The Loansharking Racket

By The Other Guy | July 9, 2020

Cartoon of a Loan “Shark”

It is said that the gambling business, in all its various forms, is the very lifeblood of organized crime.

Bookmaking on horses and sports, the policy or numbers lottery business, dice and card games, slot machines, and a variety of other games of chance became the most important and prominent racket after liquor prohibition ended in 1931. It remains so to this day.

But if gambling is number one, then nipping at its heels close behind is shylocking, which without a doubt is number two as the top revenue producer for the mafia today, as it has been for many decades.

In fact, gambling and loansharking go together like “peanut butter and jelly”. They naturally complement one another and follow suit. Often, after a betting customer gets in over his head with gambling debts, he will be referred to a local shylock to borrow the money needed to pay off his bookie.

If the bettor is what we call a “DG”, or degenerate gambler, this can often times become a vicious cycle, in that time and again he’ll repeat this process until the gambler is so in debt that he can never get out from under the money he owes out.

Because as soon as he does get “even”, he jumps right back into the shit, betting his balls again on credit with money he may not have, to back up his bets if he loses. He then has to try and secure another loan from the loanshark to square up the bookie again.

Tools of the Trade

A “shy book”, a Louisville Slugger, a bankroll of cold cash,
and a blackjack

This process is often how a bettor ends up with a mob guy as a partner in his business. It may be the only way to settle all his debts. If he doesn’t have a business, he may become obligated and compelled to come up with another way to pay off his debts.

Prime examples of this would be a guy who’s a truck driver for a freight company. He’ll advise his bookie or loanshark of a good “manifest” he may be carrying with a valuable load of electronics like televisions or computers, sneakers or shoes, expensive clothing, frozen seafood, a truckload of razor blades, etc.

The mob guy may not be a hijacker himself, but he’ll usually know where to go to set up the hijacking. The driver is then involved with what we call a “give up”. A pretend hijacking where he might later tell police that four unknown black guys accosted him on the highway or at a truck stop, pulled guns on him, tied him up and then stole his load.

Or the guy works in a jewelry store, or another high-end type business that he’ll help set up for a burglary or robbery. He essentially becomes the “inside man” that provides the much needed floor plan, the best times to hit the business when there is a stockpile of cash available, or information about the alarm system, etc.

He may leave the backdoor unlocked or the alarm off so as to ease the thieves way into the shop. In this way the bettor will get a credit against his delinquent “account” with the mob. So the wiseguys get their money, and he doesn’t get his head cracked open…everybody’s happy.
Except of course the freight company, jewelry store, or the insurance company that paid off on their insurance policy claim.

Many wiseguys and racketeers actually prefer the loanshark business to bookmaking or other type gambling rackets. This is primarily because it is a much easier business to get into, and much easier to run on a week to week basis.

Side Note: True wiseguys and racketeers don’t typically refer to the business as loansharking. That is a term that the police, the media, and the public call it. In the street, it’s called “shylocking.” And a guy who’s in that business is quite simply referred to as a shylock, or a “shy.” The process of loaning out money is called having money “on the street.” And the interest rate they charge is called the vigorish, or “vig” for short.

To be a bookmaker a guy needs to have a “wireroom” or an “betting office”. He’s gotta rent a location under a surreptitious name, rent telephones, hire telephone “clerks” to man the phones, subscribe to a daily “line” so he can move the oddsmaking accordingly and balance his books to try and swing a profit, keep intricate records on the wins and loses, deal with the “runners” or sub-bookies who feed customers into his “office”, settle up weekly by either paying or collecting from the players which requires a collector or maybe several, to meet up with the various customers and his runners, etc etc. It is a time consuming and intricate process.

A large bookmaking business can often involve hundreds of people. Even a medium-sized gambling operation can involve 40-50 individuals. It creates a lot of exposure and increased risk of arrest.

Another constant headache for the bookmaker is the fear of police raids on his call center (office) where they are answering the phones and recording the bets. In the old days, bookmakers had to pay off the local police precinct to try and avoid such raids. Or they had to constantly relocate to new apartments or locations to try and stay one step ahead of the vice cops.

Another part of the gambling business is that often times even the bookmaker himself may be in need of a shylock. Because contrary to popular opinion the bookie does not always win. In fact, quite often he may go into the “red” as we call it. This can last a week or two. Or he could have a real bad streak where he stays in the red for months on end.

This can lead to the bookie getting “busted out”, where he blows his whole bankroll and needs to borrow from a shylock in order to pay off his winning bettors to stay afloat himself.

Side Note: Don’t get me wrong here, bookmaking is a fabulous business. And done right, a potentially very lucrative business. It’s just a lot more involved and detail-oriented than loansharking is.

I’ve seen bookmaking offices that went into the hole for hundreds of thousands of dollars with shylocks until their streak changed and they made a comeback. It is a common occurrence in the underworld. In fact, bookmakers often make the best customers of shylocks.

As repeat “preferred” customers, bookies will usually be able to “buy” the money at lower rates than a regular borrower would. They usually pay anywhere from 1% to 2%. Whereas a regular loanshark customer typically pays anywhere from 2% up to 5% on the loan.

But we’re talking weekly here! This is not household finance! Depending upon the size of the loan, who’s doing the borrowing, the amount of risk involved for the shylock, and the purpose of the loan, all these factors will make a big difference in the rate that will be charged.

Additionally, the most important factor in the shylock’s decision to even consider giving out the loan to begin with will be the borrowers perceived ability to repay the debt.

If he is a solid businessman with extensive fixed assets, and he wants the loan for a lengthy period of time, the shy may be more willing to extend a larger loan at a lower interest rate. This is because the likelihood of repayment is almost guaranteed, and the shylock knows that his money is gonna be out there working for him steadily “on the street.” It’s almost like a steady weekly paycheck that he can count on.

Likewise, if the guy is a repeat customer who has a good record of repayment, the shylock may provide the money needed at a bit lower rate as a reward and incentive for this repeat trade.

But if the guy is a first-time borrower, and especially if the borrower wants the money for a high-risk venture such as buying a load of narcotics for resale, a large wholesale load of illegal fireworks for the upcoming July 4th holiday, a load of “swag” or truckload of stolen goods, or another such illegal or high-risk endeavor, the shylock will almost definitely charge a higher rate of return. A percentage rate of 3% to 5% (or more) weekly interest will be the norm for this higher risk type loan.

Contrary to popular belief most shylocks or loansharks are not looking to crack your head or put a guy into the hospital because you missed a payment. The shy only wants to get paid with as little hassle as possible. He wants to keep the money moving, in circulation so as to keep the profits steadily rolling in.

It is just a “business” to him, plain and simple, and he wants to run his operation as smoothly as he possibly can, with as little exposure to law enforcement as he can. With that in mind, a smart shylock will often times require a new borrower to have a “co-signer” for the loan.

Much like a legitimate bank would, a borrower will be denied the loan unless he can come up with a guy who will “vouch” for him. The voucher will guarantee the borrower’s performance and stands wholly responsible for the debt if the original borrower “lays down”, or fails to pay back the money according to the agreed upon time and payment schedule.

The guy who vouches is usually the same guy who brought the borrower around in the first place. After a borrower has successfully repaid the loan, the next time he comes back for another loan he may not be required to have someone vouch for him again. Because he has proven himself so to speak.

But any smart shylock worth his salt uses this process to protect his money, especially if it’s a large amount of money being requested. The shylock is also doing the borrower a big favor because it will rarely come down to “brass tacks” where the guy gets a beating because the other guy who stood up as a guarantor will be compelled topay off the loan before things get out of hand.

Side Note: But at the end of the day, the understanding by the borrower that he has made a handshake and unwritten agreement with the shylock to “do the right thing” and repay the money he borrowed looms supreme. Everybody at that table understands that whether specifically stated or implied, in the background is always the potential for violence if the borrower tries to get cute, or doesn’t repay the loan.

He’s ready for batting practice!
He’s ready for batting practice!

There is an old saying that a mafioso once told a potential borrower when the man asked if the shylock would require any collateral for the loan. The mafioso simply stated “your body is your collateral.” …I think that pretty much sums up the mentality and position of the mob on this subject.

In reality, and quite contrary to popular belief, there is very little actual violence associated with the loansharking racket. Usually, the underlying threat of violence and understanding by the borrower that if he doesn’t pay back the money there will be dire consequences for him is enough to ensure repayment.

Most borrowers are smart enough to understand who they are doing business with, and are not willing to “test the waters” to find out if the loanshark has enough muscle to collect. The only time a loan customer might push the envelope is if he perceives that the loanshark is “weak”, and can’t enforce collections.

But remember that even a seemingly mild-mannered shylock who may be small in stature becomes a giant with a baseball bat in his hands or a set of brass knuckles or pistol.

That frail old man that you borrowed from, who’s money you took that might look like a pushover and a sucker to you. If you think that you just made some quick cash, and that you don’t have to pay him back? …think again! Lol

Because that soft-spoken old man might just be a “goodfellow”. A “made guy” who you best not be fucking with, or a racketeer tied into a Mafia Family.

He’s most likely got the backing he needs to send out a couple of “young bucks” to crack your head wide open for you if you don’t pay him!

Now for a breakdown of the interest rates. As I mentioned above, shylock rates usually run anywhere from 1% up to 5% weekly. This provides the shylock with a nice return on his investment of from 52% (1%), up to 260% (5%) annually. Provided of course that the loan is out for a full 52 weeks of the year.

Smaller loans, especially ones requested for a short duration of only a few weeks to month or so, usually command a higher rate of interest. 4-5% weekly is the norm. Larger loans that are wanted for a longer period of time such as six months to a year or better, will be charged at a rate of 2% to 4% weekly. But again it’s all up to the discretion of the shylock.

As I stated above, the allure of the loanshark business, aside from the enormous profits that shylocking provides, is the relative ease by which a good shylock can operate. All he really needs is a bankroll of money (or a source for the funds thereof). A small notebook to keep track of the loans he has out “on the street”, and possibly a blackjack or baseball bat to ensure collections if it ever comes to that…and of course the balls to swing that bat if push ever comes to shove. He’s now in the loansharking business!

As far as finding customers? That’s the easiest thing in the world. Everybody wants money. Everybody needs to borrow at one time or another. Everybody!

The real issue is his ability to separate who he will lend to, and who he will deny a loan to. A shylock who lends to anyone and everyone won’t be in business very long.

Likewise, even with the people he chooses to lend to, he needs to have good judgment to be able to determine how much money he will give them, regardless of how much money they originally asked for, and under what terms and conditions he will lend it.

Side Note: There is another common way shylocks charge. It’s called a “knockdown loan”. Say for instance a guy borrows $1,000. The shy may tell him he needs to repay $130 a week for 10 weeks. After which the total loan has been satisfied and the borrower owes nothing more. The $100 a week going towards the $1,000 principal, and the $30 going toward the vigorish.

At the end of ten weeks the shylock got back his original $1,000 plus a $300 profit. He conceivably could put the same $1,000 out five times in a year. With a $300 profit each time, the shy would net $1,500 profit by years end. That equates to a 3.0% weekly profit, or 156% annually.

This type of shylock loan is very common with smaller sized loans. With larger loans, the straight weekly vigorish type loan is more traditional.

The terms of a loanshark
The terms of a loanshark

There are small shylocks with only a few loans out that may aggregate to no more than $10,000 to $50,000 totally out in loans. He may only provide loans of $1,000 up to $5,000 or so, and he’ll charge a top dollar at 4% to 5% weekly interest to borrow.

Then there is what I’d consider to be a medium to relatively large shylock, with a “shy book” of anywhere from $100,000 to $300,000 “on the street.” This sized shy-book may have anywhere from twenty to forty customers, or more on average. Again, rates may run the gamut from 2% up to 5% weekly, depending upon the size and duration of the loan, and other factors involved.

And then of course there are the major shylocks who have out on loan anywhere from $500,000 to $750,000 or better any given day of the week…but those guys are rare.

Above the three levels, I just described we have what we call a “Shylock’s Shylock”. Guys who primarily lend only to other shylocks. He is essentially a wholesaler of money to others in the trade.

A shylock of this importance often has out on loan $1,000,000 or better on any given day of the week. There are some major loanshark wholesalers of money who literally have several million dollars on the streets daily.

They typically charge rates that are considered low by underworld standards and are reserved for those highly trusted shylocks who are the “creme de la creme” of the loansharking business. This rate is only offered to other top guys, not run of the mill shylocks.

At this last level, the bankroll is usually provided by a top-ranked, wealthy wiseguy. He may be a made guy, a captain, or more likely the boss of a Family who lends at “wholesale” rates to his trusted capos, soldiers, and top associates. Sometimes even made guys in other Families.

A boss usually charges anywhere from 0.5 point a week (mostly to his capo di decina), up to 1.0 percent weekly to goodfellows. The equivalent of a 26% to 52% net profit annually. For doing nothing…and the money at this level is absolutely guaranteed. There are no excuses accepted. No lay downs, no bullshit. Between one another, goodfellows have to pay other goodfellows regardless. It’s just the way it is.

Side Note: On that note, all made guys and even mob associates know that they are absolutely responsible every step of the way when borrowing from the Family. Regardless whether their borrower leaves town, dies, or otherwise stiffs them. They alone are solely responsible to repay all monies they borrow from the borgata.

More than one knockaround guy has gotten himself clipped for not adhering to this unwritten rule!

In turn, other wiseguy’s who “buy” the money at that rate usually do so because they are pushing it out to their people (regime soldiers and crew associates who are smaller sub-shylocks) at 1.5%, 2%, or even 2.5% weekly interest or “vigorish” as it’s called in the business. These smaller shylocks will ultimately push it on the street to their borrowers at a typical rate of 3-5% a week.

These borrowers can be small businessmen; cab drivers, bartenders, restaurant owners, longshoremen, deli owners, dry cleaners, etc.

There are also many white-collar, well-heeled clients as well. Doctors, lawyers, dentists, judges, big businessmen, real estate speculators, construction companies, dress manufacturers, etc…you’d be amazed at the wide spectrum of people who come to shylocks.-At each respective level along the way, each tier of loanshark adds his percentage of profit on top of whatever he himself may be paying, so as to insure a built-in profit for himself.

Now the real “cream” in the business is when a given loanshark has both the “In” and the “Out” for the money. Meaning that he has his own personal bankroll, and doesn’t need to reach out in order to borrow money to fund his loanshark business. He had the “In” so to speak. He uses his own money, thereby keeping any extra interest he’d normally have to pay a larger shylock when borrowing.

And he also has the “Out”, meaning that he has his own network of steady borrowers who seek him out for loans. Thereby often allowing him to bypass a middleman loanshark or “steerer”, who has customers he brings to the table, which then requires a sharing of the “vigorish” every week between them.

He has both the “In” and the “Out”. A loanshark with even a medium sized “shy book”, who controls all aspects of the business can become a very wealthy guy, in a very short period of time.

For instance, a loanshark who has say $100,000 out “on the street”, at a conservative 3% weekly vigorish rate generates $3,000 per week, every week, 52 weeks of the year. That aggregates to $156,000 gross profit in just one year’s time. If he doesn’t touch any of that money, the second year he’ll be able to push out $256,000 in cash to his network of borrowers. (his original $100,000 bankroll, plus the $156,000 first years profit).

Using that same 3% weekly interest figure, but now with $256,000 out on loan, he’ll be pulling in $7,680 every single week. By the end of the second year, he would have grossed a profit of $399,360. If you add that to the $256,000 he put out in loans, he now has a total bankroll of $655,360 by the end of his second year in business.

By the start of his third year, if he’s even able to push out all $655,000 of his accumulated cash, the happy shylock will be rolling in the green. Because at that same 3% rate, the weekly turnaround is a whopping $19,660 in cold cash every single week! And that’s just the interest on the loans, it doesn’t include payback for any of his principal bankroll.

At the end of that third year, over $1,022,000 in interest alone would have been paid back into the shylock’s pockets. And of course, that’s not including the original $655,000 previously accumulated over the past two years’ time. Collectively, he now has over $1,677,000…and he hasn’t even pushed out a penny for year number four yet!

In my country? Where I come from? That’s a lot of money! In a very short period of time.

I won’t even bother to do the calculations for the end of year four. I’m afraid my calculator would blow up. Lol…but you get the idea right?

In my humble opinion, pound for pound, “shylocking” or loansharking is the single best business the underworld ever invented. Tremendous profit potential, quick and easy mode of operation, with a steady weekly profit which rivals that of narcotics and gambling, but affords much less of a chance for investigation and arrest.

With narcotics, there are often big profits, but also a huge risk of arrest, almost certain conviction, and the heavy, heavy penalties that are meted out. Decades in prison.

Gambling offers huge profits as well. But number one, you don’t always win. There is also the intricate network of constant daily interactions required between players, runners, sub-bookies, and the office in order to run a smooth and profitable bookmaking operation. It is also a very seasonal business, which constantly ebbs and flows profits. And when the “office” goes into the “red”, there are no profits to be had until the office gets even again. Once they win back all that’s been lost to players, only then can the “earn” resume.

There is also a huge overhead required to run a large bookmaking business…No such animal when loansharking!

The loanshark racketeer enjoys a steady, weekly profit. One that he can most readily be assured of. He mostly operates out of his pocket, and he can operate very surreptitiously all by himself. At best he may partner with another shylock, thereby pooling their resources and customers.

Bigger loansharks usually have one or two tough kids around them. These “kids” are often utilized to make the rounds for the weekly collections.
They are also available in the very rare instance that a customer needs to be roughed up in order to keep any recalcitrant borrowers in line so to speak.

If that even becomes a necessity, usually one good slap in the face is sufficient to ensure timely payment from even the most difficult borrower.

Now every once in a while a loan customer reaches a point where he cannot pay any longer. He has been bled dry. Maybe the guy has been paying for several years, or longer.

He had already paid the principal amount that he borrowed many times over. For instance on a $5,000 loan at 5%, if he’s kept it for two years he’s already paid into the shark $26,000 over 104 weeks.

A smart shylock will either completely stop the clock, or reduce his payments to maybe 1% weekly, which still brings in $50 every single week, or $2,600 annually. Or he may set a schedule for final payoff of $100 for a year, thereby retrieving his original investment. It is the smart move. It is the classy move!

Dumb loansharks, guys with no heart who are vicious, will demand the borrower continue paying the full amount. They may bang him around a bit in order to scare him into paying. Bad, bad move!

They think they’re tough guys, and wanna flex their muscles. The poor sucker is crying to you to be reasonable and yet they still wanna bleed the guy.

It’s a real bad move because those are the customers who become desperate. They feel they have no where to go, no one to turn to for help.
Now if a borrower if lucky enough to be friendly with a wiseguy, he may run to him for help…that the best case scenario for both the shylock and the borrower.

There will usually be a “table” where they “stop the clock” as a courtesy from one knockaround guy to another. And a repayment schedule will be set. No more vigorish. Any money paid to the shylock from that point forward goes towards the principal so that within a short period of time, the debts paid off. End of story.

But what happens if the borrower is not lucky enough to know a street guy?

Then you’ve forced this poor guy to either become a “lambster”, where he takes off and goes into hiding, or worse. He becomes the guy who screams law!

And therein lies the problem. The shylock gets pinched, and the customer is backed into a corner where he needs to point a finger and testify against his shy. Most customers do not wanna go that route.

They know they sought out the shylock to begin with for a loan, not the other way around, and have a sense of fair play. They were willing to do the right thing.

The asshole shylock forced the guy’s hand. The shylock now has only himself to blame for being too greedy and pigheaded.

But this is a rare scenario, most times things are worked out to everybody’s satisfaction. The transaction goes smoothly, and things end on a high note.

A smart, savvy shylock knows this, and wants the repeat business from his customers. He’s not there to bust people up or terrorize them.
He wants them to borrow, pay, and come back again…it is a business, like any other business. And done correctly there have been knockaround guys who have been in the trade for many decades. And their customers love them.

In short, the business of “usury” as it’s called on the penal books, is one of the oldest, tried and true money makers for the underworld.
Not only for Cosa Nostra, but for a wide range of ethnic groups ranging from Jewish hoodlums, Greeks, Irish, to independents alike.

Side Note: The word “shylock” is actually derived from the famous Shakespeare play “The Merchant of Venice.” The part of Shylock was that of a lecherous money-lender in the ancient City of Venice, Italy. He told his borrower victim that he would take a pound of his flesh for the money he was owed.

So shylocking, or usurious money lending, is almost as old as father time itself.

Up until 1965, usury wasn’t even considered a felony. It was a Class A misdemeanor which usually resulted in nothing more than a small fine and no jail time. A rarely prosecuted crime to begin with, at best an offender faced a maximum one year in jail in extreme cases.

After it became a felony, it was still a little prosecuted offense. In rare cases that a hood was even arrested for usury, the offender faced a maximum of five years in prison. But again, most received a slap on the wrist, or possibly one year behind bars at the most.

In a case where violence was involved in the offense. Where maybe a borrower was beaten in an attempt to collect the debt, only then jail was a real threat. Many notorious mafiosi, or the more violent loansharks actually got the five years…but there weren’t many victim borrowers willing to get on a witness stand and point a finger at their shylock.

In cases with violence, prosecutors also had the option of charging defendants with the more serious crime of extortion. An extortion conviction, back then as today, gave exposure of up to twenty years in jail. But rarely did anyone get the full twenty. Five years, or a “pound” as we say, was the usual.

Even with today’s much tougher penalties being meted out under the Rico law, which now imposes the severest, draconian penalties compared to decades ago, loansharking is often times still less of a penalty than many other crimes such as narcotics, robberies, fraud schemes, and sometimes even gambling cases.

Most “extortionate credit transaction” indictments (the technical term used under Rico to charge a defendant), result in those convicted receiving anywhere from one to five years in prison. In more severe cases, penalties as high as ten, fifteen, and twenty years have been dished out by the judge. But those are rare, extreme cases.

In review, loansharking has always been, and still is, a lucrative racket practiced the world over by a plethora of individuals from every background and social strata.

Whether it be the infamous Cosa Nostra in the United States, the Sicilian Mafia, Japanese Yakuza, Russian Mob, Chinese Triads, the old Jewish mobs of the 1940s, the Irish mobs, a single independent-minded racketeer, or nearly any other group you could possibly imagine, usury is as old as time itself…and I don’t imagine it’s going anywhere, anytime soon!

Until next time, The Other Guy!

This article was originally posted “here