contrary. 4. “The Laws of Eshnuna,” trans. Albrecht Goetze in James H. Pritchard, Ancient Near Eastern Texts Relating to the Old Testament (Princeton: Princeton University Press, 1950), 152:20, 21.

4

The Biblical Law against Lending on Interest

5

the Code of Hammurabi,5 include provisions for loans on interest. In some cases the law fixes the interest rate;6 in one instance a penalty is established for taking excessive interest;7 but in no case is lending on interest prohibited or even discouraged.8 How is it, then, that among the nations of the ancient Near East, only Israel condemned the acceptance of interest? I would suggest that the answer lies in Israel’s unique historical experience. It became a people in the wilderness and developed its earliest laws in the desert.9 Without a land and without a government in the normal sense, Israel was able to knit together strongly enough to begin to develop a code of law, which in its earliest form reflected a pastoral community.10 When Israel entered Canaan, the dominant form of its economy changed from pastoral to agricultural, and the desert law began to expand to meet the needs of a sedentary community. But even this community, during the time of the Judges, was a primitive and disorganized one. When, during the early years of the monarchy, a start was made to reduce the law to written form, many of the basic statutes had already been established. Part of the explanation, then, as to why Israel had a law against interest and other nations did not, is that Israel’s laws were formed during a period of political and economic life less developed than that of its neighbors.11 When Israel created its law against interest, the only loans that were given were loans to the poor and the hungry. There was no demand among the Israelites for commercial loans. On the other hand, when the Babylonians wrote their laws, they had strong central governments and economies that included not only pastoralism and agricul5. “The Code of Hammurabi,” trans. Theophile J. Meek in Pritchard at 158–70; 48–51, 66, 88–91,94–95, 99–101. 6. Goetze, in Pritchard at 162:20–21; Meek in Pritchard at 169:88. 7. Meek in Pritchard at 169:90. 8. The first instance of condemnation of lending on interest, outside of the Bible, occurs among the thinkers of Greece and Rome, Plato, Laws, Book 5, 742–43; Aristotle, Politics, book 1, chap. 10; Aristophanes, The Clouds, 1283 ff.; Cato in Cicero’s De Officiis, book 2, section 25. 9. “Research has now shown that an important part of the legal code of ancient Israel clearly derives from the pre-Canaanite period which coincides with the Hebrew wandering in the wilderness.” Harry M. Orlinsky, Ancient Israel, 41. 10. S. Stein, “The Laws on Interest in the Old Testament,” Journal of Theological Studies 4, 2 (October, 1953):164. The author stresses that the Book of the Covenant reflects mainly a pastoral society. He points out that, of all the verses in the document, only six deal with agriculture. 11. Theophile J. Meek, Hebrew Origins, 61–63; Stein, 165.

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ture, but also commerce. A more advanced economy required loans for business purposes and not merely to alleviate poverty. Also, to understand why any particular statute appears in Israel’s law and not in the laws of other people, we must realize that Israel’s religion was different from the others. Israel believed in a God who demanded justice and who taught the responsibility of one Israelite for the other. Not only were the widow, the orphan, and the stranger to be cared for, but a host of unique laws were instituted for the protection of the poor.12 A just and ethical God was not satisfied to see the poor suffer and languish in their poverty. Without overturning the basic economic system that brought about the existence of rich and poor, Hebrew law sought to raise the needy from the deepest and most severe type of economic distress. Not an unimportant factor in explaining the concern in Israelite law for the poor was Israel’s experience in slavery. No other ancient people, enslaved as a people, had escaped its bondage and established itself as an independent nation in the land of its ancestors. Throughout the Bible, the significance of that experience is reiterated. The first of the Ten Commandments reminds Israel of its origin in slavery,13 and in numerous other instances we find the phrase “Remember that you were a bondsman in the land of Egypt.”14 Indeed, the responsibility of the Israelite for all of his fellow countrymen is best reflected in a number of laws, unique to Israelite society, that were designed to aid the poor. The corner of the field and the gleanings had to be left for the poor and the stranger.15 On the seventh year the fields were to lie fallow. Whatever grew of its own accord was to be reaped by the poor.16 Also on the seventh year, Hebrew slaves were to be freed17 and all debts were to be forgiven.18 An escaped slave was not to be returned to his master.19 On the fiftieth year all property, except houses in walled cities, was to return to its original owners.20 A creditor who held a garment in pledge was to restore it to its owner at night so that he would have protection from the cold.21 A creditor 12. See below, nn. 15–23. 13. Exod. 20:2. 14. Deut. 15:15; 24:18, 22. 15. Lev. 19:9–10; 23:22; Deut 24:20–21. 16. Exod. 23:10–11. 17. Exod. 21:2; Deut. 15:12. 18. Deut. 15:1–3. 19. Deut. 23:16–17. 20. Lev. 25:10, 13–17, 23–24. 21. Exod. 22:25–26; Deut. 24:12–13.

7

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was not permitted to enter the home of the debtor to take his pledge, but had to wait outside for the debtor to give it to him.22 A millstone could not be taken as a pledge since this was the means of livelihood for the borrower.23 Three Versions The prohibition against interest can be understood, then, as part of a group of laws in the Pentateuch aimed at protecting the poor. The prohibition is stated in three different passages. In Exodus 22: 24, in the Book of the Covenant, we read: “If you lend money to any of my people with you who is poor, you shall not be to him as a creditor, and you shall not exact interest from him.” The prohibition in Leviticus 25: 35-38 in the Law of Holiness reads: “And if your brother becomes poor and cannot maintain himself with you, you shall maintain him; as a stranger and a sojourner he shall live with you. Take no interest from him or increase, but fear your God; that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit. I am the Lord your God who brought you forth out of the land of Egypt to give you the land of Canaan and to be your God.” In Deuteronomy 23: 20-21 the text reads: “You shall not lend upon interest to your brother, interest on money, interest on victuals, interest on anything that is lent on interest. To a foreigner you may lend upon interest, but to your brother you shall not lend upon interest; that the Lord your God may bless you in all that you undertake in the land that you are entering to take possession of it.” The following table points out the distinguishing elements in the three versions of the law. Passage

Item Borrowed

National Status of Borrower

Economic Status of Borrower

Exod. 22:24

money

“my people”

“poor”

neshekh

“your brother”

“poor”

neshekh and tarbit (marbit)

Lev. 25:35-38 money or food

Deut. 23:20-21 money, food “your brother” not stated or anything but not a foreigner 22. Deut. 24:10–11. 23. Deut. 24:6.

Term for Interest

neshekh

8

Jewish Law in Transition

Item Borrowed Let us now examine each aspect of the law as dealt with in the three statements. Regarding the item borrowed, we note that the law in Exodus mentions only money. Leviticus speaks of money and food, while Deuteronomy includes in the prohibition money, food or “anything that is lent for interest.” The intent of the law was to prohibit all lending on interest. That Exodus and Leviticus do not include the full statement (as we find it in Deuteronomy) does not mean that they were limiting their prohibition to money only or to money and food only. What we do learn from the way the law is stated is that money, being mentioned explicitly in all three laws, and being listed first in all three, was the chief object of the prohibition. Also, food, being specifically mentioned in two statements of the law, was a commonly borrowed item. But by mentioning one or two items, the law did not intend to eliminate others. The statute was intended to prohibit all items from being lent on interest. Nationality of Borrower A reading of the three versions of the law against interest shows that the prohibition applied only among Israelites and that it was permissible to lend on interest to a foreigner. The use of the terms “my people” and “your brother” in Exodus and Leviticus, respectively, clearly indicates that the prohibition did not apply to outsiders. The passage in Deuteronomy states this point explicitly. It says, “To a foreigner you may lend upon interest, but to your brother you shall not lend upon interest.” That the interest law applied only among Israelites should not surprise us. The law protecting the slave from harsh treatment,24 guarding the rights of the female slave,25 declaring that a slave must be freed on the seventh year,26 releasing from debts on the seventh year27 and leaving the land’s growth on the seventh year to the poor28 all applied only to Israelites. The law on interest, then, was part of a legal body that served to protect the poor among the Israelites. It should be pointed out, however, that although a foreigner passing through Israel did not benefit from most of the laws whose intent was to alle-

24. Lev. 25:39–40. 25. Exod. 21:7–11. 26. Exod. 21:2; Deut. 15:12–18. 27. Deut. 15:1–11. 28. Exod. 23:11.

The Biblical Law against Lending on Interest

9

viate the plight of the poor, provision was made to help those who established permanent homes in Israel. A distinction was made between the nokhri, the foreigner who came to the land for a limited period of time, and the ger, the alien who permanently settled among the Israelites. Most of the laws protecting the poor, among them the law on interest, included the resident alien in their application. In fact, the Pentateuch makes a special point on numerous occasions to remind the Israelite to protect the resident alien.29 Condition of the Borrower That the purpose of the biblical prohibition against interest was to protect the poor30 can be seen from the fact that in Exodus and Leviticus the law specifically states that its concern is for the poor. In Deuteronomy, the economic status of the borrower is not mentioned; nevertheless, without evidence to the contrary, we believe that the prohibition was probably intended to protect the same impoverished man in whose behalf the anti-interest law as expressed in Exodus and Leviticus was composed. The Bible’s logic may be understood as follows: (1) a person borrows because of economic hardship; (2) a loan is a righteous act performed to help relieve poverty; (3) to charge interest on a loan would be to take advantage of such poverty; (4) the law is written to ban this unfair practice.31 Some scholars32 have advanced the view that since the biblical law against 29. Exod. 12:49; 23:9; Deut. 10:18–19; 24:17–18. The law on interest in Lev. 25:35 explicitly includes the ger. See also Neufeld, “The Prohibition Against Loans at Interest,” 391–93; Rosenthal at 476–77; De Vaux, 74–76. 30. As Nahum Sarna has said, “The borrower would overwhelmingly belong to the poverty-stricken class.” Nahum Sarna, Exploring Exodus (New York: Schocken Books, 1986), 178. See also Jeffrey Tigay, The JPS Torah Commentary: Deuteronomy (Philadelphia/ Jerusalem: Jewish Publication Society, 1996), 138; Edward Glaeser and Jose Sheinkman, “Neither a Borrower Nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws,” Journal of Law and Economics 41 (1998):20; Samuel Lowenstamm in the Encyclopedia Mikra’it (Hebrew), (Jerusalem, 1968), 5, 930; Richard D. Nelson, Deuteronomy, A Commentary (Louisville, London: Westminster John Knox Press, 2002), 282 and Gershon Brin, Studies in Biblical Law: From the Hebrew Bible to the Dead Sea Scrolls (Sheffield, England: Sheffield Academic Press, 1994), 85–86. 31. Jeffrey Tigay put it this way: “The type of debt that concerns the Torah is that incurred by the poor and the insolvent. A farmer, for example, might need funds, seed, or supplies because of crop failure; or a city dweller might become impoverished because of unemployment. Loans to individuals in such circumstances were acts of charity rather than commercial ventures.” Tigay, 145. 32. Edward Neufeld, “The Prohibition Against Loans at Interest,” 398–99; S. R. Driver,

10

Jewish Law in Transition

lending on interest was aimed at protecting the poor, there is no objection, from the Bible’s perspective, to taking interest on a business loan. According to this view, interest was allowed to be charged to a farmer who wanted to borrow in order to buy seed for planting or to a storekeeper who wished to stock his shelves. Interest was forbidden only when the borrower needed the loan, for example, to feed his family. This theory, I would maintain, cannot be accepted. The prohibition against interest in no way made allowance for loans of a business nature. On the contrary, business or commercial loans were not explicitly banned in the Torah because they were not considered there. Out of sixteen biblical passages dealing with loans (but not with interest), not a single one deals with a business loan.33 In thirteen of the sixteen passages it is clear that the loan was intended purely for the relief of poverty. In the three remaining cases34 it is impossible to tell from the verse whether or not the loan was meant to help the poor. In any event, business or commercial loans simply did not come under the biblical purview. Term for Interest In the Bible, two Hebrew words are used for interest: neshekh and tarbit.35 In the Pentateuch, neshekh is used in Exodus and Deuteronomy whereas neshekh and tarbit are used in Leviticus. In four instances in Ezekiel36 and once in Proverbs,37 both terms are employed. In the other biblical reference to interest, in Psalms,38 only neshekh is used. It is clear that neshekh is the dominant word. Whenever it is coupled with tarbit, it comes first and in three instances it is used alone. Tarbit is never found by itself, but it is unclear whether or not there is a difference in meaning between the two terms. The most widely accepted view is that neshekh was derived from the Hebrew root n sh kh, “to bite,” and referred to interest “bitten off” or deducted before the loan was advanced, while tarbit meant “increase” A Critical and Exegetical Commentary on Deuteronomy (New York: Scribner, 1916), 266–67; Walter C. Kaiser, Toward Old Testament Ethics (Grand Rapids: Zondervan, 1983), 216–17; Morris Silver, Prophets and Markets: The Political Economy of Ancient Israel (Boston: Kluwer-Nijhoff Publishing, 1983), 66. 33. Deut 15:1–11; 24:10–13; 28:12; I Sam, 22:2; II Kings 4:1; Isa. 50:1; Ps. 37:21–26; 109:11; 112:5; Prov. 10:17; 22:7; Neh. 5:4; 10–32. 34. Isa. 24:2; Jer. 15:10; and Prov. 22:26. 35. In Lev. 25:37 the cognate form marbit is used. 36. Ezek. 18:8, 13, 17. 37. Prov. 28:8. 38. Ps. 15:5.

The Biblical Law against Lending on Interest

11

and referred to an additional sum above and beyond the principal that the debtor paid to the creditor. This view, held by Stein,39 Speiser40 and Neufeld,41 and incorporated into the translation of the Torah of the Jewish Publication Society,42 has been challenged in a brief but compelling article by Samuel Lowenstamm, who finds the notion that neshekh refers to deducted interest dubious.43 He suggests rather that neshekh is interest on a loan of money and tarbit on a food loan. This solution explains well the use of neshekh in Exodus and Psalms, where only money is spoken of. It is strongly supported by the verse in Leviticus that states explicitly, “You shall not lend him your money at neshekh nor give him your food for marbit.” The major difficulty encountered by this explanation is that the verse in Deuteronomy speaks of neshekh on money and neshekh on food. But, as Lowenstamm points out, this exception may be accounted for by the special character of the verse in Deuteronomy. It is the only all-inclusive law prohibiting interest on everything. The dominant term for interest, neshekh, may have been used in this verse because of its desire to state a comprehensive anti-interest formula.44 Chronology Scholars are agreed that the Book of the Covenant is the earliest of our three codes.45 But between the Law of Holiness and the Deuteronomic Code it may be difficult to say which came first. Even though the evidence is strong for a pre-Exilic origin for Deuteronomy and a post-Exilic origin for Leviticus, the Holiness Code may well be much earlier than the rest of Leviticus. Furthermore, even if we could ascertain that the Deuteronomic Code was put together before the Law of Holiness, or vice versa, we still could not be certain regarding any particular law, for these ancient codes often comprised legal

39. Stein, 163. 40. E. A. Speiser, “Leviticus and the Critics” in Yehezkel Kaufman Jubilee Volume (Jerusalem: Magnes Press, 1960), 44. 41. Neufeld, “The Prohibition Against Loans at Interest,” 355–57. 42. The Torah (Philadelphia: The Jewish Publication Society of America, 1962), ad. loc. 43. Samuel Lowenstamm, “M/Tarbit and Neshekh,” 78–80. 44. See also Edward Lipinski, “Nesek and Tarbit in Light of the Epigraphic Evidence,” Orientalia Lovaniensia Periodica, 10 (1979):133–41. 45. R. H. Pfeiffer, Introduction to the Old Testament (New York: Harper, 1948), 223; Immanuel Lewy, The Growth of the Pentateuch (New York: Bookman Associates, 1955), 249; Norman K. Gottwald, The Hebrew Bible: A Socio-Literary Introduction (Philadelphia: Fortress Press, 1985), 350; Sarna, 159.

12

Jewish Law in Transition

statements going back decades or even centuries. To determine the sequence in which these laws were written, it is necessary to study them individually. It is this writer’s view that the interest law as stated in Deuteronomy is the latest of the three.46 This conclusion becomes evident if we note that every significant change in the manner in which the law is stated occurs in Deuteronomy as opposed to Exodus and Leviticus. Let us begin with the item borrowed. In Exodus, only money is mentioned. Leviticus includes money and food. Deuteronomy prohibits “interest of money, interest of food, interest of anything that is lent upon interest.” The broadening application of the law supports the view that the statements in Exodus, Leviticus, and Deuteronomy were composed in that sequence. In regard to the nationality of the borrower, all three statements agree that the law applies only to the Israelite. Nonetheless, it is the Deuteronomic passage that feels compelled to add the explicit exclusion clause for the foreigner—perhaps because of a growing number of foreign traders in Israel by the time this statement was written. As for the economic condition of the borrower, the statements in Exodus and Leviticus make it clear that the law is intended to protect the poor borrower. Only in Deuteronomy is no mention made of his poverty. Finally, it is only in the Deuteronomic statement of the law that the dominant term for interest, neshekh, takes on an expanded meaning. In the other passages neshekh refers to interest on money whereas tarbit means interest on food. But in Deuteronomy the term neshekh has been expanded to refer to all types of interest. There is no question, then, that since the four significant changes in the wording of the interest law all occur in Deuteronomy and none occurs in Leviticus, the Deuteronomic version is the latest. It is important to point out that, in spite of the differences in language in the three versions of the interest law, each statement of the law says essentially the same thing: An Israelite may not lend to a fellow Israelite on interest. Changing economic and social conditions and varieties of literary style47 can explain the different ways in which the law was expressed, but the law itself remained unchanged. 46. See Michael Fishbane, Biblical Interpretation in Ancient Israel (Oxford: Oxford University Press, 1988) 175 and Jacob Milgrom, Leviticus 23–27 (New York: The Anchor Bible, Doubleday, 2000), 2210. This view is also supported by Isaac Seeligmann in “Halva’a, arvut ve-ribit be-huke ha-mikra u-ve-olam mahshavato,” Isaac Avishur and Joshua Blau, . . eds., Mehkarim ba-mikra u-va-mizrah. ha-kadmon (Jerusalem: Rubenstein, 1975), 203. . 47. The explicit exclusion of the foreigner is characteristically Deuteronomic. For example, it is known from Exodus 21:2 that benefits of the seventh year are only for the Hebrews,

13

The Biblical Law against Lending on Interest

Compliance It is difficult to say whether the interest laws were kept by the Israelites in Bible times.48 Among the prophets, Ezekiel condemned money lenders who took interest, but the other prophets were silent. Even Amos, who focuses his attention on the oppression of the poor, does not have a word to say about usurers. This perhaps suggests some degree of compliance with the law. In an effort to measure compliance with the interest law, we turn to the Egyptian Papyri. There are five contracts for loans preserved on papyrus where both contracting parties were clearly designated as Jews.49 The following table will indicate the posture of these documents in regard to interest. Papyrus

Date

Language

Interest Clause Penalty Clause

Cowley #10

456 bce

Aramaic

Interest Required

---

Cowley #11

455 bce

Aramaic

Interest Required50 – - -

Tebtunis #815

228–221 bce Greek

Interest Required

---

Tebtunis #817

182 bce

Greek

Interest Free

Penalty with interest for late payment

Tebtunis #818

174 bce

Greek

Uncertain51

Penalty with interest for late payment

yet in Deut 15:2–3, the author makes an explicit exclusion of the foreigner. The blessing in Deut 24:21 is also typical of that book. See, for example, Deut. 15:4 or 30:19–20. The word yamuk, “becomes poor,” appears only in the final chapters of Leviticus. The phrases, “but fear your God” and “I am the Lord your God who brought you forth out of the land of Egypt,” are both characteristic of the Law of Holiness. See, for example, Lev. 19:24, 32, 36 and 25:17, 42–43, 55. 48. Neufeld. “The Rate of Interest,” 196–97; Z. W. Falk in Hebrew Laws in Biblical Times, 99 and R. de Vaux at 170 say that the law against interest was frequently violated. 49. A. Cowley, Aramaic Papyri of the Fifth Century BC (Oxford: Clarendon Press, 1923), nos. 10–11, 29–35; J. Gilbart Smyly and Arthur S. Hunt, The Tebtunis Papyri, vol. 3, part 1 (London: Oxford University Press, 1933), 288, 315–19. The Greek papyri also appear in Victor Tcherikover and Alexander Fuks, Corpus Papyrorum Judaicarum at vol. 1, nos. 20, 23 and 24, 156–57 and 162–67. 50. Heichelheim believes that this contract is similar to Tebtunis #818, i.e. that it is a renewal of a loan that contains an interest clause and that the original loan may have been interest free. V. Tscherikover and F. M. Heichelheim, “Jewish Religious Influence in the Adler Papyri?” Harvard Theological Review 35 (1942):38. 51. Although the document itself does contain an interest clause, the editors believe that

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Jewish Law in Transition

Although it is impossible to determine the general practice from a few examples, the papyri do show that in fifth and third-century Egypt, some Jews lent to each other on interest. The Egyptian community, however, was far removed from the center of Jewish life, and, as far as can be ascertained, observed very few of the laws of the Torah.52 In the Bible itself loans are mentioned in a number of instances.53 Foreclosing of mortgages and selling oneself or one’s children into slavery in order to pay a debt are also recorded.54 But nowhere in the biblical material are we able to ascertain that a loan was given on interest.55 In sum, whether or not the interest law was kept must then lie in the realm of conjecture. The reprobations in Ezekiel, Psalms, and Proverbs might suggest that there were violations of the law, but the fact that in the entire Bible there is not one case of a loan on interest leads us to surmise that the prohibition was respected, at least to some extent.

it is a renewal of a loan and that the original loan may have been interest free. See Tscherikover and Heichelheim, “Jewish Religious Influence in the Adler Papyri?” 28, n. 10. 52. A. Cowley. See also Reuven Yaron, Introduction to the Law of the Aramaic Papyri (Oxford: Clarendon Press, 1961), 94. 53. See above, n. 32. 54. II Kings 4:1; Neh. 5:1–5. 55. Some have explained Neh. 5:11, me’at ha-kasef, as referring to a one percent per month interest charge that Nehemiah wanted restored, but it does not seem likely that he would ask for the return of such a small part of the money collected. A more likely suggestion is that he used the word me’at to indicate in round numbers that he wanted the sums of money returned to the debtors. One more explanation involves emending the text from me’at to mashat, a loan on pledge tying in with verse 7. In any case, it is doubtful if Neh. 5:11 is an example of a loan on interest in the Bible. See Raymond A. Bowman in the Interpreter’s Bible (New York: Abingdon-Cokesbury Press, 1954), 3, 711; E. Neufeld in the “The Rate of Interest,” 198–202; and Jacob M. Myers in Anchor Bible, Ezra-Nehemiah . (Garden City, New York: Doubleday, 1965), 128–29.

2

Usury in the Business World in the Talmudic Period IN THE PERIOD OF THE TANNAIM: ca. 70–200 c.e. As discussed above, the authors of the Bible designed the law on interest to prevent increasing the debt of poor Israelites in need of loans. The biblical law did not take business loans into consideration. But in the period of the Tannaim, in Palestine, following the days of the Second Temple, manufacturing and commerce increased. Wine and oil continued to be the chief components of the economy, and Palestinian Jews were known for the quality of the linen they produced, for their dyed woolen fabrics, and for their glassware.1 With the growth in manufacturing and trade, the need for loans of a business nature developed. Shopkeepers and animal breeders needed capital for their enterprises, and tradesmen of all sorts required credit to carry on their dealings. Wealthy persons, usually large landowners or established merchants, had idle money and wished to put their funds to work. The question thus arose as to whether the biblical law against interest, designed for the protection of the poor, would stand in the way of profitable business loans and investments during the period of the Tannaim. Borrowing of Produce References to ordinary loans of money on interest do not appear widely in the tannaitic literature because the law concerning them was perfectly clear. Any increase was strictly forbidden. But loans of produce were frequently discussed 1. On the development of the Judean economy see Gedalyahu Alon, The Jews in their Land in the Talmudic Age, 6–8, 152–75; Hayim Lapin, Economy, Geography, and Provincial History in Later Roman Palestine (Tubingen: ¨ Mohr Siebeck, 2001) 172–75; Joseph Klausner, Bimay bayit sheyni, 82–168; Solomon Zeitlin, The Rise and Fall of the Judean State, vol. 1, 306–9.

15

16

Jewish Law in Transition

because of the possibility that market fluctuations would result in interest. For example, if someone borrowed a kor of wheat worth 25 dinars and returned it a month later when it was worth 30, the increase in value was considered usury. The Tannaim therefore ordained that a person could borrow produce for produce only if he had the goods in his possession at the time of the loan.2 The logic behind this ruling was that if the borrower possessed the goods at the time of the loan, those goods became the property of the lender, and if they appreciated in value before the loan was repaid, they were the lender’s own goods that appreciated and, consequently, there was no interest. To the question as to why a person would borrow goods that he already had in his possession, the Tannaim responded that the goods may have been temporarily inaccessible—for example, the key to the storehouse had been lost or the borrower’s son had the key and would soon return with it.3 But surely this situation could not have obtained frequently. How often does one find his own goods out of reach so that he must borrow from his neighbor? It is clear that this formula was simply a device used by the Tannaim to allow borrowing of produce. Or, as one scholar put it, it was “only a fiction which had the power to allow usury.”4 A statement in the Tosefta confirms the fact that the goods of the borrower did not, in truth, become the property of the lender at the time of the loan. If a person owned a barrel of wine, but, because his wine cellar was locked, he borrowed a barrel of wine from his neighbor, according to tannaitic law, the barrel in the cellar became the property of the lender. Nevertheless, according to the Tosefta, if, when the cellar was opened, the barrel fell down and broke and the wine was lost, the borrower had to pay for it.5 This example clearly shows that the product did not in truth belong to the lender until he received it. The only Tanna who is recorded as opposing the above formula, which permitted the lending of produce, was Hillel, who insisted that the only way to be certain of avoiding usury when produce was lent was for the product to be assessed in value at the time of the loan. Then, when the time for repayment came, the debt could be restored with goods equal in value to the goods borrowed. Hillel would not even permit a housewife to borrow a loaf of bread 2. M. Bava metsia 5:9. The Mekhilta contains an outright ban on loans of produce. Ed. J.Z. Lauterbach (Philadelphia: Jewish Publication Society, 1935), 3: 148. 3. M. Bava metsia 5:9. 4. Ben Zion Eliash, “Shorosheha,” 43. 5. T. Bava metsia 6:10.

Usury in the Business World in the Talmudic Period

17

from her neighbor unless the bread was first weighed and its value determined. But the majority of the Tannaim were not as exacting as Hillel and allowed borrowing of produce as long as the borrower had the produce in his possession.6 Paying in Advance In tannaitic times, businessmen frequently sought payment for goods to be delivered at a later time. Farmers or tradesmen wanted payment for grain before the harvest, for wool before the shearing, for wine before the grapes were picked, for earthenware vessels before the clay was in the kiln, and for a variety of other products before they could be delivered. Their business operations required this kind of credit. The reason dealings in forward contracts were of concern to the Rabbis was that rising market prices could bring about violations of the interest law. When one paid for a product before he received it, he was lending the merchant a sum of money until the goods were delivered. If the market price of the goods advanced and the goods were worth more at the time of delivery than they were at the time of payment, then it could be said that the vendor (borrower) had paid interest because he held the purchaser’s (lender’s) money for a period of time. The Tannaim therefore established regulations that allowed people to make advance payment for goods without transgressing the usury laws. The basic rule, which if met made a forward contract permissible, was that the vendor had to have the product in his possession at the time of the payment.7 The logic behind permitting the sale in this instance was the same as

6. M. Bava metsia 5:9; T. Bava metsia 6:10. A Baraita (Y. Bava metsia 5:8, 10d) suggests that it would be permissible if it were only for two or three weeks. 7. The rule that the vendor had to have the product in his possession is not stated explicitly in the tannaitic sources. It is, however, clearly implied and accepted as axiomatic as can be seen from the following rulings: a) The Mishnah provides regulations on how complete the product in the vendor’s possession had to be before it could be sold for future delivery. Obviously, if the product was entirely in his possession, the sale would be allowed. M. Bava metsia 5:7. Also in T. Bava metsia 6:2. b) The statement is made that even if the vendor does not have the product in his possession, it may be sold if the market price is established. The implication is clear—that if he did possess the product, it could be sold. M. Bava metsia 5:7. c) The Tosefta contains a law concerning a vendor who wishes to legitimatize his agreement to receive advance payment for goods by fraudulently claiming that he possesses the goods. The attempted deception shows that possession on the part of the vendor would

18

Jewish Law in Transition

that which allowed borrowing of produce if the borrower possessed the goods. In both instances the Rabbis ruled that if the vendor had the goods, then when he received the money (even though delivery was delayed), the goods became the property of the buyer. And if they appreciated in value before delivery, they were the buyer’s own goods that appreciated and there was no interest involved. It is clear that if a person possessed the goods when he received payment, he could deliver them right away and there would be no need for an advance payment. This rule, then, was written to deal with a situation where a vendor possessed products that were only partially grown or manufactured. The tannaitic texts provided the details as to how complete various products had to be before they could be sold for future delivery.8 In the case of grain, it had to already be in the sack. As for wine, the grapes had to be in the basket. Olives had to be in the vat9 and the potters’ clay had to be already formed into lumps ready for use.10 If a product, then, was sufficiently completed, it was considered to be in the possession of the vendor and could be sold for future delivery without fear of breaking the prohibition against usury.11 Although this rule may have satisfied the needs of farmers and craftsmen, it did little to help tradesmen who did not possess the product in any form when they accepted payment for future delivery of goods. To meet their needs, the Tannaim developed a formula—namely, that dealings in forward

make the sale legal. For a further discussion of this passage, see below n. 11. T. Bava metsia 4:I. 8. M. Bava metsia 5:7 and T. Bava metsia 6:2. For a discussion of the law regarding the conveyance of an object that has not yet come into existence or into the owner’s possession, see Isaac Herzog, The Main Institutions of Jewish Law, vol. 2, 65–70. 9. R. Hiyya (in a Baraita in B. Bava metsia 74a) required that the olives be in a heated . mass before they could be sold for future delivery. 10. This is the view of R. Meir that is accepted in the Mishnah. But R. Yose said (T. Bava metsia 6:3) that in areas where black earth suitable for pottery was readily available, it was not necessary for the potter to have the clay in lumps before concluding the sale. 11. An unusual case is taken up in the Tosefta (B. M. 4:I). A vendor accepts payment for future delivery saying that he has the product in his possession, but when the time for delivery comes, he declares that he really didn’t have the product in his possession. He therefore wishes to refund the money and not deliver the goods. The Tosefta rules that he must deliver the goods. It is true that the vendor might in this instance be paying interest. But if so, it is due to his own misrepresentation of the facts. It would not be fair, in such a case, to jeopardize the rights of the buyer who engaged in the transaction in good faith.

Usury in the Business World in the Talmudic Period

19

contracts were legal if the market price of the goods was established.12 This condition was explained as an extension of the condition that the vendor had to have the goods in his possession. With the market price established, it simply meant that it was possible for the vendor to bring the goods into his possession, for the goods were then readily available to anyone. After all, even in the case where the vendor had the goods in his possession, it was not required that he deliver those particular goods. He might, for example, sell them and buy others for delivery. So in this instance, it was not required that he actually have the goods in his possession as long as they were available to him on the open market. With permission granted as long as the market price was established, it meant that for a host of products available all year long, merchants could pay early for these goods with the approval of the Rabbis.13 But even this did not satisfy the requirements of the tradesmen. They wanted to deal with seasonal products whose price could not be determined until the product appeared on the market. To meet this need, the Tannaim executed another regulation— namely, that at the time of the pre-season payment, the vendor would agree that when the product became available, he would provide it according to the market price.14 One more instance in which advance payment for a product was permitted was when the purchaser took a risk that compensated for any usurious gain he might receive. If a man paid in advance for all the milk one’s goats would provide or for all the wool his sheep would yield or for all the honey to be taken from his combs, this was permitted.15 For although it was possible that the yield would be great and the buyer would benefit from having paid in advance, it was also possible that the yield would be small or that there would be no yield at all. In this case the buyer would lose money. Since this was such a speculative proposition, it did not appear to be usurious and did not fall under the rabbinic ban.16 The following is a summary of the tannaitic law and shows the wide latitude 12. M. Bava metsia 5:7. 13. T. Bava metsia 6:5. 14. Ibid. 15. Baraita in B. Bava metsia 64a; also in T. Bava metsia 6:6. 16. This arrangement was forbidden if the vendor guaranteed the amount of produce to be delivered. For in this case the vendor would be taking the risk of a poor yield. And if the yield were good, the large delivery of produce would constitute interest. Baraita in B.M. 64a.

20

Jewish Law in Transition

granted the business community to deal in forward contracts. A transaction of this nature was permitted if any of one the following conditions prevailed: 1. The vendor had the product in his possession. 2. The vendor had the sufficiently completed product in his possession. 3. A single market price was established. 4. It was agreed to abide by the market price when it became established. 5. The buyer agreed to accept some future yield, whether great or small. Credit Sales The Mishnah states clearly: “One may not increase the sale price [in return for credit].” For example, says the Mishnah, “If one sold his field and said: If you pay me now it is yours for a thousand zuz; if [you pay me] at harvest time, [it will cost you] twelve maneh [1200 zuz], it is forbidden.”17 But already in tannaitic times a way was sought to allow an increase in price for credit, for the Tosefta18 says, “If one buys from his fellow on condition that he will pay within twelve months, the vendor may say to him, ‘You may have it for less if you pay now,’ and he need not fear that he is violating the usury law.” This formulation suggested a way to avoid the restriction against increasing the price for credit. If the “regular” price of the goods already included the cost of credit, then the transaction was allowed. The salesperson simply had to avoid saying that he was increasing the price for credit. Mortgages The biblical law restricted the types of pawns that a lender could take, the length of time they could be held, and the manner of reclaiming them, 19 but it did not consider the problem of whether a creditor’s use of a debtor’s pawn constituted a kind of interest on the loan. In tannaitic times, however, this question was raised. The tannaitic law stressed the care that the lender had to give to the pledge he held as security for a loan. He was liable for any mishap that might befall the pledge.20 If he lost it, then he forfeited his right

17. M. Bava metsia 5:2. 18. T. Bava metsia 6:12. 19. Exod. 22:25–26; Deut. 24:6, 10–13. 20. The pledge was considered a deposit and the creditor a paid guardian responsible for loss and theft. M. Bava metsia 6:7; M. Shevu’ot 6:7.

Usury in the Business World in the Talmudic Period

21

to collect his debt.21 While the pawn was in his care he was not allowed to use it for himself, for if he were to use it, his benefit would be interest forbidden by law. There is one recorded situation in which a tannaitic authority permitted a pledge to be used by the creditor. In the case of a poor debtor, Abba Saul allowed the creditor to hire out the pledge and to use the income for reducing the debt.22 This was the only circumstance in tannaitic law in which the creditor was permitted to make use of a pledge. Turning now to real property, the Tannaim allowed a debtor to mortgage his land and, if he failed to meet his debt, then the property did, by law, go over to the creditor.23 However, the Tannaim were concerned that the creditor might occupy the mortgaged land during the period of the loan and that the profit from the harvest would be a kind of interest on the loan. Thus they ruled that if land were used to secure a loan, the borrower would have to receive the produce of the land during the period of the loan.24 Any benefit the creditor might derive from the debtor’s property was forbidden by the Tannaim as usury. There was one situation, however, in which the Tannaim did not prevent a creditor from benefiting from a loan. This was in the case of a Conditional Sale. The biblical law stated that one who sold a house in a walled city had a year in which to buy back his home.25 Now if the seller exercised this option, it turned out that he was simply a borrower and the buyer had given him a loan for twelve months. During these twelve months, however, the buyer was able to live in and enjoy the house. In effect, then, the lender (buyer) derived interest (the use of the house) on his loan.26 Furthermore, the Tannaim did not restrict such an arrangement to houses in walled cities. A Baraita in Bava metsia 65b stated that although the seller of a house or a field could not stipulate, “When I have the money, you must sell it back to me,” a stipulation by the buyer, “When you have the money, I will sell it back to you,” was permitted. And in the Tosefta, 27 no such distinction was made regarding who made the statement about the repurchase agreement. The Tosefta clearly stated, “If one sells his field to his neighbor 21. B. Bava metsia 81b. 22. M. Bava metsia 6:7. 23. M. Bava metsia 5:3; T. Bava metsia 1:17, 19. 24. M. Bava metsia 5:3; T. Bava metsia 4:2; B. Bava metsia 63a; J. Bava metsia 5:3, 10b. 25. Lev. 25:19. 26. M. Arakhin 12:3; B. Arakhin 31a. 27. T. Bava metsia 4:4; J. Bava metsia 5:3, 10b.

22

Jewish Law in Transition

and says to him ‘Whenever I want, I may repay you and take it back,’ it is permitted.” The difference between the Baraita and the more lenient statement in the Tosefta was not resolved in the tannaitic literature, but we can imagine that the Tosefta’s ruling would offer future teachers a basis on which to grant permission for Conditional Sales.28 Investments Turning now to investments, we find that the Tannaim forbade what they called an “iron flock” investment.29 They used this name to describe an arrangement whereby an investor could not lose. It was as if he invested in sheep made of iron that could not die. The only difference between an “iron flock” investment and a loan on interest was that in the case of an investment, the profit was shared, so the investor’s gain depended on the success of the business, while in the case of a loan, the lender’s interest was a fixed amount agreed to in advance. But in both cases, the borrower accepted full responsibility for the funds he received. The “iron flock” investment was thus considered similar to a loan on interest and was prohibited. But the Tannaim did find a way to legitimatize gainful investments. It was through the half-profit investment.30 Unlike the “iron flock” investment, where the investor could not lose, in the half-profit investment, the investor assumed fifty percent of any loss. He also shared any profits equally with the working partner. Because the investor risked a portion of his capital, which was not the case in an ordinary loan, the Rabbis permitted him to profit if the venture proved to be successful. It was this risk that distinguished the investment from a loan and that made it legal in tannaitic law. There was one difficulty, however, with the half-profit arrangement. Even though the investor didn’t profit any more than the recipient, he did receive the benefit of the working partner’s labor. The Tannaim ruled, therefore, that

28. See Asher Gulak, “Mashkanta shel karka’ot be-dinei ha-talmud,” Tarbiz. 1:3 (1930): 82–84. 29. M. Bava metsia 5:6; T. Bava metsia 5:14; Baraita in Y. Bava metsia 5:7, 10c. The Tosefta says that an “iron flock” investment of a field is permitted. The Rabbis allowed the recipient to accept liability for the investment since the chances of damage to a field are practically nil. Such an investment amounted to sharecropping. 30. M. Bava metsia 5:4–5; T. Bava metsia 4:11–22; Baraitot in Y. Bava metsia 5:5, 10b. Sometimes the arrangement was for one-third or one-fourth profit or loss, T. Bava metsia 4:15.

Usury in the Business World in the Talmudic Period

23

a half-profit investment was not legitimate unless the worker was paid for his labor.31 But the Sages disagreed as to how much the recipient was to be paid for his labor. R. Judah believed that the payment needed to be only symbolic. It was sufficient if he dipped his bread in the investor’s vinegar or ate one of his dried figs. R. Simeon b. Yohai, . however, maintained that the requirement to pay the working partner was not to be taken lightly. He was to be paid in full for his labor. R. Meir took a middle view. He was to be paid, but not the high wages that a worker would normally receive. It was sufficient to pay him the lower wages that an idle worker would accept for such a job.32 The tannaitic literature does not inform us as to which view prevailed. Conclusion The Tannaim, during a relatively short period of time (70–200 c.e.), engaged in a remarkable transformation of the law against usury, taking it from a ban on a simple loan to assist the poor, into the world of business and finance. If the Tannaim had interpreted the biblical prohibition to apply only to loans to the needy, as explicitly mentioned in Exodus and Leviticus, there would have been no need for them to deal with business loans. But the Rabbis did not interpret the Torah’s laws narrowly. They viewed them expansively, as expressed in the Book of Deuteronomy, where interest was forbidden under all circumstances. Facing market conditions unknown in Bible times, the Tannaim plugged one hole after another with restrictive legislation. But in prohibiting usury in a host of new situations they found resistance. The economy of their time could not bear the restrictions. The pressure for relaxation was so great that the Tannaim found legal loopholes to nullify the very prohibitions they had instituted. In the case of loans of produce, where fear of inflation appeared to ban the

31. M. Bava metsia 5:4; T. Bava metsia 4:11. The Tosefta explains that if the investor worked with the working partner part of the time, then he had to pay him wages only for that period when he worked alone. Or, if the investor paid for the rental of the store, this could be balanced out against the worker’s labor. On the other hand, if the produce were on deposit in the recipient’s premises, then the investor had to add a payment for rental to the wages. T. Bava metsia 4:14. 32. T. Bava metsia 4:11; Baraitot in B. Bava metsia 68a and 68b. In the Baraita, R. Meir’s words are “whether much or little.” In the Tosefta, he is quoted as saying, “as an idle worker.”

24

Jewish Law in Transition

activity, they developed the principle that the loan was allowed if the borrower possessed the goods. This same reasoning applied to advance payment for goods. If the seller possessed the goods when he received payment, the transaction was permitted. It was also allowed if a set price had been established for the goods in the market. And the vendor did not have to have the product in its completed form, nor did the market price have to be set at payment time. A partially completed product met the tannaitic requirement, as did a market price at delivery time. As for credit sales, if the “regular” price of the goods included the cost of credit, then the Tannaim allowed it. It was only an openly stated increase for credit that was disallowed. It is true that the Tannaim prohibited a lender from taking the fruit of mortgaged property during the loan period, but they allowed the prohibition to be bypassed by permitting Conditional Sales. If someone who sold his land chose to take advantage of the buyer’s offer to sell it back to him, the result was that the buyer benefited from the use of the land during the time that he possessed it. Nevertheless this was allowed by the Tannaim. As for investments, as long as the working partner was paid for his labor, the Tannaim allowed one to put money into a business enterprise with both the profits and the losses being shared fifty-fifty between the investor and the worker. In each case, then, the Tannaim, in theory, applied the usury ban to everyday business transactions, but then found ways, in actuality, to allow the business life of the community to proceed unhampered.

IN THE PERIOD OF THE AMORAIM: ca. 200–500 c.e. In the amoraic period, the center of Jewish life shifted to Babylonia,33 to which a constant stream of Jews immigrated from Palestine. The Sassanian rulers of

33. On the economic development in Babylonia in agriculture and commerce, see Salo Baron, A Social and Religious History of the Jews, vol. 2, Philadelphia, 1952, 241–51; J. Newman, The Agricultural Life of the Jews in Babylonia between the Years 200 C.E. and 500 C.E, London, 1932, and idem., Commercial Life of the Jews in Babylonia between the Years 200 C.E and 500 C.E (in mimeograph form), especially chaps. 7–10. For the influence of the Amoraim on economic affairs, see Jacob Neusner, A History of the Jews in Babylonia, vol. 3, 295–338 and vol. 4, 220–87.

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Babylon generally refrained from persecuting the Jewish minority that resided within its borders and levied no special taxes upon them.34 The Babylonian Jews supported themselves largely from work on the land, either as landowners, sharecroppers, or day workers.35 They produced wine, dates, radishes, onions, and gourds. They raised sheep and cattle as well as chicken and fish.36 The Sassanians gave them considerable opportunity to enter the field of commerce, and Jews took an active part in the trade that developed. Not only did they trade freely among themselves and among their gentile neighbors, but a significant number were active in international commerce.37 Borrowing of Produce The prevailing amoraic opinion about loans of produce can be seen from the outcome of a discussion between R. Huna and R. Isaac (third century).38 These two Sages were dealing with the mishnaic ruling that the borrower had to have the produce in his possession at the time of the loan. The question arose: Did he have to have as much of the produce in his possession as he wanted to borrow, or could he have a lesser amount? According to R. Huna, he could not borrow more than he actually possessed. This was in keeping with the principle of the Mishnah that the borrower’s goods technically became the property of the creditor, replacing the goods that he lent. But R. Isaac said that even if he had only one seah of wheat, he could borrow many kors of wheat against it. His reasoning was that each seah of wheat borrowed could serve as a standby for the next one. R. Isaac’s decision in effect nullified the ruling of the Mishnah because a person could almost certainly lay his hands, at least temporarily, on a small amount of produce and could thus borrow at will. Nonetheless, the Gemara supported the view of R. Isaac, citing a statement of R. Hiyya (second and third centuries) to bolster its argument. R. Hiyya said . . that one could not borrow wine or oil if he did not have a drop of wine or oil.

34. L. Jacobs, “The Economic Conditions of the Jews in Babylon in Talmudic Times Compared with Palestine,” Journal of Semitic Studies 2 (1957): 350–52. 35. Isaiah Gafni, The Jews of Babylonia in the Talmudic Era, 130. 36. Moshe Beer, Amora’ei bavel, Perakim be-hayei ha-kalkalah, 82–155. . 37. Beer, 156–221. 38. B. Bava metsia 75a.

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The Gemara deduced from this statement that if he had a single drop, he could borrow a large quantity against it.39 That the Amoraim adopted a lenient outlook on the question of borrowing produce is further evidenced by a decision of R. Huna. We recall that in the above discussion with R. Isaac, it was R. Huna who upheld the strict interpretation of the Mishnah. The question was raised as to whether a person could borrow produce, not actually having it in his possession, but having it available to him on the open market. R. Huna, at first, ruled that he could not. Later, however, he was influenced by a decision on this matter by his Palestinian colleague R. Eleazar, and thereafter allowed students to borrow wheat in Tishre and repay it in Tevet. They did not have to possess the wheat in Tishre. It was sufficient that it was for sale and available to them.40 It is evident, then, that by the end of the talmudic period, there were no restrictions to speak of on borrowing produce. Whereas the Tannaim had allowed such loans if the borrower possessed the goods, the Amoraim permitted loans of produce if the borrower possessed any amount whatsoever of the goods, and they even allowed it if the borrower had none of the goods as long as they were available to him on the open market. To all intents and purposes, then, the Amoraim allowed unrestricted borrowing of produce. Paying in Advance In the amoraic period, the expansion of the Babylonian economy brought increased demands for credit from the business community. More so than in the tannaitic period, farmers, craftsmen, and merchants needed payment in advance of delivery. The Gemara dealt with only a small portion of such transactions. Most of these ordinary deals were handled by the parties involved and never came to the attention of the Rabbis.41 It was the discussion of the unusual cases that were brought to the judges for adjudication that give us an inkling of the scope and variety of dealings in forward contracts in amoraic times.42 The Tannaim had required that a vendor who contracted to deliver goods 39. Ibid. 40. B. Bava metsia 72b. It is unclear, from the text of the Talmud, whether R. Huna’s ruling dealt with a loan of money or of produce. We have understood it as referring to borrowing produce for produce since this is how most of the later authorities comprehended it. 41. Neusner, A History of the Jews in Babylonia, vol. 4, 220, 228. 42. Two cases are cited in the Gemara where one of the parties to a forwards contract

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at a future time had to have the goods in his possession at the time he was paid. That the Amoraim maintained this requirement can be seen in a decision of the third-century teacher R. Nahman. When asked whether it was . sufficient for a wax merchant to have credits for his products or whether he actually had to have the goods themselves in his possession before selling them (for future delivery), the Sage was not willing to liberalize the tannaitic law. He responded that the credits were not sufficient and that the merchant could not make the sale unless he actually possessed the goods.43 Rav and Samuel, third-century Babylonian Sages, disagreed as to how complete a product had to be before it could be sold for future delivery. Rav said that when there were only two processes left to be performed, the product could be sold.44 Samuel said that it did not matter how many processes remained to be completed. As long as they could be performed by man and did not require Heaven’s assistance, they could be sold.45 Rav and Samuel’s Palestinian contemporaries R. Yohanan and Resh Lakish were not so exacting . in this matter. They simply said that even if a number of processes were still lacking before the product would be completed, one was still permitted to engage in the transaction.46 A case came up regarding the purchase of the fruit of an orchard before the fruit was ripe. Rav said that since the fruit was worth more when it was ripe, it was forbidden to buy it at a lower price in advance. Samuel, however, permitted such a purchase, allowing that the fruit might become damaged or diseased. According to Samuel, since the purchaser bore the risk of loss, he was entitled to any gain and it should not be considered interest.47 Rav’s strict interpretation of the tannaitic regulations on how complete a product had to be before it could be sold can also be seen in his decision on gourds. He ruled that it was forbidden for a man to give money to a gardener for gourds of a cubit’s length if they were only a span’s length in size at the

wished to retract. B. Bava metsia 49a and B. Bava metsia 49b. In the first case Rava permitted the vendor to retract. In the second case R. Hisda allowed the vendee to retract. . 43. B. Bava metsia 63b. 44. In Y. Bava metsia 5:8, 10c, Rav is recorded as saying that there has to be only one process remaining to be performed. 45. B. Bava metsia 74a. 46. Y. Bava metsia 5:8, 10c. 47. B. Bava metsia 33a.

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time of payment. But a century later, Rava apparently ruled that such a transaction was permitted.48 The more permissive trend continued with the decision of Amemar (fourth and fifth centuries) regarding a dispute between the Tannaim R. Meir and R. Yose. The question related to how complete earthenware had to be before it could be purchased for future delivery. R. Meir’s view was that the contracts could not be concluded until the potter’s clay had been kneaded into lumps. But R. Yose said that only white earth had to be kneaded into lumps before the potter could enter into a contract. For black earth, which was widely accessible, the clay did not have to be kneaded. Amemar ruled in accordance with R. Yose, thus choosing the more lenient view.49 The same approach can be seen in the ruling of the fourth-century Amora Abaye, in regard to wine. If a person bought wine to be delivered subsequently, he received the profit or loss from appreciation or depreciation that occurred before delivery; but if the wine soured, the vendor was held responsible. Abaye was questioned concerning this ruling: if the wine, at the time of the payment, became the possession of the buyer, and he was affected by its appreciation or depreciation, wasn’t it right that he also be required to accept any loss that might result from souring? Making the vendor liable for souring made it appear as if the wine really belonged to the vendor and, therefore, if it appreciated before delivery, then the increase should be construed as interest. Abaye replied that as long as the buyer accepted the risk of depreciation, this was enough to show that the wine became his at the time of payment. Abaye permitted this arrangement, though the vendor was liable for souring.50 This opinion of Abaye was delineated more clearly by R. Ashi (fourth and fifth centuries). When questioned as to how it was that the Rabbis could advance money for wine in Tishre and receive choice quality in Tevet with the 48. B. Bava metsia 64a. The preface to Rava’s comment, “There are some who say,” usually introduces a second version of a previous comment, so it may be that there is an error in the talmudic text and that the prohibition of the advance payment for gourds and the permission to engage in the transaction were both statements of Rav or both statements of Rava. We, however, see the prohibition by Rav and the permission by Rava as the most likely understanding of the passage, reflecting their differing views. 49. B. Bava metsia 74a. 50. B. Bava metsia 64a-b. Eliash (in “Shorosheha,” 44) cites the objection posed to Abaye, that the arrangement he proposed was “near to profit and far from loss” as evidence that the Amoraim wanted to restrict such transactions. But Abaye’s reply, that it was near both to profit and to loss, shows that the prevailing opinion among the fourth-generation Amoraim was toward leniency.

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risk of souring falling on the vendors, he replied that they paid their money for wine, not for vinegar. If the wine soured between Tishre and Tevet, it was because it wasn’t good wine to start with, and the vendor was required to supply wine that was wine from the beginning. R. Ashi thus supported Abaye’s ruling of the previous generation, adding an argument in its support.51 The Mishnah had stipulated that even if a merchant didn’t possess the goods, he could sell them if the market price was established.52 Rabbah and R. Joseph (third and fourth centuries) pointed out that it was essential for a merchant’s livelihood that he be allowed to enter into a forward contract based on the market price.53 We have learned that according to tannaitic law, payment for future delivery of goods was permitted if the vendor had the goods in his possession. If the goods rose in value before the buyer received them, he was not getting interest because, at least in theory, it was his own merchandise that had appreciated. But suppose the buyer received, not the appreciated goods, but rather, their cash value. In other words, the would-be buyer deposited a sum of money and later received in return a larger sum. Didn’t this appear to be usury? R. Kahana once paid some merchants in advance for flax. The flax subsequently rose in value and the vendors sold the flax and gave the increased amount of money to R. Kahana. The case came before Rav (third century), who ruled that R. Kahana might accept the money only if, when the merchants sold the flax, they said, “This is R. Kahana’s flax.” If, in this way, they clearly identified that they were selling flax owned by R. Kahana, then Rav permitted the transaction, allowing the merchants to act as R. Kahana’s agents to sell his flax. But if the merchants did not follow this procedure, then Rav forbade R. Kahana from accepting the money. For if R. Kahana simply gave the flax merchants a sum of money and later received a larger sum in return, it looked to Rav too much like a loan on interest.54 This careful decision of Rav reflected his determination to prevent the opening of a loophole for the evasion of the tannaitic law. But his Palestinian contemporary R. Yannai was not as cautious. He declared, “What is the 51. B. Bava metsia 73b. Eliash (“Shorosheha,” 45) again sees a question posed in the Gemara as a trend toward limiting advance payment for goods. The Gemara, however, clearly supports R. Ashi’s reply to the objection. 52. M. Bava metsia 5:7. 53. B. Bava metsia 63b. 54. B. Bava kamma 103a.

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difference between the goods and the money?”55 If someone paid for future delivery of goods, the vendor could supply him with the goods or with their value in money. It did not matter which. And if it turned out that the price of the goods had risen and the buyer received more money from the vendor than he had paid him, it was not interest, for it was his own goods that had appreciated.56 A century later, Rava had to rule between the conflicting views of Rav and R. Yannai. He accepted the principle of R. Yannai, “What is the difference between the goods and the money?” Thus, just as in the case of gourds, above, here too Rava overruled Rav’s conservative view and the less stringent interpretation of the law prevailed.57 Our study of the deliberations of the Amoraim reveals the striking conclusion that the Rabbis consistently met the demands of farmers, craftsmen, and tradesmen to liberalize the restrictions against forward contracts. Furthermore, it is apparent that the most far- reaching of the decisions for leniency were made by the fourth-century Babylonian teachers. Whereas in the third century R. Nahman had refused to allow a flax merchant to sell his produce . even though the credits were available to him and Rav had favored constraints on the sales of incomplete products (for example, the fruit of an orchard before the fruit was ripe or the sale of gourds before they reached their full size), by the fourth century the rulings had changed dramatically. Rava had overruled Rav’s restrictions in the cases of the orchard and the gourds. As for the issue of whether a vendor could repay cash rather than deliver promised goods, Rava again overruled Rav and sided with R. Yannai’s dictum, “What is the difference between them and their value in money?” Furthermore, Rava’s contemporary, Abaye, made allowance for the sale of wine for future delivery even though the vendor was responsible for the quality of the wine; later in the fourth century this view was supported by R. Ashi. By the time the amoraic period came to an end, it was clear that the Rabbis had found a way to grant the business community its wish for freedom to purchase 55. B. Bava metsia 63a. 56. Ibid. 57. When it came to enforcing the usury ban, the Palestinian teachers were generally more liberal than the early Babylonian Amoraim. Eliash (“Shorosheha,” 67, 70–73) points this out using as examples, in addition to R. Yannai, R. Isaac, who allowed a loan of produce even if the borrower possessed but a tiny amount of the goods (B. Bava metsia 75a), and R. Eleazar, who allowed borrowing of produce based on the market price (B. Bava metsia 72b).

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goods with cash for delivery at a later time. Every rabbinic decision on forward contracts, from the time of Rava onward, was in the direction of leniency. Just as the Tannaim had developed rules that, while upholding the usury prohibition, still enabled economic life to proceed without hindrance, so the Amoraim interpreted those rules in a way that conformed to the demands of the business and commercial interests of their time. Credit Sales In the amoraic period, businessmen profited from credit through the use of a talmudic concept called tarsha. Tarsha referred to a kind of credit transaction whose exact meaning was uncertain. The Gemara tells of three different kinds of tarsha: the tarsha of R. Hama, the tarsha of R. Papa, and the tarsha of . 58 The Gemara says that the tarsha of R. Hama was permitted; R. Nahman. . . R. Hama sold goods to merchants and the merchants, in turn, sold the goods . in the market. Only then did they pay R. Hama for their purchase (a higher . price than they would have paid him at the time they received the goods). This tarsha was allowed because the merchants benefited from the fact that they were selling a Rabbi’s goods. They were released from certain taxes, and the market was held up for them. Thus the extra payment they made to R. Hama was not considered usury; it was a payment made in return for privi. leges granted. Unfortunately, this form of tarsha was of little assistance to most traders, since it applied only to Rabbis. In contrast, the tarsha of R. Papa was forbidden.59 R. Papa openly set a higher price for his beer in return for allowing buyers to delay paying. This was a clear-cut instance of increasing the price in return for credit and was forbidden as usurious. The third type of tarsha was that of R. Nahman, who is quoted in the . Gemara as saying that his tarsha was allowed. When it was pointed out that allowing tarsha would contradict the Mishnah’s forthright prohibition against increasing the price for credit, the Gemara replied that the Mishnah’s ruling applied only when one stipulated the price. R. Nahman referred to a case . where the price was not stipulated. The Gemara, however, does not explain what was meant by “It was not stipulated,” and no cases of R. Nahman’s . tarsha are found in the Talmud. It remained for the Sages of later times to elucidate its meaning.

58. B. Bava metsia 65a. 59. B. Bava metsia 68a.

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Mortgages The most common form of mortgage was land. It was inevitable that such mortgages would run into conflict with the laws against usury. The Tannaim had ruled that if land were used to secure a loan, the borrower would have to receive the produce of the land during the period of the loan, for if the lender received it, the produce would be a kind of interest on the loan.60 But it became the usual practice for the creditor to hold the pledge while a loan was in effect. This was true for personal as well as real property. In fact, in every case of mortgages dealt with by the Amoraim, the land was held by the creditor, and it was he who enjoyed the usufruct.61 That the creditor took the produce can be seen in a dispute between the third-century teachers R. Judah and R. Kahana.62 It was not clear, from a certain contract, whether a piece of property was mortgaged for two years or for three. The Rabbis had to decide who should enjoy the produce during the third year, which was in dispute. R. Judah said that the owner (the debtor) should get it, while R. Kahana said that the one who is already taking it (the creditor) should continue to do so. This case would seem to indicate that, already in the third century, it was common for the creditor to take the fruit of the land. As it turned out, the Gemara ruled in favor of R. Kahana, so even while there was a question as to whether the mortgage had a third year to run, the creditor continued to take the produce. In the fourth century, also, it appears that the practice of the creditor taking the usufruct continued. A certain man mortgaged his vineyard for ten years. But after five years, the vineyard aged. The fourth-century teachers Rava and Abaye disagreed as to whether the aged trunks of the vine should be considered part of the land, which belonged to the debtor, or part of the yield, which belonged to the creditor. It was a foregone conclusion, however, that the produce went to the creditor.63 One additional case in the Talmud shows that this was the practice. A creditor said that a certain mortgage was for five years while the debtor said that it was only for three. Said the debtor to the creditor, “Produce the note.” The creditor responded, “I have lost the note.” R. Judah (third century) said that the creditor is believed. R. Papa (fourth century), however, quoted R. Zevid and R. Avira (also fourth-century teachers) as disagreeing with R. Judah. In 60. M. Bava metsia 5:3; T. Bava metsia 4:2, B. Bava metsia 63a; J. Bava metsia 5:3, 10b. 61. B. Bava metsia 62a–62b; 66a–68a; 109b–110a. 62. B. Bava metsia 11a. 63. B. Bava metsia 109b. See also B. Ketuvot 95b.

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their view, the creditor might be suppressing the document in order to gain two extra years on the land. Although the duration of the note was in dispute, it was again taken for granted by all parties concerned that the creditor enjoyed the produce during the period of the mortgage.64 From the foregoing, it seems evident that in amoraic times, the creditor took the land for the period of a mortgage and enjoyed the yield thereof. How was this possible? The Tannaim had made strenuous efforts to prevent a creditor from gaining any advantage because of his loan. They had said that in the case in which land was pledged as security for a debt, the borrower had to take the produce. How was it, then, that in the amoraic period, the lender was enjoying the produce as a matter of course? How was this practice allowed in view of the law against lending on interest? The first answer is that the produce taken by the creditor was returned to the borrower. Though antichresis (the Greek word for the creditor using a pledge to reduce a debt) was designated as usury, 65 there were instances when it was practiced. Abba Saul, in the Mishnah, had said that for a poor debtor it was desirable to use the pledge to reduce the debt.66 In the Jerusalem Talmud, the third-century teachers R. Yohanan and R. Yose b. Hanina pointed . . out that, at times, borrowers wanted lenders to use their pledges in order to reduce their debts.67 And in the Babylonian Talmud, R. Nahman (third cen. tury) ruled that at the end of the mortgage period, the produce had to be returned to the borrower together with his land.68 It could therefore be argued that if the debtor were reimbursed for the produce taken by the creditor, then the creditor was ultimately not benefiting and the law against usury was thus not being broken. But the practice of the creditor returning the produce to the debtor did not prevail. A legal principle was established, which relieved the creditor of any 64. B. Bava metsia 110a. See also B. Bava batra 40b. 65. J. Bava metsia 6:7, 11a. See Boaz Cohen, “Antichresis in Jewish and Roman Law,” Alexander Marx Jubilee Volume (New York: Jewish Theological Serminary, 1950) and Tzvi Ehrman, “Antichresis ba-talmud,” Sinai 54 (1964): 177–84. Various kinds of antichresis, both pure and mixed forms, were practiced in new Babylonian times (612–539 b.c.e.). The creditor received the mortgaged object, house, or slaves, and deducted their rental value from the debt. Herbert Petschow, “Neubabylonisches Pfandrecht,” Abhandlungen der Schsischen Akademie der Wissenschaften zu Leipzig (Berlin: Akademie Verlog, 1956), 103–19. 66. M. Bava metsia 6:7. 67. J. Bava metsia 6:7, 11a. 68. B. Bava metsia 66 b.

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obligation to return the produce that he had illegally acquired. The third-century scholar R. Eleazar ruled that although fixed or stipulated interest (interest on an ordinary loan, prohibited in the Bible) could be recovered in a court of law, the “dust of interest” (interest derived through a business transaction, forbidden by the Rabbis) was not recoverable.69 Of all the rabbinic decisions allowing for unhampered economic activity, none was more significant than that regarding restitution. We can understand why Boaz Cohen has called this decision, “a minor revolution in law.”70 The vast majority of cases where interest was taken were not cases of stipulated interest, but rather of the dust of interest through business transactions. The clamoring of the day for leniency was not from the poor; it was from the business community. The Rabbis had built up an elaborate legal structure to prevent sales, investments, mortgages, leases, and loans of produce from resulting in usury. By declaring the dust of interest unrecoverable in court, they abdicated their power of enforcement in all of these areas. They made adherence to the vast body of law designed to prevent business dealings from resulting in usury dependent for its compliance upon persuasion and moral influence. According to Rava, the leading fourth-century teacher, the produce taken by the mortgagee was the dust of interest and was not returnable.71 This meant that, although a creditor was forbidden to take the fruit and benefit from the loan, if he did benefit, he could keep his gain and the lender could not sue to retrieve what he had lost. Without judicial remedy, it appeared that any effort to uphold the antiusury law, at least as far as mortgages were concerned, was doomed. In an effort to preserve the interest ban without stifling the economy, Rava came forward with a plan. It was a widely practiced custom that whenever the debtor had the money, he could repay his debt and get back his land. Rava said that in cases where this custom prevailed, when the produce taken by the creditor became equal to the amount of the debt, the debt should be considered repaid and the land should be returned to its owner without any payment. He agreed that if the creditor had taken more than the amount of the debt, the borrower could not receive the excess, but at least he would get his land back. The fourth-fifth-century teacher R. Ashi found a flaw in Rava’s reasoning.

69. B. Bava metsia 61b-62a; J. Bava metsia 5:1, 10a. 70. Boaz Cohen, 191. 71. B. Bava metsia 61b.

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If the produce taken by the creditor was the dust of interest, unrecoverable in court, then how could Rava dismiss the creditor from the land without payment? Wasn’t that tantamount to making him return the produce he had taken? R. Ashi thus concluded that though taking the produce was illegal, it did not have to be returned and could not be used to cancel the debt.72 Rabina (fourth-fifth centuries) also agreed with R. Ashi that produce taken by the creditor from his debtor’s land was the dust of interest and was not to be returned from the creditor to the debtor.73 It appears from the talmudic material that by the fourth century, mortgages were being written with the produce being taken by the creditor, and the Rabbis’ hands were tied because the dust of interest was not returnable. Was there a way for this practice to be reconciled with the prohibition against usury? Rava suggested a legal way for the creditor to enjoy the usufruct, through an Annual Deduction, where the creditor would deduct a fixed, agreed-upon sum from the debt each year.74 This would offset the benefit that the creditor enjoyed from the produce. Rabina agreed with Rava’s solution and followed this device.75 But R. Papa (fourth century), R. Kahana (fourth-fifth centuries) and R. Ashi (fourth-fifth centuries) would not take the Annual Deduction.76 They viewed produce taken by the creditor as interest on the loan, forbidden by law, and the Annual Deduction did not compensate for this. There were other attempts to find legal ways to enable the creditor to take the usufruct. The Fixed Time Limit was one such attempt.77 The Gemara gives two explanations of what this meant. In the first version, for the first five years of the mortgage, the creditor gives the debtor no allowance for the pro72. Ibid. 73. B. Bava metsia 62a-b. There is considerable discussion among the commentators as to how Rabina could, in one particular case (B. Bava metsia 67a), require the return of produce along with the land while here (B. Bava metsia 62a-b) maintaining that the dust of interest was not returnable. Some believe that the Gemara refers to two different teachers. But such a questionable solution is not required if it is kept in mind that the case in B. Bava metsia 67a deals with a Conditional Sale, while the general principle of the dust of interest not being recoverable in court refers to loans. See Tosafot Bava metsia 67a, ad loc. and Daniel Ashkenazi, Shita mekubetset, vol. 9, Bava metsia, part 2 (Tel Aviv, 1963) 755–57. 74. B. Bava metsia 67b. 75. Ibid. 76. Ibid. 77. Ibid.

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duce he takes; after that he makes a full deduction from the debt for the produce taken. In the second version, the creditor makes a fixed deduction each year for the first five years; after that he makes a full allowance. The Gemara reports that Rabina and R. Aha . (fourth-fifth centuries) disagreed as to whether the Fixed Time Limit (either version) was permissible, but does not make clear which scholar allowed it and which forbade it. In any case, there was still a need for a formula that would gain general acceptance. The answer proposed in the Talmud was in the form of contract known as a Mortgage of Sura.78 Such a mortgage was written in a way to indicate that after a certain number of years, the land was to be returned to the debtor without payment. A mortgage written in this way meant that the debtor was, in effect, selling the produce of his land to the creditor for a fixed number of years. It was really a sale rather than a loan; the produce, then, was not considered interest. The Mortgage of Sura was allowed by all of the Rabbis, but to what extent it was practiced is not known. Investments The dispute among the Tannaim concerning payment for labor in a half-profit investment carried into amoraic times. Rav (third century) said that an investor could make an agreement with an animal breeder that his payment for labor be any excess above a one-third profit on the investment. But Samuel (third century) said that this was not adequate payment, for the profit might not reach one-third. Samuel maintained that the investor had to pay the breeder a definite amount of money not dependent on a speculative gain. Rav apparently also agreed that the breeder could not go home empty-handed for he also said that the breeder should receive the head of the animal. The Gemara suggests that Rav meant that if the profit didn’t reach one-third, then the breeder should receive the head; it is also possible, however, that Rav meant that in any case he should receive the head.79 We cannot consider the animal’s head to be a large payment for the breeder’s labor, but, that it was of some worth is suggested by the following woeful story.80 R. Eleazar of Hagrunia (fourth century) bought a cow and gave it to his tenant to raise on a half-profit basis. When the animal was fattened, the tenant received half the profit and, for his labor, the animal’s head. Now the

78. Ibid. 79. B. Bava metsia 69a. 80. Ibid.

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tenant’s wife berated her husband for not having been in partnership with R. Eleazar, for then, she said, he would also have received the tail. So on the next occasion, the tenant paid for half of the cow and was an equal partner with his landlord. This time, however, when the profits were split, R. Eleazar took half of the head and half of the tail. “What!” exclaimed the tenant, “Shall I not receive even as much as before?” R. Eleazar replied that before he had to give him more than half of the profit lest his labor of caring for the cow appear as usury, but now that they were partners, there was no danger of usury and the split could be exactly fifty-fifty. This incident provides an example of an investor fulfilling his obligation, albeit in a small way, of payment for labor. The third-century Amora R. Nahman took the lenient view in the dispute . concerning payment for labor. He said that the law was in accordance with R. Judah81—that is, that it was sufficient payment if the worker was allowed to dip his bread into the investor’s vinegar. But in the fourth century, Rava overruled R. Nahman, explaining that R. Nahman did not say that the law . . was in accordance with R. Judah, but merely that the law, as stated by R. Judah, followed a certain principle.82 In this way Rava upheld the requirement for at least a minimum payment for labor. The Tosefta included a formula that made no separate payment for labor necessary.83 In this arrangement, the investor would accept the risk of loss for two-thirds of the investment, while still sharing the profit equally. In such a case, the reduction of the working partner’s risk was considered adequate compensation for his labor. This formula was apparently employed in amoraic times, for when R. Ilish died, a bond was presented to his children showing that their father had accepted funds on a half-profit basis without any provision to receive compensation for his labor. When Rava heard what had happened, he said that R. Ilish was a great man and it couldn’t be true. He must have employed the Tosefta formula giving him a greater opportunity for gain than for loss and making unnecessary a separate payment for labor.84 Rava’s explanation of R. Ilish’s action was in accord with his interpretation of R. Nahman’s statement, . mentioned above. Rava maintained that the working partner had to be recompensed in some way for his labor.

81. And with R. Yose ben Judah and with R. Simeon ben Gamaliel, B. Bava metsia. 68b. 82. Of leniency, B. Bava metsia 69a. 83. T. Bava metsia 4:11. 84. B. Bava metsia 68b-69a.

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Even with the requirement that the worker be paid for his labor, the half-profit investment became widely used. It gave investors an opportunity for profit, which was forbidden with loans, and it provided businessmen with the capital they needed to carry out their enterprises. The Nehardeans85 called the half-profit investment an iska and considered it one-half a loan and one-half a deposit.86 They looked upon the iska as a fine rabbinical enactment “satisfactory to both borrower and lender.” The fact that they used the terms “borrower” and “lender” in praising the enactment is revealing. It suggests that the half-profit investment indeed served as a substitute for an ordinary loan. A creditor could not legally profit from a loan, but from an iska he could. Thus the iska grew in popularity, satisfying the Rabbis that the interest laws were not being violated, yet meeting the demands of the economy for credit.

85. Nehardea was an important center of Jewish life in Babylonia. Its academy, headed by R. Samuel, flourished during the first half of the third century. 86. Undoubtedly because half of the risk (the loan) was borne by the working partner and half by the investor. The discussion among the Amoraim (B. Bava metsia 104b-105a) indicates that iska was a technical term in common use in Rava’s time.

3

Loans of Produce IN THE PERIOD OF THE GEONIM: ca. 650–1050 In the geonic period, Jewish life came under the rule of Islam. Jews, along with other non-Moslems, were considered a protected minority. They were levied a special head-tax, but were allowed to continue their autonomous community life as they had in talmudic times. The exilarch continued to reign as the secular ruler and the heads of the academies served as the Geonim, the spiritual leaders of the Jewish community.1 Furthermore, with the unification of the Mediterranean world under Moslem rule, trade among various parts of the empire expanded. Merchants traveled with their wares between Baghdad, Cairo, Kairouan, Cordoba, and other far-off places. Jews in particular were active in international trade, taking advantage of the brotherly relationships that co-religionists could facilitate.2 Whereas in talmudic times agriculture was the major occupation of the Jews, in geonic times it shifted to manufacturing, trade, and commerce. Because of heavy land taxes, Jews moved from the farms and villages into the towns and cities.3 There was also a population movement westward. Iraq remained the center of Jewish life, but Jews emigrated and settled in Egypt, North Africa, and

1. Salo Baron, A Social and Religious History of the Jews, vol. 3, chap. 18, 120–72; Abraham Ben-Jacob, Kitsur toldot yehudei bavel (Jerusalem, 1971) 48–51; Robert Brody, The Geonim of Babylonia and the Shaping of Medieval Jewish Culture (New Haven: Yale University Press, 1998), 35–82. 2. S. D. Goitein, Jews and Arabs, 105–13; H. H. Ben-Sasson, A History of the Jewish People, 397–398; S. D. Goitein, “Jewish Society and Institutions under Islam,” 179–81; Bernard Lewis, The Jews of Islam, 76. 3. H. H. Ben-Sasson, 393–94; Baron, A Social and Religious History, vol. 4, 151–58 and, by the same author, in Nahum Gross, ed., Economic History of the Jews (New York: Schocken Books, 1975), 25–27; Simha Assaf, Tekufat ha-geonim ve-sifruta, 14–16.

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Spain.4 The extensive communication between the parts of the Islamic world brought the far-flung Jewish community together. It meant that the Geonim were the heads, not only of Iraqi Jewry, but of the entire Jewish world. Wherever issues of Jewish law and practice arose, the questions were transmitted to the Geonim, whose responses were often short and direct, but at times contained essays of length and depth. Indeed, several Geonim wrote codes to organize and explain the talmudic law. Thus geonic literature was accepted by Jews the world over as authoritative, linking them to the Talmud and ultimately to Scripture itself. Loans of Produce The first book of law written after the Talmud was the She’iltot of R. Ahai . Gaon, who flourished in the first half of the eighth century. R. Ahai . was a scholar at the academy in Pumbedita before he emigrated to Palestine a few years before his death.5 R. Ahai . devoted a substantial portion of one She’ilta to the subject of lending produce.6 He began his discussion: If one borrowed produce when the price was low and returned it when the price had risen… then he was allowed to repay only an amount equal to its worth at the time he borrowed. But if the borrower had the produce in his possession at the time that he borrowed… then it was permitted. Thus the first contribution of the She’iltot was to reiterate the position of the Mishnah,7 which had allowed one to say, “Lend me until my son comes or until I find the key.” The Mishnah had ruled that if a borrower possessed the goods but the goods were inaccessible, he was allowed to borrow. R. Ahai . upheld this view. He then turned to the question of whether the borrower needed to have in his possession the full amount of the produce he wished to borrow or whether having a portion of it was sufficient. He answered this question by quoting the talmudic passage that concludes, “If he has [even a

4. Baron, Economic History, 28; S. D. Goitein, Jews and Arabs, 109–16. 5. On R. Ahai . and the She’iltot, see the introduction to Samuel Mirsky’s work, She’iltot de rav ahai . gaon, vol. 1, 1–41; Assaf, at 154–64; Baron, A Social and Religious History, vol. 6, 37–40; Simha Assaf and Yehoshua Horowitz, “Aha . of Shabha,” in Encyclopedia Judaica, vol. 2, 449–51. 6. Mirsky, Exodus, vol. 3, 53–56. 7. M. Bava metsia 5:9.

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single drop of wine or oil], he may borrow large quantities against it.”8 With this selection the She’iltot followed the talmudic ruling allowing one to borrow as much produce as he wished. Next, R. Ahai . raised the question of borrowing when the borrower did not have any of the produce in his possession, but it was available to him on the open market. The Talmud actually contains two contradictory rulings on this matter. The She’iltot answered with the one in which R. Huna, who had previously ruled that one could not borrow on the market price, changed his mind, allowing students to borrow wheat in Tishre and repay it in Tevet. The author of the She’iltot accepted R. Huna’s revised opinion as the final word on the matter. “What does it mean that one may borrow on the market price?” he asked, and he responded that it referred specifically to “produce for produce.”9 The contribution of the She’iltot to the subject of borrowing produce was significant. The author organized the material from the Talmud into a logical sequence and summarized the law on the subject. Furthermore, by allowing loans of produce for produce when the borrower possessed some of the goods or when the market price was out, R. Ahai . gave business people ample opportunity to engage in such transactions without violating rabbinic law. The major code of law of the geonic period was the Halakhot gedolot, written by R. Simeon Kayyara, who lived in Basra, in Iraq, in the middle of the ninth century. The author of the Halakhot gedolot was well acquainted with the She’iltot10 and followed the same sequence as did R. Ahai . in outlining the law of lending produce.11 He first declared that the law forbade lending

8. B. Bava metsia 75a. 9. Mirsky, Exodus, vol. 3, 56. R. Ahai . made no mention of the view of Rabbah and R. Joseph (B. Bava metsia 63b), who held that if the market price was out, a sale of produce (to be delivered in the future) was allowed, but a loan of produce was forbidden. The only study of the lending of produce in geonic times is a chapter in a doctoral dissertation by Ben Zion Eliash (Yesodot be-dinei ribit ba-mishpat ha-ivri, [Hebrew University, Jerusalem, 1977] 255–73). Eliash’s work raises important issues, but since he fails to see the major split among the Geonim on the subject of borrowing on the market price, he misses the most revealing aspect of the study of this subject. In his article, “Iskot,” Eliash suggests that the Geonim use the word “borrow” to mean entering into a business contract to receive money for the future delivery of goods. We see a distinction between the two types of transactions. 10. See J. N. Epstein, “Seride she’iltot sheba-halakhot gedolot u-pesukot,” Tarbiz. 8 (1937): 17. 11. Hildesheimer, vol. 2, 382.

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of produce for produce unless the borrower had the goods in his possession at the time of the loan. Next he taught that it was not necessary to have the entire amount of the produce in hand. Part was sufficient. Finally, again following in the footsteps of the She’iltot, he explained that the borrower did not have to actually have the produce in his possession. It was sufficient if the product was available in the locality in which the borrower lived. Like the She’iltot, then, the Halakhot gedolot provided a way for the business community to engage in loans of produce for produce when the borrower possessed some of the goods or when the market price was established. This left a wide opening for such transactions. Responsa Thousands of responsa from the geonic period have survived to our own day. In several of these responsa we find an important departure from the rulings of the She’iltot and the Halakhot gedolot. In a responsum12 probably written by the ninth-century Gaon R. Natronai, it was explained that the words “One may borrow on the market price” referred to a case in which one borrowed goods for money. The amount of money to be paid for the goods was to be determined by the market price at the time of the loan. There was no suggestion that an open market might make a loan of produce for produce permissible. R. Natronai’s viewpoint was backed by an anonymous responsum13 in which the question was asked, “If a person lends produce and it depreciates or appreciates, does he exact the produce or the monetary equivalent?” The Gaon responded: If he does not have any produce at all in his house, if the borrower stipulates the price according to the open market at the time of the loan, then he should repay him in money, as we have learned, “One may borrow on the market price.” This Gaon used the rule “One may borrow on the market price” to indicate how the price to be repaid was determined. The very same words that the She’iltot and the Halakhot gedolot had used to back up their permission to borrow produce and return produce when a fixed market price existed were now used to show the basis for stipulating the price of the produce. 12. Sha’are tsedek, part 4, gate 2, #34. Joel Muller ¨ (Mafte’ah. le-teshuvat ha-geonim, 292, n. 14) suggests that this responsum may have been written by R. Natronai. 13. Teshuvot ha-geonim, ed. Simha Assaf (Jerusalem, 1942) #78, 85–86.

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It is clear that it was not an oversight when R. Natronai and this unknown Gaon omitted a set market price as a way to allow a loan of produce for produce. They had a different view of the significance of an established market price, and they did not agree that because a market price was known, one could borrow produce and return the same amount of produce later. Two more geonic responsa permitted borrowing produce for produce if the borrower possessed the goods, but did not mention allowing such a transaction based on an established market price. The first was written by R. Nahshon, who served as the Gaon of Sura some twenty years after R. . Natronai. He was asked14 whether a man who borrowed ten jars of spices should repay the spices or their monetary equivalent. R. Nahshon replied that . if the borrower was one who worked with spices and therefore had some at the time of the loan, then he could repay spices. Another anonymous Gaon was asked,15 “What is the rule regarding lending of produce for produce? If the price increases, may he give him the [same amount of] produce or not?” The Gaon answered: If the borrower has even one seah at the time that he took it from the lender, he may borrow many seahs on the seah that he has, and he returns the same amount that he took. And even if it is worth more at the time that he pays back, it is not usury. Neither this responsum nor the one of R. Nahshon made any mention of a . loan based on the market price. As we have seen, none of the responsa allowed a loan of produce for produce based on the fact that the goods were available in the open market. It seems, then, that there existed two points of view among the Geonim. R. Ahai . and R. Simeon Kayyara held that an established market price made a loan of produce permissible, whereas R. Natronai, R. Nahshon, . and the authors of the anonymous responsa disagreed. The last of the Geonim, R. Hai Gaon, served in Pumbedita during the first half of the eleventh century. A short piece by him16 called Mishpete halva’ot was printed, together with his major work, Sefer ha-mikah. ve-ha-mimkar. It 14. Sha’are tsedek, at part 4, gate 2, #18. 15. She’elot u-teshuvot ha-geonim, ed. Mordecai Rabinowitz (Vilna, 1884), #35 (Jerusalem, 1960), #37. 16. Scholars have disputed the authorship of Mishpete halva’ot. The publishers of Sefer ha-Mikah. ve-ha-mimkar attached it to the larger work indicating that it was by the same author, R. Hai Gaon. Louis Ginzberg (Geonica 1 [New York: The Jewish Theological Seminary of America, 1968], 174), Haym Tchernowitz (Toldot ha-poskim, part 1 [New

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was in his brief work that R. Hai gave the procedures for borrowing produce. He reaffirmed the rulings of those previous teachers who allowed loans of produce if the borrower possessed the goods,17 and he sided with R. Ahai . and R. Simeon in allowing loans of produce for produce if the market price was out.18 At the close of the geonic period, one aspect of the law governing loans of produce for produce was clear. They were allowed if the borrower possessed any of the goods. In the case of a salesman who dealt with a particular product, for example, the spice merchant who was the subject of R. Nahshon’s . responsum, he would generally have some of the goods in his possession. Thus borrowing was no problem for him. The law enabled him to freely carry on his trade. But for tradesmen who did not have any of their merchandise on hand, it was not possible to meet the condition that they needed to possess the goods. They wanted permission to borrow as long as the market was open and the York: Jubilee Committee, 1946], 105) and Simha Assaf (201) agreed with this attribution. But, more recently, Shraga Abramson (Inyanut be-sifrut ha-geonim [Jerusalem: Mossad Harav Kook, 1974], 132 and 235 and “Ha-Genizah she-be-tokh ha-genizah” in Proceedings of the Rabbinical Assembly of America XV [1951], 230) has indicated that R. Hai was not the author. Abramson has not published evidence to support his viewpoint. In his doctoral dissertation (Yesodot be-dinei ribit ba-mishpat ha-ivri, Hebrew University, [Jerusalem, 1977], 183, 230 and 271), Eliash favors Abramson’s viewpoint and repeats this assertion in “Iskot,” n. 36. He offers two instances of apparent contradictions between the views of R. Hai and those expressed in Mishpete halva’ot, but neither example holds up under scrutiny. Though the issue is still open, it seems to this writer that R. Hai is indeed the author of Mishpete halva’ot. The style of giving a ruling and backing it up with a talmudic passage is similar to Sefer ha-Mikah. ve-ha-mimkar. Likewise, both works employ the technique of dividing a subject into its parts and subparts, numbering them and listing them one at a time. Furthermore, there is a striking similarity in the content of Mishpete halva’ot and gates 42 and 43 of Sefer ha-Mikah. ve-ha-mimkar. Mishpete halva’ot appears to be two separate outlines of the laws governing advance payment for merchandise. The second one (beginning in the middle of 99b) provides the same four methods of transaction that are given in Sefer Ha-mikah. ve-ha-mimkar. Mishpete halva’ot seems to consist of fragments (see Tchernowitz, 105) of R. Hai’s writings. He may have intended to expand them into a full book. Louis Ginzberg (Geonica I, 174) suggests that it may be a chapter of a lost book. In any case, based on the publisher attributing it to R. Hai, and based on its similarity in style and content to R. Hai’s Sefer ha-Mikah. ve-ha-mimkar, we must assume, until scholars adduce evidence to the contrary, that R. Hai was, in fact, the author of Mishpete halva’ot. 17. Mishpete halva’ot (Vienna, 1800 and Jerusalem, 1967) 99b. 18. Ibid. 99a.

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goods were available for purchase. The Geonim were divided in their opinion as to whether or not permission could be granted. R. Ahai, R. Simeon . Kayyara, and R. Hai permitted borrowing of produce for produce under such conditions. The authors of the responsa, who lived after R. Simeon and before R. Hai, did not. It is not surprising to find that R. Ahai, . R. Simeon, and R. Hai were of a single mind on this point. The author of the Halakhot gedolot relied heavily on the She’iltot and, in fact, borrowed word for word many passages from that work.19 Likewise, R. Hai was familiar with the Halakhot gedolot and often referred to it.20 In contrast, it is doubtful whether any of the Geonim before R. Sherira Gaon (father of R. Hai) had the Halakhot gedolot in their libraries.21 R. Natronai, R. Nahshon, and the anonymous Geonim made their . rulings about loans of produce based solely on the text of the Talmud, and the opinion of the Talmud was far from clear. True, R. Huna (BM 72b) allowed students to borrow in Tishre and repay in Tevet, but were they borrowing goods or money? The text is open to more than one interpretation. Furthermore, R. Joseph (BM 63b) explicitly distinguished between a loan and a sale and forbade a loan of produce based on the market price. The dispute among the Geonim is understandable. Living in a Muslim society that prohibited usury, knowing well the rabbinic attitude toward usury, and having before them conflicting talmudic rulings, we can appreciate why some of the Geonim were willing to place restrictions on loans of produce. But with the heightened economic activity, the increase in trade among the Jewish population during Islamic times, and the search for relief from the burdens of the usury ban sought by the business community, the move to ease the restraint on commerce is also understandable.

IN THE PERIOD OF THE RISHONIM: ca. 1000–1500 The period of the Rishonim was marked by increased trade between Europe, the Middle East, and the Far East. The route was used by Eastern merchants to bring spices, silk, raw cotton, and precious stones to the west and, in the 19. Abraham Epstein, Mi-Kadmoniyot ha-yehudim, 385–86; Assaf, Tekufat ha-geonim ve-sifruta, 170; Mirsky, at vol. 1, 12–16; Louis Ginzberg, Geonica, 106–11. 20. Jacob Mann, The Jews in Egypt and in Palestine under the Fatimid Caliphs (Oxford, 1922), vol. 2: 133–34; Hildesheimer, vol. 2: 21; Epstein, 385. 21. Hildesheimer, vol. 2: 21; Epstein, 385.

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opposite direction, cloth of wool and cotton, furs, metal wares, and glass.22 In the twelfth century, the medieval economy was already marked by specialization of production. The wine trade was centered in Bordeaux, raw wool came from England, and grain from the Baltic lands.23 International fairs afforded many opportunities for Jewish traders to buy, sell, and exchange goods with other merchants.24 The fairs of Champagne emerged in the twelfth century as the most important meeting place in Europe for merchants from north and south. When, in later medieval times, most of these fairs lost their international character, Jews were still welcomed even in areas from which they were generally excluded.25 Merchants at fairs would keep careful records of their activities, canceling out debits or credits as was the case. They would often settle debts with bills of exchange.26 Credit activities instituted at these fairs influenced practices long after the existence of the fairs themselves.27 Primitive banks were established early in the twelfth century in Venice and Genoa. These banks, originally designed as safe deposits, soon began to grant credit to favored customers, facilitating commercial relations. Other banks were established in Barcelona, Geneva, Bruges, and London, all of which were instrumental in advancing both short and long distance trade.28 Commerce became such a mainstay of Jewish livelihoods that the German Rabbi Eliezer ben Nathan said in the twelfth century that “our livelihood depends on commerce.”29 The Rishonim followed the teachings of the Talmud, and the rulings of the Geonim allowing borrowing of produce if the borrower possessed even a small quantity of the goods he was borrowing. As for allowing loans of produce based on the market price, the Rishonim accepted the views of R. Ahai, . R. Simeon Kayyara, and R. Hai. There is no reference in the works of the Ri22. Rondo Cameron, A Concise Economic History of the World (New York/Oxford: Oxford University Press, 1997), 62. 23. Ibid. 63. 24. Baron, Economic History, 41. 25. Ibid. 26. Charles Kindleberger, World Economic Primacy: 1500 to 1990 (New York/Oxford: Oxford University Press, 1996), 21. 27. Cameron, 65. 28. Ibid. 67. 29. Eliezer ben Nathan, Even ha-ezer, Avodah Zarah, #295. See also Edwin Hunt and James Murray, A History of Business in Medieval Europe, 1200–1550 (Cambridge: Cambridge University Press, 1999), 24.

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shonim to any geonic opinions that disallowed loans of produce based on the market price. Moses Maimonides (1135–1204, Rambam) stated in the Mishneh torah that borrowing on the market price was allowed. If the market price was fixed and was known to both [the lender and the borrower], and he borrows ten seahs from his fellow, he is required to repay him ten seahs even if the wheat appreciated, because when he borrowed from him there was a known market price, and if he wished, he could buy [the goods in the market] and give them to him.30 That borrowing of produce was practiced during the period of the Rishonim can be seen from a number of questions that were directed to the Sages. R. Asher ben Yehiel . (Germany/Spain, 1250–1327, Rosh) was asked about a loan of wheat or barley. The produce appreciated and the borrower wished to repay the value of the grain at the time of the loan rather than the produce itself. Rosh’s reply provides a clear understanding of the rules governing loans of produce. We have learned: If the borrower has a seah, he may borrow on it a number of seahs. And even if the borrower does not have wheat, if a fixed market price has come out, and the wheat is sold everywhere at this known price in the city, then one is allowed to borrow based on the market price. For a loan of produce is forbidden only by the Rabbis, and since wheat is available everywhere in the city at a known price, one is allowed to borrow, and the Sages did not forbid this.31 A similar question was brought to Rosh’s contemporary R. Yom Tov ibn Asevilli (Spain, c. 1250–1330, Ritba) about a loan of oil. Again no reason was stated in the contract for allowing the loan. In this case the oil appreciated and the borrower said that he did not possess any oil at the time of the loan while the lender said that he did indeed have oil.32 The questioner wanted to know who had to bring proof, the lender or the borrower. Ritba ruled that the lender had to bring proof that the borrower had some oil, for if he had some, it should have been stated so in the contract. A question directed to R. Simeon Duran (Spain/North Africa, 1361–1444,

30. Mishneh torah, Hilkhot malveh ve-loveh 10: 1. 31. R. Asher ben Yehiel, She’elot u-teshuvot ha-rosh, Klal 108 #15. . 32. R. Yom Tov ibn Asevilli, She’elot u-teshuvot ha-ritba, #135.

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Rashbats) dealt with a partnership where the investor gave the working partner a hundred gold pieces. When it was time for the partnership to be dissolved, the investor wanted his gold to be returned to him because the gold had appreciated; the working partner, on the other hand, wanted to repay the value of the gold at the time of the investment. Rashbats ruled according to the accepted principles: According to the law he must repay gold, for the law of gold is like the law of produce, and a person borrows produce for produce on the market price and there is no usury in it.33 Throughout the period of the Rishonim, the Rabbis followed R. Ahai, . R. Simeon Kayyara, and R. Hai, all of whom ruled that loans of produce were allowed if the borrower possessed the goods or if the market price was known. The views of R. Nahshon and other Geonim in the responsa that did not allow . such loans on the market price were either unknown or were totally ignored. As Rashbats put it in the fifteenth century: [Borrowing of produce may be done] in one of two ways. One is if he possesses that kind of produce, for example, if he [the borrower] has a seah of wheat and he borrows a hundred seahs and there is no usury in this… and the second is if the market price is out, for if the market price is out, it is as if he has that kind [of produce].34 Setting a Time for Repayment A dispute arose as to whether one was allowed to fix a time for repayment of a loan of produce. The Rambam had interpreted the comment of the Rabbis that “One may simply borrow and simply repay”35 to mean, not that one need not assess the price of the goods he borrows, but rather that one may not set a time for repayment of what he borrows. Rambam, in fact, said that if a time for repayment was set, then borrowing on the market price was disallowed. But this view was challenged by R. Abraham ben David of Posquieres (Provence, 1120–1197, Rabad). Commenting on the words of Rambam, he said: This interpretation I have never heard. Rather, one may simply borrow 33. R. Simeon Duran, Sefer ha-Tashbets, hut . ha-meshulash part 3, #318. 34. Ibid., part 1, #114. 35. B. Bava metsia 75a.

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produce for produce either because he possesses it or based on the market price without assessing its value, even for a set time.36 Near the end of the time of the Rishonim, R. Joseph Colon (Italy, 1410–1480, Maharik) suggested a means of resolving the dispute between Rambam and Rabad. It seems to us that we should not distinguish between “He set a time” and “He did not set a time” except in particular instances for produce that is known for cheaper or more expensive times. For example, wheat in Tishre is cheap and in Nisan is expensive and, likewise, wine and other products according to the time of their harvest, and in these cases it is right to distinguish between whether “He set a time” or “He did not set a time,” for if he will lend him a seah of wheat in Tishre when wheat is cheap to repay in Nisan when wheat is expensive, then it certainly looks like interest more so than if he simply lends [without setting a time for repayment], but for gold dinars and the like, which have no fixed time to appreciate or depreciate, it seems to me a simple matter that all are allowed even if he fixes a time for repayment.37

IN THE PERIOD OF THE AHARONIM: ca. 1500–2000 . The emergence of a single market center in northwestern Europe in the early modern period—first Bruges, then Antwerp and then Amsterdam, each larger and more active than the one before—was of great importance. The existence of these markets, in contrast to the periodic fairs of the Middle Ages, is evidence of the rate of growth of commerce, and the fact that these existed only one at a time signified an organized and regulated market for trade.38 Though international commerce increased dramatically during the period of the Aharonim, by far the greatest part of the growth in trade was . local. Towns and cities received most of their food supplies from their immediate surroundings. In exchange the city dwellers provided the country36. R. Abraham ben David commenting on the Mishneh torah, Hilkhot malveh ve-loveh 10: 1. 37. R. Joseph Colon, She’elot u-teshuvot maharik ha-hadashim, #1. . 38. Cameron, 126–7. See also Peter Hugill, World Trade Since 1431 (Baltimore and London: The Johns Hopkins University Press, 1993), 16–26.

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side with almost all of its need for manufactured goods. It was mostly smallscale trade, and Jews played a significant part in it.39 And second to trade, their largest occupation was that of artisans. Though they were excluded from the guilds and frequently had to pay compensation to them, Jews still excelled and prospered as jewelers, carpenters, blacksmiths, and tailors.40 R. Joseph Caro (Turkey/Palestine, 1488-1575), in the Shulhan . arukh, added an important opening to allow for the lending of produce. Not only could one borrow produce if he possessed a little of it and not only could he borrow if the market price was known for the goods he borrowed, but the lender could give the borrower a small amount of the product or could lend him some, and this would then enable him to borrow as much of the goods as he wished.41 This permission granted in the Shulhan arukh . thereby removed all restraints against lending of produce. The permission to borrow produce was reinforced by R. Abraham Danzig in the eighteenth and nineteenth century in Hokhmat adam. He stated . that not only was a loan of produce allowed if the borrower had a little of the product, but it was allowed even if the borrower had deposited some of the goods in another city. One is allowed to borrow even a thousand seahs at once if he has but one seah… and if the borrower does not have any of this kind, then the lender may gave him a little of this kind as a present or sell him a little… and it is as if he had some and it is allowed.42 We thus see that according to these two codes, Jews were allowed to borrow produce from each other without hindrance from the usury ban. Perhaps for this reason only a few cases on the subject of borrowing of produce appear in the responsa literature of the Aharonim. In one such case it was reported that . the custom among flour merchants in late nineteenth-century Poland was that if one of them needed a certain type of product, he would borrow it from his fellow merchant and would return to him either the flour itself or its monetary equivalent. The reason we have a record of this is that a dispute arose when the price of flour rose dramatically after a loan. The borrower wanted to repay 39. Cameron, 120–121; Baron, Economic History, 64–65. 40. Baron, Economic History, 65–66. See also Shmuel Ettinger, “The Economic Activities of the Jews,” in Nahum Gross, ed. Yehudim ba-kalkalah (Jerusalem: Merkaz Zalman Shazar, 1985), 15–16. . 41. R. Joseph Caro, Shulhan . arukh, Yoreh de’ah #172: 2. 42. R. Abraham Danzig, Hokhmat adam #134: 2. .

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the value of the flour at the time of the loan whereas the lender wanted to be repaid in flour. R. Shalom Mordecai Shvadron (1835–1911) ruled that since the borrower possessed some flour at the time of the loan, he had to return the flour itself or its increased value in money.43 In the twentieth century, two similar cases arose regarding goods appreciating, one dealing with oil,44 and the other with benzene.45 The decisions of the Rabbis in these cases also depended on whether the borrower possessed the goods at the time of the loan. One other twentieth-century responsum takes up the interesting case of the loan of a bus ticket purchased by the lender for one dollar. (He bought ten for ten dollars.) The borrower, however, had to pay a dollar and a half to buy one ticket to repay the loan. R. Menashe Klein (1925–) ruled that this was not a usurious transaction since a bus ticket was borrowed and a bus ticket was returned.46 Questions about loans of produce declined during the time of the Aha. ronim, perhaps not because such loans themselves declined, but, rather, because the law had been interpreted with such leniency that any conflict with the prohibition against usury was reduced or eliminated.

43. R. Shalom Mordecai Shvadron, She’elot u-teshuvot maharsham, part 2, #170. 44. R. Khalfon Moses Ha-Kohen, Sho’el ve-nish’al, Part 3, Yoreh de’ah #314. 45. R. Rahamim Ha-Kohen, Simhat . . kohen, Yoreh de’ah 2: 9. 46. R. Menashe Klein, Mishneh halakhot 15: 34.

4

Advance Payment for the Purchase of Goods THE PERIOD OF THE GEONIM: ca. 650–1050 In the period of the Geonim, buyers paid in advance for their goods for a variety of reasons. For example, a tradesman might have advanced money to a farmer for his products in order to guarantee delivery at a certain price. A householder might have paid in advance for certain goods that he wanted to be sure to acquire. A storekeeper might have paid a manufacturer ahead of time in order to be sure to have wares on his shelves. An investor might have provided cash to a merchant so that he would purchase goods for him in another locality. In all of these situations, payments were made in advance of receiving goods. And any increase in the worth of goods between the time of payment and the time of delivery benefited those who paid early. Such increases could be considered “payment for waiting,” forbidden by law. When dealings of this sort were considered in the Talmud, regulations were established. These regulations, which allowed advance payment for goods, were also approved by the Geonim. One rule that made such payment permissible was similar to the one that allowed borrowing of produce for produce: early payment was permitted if the vendor possessed the goods at the time of the payment. The logic was that the buyer became the owner of those goods at the moment he paid for them. If the goods rose in price, they were, technically, his own goods that had appreciated. Allowing payment in advance under these circumstances was affirmed in the geonic literature. For example, the Halakhot pesukot,1 an eighth-century work by an unknown author,2 included the ruling that a forward contract was allowed if the seller 1. Sefer Halakhot pesukot, 48 and 50. 2. The laws of lending produce are the same, word for word, in the Halakhot pesukot as in the Halakhot gedolot. In the past, it was generally believed that the Halkhot pesukot were

52

Advance Payment for the Purchase of Goods

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possessed the merchandise at the time of the sale. The Sefer ha-Mikah. ve-ha-mimkar3 also contained such a passage, as did two geonic responsa.4 However, the rule regarding advance payment for a purchase was more stringent than that for lending produce. Whereas in the case of a loan any amount that the borrower possessed was deemed sufficient, for an advance payment toward a purchase, the vendor had to own all of the goods to be sold. Because this condition was difficult to meet, the advance payment option was rarely used in geonic times.5 The Mishnah had suggested another way to make an advance payment contract legal: when the contract was struck, the price of the goods was to be set according to the open market price.6 The reasoning was that if the buyer paid the market price, he was not receiving any special discount for his early payment. And if the goods appreciated before he received them, it was not considered usury because he could have bought them on the open market and it would have been his own goods that appreciated. Therefore, as long as the buyer paid the market price and the goods were available to him, he was allowed to pay for future delivery of produce and not be concerned about usury.7

written by R. Yehudai Gaon or by his pupils in the eighth century. (See S. Sasson’s introduction to Sefer Halakhot pesukot, [Jerusalem, 1950] 9–11; Mordecai Margaliot, “Halakhot pesukot,” Encyclopedia Judaica 7:1171; Shraga Abramson, “Halakhot Pesukot,” Ha-Encyclopedia ha-ivrit, vol. 14, [Jerusalem, 1960] 532; Assaf, 167–68.) However, the arguments of Neil Danzig (Mavo le-sefer halakhot pesukot, 109–45) are compelling and it is now believed that R. Yehudai Gaon was not the author of the Halakhot pesukot and that its author is unknown. See also Robert Brody, The Geonim of Babylonia and the Shaping of Medieval Jewish Culture, 217–23. 3. Sefer ha-Mikah. ve-ha-mimkar, 81b. 4. Simha Assaf, ed., Teshuvot ha-geonim, (1942), 120–21; Geonica 2: 80–81. 5. In the Gemara one is allowed to possess only a portion of the goods he wishes to borrow, but it requires a person to have all of the goods when he is advanced money for his goods. Eliash (“Iskot,” 217–18) sees the responsum in Geonica 2: 80–81 as ruling in favor of allowing a forward transaction even if the vendor does not possess all of the goods. In our view the Gaon rejects this suggestion, pointing out that this is not a case of lending produce, where such a solution would be acceptable, but rather a case of a buyer advancing money for a purchase. 6. M. Bava metsia, 5:7. 7. Eliash (“Iskot,” 225) cites a responsum translated from the Arabic to support this view. “If someone gives his fellow money for merchandise available in the market, it is as if he (the vendor) delivered the merchandise to him.” Harkavy, #154.

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The She’iltot8 included the ruling of the Mishnah that allowed advance payment based on the market price. The Halakhot gedolot9 also told of this type of contract and provided the following example to illustrate its point.10 A tradesman advanced money for wheat or barley. The market price was five grivas per zuz at the time of the contract. By the time of delivery, the goods had risen to three grivas per zuz. Even though the buyer benefited from the appreciation, it was permitted. R. Simeon Kayyara explained the reason for allowing it by citing the argument of Rabbah and R. Joseph in the Gemara.11 They had said that the buyer did not receive any special benefit from the vendor. Had he (the buyer) wished, he could have bought the goods with his money on the open market from the start, and it would have been his own goods that appreciated. Thus there was no reason to ban such payment in advance as long as the goods were available on the open market. R. Hai Gaon, in both the Sefer ha-Mikah. ve-ha-mimkar12 and Mishpete halva’ot,13 also allowed advance payment for merchandise, based on an established market price. Both R. Simeon Kayyara14 and R. Hai15 made the point, based on the ruling of R. Yannai in the Gemara,16 that when the time came for the vendor to deliver his wares, it didn’t matter whether he provided the goods themselves or their worth in money. If the goods appreciated in value, and if the delivery was made in cash, it would turn out that the buyer would receive more money than he had advanced. Nevertheless, this form of transaction was declared legal and was allowed. This arrangement was advantageous to business people in need of cash. They received a fair market price for their products and were allowed to make their deliveries at a later date. It also benefited investors, allowing them to profit from an increase in the price of the goods without having to buy, store, and sell the goods themselves. We can understand that an investor who didn’t want to deal with merchandise himself would be pleased to advance funds to a reliable merchant. It would be up to the merchant to do the buying and the

8. Mirsky, 55–56. 9. Hildesheimer, 393. 10. Ibid., 391. 11. B. Bava metsia 63b. 12. Sefer ha-Mikah. ve-ha-mimkar, 80b. 13. Mishpete halva’ot, 98b. 14. Hildesheimer, 391. 15. Sefer ha-Mikah. ve-ha-mimkar, 82b. 16. B. Bava metsia 63a.

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selling, and when the enterprise was completed, if the price of the goods had climbed, then the investor profited. Two anonymous responsa from the Genizah affirm the legality of this type of transaction. One of them is extant only in fragments and contains but a few chopped phrases:17 We have heard that there are among you those who take interest. It is forbidden for you to take interest from your brothers… to take according to the market price of the dates… if the market price is established… if they possess it, it is permitted. Although this responsum is short and disjointed, it provides a significant amount of information. First we learn that there were people who were carrying on their transactions without observing the proper restrictions. The Gaon remonstrated these persons for breaking the law. Then the Gaon offered the tradesmen two legal methods for carrying out their dealings: they could pay in advance at any agreed price if the vendor possessed the goods, or they could pay in advance according to the established market price. The most informative record of this type of transaction, found in a responsum from the Genizah,18 deals with investors who advanced money to merchants for the purchase of goods. It shows how advance payment for goods functioned in the economy. The questioner asked: Merchants travel in the towns and villages and sell small ware, flax, wool and spices and gather wheat and barley and wax and other things and take money from the householders for the wax and wheat and barley and contract with them so many kepizim for a dinar. And they take the money and buy the product and sell to them. And they [the householders] profit when they take payment of goods that have appreciated. Is it permitted to give them the goods or must they return to them their money? The questioner continued, pleading for a positive response: The householders have already been deprived of their money for a long

17. Assaf, Teshuvot ha-ge’onim, (1942), 120–21. Assaf dates this responsum from the ninth century. He says (116–18) that it was written in Palestine—as opposed to Victor Aptowitzer (Mehkarim, 38), who sees its origin as Babylonian. . 18. Ginzberg, 80–81. A much shorter version of this responsum may be found in She’elot u-teshuvot ha-geonim, ed. Rabinowitz, at #120.

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time. If you say that they [the merchants] must return the money, no one will be found to lend to them and the door will be closed to borrowers. The unknown Gaon responded with the requirement that the vendor had to possess the goods at the time that he was paid: This is the law: These householders who give money to these merchants and contract with them so many kepizim for a dinar, if at the time they give them the money, they [the merchants] have the wheat and barley in their possession19… it is permitted, and if they don’t have it, it is forbidden. The Gaon continued his responsum with three quotations from the Talmud to reinforce his ruling that the transaction was invalid unless the vendor possessed the goods. A fourth citation gave the words of R. Nahman, “The . general rule about usury is that all profit for waiting is forbidden.” We might imagine that with all of the strong words against the transaction and with the talmudic passages cited to support the prohibition, the questioner would have been left empty-handed. It was not so. At the very end of the responsum, the Gaon said that there was an alternative to returning the money. They could base their contract on the market price and this was “acceptable before Heaven.” In this way, the Gaon provided a way for the business at hand to proceed. The most significant aspect of this responsum is that it provides a picture of how advance payments functioned in the geonic society. It shows how both the needs of merchants for funds and the appetite of investors for investment opportunities were satisfied through such transactions. And it demonstrates, once again, how the Geonim allowed business people to deal in credit, with profit for the creditor depending on price appreciation.

IN THE PERIOD OF THE RISHONIM: ca. 1000–1500 The Rishonim also ruled in accordance with the well established talmudic law that allowed vendors to accept money for future delivery of goods if they 19. Literally, “in their houses.” In “Iskot,” 210–16, Eliash suggests that the use of the term “in their houses” may be an effort to limit the permission for the transaction. We see it as simply a form of expression meaning “in their possession.”

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possessed the goods. We remember that in the case of advance payment, possessing a small amount of the merchandise was not sufficient. The vendor had to possess an amount equal to that of his sale. A transaction for future delivery of goods was also allowed if the market price was known. Rambam (1135–1204) so ruled in the Mishneh torah20 and so did later poskim. A few inquiries were submitted to the Rabbis on the subject of such transactions. R. Asher ben Yehiel . (1250–1327) was questioned about Reuben, who paid Simon for grain and agreed to accept delivery from Judah. By delivery time the price of the grain had risen and Judah agreed to pay Reuben only the value of the grain at the time of the payment. R. Asher ruled, according to accepted law, that if Simon had in his possession grain equal in amount to what he owed Reuben, or if the price of the grain was publicly known at that time, then Judah had to give Reuben the promised grain. But “if the public price did not come out in the market and Simon did not have grain, then Simon and Judah were required to give Reuben only the money listed in the contract, and if they gave him grain it would be interest.”21 R. Isaac ben Sheshet Perfet (Spain/North Africa, 1326–1407, Rivash) was asked about a man who paid 18 dinarim in advance for the delivery of wool whose market price was two perahim, equal to 20 dinarim. He received the . 22 discount because he paid in advance. Rivash replied that if the seller had the wool, he was allowed to strike the deal even if he reduced the price. But apparently the farmer did not have the wool at the time that he received payment, so Rivash said: Those who buy wool during the year from one who does not have wool, at a time when it is worth two perahim . at the market price, and he [the

20. Mishneh torah, Hilkhot malveh ve-loveh 9:1. 21. She’elot u-teshuvot ha-rosh, klal 69 #7. 22. Eliash has written a small piece commenting on the verse in the Tosefta (B. M. 6:5): “This is the rule: For anything that has a season, he may strike a deal with him according to the market price of the season, and for anything that does not have a seasonal price, he may strike a deal any time he wishes.” Eliash says that R. Moses Gabbai of Majorca, who posed this question to Rivash, held that the prohibition against giving a bargain price to someone who advances money for goods applied only to restricted markets and not to open markets where products sold at varying prices. R. Moses considered the wool market in his day to be open with a multitude of prices. Had his view prevailed, the ban on reducing prices for early payment would have virtually been abolished. Ben Zion Eliash, “Kol she-yesh lo goren kotsets imo ke-sha’ar ha-goren, ve-kol she-ayn lo goren kotsets imo kol zeman she-yirtseh,” Tarbiz. 51 (1982): 185–91.

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vendor] agrees to deliver it at shearing time for a price of 18 dinarim for advancing the money…, this is forbidden because he reduces the price from the fixed market price. And even if the seller has sheep ready to shear and a little of the wool that they agreed to, and the wool is increasing by itself and at shearing time he will have all that he promised, even so it is forbidden… because he does not have in his possession all that they agreed to.23 In another responsum, Rivash was asked about a case where a community was in need of money. Several members of the community agreed to advance the money for the purchase of wheat. They stipulated, however, that they would have the option of choosing whether to receive the wheat itself or its monetary equivalent as repayment. Rivash responded that if the funds were simply advanced for the sale of wheat based on the market price, the transaction would be allowed. But with the stipulation that the buyer would have the option of receiving his money back if he wished, the deal seemed to be near to profit and far from loss and was forbidden.24 R. Simeon Duran (North Africa, 1361–1444, Rashbats) received an inquiry about Simon who owed Reuben three and one-half gold pieces for merchandise he bought in Reuben’s store. Simon did not have any money but promised to give Reuben a quarter of a loaf of wax to pay off his debt. Reuben agreed and gave Simon until Shabbat Nahamu to make his payment. In the . meantime the price of wax rose to eighteen gold pieces per loaf and Simon wanted to give Reuben the three and one-half gold pieces. But Reuben said, “Give me the promised wax; we have a contract.”25 Rashbats replied that if the wax was not available at the time of the sale and did not have a known market price, he was not required to give him the wax, and he should return the money he owed him. But if the public market price for the wax was known at the time they made their agreement—and if the agreement was made according to that price—then Simon had to stick to their agreement and deliver the wax even though its price had risen. In the fifteenth century, as the period of the Rishonim drew to a close, the position of the Rabbis regarding this issue remained the same as it was in the Talmud. The Rishonim required that the seller have the goods in his possession, or else that there be a publicly known market price for the goods. 23. R. Isaac ben Sheshet Perfet, She’elot u-teshuvot rivash, #306. 24. Ibid., #19. 25. Sefer ha-Tashbets, part 2, #289.

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IN THE PERIOD OF THE AHARONIM: ca. 1500–2000 . At the start of the time of the Aharonim, the above view was incorporated . 26 into the Shulhan arukh and was confirmed by a ruling of R. David ibn . Zimra (Egypt, 1480–1573).27 Ibn Zimra made it clear that, although in the case of a loan it was sufficient if the borrower possessed even a small amount of what he was borrowing, in the case of a purchase, he had to have the full amount of what he was selling at the time of the sale. Later in the sixteenth century, the Turkish Sage R. Samuel de Medina was asked whether someone who promised to deliver wool after receiving advance payment for it had to fulfill his obligation. The seller had signed a contract obligating himself to deliver 600 measures of wool to the buyer. The contract even stated that if the seller did not possess the promised wool he would buy it wherever he could in order to fulfill his obligation. The seller now claimed that the contract was invalid because the wool did not exist when he made the promise. R. Samuel ruled that the contract written by the seller and signed by witnesses contained his solemn obligation to deliver the wool and that the seller must provide the promised wool.28 Similarly, his contemporary in Salonika, R. Isaac Adarbi, required a seller to fulfill his obligation to deliver 600 skins to a buyer who had paid him in advance.29 R. Raphael Berdugo of Morocco (1747–1821) dealt with the case of a merchant who paid in advance for 20 measures of wheat. At the time of the transaction, wheat was selling for 400 per measure. It later rose to 600 per measure. The seller delivered 10 measures but claimed, because of its increased value, that he should be credited with having delivered 15 measures. R. Raphael rejected this argument, ruling that the sale was valid and that the seller should deliver all the rest of the promised wheat in the promised quantity.30 A question was posed to the nineteenth-century Sage R. Joseph Hayyim al . Hakham of Baghdad. He was told about Reuben, who gave money to Simon . for wool. Simon sent the money to his partners, who lived in the villages near the Arabs who owned sheep. The partners bought the wool and forwarded it back to Reuben within three months. Reuben was given a discount of five or six percent from the market price. The questioner made it clear that this was 26. R. Joseph Caro, Shulhan . arukh, Yoreh de’ah #175: 1. 27. R. David ibn Zimra, She’elot u-teshuvot radbaz, part 1, #527. 28. R. Samuel de Medina, She’elot u-teshuvot maharashdam, Hoshen mishpat #62. . 29. R. Isaac Adarbi, Divre rivot, #108. 30. R. Raphael Berdugo, Mishpatim yesharim 1:308.

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the common practice among the merchants and requested that R. Joseph find a way to allow it. R. Joseph admitted that such a practice was forbidden because Simon did not possess any wool at the time that he received the money from Reuben. But R. Joseph did suggest a way that their goal might be accomplished. He said that Simon should write a note to Reuben for the wool and that Reuben should write a note to Simon for the full market price of the wool. After exchanging the notes, Simon should sell Reuben the promissory note that Reuben wrote for the money, less six percent for a cash payment. Using this procedure made the transaction legal, said R. Joseph, since a person is allowed to sell a debt for less and the payment for the wool was at the full market price.31 R. Shalom Mordecai Shvadron (1835–1911, Maharsham), a Polish contemporary of R. Joseph, ruled in two cases dealing with advance payment for grain, one for spelt and the other for wheat. In the case of spelt, the grain was delayed in growing and the buyer wanted to cancel the sale and get his money back. The seller, however, wanted to provide the spelt even though it was late. Maharsham ruled that since their agreement had been that the payment was for the first spelt of the season, and the seller’s spelt was late in growing, the sale was cancelled.32 In the wheat case, Simon paid in advance for Reuben’s wheat and for that of Reuben’s brother-in-law. Simon did not want to deal directly with the brother-in-law because he did not trust him. Though the price of the grain rose between the time of the payment and delivery time, Reuben delivered the wheat on schedule, although his brother-in-law did not. Simon claimed that Reuben was the guarantor for his brother-in-law. Maharsham supported this position and required Reuben to pay for Simon’s loss.33 These two cases are evidence that paying in advance was still practiced in the nineteenth century. R. Khalfon Ha-Cohen (Tunisia) stressed in a twentieth-century responsum that the seller of goods who receives payment before delivery must have all of the goods in his possession at the time of the sale. Having a token amount, which was sufficient in the case of a loan, was not adequate where an advance payment for a sale was made. In such a case the seller had to possess the full amount of the goods.34 31. R. Joseph Hayyim al Hakham, Rav pe’alim 2, Yoreh de’ah. . . 32. R. Shalom Mordecai Shvadron, She’elot u-teshuvot maharsham 5: 51. 33. Ibid., 6: 222. 34. R. Khalfon Ha-Cohen, Sho’el ve-nish’al, part 1, Yoreh de’ah #69.

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Another twentieth-century posek, R. Tsevi Pesah. Frank (Israel), ruled that meat from a live animal may be purchased with an advance payment.35 He stated that though at first glance one might think that an animal required three actions (slaughtering, skinning, and cutting) and therefore the meat was not considered to be in existence, in truth the seller does possess what he will sell though he will need to “break down several doors” before it is delivered. Thus R. Frank allowed the advance payment and even permitted the seller to grant the buyer a discount. Also in the twentieth century, R. Isaac Weiss (Rumania/England/Israel) quoted from the responsum of R. Joseph Hayyim al Hakham a century earlier . . and allowed merchants to pay in advance for wool through an exchange of contracts. 36 Finally, R. Solomon Zalman Auerbach (Israel), also in the twentieth century, dealt with the case of someone who paid a publisher before a certain book made its appearance and received a discounted price. R. Auerbach said that, at first, it would seem to be forbidden for the law forbids one who pays in advance from receiving a lower price. But R. Auerbach in the end allowed the transaction, pointing out that the discount was not certain since the price of the book had not yet been set. In fact, the final price of the book might turn out to be lower than the one quoted to the buyer. In addition, the price reduction was not because money was paid in advance, but because the buyer guaranteed that he would buy the book.37 In sum, we have seen that the Rabbis upheld the talmudic principle that a seller either had to have the goods in his possession at the time he received payment for them or else the market price had to be known and that price used for the sale. From a practical standpoint, however, the Rabbis did not allow this ruling to stand in the way of sales where the payment preceded the delivery of the goods. In every case they found a way for the transaction to proceed. Wheat, wool, meat, books, all could be purchased in advance of delivery, and all sales could be arranged to give the buyer a discount from the going price.

35. R. Tsevi Pesah. Frank, Har tsevi, Yoreh de’ah #135. 36. R. Isaac Weiss, Minhat . yitshak . 4: 99. 37. Solomon Zalman Auerbach, Minhat . shelomo, Tanina #69

5

Buying on Credit IN THE PERIOD OF THE GEONIM: ca. 650–1050 The biblical law against lending on interest refers to personal loans. In the Talmud, however, this prohibition was applied to business transactions. The Mishnah clearly states, “One may not increase the price [when one sells on credit].”1 A number of geonic responsa indicate how strongly the Geonim sought to adhere to this prohibition. R. Sar Shalom (ninth century) denounced vendors who increased their prices in exchange for delayed payment:2 Storekeepers who sell for immediate payment for less, but on credit with an addition, commit robbery; it is usury and it is forbidden to do so, for R. Nahman said, “The general rule about usury is that all profit for . waiting is forbidden.”3 R. Sar Shalom added that if those who engaged in these practices did not desist, they should be fined by the court, and the interest they took (which was not normally recoverable) should be exacted from them by the court. R. Natronai Gaon, who followed R. Sar Shalom as Gaon of Sura, was asked about merchandise such as clothes made of rabbit skins or garments with gold embroidery, which had no fixed market prices.4 The questioner wanted to know whether it was permitted to sell such items on credit. The Gaon replied, “It is forbidden to give him on credit because he profits by increasing the price over what is sold at that time. That is the essence of usury.” And he quoted R. Nahman, “All profit for waiting is forbidden.” . Some time later, R. Natronai’s son, R. Hilai Gaon, was asked whether it was permitted to raise the price on a credit sale if the increase was less than 1. M. Bava metsia 5:2. 2. Sha‘arei tsedek part 4, gate 2, #3, 77. 3. B. Bava metsia 63b. 4. Hemda genuza, Jerusalem, 1863 and 1967, #82, 16 a–b. .

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one-sixth of the price of the goods.5 (The Mishnah considered an overcharge of more than one-sixth to be fraudulent.)6 The answer again quoted R. Nahman to the effect that “the general rule about usury is that all profit . for waiting is forbidden.” “Therefore,” continued the responsum, “if he sells to him on credit at the current price, it is permitted, but if he adds even a perutah over a price of a thousand gold dinars, it is forbidden.” About a half century later, R. Hananya (the father of R. Sherira Gaon and . the grandfather of R. Hai Gaon) was asked about the same matter: Was increasing the price for credit allowed?7 Something was selling in the market for ten dinars and a buyer offered to pay fourteen if the vendor would wait six months to be paid. R. Hananya reiterated R. Nahman’s position: . . Said R. Nahman, “The general rule about usury is that all profit for . waiting is forbidden.” Every time he profits from it, even one zuz, because he defers payment, it is usury and it is forbidden. Clearly, questions about buying on credit continued to be asked throughout the geonic period. But although merchants sought permission to engage in such transactions, the Geonim relied on the familiar refrain, “All profit for waiting is forbidden.” The First Solution From the foregoing, it would appear to have been impossible for salesmen to gain the approval of the Geonim for profitable credit transactions. And yet, such transactions were not only common; they were legal. R. Sar Shalom, R. Natronai, R. Hilai and R. Hananya had all forbidden sales when profit for . credit was explicitly stated. But if merchants could profit from credit without openly saying so, that was another matter. The Geonim accommodated the need for credit sales in their day by pointing to a ruling that originated in tannaitic times. It appeared in the earliest

5. Sha’are tsedek, at part 4, gate 2, #19, 90. This responsum appears with small variations in Geonica 2: 118, in Ginze schechter, book 2, ed. Louis Ginzberg (New York: The Jewish Theological Seminary of America, 1929), 103, and in Teshuvot ha-geonim, ed. Simha Assaf (Jerusalem: Hamadpis, 1927), #29, 50. The text of Sha‘are tsedek names R. Ha-Levi as the author of the responsum. Assaf and Muller (Mafte’ah. le-teshuvot ha-geonim, 155) ascribe it to R. Hilai. Ginzberg (Geonica 2: 111) suggests that it was written by R. Natronai. 6. M. Bava metsia 4:3. 7. Sha‘are tsedek, part 4, gate 2, #10, 81.

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extant geonic comment on credit buying, in a brief responsum from the pen of R. Yehudai Gaon (eighth century).8 One who sells something to his neighbor on condition that he [the buyer] pay him starting now for 12 months, may say to him, “Pay me immediately [at a reduced price],” and he need not fear [that he is breaking the law against] usury. The question was apparently sent by someone who was aware of the Mishnah’s ruling on the subject but not of the Tosefta’s. The Mishnah had said: We may not increase the price [when we sell on credit]. For example, … if one sells his field and says, “If you pay me now, it is yours for 1000 zuz; if at harvest time, [it will cost you] twelve maneh [1200 zuz],” it is forbidden.9 The Mishnah forbade the seller from profiting in return for accepting delayed payment, but it did not speak about a deduction for payment at the time of purchase. The Tosefta, on the other hand, did.10 If one purchased from him logs, half-logs, quarter or eighth, he may say to him, “Give me now for less; and he need not fear [that he is breaking the law against] usury. Similarly, if one makes a purchase from his neighbor on condition that he will pay him between now and the next twelve months, he may say to him, ‘Give me now for less; and he need not fear [that he is breaking the law against] usury. In R. Yehudai’s answer, he confirmed the tannaitic principle that there was no objection to reducing the price in return for immediate payment. The question of interest arose only when payment was delayed. A century later, R. Simeon Kayyara,in his code, the Halakhot gedolot, quoted both the Mishnah and the Tosefta passages, making it clear that increasing the price for credit was illegal, but that there was no objection to reducing the price in return for immediate payment.11 R. Hai Gaon (eleventh century) made the same point in his work on busi-

8. Ibid., #21, 90. 9. M. Bava metsia. 5:2. 10. T. Bava metsia. 6:11–12. 11. Hildesheimer, vol. 2: 400 and 393.

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ness law, Sefer ha-Mikah. ve-ha-mimkar.12 Although it was forbidden to increase the price of a product in return for granting the buyer credit, there was no objection to reducing the price in return for immediate payment. For example, if the vendor delivered 50 kors for 100 dinars on credit and said to the buyer, ‘Pay me now for the 50 [kors] and I will give you a discount of 10 [dinars],’ it is permitted. Thus three major geonic authorities allowed vendors to profit from credit. All the salesmen had to do was to include the cost of credit in their “regular” prices and grant discounts to those who paid from the start. There is strong evidence to suggest that this is exactly what was done.13 Sales on Credit Were Normal According to Abraham Udovitch, in the Moslem economy in which the Jews of geonic times lived, “buying and selling on credit was an accepted and apparently widespread commercial practice.”14 Udovitch has pointed to the Islamic codes of the late eighth century, which provided instruments for credit transactions that did not violate the Moslem ban on usury.15 He has concluded that the jurists who wrote these laws had an “intimate and sympathetic familiarity with the conditions of the marketplace.”16 Their rulings constituted “a fairly accurate description of the manner in which commerce was conducted.”17 What Udovitch has asserted regarding the Moslem jurists’ knowledge of the day to day practices of Islamic merchants can be said with even greater assurance regarding the familiarity of the Geonim with the activities of Jewish tradesmen. We have from the Geonim not only codes of law, but also responses to practical questions of the day. R. Hai Gaon, for example, who wrote over one-third of all extant geonic responsa, was well aware of what 12. Sefer ha-Mikah. ve-ha-mimkar, 79b–80a. 13. In addition to the geonic material previously cited, see Udovitch and Goitein below. 14. Abraham Udovitch, “Credit As a Means of Investment in Medieval Islamic Trade," 260, and “Reflections on the Institutions of Credit and Banking in the Medieval Islamic Near East,” 8. 15. Udovitch, “Credit,” 262; idem., “At the Origins of the Western Commenda,” 205, and Partnership and Profit in Medieval Islam, 80. 16. Udovitch, “Commercial Techniques in Early Medieval Islamic Trade,” in Islam and the Trade of Asia, ed. D. S. Richards (Oxford: B. Cassirer, Philadelphia: University of Pennsylvania Press, 1970), 40. 17. Ibid., 41.

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was going on in the marketplace. When he said that one could grant a discount for prompt payment, he was well acquainted with the practice of the merchants to include the cost of credit in their “regular” prices. He granted his seal of approval to this procedure based on talmudic precedent and based on business usage going back hundreds of years. The conclusion that the rulings of the Geonim reflected ongoing commercial activities is bolstered by our current knowledge of the Genizah community. S. D. Goitein, after analyzing thousands of Genizah documents (business letters, contracts, deeds, receipts, and more from the closing decades of the tenth century to the middle of the thirteenth), has asserted, “Business was normally conducted on credit.” “Normally,” Goitein said, “a waiting period of two months was allowed…. A one month postponement was rare.”18 In some documents, credit was granted for four months, six months, or a year. Goitein pointed out that prompt payment was rare, but several of the Genizah documents do indicate that cash discounts were granted in return for prompt payment. 19 It is clear, then, that the ban on usury was no impediment to the conduct of business among the merchants of geonic times as long as their contracts did not expressly stipulate that there would be an additional charge for delayed payment. As long as the “regular” price of the merchandise included the cost of waiting, the transactions were considered legal and were acceptable to the Geonim. Tarsha The Gemara had left unanswered a number of questions regarding tarsha. As discussed above (p. 31), tarsha was a talmudic term used to describe a credit transaction. R. Nahman said that his tarsha was allowed and the Gemara . explained that it was allowed because he did not stipulate. But what was unstipulated and why did it make tarsha permissible? In the first half of the ninth century, R. Joseph Gaon of Pumbedita was 20 His asked what was meant by tarsha that was permitted by R. Nahman. . answer was: A storekeeper had wine and beer. A buyer came and said to him, “Leave 18. S. D. Goitein, A Mediterranean Society, vol. 1, 197. 19. Ibid., 199. 20. Sha’are tsedek, part 4, gate 2, #37, 93. Joel Muller ¨ attributes this responsum to R. Joseph Gaon (Mafte’ah. le-teshuvot ha-geonim, 80 and 82).

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it here in my name from now to such-and-such a date, and I will pay for it at the market price [that will prevail] at that time.” And the seller said to him, “I will do it and have it ready for you at the market price at that time.” But he didn’t set the price (at the outset). That is tarsha. In this explanation, tarsha is not a credit transaction at all. It is simply a promise of a vendor to set aside merchandise for his customer for a certain period of time. The goods, then, were paid for at the time they were picked up. Since the goods were received at the same time that payment was made, there was no credit involved and no question of usury. R. Hai Gaon spoke of forbidden tarsha and permitted tarsha.21 He defined forbidden tarsha as that which R. Papa took, in which the parties contracted for an increased price in return for credit. R. Hai’s definition of permitted tarsha was similar to that of R. Joseph. He called it “debt for debt.” It was an agreement to buy merchandise at a future time and to pay for it at that time according to the market price that would prevail then. Since, according to this definition of tarsha, no credit was granted, it was of little use to merchants in the credit society of geonic times. We now come to the responsum that allowed a merchant to profit from a rise in prices. It was a new and radical definition of tarsha from the pen of R. Tsemah. ben Paltoi, the Gaon of Pumbedita (second half of the ninth century).22 When asked about the meaning of the tarsha permitted by R. Nahman, . R. Tsemah. responded: Here is its explanation: Reuben sold wheat or wine to Simon. It was selling in Nisan at a kor per dinar [worth 24 silver dinars] and he didn’t set the price. When he collects [payment] from him in Tammuz, if he calculates it [according to the appreciated market price] at 30 silver dinars [per kor], he is permitted to take from him the 30 silver [dinars]. And this transaction the rabbis called tarsha. It was R. Tsemah’s . view, then, that the buyer could take the goods at the time that the contract was struck, in Nisan, when the price was low, and he could delay payment until Tammuz, when it was expected that the price would be higher, and pay at the Tammuz rate. As long as no price was stipulated at the outset, the transaction was allowed. 21. Sefer ha-Mikah. ve-ha-mimkar, 80a and Mishpete halva’ot, 100a and b. 22. Sha’are tsedek part 4, gate 2, #28, 92, attributed by Muller ¨ to R. Tsemah. Gaon in Mafte’ah. le-teshuvot ha-geonim, 151.

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Another responsum that allowed a vendor to benefit from price appreciation when payment was delayed was written by R. Hai Gaon23 in his effort to resolve a dispute between two businessmen, Reuben and Simon. Reuben bought cut-up pieces of gold from Simon, a money changer, on the condition he would pay him twelve zuz per measure (by weight) by the eve of Yom Kippur. They also agreed that if Reuben did not pay for the gold by Yom Kippur eve, he would have to pay for it at the prevailing market price. Yom Kippur passed and Reuben did not pay the debt, and before the end of Tishre, the price of gold coins had risen from 13.5 to 14.5 zuz per coin. Reuben then sent Simon a purse of money with instructions to take from it according to his debt for the gold. When the time came to settle the account, it turned out that Simon had taken twelve and three-quarter zuz for each measure of gold. Reuben said to him, “I bought the gold from you for twelve zuz and you are taking from me twelve and three-quarters. There is no greater usury than this.” Simon answered, “There is no usury in this at all since there was an agreement between us. Besides which, we are both well versed in business matters.” What we have here is a case where the parties agreed that if the buyer paid late, he would pay a premium based on price appreciation. Reuben argued that the contract violated the ban on usury and was illegal. Simon disagreed. Let us now see how R. Hai replied. He began his response with an unequivocal declaration that the transaction was usurious. It was forbidden because the agreement called for increasing the cost to the buyer if he delayed payment. R. Hai then quoted the same verse from the Gemara that had been used in the responsa of earlier Geonim, “R. Nahman said, ‘The general rule about usury is that all payment for wait. ing is forbidden.’” R. Hai followed this negative reply with an explanation of how the parties could have arranged their business in a legal way. If Simon, at the time that he sold the cut-up pieces of gold to Reuben, had set the price and had said to him, “You owe me for them in gold coins, and I may take payment from you at any time that I wish,” then it would have been permitted. What R. Hai did, then, was to provide a way for the vendor to tie the 23. Sha’are tsedek, part 4, gate 2, #4, 77–78. Joel Muller ¨ suggests that this responsum may be by R. Sar Shalom (Mafte’ah. le-teshuvot ha-geonim, 292), but Esriel Hildesheimer has identified R. Hai Gaon as the author from the superscription in the Halberstam manuscript (Esriel Hildesheimer, “Die Komposition der Sammlungen von Responsen der Gaonen,” Judische Studien, in honor of Josef Wohlgemuth [Frankfurt am Main: Kauffmann, 1928], 88).

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repayment to the market price of the goods, which is is exactly what R. Tsemah did in his definition of tarsha. R. Hai, in his responsum, allowed Simon to benefit from the sale if the gold were to increase in value, and R. Tsemah, . in his responsum, permitted Reuben to profit if the price of wheat or wine were to rise. In both cases, the Geonim allowed merchants to gain from credit sales if the price of their goods were to increase. Conclusion Notwithstanding the stern mishnaic prohibition against increasing the price when one sold on credit, the Geonim found two ways to allow it. One was to include the cost of credit in the “regular” price, giving a discount for immediate payment. The other was to tie the payment price to the cost of the goods purchased. A wise businessman, aware of price fluctuations, could profit from a rise in the price of his merchandise.

IN THE PERIOD OF THE RISHONIM: ca. 1000–1500 “The medieval economy was grounded in credit.”24 As agricultural surpluses grew and the means of transportation improved, trade expanded. With rulers unable to meet the demand for coinage, credit arrangements came to the fore. Lending on pawns, mortgaging of property, and establishing partnerships were some of the means employed to establish credit and enable the economy to survive and thrive.25 But the most common form of credit was created through sales.26 Not only were borrowers anxious to buy merchandise on credit, but lenders were motivated to grant credit in order to complete their sales. Credit sales so dominated the medieval economy that they became the normal means of transacting business. Merchants took their goods from manufacturers or middlemen,

24. Kathryn Reyerson, “Commerce and Communications,” in David Abulafia, ed., The New Cambridge Medieval History, vol. 5, c. 1198–c. 1300, 65. 25. Robert Lopez, The Commercial Revolution of the Middle Ages, 950–1350, 70–73; N. J. G. Pounds, An Economic History of Medieval Europe, 408; Jean Favier, Gold and Spices, The Rise of Commerce in the Middle Ages (New York/London: Holmes & Meier, 1998) 193–214; Reyerson, 63–65. 26. Favier, 201.

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sold them locally or in far off places, and then returned to the vendors with their payments. Cash sales were the exception to the rule.27 The Genizah documents attest to the fact that credit sales were practiced by Jews in the Mediterranean communities during the first three centuries of the second millennium.28 And the responsa of the Sages show that credit sales were widely practiced by the Jews of Germany, France, and Spain during the entire period of the Rishonim.29 The Eleventh Century In the eleventh century, R. Hananel (North Africa) defined tarsha in exactly . the same way R. Tzemah. Gaon had explained it. “He gives him the goods in Heshvan and he stipulates to pay him the money in Iyar according to the price . in Iyar which is higher.” If the goods appreciated, he allowed the seller to profit from the late payment.30 R. Hananel’s younger contemporary in North Africa, R. Isaac Alfasi, did . not suggest in his writings any acceptable means of engaging in credit transactions. When asked about credit sales, he made it clear that it was forbidden to increase the price for credit. One question addressed to Alfasi dealt with a case of someone who bought wine on credit for four dinars but later discovered that the wine, when he received it, had been worth only three.31 Alfasi answered that such a transaction was “the dust of interest,”—that is, it was rabbinically prohibited interest. The buyer had to give him only the amount that it was worth at the time that he bought it from him. If there were witnesses that, at the time that he received the wine, it was worth only three dinars, he had to give him only three dinars. It is evident that Alfasi, like his predecessors, disallowed credit sales if an arrangement was made to charge someone more than the market price. He considered such a transaction to be a violation of the rabbinic ban against usury. In contrast, Alfasi’s contemporary in France, R. Solomon Yitshaki . (1040–1105, Rashi), interpreted tarsha in a way that made room for credit 27. Ibid. 28. S. D. Goitein, A Mediterranean Society, vol. 1, Economic Foundations, 197–200. 29. See below. For the prominent place of Jews in medieval trade, see Lopez, 60–62. 30. Kol hidushe ha-ramban, part 2, (Jerusalem, 1929 and Brooklyn, 1964), Bava metsia . 65a, 140a. R. Hananel’s view is also reported by R. Samuel Ha-Sardi in Sefer ha-terumot, . vol. 2:46; 4:,28, 972; and by R. Meshullam b. Moses in Sefer ha-Hashlamah, part 1 (Paris, 1885 and Jerusalem, 1967), Bava metsia 5:3. 31. R. Isaac Alfasi, She’elot u-teshuvot ha-rav yitshak . alfasi, ed. Dov Zvi Rotstein, #12.

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sales under certain circumstances. When commenting on the Gemara’s statement that the tarsha of R. Nahman was allowed because “he did not stipu. late,” Rashi said that it meant that he did not stipulate a lower price were he to pay now.32 According to Rashi’s view, then, if the parties agreed to a sale at a certain price, with payment deferred to a certain date, it was acceptable. The law would be violated only if the seller were to explicitly offer a lower price for early payment and a higher price for a later payment. Rashi’s explanation provided a major opening for the conduct of credit sales among Jews, and it had a significant influence on the thinking of the Sages who followed him. The Twelfth Century R. Jacob b. Meir (1100–1171, R. Tam), agreed with his grandfather, Rashi, that as long as a lower price for immediate payment was not specified, one might sell on credit for a higher price. R. Tam added, however, that the transaction would be forbidden if the market price was known for the goods being sold.33 He stated that a publicly known price was the same as if the price for immediate payment were specified by the seller. In either case the buyer would clearly know that if he were to pay immediately, he would receive the goods at a lower price. Aside from this restriction, however, R. Tam allowed credit sales. He justified his defense of these sales with a notable statement. He said that the Rabbis were lenient regarding rabbinical usury… because of a market enactment where both [parties] wanted to deal in credit. And this is the law regarding selling an item on credit even though he increases the price. R. Tam did not suggest that credit sales were illegal, but his use of the phrase “the Rabbis were lenient” and “a market enactment” does suggest that though credit sales might be tainted with usury, they were, nonetheless, allowed by the Rabbis because market conditions mattered to them. To put it in other words, the needs of Jewish businessmen mattered to them. Furthermore, in following R. Tam’s reasoning, we learn that if the law were, in fact, broken, it was only a rabbinical law and not the more serious biblical prohibition against interest.

32. B. Bava metsia 65a, s. v. Tarsha shari. 33. Sefer ha-yashar le-rabeinu tam, Helek ha-hidushim, Simon Schlesinger, ed., #592. . .

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Like his older contemporary R. Tam, R. Moses Maimonides (1135–1204, Rambam) imposed restrictions on credit sales. He explained in the Mishneh torah that one could not sell on credit if he stipulated a lower price for immediate payment or if a lower price was available in the open market.34 He also expressed this view in a responsum:35 Question: Let our master teach us. Reuben sold something to Simon for payment at a set time for a dinar and it was worth [only] two-thirds of a dinar. And he wrote a contract for the set time, and when the time came, [the seller] claimed [the payment] from him. [The buyer] claimed that it was an overcharge and said: I have witnesses who can testify that at the time that I bought it from you, it was worth so much. When he brings the witnesses, shall he pay him what it was worth or not? … Answer: If we establish [by the testimony of witnesses that] this extra [was added because of the delayed payment], it is the dust of interest and it is not proper to collect it.36 Furthermore, when the Rambam was asked about merchants who employed certain practices to avoid the ban on credit sales, he responded: And every method that you mentioned, all this is forbidden; it is not allowed in any way, for they are all of one kind; they are all the dust of interest. And we have no regard for anyone who allows this, for he is an 34. Mishneh torah, Hilkhot malveh ve-loveh 8:1. 35. Teshuvot ha-rambam, vol. 2, Joshua Blau, ed., #330. 36. The following inquiry reveals the severe needs of the borrowers and the attempt of lenders to conceal a loan with interest in the form of a credit sale. “Question: Let our master teach us about a Jewish man who had to pay the head tax. He went to another Jew to borrow money from him, but he did not lend. He gave him three garments, which were worth 40 drahm minus one according to what they were sold for to people. And he wrote for it a note for 60 drahm because of his poverty and his need and because of the seller’s waiting. And the buyer gave him a pledge worth more and established it in the contract. Let our master teach us whether the seller is allowed to take this full sum or whether it is not proper and the buyer owes him only their worth. And your reward from Heaven will be double.” In this question the Rambam was asked whether an increase of over 50 percent was allowed in return for the credit granted. His answer was unequivocal. “Answer: The seller is allowed to take only the value of the merchandise and may be paid only that if he seeks it at that time. And the buyer is obliged to pay him a sum equal to the value of the clothes and not the amount of the contract.” Ibid., vol. 1, #74.

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ignoramus, nor for anyone who practices this, for he is a transgressor.37 With his recognition that members of the business community were seeking to overturn the restrictions on credit sales and his strong condemnation of the illegal practices that were brought before him, it would seem that the Rambam was fully opposed to the credit sales of his day. Yet, in one remarkable responsum, he displayed an opening for businessmen not revealed in his other writings.38 Question: Let our master teach us regarding a person who does business with his fellow, saying: How much does this merchandise cost? He says to him, for example, a dirhem. He buys it from him on credit for a dirhem and a quarter, or for a dirhem and an eighth, or he buys it from him without informing him of its [current] price, in place of a dirhem for a dirhem and a quarter because he gives him credit and he doesn’t require any of the money at the time of the purchase. But he pays him, for example, after a month or two or more, one payment at a time, one or two dinars at a time more or less. And when he pays him some of the money, he takes other merchandise from him on credit like the first, and he owes the balance on the first merchandise and the second. Thus [they engage in this practice] many times. And the business is carried on between them in this way for years and the creditor has a sizable debt against the borrower. Answer: This is the profit of the business custom among people, and were it not for this, most livelihoods would be cancelled. And I do not consider this to be the dust of interest, to collect cash bit by bit, and this is not the dust of interest. On the other hand, for example, if peppers are sold for ten rotlim per dinar cash, and someone buys them for nine rotlim per dinar on condition that he wait until a certain time for payment, and after the time passes he pays him the agreed money or the seller claims it from him, this is the dust of interest. But here, where they always grant credit with tiny payments to the merchants in the stores for a known profit, this is not the dust of interest, but it appears to me as someone who is eager to bring the merchandise and to collect the money bit by bit.

37. Ibid., vol. 1 #51. 38. Ibid., vol. 1 #53.

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This responsum of the Rambam stands out in the literature of the Rishonim as a recognition of the need of businessmen to carry on their activities with the continual use of credit. Rambam’s comment, “Were it not for this, most livelihoods would be canceled,” is especially telling. Whereas previous Sages had simply allowed credit sales according to the practice of the tarsha of R. Nahman, without specifying that there was an increased price for credit, . Rambam openly admitted that this unspoken price increase for credit allowed a merchant and his creditor to engage in an ongoing credit relationship. Rambam’s responsum permitted business people to pursue their crafts and sustain their livelihoods. In Ha-Ma’or, a work of criticism of Alfasi’s Halakhot, the twelfth-century talmudist R. Zerahya . Ha-Levi (Provence, 1125-1186, Razah), included a discussion of tarsha. R. Zerahya . took a step not taken by Alfasi, and explicitly supported the position of Rashi—allowing credit sales as long as the seller did not specify a lower price for early payment.39 To the names of Rashi and R. Tam in northern France and R. Zerahya . Ha-Levi in Provence can be added the name of R. Moses of Coucy (also from northern France) who, in his Sefer Mitsvot gadol,40 permitted an increased price for credit if no mention was made of a lower price without credit and if there was no established market price for the goods in question. The Thirteenth Century It might seem that the question of credit sales had finally been settled by the authorities. But it was not. The leading Spanish Sage of the thirteenth century, R. Moses ben Nahman (Ramban), opposed the views of Rashi and R. . Tam. He said that when Rashi agreed that the tarsha of R. Nahman was . allowed, he meant that a buyer could stipulate that he would pay according to the market price that would prevail at the time of the payment, whether that price had increased or decreased. This is the view of the credit sale that was espoused by both R. Tsemah. Gaon and R. Hananel, but not by any of . the later Sages. Ramban said that vendors were accustomed to give produce on credit at double and double double the worth [of the goods] and to say that since [the seller] did not stipulate a price for payment now, it was allowed, and this was completely forbidden according to the words of all of them because he did not 39. Ha-Ma’or ha-gadol, Alfasi pages, Bava metsia 36a-b. 40. R. Moses of Coucy, Sefer Mitsvot gadol, Mitsvot lo ta’aseh, #191–93.

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contract with him according to the market price that came out.41 How can Ramban’s viewpoint be explained? Surely Jewish businessmen in Spain in the thirteenth century were at least as active in trading and in lending as were their co-religionists in France in the eleventh and twelfth centuries.42 Surely their need to buy on credit was as great. Ramban’s view, disputing that of his fellow Sages, can best be understood as part of the powerful and sustained defense of the early Sefardic halakhists seen throughout his work. He follows the Sefardim regarding “the recitation of piyyutim and the Shema, preparation of food for the Sabbath, and the burial of Jews on Yom Tov by non-Jews.”43 Isak Unna has written, “One of the most characteristic features in the works of the Ramban is his faithfulness to tradition, and his desire to protect tradition against every attack.”44 C. B. Chavel writes, “The humble and modest Ramban stands like a soldier ready for battle in the line of defense for the early Sages.”45 And Bernard Septimus asserts, “Nahmanides’ conservative sensibility inclined [toward] the . great geonic, North African and Andalusian figures who had become the pillars of Spanish halakhah.”46 Ramban’s position, that credit sales are a violation of the law, then, is one more example of his loyalty to the rulings of R. Hananel and R. Isaac Alfasi.47 . 41. Hiddushe ha-ramban, Bava metsia, 140b; see also Milhemet ha-shem, Bava metsia, . . Alfasi pp. 36a–37a. 42. Yom Tov Assis, Jewish Economy in the Medieval Crown of Aragon, 1213–1327, 78–84. 43. Ephraim Kanarfogel, “On the Assessment of R. Moses ben Nahman: Nahmanides . . and His Literary Oeuvre,” Jewish Book Annual 54 (1996–97): 76–77. 44. Isak Unna, Rabbi Moses ben Nahman, The Ramban: His Life and Work (Hebrew), . (Jerusalem: Kiryat Sepher, 1976), 28. 45. C. B. Chavel, Rabbi Moshe ben Nahman: His Life, Time and Works (Hebrew), . (Jerusalem: Mossad Harav Kook, 1990), 87. 46. Bernard Septimus, “‘Open Rebuke and Concealed Love’: Nahmanides and the . Andalusian Tradition,” in Isadore Twersky, ed., Rabbi Moses Nahmanides (Ramban): Ex. plorations in His Religious and Literary Virtuosity (Cambridge, Mass.: Harvard University Press, 1983), 31. 47. Ramban’s rejection of interpretations that would allow credit sales brings into question Ephraim Kanarfogel’s suggestion (77) that Nahmanides may have followed the . Sefardic halakhists in ritual matters, but the Tosafists regarding monetary law. Kanarfogel’s suggestion also appears problematic in light of Soloveitchik’s showing (Haym Soloveitchik, Halakhah, kalkalah ve-dimui-atsmi [Jerusalem: Magnes Press, 1985] 112–19) that Ramban follows the Sefardic school, as opposed to the opinion of R. Tam, in regard to pawnbroking, and by this writer’s description of the Ramban (See below, pp. 113–15) as

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The most prolific writer on business law during the period of the Rishonim was R. Samuel Ha-Sardi (Spain, 1190–1256), who corresponded extensively with the Ramban and took from him much material for his work Sefer ha-Terumot. However, on the subject of tarsha R. Samuel disputed his colleague.48 R. Samuel agreed that if a vendor were to stipulate how much the goods would cost if he were to receive immediate payment, then a credit sale at a higher price would be forbidden. He also admitted that such a sale would be disallowed if the market price were known, for it would be obvious then that the price had been increased because the seller waited for his money. But concerning anything where the market price has not come out and its value has not been publicized and he did not stipulate, that is to say that he did not say to him, “It will cost so much now,” but rather simply says to him, “You will pay me so much at such-and-such a time,” even though we know that if he had the money available, he would buy it cheaper, this is the tarsha of R. Nahman, which is allowed according to . the words of the authorities and according to their explanations. R. Samuel is the first of the Rishonim to openly admit that credit sales were allowed even though “we know that if he had the money available, he would buy it cheaper.” His contemporary in Germany, R. Meir of Rothenburg (1215–1293, Maharam) in a responsum, made the same admission. R. Meir was asked about a sale of grain in Heshvan for payment in Tammuz. The market price . in Heshvan was seven; the buyer agreed to pay ten in Tammuz. R. Meir ruled . that the transaction was forbidden. He said that his decision applied wherever there was an established market price for the goods, for it is clear, in such a case, that if the buyer had the money at the time of the purchase, he would pay for it then. It is only because he does not have the money that he is forced to pay a higher price later. R. Meir continued his response by explaining, however, that this rule did not apply to merchandise that did not have a fixed price, that cannot be sold to

only reluctantly (as opposed to Rashba’s unapologetic leniency) giving sanction to the practice of Mortgages with Deductions. Also, Septimus provides further example of Ramban’s preference for the teachings of R. Hananel and Alfasi, as opposed to R. Tam and Ri in . monetary matters (33, n. 86). 48. R. Samuel Ha-Sardi, Sefer ha-terumot, gate 46, part 4, #30, 980.

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everyone at a single price, like coats and similar items that are not sold according to a market price, but depend on what is appealing in the eyes of a buyer. And if one said: If you will sell it to me at such and such a price for payment at such and such a time, even if it could be clearly seen that he had raised the price, it is allowed, as long as he does not say, “Now at such-and-such a price and after a period of time for suchand-such.” [And this is allowed] because it has no fixed price, and a person who needs it now might pay the same price as someone who [is given credit and] pays after a period of time. And sometimes someone who needs it will pay double.49 In other words, it was R. Meir’s view that as long as no price was stated for immediate payment and no market price was announced, merchandise could be sold on credit for any price, for one could not be certain that the price was higher because of the delay in payment. We might suspect that that was the reason, but since there could be other reasons, it was allowed. R. Solomon b. Adret (Spain, 1235–1310, Rashba), who often followed in the halakhic footsteps of Ramban, also took issue with his fellow Spaniard on the matter of tarsha. He accepted Rashi’s interpretation of tarsha, that one could “sell merchandise on credit for more than it was worth as long as he did not stipulate, ‘Now for less,’ but rather simply said, ‘For [payment of] such-and-such a price on such-and-such a day.’”50 The Fourteenth Century R. Asher b. Yehiel . (Germany/Spain, Rosh), the foremost halakhist during the last quarter of the thirteenth century and the first quarter of the fourteenth century, ruled in the same way. He explained that tarsha meant that he sells merchandise for more than its worth with waiting, with the proviso that he not stipulate that if he pays now it will be less… And it is possible to say that the tarsha of R. Nahman is allowed specifically in the . case of a cow or a garment that has no known market price, but where the market price is known, it is like stipulating and it is forbidden.51

49. She’elot u-teshuvot maharam b. R. Barukh, Defus Prague, #396. 50. Hiddushe ha-rashba al masekhet Bava metsia (Jerusalem: Torah Utevunah, 1960) . 65a, 123. Rashba’s view, accepting Rashi’s interpretation of tarsha, is also expressed in She’elot u-teshuvot ha-rashba, part 3, #245 and part 7, #504. 51. Piske Ha-Rosh, Bava metsia, chap. 5, #22.

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A revealing comment was made by R. Yom Tom ibn Asevilli (Spain, Ritba) in the fourteenth century. He spoke of the differing opinions regarding the tarsha of R. Nahman. Some Sages had said that it was allowed and others that . it was not. Then, quoting his teacher (perhaps R. Aaron Ha-Levi), he said that even someone who interprets the law according to R. Nahman allows . selling in accordance with R. Nahman only to storekeepers and . merchants, that they may sell and profit from the matter, and they sell bit by bit and profit on most of it.52 This comment harks back to the responsum of Rambam, 150 years earlier, when that Sage declared that it was permissible for business people to buy on credit, bit by bit, and pay for the goods bit by bit. Now, in the commentary of the Ritba, it was made clear that credit sales were allowed for the sake of storekeepers or merchants, who relied on credit for their survival. R. Jacob b. Asher (Spain, 1275–1340), in the Tur, concurred with his father (Rosh) about the tarsha of R. Nahman. . Just as there is interest on loans, so is there interest in sales. How is that? If he sold him something that was worth ten gold pieces for twelve in order that he wait for the money, this is forbidden, even if the seller is rich and doesn’t need the money and the merchandise would not have spoiled with him. With what are we dealing? With something whose value is known, like pepper and wax and the like, that have a known market price; but in regard to a garment, which does not have a market price and its value is not known, he may sell it at a high price for waiting for the money as long as he does not say to him explicitly, “If you pay me right away, you may have it for ten gold pieces but if you pay later, for twelve.” Up to this point there is no difference between what R. Jacob held and what was taught by his father. But then R. Jacob added a new restriction. And it seems that even if he does not stipulate in public, it is not allowed unless he raises the price only a small amount, but if he raises it much so that it becomes clear to all that he raised the price because of waiting for the money, then it is as if he specified [that the price would be lower if he paid right away].53 52. Hiddushe ha-ritba, Bava metsia (Jerusalem: Mossad Harav Kook, 1992), 65a. . 53. Tur, Yoreh de’ah #173.

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More than any previous Sage, R. Jacob stressed that credit sales were allowed except where it was publicly visible that the price of the merchandise was raised because of the credit granted.54 R. Judah b. Asher (Spain, 1280–1349), brother of R. Jacob, stated that credit sales were allowed for goods that had no market price, like a cow or a garment “for each one has its own individual price,” but goods that were “sold by measure or by weight, like peppers or wax, which have a known market price,” may not be sold on credit, for it would be obvious that the price was increased because of the time granted the buyer to pay.55 In this, his view is similar to that of his father, Rosh, and his brother, the author of the Tur. But R. Judah went further than they did in displaying a keen understanding of the market needs of his time. The truth is that someone with money buys the goods from a merchant, and the store owners take it from him on credit and pay him bit by bit, for if he sells to them on condition that they will pay him at the end of a month or two months or longer, then it is forbidden to charge them a higher price. Surely, when a person has merchandise and cannot find a buyer except store owners who do not have money, he is able to ask how much this merchandise is worth to someone who needs it and wants to buy it, and according to what they say, he may buy it for that sum and he is able to sell it on credit following R. Nahman in the chapter Eizehu . neshekh who allows one to sell merchandise on credit at a higher price.56 R. Judah made two important points. First, that business people who did not set a definite date to pay for their goods, but paid a little at a time, were allowed to buy on credit. These people, as Rambam explained, buy a little, pay a little, buy a little, pay a little. The process may go on for years, and was allowed. Second, R. Judah tells how the price (for goods without a market price) was set. The merchants determined the amount people who needed the goods were willing to pay. Clearly, it was a high price, but it was allowed; buyer and seller agreed on the price and rabbinic law did not stand in their way. In sum, credit sales among Jews were a way of life during the period of the 54. See also R. Moses of Coucy, Sefer Mitsvot gadol, Mitsvot lo ta’aseh, #191–93, where the point is also made that even where credit sales are allowed, the price increase must be moderate. 55. Zikhron yehudah, Sefer She’elot u-teshuvot le-rabeinu yehudah ben ha-rosh, #86. 56. Ibid.

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Rishonim. The rabbinic authorities did not fully loosen the restrictions on them. The general rule was that they were disallowed if it was clear that the price had been increased because credit had been granted. If the seller offered a lower price for cash, if a lower price was known to be available to the public, or if the price was so outrageously high as to testify that it had been increased for the sake of credit, the Rabbis said that it was a violation of the law against interest. But from the time of Rashi on, every rabbinic Sage (with the exception of Ramban) who ruled on the matter followed the interpretation of Rashi. Tarsha meant that credit sales were allowed as long as no price was specified for immediate payment, and this is how credit sales were conducted. There was no mention of a cash price, but the Rabbis knew (as admitted by R. Samuel Ha-Sardi and R. Meir of Rothenberg) that the price paid by the buyer included the cost of credit. Several statements of the Rabbis showed their understanding of the role credit played in the business world. Rambam declared that, were it not for this “business custom [of selling on credit] most livelihoods would be cancelled.”57 Ritba explained that the tarsha of R. Nahman made possible sales . “to storekeepers and to merchants who sell bit by bit and profit on most of it.”58 And R. Judah b. Asher stated that “when a person has merchandise and cannot find a buyer except store owners who do not have money… he may sell it on credit… at a higher price.”59 The Rabbis were well aware of the needs of business people, and, as long as they could avoid overt and flagrant transgressions of the law, they allowed credit sales among Jews.

IN THE PERIOD OF THE AHARONIM: ca. 1500–2000 . Early in the period of the Aharonim, R. Jacob Castro (Egypt, 1525–1610) . sanctioned an agreement by which one could buy merchandise on credit if he would agree to pay the prevailing price at the time of payment.60 This was the same type of agreement, defined as tarsha, proposed by R. Tsemah. in the ninth century and R. Hananel in the eleventh century. . 57. Teshuvot ha-rambam, vol. 1, #53. 58. Hiddushe ha-ritba, Bava metsia, chap. 5, 528. . 59. Zikhron yehudah, #86. 60. R. Jacob Castro, Sefer Maharikash ha-nikra erekh lehem, Yoreh de’ah, #173. .

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This type of agreement was also upheld by R. Mordecai Jaffe (Poland, 1535–1612). He said that if one sells goods and does not set a price but says to him, “I am selling you such-and-such merchandise and you will pay me at such-and-such a time according to the market price at that time,” this is allowed even if the market price of the merchandise is known [at the time of the sale] and even if the merchandise normally appreciates and now [at the time of the sale] is not worth so much; it does not look like profit for waiting since he did not mention a specific price.61 This position was also maintained by R. Shabbtai Ha-Kohen (Lithuania, 1622–1663, Shakh) when he stated that if the vendor simply said “Pay me in Iyar at Iyar’s price,” whether at that time [in Iyar] it is expensive or cheap, this is allowed even though they normally appreciate in Iyar… And even if the goods have a known market price, this is permitted.62 This same view was expressed by R. Moshe Yekuti’el Koifman (Poland, seventeenth century),63 R. Abraham Danzig (Lithuania, eighteenth–nineteenth centuries)64 and R. Simeon Gruenfeld (Hungary, twentieth century).65 However, an agreement to pay for goods at their future price was not universally accepted. R. Shneur Zalman of Lyady (1745–1813) pointed to this practice as being controversial,66 and R. Jacob Lorbeerbaum (Poland, 1760–1832) declared it to be forbidden.67 But the real problem with the definition of tarsha as an agreement to pay for a credit sale at the future market price was that it was too risky for the vendor. His profit in such a case depended on market timing, which was not always reliable. How much the price would rise depended on factors beyond the control of the seller. He might profit a great deal from the credit sale, or the price of the goods might fall and his sale on credit could turn out to be a losing enterprise. 61. R. Mordecai Jaffe, Levush malkhut, Ateret zahav, #173:1. 62. R. Shabbtai Ha-Kohen, Sifte kohen, Yoreh de’ah #173:3. 63. Moses Yekuti’el Koifman, Lehem ha-panim, Hilkhot ribit 22. . 64. R. Abraham Danzig, Hokhmat adam 139:2. . 65. R. Simeon Gruenfeld, She’elot u-teshuvot maharshag, part 2, #235. 66. R. Shneur Zalman of Lyady, Shulhan . arukh ha-rav, #22. 67. R. Jacob Lorbeerbaum. Havat da’at al hilkhot ribit, #173:1. R. Lorbeerbaum based . his view on an interpretation of R. Moses Isserles’ commentary on the Shulhan . arukh #173:14.

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Opening the Door to Credit Sales Vendors needed a legal way to sell their goods on credit and guarantee themselves a profit for having done so. Rashi, basing himself on the talmudic statement that tarsha was allowed as long as one did not stipulate a price, explained that one could sell merchandise on credit for more than its going price as long as he did not explicitly say, “If you pay me now, it is yours for less.”68 Rashi’s explanation opened the door to credit sales with rabbinic approval. As long as no mention was made of a lower price for cash (and as long as there was no public market price for the goods), vendors were free to increase the price of the goods they sold on credit. The Shulhan . arukh The start of the period of the Aharonim was marked by the appearance of the . Shulhan arukh by R. Joseph Caro (1488-1575). R. Caro summarized the law . on credit sales as follows: If someone sells his fellow something worth ten gold pieces for twelve in order that he wait [for payment], it is forbidden… To what do we refer? To something that has a known market price or something whose value is known like pepper or wax, but regarding a garment or the like that does not have a set market price and whose value is not known, he is allowed to sell it at a higher price so that he will pay him for it at a certain time [in the future]. And this is allowed as long as he does not say to him explicitly, “If you pay now it will be yours for ten gold pieces and if [you pay me] at that time, it will be twelve.”69 Credit Sales of Merchandise with a Known Price But the restriction against selling on credit goods with a known market price turned out to be an onerous one. There was a significant market for wheat, barley, legumes, fruits, and vegetables in the sixteenth century. All were products with well known market prices. Sesame seeds, olives, and grapes also had fixed market prices.70 Faced with a market environment of

68. Bava metsia 65a, s. v. Tarsha shari. 69. R. Joseph Caro, Shulhan . arukh, Yoreh de’ah #173:1. 70. For a picture of Jewish participation in the economic life of the Ottoman Empire in the sixteenth century, see Mark Alan Epstein, The Ottoman Jewish Communities, 127–44; Aryeh Shmuelevitz, The Jews of the Ottoman Empire in the Late Fifteenth and the Six-

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credit trading for all goods, even those with established market prices, the Rabbis were asked to find a way to allow such transactions. The prohibition against increasing the price for credit of goods with a known market price was virtually done away with by several sixteenthcentury Sages in the Ottoman Empire. R. David ibn Zimra (Egypt, 1480–1573) spoke about the price of wheat, which, he said, was well known, for it was set by the king. And he admitted that, strictly speaking, increasing the price for credit was forbidden. Nevertheless, pointing to a responsum of Rambam,71 he said that it was allowed, for the custom of merchants was to increase the price for credit. In order to give a livelihood to the children of the covenant, we rely on the later authorities, of blessed memory, who allowed it. And so the custom to allow it spread. And the essence is that since there is no biblical interest here, but rather, the “dust of interest,” we are not so strict.72 And in another responsum he added: It was a universal practice to sell their merchandise on credit for more than it was worth, and we haven’t seen anyone who took this practice away from them. And in this they relied on great scholars in order that the door not be closed to merchants…. And now, since the custom of merchants is thus, where there is no prohibition of the Torah, “custom cancels law.”73 During this same time period, R. Abraham de Boton (1545-1588) of Salonika issued a responsum that also dealt leniently with credit sales. Many of the Jews expelled from Spain and Portugal came to live in Salonika. They also came from Italy, Sicily, France, and North Africa to settle there. It is estimated that by the middle of the sixteenth century more than 20,000 Jews lived in Salonika. They were active in the local market and played a central role in teenth Centuries, 128–78; Moises Orfali, “Dona Gracia Mendes and the Ragusan Republic: The Successful Use of Economic Institutions in Sixteenth Century Commerce,” in Elliott and Moises Orfali, eds., The Mediterranean and the Jews (Ramat-Gan: Bar-Ilan University Press, 2002) 175–202. 71. Teshuvot Ha-Rambam, 21. 72. She’elot u-teshuvot ha-radbaz, 1:493. 73. She’elot u-teshuvot ha-radbaz, 3:892 (451). The quotation “custom cancels law” first appeared in the Jerusalem Talmud, Yevamot, chap. 12, 12c and Bava metsia, chap. 7, 11b.

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Salonika’s international trade. Credit sales were the normal way of doing business.74 R. Abraham answered a question addressed to him about a man who bought clothes worth 105,000 levenim for 125,000 levenim to be paid within one year. After describing a dispute in this matter among the Rishonim, R. Abraham said that all merchandise is sold for more than it is worth, and if you [forbid such dealings] you will lock the door before the merchants, and in particular in our city, Salonika… In fact, I have seen here in our city that they engage in this practice with regard to peppers, which they sell on credit, and its estimated price is surely known and in any case they sell it at an increased price for credit, and it is forbidden according to everyone… Now this practice is evil to me, and someone who guards his soul will depart from it. But where they are accustomed to sell with an increase from 5 to 6, surely they have those on which they can rely, the Rosh and the Tur and their supporters. And we are pulled along after them, and it is appropriate to rely on them regarding a small rabbinic prohibition.75 Apparently R. Abraham recognized the validity of the prohibition, but agreed with the maxim of R. David ibn Zimra that “custom cancels law.” The heavy involvement of Jews in the commercial life of the Ottoman Empire was also visible in a responsum of the sixteenth-century Palestinian Sage R. Moses Trani (1500–1580).76 Asked about someone who increased the 74. Jacob Ben-Mayor, “Salonika,” Encyclopedia Judaica,” 14: 700; Maria Efthymiou, “The Jews of Thessalonika in the Sixteenth Century and the Organization of Production: Aspects of Adaptability,” in I. K. Hassiotis, ed., The Jewish Communities of Southeastern Europe from the Fifteenth Century to the End of World War II (Thessalonika: Institute for Balkan Studies, 1997), 105–8. 75. R. Abraham de Boton, Lehem rav, #14. . 76. Abraham David, To Come to the Land: Immigration and Settlement in Sixteenth-Century Erets-Israel (Tuscaloosa, London: The University of Alabama Press, 1999), 36–40 and by the same writer, “Hishtalvut yehude erets yisrael bi-sehar . hayam-tikhoni be-reshit ha-tekufah ha-ottomani,” in Ariel Toaff and Simon Schwarzfuchs, eds., The Mediterranean and the Jews (Ramat-Gan: Bar-Ilan University Press, 1989), 15–28, Hebrew section; H. H. Ben-Sasson, “Jewish Settlement and Economic Activity in the Sixteenth and Seventeenth Centuries,” in H. H. Ben-Sasson, ed., A History of the Jewish People (Cambridge, Mass.: Harvard University Press, 1976), 635.

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price of a credit sale of wool, he quoted R. Solomon ben Adret (thirteenth century, Rashba) and said that such a practice, which was not forbidden in the Torah, was allowed in order that the door not be closed to buyers and sellers.77 Regular Price Is the Credit Price One of the justifications for charging a higher price for credit was that the cost of granting credit was worked into the regular sale price. In other words, the seller was not increasing the price for credit, he was simply charging the normal price for the goods which, incidentally, took credit into account. This viewpoint was incorporated into the Shulhan . arukh of R. Joseph Caro in his ruling that though a product could be bought for ten if the seller was in urgent need of cash, if its normal price was twelve, it was still allowed to be sold on credit for twelve.78 This was also allowed by R. Shabbtai Ha-Kohen who stressed that the price of the goods was twelve, and the only reason that it was sold in the market for ten was because the seller was in urgent need of money.79 R. Ephraim Navon (Palestine, 1677–1735), in Mahaneh ephraim, allowed . credit sales at the going price of the goods. He based himself on Maimonides’ statement in Hilkhot malveh ve-loveh that a buyer needed to pay only what the goods were worth at the time of the sale. R. Ephraim’s point was that if a buyer paid what people normally said the goods were worth, that was not interest. The fact that a rare individual might get a discount for a cash payment did not take away from what the regular price was.80 R. Navon was supported in this position by R. Abraham Danzig in the Hokhmat Adam. He said that a credit sale was allowed . because everyone who comes to buy them will pay twelve except that the one who sells at the market gives a discount, and it seems to me that that is the law if the price in all of the stores is twelve.81 Additional Support for Credit Sales One of the most remarkable responsa justifying credit sales was written in 77. R. Moses of Trani, She’elot u-teshuvot mabit 1:114. 78. Shulhan . arukh, Yoreh de’ah #173:2. This is based on Caro’s commentary in the Bet yosef, Yoreh de’ah #173, s. v. Vekhol. 79. R. Shabbtai Ha-Kohen, Sifte kohen, Yoreh de’ah #173:6. 80. R. Ephraim Navon, Mahaneh ephraim, #31. . 81. R. Abraham Danzig, Hokhmat adam, #139:5. .

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Baghdad. R. Joseph Hayyim Avdala (1832-1909) pointed to the widespread . prevalence of credit sales in his city. In our day, we see in all the places here in our city of Baghdad… that they all engage in the practice of selling on credit all kinds of merchandise… pepper, coffee, sugar, wax, bronze, iron, silk, wool and all kinds of merchandise on credit… for there is no merchandise in the world that they will refrain from selling on credit.82 All of the goods listed by R. Joseph Hayyim had a fixed public price in the . market; yet he defended the practice of credit selling by explaining that in his day prices changed rapidly. Surely it is clear and simple that one cannot compare our time to the time of the Rishonim in these matters… for caravans were not present [then], and also when merchandise came from across the sea they used to bring it all on simple ships that sailed by the winds once a year, and after those ships came, no one went or came across the sea. There was no knowledge and no merchandise until the following year. And if some goods became more expensive across the sea, who would let it be known in far off places? Which is not the case now, where steamships are common every single month and the caravans are present every week, and almost all parts of the settlement are considered one city. This one goes and that one comes, and more important than all this is the news on the telegraph… And behold you will find the peppers, that our master, of blessed memory [R. Joseph Caro], wrote about, that their estimated price was known. But we see in our day that sometimes the price of peppers rises thirty percent or more in one month. Therefore we see in our day that all merchandise consists of goods whose estimated price is unknown. Hence it is possible to sell on credit what is worth ten for twelve since this is what they practice and there is great strength in this custom. Finally, R. Joseph Hayyim said that as long as the price increase took place . in the course of a sale, a legitimate business transaction, the Rabbis were lenient so as “not to lock the door in front of” the business community. In eastern Europe, R. Simeon Gruenfeld (Hungary, 1881–1930, Maharshag) also allowed a vendor to increase the price of his goods even if 82. R. Joseph Hayyim Avdala, Rav pe’alim, 4:12. .

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their price was known. Maharshag was asked about someone who wanted to sell a kilo of sugar, with a known price of 18 crowns, for 20. He gave two reasons for allowing such a transaction. The first was that if the price increase was less than one-sixth of the going price, there was no fraud, and if there was no fraud, the prohibition against interest did not apply. To prove his point he used the example of land, where fraud did not apply. Just as land could be sold for any price without breaking the interest ban (as long as the seller did not say, “Now for this price and later for that price”), so movables could be sold for a higher price as long as the increase was less than one-sixth of the prevailing price. Maharshag’s second proof applied when the seller charged the higher price for the goods, knowing that there would be a delay in payment, but not specifying a payment date. Since the seller does not remind him that he will pay for the merchandise in four or five months from this day, but simply sells him a kilo of sugar for 20 crowns… the meaning of this language is that he does not want to sell his merchandise for less than 20 crowns even if he were to pay right away… If so, there is no interest at all in this where he would be taking profit for waiting, but only that he wants to sell his goods at a high price, and in this there is no prohibition, for the Torah does not prohibit any person from selling his merchandise at a high price if he so wishes.83 Credit Sales Like Rentals In the late nineteenth and early twentieth centuries, Jews were highly active in Poland’s economic life. They processed food, manufactured textiles, and were involved in trading all sorts of goods. Credit sales were the normal way of doing business.84 R. Meir Arik (Poland, 1855–1926) based his permissive ruling on credit sales on the talmudic law allowing one to charge more for a rental payment made at the end of the month than for one at the beginning of the month.85 R. Arik reasoned that just as rent payments were due only at the end of the month, so, by custom, payments for purchases were due 30 days after merchants received their goods. And just as a renter was permitted to receive 83. Simeon Gruenfeld, She’elot u-teshuvot maharshag, 2: #193. 84. Peter Stachura, Poland in the Twentieth Century, 46; Jack Taylor, The Economic Development of Poland, 1919–1950, 102.

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a discount for early payment, so a merchant who paid for his goods upon receiving them was permitted to pay less if he paid immediately.86 The most sweeping permission to pay the “regular” price for merchandise was offered by R. Mordecai Jacob Breish (Poland/Switzerland, 1896–1976). He pointed out the difference, as R. Arik had done, between a sale, where the Mishnah forbade one to increase the price in return for credit, and a rental agreement, which allowed such an increase. The Gemara, in Bava metsia 65a, explained the reasoning behind this ruling by saying that payment for a sale is due when the buyer receives his goods, whereas rent payments were not due until the end of the month. In R. Breish’s words, In an ordinary rental, the rule is to pay at the end… but he may reduce the cost by paying early, and this is just a discount.87 Now R. Breish came to his main point. In our own day the custom among merchants who buy goods from each other or from the factory is that they have three months to pay for the merchandise. Even though it is not stipulated at the time of the sale… for this is the custom of the country.88 Then he added that the sale [with which we are dealing] is exactly like a rental… It is not due until the end [of the three months] and that is the time for the payment. [In the case of a rental], if he says, “You may pay me a lesser amount now,” it is allowed. So also [this is true] for sales in our day, for the custom is that the seller is not allowed to claim his money beforehand… for this [waiting for three months] is the custom of the merchants… In any case, the time of payment is after three months (and sometimes only 30 days). If so, even if he stipulated or wrote on the document, “If you pay now, there is a discount,” it is allowed as in the case of a rental.89 85. A century earlier R. Isaac ibn Walid (1773–1830) used the same talmudic principle as the basis for his ruling that allowed vendors to charge more to those who delayed payment for their merchandise. R. Isaac ibn Walid, Va-yomer yitshak, #56. . 86. R. Meir Arik, She’elot u-teshuvot imre yosher, #1:150. 87. R. Mordecai Breish, Helkat ya’akov, Yoreh de’ah, #77:2. . 88. Ibid.,#77:3. 89. Ibid., #77:3.

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With this responsum, R. Breish refuted those who disallowed a credit sale because a contract indicated that an early payment would result in a discount. Since there was no objection to mentioning a lower price for early payment of rental, so there should be no prohibition to charging the customary price for payment within 90 days, even if an early payment discount was disclosed. Opposition But not all authorities agreed that charging for interest was allowed even if the credit price had become the “regular” price charged by merchants. R. Shneur Zalman of Lyady (1745–1813) was one of those who disputed this view. He stated that it did not matter if the item was generally considered to be worth twelve. If a discounted price of ten was available for a cash payment, then the credit price of twelve was usurious and was forbidden.90 A similar ruling was given by R. Abraham Maskil Laitan (Russia, died 1848) in Yad Avraham. He feared that if one charged a higher price when it was customary to do so, he might charge the higher price even when it was not the prevailing price.91 And R. Abraham Eisenstadt (Poland, 1838–1868), in Pithe . teshuvah, argued that it did not matter what the “regular” price was; if the buyer had ten gold pieces, he would have paid ten; the only reason he paid twelve was because he did not have money; the two extra pieces were thus forbidden interest.92 Similarly, R. Moses Schick (Hungary, 1807-1879) was unmoved by the arguments of those who allowed credit sales for goods at their “regular” price if a buyer could obtain them for less for cash. It was his view that if the goods were available at ten, then the buyer, as soon as he took possession of the goods, owed the seller ten, and if he did not pay right away, and later paid the seller twelve, then the increase was profit for waiting and was forbidden.93 Retracting from Lower Price The Rabbis were thus divided over whether merchants could charge for credit even if the credit price was the “regular” price. Some, like R. Arik and R. Breish, felt that Jewish law needed to be lenient and adjust to the needs of the

90. R. Shneur Zalman of Lyady, Peri ets hayyim, Shulhan . . arukh ha-rav, Hilkhot ribit, 18:B. 91. R. Abraham Maskil Laitan, Yad avraham, Shulhan . arukh #173. 92. R. Abraham Eisenstadt, Pithe teshuvah, Shulhan . . arukh #173:5. 93. R. Moses Schick, She’elot u-teshuvot maharam schick, #163.

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population. Others believed that if a lower price was available for immediate payment, then the credit charge was interest, forbidden by law. With the matter unsettled, the Sages sought other ways to allow credit sales. One was suggested by R. Jacob Lorbeerbaum (Poland, 1760–1832) in Havat da’at. He . said: If he comes to buy, and the seller thinks that he is paying cash and he tells him, “Ten,” and the buyer says, “I want to buy it on credit,” then the seller is able to say, “I am retracting, and even if you pay me cash I will take only twelve” … And in this way it is possible, for everyone agrees.94 This view was supported by the twentieth-century jurists R. Arik95 and R. Breish.96 Both referred their readers to the teachings of the Havat Da’at. . Buying and Renting Another solution to the problem was proposed by R. Moses Feinstein.97 He suggested a technique for buying that did not include a loan at all. Suppose (in the example which he gives) Simon wants to buy a $20,000 house from Reuben, but has only $10,000. R. Feinstein proposed that Simon buy half of the house with his $10,000 and rent the other half from Reuben. Now if Reuben wants to receive 8 percent on his “loan,” he will charge Simon $850 per year for rent. Simon, however, will pay a bit more than the $850 so that he will reduce the debt, to some extent, each month. Thus, each month, a greater portion of the house becomes Simon’s property and he will need to pay Reuben a smaller rental fee each month. Heter Iska Was there a way to allow credit sales that would be universally acceptable? Counting the credit price as the “regular” price was controversial; R. Lorbeerbaum’s suggestion was, after all, a subterfuge, and R. Feinstein’s proposal was complicated. There was, however, one way to engage in a legal sale on credit where the price of the goods was increased and still not violate the

94. R. Jacob Lorbeerbaum, Havat da’at al hilkhot ribit #173:2. The same opinion is . expressed by R. Aryeh Leib Zunz (1765–1833) in Hidushe maharal al hilkhot ribit, #173:7. . 95. She’elot u-teshuvot imre yosher, #2:192. 96. R. Mordecai Jacob Breish, Helkat ya’akov, #3:206. . 97. Igrot moshe 2:62.

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law against usury. It was to employ a heter iska, which could turn a profitable credit sale into a legal business investment.98 Shortly before his death, R. Moses Schick (Hungary, 1807–1879) was asked a question about merchants who sell on credit at a higher price, and he suggested a kind of iska that would allow the transaction and would not violate the laws against usury.99 And R. Meir Arik, when asked a similar question, replied: And there is also another simple idea, that after the buyer says to him that he wants [to buy on] credit, he [the seller] should say to him that he wants so much [profit] with a heter iska, and with this it is surely allowed, for it is as if he lends him money with a heter iska, … Here, where he obligates himself entirely before the sale, it is obvious that a heter iska works. And this is a simple idea for anyone with a soul.100 R. Mordecai Jacob Breish also recommended the use of a heter iska in credit sales. He said, “In my view, in matters like this, regarding buildings or buying apartments with a debt remaining, and he increases the price for waiting for the money, it is best to use a heter iska.” Conclusion Talmudic law issued a firm ruling, “One may not increase the sale price [for credit].” But in a society that relied on credit for its existence, it was not a rule that could be easily obeyed. Merchants followed their instincts, and Rabbis sought ways to legalize what was being practiced. These responses perhaps should not surprise us, for the Rabbis had loosened other talmudic restrictions in light of economic realities. For example, the Talmud forbade dealing in any wine with which a gentile had come in contact. But in the Middle Ages a dispensation was introduced to allow the handling of gentile wine101 and even to accept it in payment of a debt. By the

98. Iska was the talmudic term used to signify a business partnership in which the investor and the recipient shared the profits and losses. A heter iska is the document that legalized such partnerships. A loan was often converted into an investment by means of a heter iska. See below, pp. 159–63. 99. She’elot u-teshuvot maharam schick, #164. 100. She’elot u-teshuvot imre yosher, 2:192 (1). 101. See Haym Soloveitchik, “Can Halakhic Texts Talk History?” AJS Review 3 (1978): 153–96, where the author shows how Rashi and R. Tam struggled with the issue of wine production, ultimately allowing non-Jews to handle the first phase of Jewish wine production. For a fuller discussion of how economic activities of the Jewish population

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modern period, the religious authorities bowed to the needs of the community and found ways to permit dealing in gentile wine. Wine trading, in fact, became one of the characteristic Jewish occupations.102 Another example of liberal rabbinic interpretation of the halakhah to meet the needs of the people was in regard to non-Jews working for Jews on the Sabbath. The Bible forbids not only the Jews from labor on the Sabbath, but also those who work for them. Thus the law prohibited Jewish businessmen from hiring non-Jews to do their Sabbath work for them. Tavern owning and management were common Jewish occupations in Poland and Lithuania. To avoid significant loss, these establishments had to stay open on the Sabbath. Recognizing this, the Rabbis gave the Jewish tavern owner permission to sell his wine or liquor to a gentile before the onset of the Sabbath and have the gentile dispense the drinks on the Sabbath. After the Sabbath, the Jew would buy back from the gentile any unsold drink.103 Another common Jewish livelihood was toll collecting. The Rabbis allowed a Jew to engage a non-Jew as his substitute on the Sabbath. The Jew, not touching the money, kept his eye on the toll collector and settled the account at Sabbath’s end.104 Early in the nineteenth century a new problem arose as Jews became owners of various kinds of factories, many of which needed to continue their operations on the Sabbath. Using the model of the fictitious sale of hamets to . non-Jews before Passover, the Rabbis ruled that a factory could be sold to a influenced halakhic rulings, see Soloveitchik’s Principles and Pressures: Jewish Trade in Gentile Wine in the Middle Ages (Hebrew) (Tel Aviv: Am Oved Publishers, 2003). 102. R. Joel Sirkes, She’elot u-teshuvot bayit hadash ha-hadashot, #29–30; Shabbtai . . Ha-Kohen, Sifte kohen, Yoreh de’ah #124:71; Ber of Bolechow (1723–1805), in fact, earned his livelihood trading in wine. Nowhere in his memoir does he express any reservations about his occupation due to rabbinic law. Ber of Bolechow, Mark Wischnitzer, ed. Zikhronot R. Dov mi-Bolihov (Berlin: Hotsa’at Kelal, 1922). As Jacob Katz put it, “License to engage in this [wine] trade gradually spread. At first the more stringent among the Rabbis objected to this development, but they were not able to prevail in the face of increased economic pressure.” Jacob Katz, Tradition and Crisis: Jewish Society at the End of the Middle Ages (New York: New York University Press, 1993), 18–19. See also Edward Fram, Ideals Face Reality: Jewish Law and Life in Poland 1550–1655 (Cincinnati: Hebrew Union College Press, 1997), 95–105. 103. Regulations of the 1602 Vladimir Conference in H. H. Ben-Sasson, “The Sabbath Violation Regulations of Poland and Their Social and Economic Significance,” (Hebrew) Zion 21 (1956): 199. See also R. Judah Loeb Pukhovitser, K’ne hokhmah (Frankfurt an der . Oder, 1681), fol. 3d, who says, “They sell drink to gentiles on the Sabbath and are careful only not to touch the money.” 104. Vladimir Conference in Ben-Sasson, 202.

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non-Jew on the eve of the Sabbath so factory work could proceed without interruption.105 The above-mentioned solutions were huge acts of halakhic leniency undertaken by respected rabbinic authorities to meet the economic needs of the Jewish community. The steps taken to allow credit sales were but one more example of the Rabbis’ recognition that economic necessity demanded flexibility. Rashi’s interpretation of the talmudic text opened the door for legal credit sales. As long as no mention was made of a lower price for cash payment, credit sales at a higher price were allowed. But with the restrictions imposed by R. Tam (that a publicly known price for goods was the same as if the cash price had been mentioned) and Rosh (that only a small increase was allowed), the practice of credit sales was still questionable and fell under rabbinic scrutiny. Even where credit sales were considered the normal way of conducting business, there were Rabbis who believed that such transactions were wrong if the buyer could obtain a discount for prompt payment. But the economic needs of the community prevailed. Various techniques were employed to permit a seller to profit from credit and where a heter iska was used, all of the authorities agreed that an increased price for credit was allowed. The statement of R. David ibn Zimra that “custom cancels law” was not often quoted, but its meaning prevailed as the Rabbis interpreted the law to allow the business community to work its will.

105. R. Solomon Kluger, Sefer ha-hayyim al orakh hayyim, (Hokhmat shelomo: Jerusa. . . lem, 2004) 244:6; R. Haym Halberstam, Sefer she’elot u-teshuvot divre hayyim (Brooklyn: . Hanhalat Mosdot Babov, 2002) #1:7. The story of the Rabbis allowing Jews to engage non-Jews to substitute for them to perform Sabbath work is detailed in Jacob Katz, The “Shabbes Goy:” A Study in Halakhic Flexibility (Philadelphia, Jerusalem: The Jewish Publication Society, 1989).

6

Mortgages IN THE PERIOD OF THE GEONIM: ca. 650–1050 The prevailing practice from the talmudic period onward was for lenders to take possession of mortgaged property during the period of the mortgage.1 Thus, if the property were a field, lenders would harvest the produce of the field during the period of the loan, and the produce that the lenders consumed was considered by the Rabbis to be usury, a payment for the loan, forbidden by law. The Sages in the Amoraic period had developed a number of techniques for circumventing the ban on such dealings.2 One, which was called a Mortgage of Sura, gained wide approval among the Rabbis.3 It was structured so that, after a specified time period, the property was returned to the borrower without his having to repay the loan, the lender having agreed to accept the produce he had consumed during the mortgage period as full payment. Although the Mortgage of Sura was accepted by the Rabbis as not being in conflict with the usury ban, there is no evidence to suggest that it was put into practice. There is not a single instance in the Gemara—nor in the geonic responsa—that tells of people engaging in Mortgages of Sura. This is not hard to understand. Creditors, after all, wanted to profit from their loans. The yield from property would have to be large and the number of years long for there to be a chance for a creditor to profit from a Mortgage of Sura, a loan in which the principal was entirely forgiven. And no matter how profitable the 1. B. Bava metsia 62a–62b; 66a–68a; 109b–110a. This practice was provided for in Roman law as well. See William Buckland, A Manual of Roman Private Law (Cambridge: Cambridge University Press, 1953), 260–61, 353; Alan Watson, Roman Private Law around 200 BC (Edinburgh: Edinburgh University Press, 1971), 84–85; Boaz Cohen, “Antichresis in Jewish and Roman Law,” 184–85. 2. See above, pp. 35–36. 3. B. Bava metsia 67b.

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mortgaged property promised to be, there was always the risk of some unforeseen calamity, a flood or a drought, for example, wiping out the potential gain.The possibility existed that the property would yield no profit at all. Lenders simply didn’t care to accept a Mortgage of Sura. It was an arrangement that was theoretically possible, but, in reality, not useful.4 People who needed to get cash out of their property and investors who wanted to profit from their loans had to find another way to fulfill their needs. Conditional Sale One way to get around the ban on usury was for an owner to sell his property on condition that it would be sold back to him. This Conditional Sale would allow the buyer to take the produce during the time that he owned the property, and, since it was a sale and not a loan, he could do so without concern about violating the usury ban. The Conditional Sale was discussed in the Talmud and was allowed only when the buyer freely volunteered to resell the property. If the seller made it a condition of the sale, then it was looked upon as a thinly veiled usurious loan and was forbidden.5 One case cited in the Gemara dealt with a woman named Navla who bought some property from a relative. Before agreeing to the sale, the relative asked and received assurances that when he would have the money, Navla would sell the property back to him. Though this was, on the surface, a sale, the Amoraim considered the arrangement to be an illegal evasion of the usury ban and the produce taken by Navla to be interest forbidden by law.6 There is one piece of evidence showing that in geonic times an effort was made to circumvent the prohibition against usury by turning what would normally be a mortgage into an outright sale. It happened in Kairouan and was reported in a responsum that was probably authored by R. Hai Gaon.7 4. Haym Soloveitchik says that the literature does not even offer a hint that the Mortgages of Sura were ever practiced in any location. “Shetar be-sefer ha-itur,” Tarbiz. 41 (1972): 318, n. 15. 5. B. Bava metsia 65b. 6. B. Bava metsia 67a. Biblical interest or fixed interest (ribit ketsutsah) taken by a lender had to be returned to the borrower, but rabbinic interest or the dust of interest (avak ribit) did not have to be returned once it had been taken (See above, pp. 33–34). The Gemara questioned whether the produce taken by Navla should be considered biblical interest returnable to the borrower or the non-returnable rabbinic interest. Though two Sages answered that it was rabbinic interest, which did not have to be returned, all agreed that the produce should not have been taken in the first place. 7. Sha’are tsedek, part 4, gate 2, #12. Joel Muller ¨ attributes the responsum to R. Hai

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A method was devised that the authorities in Kairouan hoped would overcome the objections raised in the Gemara to Navla’s consuming the produce of the land purchased from her relative. What they did in Kairouan was to write two separate contracts. One was a simple sale. The property was sold without conditions. The other was dated several days later to suggest that it was independent of the first contract. It stated that the buyer, of his own free will, agreed that if the seller would return the money within a specified time frame, then he, the buyer, would resell the land to him. The description of the arrangement, however, made it clear that the second contract was a subterfuge. Even though it was formulated in such a way as to indicate that the resale was freely volunteered by the buyer, and even though it was signed several days after the first contract, everyone knew that the condition was, in fact, an essential part of the sale, and that the seller would never have agreed to the transaction were it not for the buyer’s promise to resell in the second contract. The proof of the fraudulent nature of the arrangement was that the price paid for the land was generally far below its value. A piece of property worth 150 gold pieces might be sold for 100. But the seller didn’t mind receiving an unrealistically low price for his land because he knew that the whole transaction was a disguised loan and that, in the end, when he repaid the loan, he would retrieve his land. The low sale price clearly showed that the promise to allow the buyback was not a voluntary act of good will on the part of the buyer, but rather, an essential part of the sale itself. R. Hai called those who

Gaon (Mafte’ah. le-teshuvot ha-geonim, 247) as does Simha Assaf (Teshuvot ha-geonim, 18–19 and Tekufat ha-ge’onim ve-sifruta, 282), S. A. Poznansky (“Anshe Kairouan” in Zikhron le-avraham eliyahu harkavy [St. Petersburg: 1908, reprinted New York: Arno Press, 1980], 181), Joseph Kafih. (She’elot u-teshuvot ha-ravi avad, Joseph Kafih. ed. [Jerusalem, 1962], #141, 122, n. 23) and Haym Soloveitchik (although Soloveitchik admits that the attribution has not been fully proven), “Shetar be-sefer ha-itur,” 318, n. 17. Tsvi Groner points out that Assaf’s evidence is not conclusive and Groner does not include this responsum in his “A List of the Responsa of R. Hai Gaon,” Alei sefer 13 (1986): 116. We believe that R. Hai Gaon is probably the author. The following points support this conclusion: 1) R. Hai Gaon had close ties to Kairouan and wrote many responses to that community. 2) R. Avraham b. Yitshak . includes R. Hai Gaon among those Geonim who forbade Mortgages with Deductions (She’elot u-teshuvot ha-ravi avad, at 122) as the author of this responsum does. 3) R. Sherira Gaon forbade Mortgages with Deductions and R. Hai Gaon usually agrees with the views of his father. 4) R. Hananel b. Hushiel and R. Isaac Alfasi, . . who frequently follow the rulings of R. Hai Gaon, also forbade Mortgages with Deductions.

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devised this subterfuge “pseudo-scholars,” and ruled that the Kairouan transactions were forbidden. Mortgages with Deductions If the Mortgages of Sura were impractical and the transactions of Kairouan illegal, what way was there, then, for landholders in need of cash to obtain loans on their property? In the Gemara, Rava suggested yet another device to make mortgages legal.8 It was called a Mortgage with a Deduction. In this transaction, the creditor would deduct a fixed, agreed-upon sum from the debt each year to offset the benefit that he derived from the usufruct. Amoraim after the time of Rava were of divided opinion as to whether or not this type of arrangement was legitimate. Rabina (fourth-fifth centuries) believed that this was an acceptable procedure and followed the practice himself.9 But R. Papa (fourth century), R. Kahana (fourth-fifth centuries) and R. Ashi (fourth-fifth centuries) refused to engage in it.10 They apparently viewed the produce taken by the creditor as interest on the loan and thus forbidden by law. In their view, the annual deduction did not compensate for what the creditor consumed. There is evidence that Mortgages with Deductions were practiced in geonic times with the approval of the Geonim. R. Jacob, Gaon of Sura early in the ninth century, allowed the mortgage of a courtyard or a vineyard as long as the annual deduction was worth at least one-fourth of the value of the produce consumed.11 And R. Kohen Tsedek, Gaon of Sura during the second quarter of the ninth century, simply declared that, following Rabina’s practice, it was the custom in his time for lenders to take deductions from debts to offset the benefits they received from their mortgages.12 R. Simeon Kayyara of Basra (middle of the ninth century) indicated in the Halakhot gedolot that Mortgages with Deductions were the norm in his day,

8. B. Bava metsia 67b. 9. Ibid. 10. Ibid. 11. Sefer ha-Metivot, 70; R. Isaac b. Abba Mari, Sefer ha-Itur, part 1, Potiki, 65b; R. Samuel Ha-Sardi, Sefer ha-Terumot, gate 46, part 3:20, 226b. 12. Sefer ha-Metivot, 69; Sefer ha-Itur, at Potiki, 65a. R. Kohen Tsedek’s view is affirmed in Simha Assaf, ed., Sefer Miktso’ot, 56. The same source appears in Simha Assaf, ed., Teshuvot ha-geonim (Jerusalem: Darom, 1929), 235.

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the deduction being “four zuzim, two zuzim or any amount,” in other words, a token deduction.13 Two responsa,14 probably from the pen of R. Natronai,15 Gaon of Sura in the middle of the ninth century, allowed mortgages as long as the creditor took a deduction from the debt each year. The Gaon even permitted the borrower to become a sharecropper on his own property, giving the lender a portion of the produce, and thus allowing him to profit from the transaction. Near the end of the third quarter of the ninth century, R. Nahshon, Gaon . of Sura, responded to a question dealing with the mortgage of a store.16 The amount of the loan was five dinars. The stipulated term was for two years. The lender agreed to deduct one zuz a year from the debt to compensate for the use of the store. The case came before R. Nahshon because the borrower . wanted to repay the debt and take back his store after only one year. R. Nahshon responded that the borrower had agreed to the two-year mort. gage period and could not oust the lender after one year. What is revealing to us in this responsum is that at no point did R. Nahshon object to the whole arrangement.17 He was apparently unconcerned about the fact that the creditor occupied the store during the mortgage period, deducted but a pittance from the debt each year, and in no way compensated the borrower for the rental value of the store. R. Hilai Gaon served in Sura during the final years of the ninth century and at the start of the tenth. He was asked to explain a talmudic passage (Bava metsia 67a) dealing with mortgages. In the course of his answer, he made it clear that a mortgage that allowed a lender to occupy a borrower’s field while deducting a fixed annual amount from the loan was acceptable.18 R. Samuel b. Hofni (tenth-eleventh centuries) also allowed mortgages if the . lender took a deduction from the loan each year.19 The responsa available thus show that the authorities of Sura (R. Jacob, 13. Sefer Halakhot gedolot, E. Hildesheimer, ed., vol. 2: 405. See also Sefer ha-metivot, 69 and Sefer ha-Itur, at Potiki, 65a. 14. Sha’are tsedek, part 4, gate 2, #14–15. 15. Three responsa, Sha’are tsedek, part 4, gate 2, #13–15, deal with the same subject and are composed in the same style. R. Natronai Gaon is named as the author of the first, #13, and it is likely that he composed the other two. Joel Muller, ¨ Mafte’ah. le-teshuvot ha-geonim, 292, also speculates that R. Natronai is the likely author of all three. 16. Sha’are tsedek, part 4, gate 2, #48. 17. This was noted by Soloveitchik, Shetar be-sefer ha-itur, 317, n.13. 18. Sha’are tsedek, part 4, gate 2, #41. 19. Sefer Miktso’ot, 56. The same citation appears in Teshuvot ha-geonim, 1929, 235.

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R. Kohen Tsedek, R. Natronai, R. Nahshon, R. Hilai and R. Samuel b. Hofni) all followed the teaching of Rabina in the Gemara and permitted Mortgages with Deductions. Divided Opinion But this was not the end of the matter, for just as there had been a difference of opinion on this issue in talmudic times, so did a divergence of views appear among the Geonim. R. Sherira and R. Hai, the two foremost Geonim of Pumbedita, who together reigned for almost a century at the close of the geonic period, expressed a view opposed to that of the Geonim of Sura. R. Sherira Gaon, during the second half of the tenth century, was asked whether a person could mortgage his house or his court with an annual deduction and then pay the lender an annual fee for the use of his own house or court.20 In his response, R. Sherira went further than simply saying that this transaction was illegal. He declared that a lender was not allowed to benefit from mortgaged property even if he took an annual deduction from the debt. The Mortgages of Sura were allowed, he said, because they were like sales, but Mortgages with Deductions were loans, and when lenders made use of borrowers’ property, they were consuming interest. Furthermore, R. Hai Gaon, who was probably the author of the responsum to Kairouan dealing with conditional sales,21 said, as an aside in that very responsum, that Mortgages with Deductions were illegal. He held that when a creditor consumed the produce, he was taking interest, and the deduction did not alter its status. Two questions now confront us: 1) How is it that in spite of the equivocation of the Amoraim regarding Mortgages with Deductions, the Geonim of Sura ruled unanimously in their favor? and 2) Why did the Pumbedita authorities demur? Economic Life To answer the first question we need to look at the striking changes that took place in the economic life of the Jews during the geonic period. In talmudic times, the economic foundation of Jewish life had been agriculture.22 The people had derived their livelihood from work in the fields, orchards, and 20. Sha-are tsedek, part 4, gate 2, #2. 21. See above n. 7. 22. Assaf, Tekufat ha-geonim ve-sifruta, 10; S. Safrai, in H. H. Ben-Sasson, 376; Moshe Beer, Amora’e bavel, 15–82.

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vineyards, and from trading the fruits of the soil. Of course, there had been those who followed other occupations—artisans and merchants of all kinds—but most had lived on the land and from the land. During the first two centuries (circa 650–850 c.e.) of the geonic period, however, a migration to the cities took place.23 Jews (and the rural population generally) found it difficult to remain on the farms and in the villages,24 partly because of the persecution that followed the Muslim conquest and partly because heavy tax burdens made farming unprofitable.25 The movement from the country to the city was not sudden. It began before geonic times and continued over a period of three centuries. By the ninth century, the economic life of the Jewish people in Iraq had been completely transformed, shifting “from an agrarian to an urbanized commercial society.”26 The Jews now lived in the large centers of Baghdad, Mosul,and Basra. No longer farmers, they were now artisans, shopkeepers, and merchants. Some became international traders. “Even the hoary academies of Sura and Pumbedita, which carefully guarded their old traditions and their ancient ways, were not able to resist the great power of the attraction of Baghdad, capital of the world.”27 By the end of the ninth century, the academies, with their teachers and students, moved to Baghdad. They kept the names of their cities of origin, but they functioned in Baghdad.28 As the economic environment of the Jews changed, the community faced new problems. The Geonim were called upon to solve these problems within the framework of the law. One scholar put it this way: “The transition from an agricultural society to an urban, commercial society… created patterns of commerce and techniques of credit… which frequently did not fit exactly into

23. Ira Lapidus, 37, 81, 226–27; S. D. Goitein, Jews and Arabs: Their Contacts Through the Ages, 98–99. 24. Asaf, Tekufat ha-geonim ve-sifruta, 13–15; Norman Stillman, The Jews of Arab Lands (Philadelphia: Jewish Publication Society, 1979), 30; E. Ashtor, 58–67, 86–90. 25. Norman Stillman, “The Jew in the Medieval Islamic City,” in Daniel Frank, ed., The Jews of Medieval Islam: Community, Society and Identity, 6; Eliyahu Ashtor, “Prolegomena to the Medieval History of Oriental Jewry,” in The Jews and the Mediterranean Economy, 10th–15th Centuries (London: Variorum Reprints, 1983), 147; Lapidus, 44–45. 26. Brody, 63. 27. Assaf, Tekufat ha-geonim ve-sifruta, 15; Brody, 31. 28. Among other factors leading to the move to Baghdad: it placed the academies at “the political and intellectual center of the empire,” and “facilitated access to high-ranking Muslim authorities.” Brody, 36–38.

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the frame of accepted halakhah… The Geonim were thus obliged to accommodate halakhic theory to economic reality.”29 This is what happened regarding mortgages. When Jews sought to obtain cash from their fields and vineyards, the Geonim of Sura allowed them to accomplish their goal through Mortgages with Deductions, transactions that benefited both borrowers and lenders. And as the Jewish population became urbanized, these mortgages started to be used in the cities. Two of our responsa, those of R. Nahshon Gaon and R. Sherira Gaon, deal with mortgages . of stores, and a third, that of R. Hai Gaon, although couched in the talmudic terminology of “field” and “fruit,” may also, in reality, have been about an urban property.30 Furthermore, the Geonim were not immune to the influences of the Muslim community in which they resided. Although Islamic law forbade usury as did Jewish law, the Islamic jurists invented devices to allow the credit society of their time to function without hindrance.31 It should not surprise us, then, to discover that when the question of the legality of these Mortgages with Deductions came before the Geonim of Sura, and they found a talmudic authority, Rabina, who permitted them, that they allowed them as well. With precedent in hand, the Sura Geonim declared Mortgages with Deductions to be legal, and apparently these mortgage arrangements were widely employed. Adjustments in the Law We now turn to our second question. How is it that the views of R. Sherira and R. Hai differed so sharply from those of the Geonim of Sura? In view of the economic pressures outlined above, how can we explain the refusal of the Pumbedita authorities to allow Mortgages with Deductions? Before seeking to answer this question, let us look at two other adjustments 29. Gideon Libson, “Halakhah and Reality in the Geonic Period,” in Daniel Frank, 70. By the same author, see also “Minhag ke-gorem megasher bein halakhah le-vein kalkalah ba-halakhah ha-yehudit u-va-halakhah ha-muslemit be-tekufat ha-geonim,” in Menahem Ben-Sasson, ed., Dat ve-kalkalah, yahase gomlin (Jerusalem: Merkaz Zalman Shazar . Le-Toldot Yisrael, 1995), 269–71. 30. See Menahem Ben-Sasson, Tsemihat . ha-kehila ha-yehudit be-artsot ha-islam, Kairouan 800–1057 (Jerusalem: Magnes, 1996), 101, n. 275. 31. N. J. Coulson, A History of Islamic Law (Urdu Bazar-Lahore: Lahore Law Times Publications, 1979), 72–73; R. M. Savory, “Law and Traditional Society,” in Introduction to Islamic Civilization (Cambridge: Cambridge University Press, 1976), 59. See also Ziaul Haque, Riba: The Moral Economy of Usury, Interest, and Profit (Kuala Lumpur: S. Abdul Majeed, 1995), 83–106.

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that the Geonim of Sura made in the law in light of the migration from the farms to the cities. One had to do with collecting debts from the heirs of debtors. According to talmudic law, a creditor could exact payment from a debtor’s heirs only if the heirs had inherited land. Likewise, a widow or a divorcee could not receive her payment as guaranteed in her ketubah unless her husband owned land.32 In geonic times, however, with few landowners among the Jewish populace, a need was felt to make a change in the law. Thus, near the end of the eighth century, it was ordained33 that debts and ketubah obligations could be recovered from the personal property of heirs as well as from their real estate.34 The reason behind this ruling was stated by R. Moses b. Jacob, Gaon of Sura (second quarter of the ninth century). It was “because here most of the people do not own land and the later Rabbis made an enactment in order not to close the door before borrowers and in order to help a woman receive her dues from her ketubah.”35 In the years that followed, this ordinance was sustained in the responsa of R. Moses, R. Amram36 37 (the latter two from the third quarter of the ninth century), and R. Nahshon . all Geonim of Sura. But the Pumbedita authorities opposed this ruling. One anonymous responsum informs us that “the heads of the academy of Pumbedita… [exact payment] from land but not from movables,”38 and R. Hai Gaon (the last of 32. “The law is [that we may exact payment] from real property but not from movable property.” B. Ketubot 51a. 33. R. Sherira Gaon states (B. M. Lewin, ed., Iggeret R. Sherira Gaon [Haifa: 1921], 108) that the Geonim of Sura and Pumbedita joined together in making this enactment. 34. Iggeret R. Sherira Gaon, 105, 108. 35. Hemda genuzah (Jerusalem: 1863, reprinted, 1967), #65; See B. M. Lewin, ed., . Otsar ha-geonim, vol. 8, Ketubot, #531 and H. Tykocinski, Taqanot ha-geonim, 30–31. 36. Ginze kedem, I (Haifa: 1922), 70; Jacob Mann, “Addenda to ’The Responsa of the Babylonian Geonim as a Source of Jewish History,” Jewish Quarterly Review, New Series 11 (1920–21): 457–59. 37. In Sefer ha-Itur, Ketubah demirkhasa, 34a, the responsum is attributed to R. Sar Shalom and R. Natronai, whereas in the same work at Shetarot ha-yots’in, 34c, it is attributed to R. Nahshon and R. Natronai. Schepansky (Ha-Takanot be-yisrael, Takanot . ha-geonim, vol. 3, book 2 [Jerusalem: Mossad Harav Kook, 1992], 256, n.8) shows that the correct attribution is R. Nahshon as opposed to Tykocinski (31–32), who attributes it to R. . Natronai. See also Robert Brody, “Kelum hayu ha-ge’onim mehokekim?” 305, n. 129 and . Neil Danzig, Mavo le-sefer halakhot pesuqot, 304–5, n. 143. 38. Otsar ha-geonim, vol. 8, Ketubot, #534. See Assaf, Tekufat ha-geonim ve-sifruta, 273–75; Tykocinski, 30–50; Brody, “Kelum hayu ha-geonim mehoqeqim?” 304–14. Pum. bedita’s opposition is surprising since its authorities, according to R. Sherira Gaon, had

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the Pumbedita Geonim), although he allowed creditors to recover debts from the movable property of heirs, did not agree that the ordinance should apply generally to ketubah dues.39 One more adjustment in the law that the Geonim of Sura made in deference to the fact that Jews were no longer landowners had to do with a method of acquiring ownership of movable goods. According to Talmudic law, one way a person could acquire movable property was to do so as an adjunct to the acquisition of real property.40 In this way a buyer did not have to grasp, pull, or lift the movable item he was buying. In fact, he did not have to be anywhere near the item. He could simply acquire the goods along with the acquisition of land. This technique was particularly useful when a merchant wanted to transfer authority to an agent to handle merchandise or to recover a debt in a distant place. As inter-city commerce grew, this method of acquisition grew in popularity. In the geonic period, however, because of the dearth of Jewish land ownership, a difficulty arose. How could one use his land to transfer the ownership of goods if he had no land? The Geonim of Sura provided a solution. Since every Jew was considered to be an owner of four cubits of land in Israel, one’s movable property could be transferred along with the theoretical ownership of his land in Israel. The oldest responsum on this subject was from the pen of R. Hilai, Gaon of Sura at the end of the eighth century.41 R. Nahshon of . 43 the ninth century42 and R. Samuel b. Hofni of the tenth-eleventh centuries, . 44 both Geonim of Sura, also permitted this practice. participated, along with the Geonim of Sura, in establishing this enactment in the first place. Brody suggests that R. Sherira’s report may be inaccurate and that the Pumbedita authorities did not participate in its promulgation (Brody, “Kelum hayu ha-geonim mehoqeqim?” 307). . 39. Sha’are tsedek, part 4, gate 5, #31. 40. M. Kiddushin 1:5. 41. Avraham Eliyahu Harkavy, Zikhron la-rishonim ve-gam la-aharonim, vol. 1, 90, . #199. Since this responsum of R. Hai Gaon speaks of R. Hilai as one of the early Geonim, it probably refers to R. Hilai Halevi of Naresh, the first of four Geonim who bore the name R. Hilai. 42. She’elot u-teshuvot maharam b. R. Barukh, #536. 43. Sefer ha-Itur, Agav, 15c; Ishtori Haparhi, . Kaftor u-ferah. (Jerusalem: Avraham Moshe Luntz, 1897), 356. 44. Among the Geonim of Sura, R. Saadiah’s name may be added to those who allowed the use of the four cubits in the land of Israel, as reported in a responsum of R. Hai Gaon (Harkavy, 93, #200). See also the responsum of an anonymous Gaon in Sefer ha-Pardes (Budapest: H. L. Ehrenreich, 1924), 102 and in Sefer Kol bo (Tel Aviv, 1964), #128.

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But R. Hai, Gaon of Pumbedita,45 limited this method of acquisition to cases where an agent was authorized to recover a debt or a deposit. In the case of an ordinary sale of movable property along with real property, he held that the seller actually had to own the real property.46 What we see, then, is a pattern. The decision of the Geonim of Sura to allow Mortgages with Deductions was one of a series of rulings from their academy aimed at easing the people’s economic burden, while the Sages of Pumbedita were more conservative in this area and more reluctant to make adjustments in the law.47 In Simha . Assaf’s essay on the differences between the teachings of the academies of Sura and Pumbedita, he notes that “in general, one can say that the academy of Sura was more awake [than the academy of Pumbedita] to what was taking place then in the Jewish world.”48 The willingness of the Sura authorities to adjust the law to the altered economic circumstances of the Jews supports his thesis. 45. Another Gaon of Pumbedita, R. Tsemah. ben Paltoi of the ninth century (Assaf, Teshuvot ha-geonim, [Jerusalem: Hamadpis, 1927, #55]), permitted the use of the four cubits for authorizing an agent to recover a debt or a deposit. Since he did not explicitly state that one had to own property for an outright sale of movables, it is not clear whether or not he was as restrictive as R. Hai Gaon. The same can be said regarding the responsum of R. Samuel ben Hofni of Sura. From the wording of his responsum, it is difficult to know . the extent to which he allowed this procedure. 46. Harkavy, 93, #200. It is not always clear, from the various responsa on the subject, how each individual Gaon made use of the four cubits in the land of Israel for acquisition of movable property. Assaf (Tekufat ha-geonim ve-sifruta, 278), Louis Ginzberg (Geonica 2, 290), and Benjamin Lewin (Sefer ha-Metivot, Introduction, 3) see R. Hai’s opinion as an example of Pumbedita’s view differing from that of Sura. Tykocinski (82–83) and Israel Schepansky (Ha-Takanot be-yisrael, Takanot ha-ge’onim, vol. 3, book 2 [Jerusalem: Mossad Harav Kook, 1992], 234–39) believe that a difference of opinion between the academies cannot be demonstrated. See also Nahum Rakover, Ha-Shelihut . ve-ha-harsha’a ba-mishpat ha-ivri (Jerusalem: Mossad Harav Kook, 1972), 254–65, Tsvi Groner, Rav hai gaon ve-darko ba-halakhah, Doctoral Dissertation, Hebrew University (Jerusalem, 1974), 155, 166–67, 177–78 and Gideon Libson, “Minhag ke-gorem megasher bein halakhah le-vein kalkalah ba-halakhah ha-yehudit u-va-halakhah ha-muslemit be-tekufat ha-geonim,” in Frank, 270–71. 47. David Sklare, in discussing the later part of the Geonic period, points out that “the Sura yeshiva seems to have been more open to Arabic culture...than Pumbedita.” Sklare, Samuel ben Hofni and his Cultural World (Leiden: E. J. Brill, 1996), 96. Sura may also . have been more open than Pumbedita was to the influence of Muslim legal practices. See Sklare, 54. 48. Simha Assaf, Tekufat ha-geonim ve-sifruta, 264.

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Conclusion The Geonim did not look upon themselves as legislators. They considered themselves to be interpreters of the law and its preservers. By the same token, they were not oblivious to contemporary economic realities. There was a constant tension between the desire for preservation of Halakhah and the need for interpreting the law. The Geonim wanted to make the Talmud the foundation of Jewish life in their time and to a large measure they succeeded; by the same token, they wanted the law to serve the needs of the Jewish population of their day. It is not surprising, then, that in the matter of mortgages they would feel pulled in two directions. On the one hand, the refusal of R. Papa, R. Kahana and R. Ashi to allow the use of Mortgages with Deductions gave strong support to the view that this practice was illegal. On the other hand, the people needed to find a way to borrow. And since Rabina did allow this practice, there was a precedent for it. At the close of the geonic period, the matter still remained undecided. R. Hai of Pumbedita disallowed the practice, while his contemporary R. Samuel b. Hofni of Sura permitted it. Sages of the generations that followed did not . have the benefit of a clear-cut ruling either from the Talmud or from the Geonim.

IN THE PERIOD OF THE RISHONIM: ca. 1000–1500 In the period of the Geonim, merchants and money lenders needed capital for their enterprises. The greater the funds at their disposal, the greater their opportunity for profit. Also, ordinary persons at times found themselves in need of cash, perhaps to pay back a loan or to remit a tax. One way for a person to acquire liquid assets was to sell his property—often a difficult step to take. Because people did not want to give up their farms, vineyards, or homes, they sometimes resorted to the Conditional Sale. That is, when they sold their property they requested from buyers the right to repurchase their property should they acquire the necessary funds within a certain time frame. Though the Rishonim received a few questions dealing with such cases, the responsa indicate that the Conditional Sale was rarely practiced during the first half of the second millennium and that it was not employed as a means of avoiding the usury ban.49 49. Joseph Rivlin has studied the phenomenon of the Conditional Sale and has concluded

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But mortgages were another matter. What type of property did Jews own? Mortgage laws in the Talmud dealt chiefly with fields and vineyards because the people at that time were mostly farmers and vintners. But during the geonic period, there was an enormous migration to the cities. By the ninth century the Jews were primarily an urban population. To obtain the cash they needed, Jews mortgaged their homes.50 With the money obtained from mortgages, people could engage in enterprises, make a profit, and then redeem their property. But as we have seen, for Jews there was a special problem. Based on the biblical law against lending on interest, the Talmud placed restrictions on mortgages. Finding a type of mortgage arrangement acceptable to all occupied the Sages throughout the period of the Rishonim. North Africa The eleventh-century North African Sage R. Hananel followed the views of . the Pumbedita Geonim. Commenting on Rabina’s decision to engage in a Mortgage with a Deduction, R. Hananel stated that “the law is not in accord. 51 ance with Rabina.” The only legal form of mortgage, according to R. Hananel, was the Mortgage of Sura,52 which as we recall stipulated that after . a specified time period the property was returned to the borrower without his having to repay the loan, the lender having agreed to accept the produce he had consumed during the mortgage period as full payment. R. Isaac Alfasi, in his Halakhot, expressed the same view as did R. Hananel. . Alfasi said: A Mortgage with a Deduction, according to Rabina, is allowed, and he, himself, consumed with a deduction, … but R. Kahana, R. Papi and R.

that this was a rare practice during the period of the Rishonim. “Al kalkalah ve-halakhah: Ha-Mashkanta ve-ha-mekher ha-hozer,” Dine Yisrael 20–21 (2001): 353–95. . 50. This was reflected in the responsa literature. Questions about the mortgage of houses were addressed in the 11th century to Alfasi (See below, pp. 107–108), in the 12th century to Rabad (Rabenu Avraham ben David, Teshuvot u-fesakim, ed. Joseph Kafih [Jerusalem: Mossad Harav Kook, 1964] #131), in the 13th century to Rashba (See below, pp.110–17), in the 14th century to Rosh (She’elot u-teshuvot le-rabeinu asher ben yehiel, [Jerusalem: . Makhon Yerushalayim, 1994), klal 91, #5] and in the 15th century to Rashbash (See below p. 123). 51. Perush ha-rav hananel al ha-shas, Masekhet Bava metsia, 67a, 133. . 52. R. Isaac of Vienna, Or zarua (Zhitomir, 1862, repr. 1976) Piske bava metsia 5, #195, p. 28a, col. 1.

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Ashi did not consume with a deduction… and we agree with them and not with Rabina.53 Alfasi reiterated his rejection of Mortgages with Deductions in a responsum: As for a Mortgage with a Deduction, concerning which you inquired, we do not allow it for it is the “dust of interest,” and thus did all of the venerable Rabbis teach, that it is forbidden.54 However, in several other responsa, Alfasi allowed Mortgages with Deductions. For example, in the case of a six-month mortgage of an apartment where the lender lived in the apartment for the mortgage period, Alfasi said that the lender did not have to pay rent, but should take a deduction according to the custom of the land regarding mortgages.55 How can Alfasi’s inconsistency be explained? He forbade Mortgages with Deductions in the Halakhot and in one responsum, but allowed them in other responsa. Some scholars56 have suggested that Alfasi forbade Mortgages with Deductions in his native North Africa but, when communicating with the Jews of Spain, bowed to their local custom. This writer, however, believes that it is not necessary to maintain that Alfasi expressed different views to different communities, but rather, that his responsa reflect the conflict he felt between the dictates of the law and the practices of the community. In the responsa where Alfasi allowed Mortgages with Deductions, the questions posed to him dealt with cases where lenders were already enjoying the fruit of the property they had occupied. The question was whether the lender could continue to benefit from the property after the mortgage period had expired. Alfasi made 53. Alfasi pages, Bava metsia, chap. 5, 38a. 54. She’elot u-teshuvot R. yitshak . b. ya’akov alfasi, Dov Tzvi Rotstein, ed., #2. In Responsum #105, Alfasi also states that a lender who profits from the fruit of a borrower’s field consumes the dust of interest, but it is not clear, in this case, that the lender took a deduction from the debt. 55. Rotstein, #7. Other versions of this responsum are found in She’elot u-teshuvot ha-rif (Bilgorai, 1935) #156 and in She’elot u-teshuvot rabeinu yitshak . alfasi (Jerusalem, 1974) #162. See also Bilgorai #155. A similar view is expressed in Rotstein #26. 56. Rotstein, #23 and Joseph Rivlin, “Al kalkalah ve-halakhah – Ha-Mashkanta ve-ha-mekher ha-hozer,” in Iyunei halakhah u-mishpat, in honor of Professor Aaron . Kirschenbaum, Dinei yisrael 20–21, (2000–2001), 362. See also Soloveitchik “Shetar be-sefer ha-Itur,” Tarbiz. 41 (1972): 318–19 and n. 21 and Joseph Rivlin, Shetare kehilat alisena, 57.

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it clear, in each case, that such benefit was permitted only if the mortgage document included a provision for allowing the lender to maintain his use of the property after the pre-arranged loan period had expired. As for the benefit that the lender gained from the property during the mortgage period, Alfasi bowed to the “custom of the land.”57 It should also be noted that rabbinic law did not mandate the return of a lender’s profit once it had been taken. Alfasi made this clear when he stated, “At the outset, it is forbidden to establish such a mortgage, but if it has already been set up, then we do not have to cancel it.”58 It was perhaps with this in mind that Alfasi stood aside and allowed Mortgages with Deductions to continue. From a theoretical standpoint, he agreed with the Geonim of Pumbedita and R. Hananel that Mortgages with Deductions were a violation of the . law, but when faced with the ongoing practice in the community he served, he yielded.59 Germany In Germany, the first to allow Mortgages with Deductions was R. Gershom, Me’or ha-golah, who lived during the first part of the eleventh century. R. Gershom was asked60 about the case of a man who mortgaged his vineyard, received a fixed annual deduction from his debt, and allowed the lender to take a specified amount of produce from the vineyard. The questioner wanted to know if this mortgage was allowed or whether it was forbidden because the lender was benefiting from the borrower’s vine. R. Gershom responded that the arrangement was allowed as long as it was clear that the lender could profit only to the extent that the vineyard yielded its fruit. Were the vineyard to fail, then the lender would still have to make the deduction from the debt and would suffer a loss. According to R. Gershom, the creditor was not like a lender who takes interest. Rather, “he is like a buyer.” He provides money to the property owner, makes an annual deduction from the debt and thereby buys the right to take a certain amount (not guaranteed) of fruit from the vineyard.

57. Rotstein, #7. In the Bilgorai #156 version of this responsum, the phrase “custom of the place” is used. Also of note is that even in the Halakhot (Alfasi pages, Bava metsia, chap. 5, 38a), Alfasi admitted , “Mortgages are always Mortgages with Deductions.” 58. Rotstein, #105. 59. Rivlin says that this was, in general, the practice of the Rishonim. “Al Kalkalah,” 360. 60. Teshuvot rabenu gershom me’or ha-golah, #27 and #28.

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France Later in the eleventh century, Rashi, like R. Gershom, expressed the idea that it was the risk that the lender took that made it legal for him to profit from a Mortgage with a Deduction. He deducts a fixed amount from the debt each year, for it appears like he sells it to him, and there is a doubt [as to whether the lender will make a profit], for even if [the field or vineyard] is stricken and there is no produce, [the lender] still deducts the fixed amount. Therefore, even when [the lender] takes more from him [than the deduction] it is not considered interest.61 Emphasizing that it was the risk that the lender assumed that allowed him to take the produce of the mortgaged field, Rashi made a distinction between houses and fields. Profits from a house were, in Rashi’s view, a sure thing and not offset by a nominal deduction from the debt. Therefore he disallowed Mortgages with Deductions in the case of houses. It is forbidden to lend on a house and to live in it even with a deduction… But this is not like the mortgage of a vineyard, for in that case there are times when he does not take anything from it, and even here [in the case of a vineyard], he is buying the produce with a deduction with a doubt [as to whether the vineyard will produce fruit]. But here [in the case of a house], this one [the lender] always benefits and there is no doubt.62 Another point that Rashi made regarding Mortgages with Deductions relates to a distinction made in the Gemara between places where it was customary to force lenders to leave the property whenever the borrower was able to repay his debt, and places where lenders could not be forced to leave during a certain period of time. The difference was important because if there was a time frame during which the lender had uncontested control of the property and unquestioned rights to the fruits of the property, then the transaction could be considered similar to a sale. In return for the deduction that he made from the debt, the lender purchased the rights to the property for a specified time period. In the Gemara, Rava is cited as saying that in a place where the lender

61. Rashi’s commentary on Bava metsia 67b-68a, s.v. Be’atra demesalki. 62. Rashi’s commentary on Bava metsia 64b, s.v. Ka mashma lan; Teshuvot Rashi, part 2, #342.

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could be forced to leave whenever the borrower wished to repay the debt, the lender could not enjoy the produce of his mortgage without taking an annual deduction.63 From this statement, Rashi concluded that his ruling, that Mortgages with Deductions were allowed for fields and vineyards, but not for houses, applied only in places where a borrower could bring his money and force the lender to leave at any time. In places where the lender had the use of the property for a fixed amount of time, and the borrower could not force him out until that time period was over, the transaction was considered more like a sale than a loan; such a mortgage, according to Rashi, was allowed with or without a deduction.64 By allowing a mortgage, with or without a deduction, when the lender could not be evicted, and by allowing mortgages of fields and vineyards with a deduction even when the lender could be evicted, Rashi took a significant step toward easing the restrictions against mortgage transactions. The distinction that Rashi made between houses and fields was incorporated by the Rambam into his Mishnah torah. He stated: If he mortgages his courtyard and the like with a deduction, it is the dust of interest; if he mortgages his field with a deduction, it is allowed.65 Furthermore the Rambam explained that a token deduction was sufficient to meet the requirements of the law. “What is a deduction?” asked the Rambam. And he answered, “For example, if he lent him a hundred dinars and deducted a silver ma’ah each year.”66 In the Rambam’s example, it would take six hundred years of deductions to eliminate the debt. Yet, as far as fields and vineyards were concerned, he allowed it. Rashi’s grandson, R. Jacob Tam of Ramerupt, went even a step further than Rashi and Rambam. He said that the lender’s profit from a house also had its risks. In the case of a field, the crops could suffer from a drought or a flood, and in the case of a house, R. Tam asserted, it could burn down or collapse. R. Tam’s point was that as long as the lender deducted a fixed amount from the debt each year, there was no prohibition against a mortgage.67 R. Tam pointed out that the Mishnah’s rule prohibiting a lender from living

63. B. Bava metsia 67b. 64. Rashi’s commentary on Bava metsia 67b, s.v. Be’atra demesalki. 65. Mishneh torah, Hilkhot malveh ve-loveh 6:7. 66. Ibid. 67. Tosafot, Bava metsia 64b, s.v. Velo.

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in a borrower’s house rent free or at a discount68 applied when, after a loan was given, the lender asked for such a concession. The prohibition applied in the case of a house and in the case of a vineyard as well. But if an arrangement were made, at the time of the loan, for a Mortgage with a Deduction, R. Tam allowed it whether it was a house, a field, or a vineyard that was mortgaged.69 Furthermore, R. Tam commented on the reason that the Rabbis in the Talmud, R. Kahana, R. Papa and R. Ashi, did not consume with a deduction. It was not because it was forbidden, but because these Rabbis practiced a special form of piety. They considered themselves to be among those who, at times, avoided even what the law allowed. On the other hand, Rabina, who did consume with a deduction, did so out of humility; he did not consider himself and did not want to be considered among the pious ones. R. Tam’s view was that, in Rabina’s opinion, Mortgages with Deductions were allowed by law, and that was good enough for him.70 R. Isaac of Dampierre (Ri), a nephew of R. Tam, a great-grandson of Rashi and one of the leading Tosafists, agreed with Rashi that a Mortgage with a Deduction was like a sale and should be allowed. He also agreed with R. Tam that it should be allowed for houses as well as for fields and vineyards.71 Provence R. Abraham b. David of Posquieres (Rabad) also made allowances for mortgages. He supported the position of Rabina and, in reference to the opposing view of R. Kahana, R. Papa, and R. Ashi, pointed out that the talmudic text said that the three scholars “did not [themselves] benefit [from Mortgages with Deductions]. It did not say that they forbade [such mortgages].” Rabad’s view (like that of R. Tam) was that these Sages were especially pious and refused to allow themselves to take part in Mortgages with Deductions. This

68. M. Bava metsia 5: 2. 69. Sefer ha-Yashar le-rabeinu tam, Helek ha-hidushim #592; Tosafot, Bava metsia . . 64b, s. v. Velo. 70. Tosafot, Bava metsia 67b, s. v. Rabina. 71. Piske Ha-Rosh, Bava metsia 5: 16–17, 64b. Among the sages of Ashkenaz, only R. Eliezer b. Joel Ha-Levi (Ravyah) is recorded as holding the view that Mortgages with Deductions were forbidden. This report comes from R. Meir Ha-Kohen of Rothenberg in Hagahot maimoniyot (Hilkhot malveh ve-loveh 6: 7); R. Moses of Coucy, in Sefer Mitsvot gadol, follows the position of Rashi that such mortgages are permissible for fields but not for houses (Lo ta’aseh, Alter Farber, ed., [1991] #193, p.194).

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did not mean that they prohbited the general population from engaging in this practice.72 The Talmud had ruled73 that in a place where they could evict the lender whenever the borrower came up with the money, a mortgage was allowed only if an annual deduction was taken. Rabad was aware that when mortgages were written for a specific time period, and the time expired, the borrower was allowed to pay off his debt and retrieve his property at any time. Such a mortgage would then be considered as being in a place where the lender could be evicted, and thus would be disallowed since the time period for the deductions had expired. Rabad had a solution for this problem. He followed a formula first proposed by R. Isaac Alfasi,74 which stated that after the mortgage period elapsed, a Mortgage with a Deduction was still allowed if the contract included the clause, "You may profit [from this property] with a deduction as long as this mortgage remains in your hand.”75 This meant that if Rabad’s suggestion was followed, mortgages remained legal and operable even after their stipulated time period had expired. Furthermore, Rabad held that, as a rule, mortgages in his day could be considered as being in a place where they did not evict the lender. These are his words: The custom has spread, in all the places, that [the borrower] can redeem his mortgage only at the beginning of each year, for if he comes one day into the year, he is not allowed to redeem it until the end of the year. And this surely is a place where they cannot evict him; and he is like one who, after the first day of the year, sells [the produce of his field] each year.76 With this reasoning, Rabad freely allowed Mortgages with Deductions. The lender had bought the produce of the property for the price of the deduction; the produce might be large and the deduction small; it might be a bargain purchase for the lender, but it was still considered a purchase and was allowed. Finally, Rabad stressed that the universal custom in his day was to engage in Mortgages with Deductions. He cited a talmudic passage, "Go out and see 72. R. Solomon b. Adret, Hidushe ha-rashba al masekhet bava metsia, 150–51. . 73. B. Bava metsia 67b. 74. See responsa listed above in n. 50. 75. Hidushe ha-rashba, 151. . 76. Sefer ha-Terumot, gate 46, 3: 20, p. 902.

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what the people are doing."77 As one Sage put it, “Rabad found a way to accommodate the custom that we practice.”78 Spain Evidence of the practice of Mortgages with Deductions is found in Spain early in the period of the Rishonim. A collection of contracts from the city of Lucena, written between 1020 and 1025, contains two contracts that provide for such mortgages. The form reads: I have received from him so many dinarim, and for them I have mortgaged to him the courtyard and houses that I own here in Lucena… This is a complete mortgage with such-and-such a deduction each year… [He] may live in the courtyard for a whole year.79 R. Judah of Barcelona, early in the twelfth century, compiled a book of contracts and made provision in his collection for Mortgages with Deductions. The borrower mortgaged his field and said to the lender that he could harvest the fruit of the field, taking an annual deduction from the debt, until the money was repaid.80 The contracts of Lucena and the collection of R. Judah of Barcelona show that Mortgages with Deductions were practiced in Spain. This presented a dilemma in the thirteenth century for the great Spanish authority R. Moses ben Nahman (Ramban), not unlike the dilemma faced by his “great teacher,” . R. Isaac Alfasi, two centuries earlier. In theory, Ramban believed that Mort-

77. Hidushe ha-rashba, 151. The quotation is found in several places in the Talmud, for . example, B. Berakhot 45a. 78. R. Samuel Ha-Sardi in Sefer ha-Terumot, gate 46, 3: 20, p. 901. 79. Rivlin 131–35. See also 54–59. In Rivlin’s article, “Al kalkalah,” 362, he reports that R. Joseph ibn Migash (Sh’ut ha-ri migash #1, [Jerusalem] 1959) says that the case in question contains the dust of interest because the mortgagor lived in the house he mortgaged. Rivlin concludes that it was ibn Migash’s view that if the mortgagee had enjoyed the property and had taken a fixed annual deduction, it would not have been forbidden. Rivlin shows in this article (360–64) that though the Rishonim were opposed in theory to allowing the Mortgages with Deductions they bowed to the practice of the community and did not stand in the way of the people’s needs. 80. S. J. Halberstam, Sefer ha-Shetarot le-rabeinu yehuda ha-barziloni (Berlin, 1898), 63–64. R. Judah speaks of two kinds of Mortgages with Deductions, one in which the borrower agrees to mortgage his property from the start, the other in which the lender does not occupy the property unless the borrower fails to repay the debt by a certain date. In both cases the contracts provide for an annual deduction.

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gages with Deductions were wrong, for in his talmudic commentary, he said that [a Mortgage with a Deduction] is the dust of interest and every mortgage is always forbidden except for the Mortgage of Sura.81 But in a responsum, where he needed to give a practical answer to a practical question, he stated that, “one may consume with a deduction.” This conflict between theory and practice was openly faced in another responsum. Ramban began his answer by repeating what he said in his talmudic commentary: A mortgage with a yearly deduction is forbidden whether in a place where they evict him or whether in a place where they do not evict him in light of what our teacher [Alfasi] stated in the Halakhot.82 But he continued by admitting that this issue had been a highly divisive one among the Rabbis: And the end of the matter is that it is a very shaky law, and that the decision of our great rabbi [Alfasi] to forbid depended on R. Kahana, R. Papa, and R. Ashi, who would not take profit from [a mortgage] with a deduction, and it can be said that they did so to be stringent upon themselves… And the whole subject is a grating one. Ramban concluded his responsum by figuratively throwing up his hands and saying, The end of the matter is: Let the community engage in this practice, for 81. R. Moses b. Nahman, Hidushe ha-ramban (Jerusalem, 1929; repr. Jerusalem, 1991) . . Bava metsia 5, 67a, p. 141b. The 14th century author of Magid mishnah, R. Vidal of Tolosa, bases his analysis on Hidushe ha-ramban and says simply that Ramban agrees with . Alfasi, Hilkhot malveh ve-loveh 6:7. R. Meir Ha-Levi Abulafia of Toledo (Ramah), an older contemporary of Ramban, expresses views similar to those of Rashi and Rambam, allowing Mortgages with Deductions for fields and vineyards but forbidding those of houses and stores even if they include annual deductions. 82. Teshuvot ha-ramban, Simha Assaf, ed., (Jerusalem: Mekitse Nirdamim, 1935; repr. Jerusalem, 1967) #41 and Teshuvot rabenu moshe ben nahman, Hayim Dov Shu’al, ed. . (Jerusalem: Mossad Harav Kook, 1975), #42. Apparently, the Ramban was not aware of the responsa of Alfasi, which made allowances for Mortgages with Deductions. Neither was his contemporary R. Samuel Ha-Sardi aware of these responsa. Both refer only to Alfasi’s prohibition of such mortgages as stated in the Halakhot.

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this is an undecided law, which is weak and unstable in our hands. A contemporary of Ramban, R. Samuel Ha-Sardi, in his work Sefer ha-Terumot recounted the views of earlier teachers, but stated that the universal practice in his time was for mortgage lenders to take an annual deduction from their debts and to profit from the mortgaged property. He said “We need to understand and to explain how this custom has spread and come to be permitted.”83 R. Samuel then explained the position of Rabad. In a locale where mortgages were set up for a fixed amount of time, Mortgages with Deductions were allowed. Furthermore, all mortgage contracts were written for a specified time period and therefore all Mortgages with Deductions were permissible. Again, following Rabad, R. Samuel stated that although the pious among the Rabbis did not engage in such mortgages, the people, as a whole, were not forbidden to do so. Finally, accepting Rabad’s arguments, but still, apparently, feeling apprehensive about rejecting the norms advanced in Alfasi’s Halakhot, he concluded his discussion in the mode of the Ramban: We must not erase what is in the hands [of the people] and we need to allow the community to engage in this practice with the permission of the law which [in this case] is shaky, unstable, and undecided.84 The contracts of Lucena and the collection of contracts of R. Judah of Barcelona testify to the existence of Mortgages with Deductions in Spain in the eleventh and twelfth centuries. In view of the comments of Ramban and R. Samuel Ha-Sardi, it is clear that these practices continued into the thirteenth century. The great Spanish authorities of the thirteenth century, whose natural inclination was to follow the conservative teachings of the Geonim of Pumbedita, of R. Hananel and of Alfasi’s Halakhot, were resigned . to accept what was going on in their community. This was a case of where the rabbinic Sages, rather than affirming halakhah to guide the people, observed the community’s custom and followed the people. We have seen how the restraints against mortgage practices were loosened over the generations. This process continued with the rulings of R. Solomon ben Adret of Barcelona (Rashba), the leading rabbinic authority during the second half of the thirteenth century. Thousands of questions came to him from all over the Jewish world including several on the subject of mortgages. 83. Sefer ha-Terumot, gate 46, 3: 20, p. 900. 84. Ibid., 903.

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One had to do with meat rights.85 The king granted a certain Jew a daily supply of lamb or its monetary equivalent—a privilege that was passed from one generation to the next. The question that came before Rashba dealt with someone who had inherited this right from his father. This man then took a loan and mortgaged his right to the meat with the proviso that he receive an annual deduction from his debt. From then on, the lender collected the daily allowance of meat. In the question that came to Rashba, the borrower claimed that the transaction was illegal in that it violated the ban on interest. The borrower wanted to be paid back the value of the meat taken by the lender or, at least, to stop the lender from taking further meat. The borrower maintained that even if the mortgage of a field with a deduction was legal, it was because there was some risk to the lender; the field might not yield its crop. But in a case where the king had guaranteed the meat rights, the lender’s profits were certain, and the arrangement should be disallowed as usurious. R. Solomon, however, rejected the arguments of the borrower. He replied that since the lender took an annual deduction from the debt, the arrangement was legal. Every case of a deduction is like a sale, except that he gives him a bargain price, and therefore we allow a Mortgage with a Deduction. Before concluding his responsum, Rashba added that when a Jew enjoyed a right from the king, it was even more risky than the case of a field or a vineyard, and, therefore, there was no reason to disallow the transaction. Another question addressed to Rashba dealt with the case of a person who mortgaged some books.86 When the time came to repay the loan and the borrower asked for the return of the books, the lender replied that the books had been lost in an unavoidable accident. Rashba answered that the issue depended on whether or not an agreement had been made for the lender to take a deduction from the debt for the use of the books. Without a deduction the arrangement was strictly forbidden, “but if they stipulated that there be a deduction, then it is allowed.” A third question on mortgages that came before R. Solomon dealt with a house.87 Reuben mortgaged his house to Simon; Simon’s travels took him to another land; Reuben then mortgaged the house to Levi; Levi then lived in

85. R. Shlomo b. Adret, She’elot u-teshuvot rashba, part 2, #213. 86. Ibid., part 2, #332. 87. Ibid., part 2, #381.

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the house for two or three years; when Simon returned from his travels he demanded that Levi pay him rent for the years that he had stayed there. Levi responded that Reuben, the owner of the property, had mortgaged it to him and that he did not have to pay rent. Rashba responded that because the questioner omitted vital information about the mortgage contract, he would have to make certain assumptions. He would assume that the contract was written in the normal fashion of the time—namely, that the lender was to make a deduction from the debt each year, that the mortgage was for a specified time period, and that the mortgage was to remain in the hands of the lender as long as the debt was unpaid. Rashba concluded, then, that even if Reuben did not mortgage the house to Levi until after Simon’s mortgage period had expired, if the debt had not been repaid, the profit from the house belonged to Simon; thus Levi had to pay Simon for the rent. In the last sentence of this responsum, Rashba disputed the opinion of Rashi and Rambam by saying, “Our custom is to consume even the mortgage of a house with a deduction.” In all three of the responsa cited, the one dealing with meat rights, the one dealing with books, and the one dealing with a house, a common thread ran through Rashba’s replies: Mortgages were allowed if the lender took an annual deduction from the debt. In making this ruling, Rashba rejected the opinion of Alfasi (as expressed in the Halakhot), which forbade mortgages even with deductions. He also rejected the views of Rashi and Rambam, who allowed such mortgages for fields but not for houses. Rashba, in fact, went a step further than Rabad did in allowing Mortgages with Deductions. Rabad had admitted that the Talmud would not allow a Mortgage with a Deduction in a place where the creditor could be evicted any time the debtor repaid the debt (although he maintained that all mortgages in his day were written for a specified time period). In contrast, Rashba claimed that it did not matter whether or not the creditor could be evicted. In his view, Mortgages with Deductions were allowed in all cases.88 Furthermore, Rashba ruled that a requirement made by Rabad was not necessary. Rabad had said that the mortgage contract should include a clause to the effect that as long “as this mortgage remains in your hand, you may profit [from the property] with a deduction.” In Rabad’s view, it was this stipulation that made it possible for the lender to profit even after the mort88. Ibid., part 3, #43.

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gage period had expired. Rashba did not require this clause. He ruled that as long as the borrower had not actually said to the lender that he was ready to repay his debt, the mortgage continued with its annual deduction, and the lender could continue to profit from the property.89 Rashba lived only a generation after Ramban, but a sharp contrast is discernible in their attitudes toward Mortgages with Deductions. Ramban was hesitant to allow such mortgages.90 His inclination was to defer to previous halakhists who forbade such transactions. He reluctantly agreed to the practice because people had been engaging in it for many years and he felt powerless to stop them now. Rashba, on the other hand, was unapologetically lenient. In his view, there was no question that Mortgages with Deductions were allowed and that rabbinic law did not stand in their way.91 This change in outlook from Ramban to Rashba may be partly explained by the continued growth of industry and commerce in the late thirteenth century and in the first part of the fourteenth.92 During the last quarter of Rashba’s life, Aragon was ruled by Jaime II, who protected the Jews and encouraged their full participation in the economic life of the Crown.93 Rashba, in fact, came from a family of money lenders, and until he accepted a rabbinic post in Barcelona, he was himself a financier.94 The difference between Ramban and Rashba may also be a reflection of the literature they produced. Ramban’s major works were commentaries in which he devoted great attention to defending the views of the Geonim and R. Isaac Alfasi. Although Rashba also wrote commentaries, more than any other medieval Sage, he spent his time responding to questions addressed to him, and more than any other medieval Sage, his ear was attuned to the

89. Ibid. 90. The same may be said of R. Samuel Ha-Sardi. 91. Rashba’s lenient attitude toward Mortgages with Deductions is seen also in recently published Rashba responsa from manuscripts of Israel’s National Library and the Hebrew University in Jerusalem. Shlomo Zalman Havlin, “Teshuvot hadashot le-ha-rashba . be-inyane ribit,” Yeshurun 6 (2002): 56 and 70. 92. J. N. Hillgarth, The Spanish Kingdoms 1250–1516, 32–42; Bernard Reilly, The Medieval Spains, 141–44; MacKay, Spain in the Middle Ages, 77; O’Callaghan, A History of Medieval Spain, 470. 93. Assis, Jewish Economy in the Medieval Crown of Aragon, 60–63, 78–79, 87–94. 94. Yom Tov Assis, The Jews of Barcelona 1213–1291, Regista of Documents from the Archivo Capitular (Jerusalem: The Henk Schussheim Memorial Series, 1988), 7–8.

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economic circumstances of his time.95 In any case, by the end of the thirteenth century, the practice of Mortgages with Deductions was widespread and was approved by the leading rabbinic authorities. In the fourteenth century, the same question that had been posed to Rashba, about mortgaging the king’s meat privileges, came before R. Yom Tov ibn Asevilli (Ritba).96 Like his teacher, Rashba, Ritba also ruled that it was legal to mortgage such rights, and he added: All Mortgages with Deductions for fields and vineyards are permitted, and this case [of meat privileges] is similar to a field, for it is not completely secure, for there could be accidents and circumstances where there could be unusual expenses. Even more so [is this mortgage of meat privileges allowed] since the custom in all these lands is to allow even the mortgage of a house with a deduction. Thus we see that a leading Spanish authority of the generation after Rashba took a position allowing all types of Mortgages with Deductions. One more important proposal on mortgages was made during the period of the Rishonim. It came from the outstanding Sage R. Asher ben Yehiel . (Rosh), who lived during the second half of the thirteenth and the first quarter of the fourteenth century. In his Pesakim, Rosh reviewed the opinions of previous teachers on the subject of mortgages and concluded that the law was in accordance with Rashi and the Tosafists who held that Mortgages with Deductions were allowed.97 In the course of his comments, Rosh referred to the long ignored Mortgage of Sura. The Mortgage of Sura, as stated above, called for the mortgaged property to be returned to its owner at the end of the mortgage period without 95. Joseph Rivlin put it this way. “Among the walls of the academy the sages of Israel tended toward stringency, but when they were asked to make practical legal decisions, their inclination was toward leniency, especially when dealing with situations already solidified by the custom of the place.” “Al kalkalah ve-halakhah – Ha-mashkanta ve-ha-mekher ha-hozer,” in Iyunei halakhah u-mishpat, in honor of Professor Aaron Kirschenbaum, . Dinei yisrael 20–21 (2000–2001): 360. 96. R. Yom Tov b. Abraham Asevilli, She’elot u-teshuvot, #44. 97. Piske ha-rosh, Bava metsia 5: 34, 68a; Tur yoreh de’ah, Hilkhot ribit, #172; R. Yeruham b. Meshullam, Sefer mesharim (Venice, repr. Israel, 1975), 8:5. In a responsum . (She’elot u-teshuvot le-rabenu asher ben yehiel, Jerusalem: Makhon Yerushalayim, 1994, . klal 13, #7) the Rosh points out that Rashi forbids a lender to live in a house that has been mortgaged to him whereas R. Tam allows it. The Rosh then comments that whoever behaves stringently will be blessed.

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any payment of money. Because of the requirement to return the property without getting the loan repaid, lenders had avoided this type of mortgage for generations. But R. Asher suggested that it was possible, in the case of a Mortgage of Sura, for the lender to return the property before the expiration of the mortgage period, and for the lender “to deduct from his debt according to the years that he has profited.” This allowance made the Mortgage of Sura, which was permitted by all, to be similar, in many respects, to a Mortgage with a Deduction.98 This proposal of Rosh was not entirely new. R. Moses (b. Ha-Nasi R. Todros) of Narbonne, in the twelfth century, had said that the common practice in his community of making a small deduction each year was allowed. He said that since “it was possible to completely pay off the mortgage with this kind of a deduction, a little bit at a time,” it was like a Mortgage of Sura, which all agreed was permissible. But R. Moses’ suggestion was rejected by Ramban99 and by R. Samuel Ha-Sardi100 because in the case of a Mortgage of Sura the lender did not leave the property until the mortgage period had expired, at which time he received no money. In other words, in the case of a Mortgage of Sura, it was not so much a loan as a rental for a fixed time period. But in the case described by R. Moses of Narbonne, where the loan period was not completed and the borrower had to repay a portion of his debt, the mortgage was a loan and the lender’s profit looked like interest. Rambam, in the Mishneh torah,101 had stated: A person may lend someone a hundred dinars on the mortgage of a house or a field, and stipulate that after ten years the property will return to its owner free, and [the lender] is allowed to consume the profit during the ten years even if it is worth a thousand dinars a year, for this is like someone who rents at a bargain. And likewise, if the owner of the field stipulates with him that whenever he brings the money, he will deduct ten per year, and he may evict him from it, it is allowed. And if the borrower stipulates that whenever he wants, he will calculate how long he lived there and will return to him the balance of the money

98. Piske ha-rosh, Bava metsia 5: 34, 68a. 99. Hidushe ha-ramban, Bava metsia 5, 67a, 141b-142a. . 100. Sefer ha-terumot, gate 46, 3: 20, p. 901. 101. Mishneh torah, Hilkhot malveh ve-loveh 6: 8.

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and he will depart, this is allowed, for this is only a rental, and whatever conditions are made in a rental are allowed. Rambam did not call this a Mortgage of Sura. But the permission he granted to allow the parties to cut short the loan period, which if extended would result in the cancellation of the debt, appears to be exactly what had been proposed by R. Moses of Narbonne and was rejected by later authorities. In any case, Rosh elaborated on his suggestion in a responsum.102 When asked whether a Mortgage with a Deduction was allowed, Rosh replied: If someone wants to do it in a way that is completely permissible, he should engage in a Mortgage of Sura, and let him extend the time to a hundred or two hundred years so that the deduction will be small. And the Mortgage of Sura is such that the borrower is able to make him leave any time he wishes, and he deducts according to the years.103 All through the years, the Rabbis had allowed the Mortgage of Sura to be utilized, but it had been disregarded by the business community as being unprofitable and impractical. What lender would want to forego the repayment of his debt as required by the Mortgage of Sura? The profit from the property for five years or ten years was simply not enough to compensate the lender for the loss of his loan. But here, Rosh’s idea was that the law did not limit the number of years allowed for a Mortgage of Sura. The lender could deduct a tiny amount from the debt each year, like in the case of a Mortgage with a Deduction, even though formally the contract would be written as a Mortgage of Sura. When the borrower repaid his debt, a small deduction would be made from it, and the lender would profit from his use of the property. And since the years of the Mortgage of Sura would be extended, the lender would have no fear that he would ever have to give back the property without repayment of the debt, as called for in the formula of the Mortgage of Sura. R. Asher’s proposal thus accomplished what R. Tam, Ri, Rabad, and Rashba all sought to do—that is, to allow mortgages to proceed without hindrance, but to avoid the controversy that had swirled for hundreds of years as to whether or not Mortgages with Deductions could be allowed.

102. She’elot u-teshuvot R. Asher b. Yehiel, Isaac Yudolov, ed. (Jerusalem: Makhon Or . Hamizrah, 1994), 91:6. 103. Rosh’s preference for the Mortgage of Sura over the Mortgage with a Deduction is also expressed in Tosefot ha-rosh al masekhet bava metsia, Moshe Hershler and Joshua Dov Grodzitsky, eds. (Jerusalem, 1969), 67b, 180–81.

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Two students of Rosh noted in their writings that Mortgages with Deductions were allowed. One was R. Yeruham, who wrote a work on monetary . law during the second quarter of the fourteenth century.104 The other was Rosh’s son, R. Judah. A dispute arose between a man who took a loan and mortgaged some barrels with the proviso that a specified amount would be deducted from the debt each year. When the time came to return the barrels and collect his debt, the borrower wanted the lender to deduct not just the small amount provided for in their contract, but rather the full worth of barrel rentals. He said that otherwise the lender’s profit would be usury. When the matter came before R. Judah, he ruled in favor of the lender. A Mortgage with a Deduction was allowed whether for real property or for movable goods; it did not violate the law against usury. R. Judah’s older brother, R. Jacob b. Asher (Tur) followed in the footsteps of his father in suggesting a truncated Mortgage of Sura: The only mortgage that is allowed [by all] is the Mortgage of Sura where he mortgages it to him for a certain number of years, and writes in [the contract] that at the end of these years the land will return without money. And in this way it is allowed even if he greatly extends the time until he reaches the point where only a small amount [is deducted] each year… and it is not like a loan, but rather, as if he sold him the produce of each year for such-and-such a sum even though he may make him leave any year. And when he evicts him, he deducts for the produce according to the years that he consumed… And the time may be extended so that only a tiny amount is deducted each year… and it is as if he sold him the produce of each year for such-and-such a sum.105 With this thorough explanation, R. Jacob widened the door that his father had opened and removed any rabbinic hindrance to mortgage transactions. The foremost rabbinical authority in the middle of the fourteenth century was R. Nissim (Ran),who lived in Barcelona. In his talmudic commentary, Ran appeared, like Ramban, to be conflicted. At first he rejected the Mortgage with a Deduction as the dust of interest,106 but then gave permission for the practice, which was frequently taking place in his community. He wrote:

104. Sefer Mesharim (Jerusalem, 1975), 8: 5. 105. Tur yoreh de’ah, Hilkhot ribit, #172. 106. R. Nissim b. Reuben Girondi, Hiddushe ha-ran, Bava metsia 67b. He also rejects . the extended Mortgage of Sura as proposed by Rosh and Tur.

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Today the universal custom is to engage in Mortgages with Deductions… and we hold that [Mortgages with] Deductions are allowed in all places.107 In the fifteenth century, R. Joseph Habiba, the Spanish commentator, . acknowledged that “the Mortgage with a Deduction is now the universal practice.” And he justified what went on in the community by explaining: [The lender] deducts a fixed amount from the debt, and thus it appears that [the borrower] sells him [the produce of the property]. And since it is possible that the produce of the property might spoil and not provide any profit, and [the lender] would still have to make the same deduction, therefore if he takes more [than the amount of the deduction], it is not considered interest.108 North Africa R. Simeon Duran (Rashbats) was the spiritual leader of the Jewish community of Algiers during the first half of the fifteenth century. He pointed out109 that although Rambam disallowed Mortgages with Deductions in the case of houses, there were later Sages who allowed them, and “we follow the one who is lenient and allows this practice.”110 Rabbi Solomon Duran (Rashbash) succeeded his father as head of the Algiers Jewish community. It is clear from his responsa that he followed his father’s position on the subject of mortgages. In one case a lender lived in a mortgaged house for only part of the mortgage period and did not want to make a deduction from the loan for the time that he did not live there. R. Solomon responded: If, when the mortgage was arranged, they stipulated that he would give him a deduction, then he must give him the deduction whether he lived there or not, because they stipulated.111 In another responsum, R. Solomon was asked about the Mortgage of Sura, 107. Ibid. 108. R. Joseph Habiba, Nimuke yosef, Bava metsia 5, 38a of Alfasi pages. . 109. R. Simeon b. Tsemah. Duran, Sefer ha-tashbets, part 3, #103. 110. In another responsum, Rashbats was asked about mortgage contracts. He replied that “A mortgage without a deduction is forbidden,” thus implying (but in this case not saying explicitly) that a mortgage with a deduction was allowed. Ibid., part 1, #39. 111. Solomon b. Simeon Duran, Sefer ha-Rashbash, #66.

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whether it was possible for the borrower to evict the lender before the contract years expired. R. Solomon understood perfectly that if the Mortgage of Sura was interrupted before the expiration of its contract years, then the borrower did not get his land back without payment, as stated in the Sura contract. He understood that the lender made an annual deduction from the debt, but, if the years were not fully completed, the debt was not fully canceled. Rashbash answered that if a provision for an annual deduction from the debt was made with an allowance for an early return of the property, then the mortgage was allowed. The formulation of the contract as a Mortgage of Sura made it like a rental or a sale and not like a loan, and therefore it was permitted.112 Conclusion We have seen that at the end of the geonic period, the Rabbis were divided over the issue of mortgages. Among the earliest Rishonim, R. Hananel de. clared Mortgages with Deductions to be illegal, and Alfasi was ambivalent on the matter. But, step by step, the Sages allowed the law to be relaxed. First, Rashi (and Rambam) allowed Mortgages with Deductions if the mortgaged property was a field or a vineyard, where the lender took some risk that the land might not provide a yield. Then R. Tam (and Ri) allowed such mortgages on houses and stores as well as on vineyards and fields, explaining that there was a risk with these properties as well. In the twelfth century, Rabad made the point that all Mortgages with Deductions were allowed because they were made for a specific time period. The laws against interest did not apply, he said, because the lender was, in effect, buying the property’s profit for that time period. Furthermore, Rabad made provision to allow the mortgage to continue after the fixed loan period had come to an end. All that had to be done, he proposed, was to include a clause in the mortgage contract stating that the lender could continue to profit from the property for as long as the debt was unpaid. In the thirteenth century, Rashba ruled in a number of cases allowing for Mortgages with Deductions. And, as for dealing with mortgages that continued after the stipulated time frame had expired, Rashba did not require the inclusion of any special clause in the contract. According to him, the lender could continue to profit from the property until the loan was repaid. Finally, in the fourteenth century, Rosh interpreted the Mortgage of Sura in such a way that it became, to all intents and purposes, the same as a Mort112. Ibid. #401.

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gage with a Deduction. If the contract was composed in the form of a Mortgage of Sura, which was allowed by all, and the period of the loan was extended, perhaps even to hundreds of years, then the debt would never be canceled, as called for in the Mortgage of Sura. Instead, the profit would go to the lender while a small deduction would be made each year. Rosh’s interpretation made it possible for people to engage in Mortgages with Deductions that were defined as Mortgages of Sura. During the period of the Rishonim, Jews were highly involved in trading and in money lending. They continually required credit so that they could earn their livelihoods. They often mortgaged their properties in order to obtain the cash with which to carry on their businesses. In the works of the Rabbis, phrases such as “Go out and see what the people are doing,” “We must not erase what is in the hands [of the people],” or “The universal custom is to engage in Mortgages with Deductions” were a clear indication that the rabbinic authorities were well aware of economic practices in their communities. It is not surprising that they interpreted the law so as to make mortgages among Jews legal.

IN THE PERIOD OF THE AHARONIM: ca. 1500–2000 . Early in the period of the Aharonim, R. Joseph Caro explained in the Shulhan . . arukh that if a mortgage contract was written in the form of a Mortgage of Sura, it was perfectly legal. Furthermore, he stated that if the lender took a deduction for each year of the mortgage, the borrower could repay the debt whenever he wanted and take back his property.113 Thus, although the formula for the Mortgage of Sura was used, the practical result was similar to that of a Mortgage with a Deduction. This viewpoint was upheld by R. Caro’s contemporary, R. David ibn Zimra (Egypt, 1480–1573). R. David was asked about Reuben, who mortgaged a courtyard from Simon in which the contract stated that Reuben would deduct a gold perah. every year according to the law of the Mortgage of Sura. R. David answered that the mortgage was allowed. And the mortgage shall remain as a Mortgage of Sura with permission for all people. And when Simon has the money, he may redeem his courtyard, and he [the lender] must deduct for him according to the 113. R. Joseph Caro, Shulhan . arukh, Yoreh de’ah #172:1.

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years that have passed according to what they stipulated, a gold perah. per year.114 R. Moses Isserles (Poland, 1530-1572, Rama), in his additions to the Shulhan . arukh, did not require the Mortgage of Sura contract. He said: There are some who say that even without a Mortgage of Sura one is allowed to lend. How so? If he lends for a fixed amount of time, for so many years… and he deducts for him every year, even a small amount, this is called a Mortgage with a Deduction, which is allowed… and in this matter we should follow the custom, and in these lands we allow the Mortgage with a Deduction.115 R. Mordecai Jaffe (Poland, 1535–1612, Levush) agreed with the viewpoint of the Rama, explaining that it was not necessary to write a Mortgage of Sura contract. He said: And there are those who say that even if he did not write that at the end of these years the land will return without money [as in a Mortgage of Sura] … he may lend to him as he wishes and may write that during so many years I will deduct so much for you each year, and at the end of those years, you must return to me the balance of the money for the land… This also is allowed even if he only deducts a small amount each year… and this is how it is practiced in these countries.116 Levush was one of the leading Rabbis of Polish Jewry and was well acquainted with the commercial activities of his day. The permission he gave to those who engaged in mortgages allowed the practice of his time to spread without hindrance. North Africa and the Middle East Joseph Rivlin, who has made a valuable contribution to the study of mortgages,117 has shown that in North Africa and the Middle East the Mortgage with a Deduction was largely replaced by the Conditional Sale.118 He gives 114. R. David ibn Zimra, She’elot u-teshuvot ha-radbaz, part 6, #2162. 115. R. Moses Isserles, Commentary to Shulhan . arukh #172:1. 116. R. Mordecai Jaffe, Levush malkhut, ateret zahav, #172. 117. Joseph Rivlin “Al kalkalah ve-halakhah, Ha-Mashkanta ve-ha-mekher ha-hozer,” . Dine yisrael 20–21 (2001): 353–95. 118. Although Mortgages with Deductions had largely given way in the Middle East and North Africa to the Conditional Sale, there is evidence that such mortgages were still prac-

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examples from Egypt, Turkey, Palestine, and Morocco of Rabbis in the sixteenth to eighteenth centuries who gave permission to borrowers to sell their property and then, in separate contracts, granted them the right to repurchase their possessions. Rivlin relates this phenomenon to the hardships of the Spanish exiles who, though economically pressed, wanted to continue to work their land or live in their homes. In the case of an ordinary Mortgage with a Deduction, the property was taken over by the buyer/lender who benefited from the produce of the land or from the rental of the house. Any arrangement allowing the borrower to continue to occupy the property and pay the lender a fee for its use was forbidden by the Rabbis as interest. But in the case of a Conditional Sale, with the property being completely sold to the buyer, there was no objection to the seller renting from the buyer and paying him a regular rental fee. And if he succeeded in accumulating the required funds, he could eventually buy back his property. This is what was done in the lands to which the exiles fled. Codes of Law As Rabbis of Europe compiled rules of law in the period of the early Aha. ronim, they continued to clarify what was and was not permitted regarding mortgages—in the same manner as had been done by earlier Sages. Thus R. Samuel Ha-Levi (Poland/Germany, 1624–1681) included a contract for such an agreement in his compendium of contracts called Nahalat Shiv’a.119 And . R. Shneur Zalman of Lyady (1745–1813) gave permission for a Mortgage with a Deduction when he laid out the rules on interest in his Shulhan . arukh 120 ha-rav. The same can be said regarding the rules of observance developed by R. Abraham Danzig (Lithuania, 1748-1820) in his Hokhmat adam. . And indeed the custom of the poskim is to allow it [a mortgage] even if ticed there in the 18th and 19th centuries. R. Abraham Addadi (Libya, 1801–1874) approved of such a mortgage in Libya (R. Abraham Addadi, Va-Yikra avraham, Yoreh de’ah #3), and, in Baghdad, such a mortgage was allowed by R. Joseph Avdala (1832–1909). R. Joseph wrote, “Here in our city [Baghdad], we must say that we follow the view of the Rashba, which is the custom of most places, that with a deduction it [a mortgage] is allowed and this permission is because there is a deduction.” (R. Joseph Avdala, Rav pe’alim, Ho. shen mishpat, part 2, #8). 119. R. Samuel Ha-Levi, Nahalat shiv’a, #41. . 120. R. Shneur Zalman, Peri ets hayyim, Shulhan . . arukh ha-rav, #52.

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it is not a Mortgage of Sura but rather a Mortgage with a Deduction, for example if the lender does not want it to be for a long period of time, but for some years, and he would deduct from the debt a set amount, even a small amount per year, and even if the borrower is able to make him leave at any time, it is allowed because he deducts from the debt.121 And the same permission is given in the Kitsur shulhan arukh where the . Mortgage of Sura is not even mentioned. The author, R. Solomon Ganzfried (Hungary, 1804-1886), simply says: If someone lends money on the mortgage of a house or a field or a place in the synagogue, and the lender takes the produce of the mortgage, it has to be with a deduction, that is, that he will deduct from the debt a fixed amount every year, which will be the rental that the lender gives, and even if the rental is worth more than the amount that they established between them, it is allowed.122 Disappearance in the Responsa From reading these legal digests one might imagine that mortgages were still arranged in Europe as they had been for centuries. But a study of the responsa literature from the seventeenth century on shows a sharp decline in questions regarding mortgages. Inquiries about Mortgages with Deductions began to disappear from the European responsa in the seventeenth century and were totally absent from the responsa of the eighteenth to twentieth centuries. One explanation for this disappearance is that lenders no longer occupied the property mortgaged to them. “By the end of the sixteenth century, the practice of leaving the mortgagor in possession [of his property] seems to have begun.”123 Indeed, early in the seventeenth century, a change took place in Europe that resulted in a radical alteration in the mortgage practices of the Jewish community. The major reason for this alteration was the development and expansion of banks, which occurred in Europe in the seventeenth century and later.124 121. R. Abraham Danzig, Hokhmat adam, #135:2. . 122. R. Solomon Ganzfried, Kitsur shulhan . arukh, #65:12. 123. R. W. Turner, The Equity of Redemption, 89; Hermann Kellenbenz, The Rise of the European Economy, 167–89. 124. Jean-Francois Bergier, “From Fifteenth Century in Italy to Sixteenth Century in Germany: A New Banking Concept?” in The Dawn of Modern Banking, 105–29. See also

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Lenders, rather than being individuals seeking investments, were businesses in the business of lending. That is, they were bankers or professional lenders. They were ready to take mortgaged property as collateral for their loans, but they did not wish to take the fields or the homes themselves. “The possession of land… would be just as troublesome… as a pledge of mules, trucks or shifting securities would be to a modern banker.”125 They were pleased to receive repayment of their loans with, of course, their interest payments, but they did not wish to occupy the mortgaged homes and fields during the loan period. Taking over the mortgaged property was for them only a last resort in case the debtor reneged on his payments.126 This was a profound change from the way mortgages were handled in talmudic times and throughout the Middle Ages, when lenders occupied mortgaged property and derived their profit, not from the lender’s interest payments, but from the property itself, that is from the harvest of a field or the rent of a home. Another factor contributing to the change whereby mortgagors maintained possession of their real estate was the relaxation of the rules against usury within the Christian society. When Church law stood firmly against loans on interest, lenders could profit from mortgages only by occupying the mortgaged property. But when the prohibitions were relaxed, a mortgagor could keep his land and pay interest to the mortgagee. “The Protestant Reformation brought about a change in attitude. Some of the reformers, notably Calvin and Melancthon, approved of interest at fair rates and it had become evident to many that to permit the charging of interest at

Michael North, “The Great German Banking Houses and International Merchants, Sixteenth to Nineteenth Century,” in Banking, Trade and Industry, Alice Teichova, Ginette Kurgan-Van Hentenryk, and Dieter Ziegler, eds. (Cambridge: Cambridge University Press, 1997), 35–49; Herman Van der Wee, “Monetary, Credit and Banking Systems,” in The Cambrige Economic History of Europe, vol. 5, 310–47; and Hermann Kellenbenz, The Rise of the European Economy, 178–80. 125. Garrard Glenn, Mortgages, Deeds of Trust, and Other Security Devices as to Land (Charlottesville: The Michie Company, New York: Baker, Voorhis and Company, 1943), 9. 126. For a discussion of the change from “old mortgages” where the creditor took possession of the land, to “new mortgages” where the property remained in the hands of the debtor, see Rudolf Heubner, A History of Germanic Private Law, trans. Francis Filbrick (Boston: Little, Brown and Company, 1918), 374–85. See also Edward Kenelm, An Introduction to the History of the Law of Real Property with Original Authorities (Oxford: Clarendon Press, 1875), 209–11.

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regulated rates was better than to drive borrowers to the use of subterfuges.”127 That Christian clergy found ways to allow loans on interest within the framework of Church law certainly influenced the rulings of Jewish jurists. And it was, in fact, during this same time period that the heter iska contract of Maharam made its appearance. Contracts converting forbidden loans on interest into permitted investments for profit originated in the Talmud, and, over the centuries, these contracts were developed and refined to a point where a lender could be almost certain of getting back his principal together with regular interest payments.128 The heter iska contracts were so popular with lenders that the borrowers did not find it necessary to give up their homes or their fields to the lenders.129 With borrowers maintaining possession of their properties, giving them up only in cases of default, all of the questions that had come before the Sages in previous times were now irrelevant: To what extent was the mortgagee responsible for the property? When could the mortgagee be made to leave the property? or Did the mortgagee’s use of the property constituted usury? These and many more questions simply did not apply when the borrower maintained possession of his property. So none of the responders in Poland, Russia, Hungary or Germany were asked about cases where a lender took possession of a mortgagor’s property. In fact, in a responsum of R. Judah Gruenfeld (Hungary, 1837–1903) we learn of a case where a lender does not take possession of a field that was mortgaged to him. R. Judah stated that if Reuben lends money to Simon on his field and they do not stipulate that he [Reuben] will consume the produce, … because the field still belongs to Simon, then Reuben does not acquire the produce or the field itself. If, however, it happens that if he [Simon] does not pay him, then he collects his debt from that field. But as long as he [is paid and] does not collect his debt from the field, it belongs to Simon like any other field upon which he did not lend. And if Reuben should consume the 127. William Fratcher, “Restraints on Alienation of Equitable Interests in Michigan Property,” Michigan Law Review 51 (1952–53): 540. 128. See below, pp. 159–67. 129. Shalom Lerner gives this as a reason for the disappearance of mortgages among Jews. He also says that they declined because Jews no longer were landowners. Shalom Lerner, Yesodot dine ha-mashkon ba-mishpat ha-ivri, Doctoral Dissertation at the Hebrew University, Jerusalem, 1980, 39.

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produce, [though he is unauthorized to do so], Simon can collect it in court, not because of interest but because of theft.130 This powerful responsum is a renunciation of the time-honored custom of the lender taking possession of the mortgaged property. R. Judah stated that unless the contract explicitly called for the lender to consume the produce of the land, he could not do so. The mortgaged field still belonged to the borrower. The significance of it being mortgaged was simply that it stood as security for an unpaid debt. In another case, this one related by R. Shalom Mordecai Shvadron (Poland, 1835–1911), Simon, whose house was mortgaged to a bank, took a loan from Reuben and gave him a second mortgage on his house. Even though Simon had two mortgages on his house, he continued to live in it.131 Conclusion Our evidence shows that in sixteenth-century Europe, lenders occupied the property mortgaged to them, a practice observed since talmudic times. The responsa of this period made allowances for Mortgages of Sura and even truncated ones which, to all intents and purposes, were Mortgages with Deductions. In North Africa and the Middle East, however, these mortgages gave way to sales with separate contracts allowing the borrower to reclaim his property if he had the funds to do so. But in Europe, by the seventeenth century mortgage practices had changed, and lenders no longer took possession of mortgaged property; it remained in the hands of the mortgagors. Apparently owners of property did not want to give up their property to their lenders and the mortgagees used the mortgaged property only as security to insure the repayment of their loans. The question of the legality of Mortgages with Deductions, which had been a source of debate and conflict among the Sages for generations, faded in modern times. Though the Rabbis reached a nearly unanimous agreement to allow Mortgages with Deductions, with the flow of time they became an extinct practice within the Jewish community.

130. R. Judah Gruenfeld, Kol yehudah, #52:35. 131. Shalom Shvadron, She’elot u-teshuvot maharsham, 6:214.

7

Investments IN THE PERIOD OF THE GEONIM: ca. 650–1050 The Mishnah had ordained that one could set up a storekeeper or give money to a trader on a half-profit basis. This meant that an investor could provide the funds for an enterprise and share the profits (or suffer the losses) equally with the working partner. In the Gemara this was called an iska.1 In order to avoid the possibility that the active partner’s labor would be a gift to the investor (and be construed as interest), the Mishnah had stipulated that the investor had to pay the worker for his labor.2 A formula suggested in the Tosefta was that instead of receiving a separate payment for wages, the working partner could get one-third of the investor’s share of the profit.3 In other words, if the business were to prosper, the investor would get one-third of the profit and the worker two-thirds. If the business were to fail, both would still share the losses equally. By the time of the Talmud, the custom of giving the active partner a higher percentage of the profit or a lower share of any loss, instead of a separate payment for labor, was well established. There is evidence that the Geonim exercised care to enforce the working partner’s compensation. In the Halakhot pesukot, an eighth-century work by an unknown author,4 and in R. Simeon Kayyara’s ninth-century code the Halakhot gedolot,5 it was explained that the investor had to assume two-thirds of any loss while sharing the profits equally with the working partner. Alternatively, if the investor paid the worker separately for his labor, then the in-

1. B. Bava metsia 104b. 2. M. Bava metsia 5:4. 3. T. Bava metsia 4:11, 14. 4. Sefer Halakhot pesukot, 49. 5. Sefer Halakhot gedolot, 406.

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vestor could share equally with his partner in profit or in loss. The wording in these codes faithfully followed the talmudic law. In a question dated 929, R. Saadya Gaon was asked regarding an iska contract that stipulated a fifty-fifty split of the profits, but, apparently, did not indicate how any losses would be shared.6 The enterprise failed and R. Saadya was asked what was to be done. He replied, following the talmudic teaching, that the investor would have to bear two-thirds of the loss. Only in this way could any hint of usury be avoided. R. Sherira Gaon, during the second half of the tenth century, was asked whether an iska was allowed if the investor received two-thirds of the profit rather than the customary one-third.7 R. Sherira responded that the investor was allowed to take two-thirds of the profit only if he accepted two thirds of the loss as well. Furthermore, he had to pay the active partner additionally for his labor and his expenses. In this case, the Gaon explained, the investment would be one-third a loan and two-thirds a deposit and would be legal. R. Hai Gaon’s (eleventh century) explanation of the iska was similar to that of his father, R. Sherira Gaon. In his Sefer ha-shetarot 8 R. Hai drew a distinction between a shetar shutafut, a partnership contract, in which both parties invested in the enterprise, and a shetar kis, in which only one party invested. R. Hai made it clear that he strictly followed the ruling of the Talmud. In the case of the shetar kis, where one partner invested and the other worked, the worker had to be compensated for his labor, either by being granted a preferred proportion of the profit or the loss, or else by receiving an agreed upon salary. In a question addressed to R. Hai Gaon,9 it was stated that R. Jacob Gaon (early tenth century) had ruled that a fifty-fifty profit arrangement was permitted. In contrast, R. Sherira Gaon, R. Hai’s father, required that the working partner receive two-thirds of the profit. R. Hai replied that he did not remember what his father had written, but he did know what the law was. If

6. A. E. Harkavy, #556. 7. Sha’are tsedek, part 4, gate 8, #5. 8. Simha Assaf, Sefer ha-shetarot le-rav hai bar sherira gaon, Supplement to Tarbiz, . 1 (1930): 35. 9. Sha’are tsedek, part 4, gate 8, #6. Several anonymous responsa also affirm the consistent geonic position that the working partner had to be compensated for his labor either by an agreed upon wage or else by getting two-thirds of the profit or suffering only one-third of any losses. See Harkavy, #235 and #550 and Joel Muller, ¨ Teshuvot geonei mizrah. u-ma’arav (Berlin, 1885, reprinted Jerusalem, 1967), #225.

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the working partner received no separate payment for his labor, then he had to receive two-thirds of the profit or suffer only one-third of any losses. But if the investor gave the active partner a separate payment for his labor, then a half-and-half split was allowed. It is clear, then, that throughout the Geonic period, the authorities maintained that, to avoid the appearance of usury, the active partner had to be compensated for his labor, either through a separate payment, or by giving him a greater proportion of potential gain than of potential loss. How Much Payment for Labor? Although the Mishnah had ruled10 that in order to avoid violating the usury ban, the working partner of an iska had to be paid for his labor, it was not clear how much the working partner had to be paid. Was a payment equal to the real value of the worker’s labor required, or was it sufficient to give him a token payment and thereby fulfill the niceties of the law? A Baraita11 had reported a dispute among the Tannaim on this matter. How much was the working partner of an iska to be paid? R. Simeon required that the worker be fully compensated for his labor. R. Judah held that only a token payment was necessary, whereas R. Meir taught that he should be paid “much or little.” In another version of this Baraita, R. Meir said that he should be paid as a po’el batel, an idle worker.12 The Mishnah also ruled that he should be paid as a po’el batel.13 And the Gemara, citing Abaye, explained that the pay of a po’el batel depended on the particular job from which the worker was idle. In other words, if an agricultural laborer came to his job but found no work to perform (perhaps because the field was flooded), the employer was still required to pay him, but not at the normal wage that he would receive had he been actually working, but rather at a reduced rate, that is, as a po’el batel, an idle worker.14 Abaye’s 10. M. Bava metsia 5:4. 11. B. Bava metsia 68b. 12. T. Bava metsia 4:11. 13. The Mishnah in the Bavli says that he should be paid as a “worker,” whereas the version of the Mishnah that appears in the Yerushalmi says that he should be paid as an “idle worker.” It appears that the editors of the Bavli had before them “idle worker,” or at least understood “worker” to mean “idle worker” for the Gemara (Bava metsia 68a-b) that follows the Mishnah deals with the question of how much an idle worker should be paid. 14. This explanation of the meaning of a po’el batel is clear from a reading of B. Bava metsia 76b. Rashi’s view (B. Bava metsia 68b), that a po’el batel is one who receives less than a full wage because he accepts an easier job than he had before, is certainly wrong,

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statement, then, made clear R. Meir’s view in the Baraita, that the worker should be paid “much or little.” As an idle worker, the managing partner was to be paid “much or little,” depending on his rate of pay when he was employed at his regular job. The Gemara upheld R. Meir’s viewpoint,15 and this position was sustained in the geonic period as well.16 In R. Hai’s responsum cited above,17 he pointed out that the Gemara had rejected R. Judah’s opinion that a token payment was adequate. “Whoever said that any amount of wages was acceptable, his words are null and void.” According to R. Hai, the payment, as explained in the Talmud, had to be based on what a worker who was forced by circumstances into idleness would receive. Liability Another important issue that arose in the geonic period dealt with liability. Who was responsible if the investment decreased or was lost altogether? R. Mattityahu Gaon18 (ninth century) was reported to have ruled that if an unavoidable accident befell an investment, the working partner was exempt and did not have to pay for any portion of the loss. But R. Sherira Gaon responded that this was incorrect. In fact, he doubted that R. Mattityahu had made such a ruling. R. Sherira explained that the Talmud had defined an iska as half loan and half deposit and that although the working partner was exempt from liability regarding the deposit portion of the investment, he was fully liable for the loan portion. The question arose as to whether there were circumstances under which the active partner could be held liable for the deposit portion of the investment (as well as the loan portion), but the Geonim consistently responded in the for who is to say that buying and selling will be easier work than before? Tosafot (Bava metsia 68a) explains a po’el batel to mean an unemployed worker who, since he badly needs a job, is willing to work for less. This suggestion is reasonable, but since the Gemara itself uses the term po’el batel to denote an employed individual who was forced into idleness, we prefer this definition. See Joseph Heinemann, “The Status of the Laborer in Jewish Law and Society in the Talmudic Period,” Hebrew Union College Annual 25 (1954): 278–83. 15. This is evident by the arguments at the top of 68b and at the top of 69a. 16. See R. Hai Gaon in Sha’are tsedek, part 4, gate 8, #6. 17.Ibid. 18. Reported by R. Sherira Gaon in Sha’are tsedek, part 4, gate 8, #5. R. Isaac b. Abba Mari also ascribes this viewpoint to R. Mattityahu Gaon in Sefer ha-Itur, part 1, kis, 39a; R. Isaac incorrectly ascribes this position to R. Simeon Kayyara as well.

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negative. It was stated in the Halakhot pesukot19 and in the Halakhot gedolot20 that if an accident befell an investment, or if it were stolen, then the investor would bear the loss for the deposit portion. R. Sherira Gaon stated his agreement with this position,21 that the investor was responsible for the deposit portion of a loss due to an unavoidable accident. R. Sherira, in fact, was asked about a case where thieves broke into a store and stole an investment.22 He ruled that as long as the active partner was not negligent, the investor was liable for the deposit portion of his investment. R. Hai Gaon said that, regarding the deposit portion of an investment, the working partner was considered a paid bailee.23 R. Hai certainly understood that a paid bailee was, as a rule, responsible for loss or theft;24 however, he explained that the working partner of an iska was not like an ordinary paid bailee. He was given money with which to do business, and if he cared for that money in the manner of normal business people, then he would not be liable for the deposit portion of the investment. The Geonim thus upheld the talmudic formula of half-and-half. Not only were the profits to be shared, but also the losses. Efforts to free the investor of the possibility of losing his investment were rejected by the Geonim. When an investor gave his money to a working partner, he risked losing the deposit half of his investment.

IN THE PERIOD OF THE EARLY RISHONIM: ca. 1000–1200 The view of R. Hai Gaon—that the working partner had to be paid what a worker who was forced by circumstances into idleness would receive—was also maintained in the eleventh century by R. Isaac Alfasi (North Africa, 1013–1103, Rif) in his Halakhot.25 He said that the law was in accordance with R. Meir—that is, the wage rate should be that of an idle worker, “much 19. Sefer Halakhot pesukot, 49. 20. Sefer Halakhot gedolot, 406. 21. Sha’are tsedek, part 4, gate 8, #5. 22. Simha Assaf, “T’shuvot me-rav sherira (v’rav hai?) li-vne Pas,” Ginze kedem 5 (1934): 115–17. Many thanks to Alex Jassen for his helpful translation of this responsum in his term paper, University of Washington, March, 1999. 23. Simha Assaf, “Keta me-hiburo shel R. yehudah ha-nasi albertziloni (?) le-bava . metsia,” Ginze kedem, 5 (1934):101–2. 24. M. Bava metsia 7:8. 25. Bava metsia, p. 39b of the Rif pages.

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or little, as they have contracted and agreed with each other, according to the job from which he was idle.” The phrase in the Baraita, “whether much or little,” was understood by the Rif to mean that the worker’s wage depended on the job that the worker formerly held. If he was a highly skilled worker with a high salary, then his “idle wage” might still be fairly high, but if he was an unskilled laborer, then his “idle wage” could be rather small. This is what the Baraita meant when it said, in R. Meir’s name, that he was to be paid “much or little,” and this is what Alfasi understood it to mean. The first authority to relax the requirement for the working partner’s pay was R. Judah of Barcelona (early twelfth century). Although, in his Sefer ha-Shetarot,26 he followed Alfasi in agreeing that the worker’s payment was to be at the scale of an idle worker, he stressed R. Meir’s view that the worker could be paid “much or little,” and at one point stated that even a single zuz might be sufficient. The twelfth-century scholar R. Moses Maimonides (Rambam), in the Mishneh torah,27 followed the same Talmudic formula as did Alfasi, saying that to avoid violating the usury ban the active partner had to be paid as an idle worker, the rate depending on the particular job from which the worker was idle. In the twelfth century, R. Abraham b. David of Posquieres (Rabad) issued a ruling that clearly diminished the requirement to pay the working partner for his labor.28 He stated that if the investor wished “to stipulate to pay him a dinar for his labor, he could do so, even though his labor was worth more than that.” “Whatever he contracted with him,…whether much or little,” was acceptable. Rabad’s view was that an investor might pay the working partner any amount at all for his labor as long as it was agreed upon by both partners. Even a token daily payment was allowed. This opinion contrasted sharply with the ruling of R. Hai Gaon, who had stated unequivocally that the tannaitic opinion allowing a token payment was rejected in the Gemara. Although it was similar to the ruling of R. Judah of Barcelona, it differed from the Rif

26. R. Judah ben Barzilai of Barcelona, Sefer ha-Shetarot (Berlin, 1898, repr. Jerusalem, 1967), #64. 27. Mishneh torah, Shiluhin . ve-shutafin 6:2. 28. R. Avraham ben David, Teshuvot u-fesakim, ed. Joseph Kafih. (Jerusalem: Mossad Harav Kook, 1964), #132. This responsum can be found in Temim de’im, #51 and in Betsalel Ashkenazi, Shita mekubetset, Bava metsia 68b.

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and the Rambam, both of whom had indicated that the active partner had to be paid like an idle worker. When the Details Were Unspecified Rabad tilted the iska in favor of the investor in another way as well. His modification had to do with a situation where an iska was established without making provision for paying wages to the active partner and without stipulating how profits or losses were to be divided. An anonymous respondent (possibly R. Judah Ha-Kohen, eleventh century) was asked about just such a case.29 A certain investment had earned a profit of one hundred percent. Since no provision for dividing the profits had been made, the working partner claimed two-thirds of the profits, stating that if there had been a loss, he would have had to bear half of it. But the anonymous authority ruled that in case of a loss the investor would have had to accept two-thirds of it, and he, therefore was entitled to half the profit. However, Rashi, in a similar case, made just the opposite decision.30 He said that in the case of an unspecified iska, the working partner should receive two-thirds of any profit, but should bear only one-half of any loss. Maimonides took still a different position. When he dealt with this issue in the Mishneh torah,31 he ruled that in order to avoid breaking the law against usury, if there were a profit, the managing partner was entitled to two-thirds of it and if there were a loss, the investor should assume two-thirds of that loss. This ruling of the Rambam was intended to discourage investors from entering into an iska without spelling out the conditions in advance. But when Rabad took up the case of an iska where no arrangements had been made either for a separate payment for labor or for dividing the profits or the losses, he said that the investor had the advantage.32 If there were a profit, the investor could say, “I don’t have to pay you wages because if there had been a loss, I would have absorbed two-thirds of the loss.” On the other hand, if the business lost money, the investor could pay the worker separate wages and accept just half the loss since he had not made a commitment at 29. Sefer ha-Dinim, recorded in She’elot u-teshuvot maharam b. R. Barukh, Prague edition, #895. See translation and comments by Irving Agus in Urban Civilization in Pre-Crusade Europe, vol. 1 (New York: Yeshiva University Press, 1965), 284–86 and introduction, 43–45. 30. B. Bava metsia 104b, s. v. Had . iska. 31. Mishneh torah, Shiluhin ve-shutafin 6:3. . 32. Teshuvot u-fesakim #132; Temim de’im, #51.

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the outset to accept two-thirds of the loss. Rabad’s ruling that “if he [the investor] did not stipulate at the beginning, he may stipulate at the end,” provided an incentive to the investor not to spell out the iska arrangements in advance. If when the iska was first set up, he did not indicate exactly what the worker’s compensation would be, the investor was at a strong advantage. Thus, if an iska succeeded, the investor did not have to compensate the managing partner in any way for his labor. Liability Rabad provided one more important advantage to the investor. This advantage had to do with the question of liability in the case of loss. The Geonim had unanimously rejected all efforts to absolve investors from liability for half of their investments. R. Hananel (eleventh century) took the . same position as did the Geonim.33 The working partner was a paid bailee; paid bailees were normally liable for theft; but in the case of a working partner of an iska, unless it could be shown that he was negligent, if the investment was stolen, he was not liable. The most clear-cut enunciation of this viewpoint came from the pen of R. Isaac Alfasi (eleventh century). When asked about the deposit portion of an iska, he replied that the deposit held by the working partner was not like a normal deposit. It was called an iska because the investor could say to the active partner, “I didn’t give it to you for excellent guarding, but rather, for conducting business, and you should work with it the way merchants do.” Alfasi declared that the recipient of the investment should guard it carefully, but he pointed out that “one who received an iska was not able, wherever he went, to guard it in the ground.34 Therefore, if he acted in the way that merchants did, more or less, then he was not called to account and was not liable” for the deposit portion of an iska.35 Maimonides, in the Mishneh torah,36 ruled in the same way as did Alfasi. If partners were engaged in an iska and the investment was lost or stolen, it was the investor who suffered the loss for the deposit portion of the investment. R. David b. Saadya (Spain) in the eleventh century was the earliest author-

33. Hananel ben Hushiel, Perush ha-rav hananel, Tractate Bava metsia, 179. . . . 34. The Talmud teaches that, under normal circumstances, the proper way to care for money is to bury it in the ground. B. Bava metsia 42a. 35. R. Isaac Alfasi, She’elot u-teshuvot ha-rav yitshak . alfasi, #75. 36. Mishneh torah, Shiluhin ve-shutafin 6:2. .

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ity to rule that, as a paid bailee, the recipient of an iska was liable for the theft or loss of the deposit portion.37 He wrote: If a man received an iska from his fellow, and the money, while with him, suffered an accident, if the accident was a result of theft or loss, the recipient is liable to pay for the loan half… and he also must pay for the deposit half. Since he gave him wages to work with it, he is a paid bailee and is liable for theft and loss. In the twelfth century, R. Moses Ha-Kohen (Provence) expressed his support for this view as well.38 Speaking of the manager’s responsibility for an iska investment, he said that “if he was negligent, he pays for all of it. And likewise if it were stolen or lost, for he is liable as a paid bailee regarding the deposit half.” And this was also the opinion of Rabad. For even though Rabad had relaxed the requirement that the managing partner be paid as an idle worker (allowing the payment to be any amount to which the parties agreed), he pointed to those wages as justifying the fact that the working partner should be counted as a paid bailee. This is clear from his criticism39 of Rambam’s statement that the working partner was not liable for loss or theft. In that criticism Rabad stated, “This is not possible. Why shouldn’t he be considered a paid bailee for the deposit, for he receives wages as an idle worker.”40 While Rabad, in southern France, was writing his critical comments on the Mishneh torah, R. Isaac of Dampierre,41 in the North, made an observation

37. Shita mekubetset, Bava metsia 104b. 38. Ibid. 39. Hasagot ha-rabad, Hilkhot shiluhin . ve-shutafin 6: 2. 40. One 12th-century Rabbi made a different kind of ruling to reduce the investor’s risk. R. Judah ben Nathan (Rivan) said that it was permissible to establish an iska in which the recipient would accept all of the liability for accidents, as long as the investor was liable for depreciation. This went even further than the decisions of R. David b. Saadia, R. Moses Ha-Cohen and Rabad. The ruling was disputed by R. Isaac of Danpierre and was not repeated by later Rishonim. Tosafot, B. Bava metsia 70a; Tur, Hilkhot Ribit #177. See R. Joseph Colon (She’elot u-teshuvot maharik ha-yeshanot le-rabbenu rabbi yosef kolon [Jerusalem: Oraysoh, 1988], Shoresh #119, 242–43), who interpreted Rivan’s permission in a narrow and limited way. 41. It is credited to R. Isaac of Dampierre by R. Moses of Coucy in Sefer Mitsvot gadol, Mitsvot asei, Hilkhot shutafin (Venice, 1547, repr. Jerusalem, 1961), 167, column c and by R. Jacob Hazzan in Ets hayyim, vol. 3, Israel Brody, ed. (Jerusalem: Mossad Harav Kook, . . 1967), 150.

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in the Tosafot42 that was to have a far reaching effect in this matter. In discussing the case of an agent who buys the wrong grain for his employer, the Tosafot pointed out that, under certain circumstances, all of the liability for an iska could be placed on the working partner. This passage reads as follows: If one gives money to his fellow on a half-profit basis and says to him, “This is on condition that you lend it only on pledges of silver and gold and that you guard it in the ground, and if you deviate, you will be liable for everything.”… this is not usury for if he hadn’t changed his mind [i.e. changed the stipulated mode of caring for the funds], it would not be all his liability. Rabad apparently used this passage43 as a springboard to provide investors with a technique for avoiding all liability for an iska. Unlike the Rif, who had said that it was impractical for someone engaged in a business enterprise to bury the deposit portion of an iska in the ground, Rabad took advantage of the fact that there was small likelihood that the working partner of an iska would be able to hide the money under the earth. He wrote in a responsum:44 If someone wants to give his fellow an iska, in a legal manner, for a set amount of time, let him do it this way. The investor should say to the recipient,… “Lend it only with good pledges of silver and gold and always put the money under the ground in order to guard it from fire and thieves… and guard the money and the pledges with exceptional guarding.”… And then the investor will be able to take his profit without transgressing the usury ban and without worry… And after the investor makes these stipulations with the recipient, then the recipient may lend in any way that he wishes,… for he knows that the investor stipulated with him in order to place all of the liability on him should he deviate [from the stipulations]. What Rabad was suggesting, then, was a contract that both parties knew to be a fiction. The manager got the capital that enabled him to trade, and the investor had the opportunity to profit while being relieved of liability for his

42. B. Bava kamma 102a, s. v. Hanoten. 43. There are many examples demonstrating Rabad’s knowledge of the Tosafot. See Isadore Twersky, Rabad of Posquieres, 235–36 and E. E. Urbach, Ba’ale ha-tosefot , 66–67 and 227 n. 1. 44. Teshuvot u-fesakim, #140; Temim de’im, #60.

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investment by setting conditions for care of the stake that all knew could not and would not be fulfilled.45 A Major Innovation People who wanted to make money with money found two drawbacks in the iska. One was that they had to pay the working partner for his labor. The other was that the investor risked losing the deposit portion of his investment. Rabad provided the solution: an iska that reduced or negated the working partner’s wages for labor and a suggestion that made the working partner liable for the deposit portion of the iska (as well as, of course, the loan portion). How is it that, in the twelfth century, after generations in which rabbinic authorities had crafted the iska in such a way as to prevent it from resulting in usury, the restrictions were relaxed and the iska was allowed to become a profitable, risk free investment? The answer, we believe, can be derived from two sources: from an understanding of the economic conditions of the time, and from an acquaintance with the unique personality of R. Abraham ben David of Posquieres. Twelfth-Century Provence The twelfth century was at the height of what has been called the “commercial 45. By proposing a legal fiction Rabad employed a technique used time and again by the Rabbis to accommodate the social and economic needs of the community. The prosbul, for example, was a legal formula that allowed creditors to collect their debts after the Sabbatical year even though, according to biblical law, debts were cancelled on the seventh year. The law regarding an eruv established the rules for constructing an enclosure formed with poles and wires that transformed a public area into a private domain. This allowed Jews to carry therein on the Sabbath. According to rabbinic understanding of biblical law, Jews were not allowed to keep hametz (leaven) in their homes (Later they could keep it in . their homes but not own it.) during the festival of Passover. Therefore, with rabbinic approval, hametz was sold to non-Jews before the holiday. But the sales were not real, for they . were made on the presumption that the hametz would be repurchased after the festival. . For further examples of legal fiction in Jewish law and to see how Jewish law was creatively adjusted to meet reality, see Samuel Atlas, “Legal Fictions in the Talmud” in Louis Ginzberg Jubilee Volume (New York, 1958), Hebrew Section; Louis Jacobs, A Tree of Life: Diversity, Flexibility, and Creativity in Jewish Law (Oxford: Oxford University Press, 1984), 122–65; Jacob Katz, The Shabbes Goy (Philadelphia: The Jewish Publication Society, 1989); Haym Soloveitchik, Halakhah, kalkalah ve-dimui atzmi (Jerusalem: The Magnes Press, The Hebrew University, 1985). For a discussion of the legal fiction that allowed Jews who did not own real estate to sell movable property in a distant place, see above, p. 103 .

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revolution” of the Middle Ages.46 Trade and commerce had increased dramatically. Merchants from Italy brought goods from Mediterranean lands and from the East to the North. From England and Flanders goods were transported to Italy and beyond. Much of the trade went through the towns and ports of Southern France. The merchants of Provence took an active role in the growing commercial life.47 Large numbers of towns were founded in this period and they grew in population and in stability.48 When Benjamin of Tudela traveled to Provence about 1170, he visited the communities of Narbonne, Beziers, Montpellier, Lunel, Posquieres, Bourg de St. Gilles, Arles and Marseilles.49 According to his description, they were established, prosperous communities with academies and scholars.50 The principal occupations of the Jews of Provence in this period were those associated with commercial trading, both local and international, which involved travel by land and sea. Many merchants were successful and some even acquired great wealth. After the time of the First Crusade, however, international travel became less secure. Moreover, Jews also found themselves excluded from the guilds of merchants and craftsmen. With the Church discouraging Christians from dealing with money, Jews became the money lenders. By the end of the twelfth century, it had become their major occupation.51 Both Jewish merchants and Jewish money lenders needed capital for their enterprises. It was a common practice for those with funds at their disposal to 46. Robert S. Lopez, The Commercial Revolution of the Middle Ages, 950–1350, 85–91. 47. Sidney Painter, A History of the Middle Ages, 284–1500, 220–25; N. J. G. Pounds, An Economic History of Medieval Europe, 351–95; Edouard Baratier, Histoire de la Provence (Univers de la France et des pays francophones, 1969), 143–46. 48. Painter, 226–28; Jacques Le Goff, “The Town as an Agent of Civilization,” in Carlo M. Cipolla ed., The Fontana Economic History of Europe, The Middle Ages (London, Collins/Fontana Books, 1972), 71–85; Carlo M. Cipolla, Before the Industrial Revolution, European Society and Economy, 1000–1700, 143–49; S. Schwarzfuchs, “France Under the Early Capets,” in Cecil Roth, ed., The Dark Ages (Rutgers University Press, 1966), 150–51; Francois-Xavier Emmanuelli, Histoire de la Provence (Hachette, 1980), 71. 49. Sefer Masa’ot shel R. Binyamin, M. Adler, ed., 3–5. 50. See Shalom Albeck, Introduction to Sefer ha-Eshkol, I, (Jerusalem: Reuben Mas, 1935) 1–15 and I. A. Agus, “Rabbinic Scholarship in Northern Europe,” in Cecil Roth, ed., The Dark Ages (Rutgers University Press, 1966), 205–9. 51. Schwarzfuchs, 159. See Lopez, 60–62. Also see Isadore Twersky, Rabad of Posquieres, 20–21. Kenneth Stow, Alienated Minority, 213–16; H. H. Ben-Sasson, A History of the Jewish People, 469–71; and Baron, Economic History, 44–45.

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enter into contracts with those who would use the money for buying and selling goods or for lending to Christians. The recipients would then provide the investors with a share of the profits.52 We must understand that medieval trade was a high-risk undertaking.53 Sales were not consummated before shipment. Goods, as a rule, were transported from one locality to another with a hope and a prayer of finding buyers. Travel by sea was subject to the dangers of shipwreck and piracy, and with robbers stalking the roads, travel by land was also hazardous. And even if a merchant arrived safely at his destination with his wares intact, there was always the possibility that a shipment of competing merchandise might arrive simultaneously and cause the price of the merchant’s goods to plummet. The same can be said, perhaps more so, for the lending of money.54 It was a risky business. Defaults were commonplace. Actions against Jewish lenders were often defended by nobles and kings who perhaps themselves were debtors to Jews. Rabad surely wrote with some knowledge of the times when he urged Jews not to take pledges from powerful persons who could forcibly take them back.55 The Personality of Rabad With all of the uncertainty that investments entailed, it is not surprising that the rabbinic authorities of the twelfth century were asked to help find ways to reduce the investor’s risk of loss without violating the prohibition against usury. And who was more likely to meet this challenge than R. Abraham ben David of Posquieres? Benjamin of Tudela’s description of the Jewish communities of Provence informs us not only of their schools and Sages, but also of their wealth and prosperity. He makes a special point of saying that R. Abraham ben David was a very rich man.56 We have no way of knowing the source of Rabad’s

52. Abraham L. Udovitch, “The Origins of the Western Commenda: Islam, Israel, Byzantium, Speculum, 37 (1962): 198–207; John H. Pryor, “The Origins of the Commenda Contract,” Speculum 52 (1977), 5–37; Lopez, 73–79; R. de Roover, “The Organization of Trade,” in M. M. Postan, E. E. Rich and Edward Miller, eds., The Cambridge Economic History of Europe, 49–57. 53. de Roover, 44–46. 54. Stow, 219–20; Ben-Sasson, 471–72. 55. Teshuvot u-fesakim, #140; Temim de’im , #60. 56. Sefer Masa’ot shel R. binyamin, 4.

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wealth,57 but it is clear from his writings that he was well acquainted with the commercial activities of his day and with the needs of merchants.58 And Rabad was an independent thinker. Though he respected his teachers and the authorities who came before him, he never hesitated to state views that departed from conventional wisdom. His “greatness may lie largely in the innovative nature of his work.”59 He is best known for his hasagot, his critical notes on the works of Rif, Razah (R. Zerahya . Ha-Levi), and Rambam, all of whose views he often sharply disputed. The description of Rabad as “independent” and “outspoken,” as “autonomous” in judgment, and as an “unflinching individualist”60 seems to have been well suited to someone who could make a major change in the interpretation of the law governing the iska.61 Another indication that Rabad was willing to bend to economic necessity can be seen in a responsum of his regarding mortgages.62 Rabad was asked whether a borrower could be compelled to redeem his pledge after a certain period of time. He responded by describing the practices in Barcelona and in Narbonne, then accepted the gentile custom that did not require the redemption of the pledge. He concluded the responsum by saying that wherever an explicit Jewish law did not govern, the custom of the non-Jews should be followed. Rabad was willing “to transform local custom into legal precedent.”63 And this is perhaps what he did regarding the iska. Investors were reluctant to assume the great risks of commercial lending. They wanted to reduce their liability and increase their profit. They found merchants who were willing to accept less favorable terms. All they needed was rabbinic sanction, and Rabad responded to the needs of the “commercial revolution.”

57. Twersky speculates that it was inherited, Rabad of Posquieres, 6. Twersky also notes that Rabad’s wealth is corroborated by R. Mordecai b. Hillel’s reference to Rabad as ha-nagid and by Rabad’s son’s use of the phrase “aristocrats of the land” to describe his ancestors. 58. See Teshuvot u-fesakim, #124–25, 127–28, 131–34, 140. 59. Haym Soloveitchik, “Rabad of Posquieres: A Programmatic Essay” in Peraqim be-toldot ha-hevrah ha-yehudit (Jerusalem: Magnes Press, Hebrew University, 1980), 14. . 60. Twersky, 40. 61. Throughout his essay Soloveitchik stresses Rabad’s originality, his “almost unparalleled capacity to confront Talmudic texts unaided, to wrest their meaning single-handedly.” 13. 62. Teshuvot u-fesakim, #131; Temim de’im, #50. 63. Twersky, 116. See also Soloveitchik, 32–33.

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IN THE PERIOD OF THE LATER RISHONIM: ca. 1200–1500 We remember that Rabad had made a new and remarkable ruling as to what should be done when an iska was set up without specifying the details of profit or loss. Rabad allowed the investor to wait and see how the enterprise was going before determining the profit/loss arrangements. Thus, if there were a profit, he could receive half of it, saying that if were there a loss, he would have accepted two-thirds of it. Furthermore, Rabad had maintained that if the investor saw that there was a loss, he had the option of paying the worker his wages and accepting only half of the losses. Rabad’s view was that the investor “always had the upper hand” and could craft the arrangements to his own liking. How did the Sages after the time of Rabad react to his innovation? R. Moses b. Nahman (Ramban), in the thirteenth century, turned away . from Rabad’s solution to the problem of an unspecified iska. He explicitly declared that Rabad was wrong and ruled that where no details were mapped out in advance, the investor should bear half of the losses but take only a third of any gains.64 A ruling similar to that of the Ramban was also issued by the fourteenth-century teacher R. Nissim.65 In the fourteenth century, R. Yom Tov Asevilli (Ritba) voiced agreement with the position of Maimonides, saying that the investor receives either half of the profit and two-thirds of the loss or half of the loss and one-third of the profit, and “the choice is the manager’s… in order that the manager receive wages for his labor and his food.”66 In other words, according to Ritba, whether the enterprise gains or loses, the manager should receive some advantage to reward him for his labor. What is remarkable about the rulings of the Sages of the thirteenth and fourteenth centuries is that none of them supported the view of Rabad.67 His 64. Kol hidushe ha-ramban, part 2 (Jerusalem: Or Olam, 1962), Bava metsia, chap. 9, . 155b. 65. Rabbenu Nissim, Hiddushe ha-ran, Masekhet bava metsia (Jerusalem: Makhon . Harry Fishel L’derishat Ha-Talmud U-Mishpat Ha-Torah, 1994), 332. Both Sages were echoing Rashi’s teaching of the eleventh century. 66. R. Yom Tov b. Abraham Asevilli, Hiddushe ha-ritba, Masekhet Bava metsia, Shiloh . Raphael, ed. (Jerusalem: Mossad Harav Kook, 1992), column 558. 67. R. Aaron Ha-Levi (Ra’ah) of the 13th century also disagreed with Rabad. He disputed Rabad’s assertion that the investor had the advantage and could thus decide how profits and losses were to be divided. He said that “the recipient had the advantage because he held the money.” Bet yosef, Yoreh deah #177.

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novel approach, in which he concluded that the investor “always had the upper hand,” was decisively rejected by the authorities who followed him. Up to this point we might be tempted to believe that the iska was upheld by the Rishonim in the same way that it had been established in the Talmud and maintained by the Geonim, and that Rabad’s decisions promoting liberalization had no lasting influence. Before reaching such a conclusion, we need to examine the reception of Rabad’s other rulings on the subject of iska by the later Rishonim. Did they uphold his other innovations or did they preserve, without amendment, the centuries long rulings of the Amoraim, the Geonim, and the early Rishonim? Economic Conditions Let us keep in mind the needs of the business community in the Middle Ages. Commerce was growing. Better methods of farming created agricultural surpluses. Improvements in ship building meant that more goods could be transported more quickly and more securely, and greater safety on the roads meant that more traders could bring their wares to far-off places. The establishment of weekly markets and annual fairs also had a profound influence on the economy of Europe. People who could produce more than they needed for consumption could sell their surplus goods, and those who wanted materials that they could not make themselves were able to acquire them. The twelfth to fourteenth centuries saw startling growth in international trade. Grain, fish, wine, timber, salt, wool,and flax were brought to the towns and fairs as well as textiles, metal products, and other manufactured goods.68 The economic expansion of the Middle Ages was accompanied by the growing use of credit.69 As one scholar put it, “Unstinting credit was the great lubricant of the Commercial Revolution.”70 Credit developed in many forms among ordinary buyers and sellers and among professional traders. One tech-

68. N. J. G. Pounds, An Economic History of Medieval Europe (London and New York: Longman, 1994), 353–57; Jean Favier, Gold and Spices, The Rise of Commerce in the Middle Ages , 31–52; Brian Tierney and Sidney Painter, Western Europe in the Middle Ages 300–1475 (New York: Alfred Knopf, 1983), 267–73; Michael Postan, “The Trade in Medieval Europe: The North,” in M. M. Postan and Edward Miller, eds., The Cambridge Economic History of Europe, vol. 2 (Cambridge: Cambridge University Press, 1987), 168–78. 69. Favier, 200–10. 70. Robert Lopez, The Commercial Revolution of the Middle Ages , 72.

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nique frequently practiced among Christians was called the commenda. An investor gave a merchant the funds with which to do business. If there were losses, they were charged to the investor; if there were profits, three-quarters went to the investor and one-quarter to the merchant.71 Jews did not use the commenda, but in order to function in the medieval economy as merchants and as money lenders to non-Jews, they needed capital. Similarly, potential Jewish lenders or investors needed agents or managers to handle their merchandise or to lend money to Christians. For all of them, the usury ban stood as a barrier, always ready to inhibit their activities. There were, in particular, two drawbacks to the iska, both of which were imposed upon it by the usury law. One was the requirement to pay the managing partner for his labor; the other was that the investor had to accept half the risk of any loss. Was there a way to relieve the iska of these burdens and thereby make it more attractive to those with savings? Payment to the Working Partner for His Labor As has already been noted, a debate went back to the time of the Mishnah regarding the amount of pay required to give the working partner for his labor. The Gemara accepted R. Meir’s view,72 that he should be paid as a po’el batel, as a worker who came to his place of employment but found no work to do.73 This position was sustained by the Geonim,74 by R. Isaac Alfasi in the eleventh century,75 and by R. Moses Maimonides in the twelfth century.76 But in twelfth-century Provence, with the tremendous growth in commerce,77 pressure grew to allow less restrictive business partnerships. R. Judah of Barcelona stated that “even a single zuz would be enough.” Rabad, also in the twelfth century, downplayed the importance of the payment due the working partner by saying that the investor could stipulate to pay him “a dinar for his labor, even though his labor was worth more than that.”78 71. Carlo Cipolla, Before the Industrial Revolution, 183–85. 72. This is evident by the arguments at the top of 68b and at the top of 69a. 73. The meaning of po’el batel is made clear in Bava metsia 76b. See above, n. 13 and Joseph Heinemann, “The Status of the Laborer in Jewish Law and Society in the Talmudic Period,” Hebrew Union College Annual 25 (1954): 278–83. 74. R. Hai Gaon in Sha’are tsedek (Jerusalem: Klal Ufrat, 1971), part 4, gate 8, #6. 75. Bava metsia, p. 39b of the Rif pages. 76. Shiluhin . ve-shutafin 6:2. 77. See above, pp. 214–16. 78. R. Avraham ben David, Teshuvot u-fesakim, #132. This responsum can be found in

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The ruling that a minimum payment was sufficient was upheld by the rabbinic authorities in the centuries that followed. The thirteenth-century teacher R. Moses of Coucy, in the Sefer Mitsvot gadol,79 said that a dinar was adequate payment; the fourteenth-century Sage R. Asher ben Yehiel . (Rosh) said that since the required payment to the worker was to avoid only “the dust of interest, the Sages were lenient, and if he gives him a small payment, it does not look like interest.”80 His son, R. Jacob ben Asher, in the Tur, said, “If he wants to contract with him for… even only one dinar, he may do so.”81 In the fifteenth century, R. Solomon ben Simeon Duran ruled similarly that if they agreed “to divide the profit and the loss equally, it was enacted that he could give the worker something small every day as payment for his labor.”82 It is clear, then, that the amount paid to the working partner of an iska, which the Talmud took pains to protect (explicitly rejecting the view that a token payment was sufficient), and which the Geonim and early Rishonim likewise upheld, was a non-issue from the twelfth through the fifteenth centuries. A study of the rulings, commentaries, and responsa of this period shows that not a single rabbinic authority ruled that the manager’s daily wage had to be tied to the value of his labor. The views of the twelfth-century Provencal scholars R. Judah of Barcelona and Rabad prevailed. From their time and onward the requirement to pay the working partner for his labor was no longer a deterrent to iska investments. The Effort to Reduce the Investor’s Risk But what about the other disincentive to engage in an iska that was faced by investors—the fact that if the enterprise failed, they could lose half of their investment? Persons with capital would surely be more inclined to participate in an iska if they could be sure that their investment was safe. Was there a way to structure an iska so as to make the active partner fully liable for the investment? Could an iska of this nature gain rabbinic approval? The Talmud had established that an iska was half loan and half deposit. The Geonim, in explaining the significance of this division, made it clear that Temim de’im, (Warsaw, 1897), #51 and in Betsalel Ashkenazi, Shita mekubetset, Bava metsia 68b. 79. R. Moses of Coucy, Sefer Mitsvot gadol, Mitsvot asei, Hilkhot shutafin, 168, column b. 80. R. Asher ben Yehiel, Rabbenu asher, Bava metsia 5: 39, 135b. . 81. R. Jacob ben Asher, Tur, Yoreh de’ah, Hilkhot ribit, #177: 3. 82. R. Solomon ben Simeon Duran, Sefer Rashbash, #496, 94a.

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though the active partner was liable for the loan half, the investor was responsible for the deposit half.83 When it was suggested that the managing partner, as a paid bailee, might be responsible for the deposit half as well, the Geonim responded that the manager of an iska, who used the deposit in behalf of the partnership, should not be considered an ordinary paid bailee and should not be held liable for loss or theft. The position of the Geonim, then, was that although the worker was entirely responsible for the loan portion of the investment, the investor was liable for the deposit portion.84 85 and R. Isaac Alfasi86 supported this In the eleventh century, R. Hananel . position, as did Rambam in the twelfth. But several scholars, R. David b. Saadya87 in the eleventh century and R. Judah ben Nathan88 and R. Moses Ha-Kohen89 in the twelfth, held that the manager was liable for the entire investment if it was lost or stolen. Rabad supported this position as well. In the thirteenth century, R. Isaac of Vienna,90 R. Jacob Hazzan (Eng. 93 land),91 R. Meir of Rothenburg92 and R. Menahem (Provence, Ha-Meiri) . all echoed Rabad’s position by indicating their support for the view that the working partner was a paid bailee and was responsible for any loss or theft that befell the deposit portion of the investment. The issue, however, was not settled, for in the fifteenth century, two teachers took positions similar to that of the Rambam. The first was R. Solomon Duran (North Africa, Rashbash), who held the investor liable for the deposit half of the principal. He wrote that if the deposit half “is stolen or lost or sinks

83. Sefer Halakhot pesukot, 49; Sefer Halakhot gedolot, vol. 2, 406. 84. Sha’are tsedek, part 4, gate 8, #5; Simha Assaf, “Teshuvot me-rav sherira (V’rav Hai?) li-vne pas,”Ginze kedem 5 (1934): 115–17; Simha Assaf, “Keta me-hiburo shel R. . yehudah ha-nasi Albertziloni (?) le-bava metsia,”Ginze kedem 5 (1934): 101–2. 85. Hananel ben Hushiel, Perush ha-rav hananel, Tractate Bava metsia, 179. . . . 86. R. Isaac Alfasi, She’elot u-teshuvot ha-rav yitshak . alfasi, ed. Dov Zvi Rotstein, #75. 87. Betsalel Ashkenazi, Shita mekubetset, Bava metsia 104b. 88. Tosafot, Bava metsia 70a, s. v. D’ka; Tur, Hilkhot ribit #177. 89. Shita mekubetzet, Bava metsia 104b. 90. R. Isaac of Vienna, Or zarua, part 3, Bava metsia, #342. 91. R. Jacob Hazzan, Ets hayyim, vol. 3, ed. Israel Brody (Jerusalem: Mossad Harav . . Kook, 1967), 152. 92. She’elot u-teshuvot maharam ben R. barukh, #806. 93. Menahem ben Solomon (Ha-Meiri), Bet ha-behirah al masekhet Bava metsia (Jeru. . salem: Mekitse Nirdamim, 1959), 104b, 388.

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into the sea, it is the investor’s responsibility.”94 The other was R. Joseph Colon (Italy, Maharik) who “ruled out the practice of the Lombards,95 who invest their money for profit, and the lender does not accept liability for accidents like theft, robbery, armed robbers and many other accidents except fire and capture, God forbid.”96 The Rabbis who declared the managing partner responsible for loss and theft of the deposit portion had sought to meet investors’ needs for security. But, as we have seen, not all of the later authorities were comfortable with this ruling. Four thirteenth-century Rabbis accepted it, but two of the fifteenth-century teachers did not. Thus naming the working partner a paid bailee turned out to be an inadequate remedy for the investment needs of the time. What investors really wanted, after all, was rabbinic approval for profits without taking any risks at all. What they wanted was for the recipients to be fully responsible for the money they received, like borrowers who assumed all of the risks for their loans. But how could investors be granted immunity from loss, like lenders? If the recipients were to assume all of the risks, then wouldn’t the investors’ profits be considered interest, forbidden by law? Rabad had suggested a way for the investor to be completely absolved of liability for the deposit half of his investment.97 He proposed that, at the start of the partnership, the investor would instruct the manager to accept only pledges of silver and gold, which would always be buried in the ground, and that if the manager deviated from these instructions, he would be deemed totally liable for the deposit portion of the loss. It was clear that merchants or money lenders who dealt with their money or goods on a continuing basis would be unable to keep these instructions. The investor knew it and the recipient knew it. In essence, then, this was a formula for allowing the investor to make a no risk investment. Rabad’s ruling was accepted by the major rabbinic authorities throughout the period of the Rishonim. It was included in the writings of the

94. Solomon ben Simeon Duran, Yakhin u-voaz, She’elot u-teshuvot, part 2 (Levorno, 1782; repr. Jerusalem, 1970), #23. 95. The Lombards, from northwestern Italy, were known primarily as money lenders. Lopez, 77; Favier, 207–8; Thomas Bloomquist, “Lombards,” in Joseph Strayer, ed., Dictionary of the Middle Ages (New York: Charles Scribner’s Sons, 1986), vol. 7, 653–54. 96. R. Joseph Colon, She’elot u-teshuvot maharik ha-yeshanot, Shoresh #119. 97. Rabenu Avraham ben David, Teshuvot u-fesakim, Joseph Kafih, . ed., #140. This responsum can be found in Temim de’im (Warsaw, 1897), #60.

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thirteenth-century teachers R. Moses of Coucy,98 R. Samson of Sens,99 and R. Meir of Rothenburg,100 and in the works of the fourteenth-century authorities Rosh,101 his son, R. Jacob,102 and R. Nissim.103 R. Israel Isserlein Perhaps the clearest permission for a partnership agreement that allowed the investor to profit without risking his principal came from the pen of R. Israel Isserlein in the fifteenth century. Isserlein was told, in an inquiry, that Reuben wanted to profit by giving money to Simon “while being almost completely certain that he would not lose any of his principal.” “How,” asked the inquirer, “might this be accomplished legally?”104 Isserlein had reservations about answering the question. He said that the questioner’s purpose could, indeed, be achieved, “but I am afraid lest by these rules and by seeking strategies to allow business dealings with interest, the words of the Torah will become a laughingstock.” However, in spite of his concern, Isserlein believed that his views were correct, and he proceeded to answer the question. He referred to the same passage in the Tosafot that had been the source for the comments of the thirteenth and fourteenth-century scholars, that “a person could give money to his fellow on a half-profit basis and could contract with him not to lend it except on pledges of silver or gold and to bury them in the ground, and then the liability would be the investor’s. But if he lends in others ways, then the recipient will be liable.” But Isserlein went beyond his predecessors by saying that it was not forbidden even though everyone knows that it is not at all the intention of the investor or of the recipient that the stipulation be fulfilled, that is, that he will lend only on silver and gold and will bury it in the ground, but rather, he will lend on debts without any pledges at all, or on pledges

98. Sefer Mitsvot gadol, 167, column c. 99. R. Samson of Sens in R. Isaac of Vienna, Or zarua, part 3 (Jerusalem, 1892), Bava metsia, 5:200, 29, column a. 100. Meir of Rothenburg, Sefer She’elot u-teshuvot (Krimona, 1557, repr. Jerusalem, 1986), #12; She’elot u-teshuvot maharam ben barukh, Prague Edition, #102. 101. R. Asher ben Yehiel, Rabbenu asher, Bava metsia 9:18, 102b. . 102. R. Jacob ben Asher, Tur, Yoreh de’ah, #177: 5. 103. R. Nissim, She’elot u-teshuvot ha-ran, Aryeh Feldman, ed., #73, 329. 104. R. Israel Isserlein, Terumat ha-deshen, #302.

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which are not silver or gold, or if they are silver or gold, he will surely not bury them in the ground. Nevertheless it is allowed. The unique feature of Isserlein’s response was his open admission that the contract was a subterfuge, and that the parties were well aware that the working partner would not live up to the stipulations. The stipulations were inserted with a wink and a nod by all concerned, knowing that they were simply a way of allowing the investor to place all of the risk on the recipient. Surely the fictitious nature of this undertaking was understood by the Rishonim of the twelfth to fourteenth centuries, but it was not openly stated by them, perhaps for fear of “making the Torah a laughingstock.” In any case, Isserlein’s admission of what was going on was new and refreshing. Isserlein’s responsum was unique in one more way. He provided yet another method whereby the investor could place the entire liability onto the shoulders of the manager. This is how it worked: The contract would state that Simon, the working partner, accepts liability for gross negligence, and he also accepts upon himself that he is not to be believed even with an oath on the Torah, and even with witnesses, and even if there are a hundred who testify that he was not greatly negligent. Only if the Rabbi and the cantor and similar people who are residents of the city and are familiar with the business dealings in the city will testify, will they be believed if they testify with proof and complete knowledge. And in this way will his principal be secure as he always wishes. For if it is lost, Reuben [the investor] may claim that it was lost intentionally, and Simon will be able to uphold his claim only with the testimony of the Rabbi and the cantor. And it is almost entirely certain that they will not know all [of the details regarding] the liability. And it is permitted to stipulate as has been said… even though surely neither of them believe that the conditions will be fulfilled, and they make these stipulations only in order to take interest in a legal way. Perhaps we should not be surprised that the Rabbis devised a legal way to allow profitable investments in partnerships. The Muslim jurists, in their day, found a way for the faithful to pursue their business activities without hindrance from their laws against usury,105 and Christian theologians 105. N. J. Coulson, A History of Islamic Law (Urdu Bazar-Lahore: Lahore Law Times Publications, 1979), 72–73; R. M. Savory, “Law and Traditional Society,” in Introduction to Islamic Civilization (Cambridge: Cambridge University Press, 1976), 59. See also Ziaul

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provided ways for bankers to lend on interest with the Church’s blessing.106 Why shouldn’t the Rabbis have devised a means to allow the economic activity of their day to proceed within the framework of the halakhah? The period in which Isserlein lived was one of heavy trade and commerce. In the fifteenth century, South Germany and Austria were at the center of powerful economic activity.107 Isserlein’s responsa show evidence of the numerous economic activities in which Jews were engaged and of the demands for accommodation that came before him.108 As a rule, Isserlein sought to find ways to allow his co-religionists to carry on their business enterprises successfully.109 In one revealing responsum110 he was asked about the case of a man who was owed money by some non-Jews. The lender was engaged in a lengthy discussion with his debtors and some drinking went on. He had to consider and respond to a number of proposals and could not cut the conversation short without suffering a loss on the debt. He missed the time for the afternoon prayers and wanted to know if he was allowed to say the evening prayers twice in order to make up for what he had missed. In responding to this query, Isserlein had to consider the decisions of previous authorities, who had ruled that when a person is engaged in an activity in which he is fully aware that he is missing the time for prayers, he may not make up for what he has missed. Isserlein overruled this decision ´ by stating that the case under discussion, rather than being in the catagory of full awareness, should be considered one of duress. He pointed to a statement in the Talmud111 that says that a person who loses something is considered under

Haque, Riba: The Moral Economy of Usury, Interest and Profit (Kuala Lumpur: S. Abdul Majeed, 1995), 83–106. 106. “Canonists became increasingly broad in their interpretations of the canons as the need for credit grew.” Pounds, 410; Jean Favier, 195–97. 107. Pounds, 362; Jacques Bernard, “Trade and Finance in the Middle Ages 900–1500,” in C. M. Cipolla, ed., The Fontana Economic History of Europe, The Middle Ages (London and Glasgow: Collins/Fontana Books, 1973), 298; Jean Berenger, A History of the Habsburg Empire 1273–1700 (London and New York: Longman, 1994), 78–82; Robert Lopez, “The Trade Of Medieval Europe: The South,” in M. Postan and E. E. Rich, eds., The Cambridge Economic History of Europe (Cambridge: Cambridge University Press, 1952), 349. 108. Shlomo Eidelberg, Jewish Life in Austria in the Fifteenth Century, 45–47, 106–11. 109. Eidelberg, 45. 110. R. Israel Isserlein,Terumat ha-deshen, 5. 111. B. Mo’ed katan, 14a.

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duress when he has to drop other matters in order to go and look for his lost object. Isserlein concluded from this that “in all cases where one misses the performance of a mitsvah in order to avoid financial loss, it is considered duress.” Isserlein was known to be independent minded,112 and when the occasion arose, he was willing to rule on the side of leniency.113 With a wide knowledge of business and money matters,114 he demonstrated an understanding of the problems faced by those who earned their living in the business world. Thus he frequently interpreted the law in a manner that conformed to the the economic realities of his time.115 Conclusion As the time period of the Rishonim drew to a close, investors had within their grasp a means of profiting from their investments without risking the loss of their principal. Just as in the case of a loan where the borrower was completely responsible for any loss, so in the case of an iska. If the proper stipulations were included in the contract, the manager could be held completely responsible for the investment. Any profit from a loan was forbidden as usury, but profit from an iska was deemed to be a legitimate business gain. What the business community achieved, then, was rabbinic sanction for persons of means to earn money with their money. The arrangement was called an iska rather than a loan, but from a practical standpoint, it provided the investor with the benefits of a loan.

IN THE PERIOD OF THE EARLY AHARONIM: ca. 1500–1700 . As discussed above, when a partnership was established, one party investing and the other working, with the profits to be shared fifty-fifty, talmudic law had required that the investor make a separate payment to the working partner for his labor. The reason for this requirement was that the investment was 112. Eidelberg, 45 and 56. 113. R. Israel Isserlein, Terumat ha-deshen, #1 (in regard to reciting evening prayers early in the day), #16 (in regard to handling bodily needs at prayer time), #64 (in regard to retrieving a stuck knife on the Sabbath) and #114 (in regard to putting out a fire on the Sabbath). 114. Eidelberg, 106–11. 115. Eidelberg, 59.

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considered part loan and part deposit, and the Rabbis wanted to avoid the possibility that the working partner’s labor might be considered interest on the loan portion of the investment. How much this payment had to be was a source of controversy in the Talmud and in later generations as well. By the end of the time of the Rishonim, it had become well established that when an investment contract was written, it was sufficient to give the working partner merely a token payment. The attitude of the Sages of later times was well expressed by R. Abraham Ha-Levi (Egypt, 1650–1712) in Ginat veradim: It is good for the owner to pay the worker at the start, for whatever he gives him then is sufficient. And we have learned from the words of the poskim that we do not have to be concerned about the amount of this payment; whatever he gives him is enough.116 In other words, contracts for investments, from the sixteenth century on, all included a phrase requiring a payment for labor, but stating that a token payment was adequate compensation. Liability Perhaps the most significant change introduced into the partnership contract in the period of the Rishonim was a formula placing all liability for loss of capital on the shoulders of the working partner. This was done by stipulating in the partnership agreement that the working partner was instructed to practice his business in a certain way, and that if he departed from this practice, he would be totally responsible for any loss that occurred. This method of protecting investments, first proposed by R. Abraham ben David of Posquieres (twelfth century),117 was accepted by R. Meir of Rothenberg (thirteenth century),118 R. Asher ben Yehiel . (thirteenth and four119 teenth centuries) and his son, R. Jacob ben Asher (fourteenth century),120 and was incorporated by R. Israel Isserlein (fifteenth century) into his Terumat

116. R. Abraham Ha-Levi, She’elot u-teshuvot ginat veradim, Yoreh de’ah, 6:4. 117. R. Avraham ben David, Teshuvot u-fesakim, #140. This responsum can also be found in Temim de’im (Warsaw, 1897), #60. 118. R. Meir of Rothenberg, Sefer She’elot u-teshuvot (Krimona, 1557, repr. Jerusalem, 1986), #102. 119. R. Asher ben Yehiel, Rabbenu asher, Bava metsia 9:18, 102b. . 120. R. Jacob ben Asher, Tur, Yoreh de’ah #177:5.

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ha-deshen.121 This type of arrangement was also allowed by R. Joseph Caro (Palestine, 1488–1575) in the Shulhan . arukh. One is allowed to execute a contract for a half-profit agreement and to stipulate that he [the recipient] will work only with a certain item, and if he changes, that all of the liability will be the recipient’s. And likewise any stipulation that he [the investor] wants [may be included in the contract]. For example, he may stipulate that he [the recipient] will guard the money under the ground, and if he changes and loses [the money], all of the loss will be the recipient’s. But if he profits, it is for the partnership. Even though now he [the investor] is near to profit and far from loss, it is not considered interest since if he [the recipient] did not change [from the stated stipulations], it would be near both to profit and to loss. 122 This stipulation, inserted into the investment contract to protect the lender’s investment, was allowed by R. David ibn Zimra (Egypt, 1480–1573)123 and was elaborated on by R. Moses Trani (Palestine, 1500–1580), who outlined the stipulations that could be included in the investment contract: A person should only keep the money, or what he derives from the money, in pawns of gold and silver, and the money or the pawns should be in his possession under the ground without anyone knowing about it except for his wife. And the goods should be in his possession and in the house in which he lives, and when he is not in the city he should have a guard stand by his house at night. And if it is stolen or lost, the liability will fall on both of them, just like the profit, but if he should fail to fulfill any of the above stipulations, then the loss will be his and not the money’s owner.124 That the investor’s inclusion of all these stipulations was intended, not to protect the goods, but rather to have the working partner violate them and become fully liable for the investment was admitted by R. Abraham Ha-Levi in Ginat veradim: It seems to us that, in this matter, that the owner is satisfied if the worker 121. R. Israel Isserlein, Terumat ha-deshen, #302. 122. R. Joseph Caro, Shulhan . arukh, Yoreh de’ah, #177:5. 123. R. David ibn Zimra, She’elot u-teshuvot ha-radbaz 1:578. 124. R. Moses Trani in She’elot u-teshuvot mabit, 1:244.

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changes and violates the stipulation, for then the money of the iska125 will be all the worker’s responsibility and the owner will be relieved of all liability.126 Or, as R. Abraham Danzig (Lithuania, 1748–1820) put it in Hokhmat adam: . And if the one who gives the iska is fearful [of losing his money] and wants to be certain about the principal, he may make any stipulation with the recipient that he wishes… even though everyone knows that neither the giver nor the recipient believe that he will fulfill the stipulation. 127 Another way to place liability for loss on the working partner was included in a responsum by R. Israel Isserlein in the fifteenth century. He suggested that the partnership contract state that the working partner has agreed that if he claims that the investment was not successful and that he lost money, he is not to be believed unless witnesses such as “the Rabbi and the cantor and similar people who are residents of the city… will testify.”128 In the generations following R. Isserlein, half-profit investment contracts included either the stipulation against violating the investor’s instructions or the statement that the recipient was not to be believed without the corroboration of witnesses. In either case the result was to insure the investor’s funds. Another Type of Iska Contract 129 The Shulhan . arukh actually listed two kinds if iska arrangements. One was 130 the type that originated in the Talmud, in which the investment was considered, as described above, half deposit and half loan. This type of investment was widely practiced during the Middle Ages. Profits or losses were shared equally by the investor and the worker. In the other type of iska,131 instead of dividing the investment sum between a deposit and a loan, the investment time was divided between a deposit and 125. Iska means a business enterprise. In this case it refers to a partnership in which one party invests funds and the other carries on the work of the business. Sometimes iska refers to the contract that establishes the partnership. 126. R. Abraham Ha-Levi, Ginat veradim, 6:4. 127. R. Abraham Danzig, Hokhmat adam, 142:6. . 128. R. Israel Isserlein, Terumat ha-deshen, #302. 129. Shulhan . arukh, Yoreh de’ah, #177:2. 130. B. Bava metsia 104a. 131. Shulhan . arukh, Yoreh de’ah, #167.

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a loan. At the start, the whole investment was considered a deposit with all of the profit (and liability) going to the investor until a certain point, after which the entire investment became a loan with all of the profits (or losses) going to the recipient. This form of the iska had its origin in the Jerusalem Talmud,132 where R. Eliezer gave money to someone on condition that he (R. Eliezer) would profit from the investment until Hanukah; after Hanukah, all of the . . profit would go to the worker. R. Abraham ben David of Posquieres allowed an iska of this nature,133 basing his ruling on the example of R. Eliezer in the Yerushalmi. The innovation of the Yerushalmi, that the investment be divided into two time periods, was used as the basis for a ruling by R. Jacob ben Asher in the 135 Tur,134 which was included by R. Joseph Caro, in the Shulhan . arukh. Instead of setting a fixed time when the investment would be transformed from a deposit to a loan, this ruling set a fixed amount of profit the worker needed to reach; only then would the funds become a loan with all of the profit (and liability) becoming the worker’s. The Heter Iska of Maharam It was not by chance that a heter iska form, which could be used by simply filling in the blanks, was created in Poland. The Jewish population of Poland had grown dramatically in the sixteenth and seventeenth centuries, and Jewish participation in business and commerce greatly increased. Credit was an essential ingredient of the business community. Jews opened shops of all kinds and traded locally and internationally. Shopkeepers needed credit to stock their shelves and merchants needed goods to ply their trade. The half-profit formula became a popular way for Jews to conduct their business. Rabbis were called upon to write the contracts so that the loans could be granted in a legal manner while at the same time funds of investors could be protected.136 In any case, near the end of the sixteenth century, R. Isaiah Menahem ben . Isaac (Poland, died 1599), better known as R. Mendel Avigdors (Maharam),137 132. J. Bava metsia 5:6. 133. Temim de’im, #52. 134. Arba’ah turim, Yoreh de’ah, #167:1. 135. Shulhan . arukh, Yoreh de’ah, #167:1. 136. H. H. Ben-Sasson, “Jewish Settlement and Economic Activity in the Sixteenth and Seventeenth Centuries,” in H. H. Ben Sasson, ed. A History of the Jewish People (Cambridge, MA: Harvard University Press, 1976), 628–45; Jacob Katz, Tradition and Crisis, 43–50; Bernard Weinryb, The Jews of Poland, 115, 137–41. 137. Mendel was a common name for the Hebrew, Menahem. Avigdors was his fa.

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assumed the task of writing a partnership contract to serve as a template for anyone who wished to engage in an investment transaction. Maharam, the rabbi of Lodomeria, was a prominent member of the Council of Four Lands.138 He chose the type of iska described in the Shulhan . arukh that divided the investment into two time periods. The reason he chose this type of iska for his contract appears obvious. Investors did not want the amount of their gain to depend on the business success of the recipient. They wanted a specific amount of profit to be assured. The contract designed by Maharam included the amount of the expected profit due the investor (after which the deposit became a loan) as well as a clause stating that any claim of the recipient that he had not profited was not to be believed unless two reliable witnesses so testified.139 The publication of this contract gave the business community what they sorely desired: a way to invest their funds with both the assurance of profit and the approval of one of the foremost rabbinic authorities of the time. Rabbinic law had come a long way. The authorities of the Mishnah had disagreed about whether a lender who had taken fixed interest should be penalized and made to return the principal along with the interest.140 But all agreed that fixed interest was a firm biblical prohibition to be roundly condemned. Now, however, in the sixteenth century, it was customary for contracts to include a specified sum to be paid to the investor. True, it was an investment, not a loan, and the specified sum was profit, not interest, but the outcome was similar; the profit for the investor was assured by a legal contract. When the format of Maharam’s partnership contract became known to R. Mordecai Jaffe of Posen (Poland, 1535–1612), a fellow member of the Council of Four Lands, he strongly denounced it as a document that would lead to the practice of usury. The flaw in the contract, according to R. Jaffe, was that it relied on a faulty understanding of a ruling of R. Israel Isserlein. R.

ther-in-law’s name, which was customary for a young man in his time to adopt. 138. The Council of Four Lands was the chief institution of Jewish self-government in Poland. 139. Issachar Shreiber in Ta’am ribit, 251, says that Maharam’s reason for choosing the formula where the investment starts out fully as a deposit is that it is not so obvious a subterfuge to avoid the usury ban as is the half loan/half deposit form. There is not so much concern, he explains (regarding the heter iska, which starts out as entirely a deposit), “for as long as he does not profit to the amount that they established, it is still merely a deposit and there is no loan here.” Thus there is no danger of breaking the law against interest. 140. B. Bava metsia 72a.

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Isserlein, in Terumat ha-deshen, had said that an investor could protect his investment by including a clause in the contract whereby the worker would not be believed that he had lost the investment unless two reliable witnesses so testified. R. Isserlein suggested that the rabbi and the cantor in the town could be designated in the contract as the witnesses. Since these two officials were unlikely to be able to testify that the managing partner had lost the investment in the course of his business dealings, the investment was well protected.141 The contract that Maharam had prepared included the clause to protect the investor, but he applied it not only to the principal but to the profit as well. R. Jaffe saw in this protection of the profit a form of interest forbidden by the Torah, and he denounced it in strong terms: I saw one of the teachers who… wanted to find a subterfuge so that the lender would be certain to profit… And he wrote it in the contract in this way: … Regarding his profit, anyone who says that the borrower lost or did not profit so much will not be believed unless two persons like, for example, the Rabbi and the cantor, testify that he had lost and did not profit, and if he did not have such witnesses, the lender could say, “I know that you did not lose and that you profited the full amount, and you need to pay me at the end of the year the principal and also the profit…” And now see the great mistake in this where this teacher came to allow flagrant interest. His mistake is egregious, for this is not at all like the ruling of the Gaon, the author of Terumat ha-deshen… who was a little lenient in order to grant livelihoods to the children of the covenant who are not experts in business, allowing them to be secure with their principal… But to grant them security for interest, God forbid that it would occur to the Gaon to allow it… And if one were to imagine that it was possible to be assured of interest, then they would be, God forbid, wiser than Moses, our teacher, and his Torah would be null, for surely the Torah would not forbid interest if it were possible to fix it and to find permission easily like this… Therefore I say that the contracts about which we are speaking cause many to stumble.142 141. R. Israel Isserlein, Terumat ha-deshen, #302. 142. R. Mordecai Jaffe, Levush ateret zahav, #167. R. Jaffe does not mention Maharam by name, but it is clear who the object of his anger is.

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R. Mendel Avigdors was succeeded in Lodomeria by R. Joshua Falk Katz. It was there that R. Joshua became aware of the permissive contract prepared by R. Mendel. He read R. Mordecai Jaffe’s harsh criticism of the contract. He knew both colleagues personally as all three were members of the Council of Four Lands. R. Joshua took it upon himself to communicate with R. Mendel and point out that requiring witnesses to testify to a loss, which was allowed by the author of Terumat ha-deshen, applied to the principal, but not to the profit. Including a clause in the contract to safeguard the principal was a concession to the business community granted out of economic necessity, but to guarantee the profit in this way was beyond even their most liberal tendencies. It was an outright guarantee of interest and could not be countenanced.143 When R. Mendel entered his new post in Cracow, he bowed to the criticism of his colleagues and revised the contract form.144 In its revised form, the requirement for two witnesses to confirm the business losses was applied only to the principal. The profit was not guaranteed in this way. It was this revised form of the contract that spread in usage throughout the Jewish communities of Eastern Europe and became known as the Heter Iska Contract of Maharam.145 Though the revised form of Maharam’s heter iska contract did not allow witnesses to be required to testify that there had been no profit, it did include a phrase whereby the recipient who did not profit had to give a “stern oath” stating that there had been no profit. Most Jews avoided taking such oaths, fearing that they might somehow, inadvertently, swear falsely. As the author of the Kitsur shulhan . arukh put it: Ordinarily, the recipient does not want to take an oath and will give the investor what they have established between the two of them. And this 143. Joshua Falk Katz, Kuntros ha-ribit, 9 long. 144. I. M. Zunz, Geschichte der Krakauer Rabbinate (Lemberg, 1874), 45–49; Hayyim . Joseph David Azulai, Shem ha-gedolim he-hadash (Warsaw, 1880, Jerusalem, 1965), part . I, 90–92. 145. The text of Maharam’s iska form is published in R. Samuel Halevi’s (1624–1681) Nahalat shiv’ah, #40 together with his comments on the controversy surrounding the heter . iska and its revision. That the heter iska contract of Maharam was approved for usage by the Rabbis of Poland was attested by R. Abraham Gombiner (1634–1682), the Magen Avraham, and by Moses Yekuti’el Koifman, R. Gombiner’s son-in-law, in Lehem . ha-panim (Hanau, Brooklyn: Katz Bookbinding, 1991), in the Kuntros aharon at the be. ginning of Hilkhot ribit.

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is the heter iska that is practiced in our day.146 Using Maharam’s iska contract meant that the investor would definitely get back his principal, and, in all likelihood, would receive the sum specified in the contract as his profit. This was not a loan with guaranteed interest, but it was mighty close.147 Agreeing to a Fixed Profit The idea of establishing a fixed sum for the profit due the investor predated Maharam. It was already included in a responsum of R. Moses Isserles (Poland, 1530–1573, Rama). Rama allowed the lender of 800 gold pieces to specify in his contract with borrowers that at the end of the year, instead of dividing the profit, the borrowers could pay him 1,000 pieces, or twenty-five more per 100 coins.148 Imagine, this amount was specified in the contract between borrower and lender. It was not interest; it was profit on an investment, but it was specified to be 25 percent and it was permitted by Rama. A half century later, R. Meir ben Gedalyah (Poland, 1558–1616, Maharam Lublin) was asked about a case where an iska contract granted an investor one-third of the profit. The contract also stated, however, that should the working partners wish to give the investor 30 gold pieces, that would suffice, and they could keep any additional profit for themselves. Not only did Maharam Lublin approve of the arrangement, but when the working partners tried to rescind a promissory note that they had given the investor for 30 gold pieces, claiming that they had not, after all, profited, Maharam ruled that their note for the 30 gold pieces was enforceable and that they had to pay that sum to the investor.149 A contemporary of Maharam Lublin, R. Joshua Falk Katz (Poland, died 1614) also indicated that such an arrangement was permitted. He said: 146. R. Solomon Ganzfried, Kitsur shulhan . arukh, #66:3. 147. The revised form of Maharam’s contract was accepted by both R. David Ha-Levi (Taz) and R. Shabbtai Ha-Kohen (Shakh) in their commentaries on the Shulhan . arukh (#167:1). This method of protecting the investor’s money was accepted by Rabbi Joshua Falk Katz, but he makes it clear (Kuntros ha-ribit 8 long) that the stipulation may not be beyond the bounds of reason. He allows the contract to say that only two prominent town officials may testify to the loss, but not to name two individuals who do not live in the town and would thus be unable, under any circumstances, to testify about what happened in the business. 148. R. Moses Isserles, She’elot u-teshuvot ha-rama, #80. 149. R. Meir ben Gedalyah, She’elot u-teshuvot maharam lublin, #135.

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If the investor says to the worker at the start of the esek, “I am giving you a hundred gold pieces; work with them for half profit or loss, and I will give up any claim should you profit more than 40 during the course of the year. You have my permission to give me 20 gold pieces and anything above that will remain yours, and if you should lose, half of the loss will be mine.”150 Another half century later, in his commentary on the Shulhan arukh, R. . David Ha-Levi (Poland, 1586–1667, Taz) reinforced the arrangement whereby a specified sum was entered into the iska contract, this sum to be accepted by the investor as adequate: If someone gives a sum as an iska to his fellow with which to work and profit, and if he [the recipient] profits, he will give a fixed amount to the investor, and if he does not profit, then he will not give him anything. This is not forbidden, and this is what is done every day in all of the communities. 151 Egypt was conquered and incorporated into the Ottoman Empire in 1517. A large Jewish population resided there, active in business and commerce. R. Abraham Mordecai Ha-Levi (Egypt, 1650–1712), in his Ginat veradim, pointed out that in his time the rabbinic authorities were writing illegal iska contracts designed to guarantee both the principal and the profit of the investor.152 He said that they justified their activity by relying on a responsum of R. Joseph ibn Lev (Turkey 1500–1580). However, R. Abraham explained that the responsum of R. Joseph dealt with a special case153 and that R. Joseph’s responsum had been misused for some 35 years by those who wrote contracts guaranteeing the investor all of the profit and promising to pay him a fixed monthly sum. To bring an end to the use of these contracts, “whose transgression is destroying the land,” R. Abraham turned his attention to preparing a “proper form” in which “the principal would be completely guaranteed, and the profit [be guaranteed] to as great an extent as possible.” The contract in Ginat veradim presented a dramatic innovation. It re-

150. Kuntros ha-ribit, 2 short. 151. Taz, Shulhan . arukh, Yoreh de’ah, #177:12. 152. R. Abraham Ha-Levi, Ginat veradim, 6:4. 153. In which the recipient had no interest in making a profit for himself, but only for the investor.

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turned to the traditional talmudic formula dividing the iska into half deposit and half loan, but, like the heter iska of Maharam, it included a place to enter a specified sum for the investor’s share of the profit. If the investor’s share of the profit at the end of the year was greater than that sum, then the recipient was allowed to keep the excess. If the profit was less than that sum, then the recipient needed to take a stern oath to affirm that fact. The heter iska contract in Ginat veradim was thus advantageous in every way. It called for dividing profits and losses fifty-fifty according to talmudic law, but it included a specific sum, a profit goal, if you wish, after which all profits went to the working partner. It also called for a stern oath should the profit goal not be reached. R. Abraham was quite honest and open in his explanation of the text of the contract. He admitted that the clause putting all liability on the working partner should he violate the investor’s instructions was not meant to inhibit the worker’s activities. Quite the reverse. The investor is satisfied if the worker changes and departs from the stipulations, for then the iska money becomes entirely the liability of the worker, and the investor is exempt from all liability.154 Furthermore, in his forthright way of speaking, R. Abraham admitted that the working partner was not likely to take an oath if he did not reach the specified sum of profit. We have required this stipulation of the worker [that to avoid paying the specified sum, he will have to take an oath] because usually he sits in his store doing business with his own goods and with the goods of others, and he is not able to be precise and exact to estimate the profit that will come from the iska, and in order that he not possibly violate the stringency of the oath, he gives in and gives the specified sum to the investor.155 The Rabbis, in fact, stated that even if the recipient did not profit at all, he still was permitted to pay the agreed upon sum to the investor. R. Abraham Danzig said, “It seems to me that even if the recipient loses, he is allowed to give him the agreed profit and there is no need to fear [violating the ban against usury].”156

154. R. Abraham Ha-Levi, Ginat veradim, 6:4. 155. Ibid. 156. R. Abraham Danzig, Hokhmat adam, 142:10. .

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And R. Solomon Ganzfried added: Even if the recipient knows afterwards that he did not profit, or even if he lost, he is allowed to repay the investor the principal and the profit to which they agreed. And it is not forbidden. For as long as he has the ability to take an oath [if he wants to claim that there was no profit], he is able to avoid the oath by paying the money.157 Setting a specific sum to be paid to the investor, which could be avoided only by taking an oath, became a standard part of the heter iska used in Poland and beyond.158 Conclusion The Bible had shown its concern for poor borrowers in a series of laws such as the requirement to return a garment taken in pledge at nightfall, the prohibition against taking a millstone in pledge, and the law against a creditor entering the house of a debtor to take his pledge. The ban on taking interest on a loan was, undoubtedly, the most far-reaching of the laws to protect the poor borrower. As we have seen, however, almost immediately after the time of the Bible, the law against interest was subjected to pressure from the business community. Storekeepers needed the wherewithal to stock their shelves; merchants needed goods to engage in trading; property owners needed to obtain cash by mortgaging their homes or fields. And persons who had accumulated capital would not lend unless they believed that they could gain from the transaction. Logically, one would think that the law composed in Bible times to help the needy would be limited in its application to the poor and not be imposed upon the wider world of business and commerce. Nevertheless, in two thousand years, no Rabbi or Sage has ever suggested that the biblical law be applied only to the poor and that those engaged in business be exempt from its application. Such a challenge was simply unthinkable. The Bible said that interest was totally forbidden and no authority was prepared to assert that, in certain circumstances, it should be allowed. So the Rabbis turned to interpretation. Rather than rule that the law should be ignored, they subverted it by interpreting it to meet the desired goals of

157. R. Solomon Ganzfried, Kitsur shulhan . arukh, #66:3. 158. The clause for a specified payment to the investor became part of the heter iska contract forms in the Hokhmat adam (#143) and in the Kitsur shulhan . . arukh (#66:6).

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community members. In doing so, they were following a long established tradition of legal flexibility. Hillel had permitted debts to be collected on the seventh year by allowing the court to collect them from borrowers in behalf of lenders.159 Dealing in gentile wine was forbidden in the Talmud, but Rashi allowed it on the grounds that the talmudic law applied only to the wine that non-Jews used to offer libations to idols. Since non-Jews did not use wine in this way in Rashi’s day, he relaxed the stern prohibition.160 The injunction against having servants heat Jewish homes on the Sabbath was overcome by R. Tam, who explained that the servants themselves benefited from their labor and that the comfort afforded to their Jewish masters was only incidental.161 Solomon Luria, when faced with the fact that women were widely engaged in business and commerce, interpreted the talmudic prohibition against looking at or speaking with women to apply only to men who could not control their desires.162 In the case of interest, it was a matter of calling a loan an investment. It was forbidden to lend on interest, but to invest for profit was allowed. It was forbidden to lend a hundred dollars and stipulate that the borrower return a hundred and ten, but one was allowed to invest a hundred dollars in a partnership agreement and stipulate that a profit of ten dollars be returned along with the principal. The heter iska was the culmination of centuries of struggle between a credit society where borrowing and lending were everyday occurrences and the prohibition against interest. The heter iska became an integral part of business dealings within the Jewish community. Over the years variations were made in its form, but its essence remained the same; the investor gave the worker a token payment for his labor; the investment was guaranteed by a clause placing all liability on the recipient, and the profit was guaranteed by requiring a recipient who did not profit to take a seldom-used solemn oath to affirm his claim.

IN THE PERIOD OF THE LATER AHARONIM: ca. 1700–2000 . In the eighteenth century, Jews played an important role in the economy of Eastern Europe. They supplied agricultural goods and crafts to the villages 159. B. Gittin 36a. 160. R. Solomon ben Isaac, She’elot U-Teshuvot Rashi (Bene Berak, 1980), #58, #327. 161. R. Tam, Sefer ha-Yashar le-rabbeinu tam (Jerusalem: Simon Schlesinger, 1959), #286. 162. R. Solomon Luria, Yam shel shelomo (Jerusalem, 1996), Kiddushin 4: 4 and 4: 25.

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and to the estates. They went to the fairs where credit was arranged and contracts were signed. It has been said that “Jews controlled the urban trade in Poland in the eighteenth century.”163 The heter iska served the needs of the Jewish business community. It gave legal sanction to merchants, craftsmen, and workers of all sorts to borrow money to pursue their business activities while adhering to the confines of rabbinic law. Some people, however, wanted money, not for a business purpose, but for personal use. They needed funds to buy a house or to pay a debt. Could a heter iska, a business investment contract, be used in such a case? It seemed to be a contradiction in terms. The heter iska was the clothing that gave legitimacy to a business loan, a profit making loan. But in the case of lending money for personal use, there was no possibility of a profit. It would seem that if a heter iska were used for a personal loan, then the clothing would be removed and a loan with interest would be revealed in all its nakedness. In fact, R. Joseph Caro specified that the terms of an iska required that the recipient use the funds for a profit earning business and not for personal use.164 And R. Moses Isserles, in his comments on the Shulhan . arukh, said, “If he changed [from the investor’s instructions] and said, ‘I will use the funds for myself and not for the iska,’ then he is like a robber.”165 Early in the eighteenth century, the Egyptian Sage R. Yeshua Shababo Yedia Zin stated forcefully that a heter iska may be used only when it is certain that the recipient uses the funds for the purpose of earning a profit. For example: If the working partner is a poor man and has a creditor and he does not have in his home or in his store merchandise to sell in order to cover his debt, but he uses the iska to pay his debt, or uses it to eat or drink, then this is a great prohibition, because writing the contract does not allow him to take complete interest and call it profit, because he is not working with the money, because what matters is not the contract but what is actually done.166 This same idea was stressed by his contemporary, R. Meir Eisenstadt (Poland, c. 1670–1744), who said, “If the borrower took out all of the money for his 163. Shmuel Ettinger, “Migration and Economic Activity in the Seventeenth and Eighteenth Centuries,” in H. H. Ben Sasson, 733–40; Bernard Weinryb, 137–41. 164. Shulhan . arukh, Yoreh de’ah, #177:30. 165. Moses Isserles, in the Shulhan . arukh, Yoreh de’ah, #177: 5. 166. R. Yeshua Shababo Yedia Zin, in Ginat veradim, end of 6:8.

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expenses, then any profit that he [the lender] would take would be fixed interest.”167 Later in the eighteenth century, R. Shneur Zalman of Lyady (Russia, 1745–1813) expressed a somewhat more lenient view on this matter. Since the investment was half deposit and half loan, he allowed the recipient to use up to half of the investment (the loan half) for his own personal needs, but if he removed more than half the money… for example, for his livelihood or for his apartment or to repay a debt, whether with the knowledge of the investor… or without his knowledge, even if he immediately returned other funds in place of them [in place of the money that he took for his personal use] and worked with them [the new money] and profited, then this is his profit, and if he gives it to the investor, then it is complete interest.168 But community members clamored for a legitimate way to allow personal loans, and the Rabbis responded. Such loans were allowed by R. Abraham Danzig in Hokhmat adam by having the lender buy merchandise that the . 169 borrower owned. This technique was explained by R. Solomon Ganzfried in the Kitsur shulhan . arukh: An iska contract is not allowed unless it is truthful that he borrows the money to use in a business. For if he does not use the money for business, but rather to pay a debt or the like, then an iska contract will not work because it is a lie. But we can do it [allow the loan] in this way: For example, if Reuben needs money, and he has some merchandise, even in another place, he may sell it to Simon, even at a large discount, and on condition that the choice is Reuben’s, that if he does not deliver it [the merchandise] to Simon by a certain day, he will pay him so much for it (so that Simon will receive a proper profit), and Simon will give the money to Reuben.170 By this subterfuge, R. Solomon allowed a person to borrow money on interest. Reuben received the money from Simon as payment for his merchandise, but 167. R. Meir Eisenstadt, Panim me’irot, 2:30. 168. R. Shneur Zalman of Lyady, Shulhan . arukh ha-rav, #42. 169. R. Abraham Danzig, Hokhmat adam, 143:5–6. . 170. R. Solomon Ganzfried, Kitsur shulhan . arukh, 66:10.

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he did not deliver the merchandise. After the specified date passed, Reuben had to pay Simon the specified sum, which was larger than the amount he received. R. Joseph Saul Nathanson (Poland, 1808–1875) also allowed one who received an iska to use the money to meet his personal needs. He justified his stance by saying that a teacher’s livelihood is from the teaching, and if he doesn’t have anything to eat, he would not be able to do the teaching and would not earn his livelihood. And if so, it is better that we execute a heter iska, for whatever a person does in order to earn his livelihood should be called profit. And if so, that money will be a help to him to earn his livelihood and it is well that we should execute an iska.171 Furthermore, R. Nathanson explained that the prohibition against using heter iska funds for personal use applied when the recipient tells the lender that he will use the money in a business. But if the investor is made aware that the funds will be used, for example, to pay off a debt, then the terms of the heter iska are applicable and the recipient is allowed to pay the investor the agreed upon profits.172 R. Shalom Mordecai Shvadron (Poland, 1835–1911, Maharsham) also advanced the idea that a heter iska could be used for a personal loan.173 He taught that the other businesses of the borrower became subservient to the lender and that his profit could legitimately be derived from them. He even expressed the view that a heter iska could be used to allow the borrower to build a house. For either the house could be rented for a profit or else, if the borrower lived in the house, then he saved the price of renting elsewhere. In any case, Maharsham allowed a heter iska to be used even when the borrowed funds were not invested in a profit-making enterprise. And R. Meir Arik (Poland, 1855–1926) was asked about a case where someone borrowed from his fellow by means of a heter iska and did not engage in any business with the money. He took it [the loan] only to pay the bank which was pressing him and [the bank] wanted to sell his house [to obtain its money].

171. R. Joseph Saul Nathanson, Sefer She’elot u-teshuvot sho’el u-meshiv, 1:3:160. 172. Ibid. 3:1:137. 173. R. Shalom Mordecai Shvadron, She’elot u-teshuvot maharsham, 2:216.

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And R. Arik responded that the custom has spread widely that they borrow with a heter iska in order to pay off a debt, and they repay the iska. And perhaps [it is allowed because] they relied on the fact that ordinarily the recipient has merchandise in his house, and the heter is on the merchandise, and the investor buys it with his money.174 Thus even though the money received may not have been used for business purposes, it allowed the recipient to maintain his other business activities, whose profits would be shared with the investor. R. Simeon Gruenfeld (Hungary, 1861–1930, Maharshag) agreed with the position that a recipient could use the funds to meet his personal needs. After all, he was allowed to take an oath that he did not profit. If he chose not to take an oath, then he had to pay the investor the agreed sum and it was allowed.175 Perhaps the most forceful expression of permission to give a heter iska to a borrower who makes personal use of the money comes from R. Mordecai Jacob Breish (Poland/Switzerland, 1896–1976). He was asked whether officials or teachers, people without a business, were allowed to borrow using a heter iska. He answered: And in my view we can say… that this one who marries his son or daughter with the money that he borrowed, this is called the greatest profit… or if he uses the money to pay a debt to a non-Jew whom he owed on his house, where, if he did not pay the money to the non-Jew then his house would be sold and he would have to move out… and it goes without saying that he must pay the lender the amount to which they agreed… because he did indeed profit with the money. And in my view this permission is clear and simple.176 By granting permission for personal loans under the rubric of the heter iska, the Rabbis had come full circle, from the biblical law forbidding interest to protect the poor, to restrictions on business transactions because of fear of violating the interest ban, to the heter iska that allowed business loans, calling them investments, to loans to anyone, for whatever their personal needs might be. 174. R. Meir Arik, She’elot u-teshuvot imre yosher, 1:108. 175. R. Simeon Gruenfeld, She’elot u-teshuvot maharshag, Yoreh de’ah, 1:4. 176. R. Mordecai Jacob Breish, Helkat ya’akov, 3:199. .

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The Generic Heter Iska In the twentieth century, the Jews played a leading role in Poland’s economy, especially in textiles, food processing, shoemaking, and clothing manufacture. They were also important in banking, insurance, and other financial services.177 Credit was an essential ingredient of Jewish business life.178 The use of the heter iska for loans of all sorts became normative within the Jewish community. But there was a problem. In the case of a Jewish owned bank, writing a heter iska every time the bank issued a loan was a cumbersome task. To ease this problem, R. Shalom Mordecai Shvadron approved the writing of a generic heter iska,179 a contract signed in court by the owners of a Jewish bank indicating that all the loans given by that bank would be made in accordance with the rules of heter iska. After this declaration was signed in court, Maharsham publicized the matter by announcing it in the synagogues and in the houses of study. With this action, Maharsham declared that when one borrowed from that bank, it was as if he had explicitly stipulated that the loan was executed according to a heter iska and that the text of the contract was in the court.180 Maharsham was a renowned and respected religious authority. His introduction of the generic heter iska opened up a new avenue for loans among Jews. With a formal declaration by the bank’s authorities and with the approval of the court, it was no longer necessary for each and every borrower to complete an individual contract. The heter iska was filed with the court and then one could borrow on interest from the bank. There was no necessity to complete a separate contract. The one that the court held applied to all loans issued by the bank. The generic heter iska of Maharsham, early in the twentieth century, designed for use by Jewish owned banks, was followed in 1924 by a heter iska prepared by R. Ezriel Meir Eiger (Poland, 1878–1943) for all Jewish businesses. R. Eiger contended that not just banks, but all Jewish businessmen needed a generic heter iska. Even Torah abiding people were not always in a position to write one for every loan. And at times people who would normally enter into a heter iska simply forgot to do so. R. Eiger proposed that whenever a Jew entered the world of business, he should write a generic one that would last him a lifetime. This would keep him from transgression in case he was 177. Peter Stachura, Poland in the Twentieth Century, 46. 178. Jack Taylor, The Economic Development of Poland, 1919–1950, 102. 179. R. Shalom Mordecai Shvadron, She’elot u-teshuvot maharsham, 1:20, s. v. Uv’guf. 180. R. Meir Arik agreed with Maharsham’s decision. Imre yosher, 1:189.

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forgetful or, for some reason, was unable to write one when engaging in a loan transaction. He said: For a number of years my spirit has been blackened by the great amount of stumbling over the stern prohibition against interest… This one gives and this one takes, and only a tiny number of people remember to execute a heter iska… Many [borrowers] fear that they will lose the chance to get a loan if they seek a heter iska, and lenders fear that they will lose a day’s interest, that their money will sit without gaining any profit. And there are hundreds of our Jewish brothers who commit this transgression and support themselves from it… The sum of the matter is that this strict Torah ban [against interest] is almost forgotten, and even the pious succumb to it daily, and no one is working to find a way to avert this great stumbling… Therefore, “I thought of doing something good.” Perhaps there is a way to fix this thing through a generic [contract], to provide the many with a fixed ordinance, that every Jew, when he begins his work in business, will accept the obligation to write with his own hand once before the town rabbi who is in every city that all of his financial dealings, what he gives to others and what he receives from others, … will be in accordance with an iska following the ordinance of the Rabbis… Let a person sign his name stating that all his dealings will be according to the heter iska; then, even if he is distracted and afterwards forgets [about the heter iska which he had executed], the soul inside him, which really wants to fulfill God’s word, will remember that it was done properly.181 R. Eiger’s plan appeared first in Kovets derushim, a publication of the Agudat rabbanim of Poland. In subsequent issues, Rabbis throughout the country expressed their views, pro and con, on the proposal. In 1930, R. Eiger assembled many of the comments and responses to his proposal into a collection called Takanat rabim. Most of the respondents supported the proposal, although some with caveats such as that the heter iska needs to be renewed annually or that the words “loan” and “interest” not be mentioned when the “investment” is made.182 181. Kovets derushim (Warsaw: Piotrkow Trybunalski, 1924). 182. Ezriel Meir Eiger, Takanat rabim (Warsaw, 1930, Bene Berak, 1956), Introduction. See Jacob Bloi, Brit yehudah, (Jerusalem, 1979) 628–30, n. 19 for a fuller analysis of the response to R. Eiger’s proposal.

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Some years later, in his collection of responsa, R. Mordecai Jacob Breish expressed the same concern about the widespread violation of the usury ban as did R. Eiger. R. Breish lamented: We see, to our great sadness, … in the market of the merchants that they are not careful and stumble in this every day… for the livelihood of the population of Israel is in the world of commerce, and most of them are compelled to take loans and credits of various kinds and to do business with other people’s money, and the endless fear in our time, the yoke of livelihood, the needs of the household, the burden of taxes and the heavy property taxes causes them to depart from their knowledge. And like R. Eiger, R. Breish felt that it was necessary to take steps to keep the people from transgressing. It is a mitsvah for every rabbi, teacher, scholar and eager student to dig through the sources and find a way, according to the laws of the Torah and the rules of teaching, to be lenient with commerce so that it not sit and be entangled with the stern prohibition against interest.183 R. Breish prepared a generic text for the use of banks to indicate that all of their transactions, whether accepting the money of its customers or lending to them, would be done in accordance with the rules of heter iska as ordained by the Rabbis. In 1974, R. Moses Feinstein (United States, 1895–1986) wrote a responsum outlining the points to be included in a generic heter iska for banks.184 He allowed banks both to lend and to accept deposits, to charge a fee to borrowers and to grant an increase to depositors; all this could be accomplished through the issuance of a generic heter iska by the directors of the bank. R. Feinstein explained that the heter iska would work even if the borrower did not know about the heter iska. R. Feinstein’s responsum was written to apply to a bank in Rockland County, New York, but the greatest use of the generic heter iska is in the banks in Israel. It is simply not practical for Jewish owned banks that cater to Jewish customers to deal with a heter iska contract every time someone makes a deposit or takes a loan. For this reason the generic heter iska is widely used in

183. Mordecai Jacob Breish, Helkat ya’akov, Helek yoreh de’ah. Introduction to . . Kuntros ha-ribit. 184. Moses Feinstein, Igrot moshe, Yoreh de’ah, 3:41.

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Israel’s banks. Each bank has its own heter iska formula with formal rabbinic approval of its text. A person, then, who makes use of the services of an Israeli bank may be unaware of the fact that his borrowing or lending is under the rules of heter iska; to him it may simply be a loan with interest; but the transaction is legal and is carried on with the approval of the highest rabbinical authorities in Israel. Conclusion In the fifteenth century, R. Israel Isserlein expressed his reservations regarding the techniques he and his colleagues used to allow Jews to profit from the use of money. “I am afraid that by seeking strategies to allow business dealings with interest, the words of the Torah will become a laughingstock.”185 Surely many of the Sages who approved of such strategies felt qualms about their actions, but over the course of the centuries, the process continued. Credit was the lubricant of the economy. Merchants needed funds to buy their wares; businesses needed investments to expand their enterprises and ordinary people needed money to pay their daily bills. The rabbinic community could not hold back the tide. Loans had to be granted and lenders had to be compensated. If the Rabbis wanted to prevent the flouting of the Torah’s law, they had no choice but to employ strategies to legitimize the business activities that flourished within the Jewish community. The Rabbis’ tool of preference was the heter iska. Based on the talmudic practice of a business partnership, it has become the vehicle that allows for Jews to borrow and lend on interest. R. Moses Feinstein wrote that a heter iska is not “a magic incantation”186 to allow loans on interest, but, in fact, it is just like one. A Jew can lend money to his co-religionist, establish a fixed rate for periodic interest payments, and do so within the letter of the law through the medium of a heter iska. A Jew can walk into a Jewish owned bank, deposit his money, receive his regular interest payments unaware that his deposit is governed by a heter iska, and still be acting within the framework of Jewish law approved by leading halakhic authorities. The Rabbis faced the challenge of preserving the laws of the Torah while upholding the needs of the Jewish community. The law against lending on interest provides an excellent example of how they used their interpretive skills to uphold the law while allowing business and commercial life to flourish.

185. R. Israel Isserlein, Terumat ha-deshen, #302. 186. R. Moses Feinstein, Igrot moshe, 2:62.

Conclusions The biblical law forbidding usury was direct and simple. It was wrong to take advantage of a poor person by charging him a fee for the use of a loan. Loans were an act of kindness on the part of the lender. Any gain by the lender was forbidden. The Torah’s law, however, did not take into account loans of a commercial nature. The writers of the Torah did not imagine someone borrowing produce in order to sell it for profit, paying a farmer in advance in order to guarantee that he would receive goods at a specified price, or borrowing funds in order to establish and engage in a business enterprise. These situations, however, eventually became common realities. In the days of the Tannaim, farmers, manufacturers, and tradesmen needed funds to advance their business ventures. Was a simple loan of produce a violation of biblical law if the price of the goods rose before they were returned? The Rabbis were concerned that it was, but agreed that if the borrower possessed the goods at the time that they were borrowed, the transaction was perfectly legal. What the Tannaim did, in essence, was to apply the prohibition against lending on interest to business transactions, and then find loopholes whereby the transactions could be allowed. The Tannaim followed the same practice in every case in which the prohibition against interest might have affected business life: advance payment for produce was permitted if the market price was available; a vendor was allowed to increase the price for credit as long as he did not mention that a lower price was available for cash; a lender was allowed to profit from mortgaged property as long as he took a deduction from the debt each year, and investors were permitted to profit from partnership agreements as long as they paid their managing partners a fee for their labor. Indeed, the Tannaim of the second century had taken a step that would have far-reaching consequences over the centuries. They, in fact, established a precedent that would be followed for the next 1800 years. They obeyed the letter of the law; they even expanded the letter of the law, but they had no regard for the purpose and spirit of the law. Nowhere in the tannaitic literature is a question raised about the fact that the biblical law against usury was

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designed to protect the poor. The Rabbis were concerned only with the fact that usury was banned. They then applied the ban without a thought as to whether the borrower was rich or poor. And when they developed techniques for circumventing the ban, they completely disregarded the purpose of the biblical prohibition. They extended the ban to apply to all persons, rich or poor, and then developed ways to overcome the restrictions. There was one Tanna, R. Simeon, who was known for interpreting the Torah’s laws in light of their original purpose. One case cited in a Baraita is, in fact, analogous to ours.1 In this case, the Torah ruled that if a garment were taken in pledge for a debt, the creditor had to return it at night since it might be his only covering for the night.2 In addition, the Torah stated that from a widow, one could not take a garment as a pledge at all.3 The question arose as to whether the logic behind this prohibition applied to all widows or just to poor widows. R. Judah said that the law applied to any widow, making no distinction between rich and poor. But R. Simeon pointed to the purpose of the law. A poor widow who needed her garment to keep her warm at night would have to insist that the lender return it to her each night. Doing so, however, might cast aspersions on her morals if a man were seen coming to her place each night. A wealthy widow, on the other hand, would have no need for her garment and would suffer no loss to her good name. Therefore, according to R. Simeon, the judges should take the purpose of the Torah’s law into consideration in making their rulings. The purpose of the law, in R. Simeon’s view, was to protect poor widows, and the prohibition against taking a widow’s garment as a pledge should apply only to them. If R. Simeon maintained that the law against taking a widow’s garment in pledge was meant to protect only poor widows, even though the Torah does not explicitly say so, then the prohibition against interest, which the Torah clearly says is for the protection of the poor, should certainly have drawn his attention. We would expect that he would state that the ban on usury applied only to the poor and that loans on interest to the wealthy should be allowed. We might even have expected him to have taken the position that business loans on interest should be permitted. R. Simeon, however, was silent about interest. We have no record of his challenging the tannaitic majority, who 1. B. Bava metsia 115a. Other instances of R. Simeon showing concern for the reason behind a biblical law may be found in B. Yoma 42b, B. Gittin 49b, B. Kiddushin 68b, B. Sota 8a and B. Sanhedrin 16b and 21a. 2. Deut. 24:12-13. 3. Deut, 24:17.

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applied the biblical prohibition to all sorts of business ventures.4 In fact, not a single tannaitic Sage raised a voice against the broad application of the biblical prohibition. The Amoraim followed in the footsteps of their predecessors and never questioned the reasoning behind the establishment of the usury ban. They made no distinction between the wealthy and the poor. Their attitude was simply “This is the law and it must be obeyed.” At the same time, if there were ways to circumvent the law or avoid its application, they were ready and willing to do so. In the centuries following the completion of the Talmud, Jewish involvement in economic activities grew by leaps and bounds. Jews involved themselves in businesses of all sorts in Spain, France, Germany, and in the Mediterranean world. When the economy expanded in Poland and Russia, Jews took an active part in a variety of pursuits. In every country in which Jews lived, credit was the normal practice in the business world. The Jews sought it to pursue their enterprises, and lenders seeking profit were readily available. How was this possible? In spite of the stern prohibition against lending on interest, there was an inherent flexibility in Jewish law, apparent from the time of the Mishnah. One scholar has pointed out that of the 523 chapters of the Mishnah, only six contain no disputes among the Sages. And these disputes offered no firm resolutions. A book of law that left item after item as a matter of dispute left decisions up to those who read and interpreted its pages. And this is exactly how the authorities of later times looked upon the Mishnah. It was law, but not final law. It perhaps raised more questions than it answered. The Sages of the Gemara at times sustained the Mishnah’s anonymous rulings, but often favored the minority views of named scholars or simply left matters open, to be decided by those who came after them. By the time of the Geonim and the Rishonim, a tradition of flexibility had been established. Interpretations ruled the day. Hallowed laws were sometimes turned on their heads by rabbinical interpretations. This flexibility was particularly visible when it came to the law against usury. Thousands of pages have been penned by rabbinic authorities seeking to uphold the prohibition against usury, yet allow Jews to carry on profitable business undertakings. The Sages over the years have displayed the flexibility and the courage to make decisions that allowed the economic needs of the community to be met. From R. Tsemah. Gaon in the ninth century, who 4. It was, in fact, R. Simeon who prohibited interest with words. B. Bava metsia 75b.

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defined the term tarsha in a way that allowed vendors to profit if they waited to be paid for their goods, to R. Mendel Avigdors in the sixteenth century, who prepared the contract form for the heter iska, to R. Shalom Mordecai Shvadron in the twentieth century, who pioneered the development of the generic heter iska, making it unnecessary to fill out a form for every individual loan transaction, the Rabbis showed their initiative and their inventiveness. On the one hand they were bound by faith and by training to uphold the laws of the Torah. At the same time, they needed to serve the members of their communities. The people lived in a credit society. To abandon interest would imperil their livelihoods. Thus the Rabbis, well aware of the needs of the people, followed the path laid out by their predecessors. They solved their problems through bold interpretation of the law, allowing business life to continue unfettered by the ban on usury.

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Bibliography Biblical Period Brin, Gershon. Studies in Biblical Law: From the Hebrew Bible to the Dead Sea Scrolls. Sheffield, England: Sheffield Academic Press, 1994. De Vaux, Roland. Ancient Israel. New York: McGraw-Hill, 1961. Driver, G. R. and John C. Miles. The Babylonian Laws, I. Oxford: Clarendon Press, 1952. Falk, Z. W. Hebrew Law in Biblical Times. Jerusalem: Wahrmann Books, 1964. Fishbane, Michael. Biblical Interpretation in Ancient Israel. Oxford: Oxford University Press, 1988. Glaeser, Edward and Jose Sheinkman. “Neither a Borrower Nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws.” Journal of Law and Economics 41 (1998): 1–36. Lowenstamm, Samuel. “M/Tarbit and Neshekh,” Journal of Biblical Literature 88 (1969): 78–80. Maloney, Robert P., “Usury and Restrictions on Interest-Taking in the Ancient Near East.” The Catholic Biblical Quarterly 36 (1974): 1–20. Meek, Theophile J. Hebrew Origins. New York: Harper, University of Chicago Press, 1960. Milgrom, Jacob. Leviticus 23–27. New York: The Anchor Bible, Doubleday, 2007. Nelson, Richard D. Deuteronomy: A Commentary. Louisville, London: Westminster John Knox Press, 2002. Neufeld, Edward. “The Prohibition Against Loans at Interest in Ancient Hebrew Laws.” Hebrew Union College Annual 26 (1955): 355–412. . “The Rate of Interest and the Text of Nehemiah 5:11.” Jewish Quarterly Review 44 (1953): 194–204. Orlinsky, Harry M. Ancient Israel. Ithaca: Cornell University Press, 1954. Pritchard, James H. Ancient Near Eastern Texts Relating to the Old Testament. Princeton: Princeton University Press, 1950. Rosenthal, Judah. “Ribit min ha-nokhri.” Talpiyot 5 (1952): 475–92; 6 (1953): 130–52. Sarna, Nahum. The JPS Torah Commentary: Exodus. Philadelphia/New York: Jewish Publication Society, 1991. . Exploring Exodus. New York: Schocken Books, 1986. Stein, S. “The Laws on Interest in the Old Testament,” Journal of Theological Studies 4,2 (October 1953): 161–70. Tcherikover, Victor A. and Alexader Fuks. In Corpus Papyrorum Judaicarum. Cambridge: Harvard University Press, 1957. Tigay, Jeffrey. The JPS Torah Commentary: Deuteronomy. Philadelphia: Jewish Publication Society, 1996.

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The Talmudic Period Alon, Gedalyahu. The Jews in their Land in the Talmudic Age. Cambridge, Massachusetts, London: Harvard University Press, 1994. Beer, Moshe. Amora’e bavel: Perakim be-haye ha-kalkalah. Ramat-Gan: Bar-Ilan Univer. sity, 1982. . Ma’amadam ha-kalkali ve-ha-hevrati shel amora’e bavel. Jerusalem, Hebrew . Universtiy: Unpublished Dissertation, 1962. Cohen, Boaz. “Antichresis in Jewish and Roman Law.” Alexander Marx Jubilee Volume. Edited by Saul Lieberman. New York: Jewish Theological Seminary, 1950. Ehrman, Tzvi. “Antichresis ba-talmud.” Sinai 54 (1964): 177–84. Eliash, Ben Zion. Yesodot be-dine ribit ba-mishpat ha-ivri. Jerusalem: Hebrew University, 1977. . “Shorosheha ha-ra’ayoniyim shel ha-halakhah: Perek be-hilkhot ribit ba-mishnah u-va-talmud.” Shenaton ha-mishpat ha-ivri 5 (1978): 7–78. .“Kol she-yesh lo goren kotsets imo ke-sha’ar ha-goren, ve-kol she-ayn lo goren kotsets imo kol zeman she-yirtseh.” Tarbits 51 (1982): 185–91. Gafni, Isaiah. The Jews of Babylonia in the Talmudic Era. Jerusalem: The Zalman Shazar Center for Jewish History, 1990. Herzog Isaac. The Main Institutions of Jewish Law. Vol. 2. London: The Soncino Press, 1967. Jacobs L. “The Economic Conditions of the Jews in Babylon in Talmudic Times Compared with Palestine.” Journal of Semitic Studies 2 (1957): 349–59. Klausner, Joseph. Bi-yemay bayit shaynee. Jerusalem: Mada, 1954. Lapin, Hayim. Economy, Geography, and Provincial History in Later Roman Palestine. Tubingen: ¨ Mohr Siebeck, 2001. Neusner, Jacob. A History of the Jews in Babylonia. Vols. 3 and 4. Leiden: E. J. Brill, 1965–1970. Newman, J. The Agricultural Life of the Jews in Babylonia between the Years 200 C.E. and 500 C.E. London: Oxford University Press, 1932. . Commercial Life of the Jews in Babylonia between the Years 200 C.E. and 500 C.E.. (in mimeograph form). Solomon Zeitlin, The Rise and Fall of the Judean State. Vol. I. Philadelphia: Jewish Publication Society, 1962. The Geonic Period Primary Sources Assaf, Simha, ed. Sefer miktso’ot. Jerusalem: Mossad Harav Kook, 1947. . Teshuvot ha-ge’onim. Jerusalem: Mekitse Nirdamim, 1942. Eidelberg, Shlomo, ed. Teshuvot rabenu gershom me’or ha-gola. New York: Yeshiva University, 1955. Ginzberg, Louis, ed. Geonica 2. New York: The Jewish Theological Seminary of America, 1909. Hai ben Sherira Gaon. Sefer ha-Mikah. ve-ha-mimkar. Jerusalem: [1799], 1966 . . Mishpete halva’ot, at the end of Sefer ha-Mikah. ve-ha-mimkar. Jerusalem: [1799], 1966.

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R. Moses ben Maimon. Teshuvot ha-rambam. Vol. 2. Edited by Joshua Blau. Jerusalem: Mekitse Nirdamim, 1960. R. Moses ben Nahman. Hiddushe ha-ramban. Bava metsia. [Jerusalem, 1929]. Brooklyn, . . 1964. Girondi, R. Nissim b. Reuben. Hiddushe ha-ran. Jerusalem: Makhon Harry Fishel . Lederishat Hatalmud Umishpat Hatorah, 1994. She’elot u-teshuvot ha-ran. Edited by Aryeh Feldman. Jerusalem: Institute Schalem Sefunot Kadmonim, 1984. R. Samuel Ha-Sardi. Sefer ha-Terumot. Vol. 2. Jerusalem: Makhon Or Ha-Mizrah, . 1988. R. Solomon ben Adret. She’elot u-teshuvot ha-rashba. Jerusalem: Makhon Tiferet Hatorah, 1989–90. . Hidushe ha-rashba al masekhet bava metsia. Jerusalem: Ora, 1961. . R. Solomon ben Isaac. Teshuvot rashi. Edited by Israel Elfenbein. [New York, 1943], Jerusalem, 1968. Secondary Literature Assis, Yom Tov. Jewish Economy in the Medieval Crown of Aragon, 1213–1327. Leiden, New York, Koln: E. J. Brill, 1997. Baron, Salo, Nahum Gross, and Arcadius Kahan. Economic History of the Jews. New . York: Schocken Books, 1975. Ben-Sasson, H. H. A History of the Jewish People. Cambridge, MA: Harvard University Press, 1976. Cipolla, Carlo M., Before the Industrial Revolution: European Society and Economy, 1000–1700. New York, London: W. W. Norton, 1980. Roover, R. de. "The Organization of Trade." In M. M. Postan, E. E. Rich and Edward Miller eds., The Cambridge Economic History of Europe. Cambridge: Cambridge University Press, 1965. Eidelberg, Shlomo. Jewish Life in Austria in the Fifteenth Century. Philadelphia: The Dropsie College for Hebrew and Cognate Learning, 1962. Favier, Jean. Gold and Spices: The Rise of Commerce in the Middle Ages. New York/London: Holmes & Meier, 1998. Goitein S. D. A Mediterranean Society. Vol. I, Economic Foundations. Berkeley, Los Angeles, London: University of California Press, 1967. Hillgarth, J. N. The Spanish Kingdoms 1250–1516.Oxford: Clarendon Press, 1976. Lopez, Robert. The Commercial Revolution of the Middle Ages, 950–1350. Englewood Cliffs, New Jersey: Prentice-Hall, 1971. MacKay, Angus. Spain in the Middle Ages. New York: St. Martin’s Press, 1977. O’Callaghan, Joseph. A History of Medieval Spain. Ithaca, London: Cornell University Press, 1975. Pounds, N. J. G. An Economic History of Medieval Europe. London and New York: Longman, 1994. Reilly, Bernard.The Medieval Spains. Cambridge: Cambridge University Press, 1993. Reyerson, Kathryn. “Commerce and Communications.” In David Abulafia, ed., The New Cambridge Medieval History. Vol. 5. Cambridge: Cambridge University Press, 1999. Rivlin, Joseph. Shetare kehilat alisena. Ramat Gan: Bar Ilan University, 1994.

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. “Al kalkalah ve-halakhah: Ha-mashkanta ve-ha-mekher ha-hozer.” Dine israel . 20–21 (2001): 353–95. Soloveitchik, Haym. "Rabad of Posquieres: A Programmatic Essay." In Perakim be-toldot ha-hevrah ha-yehudit. Jerusalem: Magnes Press, 1980. . . “Pawnbroking, A Study in Ribit and of the Halakah in Exile.” American Academy for Jewish Research 38–39 (1970–1971): 203–68. . Halakhah, kalkalah ve-dimui-atzmi. Jerusalem: Magnes Press, 1985. . Principles and Pressures: Jewish Trade in Gentile Wine in the Middle Ages (Hebrew). Tel Aviv: Am Oved, 2003. Stow, Kenneth. Alienated Minority. Cambridge: Harvard University Press, 1994. Twersky, Isadore. Rabad of Posquieres. Cambridge: Harvard University Press, 1962. Urbach, E. E. Ba’ale ha-tosefot. Jerusalem: Mossad Bialik, 1980. The Period of the Aharonim . Primary Sources Adarbi, R. Isaac. Divre rivot. Sedilkov, 1833. Addadi, R. Abraham. Va-yikra avraham. Levorno, 1865. Auerbach, R. Solomon, Minhat . shelomo. Jerusalem: Makhon Sha’arei Ziv, 2000. Avdala, R. Joseph. Rav pe’alim. Jerusalem: Keren Hotsa’at Kol Sifre Rabane Bavel, 1964. Arik, R. Meir. She’elot u-teshuvot imre yosher. Cracow, 1925. Berdugo, R. Raphael. Mishpatim yesharim.Cracow, 1891. Breish, R. Mordecai. Helkat ya’akov, Yoreh de’ah. Tel Aviv: Bene Hamehaber, 1992. . Caro, R. Joseph. Shulhan arukh. Yoreh de’ah. New York: Otsar HaSefarim, 1967. . Castro, R. Jacob. Sefer Maharikash ha-nikra erekh lehem. Jerusalem, [1717], 1988. . Danzig, R. Abraham. Hokhmat adam. Jerusalem, Mekor Hasefarim, 1996. . De Boton, R. Abraham. Lehem rav. Jerusalem, 1981. . Eisenstadt, R. Meir. Panim me’irot. New York: Mekhirah Harashit Kihilat Yofi, 1962. Feinstein, R. Moses. Igrot moshe. Brooklyn: Moria, 1982. Frank, R. Tsevi Pesah. . Har tsevi. Jerusalem, Mekhon Harav Frank, 1976. Ganzfried, R. Solomon. Kitsur shulhan . aruk. Jerusalem: Mossad Harav Kook, 1974. Gruenfeld, R. Judah. Kol yehudah. Jerusalem: Y. Gruenfeld, 1984. Gruenfeld, R. Simeon. She’elot u-teshuvot maharshag. Jerusalem: Mordecai Grunfeld, 1983. al Hakham, R. Joseph Hayyim. Rav pe’alim. Jerusalem: Keren Lehotsa’at Kol Sifre . . Rabane Bavel, [1900], 1970. Khalfon, R. Moses Ha-Kohen. Sho’el ve-nish’al. Bnai Berak: Makhon Lerav Matsliah, . 1999–2001. Ha-Kohen, R. Rahamim. Simhat . . kohen. Yoreh de’ah. Jerusalem: Moshav Berakhyah, 1996–2000. Ha-Kohen, R. Solomon. She’elot u-teshuvot maharshakh. Israel: Defus Ha-Tehiyah, . [1585], 1989, Halevi, R. Abraham. She’elot u-teshuvot ginat veradim. Yoreh de’ah. Jerusalem:Yismah. Lev—Torat Moshe, 1992. Halevi, R. Samuel. Nahalat shiv’a. Jerusalem, 1969. . Isserles, R. Moses. She’elot u-teshuvot ha-rama. Jerusalem: Feldheim, 1971.

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Stachura, Pete. Poland in the Twentieth Century. New York: St. Martin’s Press, 1999. Taylor, Jack. The Economic Development of Poland, 1919–1950. Ithaca: Cornell University Press, 1952. Turner R. W. The Equity of Redemption. Cambridge: University Press, 1931. Van der Wee, Herman. “Monetary, Credit, and Banking Systems.” In The Cambridge Economic History of Europe. Vol. 5. Cambridge: Cambridge University Press, 1977. Weinryb, Bernard. The Jews of Poland. Philadelphia: The Jewish Publication Society, 1973.

Glossary Aharonim: Sages from about 1500 to the present. . Amora (pl. Amoraim) : A Sage from the period of the Gemara, about 200 to 500 c.e. Antichresis: A contract that calls for a creditor to reduce his borrower’s debt in compensation for his use of the borrower’s pledge. Baraita (pl. Baraitot) - A statement from the time of the Mishnah not included in the Mishnah but appearing in the Gemara. Commenda: A technique frequently practiced among Christians whereby an investor gave a merchant the funds with which to do business. If there were losses, they were charged to the investor. But if there were profits, three-quarters went to the investor and one-quarter to the merchant. Conditional Sale: A sale of property in which the buyer promises to sell the property back to its original owner if the latter obtains the necessary money. Dust of Interest (“avak ribit”): Interest resulting from a business transaction forbidden by the Rabbis. According to rabbinic law, once taken, this interest is not recoverable in court. Fixed Interest: Interest stipulated in a loan agreement, prohibited in the Bible and fully recoverable in court according to rabbinic law. Gaon (pl. Geonim) : A Sage from about 650 to 1050 c.e., head of an academy in Babylonia. Gemara: Wide-ranging legal discussions based on the Mishnah. They were carried on in Palestine about 200 to 400 c.e. and in Babylonia about 200 to 500 c.e. The Talmud is made up of Mishnah and Gemara. Genizah: A place in a synagogue where worn out books and manuscripts are placed. It usually refers to the synagogue in Cairo where thousands of important documents have been found. Generic Heter Iska: A contract that grants permission to borrow or lend according to the rules of a heter iska, but not requiring a heter iska for each individual transaction. Halakhah: Jewish law. Half-profit investment: An investment in which the investor and the recipient share profits and losses equally.

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Heter Iska: A document developed by the Rabbis in order to structure a business partnership known as an iska. A heter iska was often written to replace a common loan. Whereas a loan with interest was forbidden, a properly structured partnership with profit for the investor was allowed. Iska: A business partnership in which one party invests and the other manages the venture, with both parties sharing the profits and the losses. Mishnah: The first major redaction into written form of Jewish oral traditions. Codified by R. Judah Hanasi about 200 c.e., the Mishnah consists of six orders, each containing 7–12 tractates. Its contents are organized by subject matter rather than by biblical context. Mortgage of Sura: A mortgage contract that stipulates that after a certain number of years the land will return to the mortgagor without payment, the use of the land having served as repayment for the debt. Mortgage with a Deduction: A mortgage where the lender takes a fixed annual deduction from the debt to compensate the mortgagor for the benefit the lender receives from using the property. Rishonim: Sages from about 1000 to 1500 c.e. Tanna (pl. Tannaim): A rabbinic authority from the time of the Mishnah, about 70-200 c.e. Tarsha: A credit transaction in which a buyer pays a higher price for his purchase in return for the credit granted. Tosefta: A collection of rulings from the time of the Mishnah but not included in the Mishnah.

Index Abaye, 28–30, 32; on payment for labor, 134 Abba Saul, 21, 33 R. Abraham b. David of Posquieres (Rabad), 144–45; on liability, 139–42, 149–52; on loans of produce, 48–49; on mortgages, 106n50; on the Mortgage with a Deduction, 111–13, 115, 117, 121, 124; on payment for labor, 137–39, 146–49 Adarbi, R. Isaac: on advance payment, 59 R. Aha, . 36 R. Ahai . Gaon, 40–41, 43–46, 48 Alfasi, R. Isaac (Rif): on credit sales, 70, 74–75; on liability, 139, 150; on the Mortgage with a Deduction, 96, 106–8, 112–15, 117, 124; on payment for labor, 136–37, 148 Amemar, 28 Amos, 13 R. Amram Gaon, 102 Annual Deduction, 35, 97, 99, 108, 110, 112–18, 124 Antichresis, 33, 94 Arik, R. Meir: on credit sales, 87–88, 90, 91; on the heter iska, 170–71; on the generic heter iska, 172n180 R. Asher b. Yehiel . (Rosh): on advance payment, 57; on credit sales, 77–79, 84, 93; on liability, 151–52; on loans of produce, 47; on mortgages, 106n50; on the Mortgage of Sura, 119–25; on payment for labor, 149 R. Ashi, 28–30: on mortgages, 34–35; on the Mortgage with a Deduction, 97, 105, 106–7, 111, 114 Auerbach, R. Solomon Zalman: on

advance payment, 61 Avdala, R. Joseph Hayyim: on credit sales, . 85–86; on the Mortgage with a Deduction, 127 R. Avira, 32–33

Baghdad, 39, 59, 86, 100, 127 Banks, 46, 65, 128–29, 131, 154, 170, 172, 174–75 Benjamin of Tudela, 143–44 Berdugo, R. Raphael: on advance payment, 59 Book of the Covenant, 5, 7, 11 de Boton , R. Abraham: on credit sales, 83–84 Breish, R. Mordecai Jacob: on credit sales, 88–91; on the heter iska, 171; on the generic heter iska, 174

Caro, R. Joseph, 159, 168; on advance payment, 59; on credit sales, 82, 85–86; on liability, 157; on loans of produce, 50; on the Mortgage of Sura, 125 Castro, R. Jacob, on credit sales, 80 Christians, 129–30, 143–44, 148, 153–54 Code of Hammurabi, 5 Colon, R. Joseph: on liability, 140n40, 151; on loans of produce, 49 Conditional Sale, 2, 21–22, 24, 35n73, 95–97, 99, 105, 126–27

Danzig, R. Abraham: on loans of produce, 50; on credit sales, 81, 85; on the heter

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iska, 165, 169; on liability, 158; on the Mortgage with a Deduction, 127–28 R. David b. Saadya: on liability, 139–40 R. David ibn Zimra: on advance payment, 59; on credit sales, 83–84, 93; on the Mortgage of Sura, 125–26, 157 Deuteronomy, 7, 8, 9, 10, 11, 12, 23 Duran, R. Simeon (Rashbats): on advance payment, 58; on loans of produce, 47–48; on the Mortgage with a Deduction, 123 Duran, R. Solomon: on liability, 150–51; on the Mortgage of Sura, 123–24; on the Mortgage with a Deduction, 123 “The dust of interest,” 34–35, 70, 72, 73, 83, 95, 107, 110, 113, 114, 122, 149

Economic conditions: in Babylonia, 25, 99–101; in Europe, 45–46, 49–50, 69–70, 128–29; in the Islamic world, 39–40, 65–66; in Palestine, 15; in Poland, 159, 172; in Provence, 142–44; in South Germany and Austria, 154; in Spain, 118 Egyptian Papyri, 13–14 Eisenstadt, R. Abraham: on credit sales, 89 Eisenstadt, R. Meir: on the heter iska, 168–69 R. Eleazar b. Pedat: on loans of produce, 26, 30n57; on rabbinic interest not recoverable, 34 R. Eliezer b. Nathan, 46 R. Eliezer b. Hyrcanos, 159 Exodus, 1, 7–12, 23 Ezekiel, 4, 10, 13, 14 Eiger, R. Ezriel Meir: on the generic heter iska, 172–74

Fairs, 46, 49, 147, 168 Feinstein, R. Moses: on credit sales, 90–91; on the generic heter iska, 174; on the heter iska, 175

Fixed Time Limit, 35–36 Frank, R. Tsevi Pesah: . on advance payment, 61

Ganzfried, R. Solomon, 169; on the heter iska, 162–63, 166; on the Mortgage with a Deduction, 128 Generic heter iska, 172–79 R. Gershom Me’or Ha-Golah: on the Mortgage with a Deduction, 108–09 Ginat Veradim, 156, 157–58, 164–65, 168 Gruenfeld, R. Judah: on mortgages, 130–31 Gruenfeld, R. Simeon (Maharshag): on credit sales, 81, 86–87; on the heter iska, 171

Habiba, R. Joseph: on the Mortgage with . a Deduction, 123 Hagrunia, Eleazar of, 36–37 R. Hai Gaon, 63; on advance payment, 54; on the Conditional Sale, 95–97; on credit sales, 64–65, 68–69; on loans of produce, 43–46, 48; on the Mortgage with a Deduction, 99, 101–105; on payment for labor, 133–34, 136–37; on tarsha, 67 al Hakham, R. Joseph Hayyim: on . advance payment, 59, 61 Ha-Kohen, R. Judah: on payment for labor, 138; on iska, 138 Ha-Kohen, R. Khalfon: on advance payment, 60 Ha-Kohen, R. Shabbtai (Shakh), 92n102; on credit sales, 81, 85; on the heter iska, 163n147 Halakhot (by R. Isaac Alfasi), 74, 106–8, 114–15, 117, 136 Halakhot gedolot, 41–42, 45, 52, 54, 64, 97–98, 132, 136, 150 Halakhot pesukot, 52–53, 132, 136, 150 Ha-Levi, R. Aaron : on credit sales, 78; on

Index payment for labor, 146 Ha-Levi, R. Abraham: on the heter iska, 164–65; on liability, 157–58; on payment for labor, 156 Ha-Levi, R. David (Taz): on the heter iska, 163n147, 164 Ha-Levi, R. Samuel, 127 Ha-Levi, R. Zerahya, 145: on credit sales, . 74 Half-profit investment, 36–38, 132, 141, 159; definition, 22–23; R. Israel Isserlein on the, 152; R. Joseph Caro on the, 157–58 R. Hama, 31 . R. Hananel: on credit sales, 70, 74–75, . 80; on liability, 139, 150; on the Mortgage with a Deduction, 106, 108, 115, 124 R. Hananya Gaon: on credit sales, 63 . Ha-Sardi, R. Samuel, 70n30, 97n11, 113n78; on credit sales, 76, 80; on mortgages, 114n82; on the Mortgage of Sura, 120; on the Mortgage with a Deduction, 115, 118n90 Hazzan, R. Jacob: on liability, 150 . Heter iska, 91, 93, 130, 159–71 R. Hilai Gaon, 103; on credit sales, 62–63; on the Mortgage with a Deduction, 98–99 Hillel: on collection of debts in the seventh year, 167; on loans of produce, 16–17 R. Hiyya: on loans of produce, 25–26 . Hokhmat adam 50, 64, 85, 127–28, 158, . 165–66, 169 R. Huna: on loans of produce, 25–26, 41, 45

R. Ilish, 37 Iron flock investment, 22 R. Isaac b. Sheshet Perfet (Rivash): on advance payment, 57–58 R. Isaac of Dampierre (Ri): on liability, 140–41; on the Mortgage with a Deduction, 111, 124

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R. Isaac of Vienna: on liability, 150 R. Isaiah Menahem (R. Mendel Avigdors): . on heter iska, 130, 159–63, 165 Iska, 2, 38, 91, 132–36, 138–42, 145–50, 158–59, 165, 168–71 Islam, 39–40, 45, 65, 100–101, 144, 153 Isserlein, Israel: on liability, 152–55 Isserles, R. Moses, 163: on credit sales, 81; on the heter iska, 168; on the Mortgage with a Deduction, 126

R. Jacob b. Asher, 159: on credit sales, 78–79; on liability, 151–52, 156; on the Mortgage of Sura, 122; on payment for labor, 149 R. Jacob b. Meir (R. Tam), 92n101, 167; on credit sales, 71–72, 74, 76, 93; on mortgages 110–11, 119, 121, 124 R. Jacob b. Mordecai Gaon: on the Mortgage with a Deduction, 97 R. Jacob b. Natronai Gaon: on payment for labor, 133 Jaffe, R. Mordecai (Levush): on credit sales, 81; on the heter iska, 160–62; on the Mortgage with a Deduction, 126 R. Joseph, 29, 41n9, 54; on loans of produce, 45 R. Joseph Gaon: on credit sales, 66 R. Joseph ibn Lev: on iska, 164 R. Judah (b. Ezekiel), 32 R. Judah (b. Ilai): on a garment taken in pledge, 177; on payment for labor, 23, 37, 134–35 R. Judah b. Asher: on credit sales, 79–80; on the Mortgage with a Deduction, 122 R. Judah b. Nathan: on iska, 140, 150 R. Judah of Barcelona: book of contracts of, 113, 115; on payment for labor, 137, 148–49

R. Kahana (third century): on advance payment , 29; on mortgages, 32

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R. Kahana (fourth-fifth centuries): on the Mortgage with a Deduction, 97, 105, 106–7, 111, 114 Kairouan, 39, 95–97, 101 Katz, R. Joshua Falk: on heter iska, 162–63 Kayyara, R. Simeon, 41, 43, 45, 46, 48, 54, 64, 97, 132, 135 Klein, R. Menashe: on loans of produce, 51 R. Kohen Tsedek Gaon: on the Mortgage with a Deduction, 97–99 Koifman, R. Moshe Yekuti’el: on credit sales, 81; on the heter iska, 162n145

Labor, payment for, 167, 176; amoraic view, 36–38; early Aharonim on, 155–56; geonic rulings on ,132–34; later Rishonim on 146–49; Rabad on, 142; tannaitic ruling on, 22–24; early Rishonim on, 136–38 Laitan (Le-Eitan), R. Abraham Maskil: on credit sales, 89 Law of Holiness, 7, 11, 13 Laws of Eshnuna, 4 Legal fiction: to allow borrowing of goods, 16; to protect an investment, 141; examples of, 145 Leviticus, 7, 8, 9, 10, 11, 12, 13, 23 Levush, see R. Mordecai Jaffe Lorbeerbaum, R. Jacob: on credit sales, 81, 90–91

Mabit, see R. Moses Trani Mahaneh Ephraim, 85 Maharshag, see R. Simeon Gruenfeld Maimonides, R. Moses (Rambam),145: on advance payment, 57; on credit sales, 72–74, 78–80, 83; on liability, 140, 150; on loans of produce, 47–49; on the Mortgage with a Deduction, 110, 114n81, 117, 120–21, 123–24; on payment for labor, 137–38, 148

R. Mattityahu Gaon: on liability, 135 de Medina, R. Samuel: on advance payment, 59 R. Meir: on payment for labor, 23, 134–35; on potters’ clay, 18n10, 28 R. Meir b. Gedalya (Maharam Lublin): on the iska, 163 R. Meir of Rothenburg: on credit sales, 76–77; on liability, 150–52 R. Menahem (Ha-Meiri): on liability, 150 . Sefer Ha-mikah. ve-ha-mimkar, 43–44, 53, 54, 65 Mishneh torah, 47, 49, 57, 72, 110, 120, 137–140 Mishpete Halva’ot, 43–44, 54, 67 Sefer Mitsvot gadol, 74, 79, 111, 140, 149, 152 Mortgage of Sura, 36, 94–95, 106, 114, 119–25, 126, 128 R. Moses b. Nahman: on credit sales, . 74–77; on the Mortgage of Sura, 118, 120; on the Mortgage with a Deduction, 113–15, 122; on payment for labor, 146 R. Moses b. Jacob Gaon, 102 R. Moses of Coucy, 140n41; on credit sales, 74, 79; on liability, 152; on payment for labor, 149 R. Moses of Narbonne: on the Mortgage of Sura, 120–21

Nahalat Shiv’a, 127 . R. Nahman, 27, 30 33; on payment for . labor, 37; on profit for waiting, 62–63, 68; on tarsha, 31, 66–67, 71, 74, 76–80 R. Nahshon Gaon, 102–3; on loans of . produce, 43–45, 48; on mortgages, 98–99, 101 Nappaha, . R. Isaac: on loans of produce, 25–26, 30n57 Nathanson, R. Joseph Saul: on the heter iska, 170 R. Natronai Gaon, 102; on loans of

Index produce, 42–43, 45; on the Mortgage with a Deduction, 98–99; on selling on credit, 62–63 Navon, R. Ephraim: on credit sales, 85 Nehardeans, 38 R. Nissim: on liability, 152; on the Mortgage with a Deduction, 122–23; on payment for labor, 146

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Rabad, see R. Abraham b. David of Posquieres Rabbah: on the forward contract, 29, 41n9, 54 Rabina: on the Fixed Time Limit, 36; on mortgages, 35; on the Mortgage with a Deduction, 97, 99, 101, 105–7, 111 Rambam, see Maimonides, R. Moses Rashba, see R. Solomon b. Adret Rashbash, see Duran, R. Solomon Rashbats, see Duran, R. Simeon Rashi, see R. Solomon b. Isaac Rava, 27, 28, 30–31, 32; on mortgages, 34–35, 97,109–10; on payment for labor, 37 Resh Lakish, 27 Rif, see R. Isaac Alfasi Ritba, see R. Yom Tov ibn Asevilli Rivash, see R. Isaac b. Sheshet Perfet Rosh, see R. Asher b. Yehiel .

Mortgage with a Deduction, 98–99, 105 R. Sar Shalom Gaon, 68n23, 102n37; on credit sales, 62 Sassanians, 24–25 Schick, R. Moses: on credit sales, 89, 91 R. Shneur Zalman of Lyady; on credit sales, 81, 89; on the heter iska, 169; on the Mortgage with a Deduction, 127 Shakh, see Ha-Kohen, R. Shabbtai She’iltot, 40–42, 45, 54 R. Sherira Gaon, 63, 150n84; on the Conditional Sale, 96; on loans of produce, 45; on the Mortgage with a Deduction, 101–3; on payment for labor, 133, 135–36 Sefer Ha-Shetarot, 137 Shulhan . Arukh, Kitsur, 128, 162–63, 166, 169 Shvadron, R. Shalom Mordecai: on advance payment, 60; on the generic heter iska, 172, 179; on the heter iska, 170; on loans of produce, 51; on mortgages, 131 R. Simeon (b. Yohai): on interpreting . Torah in light of original purpose, 177–78; on payment for labor, 23, 134 R. Solomon b. Adret (Rashba): on credit sales, 76–77, 85; on mortgages, 106n50, 115–19, 121; on the Mortgage with a Deduction, 124, 127n18 R. Solomon b. Isaac (Rashi), 92n101, 167; on credit sales, 70–71, 74, 77, 80, 82, 93; on mortgages, 119; on the Mortgage with a Deduction, 109–11, 114, 117, 124; on payment for labor, 138, 146n65 Sura, 43, 62, 97–105

R. Saadya Gaon: on the iska, 133 R. Samson of Sens: on liability, 152 Samuel, 27, 36, 38 R. Samuel b. Hofni Gaon, 103–04; on the .

R. Tam, see R. Jacob b. Meir Tarsha: R. Nahman’s, 66–67, 69–71, 74, . 76–78, 80; three kinds of, 31, 81–82, 179

R. Papa, 32: on the Mortgage with a Deduction, 35, 97, 105, 111, 114; on tarsha, 31, 67 Proverbs, 4, 10, 14 Psalms, 4, 10, 11, 14 Pumbedita, 40, 43, 66, 67, 99, 100, 101–5, 106, 108, 115

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Terumat ha-deshen, 152, 154, 155, 157, 158, 161–62 Sefer Ha-Terumot. 70, 76, 97, 112–13, 115, 120 Tosafot, 141, 152 Tosefta, 16, 18n11, 23n31, 57n22; on Conditional Sales, 21–22; on paying now for goods, 20, 64; on payment for labor formula, 37, 132 Trani, R. Moses (Mabit): on credit sales, 84–85; on liability, 157 R. Tsemah. Gaon, 104; on credit sales, 67, 69, 70, 74, 80, 178

Weiss, R. Isaac: on advance payment, 61

R. Yannai, 29–30, 54 R. Yehudai Gaon: on credit sales, 63–64 R. Yeruham: on the Mortgage with a . Deduction, 122 R. Yohanan, 27, 33 . R. Yom Tov ibn Asevilli (Ritba): on credit sales, 78, 80; on loans of produce, 47; on mortgages, 119; on payment for labor, 146 R. Yose, 18, 28 R. Yose b. Hanina, 33 .

R. Zevid, 32–33 Zin, R. Yeshua Shababo Yedia: on the heter iska, 168