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The modern world of human affairs would grind to an immediate halt if the fundamental truths and underlying facts in any matter or transaction could not be established or asserted—a bill, an oath, a ledgering or bookkeeping, a statement of facts, are the life blood of the legal and commercial world. These and more are all examples of the Affidavit. The affidavit, when properly used, especially when leveraged by your standing as a secured party, is the most powerful instrument available in protecting, defending, and asserting your sovereignty. For this reason, it is incumbent upon you to become practiced in its use and in your ability to recognize its many forms.
AFFIDAVITS BACK ALL ADHESION CONTRACTS
f you are unable to recognize when affidavits are being solicited, you may be the unwitting dupe of another parties! attempt to create a binding contract. "y the signature of your own hand, or before you became of legal age, the signature of your parent or other authority such as a physician, have been signing you into bondage since you were born. #ertificate of $ive "irth, application for a driver!s license, and %& form '()(, a voter*s registration, and every single document that the system desires others to be bound or obligated by, is, or re+uires, an affidavit. ,hen signed, they represent an oath, or #ommercial Affidavit, executed under penalty of per-ury, .true, #orrect, and complete.. Affidavits may also occur in a court setting where testimony /oral0 is stated in -udicial terms by being sworn to be .the truth, the whole truth, and nothing but the truth, so help me 1od.. n chapter 2 we will explore some strategies that you can use to avoid this solicitation to contract.
MAXIMS OF THE AFFIDAVIT
"efore we get into the structure, form, and re+uirements of the formal affidavit, with examples, let!s develop a deeper comprehension and understanding of the purpose, and important maxims that govern their use. '. First and foremost, in commerce, truth is sovereign—and the &overeign tells only the truth. Your word is your bond. f truth were not sovereign in commerce, i.e., all human action and inter3relations, there would be no basis for anything. 4o basis for law and order, no accountability, there would be no standards, no capacity to resolve anything. t would mean .anything goes., .each man for himself, and .nothing matters.. That!s worse than the law of the -ungle. .To lie is to go against the mind.. 5riental proverb6 .5f all that is good, sublimity is supreme..
7. n commerce for any matter to be resolved, it must first be expressed. 4o one is a mind reader. 8ou have to put your position out there—you have to state what the issue is in order to have something to talk about and resolve. A person must put himself on the line and assume a position, take a stand, as regards the matter at hand. 5ne who is not damaged, put at risk, or willing to swear an oath on his commercial liability for the truth of his statements and legitimacy of his actions, has no basis to assert claims or charges and forfeits all credibility and right. $egal 9axim6 .:e who fails to assert his rights has none.. ;. He who leaves the battlefield first, looses by default. This means that an affidavit which is un3rebutted point for point stands as .truth in commerce. because it hasn!t been rebutted and has left the battlefield. 1overnments allegedly exist to resolve disputes, conflicts and truth. 1overnments allegedly exist to be substitutes for the dueling field and the battlefield for disputes. #onflicts of affidavits of truth are resolved peaceably, reasonably, instead of by violence. &o people can take their disputes into court and have them all opened up and resolved, instead of going out and marching ten paces and turning to kill or in-ure. $egal 9axim6 .:e who does not repel a wrong when he can, occasions it.. ). An un-rebutted affidavit stands as truth in commerce. #laims made in your affidavit if not rebutted, emerge as the truth of the matter. $egal 9axim6 .:e who does not deny, admits.. 2. An un-rebutted affidavit becomes the judgment in commerce. There is nothing left to resolve. Any proceeding in a court, tribunal, or arbitration forum consists of a contest, or duel, of commercial affidavits wherein the points remaining un3rebutted in the end stand as truth and matters to which the -udgment of the law is applied. <. A lien or claim can be satisfied only though a point by point rebuttal of an affidavit, resolution by -ury, or payment. 4o court or -udge can overturn or disregard or abrogate somebody!s affidavit. The only one who has any capacity or right or responsibility or knowledge to rebut your affidavit, is the one who is adversely affected by it. =ust as no one can know what your truth is, it!s the affected parties responsibility and obligation to issue their own affidavit and to speak on their own behalf.
COMMERCIAL LAW IS PRE-JUDICIAL
Another important concept to understand as a sovereign, if you should go before the court, because it establishes the basis for keeping your matter in the private, is that #ommercial $aw is non3-udicial, in fact, pre3-udicial /not pre-udice0. t is the only
foundation by which government or any court system can possibly exist or function. All that courts are ultimately ad-udicating and making rules about, are the fundamental precepts of #ommercial $aw. 4ow to get an idea of all the fun that you!ve been missing out on by hot knowing about affidavits, not even knowing that you could A&> F5% 54?, here is an example of how to leverage your knowledge of #ommercial $aw and the power of the affidavit. n commerce there are two phases@ assessment, and collection. The Assessment aspect, is about determining who owes who, what, why, how much, and for what reason. The collection aspect is based in nternational commerce that has existed for more than <((( years. t is based on =ewish $aw and the =ewish grace period, which is in units of three@ three days, three weeks and three months. This is why you get A( day letters from the %&. %emember, commercial processes are non3-udicial. They are summary processes /short, concise3without a -ury0.
THE POWER OF THE AFFIDAVIT
4ow, the %& creates the most activity of #ommercial #ollection in the entire world. The collection process is relatively valid, although the %& is not registered to do business in any state. Bid you understand what you -ust readC The %& is 45T %?1 &T?%?B T5 B5 "D& 4?&& 5% E?%F5%9 #599?%# A$ 9ATT?%& 4 A48 &TAT?. &o how do they get all the money they getC A4&,?%6 because you give it to them without re+uesting a proof of claim from them or even if they were .licensed. to give you offers based on .arbitrary. estimations. :owever, this is where things get very interesting. %emember the assessment phaseC T:?%? & 45 FA$ B A&&?&&9?4T. The %& has, and never can, and never will, and never could, ?F?% issue a valid assessment lien or levy. t!s not possible. First of all, in order for them to do that there would have to be paperwork, a Trite ill in #ommerce. There would have to be sworn Affidavits by someone that this is a true, correct and complete and not meant to deceive, which, in commerce is, essentially .the truth, the whole truth and nothing but the truth. when. 4ow, nobody in the %& is going to take commercial liability for exposing themselves to a lie, and have a chance for people to come back at them with a True "ill in #ommerce, a true accounting. This means they would have to set forth the contract, the foundational instrument with your signature on it, in which you are in default, and a list of all the wonderful
goods and services for which you owe them money@ or a statement of all the damages that you have caused them, for which you owe them. To my knowledge, no one has ever received goods or service from the %& for which they owe money. personally don!t know of anyone that has damaged anybody in the %& that gives them the right to come after us and say that .you owe us money because you damaged me.. The assessment phase in the %& is non3existent, it is a complete fraud.
This is why these rules of #ommercial $aw come to our rescue. T. &. ?liot wrote a wonderful little phrase in one of his poems6 .,e shall not cease from exploration, and the result of all our exploring will be to arrive at the place at which we began and know it for the first time.. This is the beginning, and this is the end. This closes the circle on the process. 5ne reason why the super rich bankers and the super rich people in the world have been able to literally steal the world and sub-ugate it, and plunder it, and bankrupt it and make chattel property out of most of us is because they know and use the rules of #ommercial $aw and we don!t. "ecause we don!t know the rules, nor use them, we don!t know what the game is. ,e don!t know what to do. ,e don!t know how to invoke our rights, remedies and recourses. ,e get lost in doing everything under the sun except the one and only thing that is the solution. 4o one is going to explain to you what and how all this is happening to you. That is never going to happen. These powers3that3be have riot divulged the rules of the game. They can and do get away with complete fraud and steal everything because no one knows what to do about it.
,hat #A4 you do about itC 85D #A4 &&D? A #599?%# A$ AFF BAF T. 8ou don!t have to title it that, but that!s what it is. 8ou can assert, in your affidavit, . have never been presented with any sworn affidavits that would provide validity to your assessment. t is my best and considered -udgment that no such paperwork or affidavit exists.. At the end of this document, you put demands on them. They must be implicit and then you state, .&hould you consider my position in error .... 8ou know what they have to do now, don!t youC They must come back with an affidavit which rebuts your affidavit point for point, which means they have to provide the paper
work with the real assessment, the true bill in commerce, the real sworn affidavits that would make their assessment or claims against you valid. 4o agent or attorney of a fictitious entity can sign an affidavit for the corporation. :ow can they swear as fact that the corporation has done or not done A48T: 41C They do not have the standing. They cannot and never will provide you with this. This means your affidavit stands as truth in commerce. Note: An even more streamlined and sophisticated approach in dealing with the %& is to send them a package with a letter and an %& power of attorney re+uesting a determination of your tax status. This is more powerful because you have completely drawn them into your power. 4ow they have two choices, sign the papers you have given them permission to prepare on your behalf, D4B?% E?4A$T8 5F E?%=D%8, or give you a determination. This approach puts you out of the business of having to !prove that your not a taxpayer! by offering them the opportunity to admit this themselves. 5r they can fill out their own death warrant. ,hich do you think they will chooseC
n its formal expression, an affidavit is a statement of facts that chronicle the events of a particular commercial or legal matter, reduced to writing, and sworn to or affirmed before a person legally authorized to administer an oath or affirmation such as a notary. The person making the statement is technically known as the affiant or deponent. The affidavit usually contains statements that you can attest to, based on your experience, and may also contain statements based on the observations of others if you indicate this by adding that the information is based on your !information and belief. 8ou may sometimes see affidavits titled and referred to as .Affidavits of Truth. or .Affidavits of Facts.. This is informal and redundant—all affidavits are about truth and facts. :ere are some formal definitions and types of affidavits and the definition for declaration since this is used in the definition for affidavit from "lacks $aw <th ?dition6 1. Aff !"# t. A written or printed declaration or statement of facts, made voluntarily, and confirmed by the oath or affirmation of the party making it, taken before a person having authority to administer such oath or affirmation. $. Aff !"# t of !efe%&e. An affidavit stating that the defendant has a good defense to the plaintiff*s action on the merits@ e.g. affidavit filed with motion for summary -udgment.
'. Aff !"# t of %() *+. "y court rule in certain states!, substituted service of process may be had on absent defendants if it appears by affidavit of plaintiff s attorney, or other person having knowledge of the facts, that defendant cannot after diligent in+uiry, be served within the state. ,. Aff !"# t of -e* t&. 5ne setting forth that the defendant has a meritorious defense /substantial and not technical0 and stating the facts constituting the same. &ee affidavit of defense. .. Aff !"# t of %ot /e. A sworn statement that affiant has given proper notice of hearing to other parties to action. 0. Aff !"# t of &e*# /e. An affidavit intended to certify the service of a writ, notice,
summons, or other document or process. n federal courts, if service is made by a person other than a Dnited &tates 9arshall or his deputy, he shall make affidavit thereof. 1. Aff !"# t to 2o3! to 4" 3. An affidavit re+uired in many cases before the defendant in a civil action may be arrested. &uch an affidavit must contain a statement, clearly and certainly expressed, by someone ac+uainted with the fact, of an indebtedness from the defendant to the plaintiff, and must show a distinct cause of action.
5. De/3"*"t o%. A common3law pleading, the first of the pleadings on the part of the plaintiff in an action at law, being a formal and methodical specification of the facts and circumstances constituting his cause or action. t commonly comprises several sections or divisions, called .counts., and its formal parts follow each other in this general order6 Title, venue, commencement, cause of action, counts, conclusion. The declaration at common law, answers to the .libel. in ecclesiastical and admiralty law, the .bill. in e+uity, the .petition. in civil law, the .complaint. in code and rule pleading, and the .count. in real actions. The term .complaint! is used in the federal courts and in all states that have adopted %ules of #ivil Erocedure.
ELEMENTS 6 FORMATS
There are two forms of the affidavit, court brief format and letter. f your matter is private, use the letter format. The court brief format re+uires a case number and must be in the standard legal form. f you write an affidavit in a private matter which then ends up in the courts, you could rewrite it in legal format@ however, it is not necessary since you can submit the affidavit in letter form as an exhibit. . 5n the facing page is an example of the court brief form of a generic affidavit. 8ou can use it as a template for creating your own. The re+uired elements in order are the Title, Fenue, notice, introduction, statements of fact, date and signature block, and the notary block for notary information and seal.
The following Affidavit is "are &le format6
AFF BAF T
5%?154 &TAT? 0 &cilicet. #ounty of =ackson 0 0
. ndeed, no more than /affidavits0 are necessary to make the prima facie case.. Dnited &tates v. >is, <2G F.7nd, 27<, 2;< /Hth #ir. 'AG'0@ #ert Benied, 2( D.&. $.,. 7'<A@ &. #t. 9arch 77, 'AG7 That , IIIIIIIIIIIII, a living breathing man /or woman0, being first duly sworn, depose and say and declare by my signature that the following facts are true to the best of my knowledge and belief. T:AT, on T:AT, T:AT Further Affiant &ayeth 4ot. Bone this IIIday of February 7(() A.B. 8our name J Affiant
ACKNOWLED7EMENT &D"#% "?B T5 A4B &,5%4 before me this IIIday of IIIIIIIIIIII, A.B. 7((<, a 4otary, thatIIIIIIIIIIIIIII, personally appeared and known to me to be the man whose name subscribed to the within instrument and acknowledged to be the same. IIIIIIIIIIIIIIIIIIIIIIII &eal@ 4otary Eublic in and for said &tate 9y #ommission expires@ IIIIII
45T?@ f you are going to use an affidavit in support of a critical point that others have experience on, we suggest that you ask those individuals come forward and provide their own affidavit in support of your case. The weight of '( or 7( affidavits as compared with -ust a few, delivered with all the legal force possible, is hard to overlook or dismiss.
AFF BAF T 5F T%DT:
PENNS8LVAINA &TAT? 0
0 &cilicet #ounty of P2 3"!e392 "
. ndeed, no more than /affidavits0 is necessary to make the prima facie case.. Dnited &tates v. >is, <2G F.7nd, 27<, 2;< /Hth #ir. 'AG'0@ #ert Benied, 2( D.&. $,. 7'<A@ &. #t. 9arch 77, 'AG7 That , Be%;"- % F*ee!o- F*"%<3 %= a living breathing man, being first duly sworn, depose and say and declare by my signature that the following facts are true, correct and complete to the best of my knowledge and belief. T:AT, the Affiant is a flesh and blood man, and is sovereign in a collective capacity with other sovereigns. T:AT, the Affiant!s rights ....existed by the law of the land long antecedent to the organization of the &tate.. /:ale v. :enkel, 7(' D.&. );0 T:AT, the Affiant!s rights exist even in light of the D.&.3"ankruptcy aka The 4ational ?mergency and that includes the right of redemption. T:AT, under Article , &ection of the 5regon #onstitution, .the people have all power. and the Affiant as one of the people that can exercise any power. T:AT, Affiant is !of the people! and is above the corporate government called !&tate of 5regon! K &TAT? 5F 5%?154, operating in a de3facto bankrupt capacityKstatus. T:AT, Affiant filed a D## Financing &tatement /D##3'0 in Pe%%&+3#"% " &tate, D## Filing 4umber H''73G<73)'7A32 on O/to4e* 1>= $>>,= to perfect a security interest to initiate redemption as a matter of right. T:AT, the Affiant is the &ecured Earty creditor and authorized representative of the corporate fiction3 entity K Bebtor /?ns legis0 identified as BENJAMIN FREEDOM FRANKLIN under necessity. T:AT, Affiant caused to be filed, a &uperior &ecurity nterest and $ien upon the property of the Bebtor and in the Bebtor!s name filed first in line and first in time, over and above the &tate of 5regon and that all property is exempt from levy. T:AT, the &tate of 5regon cannot show nor provide a superior interest in the said property as identified upon the &ecurity Agreement held by the Affiant, /see for reference@ ,ynhammer v. Eeople, 48 ;HG0.
T:AT, the AffiantK&ecured Earty is flesh and blood and the corporate fictionKBebtorK?ns legis as appearing upon any D## filing is !artificial! and was created in the contemplation of law /commerce0 A4B T:? T,5 A%? 45T T:? &A9?, F5% 54? & %?A$, T:? 5T:?% & F #T 54. T:AT, any discrimination or in-ury caused by the &tate of 5regon to recognize the two distinct entities, the one real and the other artificial agrees to such in-uries and to the associated damages as established by the Affiant and the &tate, by and through it!s agents by said agreement, is estopped from defense or rebuttal in the matter and agrees that the Affiant may proceed by Tort for damages.
T:AT, this Affidavit if not rebutted point for point by any man, representing the &tate of 5regon at any level, in any matter, at any time within H days upon receipt, these facts stand as true in the both the private and public record... as true. 45T?6 9axim of $aw6 '. n #ommerce 3 Truth is sovereign. 76 For a matter to be resolved, it must be expressed. Eoint of $aw 3 &ilence e+uates to agreement. Further Affiant &ayeth 4ot. @ Bone this )th day of =uly 7((< A.B.
.,ithout Ere-udice. Authorized %epresentative, Attorney3ln3Fact
Be%;"- % F. F*"%<3 % fo* BENJAMIN FREEDOM FRANKLIN ?/o9+* @2t:= ?4& $?1 &
&D"#% "?B T5 A4B &,5%4 before me this )th day of =uly, A.B. 7((<, a 4otary, that Be%;"- % F*ee!o- F*"%<3 %= personally appeared and known to me to be the man whose name subscribed to the within instrument and acknowledged to be the same.
4otary Eublic in and for said &tate 9y #ommission expires@ III &eal
T2e fo33oA %@ Aff !"# t & )&e! "fte* Co%! t o%"3 A//e9t"%/e fo* V"3)e fo* P*oof of C3" -: #ertified 9ail 4umber =ohn :enry Boe cKo <GG( &. "roadway Tucson, Arizona G2H)< &ecured Earty Ban the 9an dba $oan %esolution &pecialist
'<<2 Ealm "each $akes "lvd. ,est Ealm "each, F$ ;;)(' %espondent %?6 Account LI #ontract LII
AFFIDAVIT OF NOTICE OF DEFAULT
&tate of0 0 &cilicet #ounty 0
45T #? T5 A1?4T & 45T #? T5 E% 4# EA$ 45T #? T5 E% 4# EA$ & 45T #? T5 A1?4T , IIIIIIIIIIIIIII, herein !Affiant,. having been duly sworn, declares that by affidavit that of the non3response of the %espondentsKparties to the contract entitled, #54B T 54A$ A##?ETA4#? F5% FA$D? F5% E%55F 5F #$A 9 /#AFF0, hereinafter, are in full agreement regarding the following6 3
'. T:AT Affiant is competent to state the matters included in hisKher declaration, has knowledge of the facts, and declared that to the best of hisKher knowledge, the statements made in hisKher affidavit are true, correct, and not meant to mislead@ 7. T:AT Affiant is the secured party, superior claimant, holder in due course, and principal creditor having a registered priority lien hold interest to all property held in the name of the Bebtor@ =5:4 :?4%8 B5?, evidenced by D##3 Financing &tatement LIIIIIIIIIII filed with the &ecretary of &tate of the &tate of IIIIIIIIIII. ;. T:AT %espondent, Ban the 9an, is herein addressed in his private capacity, but in his public capacity as ! *e/to*= "@e%t= 7o#e*%o*=... o* ..." / t Be% "%! *e& !e%t of t2e St"te of CCCCCCCCCC "%! & 9"*t / 9"t %@ % " /o--e*/ "3 enterprise with his co3business partners /or employees0, including but not limited to St"te= Co*9o*"t o%= SH8STER BANK= et/.= hereinafter collectively referred to as .%espondent.@ ). T:AT the governing law of this private contract is the agreement of the parties supported by the $aw 9erchant and applicable maxims of law@ 2. T:AT Affiant at no time has willingly, knowingly, intentionally, or voluntarily agreed to subordinate their position as creditor, through signature, or words, actions, or inaction!s@ <. T:AT Affiant at no time has re+uested or accepted extraordinary benefits or privileges from the %espondent, the Dnited &tates, or any subdivision thereof@ H. T:AT Affiant is not a party to a valid contract with %espondent that re+uires Affiant to perform in any manner, including but not limited to the payment of money to %espondent@ G. T:AT on Se9te-4e* $$= $>>$= Affiant sent a #54B T 54A$ A##?ETA4#? F5% FA$D? F5% E%55F 5F #$A 9 /document for discovery0 to the %espondent re+uesting proof of claim as to the 3o"% /o%t*"/t DCCCCCCC= ?o* A2"te#e* t2e 9)*9o&e A"& of t2e CAFV: in regards to proof of A2"t A"& 3o"%e!= 4"%< -o%e+ o* 4"%< /*e! t ?o* A2"te#e*:= and other various proofs of claim to support a valid lawful contract. A. T:AT %espondent had 1> ?o* 1 o* ' !e9e%! %@ )9o% / */)-&t"%/e& "%! t -eE: days to respond with proof of claim, point for point, however elected to remain silent or otherwise refused to provide said proof of claim/s0 and therefore has failed to state a claim upon which relief can be granted and has agreed and stipulated to the facts and agreed that the undersigned &ecured Earty can only discharge said debt via the remedy provided by #ongress via :=%3'A7 with "ill of ?xchange or other appropriate commercial paper.
'(. T:AT %espondent has dishonored Affiant!s #AFF by not providing Eroof of #laim/s0 in respect to t2e * Lo"% Co%t*"/t= et/. This dishonor in now deemed a charge against the %espondent. Further Affiant sayeth not.
Bated this IIII day of IIIIIIIIIIIIII, 7((<.
8our 4ame :ere, Affiant
&D"&#% "?B A4B &,A5%4 T5 before me@ a 4otary Eublic for said #ounty and &tate, do hereby certify that on this III day of IIIIIIIIIIII 7((< the above mentioned appeared before me and executed the foregoing. ,itness my hand and seal6 IIIIIIIIIIIIIIIIIIIIII &eal@ 4otary Eublic 9y #ommission expires. NOTEF A& +o) 2"#e 3e"*%e!= -"<e "!;)&t-e%t& "& to +o)* G& @%"t)*eG 43o/<?&: o% "33 +o)* !o/)-e%t&... A2e*e +o) & @%= .e.: W t2o)t P*e;)! /e A)t2o* Be! Re9*e&e%t"t #e- Atto*%e+-3%-F"/t ...8o)* %"-e 2e*e...= Se/)*e! P"*t+= % 4e2"3f of DEBTOR NAME HEREH= E%& 3e@ &
T2e fo33oA %@ "ff !"# t & "% EXCEPTIONAL "ff !"# t "& to t& /o%te%t= "%! t & %/3)!e! 2e*e fo* +o)* e! f /"t o%: STATE OF MICHI7AN IN THE CIRCUIT COURT FOR THE COUNT8 OF OAKLAND
"A4> 54?, 4.A., Elaintiff, v. #ase 4o. (;3()H))G3#M :on. ?.. &osnick
AFF BAF T 5F ,A$>?% F. T5BB, ?NE?%T , T4?&& F5% B?F?4BA4T& :A%&:AFA%B:A4 BAF? and E%AT 9A BAF?, -ointly and, severally,
Befendants. :arshavardhan Bave and Eratima :. Bave #Ko 2'7G ?cho %oad "loomfield :ills, 9l )G;(7 Befendants, in propria persona 9ichael #. :ammer /E)'H(20 %yan 5. $awlor /E<)<A;0 Bickinson ,right E$$# Attorneys for "ank 5ne, 4.A. 2(( ,oodward Avenue, &uite )((( Betroit, 9ichigan )G77< /;';077;3;2((IIIIIIIIIII 4ow comes the Affiant, ,alker F. Todd, a citizen of the Dnited &tates and the &tate of 5hio over the age of 7' years, and declares as follows, under penalty of per-ury6 '. That am familiar with the Eromissory 4ote and Bisbursement %e+uest and Authorization, dated 4ovember 7;, 'AAA, together sometimes referred to in other documents filed by Befendants in this case as the .alleged agreement. between Befendants and Elaintiff but called the .4ote. in this Affidavit. f called as a witness, would testify as stated herein. make this Affidavit based on my own personal
knowledge of the legal, economic, and historical principles stated herein, except that have relied entirely on documents provided to me, including the 4ote, regarding certain facts at issue in this case of which previously had no direct and personal knowledge. am making this affidavit based on my experience and expertise as an attorney, economist, research writer, and teacher. am competent to make the following statements.
E%5F?&& 54A$ "A#>1%5D4B ODA$ F #AT 54&
7. 9y +ualifications as an expert witness in monetary and banking instruments are as follows. For 7( years, worked as an attorney and legal officer for the legal departments of the Federal %eserve "anks of 4ew 8ork and #leveland. Among other things, was assigned responsibility for +uestions involving both novel and routine notes, bonds, bankers! acceptances, securities, and other financial instruments in connection with my work for the %eserve "ank*s discount windows and parts of the open market trading desk function in 4ew 8ork. n addition, for nine years, worked as an economic research officer at the Federal %eserve "ank of #leveland. became one of the Federal %eserve &ystem!s recognized experts on the legal history of central banking and the pledging of notes, bonds, and other financial instruments at the discount window to enable the Federal %eserve to make advances of credit that became or could become money. also have read extensively treatises on the legal and financial history of money and banking and have published several articles covering all of the sub-ects -ust mentioned. have served as an expert witness in several trials involving banking practices and monetary instruments. A summary biographical sketch and resume including further details of my work experience, readings, publications, and education will be tendered to Befendants and may be made available to the #ourt and to Elaintiffs counsel upon re+uest.
1?4?%A$$8 A##?ET?B A##5D4T 41 E% 4# E$?& ;. "anks are re+uired to adhere to 1enerally Accepted Accounting Erinciples /1AAE0. 1AAE follows an accounting convention that lies at the heart of the double3entry bookkeeping system called the 9atching Erinciple. This principle works as follows6 ,hen a bank accepts bullion, coin, currency, checks, drafts, promissory notes, or any other similar instruments /hereinafter .instruments.0 from customers and deposits or records the instruments as assets, it must record offsetting liabilities that match the assets that it accepted from customers. The liabilities represent the amounts that the bank owes the customers, funds accepted from customers. n a fractional reserve banking system like the Dnited &tates banking system, most of the funds advanced to borrowers /assets of the banks0 "*e /*e"te! 4+ t2e 4"%<& t2e-&e3#e& and are not merely transferred from one set of depositors to another set of borrowers.
%?$?FA4#? 5F &D"T$? B &T 4#T 54& A"5DT T8E?& 5F 954?8
). From my study of historical and economic writings on the sub-ect, conclude that a common misconception about the nature of money unfortunately has been perpetuated in the D.&. monetary and banking systems, especially since the 'A;(s. n classical economic theory, once economic exchange has moved beyond the barter stage, there are two types of money6 money of exchange and money of account! For nearly ;(( years in both ?urope and the Dnited &tates, confusion about the distinctiveness of these two concepts has led to persistent attempts to treat money of account as the e+uivalent of money of exchange. n reality, especially in a fractional reserve banking system, a comparatively small amount of money of exchange /e.g., gold, silver, and official currency notes0 may support a vastly larger +uantity of business transactions denominated in money of account. The sum of these transactions is the sum of credit extensions in the economy. ,ith the exception of customary stores of value like gold and silver, the monetary base of the economy largely consists of credit instruments. A@" %&t t2 & 4"/<@*o)%!= I /o%/3)!e t2"t t2e Note= !e&9 te &o-e 3"%@)"@e "4o)t I3"Af)3 -o%e+I eJ93" %e! 4e3oA= /3e"*3+ /o%te-93"te& 4ot2 ! &4)*&e-e%t of f)%!& "%! e#e%t)"3 *e9"+-e%t o* &ett3e-e%t % -o%e+ of
"//o)%t ?t2"t &. -o%e+ of eJ/2"%@e Ao)3! 4e Ae3/o-e 4)t & %ot *e() *e! to *e9"+ o* &ett3e t2e Note:. The factual basis of this conclusion is the reference in the Bisbursement %e+uest and Authorization to repayment of PA2,A(2.'< to 9ichigan 4ational "ank from the proceeds of the 4ote. That was an exchange of the credit of "ank 5ne /Elaintiff0 for credit apparently and previously extended to Befendants by 9ichigan 4ational "ank. Also, there is no reason to believe that Elaintiff would refuse a substitution of the credit of another bank or banker as complete payment of the Befendants! repayment obligation under the 4ote. This is a case about exchanges of money of account /credit0, not about exchanges of money of exchange /lawful money or even legal tender0. 2. ronically, the 4ote explicitly refers to repayment in .lawful money of the Dnited &tates of America. /see .Eromise to Eay. clause0. Traditionally and legally, #ongress defines the phrase .lawful money. for the Dnited &tates. $awful money was the form of money of exchange that the federal government /or any state0 could be re+uired by statute to receive in payment of taxes or other debts. Traditionally, as defined by #ongress, lawful money only included gold, silver, and currency notes redeemable for gold or silver on demand. n a banking law context, lawful money was only those forms of money of exchange /the forms -ust mentioned, plus D.&. bonds and notes redeemable for gold0 that constituted the reserves of a national bank prior to 'A'; /date of creation of the Federal %eserve "anks0. &ee, $awful 9oney, "ebster#s $ew %nternational &ictionary /7d ed. 'A2(0. I% 3 @2t of t2e&e f"/t&= I /o%/3)!e t2"t P3" %t ff "%! Defe%!"%t& eJ/2"%@e! *e/ 9*o/"3 /*e! t& I%#o3# %@ -o%e+ of "//o)%t "%! %ot -o%e+ of eJ/2"%@e: %o 3"Af)3 -o%e+ A"& o* 9*o4"43+ e#e* Ao)3! 4e ! &4)*&e! 4+ e t2e* & !e % t2e /o#e*e! t*"%&"/t o%&. This conclusion also is consistent with the bookkeeping entries that underlie the loan account in dispute in the present case. 9oreover, it is puzzling why Elaintiff would retain the archaic language, .lawful money of the Dnited &tates of America,. in its otherwise modern3seeming 4ote. t is possible that this language is merely a legacy from the pre3'A;; era. 9odern credit agreements might include repayment language such as, .The repayment obligation under this agreement shall continue until payment is received in fully and finally collected funds,' which avoids the entire +uestion of . n what form of money o* /*e! t is the repayment obligation dueC. <. (egal tender, a related concept but one that is economically inferior to lawful money because it allows payment in instruments that cannot be redeemed for gold or silver on demand, has been the form of money of exchange commonly used in the Dnited &tates since 'A;;, when domestic private gold transactions were suspended /until 'AH)0.. "asically, legal tender is whatever the government says that it is. The most common form of legal tender today is Federal %eserve notes, which by law cannot be redeemed for gold since 'A;) or, since 'A<), for silver. &ee, ;' D.&.#. &ections 2'(;, 2''G /b0, and 2''A /a0. 4ote6 +uestion the statement that fed reserve notes cannot be redeemed for silver since 'A<). t was =ohnson who declared on '2 9arcy 'A<H that after '2 =une 'A<H that Fed %es 4otes would not be exchanged for silver and the practice did stop on '2 =une 'A<H 3 not 'A<). believe this to be error in the text of the author!s affidavit. ). (egal tender under the *niform +ommercial +ode ,*.+.+.-, &ection '37(' /7)0 /5fficial #omment0, is a concept that sometimes surfaces in cases of this nature. The referenced 5fficial #omment notes that the definition of money is not limited to legal tender under the D.#.#. .oney is defined in &ection '37(' /7)0 as .a medium of exchange authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations.. The relevant 5fficial #omment states that .The test adopted is that of sanction of government, whether by authorization before issue or adoption afterward, which recognizes the circulating medium as a part of the official currency of that government. The narrow view that money is limited to legal tender is re-ected.. Thus, conclude that the D.#.#. tends to validate the classical theoretical view of money.
:5, "A4>& "?1A4 T5 $?4B T:? % 5,4 #%?B T 4&T?AB 5F %?A$ 954?8 G. n my opinion, the best sources of information on the origins and use of credit as money are in Alfred 9arshall, 954?8, #%?B T Q #599?%#? 7)A372' /'A7A0 and #harles E. >indleberger, A F 4A4# A$ : &T5%8 5F ,?&T?%4 ?D%5E? 2(32; /'AG)0. A synthesis of these sources, as applied to the facts of the present case, is as follows6 As commercial banks and discount houses /private bankers0 became established in parts of ?urope /especially 1reat "ritain0 and 4orth America, by the mid3 nineteenth century they commonly made loans to borrowers by extending their own credit to the borrowers or, at the borrowers! direction, to third parties. The typical form of such extensions of credit was drafts or bills of exchange drawn upon themselves /claims on the credit of the drawees0 instead of disbursements of bullion, coin, or other forms of money. n transactions with third parties, these drafts and bills came to serve most of the ordinary functions of money. The third parties had to determine for themselves whether such .credit money. had value and, if so, how much. The Federal %eserve Act of 'A'; was drafted with this model of the commercial economy in mind and provided at least two mechanisms /the discount window and the open3market trading desk0 by which certain types of bankers! credits could be exchanged for Federal %eserve credits, which in turn could be withdrawn in lawful money. #redit at the Federal %eserve eventually became the principal form of monetary reserves of the commercial banking system, especially after the suspension of domestic transactions in gold in 'A;;. Thus, credit money is not alien to the current official monetary system@ it is -ust rarely used as a device for the creation of Federal %eserve credit that, in turn, in the form of either Federal %eserve notes or banks! deposits at Federal %eserve "anks, functions as money in the current monetary system. n fact, a means by which the Federal %eserve expands the money supply, loosely defined, %s to set banks! reserve re+uirements /currently, usually ten percent of demand liabilities0 at levels that would encourage banks to extend new credit to borrowers on their own books that third parties would have to present to the same banks for redemption, thus leading to an expansion of bank3created credit money. n the modern economy, many non3bank providers of credit also extend book credit to their customers without previously setting aside an e+uivalent amount of monetary reserves /credit card line of credit access checks issued by non3banks are a good example of this type of credit0, which also causes an expansion of the aggregate +uantity of credit money. The discussion of money taken from Federal %eserve and other modern sources in paragraphs '' et se+. is consistent with the account of the origins of the use of bank credit as money in this paragraph.
ADVANCES OF BANK CREDIT AS THE EKUIVALENT OF MONE8
A. Elaintiff apparently asserts that the Befendants signed a promise to pay, such as a note/s0 or credit application /collectively, the .4ote.0, in exchange for the Elaintiffs advance of funds, credit, or some type of money to or on behalf of Befendant. :owever, the bookkeeping entries re+uired by application of 1AAE and the Federal %eserve!s own writings should trigger close scrutiny of Elaintiffs apparent assertions that it lent its funds, credit, or money to or on behalf of Befendants, thereby causing them to owe the Elaintiff P)((,(((. According to the bookkeeping entries shown or otherwise described to me and application of 1AAE, the Befendants allegedly were to tender some form of money /.lawful money of the Dnited &tates of America. is the type of money explicitly called for in the 4ote0, securities or other capital e+uivalent to money, funds, credit, or something else of value in exchange /money of exchange, loosely defined0, collectively referred to herein as .money,. to repay what the Elaintiff claims was the money lent to the Befendants. It & %ot "% )%*e"&o%"43e "*@)-e%t to &t"te t2"t P3" %t ff "99"*e%t3+ /2"%@e! t2e e/o%o- / &)4&t"%/e of t2e t*"%&"/t o% f*o- t2"t /o%te-93"te! % t2e /*e! t "993 /"t o% fo*-= "@*ee-e%t= %ote?&:= o* ot2e* & - 3"* %&t*)-e%t?&: t2"t t2e Defe%!"%t& eJe/)te!= t2e*e4+ /2"%@ %@ t2e /o&t& "%! * &<& to t2e Defe%!"%t&. At most, the Elaintiff extended its own credit /money of account0, but the Befendants were re+uired to repay in money /money of exchange, and lawful money
at that0, A2 /2 /*e"te& "t 3e"&t t2e %fe*e%/e of %e()"3 t+ of o43 @"t o%& on the two sides of the transaction ,money, including lawful money, is to be exchanged for ban/ credit-.
95B?%4 ADT:5% T ?& 54 954?8
'(. To understand what occurred between Elaintiff and Befendants concerning the alleged loan of money or, more accurately, credit, it is helpful to review a modern Federal %eserve description of a bank!s lending process. &ee, Bavid :. Friedman, 954?8 A4B "A4> 41 /)th ed. 'AG)0/apparently already introduced into this case06 .The commercial bank lending process is similar to that of a thrift in that the receipt of cash from depositors increases both its assets and its deposit liabilities, which enables it to make additional loans and investments. . . . ,hen a commercial bank makes a business loan, it accepts as an asset the borrower!s debt obligation /the promise to repay0 and creates a liability on its books in the form of a demand deposit in the amount of the loan.. /#onsumer loans are funded similarly.0 Therefore, the bank!s original bookkeeping entry should show an increase in the amount of the asset credited on the asset side of its books and a corresponding increase e+ual to the value of the asset on the liability side of its books. T2 & Ao)3! &2oA t2"t t2e 4"%< *e/e #e! t2e /)&to-e*G& & @%e! 9*o- &e to *e9"+ "& "% asset, t2)& monetizing t2e /)&to-e*G& & @%"t)*e "%! /*e"t %@ o% t& 4oo<& " 3 "4 3 t+ % t2e fo*- of " !e-"%! !e9o& t o* ot2e* !e-"%! 3 "4 3 t+ of t2e 4"%<. The bank then usually would hold this demand deposit in a transaction account on behalf of the customer. nstead of the bank lending its money or other assets to the customer, as the customer reasonably might believe from the face of the 4ote, the bank created funds for the customer!s transaction account without the customer!s permission, authorization, or knowledge and delivered the credit on its own books representing those funds to the customer, meanwhile alleging that the bank lent the customer money. f Elaintiff!s response to this line of argument is to the effect that it acknowledges that it lent credit or issued credit instead of money, one might refer to Thomas E. Fitch, "A%%54!& "D& 4?&& 1D B? B #T 54A%8 5F "A4> 41 T?%9&, .#redit banking,. ;. ."ookkeeping entry representing a deposit of funds into an account.. "ut Elaintiffs loan agreement apparently avoids claiming that the bank actually lent the Befendants money. They apparently state in the agreement that the Befendants are obligated to repay Elaintiff principal and interest for the .Faluable consideration /money0 the bank gave the customer /borrower0.. The loan agreement and 4ote apparently still delete any reference to the bank!s receipt of actual cash value from the Befendants and exchange of that receipt for actual cash value that the Elaintiff banker returned. 11. A//o*! %@ to t2e Fe!e*"3 Re&e*#e B"%< of NeA 8o*<= -o%e+ & "%+t2 %@ t2"t 2"& #"3)e t2"t 4"%<& "%! 9eo93e "//e9t "& -o%e+F -o%e+ !oe& %ot 2"#e to 4e &&)e! 4+ t2e @o#e*%-e%t. For example, Bavid :. Friedman, "?T 85D T:5D1:T. ... A, Federal %eserve "ank of 4ew 8ork /)th ed. 'AG)0/apparently already introduced into this case0, explains that banks create new money by depositing 5Ds, promissory notes, offset by bank liabilities called checking account balances. Eage 2 says, .9oney doesn!t have to be intrinsically valuable, be issued by government, or be in any special form..... '7.The publication, Anne 9arie $. 1onczy, 95B?%4 954?8 9?#:A4 #& H3;;, Federal %eserve "ank of #hicago /rev. ed. =une 'AA70/apparently already introduced into this case0, contains standard bookkeeping entries demonstrating that money ordinarily is recorded as a bank asset, while a bank liability is evidence of money that a bank owes. The bookkeeping entries tend to prove that banks accept cash, checks, drafts, and promissory notesKcredit agreements /assets0 as money deposited to create credit or checkbook money that are bank liabilities, which shows that, absent any right of setoff, banks owe money to persons who deposit money.. #ash /money of exchange0 is money, and credit or promissory notes /money of account0 become money when banks deposit promissory notes with the intent of treating them like deposits of cash. &ee. '7 D.&.#. &ection 'G'; /l0/'0 /definition of .deposit. under Federal Beposit nsurance Act0. The Elaintiff acts in the capacity of a lending or banking institution, and the newly issued credit or money is similar or e+uivalent to a promissory note, which may be treated as a deposit of money when received by the lending bank. Federal %eserve "ank of Ballas publication 954?8 A4B "A4> 41, page '', explains that when banks grant loans, they create new money. The
new money is created because a new .loan becomes a deposit, -ust like a paycheck does.. 95B?%4 954?8 9?#:A4 #&, page <, says, .,hat they RbanksS do when they make loans is to accept promissory notes in exchange for credits to the borrowers! transaction accounts.. The next sentence on the same page explains that the banks! assets and liabilities increase by the amount of the loans.
COMMENTARY AND SUMMARY OF ARGUMENT
';. Elaintiff apparently accepted the Befendants! 4ote and credit application /money of account0 in exchange for its own credit /also money of account0 and deposited that credit into an account with the Befendants! names on the account, as well as apparently issuing its own credit for PA2,A(2.'< to 9ichigan 4ational "ank for the account of the Befendants. 5ne reasonably might argue that the Elaintiff recorded the 4ote or credit application as a loan /money of account0 from the Befendants to the Elaintiff and that the Elaintiff then became the borrower of an e+uivalent amount of money of account from the Befendants.
1,. T2e P3" %t ff % f"/t %e#e* 3e%t "%+ of t& oA% 9*e-eJ &t %@ -o%e+= /*e! t o* "&&et& "&
/o%& !e*"t o% to 9)*/2"&e t2e Note o* /*e! t "@*ee-e%t f*o- t2e Defe%!"%t&. /4ote6 add that when the bank does the forgoing, then in that event, there is an utter failure of consi eration for the .loan contract..0 ,hen the Elaintiff deposited the Befendants! P)((,((( of newly issued credit into an account, the Elaintiff created from P;<(,((( to P)((,((( of new money /the nominal principal amount less up to ten percent or P)(,((( of reserves that the Federal %eserve would re+uire against a demand deposit of this size0. The Elaintiff received P)((,((( of credit or money of account from the Befendants as an asset. 1AAE ordinarily would re+uire that the Elaintiff record a liability account, crediting the Befendants! deposit account, showing that the Elaintiff owes P)((,((( of money to the Befendants, -ust as if the Befendants were to deposit cash or a payroll check into their account.
'2. The following appears to be a disputed fact in this case about which have insufficient information on which to form a conclusion6 infer that it is alleged that Elaintiff refused to lend the Befendants Elaintiffs own money or assets and recorded a P)((,((( loan from the Befendants to the Elaintiff, which arguably was a P)((,((( deposit of money of account by the Befendants, and then when the Elaintiff repaid the Befendants by paying its own credit /money of account0 in the amount of P)((,((( to third3party sellers of goods and services for the account of Befendants, the Befendants were repaid their loan to Elaintiff, and the transaction was complete. '<. do not have sufficient knowledge of the facts in this case to form a conclusion on the following disputed points6 4one of the following material facts are disclosed in the credit application or 4ote or were advertised by Elaintiff to prove that the Befendants are the true lenders and the Elaintiff is the true borrower. T2e P3" %t ff & t*+ %@ to )&e t2e /*e! t "993 /"t o% fo*- o* t2e Note to 9e*&)"!e
"%! !e/e #e t2e Defe%!"%t& %to 4e3 e# %@ t2"t t2e o99o& te o//)**e! "%! t2"t t2e Defe%!"%t& Ae*e t2e 4o**oAe* "%! %ot t2e 3e%!e*. T2e fo33oA %@ 9o %t &
undisputed6 The Befendants! loan of their credit to Elaintiff, when issued and paid from their deposit or credit account at Elaintiff, became money in the Federal %eserve &ystem /sub-ect to a reduction of up to ten percent for reserve re+uirements0 as the newly issued credit was paid pursuant to written orders, including checks and wire transfers, to sellers of goods and services for the account of Befendants.
CONCLUSION 'H. "ased on the foregoing, Elaintiff is using the Befendant!s 4ote for its own purposes, and it remains to be proven whether Elaintiff has incurred any financial loss or actual damages / do not have sufficient information
to form a conclusion on this point0. n any case, the inclusion of the .lawful money. language in the repayment clause of the 4ote is confusing at best and in fact may be misleading in the context described above.
'G. hereby affirm that prepared and have read this Affidavit and that believe the foregoing statements in this Affidavit to be true. hereby further affirm that the basis of these beliefs is either my own direct knowledge of the legal principles and historical facts involved and with respect to which hold myself out as an expert or statements made or documents provided to me by third parties whose veracity reasonably assumed. Further the Affiant sayeth naught. At #hagrin Falls, O2 o Becember 2, 7((; IIIIIIIIIIIIIIIIIIIIIIIIII ,A$>?% F. T5BB /5hio bar no. ((<)2;A0 ?xpert witness for the Befendants ,alker F. Todd, Attorney at $aw
At #hagrin Falls, 5hio Becember 2, 7((; 5n this day personally came before me the above3named Affiant, who proved his identity to me to my satisfaction, and he acknowledged his signature on this Affidavit in my presence and stated that he did so with full understanding that he was sub-ect to the penalties of per-ury. 4otary Eublic of the &tate of 5hio
0rom1 The 2edemption .anual, 3th 4d.
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