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Note; Emphasis added to this affidavit with Yellow Highlighting! STATE OF MICHI AN IN THE CI!C"IT CO"!T FO!

THE CO"NTY OF OA#$AN% & 'AN# ONE( N)A)( & Case No) *+,*-.--/,C0 & 1laintiff( & Hon) E)) Sosni23 & v) & AFFI%A4IT OF 5A$#E! F) TO%%( & E61E!T 5ITNESS FO! %EFEN%ANTS HA!SHA4A!%HAN %A4E and & 1!ATIMA %A4E( 7ointl8 and seve9all8( & & %efendants) & :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Ha9shava9dhan %ave and 19atima H) %ave C>o =<?/ E2ho !oad 'loomfield Hills( MI -/+*? %efendants( in propria persona Mi2hael C) Hamme9 ;1-<.*=& !8an O) $awlo9 ;1@-@A+& %i23inson 59ight 1$$C Atto9ne8s fo9 'an3 One( N)A) =** 5oodwa9d AvenBe( SBite -*** %et9oit( Mi2higan -/??@ ;+<+& ??+,+=**

Now 2omes the Affiant( 5al3e9 F) Todd( a 2itiCen of the "nited States and the State of Ohio ove9 the age of ?< 8ea9s( and de2la9es as follows( Bnde9 penalt8 of pe97B98D <) That I am familia9 with the 19omisso98 Note and %isEB9sement !eFBest and ABtho9iCation( dated NovemEe9 ?+( <AAA( togethe9 sometimes 9efe99ed to in othe9 do2Bments filed E8 %efendants in this 2ase as the Galleged ag9eementH Eetween %efendants and 1laintiff EBt 2alled the GNoteH in this Affidavit) If 2alled as a witness( I woBld testif8 as stated he9ein) I ma3e this Affidavit Eased on m8 own pe9sonal 3nowledge of the legal( e2onomi2( and histo9i2al p9in2iples stated he9ein( eI2ept that I have 9elied enti9el8 on do2Bments p9ovided to me( in2lBding the Note( 9ega9ding


2e9tain fa2ts at issBe in this 2ase of whi2h I p9evioBsl8 had no di9e2t and pe9sonal 3nowledge) I am ma3ing this affidavit Eased on m8 eIpe9ien2e and eIpe9tise as an atto9ne8( e2onomist( 9esea92h w9ite9( and tea2he9) following statements) 1!OFESSIONA$ 'AC# !O"N% J"A$IFICATIONS ?) M8 FBalifi2ations as an eIpe9t witness in moneta98 and Ean3ing inst9Bments a9e as follows) Fo9 ?* 8ea9s( I wo93ed as an atto9ne8 and legal offi2e9 fo9 the legal I am 2ompetent to ma3e the

depa9tments of the Fede9al !ese9ve 'an3s of New Yo93 and Cleveland) Among othe9 things( I was assigned 9esponsiEilit8 fo9 FBestions involving Eoth novel and 9oBtine notes( Eonds( Ean3e9sK a22eptan2es( se2B9ities( and othe9 finan2ial inst9Bments in 2onne2tion with m8 wo93 fo9 the !ese9ve 'an3sK dis2oBnt windows and pa9ts of the open ma93et t9ading des3 fBn2tion in New Yo93) In addition( fo9 nine 8ea9s( I wo93ed as an e2onomi2 9esea92h offi2e9 at the Fede9al !ese9ve 'an3 of Cleveland) I Ee2ame one of the Fede9al !ese9ve S8stemKs 9e2ogniCed eIpe9ts on the legal histo98 of 2ent9al Ean3ing and the pledging of notes( Eonds( and othe9 finan2ial inst9Bments at the dis2oBnt window to enaEle the Fede9al !ese9ve to ma3e advan2es of 29edit that Ee2ame o9 2oBld Ee2ome mone8) I also have 9ead eItensivel8 t9eatises on the legal and finan2ial histo98 of mone8 and Ean3ing and have pBElished seve9al a9ti2les 2ove9ing all of the sBE7e2ts 7Bst mentioned) I have se9ved as an eIpe9t witness in seve9al t9ials involving Ean3ing p9a2ti2es and moneta98 inst9Bments) A sBmma98 Eiog9aphi2al s3et2h and 9esBme in2lBding fB9the9 details of m8 wo93 eIpe9ien2e( 9eadings( pBEli2ations( and edB2ation will Ee tende9ed to %efendants and ma8 Ee made availaEle to the CoB9t and to 1laintiffKs 2oBnsel Bpon 9eFBest) ENE!A$$Y ACCE1TE% ACCO"NTIN 1!INCI1$ES

+) 'an3s a9e 9eFBi9ed to adhe9e to

ene9all8 A22epted A22oBnting 19in2iples ; AA1&)

AA1 follows an a22oBnting 2onvention that lies at the hea9t of the doBEle,ent98 Eoo33eeping s8stem 2alled the Mat2hing 19in2iple) This p9in2iple wo93s as followsD 5hen a Ean3 a22epts EBllion( 2oin( 2B99en28( 2he23s( d9afts( p9omisso98 notes( o9 an8 othe9 simila9 inst9Bments ;he9einafte9 Ginst9BmentsH& f9om 2Bstome9s and deposits o9 9e2o9ds the inst9Bments as assets( it mBst 9e2o9d offsetting liaEilities that mat2h the assets that it a22epted f9om 2Bstome9s) The liaEilities 9ep9esent the amoBnts that the Ean3 owes the 2Bstome9s( fBnds a22epted f9om 2Bstome9s) In a f9a2tional 9ese9ve Ean3ing s8stem li3e the "nited States Ean3ing s8stem( most of the fBnds advan2ed to Eo99owe9s ;assets of the Ean3s& are created by the banks themselves and a9e not me9el8 t9ansfe99ed f9om one set of deposito9s to anothe9 set of Eo99owe9s) !E$E4ANCE OF S"'T$E %ISTINCTIONS A'O"T TY1ES OF MONEY -) F9om m8 stBd8 of histo9i2al and e2onomi2 w9itings on the sBE7e2t( I 2on2lBde that a 2ommon mis2on2eption aEoBt the natB9e of mone8 Bnfo9tBnatel8 has Eeen pe9petBated in the ")S) moneta98 and Ean3ing s8stems( espe2iall8 sin2e the <A+*s) In 2lassi2al e2onomi2 theo98( on2e e2onomi2 eI2hange has moved Ee8ond the Ea9te9 stage( the9e a9e two t8pes of mone8D mone8 of exchange and mone8 of account)) Fo9 nea9l8 +** 8ea9s in Eoth EB9ope and the "nited States( 2onfBsion aEoBt the distin2tiveness of these two 2on2epts has led to pe9sistent attempts to t9eat mone8 of a22oBnt as the eFBivalent of mone8 of eI2hange) In 9ealit8( espe2iall8 in a f9a2tional 9ese9ve Ean3ing s8stem( a 2ompa9ativel8 small amoBnt of mone8 of eI2hange ;e)g)( gold( silve9( and offi2ial 2B99en28 notes& ma8 sBppo9t a vastl8 la9ge9 FBantit8 of EBsiness t9ansa2tions denominated in mone8 of a22oBnt) The sBm of these

t9ansa2tions is the sBm of 29edit eItensions in the e2onom8) 5ith the eI2eption of

2Bstoma98 sto9es of valBe li3e gold and silve9( the moneta98 Ease of the e2onom8 la9gel8 2onsists of 29edit inst9Bments) Against this background, I conclude that the Note, despite some language about lawful money explained below, clearly contemplates both disbursement of funds and eventual repayment or settlement in money of account (that is, money of exchange would be welcome but is not re uired to repay or settle the Note!" The fa2tBal Easis of this 2on2lBsion is the 9efe9en2e in the %isEB9sement !eFBest and ABtho9iCation to 9epa8ment of

LA=(A*=)<@ to Mi2higan National 'an3 f9om the p9o2eeds of the Note) That was an eI2hange of the 29edit of 'an3 One ;1laintiff& fo9 29edit appa9entl8 and p9evioBsl8 eItended to %efendants E8 Mi2higan National 'an3) Also( the9e is no 9eason to Eelieve that 1laintiff woBld 9efBse a sBEstitBtion of the 29edit of anothe9 Ean3 o9 Ean3e9 as 2omplete pa8ment of the %efendantsK 9epa8ment oEligation Bnde9 the Note) This is a 2ase aEoBt eI2hanges of mone8 of a22oBnt ;29edit&( not aEoBt eI2hanges of mone8 of eI2hange ;lawfBl mone8 o9 even legal tende9&) =) I9oni2all8( the Note eIpli2itl8 9efe9s to 9epa8ment in GlawfBl mone8 of the "nited States of Ame9i2aH ;see G19omise to 1a8H 2laBse&) T9aditionall8 and legall8(

Cong9ess defines the ph9ase GlawfBl mone8H fo9 the "nited States) $awfBl mone8 was the fo9m of mone8 of eI2hange that the fede9al gove9nment ;o9 an8 state& 2oBld Ee 9eFBi9ed E8 statBte to 9e2eive in pa8ment of taIes o9 othe9 deEts) T9aditionall8( as defined E8 Cong9ess( lawfBl mone8 onl8 in2lBded gold( silve9( and 2B99en28 notes 9edeemaEle fo9 gold o9 silve9 on demand) In a Ean3ing law 2onteIt( lawfBl mone8 was onl8 those fo9ms of mone8 of eI2hange ;the fo9ms 7Bst mentioned( plBs ")S) Eonds and notes 9edeemaEle fo9 gold& that 2onstitBted the 9ese9ves of a national Ean3 p9io9 to <A<+ ;date of 29eation of the Fede9al !ese9ve 'an3s&) See, $awfBl Mone8(

Websters New International Dictionary ;?d ed) <A=*&)

In light of these facts, I

conclude that #laintiff and $efendants exchanged reciprocal credits involving money of account and not money of exchange% no lawful money was or probably ever would be disbursed by either side in the covered transactions" This

2on2lBsion also is 2onsistent with the Eoo33eeping ent9ies that Bnde9lie the loan a22oBnt in dispBte in the p9esent 2ase) Mo9eove9( it is pBCCling wh8 1laintiff woBld 9etain the a92hai2 langBage( GlawfBl mone8 of the "nited States of Ame9i2a(H in its othe9wise mode9n,seeming Note) It is possiEle that this langBage is me9el8 a lega28 f9om the p9e,<A++ e9a) Mode9n 29edit ag9eements might in2lBde 9epa8ment langBage sB2h as( GThe 9epa8ment oEligation Bnde9 this ag9eement shall 2ontinBe Bntil pa8ment is 9e2eived in fully and finally collected funds(H whi2h avoids the enti9e FBestion of GIn what fo9m of mone8 or

credit is the 9epa8ment oEligation dBeMH


6. Legal tender( a 9elated 2on2ept EBt one that is e2onomi2all8 infe9io9 to lawful

Ee2aBse it allows pa8ment in inst9Bments that 2annot Ee 9edeemed fo9 gold o9 silve9 on demand( has Eeen the fo9m of mone8 of eI2hange 2ommonl8 Bsed in the "nited States sin2e <A++( when domesti2 p9ivate gold t9ansa2tions we9e sBspended ;Bntil <A.-&)) 'asi2all8( legal tende9 is whateve9 the gove9nment sa8s that it is) The most 2ommon fo9m of legal tende9 toda8 is Fede9al !ese9ve notes( whi2h E8 law 2annot Ee 9edeemed fo9 gold sin2e <A+- o9( sin2e <A@-( fo9 silve9) =<*+( =<</ ;E&( and =<<A ;a&) See, +< ")S)C) Se2tions

NoteD I FBestion the statement that fed 9ese9ve notes 2annot Ee 9edeemed fo9 silve9 sin2e <A@-) It was Nohnson who de2la9ed on <= Ma928 <A@. that afte9 <= NBne <A@. that Fed !es Notes woBld not Ee eI2hanged fo9 silve9 and the p9a2ti2e did stop on <= NBne

<A@. O not <A@-) I Eelieve this to Ee e99o9 in the teIt of the aBtho9Ks affidavit) !. Legal tender under the "nifor #o ercial #ode $".#.#.% ( Se2tion <,?*< ;?-&

;Offi2ial Comment&( is a 2on2ept that sometimes sB9fa2es in 2ases of this natB9e)) The 9efe9en2ed Offi2ial Comment notes that the definition of oney is not limited to legal tender Bnde9 the ")C)C) &oney is defined in Se2tion <,?*< ;?-& as Ga mediBm of eI2hange aBtho9iCed o9 adopted E8 a domesti2 o9 fo9eign gove9nment and in2lBdes a moneta98 Bnit of a22oBnt estaElished E8 an inte9gove9nmental o9ganiCation o9 E8 ag9eement Eetween two o9 mo9e nations)H The 9elevant Offi2ial Comment states that GThe test adopted is that of san2tion of gove9nment( whethe9 E8 aBtho9iCation Eefo9e issBe o9 adoption afte9wa9d( whi2h 9e2ogniCes the 2i92Blating mediBm as a pa9t of the offi2ial 2B99en28 of that gove9nment) The na99ow view that mone8 is limited to legal tende9 is 9e7e2ted)H ThBs( I 2on2lBde that the ")C)C) tends to validate the 2lassi2al theo9eti2al view of mone8)

/) In m8 opinion( the Eest soB92es of info9mation on the o9igins and Bse of 29edit as mone8 a9e in Alf9ed Ma9shall( MONEY( C!E%IT P COMME!CE ?-A,?=< ;<A?A& and Cha9les 1) #indleEe9ge9( A FINANCIA$ HISTO!Y OF 5ESTE!N E"!O1E =*,=+ ;<A/-&) A s8nthesis of these soB92es( as applied to the fa2ts of the p9esent 2ase( is as followsD As 2omme92ial Ean3s and dis2oBnt hoBses ;p9ivate Ean3e9s& Ee2ame estaElished in pa9ts of EB9ope ;espe2iall8 9eat '9itain& and No9th Ame9i2a( E8 the

mid,nineteenth 2entB98 the8 2ommonl8 made loans to Eo99owe9s E8 eItending thei9 own 29edit to the Eo99owe9s o9( at the Eo99owe9sK di9e2tion( to thi9d pa9ties) The t8pi2al fo9m of sB2h eItensions of 29edit was d9afts o9 Eills of eI2hange d9awn Bpon themselves ;2laims on the 29edit of the d9awees& instead of disEB9sements of EBllion(

2oin( o9 othe9 fo9ms of mone8) In t9ansa2tions with thi9d pa9ties( these d9afts and Eills 2ame to se9ve most of the o9dina98 fBn2tions of mone8) The thi9d pa9ties had to dete9mine fo9 themselves whethe9 sB2h G29edit mone8H had valBe and( if so( how mB2h) The Fede9al !ese9ve A2t of <A<+ was d9afted with this model of the

2omme92ial e2onom8 in mind and p9ovided at least two me2hanisms ;the dis2oBnt window and the open,ma93et t9ading des3& E8 whi2h 2e9tain t8pes of Ean3e9sK 29edits 2oBld Ee eI2hanged fo9 Fede9al !ese9ve 29edits( whi2h in tB9n 2oBld Ee withd9awn in lawfBl mone8) C9edit at the Fede9al !ese9ve eventBall8 Ee2ame the p9in2ipal fo9m of moneta98 9ese9ves of the 2omme92ial Ean3ing s8stem( espe2iall8 afte9 the sBspension of domesti2 t9ansa2tions in gold in <A++) ThBs( 29edit mone8 is not alien to the 2B99ent offi2ial moneta98 s8stem; it is 7Bst 9a9el8 Bsed as a devi2e fo9 the 29eation of Fede9al !ese9ve 29edit that( in tB9n( in the fo9m of eithe9 Fede9al !ese9ve notes o9 Ean3sK deposits at Fede9al !ese9ve 'an3s( fBn2tions as mone8 in the 2B99ent moneta98 s8stem) In fa2t( a means E8 whi2h the Fede9al !ese9ve eIpands the mone8 sBppl8( loosel8 defined( is to set Ean3sK 9ese9ve 9eFBi9ements ;2B99entl8( BsBall8 ten pe92ent of demand liaEilities& at levels that woBld en2oB9age Ean3s to eItend new 29edit to Eo99owe9s on thei9 own Eoo3s that thi9d pa9ties woBld have to p9esent to the same Ean3s fo9 9edemption( thBs leading to an eIpansion of Ean3,29eated 29edit mone8) In the mode9n e2onom8( man8 non,Ean3 p9ovide9s of 29edit also eItend Eoo3 29edit to thei9 2Bstome9s withoBt p9evioBsl8 setting aside an eFBivalent amoBnt of moneta98 9ese9ves ;29edit 2a9d line of 29edit a22ess 2he23s issBed E8 non,Ean3s a9e a good eIample of this t8pe of 29edit&( whi2h also 2aBses an eIpansion of the agg9egate FBantit8 of 29edit mone8) The dis2Bssion of mone8 ta3en f9om Fede9al !ese9ve and othe9 mode9n soB92es in pa9ag9aphs << et seF) is 2onsistent with the a22oBnt of the

o9igins of the Bse of Ean3 29edit as mone8 in this pa9ag9aph) A$&AN'() *+ ,AN- '.($I/ A) /0( (12I&A3(N/ *+ 4*N(5 A) 1laintiff appa9entl8 asse9ts that the %efendants signed a p9omise to pa8( sB2h as a note;s& o9 29edit appli2ation ;2olle2tivel8( the GNoteH&( in eI2hange fo9 the 1laintiffKs advan2e of fBnds( 29edit( o9 some t8pe of mone8 to o9 on Eehalf of %efendant) Howeve9( the Eoo33eeping ent9ies 9eFBi9ed E8 appli2ation of AA1 and the Fede9al

!ese9veKs own w9itings shoBld t9igge9 2lose s29Btin8 of 1laintiffKs appa9ent asse9tions that it lent its fBnds( 29edit( o9 mone8 to o9 on Eehalf of %efendants( the9eE8 2aBsing them to owe the 1laintiff L-**(***) A22o9ding to the Eoo33eeping ent9ies shown o9 othe9wise des29iEed to me and appli2ation of AA1( the %efendants allegedl8 we9e

to tende9 some fo9m of oney ;GlawfBl mone8 of the "nited States of Ame9i2aH is the t8pe of mone8 eIpli2itl8 2alled fo9 in the Note&( se2B9ities o9 othe9 2apital eFBivalent to mone8( fBnds( 29edit( o9 something else of valBe in eI2hange ;mone8 of eI2hange( loosel8 defined&( 2olle2tivel8 9efe99ed to he9ein as Gmone8(H to 9epa8 what the 1laintiff 2laims was the oney lent to the %efendants) It is not an unreasonable

argument to state that #laintiff apparently changed the economic substance of the transaction from that contemplated in the credit application form, agreement, note(s!, or other similar instrument(s! that the $efendants executed, thereby changing the costs and risks to the $efendants" At most( the 1laintiff eItended its own credit ;mone8 of a22oBnt&( EBt the %efendants we9e 9eFBi9ed to 9epa8 in oney ;mone8 of eI2hange( and lawful oney at that&( which creates at

least the inference of ine uality of obligations on the two sides of the t9ansa2tion ; oney( in2lBding lawful oney( is to Ee eI2hanged fo9 ban' credit&) MO%E!N A"THO!ITIES ON MONEY

<<)To Bnde9stand what o22B99ed Eetween 1laintiff and %efendants 2on2e9ning the alleged loan of oney o9( mo9e a22B9atel8( credit( it is helpfBl to 9eview a mode9n Fede9al

!ese9ve des29iption of a Ean3Ks lending p9o2ess) See( %avid H) F9iedman( MONEY AN% 'AN#IN ;-th ed) <A/-&;appa9entl8 al9ead8 int9odB2ed into this 2ase&D GThe

2omme92ial Ean3 lending p9o2ess is simila9 to that of a th9ift in that the 9e2eipt of 2ash f9om deposito9s in29eases Eoth its assets and its deposit liaEilities( whi2h enaEles it to ma3e additional loans and investments . ) ) ) 5hen a 2omme92ial Ean3 ma3es a EBsiness loan( it a22epts as an asset the Eo99owe9Ks deEt oEligation ;the p9omise to 9epa8& and 29eates a liaEilit8 on its Eoo3s in the fo9m of a demand deposit in the amoBnt of the loan.H ;ConsBme9 loans a9e fBnded simila9l8)& The9efo9e( the Ean3Ks o9iginal Eoo33eeping ent98 shoBld show an in29ease in the amoBnt of the asset 29edited on the asset side of its Eoo3s and a 2o99esponding in29ease eFBal to the valBe of the asset on the liaEilit8 side of its Eoo3s) /his would show that the bank received the customer6s signed promise to repay as an asset, thus monetizing the customer6s signature and creating on its books a liability in the form of a demand deposit or other demand liability of the bank" The Ean3 then BsBall8 woBld hold this demand deposit in a t9ansa2tion a22oBnt on Eehalf of the 2Bstome9) Instead of the Ean3 lending its oney o9 othe9 assets to the 2Bstome9( as the 2Bstome9

9easonaEl8 might Eelieve f9om the fa2e of the Note( the Ean3 created fBnds fo9 the 2Bstome9Ks t9ansa2tion a22oBnt withoBt the 2Bstome9Ks pe9mission( aBtho9iCation( o9 3nowledge and delive9ed the credit on its own Eoo3s 9ep9esenting those fBnds to the 2Bstome9( meanwhile alleging that the Ean3 lent the 2Bstome9 oney) If 1laintiffKs

9esponse to this line of a9gBment is to the effe2t that it a23nowledges that it lent 29edit o9 issBed 29edit instead of mone8( one might 9efe9 to Thomas 1) Fit2h( 'A!!ONKS



TE!MS( GC9edit Ean3ing(H +)

G'oo33eeping ent98 9ep9esenting a deposit of fBnds into an a22oBnt)H 'Bt 1laintiffKs loan ag9eement appa9entl8 avoids 2laiming that the Ean3 a2tBall8 lent the %efendants oney) The8 appa9entl8 state in the ag9eement that the %efendants a9e oEligated to 9epa8 1laintiff p9in2ipal and inte9est fo9 the G4alBaEle 2onside9ation ;mone8& the Ean3 gave the 2Bstome9 ;Eo99owe9&)H The loan ag9eement and Note appa9entl8 still delete an8 9efe9en2e to the Ean3Ks 9e2eipt of a2tBal 2ash valBe f9om the %efendants and eI2hange of that 9e2eipt fo9 a2tBal 2ash valBe that the 1laintiff Ean3e9 9etB9ned) 78"According to the +ederal .eserve ,ank of New 5ork, money is anything that has value that banks and people accept as money% money does not have to be issued by the government" Fo9 eIample( %avid H) F9iedman( I 'ET YO" THO" HT) ) ) ) A( Fede9al !ese9ve 'an3 of New Yo93 ;- th ed) <A/-&;appa9entl8 al9ead8 int9odB2ed into this 2ase&( eIplains that Ean3s 29eate new mone8 E8 depositing IO"s( p9omisso98 notes( offset E8 Ean3 liaEilities 2alled 2he23ing a22oBnt Ealan2es) 1age = sa8s( GMone8 doesnKt have to Ee int9insi2all8 valBaEle( Ee issBed E8 gove9nment( o9 Ee in an8 spe2ial fo9m) ) ) )H <+)The pBEli2ation( Anne Ma9ie $) on2C8( MO%E!N MONEY MECHANICS .,++(

Fede9al !ese9ve 'an3 of Chi2ago ;9ev) ed) NBne <AA?&;appa9entl8 al9ead8 int9odB2ed into this 2ase&( 2ontains standa9d Eoo33eeping ent9ies demonst9ating that oney

o9dina9il8 is 9e2o9ded as a Ean3 asset( while a Ean3 liability is eviden2e of oney that a Ean3 owes) The Eoo33eeping ent9ies tend to p9ove that Ean3s a22ept 2ash( 2he23s( d9afts( and p9omisso98 notes>29edit ag9eements ;assets& as oney deposited to 29eate

29edit o9 2he23Eoo3 mone8 that a9e Ean3 liabilities( whi2h shows that( aEsent an8 9ight of setoff( Ean3s owe oney to pe9sons who deposit oney)) 'ash (money of


exchange! is money, and credit or promissory notes (money of account! become money when banks deposit promissory notes with the intent of treating them like deposits of cash" See( <? ")S)C) Se2tion </<+ ;l%;<& ;definition of GdepositH Bnde9 Fede9al %eposit InsB9an2e A2t&) The 1laintiff a2ts in the 2apa2it8 of a lending o9 Ean3ing institBtion( and the newl8 issBed 29edit o9 mone8 is simila9 o9 eFBivalent to a p9omisso98 note( whi2h ma8 Ee t9eated as a deposit of mone8 when 9e2eived E8 the lending Ean3)) Fede9al !ese9ve 'an3 of %allas pBEli2ation MONEY AN%

'AN#IN ( page <<( eIplains that when Ean3s g9ant loans( the8 29eate new mone8) The new mone8 is 29eated Ee2aBse a new Gloan Ee2omes a deposit( 7Bst li3e a pa82he23 does)H MO%E!N MONEY MECHANICS( page @( sa8s( G5hat the8 QEan3sR do when the8 ma3e loans is to a22ept p9omisso98 notes in eI2hange fo9 29edits to the Eo99owe9sK t9ansa2tion a22oBnts)H The neIt senten2e on the same page eIplains that the Ean3sK assets and liaEilities in29ease E8 the amoBnt of the loans) COMMENTA!Y AN% S"MMA!Y OF A! "MENT <-) 1laintiff appa9entl8 a22epted the %efendantsK Note and 29edit appli2ation ;mone8 of a22oBnt& in eI2hange fo9 its own 29edit ;also mone8 of a22oBnt& and deposited that 29edit into an a22oBnt with the %efendantsK names on the a22oBnt( as well as appa9entl8 issBing its own 29edit fo9 LA=(A*=)<@ to Mi2higan National 'an3 fo9 the a22oBnt of the %efendants) One 9easonaEl8 might a9gBe that the 1laintiff 9e2o9ded the Note o9 29edit appli2ation as a loan ;mone8 of a22oBnt& f9om the %efendants to the 1laintiff and that the 1laintiff then Ee2ame the Eo99owe9 of an eFBivalent amoBnt of mone8 of a22oBnt f9om the %efendants)

79" /he #laintiff in fact never lent any of its own pre:existing money, credit, or assets as consideration to purchase the Note or credit

agreement from the $efendants" ;!oEe9tson NotesD I add that when the Ean3
does the fo9going( then in that event( the9e is an Btte9 failure of consideration fo9 the Gloan 2ont9a2tH)& 5hen the 1laintiff deposited the %efendantsK L-**(*** of newl8 issBed 29edit into an a22oBnt( the 1laintiff 29eated f9om L+@*(*** to L-**(*** of new mone8 ;the nominal p9in2ipal amoBnt less Bp to ten pe92ent o9 L-*(*** of 9ese9ves that the Fede9al !ese9ve woBld 9eFBi9e against a demand deposit of this siCe&) The 1laintiff 9e2eived L-**(*** of 29edit o9 mone8 of a22oBnt f9om the %efendants as an asset) AA1 o9dina9il8 woBld 9eFBi9e that the 1laintiff 9e2o9d a liaEilit8 a22oBnt(

29editing the %efendantsK deposit a22oBnt( showing that the 1laintiff owes L-**(*** of mone8 to the %efendants( 7Bst as if the %efendants we9e to deposit 2ash o9 a pa89oll 2he23 into thei9 a22oBnt) <@) The following appea9s to Ee a dispBted fa2t in this 2ase aEoBt whi2h I have insBffi2ient info9mation on whi2h to fo9m a 2on2lBsionD I infe9 that it is alleged that 1laintiff 9efBsed to lend the %efendants 1laintiffKs own mone8 o9 assets and 9e2o9ded a L-**(*** loan f9om the %efendants to the 1laintiff( whi2h a9gBaEl8 was a L-**(*** deposit of mone8 of a22oBnt E8 the %efendants( and then when the 1laintiff 9epaid the %efendants E8 pa8ing its own 29edit ;mone8 of a22oBnt& in the amoBnt of L-**(*** to thi9d,pa9t8 selle9s of goods and se9vi2es fo9 the a22oBnt of %efendants( the %efendants we9e 9epaid thei9 loan to 1laintiff( and the t9ansa2tion was 2omplete) <.) I do not have sBffi2ient 3nowledge of the fa2ts in this 2ase to fo9m a 2on2lBsion on the following dispBted pointsD None of the following mate9ial fa2ts a9e dis2losed in the 29edit appli2ation o9 Note o9 we9e adve9tised E8 1laintiff to p9ove that the %efendants a9e the t9Be lende9s and the 1laintiff is the t9Be Eo99owe9) /he #laintiff

is trying to use the credit application form or the Note to persuade


and deceive the $efendants into believing that the opposite occurred and that the $efendants were the borrower and not the lender" The
following point is BndispBtedD The %efendantsK loan of thei9 29edit to 1laintiff( when issBed and paid f9om thei9 deposit o9 29edit a22oBnt at 1laintiff( Ee2ame mone8 in the Fede9al !ese9ve S8stem ;sBE7e2t to a 9edB2tion of Bp to ten pe92ent fo9 9ese9ve 9eFBi9ements& as the newl8 issBed 29edit was paid pB9sBant to w9itten o9de9s( in2lBding 2he23s and wi9e t9ansfe9s( to selle9s of goods and se9vi2es fo9 the a22oBnt of %efendants) CONC$"SION </) 'ased on the fo9egoing( 1laintiff is Bsing the %efendantKs Note fo9 its own pB9poses( and it 9emains to Ee p9oven whethe9 1laintiff has in2B99ed an8 finan2ial loss o9 a2tBal damages ;I do not have sBffi2ient info9mation to fo9m a 2on2lBsion on this point&) In an8 2ase( the in2lBsion of the GlawfBl mone8H langBage in the 9epa8ment 2laBse of the Note is 2onfBsing at Eest and in fa2t ma8 Ee misleading in the 2onteIt des29iEed aEove) AFFI!MATION <A) I he9eE8 affi9m that I p9epa9ed and have 9ead this Affidavit and that I Eelieve the fo9egoing statements in this Affidavit to Ee t9Be) I he9eE8 fB9the9 affi9m that the Easis of these Eeliefs is eithe9 m8 own di9e2t 3nowledge of the legal p9in2iples and histo9i2al fa2ts involved and with 9espe2t to whi2h I hold m8self oBt as an eIpe9t o9 statements made o9 do2Bments p9ovided to me E8 thi9d pa9ties whose ve9a2it8 I 9easonaEl8 assBmed) FB9the9 the Affiant sa8eth naBght) At Chag9in Falls( Ohio


%e2emEe9 =( ?**+

::::::::::::::::::::::::::::::::::::: 5A$#E! F) TO%% ;Ohio Ea9 no) **@-=+A& EIpe9t witness fo9 the %efendants 5al3e9 F) Todd( Atto9ne8 at $aw <<@- Shee9E9oo3 %9ive Chag9in Falls( Ohio --*?? ;--*& ++/,<<@A( faI ;--*& ++/,<=+. e,mailD westoddSadelphia)net N*/A.56) &(.I+I'A/I*N


At Chag9in Falls( Ohio %e2emEe9 =( ?**+ On this da8 pe9sonall8 2ame Eefo9e me the aEove,named Affiant( who p9oved his identit8 to me to m8 satisfa2tion( and he a23nowledged his signatB9e on this Affidavit in m8 p9esen2e and stated that he did so with fBll Bnde9standing that he was sBE7e2t to the penalties of pe97B98) ::::::::::::::::::::::::::::::::::::: Nota98 1BEli2 of the State of Ohio