What Is a Loan? (Column 522)
Defining a loan is an elusive matter. There are common notions about it, but on a closer look something doesn’t quite add up. In this column I will try to show that, at least according to Maimonides (the Rambam), a loan should be understood differently from the common view.
First Look: Civil Law or Halakhah?
On the one hand, a loan belongs categorically to Choshen Mishpat, that is, it is a legal matter dealing with rights and obligations between people. This means it is some kind of transaction or contract in which Reuven gives Shimon money, and Shimon thereby incurs a debt and an obligation to repay the loan to Reuven. In the simple view, one says that after the loan there is money belonging to Reuven that is in Shimon’s possession, and if he does not pay this is grounds for the claim “my money is in your hand.” Of course, there is also a lien on the person and on assets (shi’abud ha-guf and shi’abud nechasim) that accompanies the loan and backs the obligation to repay. Another implication of placing it in the legal category is that this debt is litigated in a rabbinical court (beit din), unlike mitzvot such as the laws of interest (ribit) or charity (tzedakah) which belong to Yoreh De’ah. Those are not matters adjudicated in court because they do not belong to the legal sphere.
On the other hand, in this transaction/contract the lender has no gain at all. The borrower receives money for his use and, although he is obligated to repay it, in the meantime he has money he can use. Yet he is forbidden to pay the lender “compensation for the waiting time of the funds,” as that is the prohibition of interest. If so, the lender receives nothing from this contract. In the words attributed to Shimon Peres: “This is not give-and-take; it’s give-and-give.” It is no wonder that halakhah views a loan as an act of kindness to another. It is no wonder, too, that repayment of a debt is defined as a mitzvah (see Ketubot 86a), to the point that the Talmud says that minors, who are exempt from mitzvot, are exempt from it (Arakhin 22a). But acts of kindness belong to Yoreh De’ah, not to Choshen Mishpat.
Thus, these two perspectives contradict each other. On the one hand, the lender’s money is in the borrower’s possession—implying a legal dispute to be tried in court. On the other hand, the borrower returns his money as a mitzvah, and if he is not obligated in mitzvot he need not repay. If this were a legal matter, we would expect that even if the borrower or his heirs are minors, they would be obligated to return the money. And if it is a mitzvah, we would expect the laws of loans to appear in Yoreh De’ah rather than in Choshen Mishpat, and that it would not be conducted in court.
A Second Look
Even if a loan is “merely” an act of kindness, it is still fairly clear that there is room for legal regulation. The lender indeed gains nothing, but he did not give the borrower a gift—he lent him money. Therefore, halakhic civil law should regulate this contract such that, once the money is given, an obligation to repay is created and remains in force. In this sense, although only one side benefits in this “transaction,” it is a bilateral contract: Reuven lends Shimon the money, and in return Shimon undertakes toward him to return the sum he received.
At first glance this seems similar to depositing a sum of money (pikadon), for there too the bailee must return to the depositor the sum he received, except that there the bailee is forbidden to touch the money. In a deposit it is clear that the money belongs to the depositor, though it is in the bailee’s possession. By contrast, in a loan the money is given for expenditure; in the language of the Talmud: “A loan is given for expenditure” (milveh lehotza’ah nitnah; see Kiddushin 47a). In other words, after the money is given, it becomes the borrower’s. We are thus left with a de facto gift, and it is not clear how to define the halakhic mechanism obligating the borrower to pay the lender back. Is he returning the lender’s money? The money given is his, and therefore that money per se need not be returned to the lender. Is it only an undertaking to pay him? As a rule in halakhah, bare undertakings are generally not binding.
Halakhah determines that the way to accomplish this is by creating what is called a “debt”—that is, giving the money generates a legal state of “debt,” by which the borrower owes money to the lender. This is not particular money, of course, for any bill or coin in the borrower’s possession belongs to him, and he is entitled to use all of that money. In principle, he could spend all his funds, including the loan amount, and leave nothing. Therefore, a new legal state is defined—“debt”—by which the borrower owes the lender unspecific money.
One might have thought these are the lender’s coins in his possession, only they are not specified, and the repayment will define which coins had belonged to the lender (a process of retroactive designation—berirah). But if that were the case, we would expect a prohibition for the borrower to spend all his money. The final sum left in his purse would become the lender’s (compare “one who buys wine from the Samaritans,” Gittin 25a: if there is a liter of untithed wine in the barrel and he drinks from it, the last liter left is retroactively determined as the tithe). In loans, however, this is demonstrably not the case: the borrower is permitted to spend all his money down to the last penny. What remains afterward is a debt to the lender, but not any specific bills or coins. This indicates that there is not even an unspecified (or non-designated) monetary claim here, but something else. What is the nature of that “something”? What exactly do I owe the lender if it is not some sum of money—or even a non-designated set of coins?
In light of what we saw in the previous column, the difficulty grows sharper. If halakhah were only a freely constructed normative framework shaped by considerations of justice and/or legal utility, then one could define whatever one wishes and however one wishes. But if we understand, as I argued there, that at the root of halakhah stands a kind of metaphysical reality that also imposes constraints on what one can or cannot do and define at the legal level, then the question arises: how can one define “debt,” and what exactly does it mean? In factual terms, we can ask: what exactly is happening in the stage between the loan and its repayment? What is the relationship between lender and borrower then, and what money—if any—belongs to each?
“A loan is given for expenditure”
In the sugya of Kiddushin 6b we find the following statement:
Abaye said: One who betroths a woman with a loan—she is not betrothed. With the benefit of a loan [i.e., waiving it]—she is betrothed; but doing so is forbidden because of the appearance of interest. What is “the benefit of a loan”? If you say he “rolled it up” and told her, “four for five,” that is straightforward interest! Rather, it is that he extended the time for her [to repay].
Abaye rules that one cannot betroth a woman with a loan—i.e., if Reuven lent Leah a sum and now wants to betroth her “with the loan money,” she is not betrothed. By contrast, if he wishes to betroth her with the benefit she receives from his waiving the loan, that does effect betrothal.
Rashi there explains why a loan does not betroth a woman:
“She is not betrothed”—for we derive [the requirement] of “taking” from the field of Ephron [i.e., purchase of a field by money—Bereishit 23], that he must give something at the time of betrothal. And a loan is given for expenditure, and the money is already hers; she merely owes him other money.
The money she borrowed is hers; therefore he has nothing with which to betroth her. Simply put, this means he has no money in her hands, and thus nothing with which to betroth her. The reason Rashi gives is the rule “a loan is given for expenditure.” Indeed, the matter is explicit in the sugya on 47a:
Rav said: One who betroths with a loan—she is not betrothed, for a loan is given for expenditure.
The common explanation of “a loan is given for expenditure” is that he does not have specific coins in her possession, since she is entitled to spend the funds she borrowed. Returning to what we saw above: if he did have money in her hands but it was unspecified, I see no logical reason why he could not betroth her with it. Some wanted to innovate a rule that betrothal must be done with specified coins, but it is unclear whence such a rule could be derived. It seems more plausible that Rashi means he has no money at all in her possession. Her “debt” to him does not mean he has money— not even unspecified money—in her hands; rather, there is some other kind of relationship. She indeed owes him something, but until she repays, he has nothing in her possession and therefore cannot betroth her. This, of course, calls for explanation: if he has nothing in her possession, what exactly does she owe him?
Some have tried to read Rashi, who also cites the derivation from the field of Ephron, as saying that the betrother must give her something tangible, but his wording does not suggest that. One who betroths with a loan is not giving her something intangible; he is giving her nothing at all.
The Rambam, Hilkhot Ishut 5:13, rules accordingly:
One who betroths with a loan—even if it is recorded in a document—she is not betrothed. How so? For example, he had a debt of a dinar owed by her, and he said to her, “Be betrothed to me with the dinar that you owe me”—she is not betrothed, for a loan is given for expenditure, and there is nothing extant from which to benefit now, for that dinar has already been spent and its benefit has passed.
The plain sense of his words indeed indicates that she has nothing in her possession from which she can derive benefit (and it is strained to interpret him as merely denying the presence of specific coins).
What about a sale?
The very same rule appears with regard to an ordinary sale. Later, on Kiddushin 47a, the Gemara presents a dispute on this point:
Shall we say it is a dispute of Tannaim? “One who betroths with a loan: some say she is not betrothed; and some say she is betrothed.” Is it not that they disagree thus: one master holds “a loan is given for expenditure,” and the other holds “a loan is not given for expenditure”? But the end [of the baraita] says: “And they agree regarding a sale that he acquires.” If you say a loan is given for expenditure, with what does he acquire? …
The Gemara notes that the end of that baraita records agreement that, in a sale, everyone agrees he acquires with a loan. It then challenges that if a loan is given for expenditure, it is difficult to distinguish between sale and betrothal, and it explains the baraita differently.
For our purposes, the conclusion is that since we rule like Abaye—that one cannot betroth with a loan—the same holds for purchase with a loan: one cannot acquire with a loan either. There is no difference between sale and betrothal (recall that Rashi notes that betrothal by money is learned from the purchase of Ephron’s field). This implies it is unlikely that only in betrothal there is a special rule requiring specified coins. The possibility that such a rule exists for every money-acquisition is even more strained. It is, therefore, more reasonable to conclude, as above, that in a loan the betrother/seller has no money at all in the woman’s/buyer’s hands, and therefore has nothing with which to betroth or sell.
Some commentators, nevertheless, push the text to invent such a rule—that money acquisitions and betrothal require specified coins, otherwise they do not take effect. Their reason is that they cannot conceive how a lender can have a debt owed by the borrower and yet have nothing in the borrower’s possession. If the borrower owes him, then, in their view, the lender must have (unspecified) money in his hands. They therefore interpret “a loan is given for expenditure” to mean that the lender does have money in the borrower’s possession, only it is unspecified. One cannot point to any particular coin in the borrower’s hand that belongs to the lender, but he has unspecified coins there; and the borrower’s ability to spend his money stems from his claim that the coins he spent were other coins, not the lender’s (though it is harder, then, to understand why the borrower may spend all of his money down to the end, as I noted above).
However, the Rambam rules in Hilkhot Mekhirah 7:4:
If one had a debt owed to him by his fellow, and he said to him, “Sell me a barrel of wine in payment of the debt owed me by you,” and the seller so desired—it is as if he gave the money now, and whichever party retracts incurs the [curse of] “He Who exacted” (mi shepara). Therefore, if he sold him land for his debt, neither of them can retract—even though the loan money is not present at the time of the sale.
At first glance, this seems to imply that in his view one can purchase with a debt—contrary to betrothing with a loan, which does not work.
Many of his commentators argued that the Rambam distinguishes between sale and betrothal, explaining that betrothal requires specified coins or money that provides immediate benefit. But, as I already noted, this is very difficult, for it lacks a source. Moreover, if we accept that for betrothal—learned from the field of Ephron, which was a sale—then whence the distinction between sale and betrothal? Especially since, as we saw, the Gemara explicitly says there is no difference between sale and betrothal.
Indeed, the Ra’avad comments there:
“If one had a debt…” I do not know why [he wrote] this, for all the Geonim are agreed: a loan is given for expenditure, and it is not like giving money at all. And thus we say in Kiddushin: “And they agree regarding a sale that he acquires”—and if a loan is given for expenditure, with what did he acquire? Perhaps he was misled by what we say, “We treat a loan as [if paid and] invested in produce,” but that is not said regarding acquisition; it pertains only to the prohibition of interest.
When I read the Rambam, it seemed clear to me that a different explanation is at play. I have now found it in the Tosafot of Ri ha-Zaken on the sugya in Kiddushin, who writes:
His [the Rambam’s] view is that which Rabbi Yohanan said—that by Torah law, money effects acquisition, whether the money is present or whether it is loan money… The view expressed here [in the sugya] is not in accordance with Rabbi Yohanan, and it does not stand; it is possible that it follows Resh Lakish, who says “drawing” (meshikhah) is explicit in the Torah, not money.
His intention is apparently that, in practice, we rule that movable property is acquired only by meshikhah (drawing/physical act), not by money. Paying money merely creates an obligation to keep one’s word (“mi shepara”), but does not effect a full acquisition. Perhaps the Rambam holds that, to create “mi shepara,” a sale in exchange for a loan suffices. But to truly acquire a field—which is not movable and therefore is acquired by money—one cannot do so via a loan. In betrothal, too, we deal with a full legal acquisition, not merely “mi shepara,” and therefore betrothal with a loan has no validity. Below we will demonstrate that this is indeed the Rambam’s position.
What about purchase price (dmei mekach)?
In Shulchan Arukh, Even ha-Ezer 28:7, the author copies the Rambam’s language and adds another ruling:
If he had a loan owed by her—even recorded in a document—and he said to her: “Be betrothed to me with the loan you owe me,” she is not betrothed, even if the money is still in her hand and she did not use it. (Even if he returned the document to her and it is worth a perutah—Tur in the name of the Rambam.) And there are those who are stringent in this (Ran, ch. 2 of Kiddushin; and Maggid Mishneh, ch. 5). The same applies if she owed him wages for work he performed for her—even if the time for repaying the loan and the wages has arrived.
He writes that the same is true for wages she owes him: one cannot betroth with that either. It is reasonable, then, that his view would be the same for purchase price. Wages and purchase price appear to be just like a loan: all are “debts,” only that in these cases the cause of the debt is a sale or wages rather than a loan. And indeed, it is commonly assumed that all of these are debts; the difference is merely the cause that created the debt.
But the Rambam, Hilkhot Mekhirah 5:4, writes otherwise:
Similarly, if Reuven sold movables to Shimon for fifty zuz, and Shimon acquired the movables and became obligated for the payment, and after Shimon became obligated for these fifty zuz he had wine or an animal or a slave or the like among other movables that he wished to sell, and Reuven said to him, “Sell it to me for the fifty zuz you owe me—the purchase price,” and he said “Yes,” Reuven acquires the movables wherever they are, even though he did not draw or lift them, for this is an uncommon matter and they did not require meshikhah here.
But if he had a debt owed by him not due to a sale, and he said to him, “Sell me movables in payment of the debt you owe me,” and both agreed—he does not acquire until he lifts them, or draws what is not lifted, or acquires by one of the methods by which movables are acquired.
Reuven sold movables to Shimon, and Shimon owes him fifty zuz. Now Reuven wants to buy from Shimon an animal or wine with those same fifty zuz that Shimon owes him. The Rambam rules that this can be done. Although, by Torah law, movables are acquired by money, the Sages required also meshikhah; here, since the case is uncommon, the Sages did not require meshikhah.
In the second paragraph, the Rambam writes that if the debt arose from a loan—rather than purchase price—one cannot acquire with that debt. We see that the Rambam indeed rules that purchase with a loan does not work, just as betrothal with a loan does not. This confirms what I claimed above: the Rambam does not distinguish between sale and betrothal; in both, a loan does not work (as Tosafot Ri ha-Zaken indicated), contrary to the view of those who read him as distinguishing.
It should not surprise you that here, too, the Ra’avad wonders at the Rambam’s ruling:
“Similarly, if Reuven sold…” I do not see a foundation for this regarding acquisition—only regarding “mi shepara.” Even though the Master of blessed memory explains it so in Kiddushin on the Mishnah “He exchanged an ox for a cow,” we have heard only regarding the price of the ox that is unknown to the seller of the cow—that, too, is uncommon.
“But if he had a debt…” I say: Not even for “mi shepara.”
His second comment is, of course, not accepted by the Rambam, for we saw that regarding “mi shepara” the Rambam holds that it is indeed created even via a loan; only a full acquisition is not created by a loan. His first comment rests on the assumption that one cannot acquire or betroth with a debt—at most, “mi shepara” arises. But the Rambam explicitly writes that there is a difference between purchase price and a loan, and that with purchase price one can truly acquire (and apparently also betroth). What, then, is the difference? Why should the cause of the obligation change anything regarding the ability to use it for betrothal or acquisition?
His major commentators there have written at length to explain his words (see Maggid Mishneh, Lechem Mishneh, Even ha-Ezer, and many more), but their explanations are difficult. I will therefore suggest a different explanation of his position.
Explaining the Rambam’s View
It seems the Rambam’s intent is that there is a difference between an obligation created by a sale (purchase price; store credit—hakafat hachanut) and an obligation created by a loan. When one buys merchandise and has not yet paid for it, the seller has in the buyer’s hands money (not specific coins) equal to the value of the goods. Therefore, if he wishes to purchase something else from the buyer with that obligation—the acquisition takes effect, for he paid him with those unspecified coins that belong to him. As argued above, by reason, even unspecified money can effect acquisition and betrothal.
Why, then, in an obligation created by a loan can one neither acquire nor betroth? Because that obligation is of a different nature: in a loan, the lender has nothing at all in the borrower’s possession, and therefore has nothing with which to acquire. In other words, when we say “a loan is given for expenditure,” the meaning is that a loan is a gift, and the money becomes entirely the borrower’s; in exchange, a legal obligation is created whereby the borrower must give the lender a counter-gift (which is the repayment). That is the mitzvah noted above: “Repayment of a debt is a mitzvah.”
Ordinarily, however, a mere mitzvah is not a legal matter. If I fail to fulfill a mitzvah, no one can sue me to perform it; at most, a court may coerce me on account of coercion to perform mitzvot. So too here: ostensibly, the lender should not be able to sue the borrower in court to repay the loan. This is an obligation upon the borrower, like charity or refraining from interest, and is not a matter of the lender’s legal rights. Why, then, are the laws of loans part of Choshen Mishpat? It appears that the Torah wished to ensure that the borrower would in fact fulfill this mitzvah, and therefore it created a legal lien upon him (and upon his property) as collateral to ensure repayment. Thus we reenter Choshen Mishpat and litigation in court. Accordingly, a loan appears in Choshen Mishpat, not in Yoreh De’ah. But the legal lien is a result of the mitzvah; therefore, minor orphans, who are exempt from mitzvot, are not obligated to repay, and consequently no legal lien is created upon them. Hence, there is no claim of “my money is in your hand” against them, nor a suit to enforce a lien.
Thus, the difference between an obligation arising from a sale and one arising from a loan is not merely the causal trigger that created the obligation. They are different kinds of obligations. In purchase price, the seller has in the buyer’s hands unspecified coins equal to the goods’ value; therefore he can acquire and betroth with them. In a loan-obligation, the lender has nothing in the borrower’s possession and therefore cannot acquire or betroth. In fact, it is not correct to call purchase price a “debt” at all. We have seen that “debt” is a concept defined in the laws of loans, designed to express the fact that the lender has nothing in the borrower’s possession but that something is nonetheless created in exchange for the money given in the loan. Therefore, purchase price is not a “debt” at all; it is a kind of deposit (unspecified), and with a deposit one can acquire and betroth.
Evidence from the Laws of Release of Debts (Shemittat Kesafim)
When one borrows money from his fellow, the law of release of debts in the Sabbatical year (shemittat kesafim) says that the seventh year cancels the debt. But the Mishnah at the beginning of the tenth chapter of Shevi’it lists exceptions:
“The Sabbatical year releases loans—whether documented or undocumented. Store credit (hakafat hachanut) is not released; but if he ‘rolled it into’ a loan, it is released. Rabbi Yehudah says: ‘The first, the first is released.’ A hired laborer’s wages are not released; but if he made them into a loan, they are released.”
Release of debts does not apply to store credit or to wages. The following Mishnah lists additional cases I will not address here. If, however, one converted the credit into a loan, it becomes a loan and is released in the seventh year. What is the difference between store credit not converted into a loan and store credit that was? Was it not already a “debt” at the outset? What does converting it into a loan do? Here we see a clear distinction between store credit (purchase price) and a loan; the conversion turns store credit into a loan-obligation.
The commentators struggled mightily to explain the difference between a loan and purchase price, and it is hard to find a satisfying explanation. The Rambam, in his Commentary to the Mishnah there, writes:
“‘Store credit’ is when people make arrangements with shopkeepers to take what they need until a sum accumulates, and then they pay him. That sum is not released in the Sabbatical year, for it is not like ordinary debts: the shopkeeper did not sell what he sold in a manner that creates a debt; rather, he sells in small payments until it combines with other payments and he takes what is his.”
The Rambam explains that store credit is not a debt “like ordinary debts.” At first glance, this seems to tie the matter to the cause of the obligation, for a loan is an act of kindness that the lender does for a needy borrower so he will have money for his expenses. By contrast, store credit is not a kindness the seller does for a poor buyer; it is simply a more efficient way for him to collect money in the aggregate once a week or month rather than in small sums for each small purchase (change, customer lines, etc.). Indeed, such arrangements are made also for buyers who are not needy and have money; it is just more efficient.
One might have explained that, in the Rambam’s view, release of debts aims to benefit the poor; hence, loans not given as kindness to the poor would not be released. But this is problematic, for the Sabbatical year releases also loans taken by the wealthy. We find no differences among loans. It is therefore more likely that the difference is not the cause of the obligation but the nature of the obligation. It seems to me that the Rambam is explaining here precisely what we saw in his Hilkhot Mekhirah: in loans, the “debt” is only a mitzvah upon the borrower to repay, but the lender has nothing in his possession. Release of debts says that this mitzvah of the borrower is canceled in the seventh year. Purchase price, however, is not a debt but a (non-specific) deposit, and the Sabbatical year does not cancel deposits. Put differently: the Sabbatical year does not award a person money that is not his; therefore, if I am holding someone’s deposit, of course I must return it to its owner even after the Sabbatical year. As we have explained, purchase price is likewise a deposit (albeit unspecified), and therefore it is not released in the seventh year. By contrast, release of a loan does not grant the borrower money that is not his—for he holds no such money; it merely cancels the mitzvah that obligates him to give a counter-gift to the lender. If I am right, the Rambam here is consistent with his Hilkhot Mekhirah, and perhaps this is even his source there—answering those who wondered at the source of his ruling.
What happens when one “rolls” the purchase price into a loan? It appears this is a case where the buyer asks the seller to postpone payment because he is in distress. Now, it is no longer a matter of efficiency but an act of kindness, and the seller grants him a loan. The seller converts the purchase price into a loan, and from that point on it is a loan that is released in the seventh year. It is released because now the seller no longer has his (unspecified) money in the buyer’s possession; rather, the buyer has upon him a mitzvah to give him a counter-gift corresponding to the loan—and that mitzvah is canceled in the seventh year.
Incidentally, this serves as a paradigm for the other obligations not released (listed in the next Mishnah). In most of them, it seems we are dealing with a kind of deposit; therefore, it is not released. I will not elaborate here.
A Note on Wages
We saw that the following Mishnah there records the rule regarding a hired laborer’s wages, which likewise are not released. The Rambam rules so in Hilkhot Shemitta ve-Yovel 9:11:
“Store credit is not released; if he made it into a loan, it is released. A hired laborer’s wages are not released; if he made them into a loan, they are released.”
He, too, connects wages to store credit, and according to my proposal the reason is the same in both: the obligation there is like an unspecified deposit, not like a loan-obligation; hence, it is not released. Wages are like purchase price, and therefore, by the same token, one should not be able to betroth or acquire with them.
Above, however, we saw that the Shulchan Arukh equates wages with a loan-obligation, and claims that in both one cannot betroth or acquire. He apparently does not accept the distinction I suggested between purchase price and loan in the matter of betrothing with a loan. Indeed, consistently, he also explains the rule in the Mishnah in Shevi’it differently than I proposed. In Kesef Mishneh on the Rambam there, he explains that release does not apply to store credit because of the cause of the obligation (whether one can collect promptly or not), not because of the nature of the obligation itself. In other words, he sees no fundamental difference between a loan-obligation and purchase price; accordingly, in his view, the difference between them pertains only to the laws of release of debts, not to betrothing or acquiring with a loan. As I noted, this is strained; it is more plausible to explain release as I proposed—and then that also serves as the source for the rule of betrothing/acquiring with a loan versus purchase price. It seems the Rambam maintains this distinction consistently across these contexts.
One Under a Vow Forbidding Benefit
There is a sugya that straightforwardly yields the conception of a loan as a gift. The Mishnah in Nedarim 33a states:
“If one is forbidden by vow to benefit from his fellow, the fellow may weigh out his half-shekel for him, and may pay his debts, and may return his lost object. In a place where one may take payment for returning a lost object, the benefit shall fall to the Temple.”
Reuven has forbidden himself by vow to benefit from Shimon. Nevertheless, Shimon may pay Reuven’s debts. If Reuven owes Levi money, Shimon may go pay Reuven’s debt to Levi, and this does not count as Reuven benefiting from Shimon. This is very puzzling, for he saved him the full amount of the loan; why should this not be considered benefit?
The Gemara explains:
“It is merely chasing away a lion [that is attacking his property], and that is permitted.”
The Gemara assumes that if a lion came to devour Reuven’s lamb, Shimon would be permitted to chase it away and save Reuven’s lamb. Apparently, Reuven derived benefit from Shimon, which ought to be forbidden; the Gemara presumes it is permitted because Shimon did not increase Reuven’s assets but merely prevented a loss (and distress).
Thus, the Gemara likens paying a debt to chasing away a lion. If Shimon pays Reuven’s debt to Levi, it is not considered as though Shimon gave money to Reuven, but only that he prevented a loss. We see from here that a loan-obligation of Reuven to Levi does not mean that Levi had (unspecified) money in Reuven’s hands; otherwise, paying the debt would truly increase Reuven’s assets (by transferring Levi’s money to him). Rather, the state of a loan-obligation is that there is upon Reuven a duty or mitzvah to give a gift of his own to Levi, and Shimon has spared him that. Just as release of debts cancels the mitzvah and does not increase the borrower’s assets, so here Shimon canceled the mitzvah whose fulfillment would have cost Reuven his own money. He prevented a loss rather than increased assets. Incidentally, the Ba’er Heitev, Yoreh De’ah 221:5, adds that for the same reason Shimon may also waive a debt that Reuven owes him (and not only to a third party).
So writes the Rambam, Hilkhot Nedarim 6:4:
“If Reuven is forbidden to benefit from Shimon—whether by vow or by oath—Shimon is permitted to give on his behalf the half-shekel that Reuven is obligated to pay, and likewise to pay a debt that is upon him; for nothing reaches Reuven’s hand, but only the demand upon him is removed, and the removal of a claim is not included in the prohibition of benefit…”
Again, we see that a loan is a gift, and afterward all the money is the borrower’s—only he has upon him a mitzvah to give a counter-gift back to the lender.
It should be noted that some early authorities (see the Tur, Yoreh De’ah 221) understood that this pertains only to a ketubah obligation and not to all kinds of obligations. It seems those authorities are unwilling to see a loan as a kind of gift, and therefore, in an ordinary loan, paying the debt would—according to them—certainly be a benefit rather than merely preventing a loss. But the Rambam and those who follow him understood that this applies to every obligation; in their view, a loan is a gift. Note, however, that according to my analysis here this applies only to a loan-obligation, not to purchase price or wages. Shimon may not pay Reuven’s laborer or his shopkeeper on his behalf. As we have seen, those are not “debts” at all but obligations akin to deposits, and paying them would indeed amount to giving money to the one under the vow.
A Note on Bank “Deposits”
Consider the money in your bank account. Is it a loan to the bank, or is it a deposit? On the face of it, it is neither. There are no specific coins of mine in the bank; hence, it is not a deposit. A monetary deposit would be handing an envelope with 1,000 shekels to someone to guard; in such a case the bailee may not touch the money (it is not given for expenditure) and must return the same envelope with the same money he received from me. Thus, bank money is apparently not a deposit. One might then conclude it is a loan. But that seems wrong too, for it is not true that I gave the bank a gift (and it merely owes me a counter-gift). There is money (albeit unspecified) of mine in the bank. The only way to describe this is to see banked money as akin to purchase price or wages—i.e., an unspecified deposit of my money in the bank.
If so, the picture I have sketched here offers a natural solution to the question of how to define the status of money in a bank. Indeed, it is not a loan; and while it is not a “deposit” in the usual sense, we have seen that there is a different kind of deposit—of unspecified money. If such a state exists, that is precisely the fitting description for banked funds. The conclusion is that, regarding the laws of interest and the like, one should view money in the bank as a deposit rather than as a loan.
Accordingly, release of debts does not apply to people’s bank deposits. As we have seen, the Sabbatical year does not release deposits—even unspecified ones. Admittedly, on this point one could also think about banked money in the terms of the Kesef Mishneh and those who follow his view: the “loan” here is not to assist a needy bank but for economic convenience; in that sense, the situation here resembles purchase price more than a loan, and thus would not be released—even without the definitions I offered here. I note only that a loan I took from the bank is, of course, a different matter and not our concern here.
See, for example, a detailed discussion here on whether bank deposits are released in the Sabbatical year or not. According to our approach, it is obvious they are not released—but not for the reasons given there. For example, he writes there:
“One who deposited money with a moneychanger—even if he granted him permission to use his money—this is, in any case, a deposit and not a loan; and a deposit is not released. The definition of a deposit is when the deposit is made for the depositor’s benefit.”
He ties it to the purpose of the deposit (for whose benefit it is made), and in other arguments there he ties it to the terminology used (whether it is called a deposit or a loan). These arguments are strained. On our approach, the answer is simpler and more compelling: it depends on the nature of the deposit itself. A money “deposit” that grants the bailee permission to use the funds can indeed be a deposit—if its nature is like purchase price and not like a loan, i.e., if unspecified money of mine is in the bailee’s possession. That is precisely the case with banks.
Expropriating a Gentile’s Loan
As is known, expropriating a Gentile’s loan is permitted. There is a dispute among early authorities as to whether robbing a Gentile is biblically prohibited. Even according to the view that it is biblically prohibited, expropriating a loan is, in principle, permitted. I was asked a few days ago why this is not forbidden as robbery.
I answered there with two points; the second touches this column’s discussion:
According to the view that robbing a Gentile is forbidden, one must say that expropriating a loan is not robbery. Robbery is like “and he seized the spear”—not when it came into his hand permissibly, or at least not by force (but through expropriating the loan). Of course, there would still be a legal wrong here.
Beyond that, one can prove—at least according to the Rambam—that a loan is a kind of gift, and the obligation to repay it is a mitzvah (that creates a lien). Where there is no mitzvah, there is no lien. Regarding a Gentile, there is no obligation to repay; consequently, the loan remains a gift. On that basis, perhaps there is not even a legal wrong here (only a moral one).
That is, if we see a loan as a gift that creates an obligation upon the borrower to give the lender a counter-gift, then when the lender is a Gentile the Torah does not impose a mitzvah to repay the loan; consequently, no legal obligation (lien) arises, and there is no robbery. The upshot is that, according to this explanation (unlike the first), perhaps there is not even a legal prohibition here (according to R. Shimon Shkop’s “Torah of Jurisprudence,” a system that precedes halakhah and which halakhah acknowledges de facto), for I am not obligated to him at all. It is, however, very likely that there remains a moral prohibition. This is an interesting example of the distinction between halakhah, jurisprudence, and ethics (the last two are often identified).
See also the continuation of that discussion there, which connects to the previous section of this column.
Conclusion: Prelude to the Next Column
Ultimately, the entire discussion begins and ends with the question of whether one accepts a construct of “debt” that is not a deposit of unspecified coins but something more abstract. Most commentators are unwilling to accept such a thing; therefore, in their view there is no difference between types of obligations, and purchase price, wages, and loans are all “debts” of unspecified coins. Hence, they are driven to innovate a rule—without source—that one cannot betroth or acquire with unspecified coins (otherwise, why is it impossible to betroth or acquire with a loan?). The Rambam, however, is willing to accept such a definition, and thus he can construe a loan as a gift that creates a “debt,” and yet the lender has nothing in the borrower’s possession; everything then reads straightforwardly.
In other words, the entire analysis stands or falls on whether such a construct is reasonable and possible. The question is this: if the lender has in the borrower’s hands not even unspecified coins, what exactly does he have there? What exactly does the borrower owe him? And after that, one must clarify what distinguishes this (a loan) from a non-specific monetary claim (purchase price or wages). To understand this, we must enter the discussion of defining the concept of “money” and its meaning; to that I will devote the next column.
Discussion
The question is not what he intends, but what mechanism the Torah allows. Just as in kiddushin on condition that she has no claim to sustenance, clothing, and conjugal rights, it is obvious that he does not intend to betroth her if she will have those rights, and nevertheless according to Rabbi Meir the condition is void and the act stands, because the Torah does not allow a stipulation to be implemented except through the mechanism it defines—namely, applying the legal effect absolutely, with the possibility of uprooting it. The same applies here: a loan is not a possible mechanism. So if he wants to lend, the only way is to do it as a gift, with the Torah creating a lien to give a return gift. Without that, there is no way to make a loan.
I think such a stipulation is possible, since he can buy some object from him, and then immediately give it back, and then the proceeds of the sale are in the other’s possession. However, it seems to me that he does not really need actually to buy and return an object; since he is able to do so, he no longer needs to do it in practice.
If such a stipulation is possible, can one say that in every loan the loan was made with this condition in mind, since he does not want to give his fellow a gift, but has no choice because this is the only mechanism through which the Torah allows a loan?
A loan between gentiles, who are not bound by the commandments, is that also done through this mechanism, or is it a full-fledged debt like a sale? And what happens when a Jew lends to a gentile and vice versa?
Why is the mere fact that he is able to buy an object from his fellow sufficient, when in practice he did not buy it?
By the way, it seems to me that Tosafot and the Rishonim in tractate Ketubot indeed ask why, according to Rabbi Meir, the act stands in a gift on condition that I have no claim to sustenance, clothing, and conjugal rights.
Of course. 56a. And what I wrote is Rabbi Isaac’s answer there.
The assumption is that this is not what people intend. Why change what he says? A loan is also repaid.
With respect to a gentile, it is reasonable that there is no such definition, because there is no commandment involved (that is how I explained cancellation of a loan).
This is “within his power” in several sugyot.
At least with a loan to a minor, who is exempt from repaying, would we say that he did not intend to give a gift and lose his money (unless he knows that a minor is exempt from repaying, in which case he certainly gave it as a gift)?
I did not understand how your words fit with what the Rambam wrote (quoted above): “Therefore, if he sold him land for his debt, neither of them can retract, even though the money of the loan is not present at the time of the sale.” He writes explicitly that land too can be acquired with a debt, and neither of them can retract (not even merely becoming subject to ‘He Who punished’).
He does not lose his money. When the minor grows up, he pays. Beyond that, a person is expected to know the laws.
Good question. It is possible that when he writes that neither can retract, he does not mean that the acquisition took effect, but only that there is a “He Who punished.” In that case, land would be like movables.
It is simply impossible that this is what the Rambam meant. If the law regarding land were exactly like movables, he would have written “and the same applies to land” or something similar. He knew how to write that anyone who retracts incurs “He Who punished,” and if instead he writes that he cannot retract, the meaning is that he cannot retract.
And if he does not know the laws, do we penalize him for that, or do we presume that he did know the laws?
Or is it built into a loan that if he lacks information that he was supposed to know, he cannot later claim that he did not have that information?
In my opinion it is possible. And also in the opinion of Rabbi Isaac the Elder.
The assumption is that people know the laws. Before they do something legal, they check. That is also the assumption in migo: people investigate, and therefore would make the best claims, even if they are not Torah scholars. The Netivot wrote this as well.
That is not Rabbi Isaac the Elder’s opinion either, for he wrote: “And the Rav, of blessed memory, wrote in Hilkhot Acquisition ch. 7 that acquiring land with a loan is a full acquisition, and movables only render one subject to ‘He Who punished.’” “A full acquisition” is the opposite of an acquisition that is only for incurring “He Who punished.”
Rabbi Isaac the Elder’s claim is only that according to Rabbi Yohanan, who holds in Bava Metzia that money effects acquisition, the same applies to loan-money, unlike the Gemara’s assumption in Kiddushin that one cannot acquire with a loan. This claim too is novel, but he certainly does not hold like you.
Looking at the Rambam shows that he distinguishes between sale proceeds and a loan. It is stated explicitly in the halakha in chapter 5:
“But if he had a debt owed to him that did not arise from the sale, and he said to him: Sell me movables for the debt that I have in your possession, and they both agreed, he has not acquired them until he lifts them, or pulls an item that is not usually lifted, or acquires it in one of the ways by which movables are acquired.”
True, this is written regarding movables, but there is no reason to distinguish between that and land (except for the matter of pulling, which he explicitly writes does not apply here because it is an uncommon case).
Beyond that, the entire context of chapter 7 deals with “He Who punished,” not with the acquisition itself, and therefore it is certainly possible to interpret it as I wrote. Otherwise he should have written this law in chapter 5.
Also, the wording “therefore” indicates that he is speaking about “He Who punished,” not about the acquisition.
It is possible that there is a difference between movables and land regarding “He Who punished”: what for movables is enough only for “He Who punished,” in the case of land one cannot retract at all (because the land remains in its place, and therefore there is less possibility of retraction).
And beyond all that, most of his commentators write that he distinguishes between sale proceeds and a loan, except that they do not understand the reasoning for it. According to what you are saying, there is no distinction.
As for Rabbi Isaac the Elder, you may be right. I need to look at the text again.
Of course there is a distinction between sale proceeds and a loan. The Sema (199:4) explained that acquisition by means of an ordinary debt (not arising from a sale) is common, and therefore requires meshikha.
Very forced. It is really no more common than sale proceeds.
Especially when one sees that the Rambam distinguishes between them in other contexts as well (such as remission of monetary debts), and there the difference certainly is not only frequency.
In my opinion, the commentators got pushed into various forced explanations because they did not think of the option I described here, which is the plain meaning of the Rambam and the sugyot.
The issue of frequency is what the Rambam himself wrote. You simply invented an explanation that seems logically plausible to you, even though it goes against the Rambam’s explicit words and has no proof at all from the sugyot in the Gemara.
The Rambam wrote that sale proceeds are uncommon, but he did not write that loan money is common. My claim is that both are uncommon (it is uncommon to buy using a debt that I have in the seller’s possession), except that with loan money there is no acquisition at all, so the discussion does not even arise.
The proofs for my words are written in the Tur, and everyone may judge whether this is an invention or not.
Perhaps this idea explains something else in the Rambam. The Rambam holds that the presumption that “a person does not pay before the due date” is stronger than ordinary presumptions, and the commentators struggled to explain what is so special about it. According to the approach you suggested (I thought of something similar from this context), one could say that before the due date the metaphysical “debt” does not exist, and therefore it is not that we presume a person does not pay before the due date, but rather that there is no such thing as “paying” before the due date, because before the due date there is no debt at all; and the claim that he paid is not a claim within the discussion of the loan debt that he has to pay.
An interesting comment. You are essentially arguing that before the due date there is no obligation to repay, although if he repays before the due date the debt is nullified. That is not repayment, but rather retroactive nullification of the debt, so that the obligation on the borrower to give a return gift will never arise when the time comes. It is like a house with a parapet, where the obligation to build the parapet never arises, rather than the commandment having been fulfilled.
But logically, it does not seem that this gives any advantage to the presumption that a person does not pay before the due date, for that is an assessment of human behavior, and has no necessary connection to understanding the legal or meta-legal situation in itself.
In principle one might even say the opposite. If repayment before the due date prevents the obligation to repay from ever arising, then the claim that he paid before the due date is stronger, since he is claiming that there is no cause of action at all (it is like “I never borrowed” as opposed to “I repaid”).
A seeming proof from the Daf Yomi, Nedarim 47a
Rava said: Come and hear: If one says to his son, “Konam, you may not derive benefit from me,” and he dies, he inherits him. “During his lifetime and after his death” — and he dies — he does not inherit him. Learn from this that a person can prohibit something that is in his possession for when it leaves his possession; indeed, learn from this.
And the Ran adds that the son does in fact inherit — but he is forbidden to derive benefit from the field — but a creditor may collect from it.
It would seem, at least from my limited study, that repayment of a debt is not considered benefit.
Indeed, similar to the mishnah I brought from page 33. Exactly the same idea.
Regarding what you said about bank deposits being like a non-specific deposit rather than a loan, apparently you are not familiar with how the banking system works today. It is based on the principle of fractional-reserve banking. That means that the bank can use the funds deposited with it in order to lend to others, while keeping only a certain percentage on hand for customers’ withdrawals. That is also why banks sometimes go bankrupt. See this Wikipedia article:
https://ecowiki.org.il/wiki/%D7%91%D7%A0%D7%A7%D7%90%D7%95%D7%AA_%D7%91%D7%A8%D7%96%D7%A8%D7%91%D7%94_%D7%97%D7%9C%D7%A7%D7%99%D7%AA
I know that perfectly well. Why is it relevant to what I said?
Because you wrote this:
“Well, then one is led to conclude that this is a loan. But on the other hand, it also does not seem to be a loan, because it is not true that I gave money as a gift to the bank (and it merely has to give me a return gift). There is money here—albeit not specific money—of mine that is in the bank. If so, the only way to interpret such a situation is to view the money in the bank as something like sale proceeds or a laborer’s wages, that is, deposits of non-specific money of mine that are in the bank.”
If when I deposit money in a bank it really is a deposit of non-specific money in the bank, then the reserve ratio the bank must hold relative to the total deposited money should be 100% (and not a fractional reserve).
Not at all. What determines it is the record, not the physical cash in the bank. Mainly because money is only a symbolic matter. When money is recorded in the bank as mine, that is a deposit, and the fact that the bank can use it is part of the regulatory rules. One must remember that the use of the money does not reduce the amount recorded to my credit in the bank; that is, my money is in the bank. But the “presence” of money nowadays is only a matter of records. And the proof is that the regulator determines whether and how much the bank may spend. If this were a loan, the bank could spend all of it and would not need permission from anyone.
But if the bank goes bankrupt, the savers lose their deposits. What good does it do them that the bank’s books say that they are owed X amount of money if they will not actually receive it?
It does not help. Exactly like a deposit that was lost.
I just saw a Torah article that argues as follows:
Article address:
https://meshiv.co.il/%D7%9B%D7%A1%D7%A3-%D7%91%D7%91%D7%A0%D7%A7-%D7%94%D7%95%D7%90-%D7%A4%D7%99%D7%A7%D7%93%D7%95%D7%9F-%D7%90%D7%95-%D7%94%D7%9C%D7%95%D7%95%D7%90%D7%94/
“Money deposited in a bank is, in halakhic terms, a loan.
In light of what has been explained—that the bank has the right to use the funds deposited with it as it wishes, and in light of the fact that the bank does not keep the depositors’ money in its possession but spends it and trades with it as it wishes—it seems clear that one cannot call money deposited in a bank a deposit. There is no doubt that money deposited in a bank has the status of a loan in every respect.”
Regarding your last point: from the moment the regulator allowed the bank to make use of the deposited funds, shouldn’t they become a loan rather than a deposit?
I know that approach. It is the accepted view. But in my opinion it is incorrect, as I explained. The bank does not spend the depositors’ money, because otherwise the full amount I deposited would not still be recorded there to my credit. The money I have deposited there is the amount recorded, not the actual banknotes.
The regulator is only looking after the bank and the depositors; as I said, if this were a loan, the bank could spend everything without permission. Therefore the regulator proves nothing either way.
In the post you wrote this:
“There is money here—albeit not specific money—of mine that is in the bank. If so, the only way to interpret such a situation is to view the money in the bank as something like sale proceeds or a laborer’s wages, that is, deposits of non-specific money of mine that are in the bank.”
On the other hand, I seem to recall that you wrote somewhere that if someone owes me money by virtue of sale proceeds, he may not use his money in such a way that its total value drops below the value of the debt to me. That is, suppose he has 1,000 shekels and owes someone 100 shekels by virtue of sale proceeds or a laborer’s wages; then he may not use more than 900 shekels of his money. According to this, on your view the bank too should not have been allowed to use the deposit money at all. Even if you say that the regulator authorized it to use it, at the end of the day after that authorization we now have a “deposit” that may be used, and therefore it becomes a loan. What difference does it make who authorized the use of the deposit, whether the regulator or someone else?
As far as I remember, I raised that only as an illustration. I am not sure there is a prohibition against spending all the money, but in principle that could be the difference between a loan and a deposit. The fact that the money is only an illustration of an abstract value means that spending it is not necessarily prohibited (that is spending the physical object, not the recorded value that the illustration merely expresses). Especially since if the regulator decides to depart from the standard definitions of loan or deposit for the public good, his decisions are no proof in either direction. And I already explained that if you look at the situation according to the regulator, it is neither a loan nor a deposit.
I have now found what you wrote there regarding a debt arising from a laborer’s wages:
“If we were speaking about non-concrete coins, I would expect that the debtor (the employer of the laborer) would not be able to spend all his money, but would have to leave in his possession the amount that he owes. Halakhically and legally there is no such obligation. He may spend everything, because the coins are not essential. What Reuven really has in his possession is value, not coins (not even non-concrete coins).”
But according to this, I do not understand what the litmus test is, on your view, to distinguish between a loan and a non-specific deposit (such as a debt arising from sale proceeds).
The litmus-test question is very difficult. But that is already in the Talmud and the decisors, and has nothing to do with me. When do a laborer’s wages become a loan? That is “carrying over into a loan.” The parties’ intention is what determines it. It is clear that a person does not intend to lend the bank money but to deposit it there. Nobody is doing the bank a favor, and nobody dreams of doing it a favor. So too in ordinary language, and that is how people conceive it. Their money is present in the bank and waiting for them there. Only for the sake of efficiency does the regulator allow the bank to spend part of the money in order to make a profit; otherwise there would be no banks in the world (or alternatively we would have to pay them very large custodial fees).
According to your view, are fixed-term bank deposits or similar deposits that are not available for immediate use also in the category of a non-specific deposit? Or is that already considered a loan?
Very likely that is already a loan.
Hello Rabbi,
You wrote that according to the Rambam, who seems to distinguish between a debt created by a sale and a debt created by a loan, a debt created by a sale should also be effective for kiddushin.
Indeed, from Kiddushin 48, regarding “make for me silk trimmings and I will become betrothed to you,” it is explained that this depends on the Gemara’s initial assumption whether one who betroths with a loan is betrothed, since hire exists from beginning to end.
And the Rambam wrote in Hilkhot Ishut 5:20: “Behold, you are betrothed to me by this work that I will do with you”—if he did it, she is not betrothed unless he gave her a perutah of his own. For the hire is acquired by the worker from beginning to end; whenever he performs part of the work, he acquires part of the wage, and thus the entire wage is a loan in her possession, and one who betroths with a loan is not betrothed.
But according to the Rav’s view, in “make for me silk trimmings” she does not owe him money by virtue of a loan, but rather because of the act he performs for her she becomes obligated to place money at his disposal, and in such a case, according to the Rambam, she should be betrothed.
Two comments, without having really checked carefully.
1. There is an assumption here that one who betroths through an act is betrothing by the wages of the act and not by the act itself. But he can betroth her by the act itself, and it should be no worse than betrothing through benefit (for example, “dance before me”).
2. Perhaps one should distinguish between one who betroths after having acted for her and one who betroths by the act from the outset. If he performed an act for her and now betroths her with the wages of the act, she would be betrothed, since the wages are his in her possession; that is like sale proceeds. But one who stipulates from the outset that he betroths her by the wages of the act that he will do—then the money is defined as a loan and not as payment for the act, since from the outset it was determined that she is not supposed to give him the wages. One must remember that he is betrothing her by an act that he will do with her in the future. At the time he says the words of kiddushin, there is still nothing in the world. The kiddushin payment is in the future (it has not yet come into existence). Perhaps that is why this is considered a loan.
1. Seemingly this is forced to be by the wages of the act, because if it were by the act itself, like “laugh before me,” why would the Gemara and the Rambam make it depend on betrothing with a loan and on whether hire exists from the beginning?
2. According to the Rav’s distinction, this is not connected to the discussion whether hire exists from beginning to end or only at the end, because the deficiency is that the money does not yet exist in the world, and this requires examination. But from the Maharam it seems that it does depend on this [see Lehem Mishneh].
Many thanks.
- Obviously. I only noted that this itself requires explanation.
- My claim is that since this is kiddushin by the future act, the wages of the act are like a loan and not like money of his in her possession. And their making it depend on whether hire exists from beginning to end may be because that conception is correct only if the wages accrue gradually (that is, hire exists from beginning to end), in which case it is a loan. But if they exist only at the end, this is a regular transaction like a sale and not a loan. Alternatively, if they exist only at the end, then the kiddushin are by the act and not by its wages, and once again it is valid kiddushin.
But all this requires clarification, and I do not currently have time for it.
Seemingly this is different, because in “laugh before me” she receives the benefit now, whereas here at the time of kiddushin she does not receive the object, but only the act, and the act itself is not considered benefit. [Indeed, the Rashba on 48b asks something like this—why is she not betrothed by the object?—and compares it to “laugh before me.”]
On further thought, perhaps the reason kiddushin does not work is that the Rambam holds that kiddushin requires money “from which she derives benefit” [this is evident from several places in the Rambam, both in one who betroths with a loan and with a pledge, and also in the case of a guarantor, etc.]. Therefore, even though in monetary law this counts as money, in the end it is not money that contains benefit, and this requires further inquiry.
Thank you very much.
Why should a loan be like a gift, with the lien only there to ensure that he repays his debt? Surely it is obvious that the lender did not lend his money as a gift, but as a full-fledged debt, like a sale.
Is there any possibility for someone who wants to lend money to his fellow to stipulate that it is not a loan in the form of a gift, but rather like a sale—that he has money (not specific money) in his fellow’s possession? Or did the Torah innovate that a loan exists only in the form of a gift? (It seems to me that the loans made in everyday life are certainly with that intention, and not as a gift.)