If you read this blog on a regular basis, you know I frequently write about the debt elimination scam. I’m usually coming at it from the angle that companies offering these services are fraudulent. The owners know they are ripping people off by selling a system that simply doesn’t work. But every once in a while I hear from someone who’s not trying to sell debt elimination as a service. They write as individuals, true believers in what I call the “conspiracy theory of global finance.”
The tendency to believe in conspiracies is rampant in our society. The Kennedy assassination, fluoridated water, UFO phenomena, the 9/11 attacks, vaccines — these subjects have all been the focus of conspiracy-minded individuals, some of whom are obvious candidates for the “tin-foil hat” award. I guess aluminum foil is supposedly pretty effective at blocking alien mind-control signals… ?
One of the most popular areas for conspiracy-mongering has been the global financial system. Some of the theories are overtly anti-Semitic, blaming Jews for all the financial evils in the world, while other are more subtle in their rhetoric. The bizarre legal and financial theories behind the debt elimination movement are in the latter category.
It’s all about the secret wheeling and dealing that happened in the early decades of the 20th century and resulted in the establishment of the Federal Reserve system and fractional reserve banking in general. Once you believe that the core financial system of world commerce is an insidious scam – you know, the system that has helped lift the living standard of billions of human beings around the world — then all remaining logic and critical thinking goes right out the window.
What follows is a classic example, starting with an opening email salvo from my new cyber pen-pal (name changed for privacy):
“Hello,
I came across your website and found it interesting, however it is grossly misinformed. I have personally discharged over $40,000 worth of unsecured debt using the exact methods you claim to be fraudulent.
I did this using the FDCPA regulations, a couple of simple letters, and information found in the book “Modern Money Mechanics.” Banks actually commit fraud when “loaning” money in several ways. One way is that a bank leads people to believe there is an actual loan made in acquiring a credit card or student “loan”, when in fact the money is created out of thin air by making an entry into a computer. Furthermore, the money that is created is entered as a CREDIT in the person’s name.. which is in capital letters. This is known in Black’s Law Dictionary as the Strawman.
The fact of the matter is that the entire credit industry IS operating fraudulently. When you research it as I have over the past three years, just HOW fraudulent is absolutely mind boggling. I realize as I write this that you have a vested interest in NOT telling people the truth, or perhaps even wanting to know it yourself because it would effectively put you out of business. However the fact remains that you are telling people blatant lies out of ignorance.
Were you to do some research and discover the truth for yourself, you might then work for real justice in the world, and perhaps change your product and service to something which is based in Truth rather than that which is perpetuating a myth and which is harming everyone.
In the meantime, you might find a couple of movies intersting (sic) :
“The Money Masters” – available on YouTube or DVD.
“Money As Debt” – Available on YouTube also.
If you would like copies of the actual letters I used please let me know and I will be happy to forward them to you.Sincerely,
Allen”
OK, so in his very first email message to me this tactful fellow accuses me of being grossly misinformed, having a vested interest in deceiving the public, and telling blatant lies out of ignorance. Nice way to start off a dialogue with a total stranger, right?
Now, I have a confession to make. I actually enjoy sparring with these folks. It’s pretty sick, I admit it, but it’s a form of amusement and entertainment for me, what can I say. My first reaction was to launch into attack mode, but I figured I would give this guy the benefit of the doubt first. Here’s my reply:
“Allen,
You are “grossly misinformed” about my supposed lack of knowledge of the system you are such a fan of, but I don’t have time to debate with you. I’m too busy helping people who have been ripped off by “crusaders for justice” like yourself, who told them they could legally walk away from their debt obligations with no consequences, only to find they got laughed out of court, lost their cases, and started seeing wage garnishments.
Extraordinary claims require extraordinary proof. Please tell me the name/county of the court where your cases were heard, along with the civil case docket numbers. Don’t send me any documents directly, please. Only documents that I can retrieve directly from the court will meet the standard of evidence required here. Let’s have the case citation(s) where a judge ruled in your favor on the basis of the “no money lent” argument.
Sincerely,
Charles J. Phelan
President/Founder
Manchester Publishing Company, Inc.”
This is my standard technique for dealing with “experts” who write to me, tell me how full of baloney I am on this particular subject, and then claim they were successful using the techniques I warn consumers against. My first response is always the same. “Prove it.” Give me the documents, *court* documents where a real-life judge pounded the gavel and agreed with your cockamamie legal theory that “no money was lent” by the creditors. I’ve been asking for proof for nearly a decade. I’m still waiting.
So how did he reply? By backing up his mental dumpster and unloading it in my email inbox:
“Actually I’m not a fan of a fraudulent system that takes advantage of others, which is why I work to bring it down rather than to support it by buying into the lies.
I didn’t go to court on any of the cards that I got charged off.. which was every one of them. Contrary to what most people believe, it’s actually quite easy to do because the banks don’t WANT to go to court, or their little scam would be revealed and a finding against them would set a legal precedent that bring the whole house of cards down around the world.
All I did to accomplish that was exactly as I said in the earlier email. I challenged the banks for fraud on the contract and fraudulent conveyence (sic) and the debts were charged off for the following reasons:
1. There is NO legal and binding contract.. only a promisory (sic) note which creates the funds to discharge.
2. There is NO disclosure of the actual accounting procedures. If there were the banks would be forced to tell people that the monies created were created as a CREDIT to the account of the Strawman, and NOT a debit. This means that the individual has legal right to the monies from the start and is under no obligation to pay them back.
They entire system is a scam that originally began in 1913 and was subsequently pushed through Congress a few years later. When done correctly the FDCPA, and the FCRA can easily be used to get an unsecured line of “credit” charged off. It is also possible to obtain the remainder of the monies in a given account in cash. As I said, the money was assigned as a credit and not a debit to the individual and is therefore legally ours to begin with.
As I said earlier, if you want to know more, watch “The Money Masters”, “Money as Debt”, and read “The Creature From Jeckyl (sic) Island”. That will bring you up to speed on what the World Bank and the Federal Reserve is REALLY up to.
In closing, I’m sure there are idiots out there who scam people. In fact I recently read about one in Florida who took thousands and never did the work promised. But that there are idiots in every walk of life, and a few bad seeds don’t change the fact that what I am saying is true. If you want, I’ve given you enough information that you can find out for yourself. And as I said, once you do, I can provide you with the necessary tools if you decide you want to alter your course a little.. and I won’t charge you a penny.”
OK, so where do I start? This is so wrong on so many levels that it’s difficult to know where to begin. But let’s begin with the obvious. No legal paperwork. All this person accomplished was to get their debts charged off. Um, hello? That happens automatically! Don’t pay a credit card bill for six months, and voila, charge-off time. A charge-off just means the creditor records the loss on their books. It doesn’t mean they will stop trying to collect afterwards.
Anyway, I was getting a bit annoyed with this chap’s self-satisfied smug tone, so I decided to let him have it with both barrels.
“Allen,
Listen carefully, please. Both your emails were very insulting in tone and approach. You’re writing to a professional, not some clueless newbie. I do this for a living. I’ve seen it all, every trick in the book. I have been aware of everything you are describing for a decade or more and know a hell of a lot more about it than you apparently do. You’re just another in a long line of people who thinks he has discovered some big conspiracy, and can’t resist emailing me to tell me how wrong I am. What a laugh. I read Jekyll Island years ago. It’s complete crap from start to finish. Griffin is a John Birch whack-job, and his book was thoroughly debunked by legitimate scholars long ago. That’s as deep as your “research” went? Griffin? LOL.
If you don’t have court cases ruling in your favor, then all you did was temporarily chase away some collection agencies via the various documents utilized by the monetary protest crowd. Creditors drop cases all the time, or choose not to sue, for a variety of reasons that have absolutely nothing to do with what you think it does. You, like everyone else tilting at windmills out there, are completely clueless about what a pile of bulls**t you have chosen to put your faith in. You apparently don’t even understand what a charge-off is! You didn’t “get” your creditors to record charge-offs. That happens automatically. You’ll get sued sooner or later by a debt purchaser, or two, or three. If you enjoy the legal fight, bully for you. But 99% of consumers don’t want to go that route.
Did you, or did you not, purchase goods and services to the tune of $40,000 via the credit cards? Are you saying you received NO value whatsoever from the purchases made with the credit you claim was illegal? If you had not had those credit cards, how would you have obtained those $40k worth of goods or services? Don’t you understand what “consideration” means in the context of a business transaction? From my perspective, all you did was stiff your creditors to the tune of $40k. But that apparently does not conflict in any way with your values or ethics. Sorry. Call me old-fashioned, but I’ll side with the OCC, FTC, and every single state AG out there, and continue to advise consumers to steer clear of conspiracy-theory-based techniques that simply do not work for the vast majority of people who attempt to implement them. I’ll continue to do what I know DOES work — good faith negotiation and settlement. If you want to preach otherwise, get your own website.
Sincerely,
Charles J. Phelan
President/Founder
Manchester Publishing Company, Inc.”
A little harsh, perhaps, but hey, he started it, right? (You have to give as good as you get sometimes with people who are a bit thick in the skull.) His response?
“My apologies if I was coming off like I was being condescending.. I wasn’t. As with you, I am a professional and hold two degrees.. one in Electrical Engineering and a Doctorate in Philosophy.. so obviously I didn’t just fall off the potato truck.
My only intent from the start was to inform you of the truth, not to try and make you believe it. I’ve researched this for over three years, and the information I have portrayed /is/ accurate. However, you are certainly entitled to believe that Jeckyl (sic) Island isn’t true, or that the system we are living with is ethical and in integrity. The choice is entirely yours.
Please don’t bother responding, no further dialog on the subject is necessary or desired.
The best,
Allen”
Translation: “Gosh, you hurt my feelings. I don’t want to play anymore.” So there ends the exchange, which is too bad, because I was having so much fun. You’ll notice, however, that he failed to answer a single relevant question that I raised. “I know I’m right, and you can’t confuse me with facts to the contrary.” That was the essence of his defense. Our monetary system is a scam, therefore I never spent any real money, blah, blah, blah.
The core point I was trying to get across to this person was the concept of business “consideration.” I focused on that because someone who has two college degrees really should know better (not to mention they should also be able to spell better). How can you study Philosophy, obtain a PhD, and not understand basic logic? The debt elimination promoters often rely on the assertion that no consideration was received by the debtor because the creditor was not out any of their own actual money. Baloney! You can read the linked Wikipedia entry on consideration for further detail, but the core idea is that in a business contractual situation, consideration must be involved for it to be a valid contract, where consideration is defined as value paid in exchange for a promise. Simple enough.
By arguing that no value is received by the debtor because the bank is extending credit and not loaning money directly, the true believer in debt elimination is overlooking basic reality. When you use a credit card to purchase goods or services at a retailer or other business, the mere fact that you had the convenience of using credit constitutes consideration. Look at it this way. If you did NOT have a credit card, you’d have to write a physical check or pay in full with cash, right? Because the creditor extended you a credit facility in the form of that little piece of plastic, you didn’t need to pony up money out of your bank account to pay for the item. That fact alone means you were extended consideration in the transaction, because otherwise you would not have been able to conclude the transaction under such convenient terms and would have had to directly negotiate credit terms with the merchant. So this blows away any and all objections by the debt eliminator that no consideration is involved. Crash. Down comes the whole kooky house of cards.
Anyway, all this person accomplished was to rip off his creditors for $40,000, *temporarily*. Since he never resolved anything, and thinks that the process stops with charge-offs (which is actually when the collection process just starts kicking into a high gear that can last for *years* to come), he will be exposed to multiple lawsuits in the coming months and years. This is my beef with all such mumbo-jumbo “magic bullet” techniques. They never result in any of the debts actually getting resolved in a final manner. A debt settlement letter accomplishes that resolution. You pay X dollars by such-and-such a date, and you’re done, period. And you have it IN WRITING FROM THE CREDITOR. Game over. On to the next debt, etc.
I doubt the above will convince a true believer. But I figured I would go ahead and post this exchange for its educational value. If I can spare one consumer from falling into the insidious trap set by the scam artists who sell these bogus “programs” for thousands of dollars, then I’m happy to keep sparring with true believers in the conspiracy theory of global finance. Anybody else out there want to take a shot at convincing me I’m wrong on this subject? 🙂
I find it interesting that you discredit all those who oppose your point of view as having all failed. I happen to know quite a few people who haven’t. And blaming an opposing point of view on anti-semetism seems rather trite to me. I don’t see a correlation between the two. You debunk Edward Griffin as a fool. But have you ever pondered how your constitutional freedoms have been stripped in the process of defending the fraudulent money systems created in 1913, which you claim to be ethical? Ever read Irwin Schiffs books? But, of course. Thanks.
In reply to Vincent:
Documents, please. Court case citations.
Nor did I draw one. Please read what I actually said.
Ah, here we go. You’re a tax protestor, right?
Yes, he’s a tax protestor, folks, citing the godfather of all tax protestors. Good luck with that. It didn’t work out too well for Mr. Schiff, who is currently doing time in prison for tax evasion.
Really the post is something special.I appreciate the author of the post for presenting a very genuine information on debt elimination.I like the term “conspiracy theory of global finance” used by the author.It is just like a vaccine for the people who are suffering from financial crisis.Really great effort……
Do you have any information about the debt elimination tactic that uses contract law? Essentially they send your creditors a new contract and state that by cashing your check payment, they enter a new contract. This contract says they will now charge no interest, no late fees, and will accept $10/month. Every violation of the contract, they must pay a $500 (or whatever) penalty. They cash your check, entering into the contract, then violate it so many times you now owe them no money.
Sonya, the program you’re referring to is just another debt elimination scam.
The creditors all have systems in place to block people from using “restricted
endorsements” that create new contracts. See my blog posts of 2/29/08 and
8/27/08 for further discussion. There are NO magic bullets for dealing with debt.
Charles, you couldn’t be more wrong! There are dozens of court cases which clearly state, a bank may not lend it’s credit. It can lend it’s money, but NOT it’s credit. The Federal Reserve has printed several official books on how loans are created within the system. They state clearly, the method used is to monitise a promissory note. If you ever get to look at your note you signed for your mortgage, you will see it endorsed on the back “pay to the order of” such and such bank. That is an act of conversion. Legal, yes, but only for banks. Once changed into a cash equivalent it is deposited into a demand deposit account at the bank. It appears as cash on the books, therefore it is a liability of the bank like any other cash deposit. The fed has stated it must be paid back on demand of the depositor. The bank creates the book entry “demand deposit” as a cash asset on their books. This they refer to as a transaction account. The bank is the one that has a secret agreement with the merchants to honor visa and mastercharge cards etc. The signed sales slips are turned in by the merchants everyday and their accounts are electornically credited with sums less the discount the bank takes. The customer is charged the full amount as though that is what the bank paid the merchant. This little arrangement is never devulged to the card user. Ever hear of the legal principle “failure to disclose”, fraud in the factum,fraud in the inducement, etc? There are cases where the Federal Reserve attorneys admit under oath that this is exactly how “loans” are made. Greenspan once stated it openly. This creation of checkbook “money” is NOT illegal, It is simply what they do, and it is legal. What is NOT legal is the failure to tell people the full truth about what is going on, and that fact is what vitiates the contract as their could never have been a “meeting of the minds to contract if one of the parties is aware of a factor which if known by the other would impinge on his knowingly entering into the contract fully informed. It is a competely fraudulent system because of this factor alone. Study the Credit River case, where the Federal Reserves own attorney stated that is how they created the checkbook money to pay a seller in the mortgage under foreclosure in that case. It was argued by the defendant attorney Jerome Daley back in 1968. You sir, are ill informed and are merely mouthing the same old bank line of crap they want everyone to believe. The merchants get paid from the transaction accounts and lose nothing. The banks issue credits from that transaction account which is merely a book entry created from the cash deposit owed by the bank to the so called “borrower”. Don’t believe it, then check the books on the day of the deposit account and you will see the reserve amount was paid to the Reserve to protect the cash deposit, which is a requirement of the bank under the fractional reserve system. Depose that record in a case, and you will quickly be offered a settlement and agreement to seal the case, or a dismissal by plaintiff for an out of court settlement. Been there a hundred times, and that is why one see’s almost no case law. In addition, a judge will many times ask to see both sides in chambers when it gets to hot to hear in open court, and he will tell the plaintiff to settle in his own best interest, lest everyone will see the “cat” as it flee’s from the golden bag. I have seen cases where depositors have sued in small claims court and gotten back the amount of their credit lines. The banks didn’t even show up to argue the point because to offset the claim they would have had to produce the books showing there was NO deposit account in the card holders name in the amount claimed. As for Arbitration matters, I have been involved in several dozen where the card holder won every one of them. Why, because the bank never showed up or refuted the charges made, and lost by default. These were legitimate Arbitration Firms under license from the Secty of State. There will never be a case where if challenged a bank can show the source of the funds used to fund the credit card transactions was anything other than the transaction account based on the demand deposit of the card holder. Pure and simple. Fraud multiplied by the millions. I have asked the Federal Reserve on several occasions, when does the depositor get his money back? They have NO ANSWER AND STAND MUTE!!! It is the best con game that has ever been created. The merchant gets paid, the bank charges interest and fees on money it never lent, uses the asset as a multiple allowing it to loan out 9 times what the asset represents on the books, all the while risking NONE OF IT’S OWN MONEY, especially if it never pays the back the depositor. They have refused to answer what happens to the deposits created by their conversions of notes to cash deposits. The FDIC is mute on the subject, the OCC stated to me, he owes no explanation to the public as his only interest is overseeing the banking community. I know dozens of people who have notified the bank of their failure to disclose and invoked a claim of an invalid contract, and have refused to honor any outstanding claim under it made by a bank. Fraud vitiates all contracts ab initio. I am of the opinion that if the bank had informed the applicants of exactly what they were doing, most people would go ahead anyway. Only the banks have the legalized mechanism to do this. The method is only fraudulent because of failure to disclose the true source of the funds. Banks can’t charge interest on credit. If they admitted that the source of the so called loan was the slight of hand used, and charged a fee for performing this service, then it would be a legitimate payment for a service rendered. But the banks have no skin in this game, they have bad debt insurance, they can write off these accounts, and then sell the claimed “obligation” to third party debt collectors for a few pennies on the dollar. As for your comment on banks having “restricted endorsements” regarding the creation of new contracts, they do it all the time with a notice stating “Notice of change of Terms”. From now on the late fee is going to be $45 instead of $25. Your next use of the card will be considered acceptance of the new contract terms in place of the previous terms”. They state clearly if you don’t accept the new offer to contract, stop using the card and send it back, but you still owe any outstanding balance. The have to do this or it would be an adhesion contract, which is not legal. One can send a “final payment” check to the bank which includes an offer to settle the entire amount for the reduced sum of the check, the acceptance of this offer is the act of cashing the check. There is much case law on this type of novation. The bank has the option of declining the offer in writing but it must return the check used as consideration in the offer. The bank may not keep the check treating it as a “partial payment” as it was not tendered as such. The band in most state has up to 90 days to return such novated payments to settle, but if they do not, they have a rough road to hoe proving an accord and satisfaction has not occurred. In California there are two laws regarding this matter, each one taking a different stance, but after reveiw it was decided by the court that the latter decision should prevail,i.e. not returning the consideration check within 90 days achieves accord and satisfaction for the debtor. Use of contract law is not trying to use “magic bullets” for dealing with debt. The magic is being performed in front of everyones eyes by the banks creating checkbook money with the stroke of computer keys. The principle remains the one loaning the money should be repaid. If the bank can prove it had risk, loaned its money to its detriment, pay them. However, no bank does this. Banks may not lend credit.
Another brave soul steps forward to tell me how full of it I am! 🙂
Let’s see, where do I start? The “Credit River Decision” would be a good place. This tired old case has been debunked so many times that I’m amazed that a DE promoter would still cite it. Leo, you need to spend more time reading the discussions at Quatloos.com and less time at DE Kool-Aid forums. Credit River was shredded to pieces years ago, over and over again. It doesn’t mean what you seem to think it means, and it hasn’t been the basis for a *single* in-court victory by a monetary protestor. Prove me wrong. Give me the case numbers that prove one of your clients won a case on the basis of the “precedent” set by this court case. I won’t hold my breath.
We live in a world where all modern nations operate on the basis of “fiat currency.” All your blather about the Federal Reserve, fractional reserve banking, and accounting alchemy overlooks this simple reality.
Let me try to cut through the crap by using a personal example. A few weeks ago, my washing machine broke down. It would have cost a lot more to repair the ancient thing (20 years old at least) than to simply buy a new one. So I did some research online, and ordered one by phone from a local store. I paid for it by giving the clerk my credit card information over the phone, and voila, the next day two guys in a truck showed up and installed the thing for me and hauled away the old one. Next month, when I get my credit card statement, I will write a check from my personal checking account to reimburse the bank that issued me the credit card. A reasonable person would understand that I received real value (aka “consideration”) as a result of using that credit card. I didn’t have to withdraw funds from my checking account immediately. I didn’t even have to drive to the store, thus saving gasoline expense. Nor did I need to do any work on the installation. And, of course, I also have a brand new washing machine.
For the benefit of less deluded readers of The ZipDebt Blog, what Leo would have you believe is that I do not need to write a check to pay for the washing machine. In his world, it’s perfectly fine for me to order the machine, have it delivered, and not pay for the thing at all — because I was using “money from thin air” in the form of credit that was extended to me rather than money loaned to me by the credit card bank. You can argue all you like about the evils of our monetary system, but in the end, it comes down to advising consumers to walk away from their debt obligations on the theory that they never received any value in return for the use of the credit extended to them. Yeah, sure.
A few questions for you, Leo:
1. How much do you charge people for your “debt elimination” service?
2. In what form do you accept payment for your fee?
3. How many of your “clients” have been sued into bankruptcy after trying your techniques?
4. Can’t you provide even *one* court case citation for one of your clients, where a judge dismissed the lawsuit *on the basis* of the no-money lent argument?
Thanks for posting this Charles. I’ll be sending consumers to it when they ask me about these debt elimination schemes.
A few years ago I interviewed someone who had gone through one of these programs. After about two years he thought it had worked and was sure he was off the hook for the debts. Then he was sued and ended up in bankruptcy anyway.
And you’re right. If it were true that the credit system was a sham then imagine where we’d be right now. The current credit crunch would look like a picnic by comparison.
Another great post Charles!
Thanks for your comment, Gerri. Given what’s going on in news lately, it’s really
hard to believe that anyone out there still buys into the whole “money from
thin air” argument. If the banks can create money from thin air, then why did
IndyMac go under? Washington Mutual? Why did Citi need to be bailed out? Why didn’t
they just create enough “vapor money” to stay afloat without needing a
government handout? A little logic is all it takes to see through the nonsense.
Charles,First let me state at the outset that I will not accept the label you have assigned to me as a seller of some “fly by night debt elimination scheme”. I am not, what I am is an interested individual in understanding the credit banking system. Not a novice, to be sure, as this study has been given more than several thousand hours of research over the last 10 years.
Regarding the “Credit River” decision, which was actually based on the “money argument”, you will find that IT WAS AND HAS NEVER BEEN OVERTURNED! Investigating the entire case will reveal that Mr. Daley did indeed put under oath the top attorney from the Federal Reserve, who admitted that what I have previously stateed is ABSOLUTELY TRUE!. He freely admitted that so called “loans” come into existence through the monetizing of promissory notes in the form of bookeeping entries. When asked to quote the exact procedure he freely used the Federal Reserves own publication to quote from, namely that bookeeping entry “money” is created by monetizing the note, simply endorsing “pay to the order of” name of bank, and depositing it as cash into the “borrowers” deposit account. This is deposited as CASH, having NO distinction than any other cash deposit from the public. The Federal Reserve in it’s own publication “Modern Money Mechanics” and “Two Faces of Debt” clearly state there is no difference in this cash deposit, through “monitization of the note” than that of any other cash deposit, AND MUST BE PAID BACK ON DEMAND! Charles, if you don’t understand the clear meaning of the Fed’s own words in their official publications, I don’t know where to go from there. Your further disagreement with my previous post took incorrect positions by trying to twist what I wrote. You tried to make it appear that I was suggesting trying to get something for nothing, rather than answering my clear indication, it was not my THEORY of what was taking place, but rather stating what the FEDERAL RESERVE ITSELF STATES IS HOW BOOKEEPING ENTRY MONEY COMES INTO EXISTENCE. The payments made to merchants accepting credit cards is paid by the bank from the transaction account which was created by operation of the cash deposit held in the “borrowers” name. The merchant gets “paid” when he turns in the signed purchase slips into the banking system. You indicate the money he is paid with is from bank funds, which technically it is, because all cash deposits are bank property, offset by the liability of what’s owed by the bank to the depositors. The credit card mechanism therefore becomes just a different method of purchasing, other than using your checking account. The difference is, THIS DEPOSIT ACCOUNT WAS CREATED BY MONITIZATION process used and allowed under the banking laws to create “bookeeping money” rather than “outside cash” creating the deposit account. On the banks books, there is a demand deposit account in the name of the credit card debtor, that is what the Federal Reserve states creates the transaction account from which the merchant transactions are deducted. Is this asset account substance or bookeeping money? The latter of course. Is this transaction account considered the banks asset? YES YES YES! Was it created through new money deposited by the borrower? NO NO! The fed states clearly in All their publications that there is NO MONEY, just bookeeping entries, money of account, created solely, entirely through lending based on monitizing promissory notes through the process explained above. This is not ME saying this, read it for yourself in the Fed Publications. Is it legal, of course it is. Congress gave banks the power to do this. Can WE the public do this kind of thing? NO NO NO. The basis of these so called “schemes” of debt elimination through use of offset or accord and satisfaction are based on the fraud of the offer which does not include the true substance of what is happening. There never was this bookeeping money in the transaction account until the note was monitized, therefore it clearly is the source of the vapor funds. Admittedly, there is no “real money” involved in any of these transactions, but that is a function of the banking system. The fact is that the bank “pays” from the transaction account, which is the banks account, but it is also true that the bank has a liability to the depositor for that amount as shown on the banks books. Failure to disclose that in effect the credit card user is funding his own account through signing the application, is at the basis for the claim of fraud in the factum, failure to disclose etc., for it is implied the bank has something to lose in this transaction if the debtor fails to pay back the amount used. The truth is that the banks immediately insure against bad debts, ande having paid that insurance, sells these accounts into security tranches which use these insured accounts as collateral backing the securities. If a debtor fails to pay, collection efforts are excercised under the insurance clause, and the non performing asset, under banking laws must be moved from one side of the books to the other. This is shown as a charge off, allowing a tax deduction, of whatever the loss can be substantiated after receiving the payment from the insurance. Of course as it is no longer a profit making account, it can no longer be used in the tranche, and it is retired and replaced by another account under the same procedures. Complicated bookeeping? YOu bet, but is this how it is done? Yes it is. So now all the originating bank has is the so called “obligation” created by the application, which it sells off to the debt collection industry for a few cents on the dollar. However the deposit is still on the banks books, is it not? Is it still an unpaid obligation as a demand deposit? Yes it is. When queried as to when this deposit is paid back to the depositors, the is only silence when asked, either from the banks or the Federal Reserve. What has happened to multiple of 9 times the asset created because of this cash deposit as allowed under the fractional reserve system? If this were not a cash deposit in the name of the applicant for credit, then why did the bank pay the required reserve amount on deposits to the regional Fed Reserve bank? Their books reveal that in fact they did pay this required amount. Therefore the deposit exists, or they wouldn’t have to pay the reserve amount, right? This is an admission to the existence of the cash deposit account, and that accountis in the depositors name, and the Fed says it must be paid back. No exceptions, period. If the bank would return the deposit and account for it honestly, or at the very least use it as offsett against what the card user drew it down to thru use, that would be an honest transaction with all parties fully aware of exactly how all this works. It is the fraudulent witholding of what is happening, the implied mistatement of the true nature of the transaction, which would allow the borrower to have capacity to make an informed decision to contract, that is where the problem lies. It this fact of failure to disclose which is at the heart of the claim that because of this, there never was a binding contract. No contract, no obligation. Claim there was a valid contract, then give the deposit money back, or at the very least use it as an offset against the claim. But the banks do none of this. When presented with accord and satisfaction in the correct way, and not rebutted in a timely manner, the law states A&C has been achieved. Again, I remind the readers of this post, it is not me saying this, it is the Federal REserve’s own publications, and their attorney’s while under oath that state this is the system. They do not claim it is illegal, nor does the public. It is the failure to reveal the true source of the funds through misdirection and false implications, that is at the heart of invalidating any contract where this has occurred. If one is not told that they are the true source of the “money” which funds the account for these purposes, then there never could have been a “meeting of the minds to contract”. No meeting of the minds, means no full disclosure, no full disclosure, no valid contract. If there never was a valid contract, then one could argue there never was a valid note, no note, no “pay to the order of”, no monitization, no deposit account, no deposit account, no transaction account from which to write checks or debit from the account or credit the merchant accounts. Back to square one. Did the merchant get paid? Yes. He has no complaint. Did the bank pay him from a bookeeping account? Yes. Did the bank lose it’s asset money if the depositor did not refill the transaction account through payments? Yes. Can the bank refuse to pay the depositor back his deposit? NO, not under the banking laws. Was the card user ever infomed he had this deposit? NO. If the bank asset was based on a declining liability to the deposit account, is the deposit liability offset to zero if not replenished by the card holder through payments? Yes, if agreed to by the depositor, which is not the case here. The bank has only “lost” its asset if has paid from it and exhausted this balance through payment to merchants. However, it is compensated through the depletion of liability to the depositor, therefore its loss is zero. It has received fees from both the card user as well as the merchant, as well as compensation from the insurance. It has from the outset been allowed to loan out an amount of 9 times the original asset created on its books through the monitization. Does the bank make a profit from this leverage? I leave that answer to your speculation. Does the card holder share in these enormous profits created through this allowable fractional reserve procedure? NO. Must the bank share or even inform the card holder how this transaction has enriched the bank? NO NO NO. Ask the FDIC about how are these depositors accounted for when a bank goes under? How are all these unpaid entries showing deposits handled? You will get the loudest silence you will ever experience. Ask the Federal Reserve top attornies this question, you will receive silence, absolute silence.
Charles claims what is written in this post, and the previous post, must be a pipe dream, for to assume it is true would mean the whole banking system is crooked? I can only refer to the complete collapse of the current financial system as reported all over the world to let the reader decide whether or not the whole banking system, including the stock markets are crooked or not. I’m afraid, Charles, it is you who are living in a pipe dream, not me, or the rest of the world. The cat is out of the bag, and it cannot be put back in. The whole thing is nothing more than an illusion, and a house of cards. Don’t believe me, all one has to do is read the official publications of the Federal Reserve. “Mondern Money Mechanics” and “Two Faces Of Debt” and many other official publications of the Fed. Greenspan himself has stated “all money, comes into existence through borrowing”. In effect it is created on the books out of thin air through a few key strokes on a computer”. If anyone doubts what I have written here, merely obtain copies of those mentioned publications, if still available, and read for yourself. Then decide who knows what he is talking about, Charles, or the Federal Reserve. What I have put forth is based on the law as written, and Charles would have you believe I am a purveyor of one of a host of “schemes”. I have already stated, I am not, merely one who has spent thousands of hours getting to the bottom of this charade. Charles, however takes the position of the banks, suggesting he might be a “shill” for them.
Charles…I should know better, but I’m always amazed at the idiocy of the conspiracy crowd. If they spent the amount of time at legitemate work, the could pay their debts and support the system that has provided a standard of living never seen before. JimMcCall
Jim, you’re absolutely correct. Looking at some of their postings, I’m
beginning to think someone is paying them by the word. 🙂
Leo returns with a book-length comment. As time permits, I will draft a separate
detailed reply in rebuttal.
Meanwhile, Leo, I notice that you did not answer any of my questions. So let’s
clear up two key points here before we go any further.
1. Have you ever attempted to profit financially from your research on this subject
by offering advice or assistance to consumers in return for a fee? If the answer
is no, then how could you have been involved in the “hundreds” of successful
cases you claim to have seen? Did you work free of charge?
2. Referring to the personal example above about the washing machine: Should I
pay for the washing machine or not? As near as I can tell from your voluminous
commentary, your position is that I don’t need to pay the credit card bank, because
they did not properly disclose the terms of the transaction. Do I understand
your position correctly?
Charles,
Answer to question #1:
No,I did not participate on peoples behalf, merely provided the paper work to use if they so chose. This was done free of charge.
Answer to question #2:
The position clearly stated is that there is no basis for a valid contract to exist between the credit card bank and the card holder. The bank of course takes the position it is a valid contract, that does not make it so.
First, the agreement, or “application” is invalid for failure to disclose and fraud in the factum. Second, the principle of the one lending the money should be repaid.
As the so called “money” of account did not exist prior to the monitizing of the promisorry note, the source of the bookeeping funds used in these accounts comes from the customer, not the bank. So, in effect the card holder is authorizing the deduction from his cash deposit,via the card transactions, not truly the banks funds even though the deductions occur in the transaction account which technically are bank assets. The deposit belongs to the card holder, not the bank. The depositor is the creditor, and the bank is the debtor
When one gets a credit card one agrees to “borrow” money from the “credit card” company via the medium of a “credit card” and pay it back with the agreed upon interest.
As lawyers know; there is a legal maxim (a self-evident truth) that says: “A THING SIMILAR IS NOT EXACTLY THE SAME.””
The form, the papers i.e. the agreement, the statements etc. are different from the substance of the agreement. The form is the appearance while the substance is what really occurred. People who enter into an agreement with the bank /Credit Card Company do not receive a loan from the bank or credit card company regardless of what they think.
All federally insured banks (FDIC) must follow what are called the Generally Accepted Accounting Principles (GAAP) which are in the federal statutes at 12 USC. Sec. 1831n(a) Accounting objectives, standards, and requirements.
One learns from this section:
(I) That there are certain accounting principles that must be followed by (FDIC) banks and financial institutions.
(2) That certain reports or statements must be filed with federal banking agencies by insured depository institutions.
(3) That these reports and or financial statements must accurately reflect the capital of these institutions.
(4) That the institution’s accounting principles shall be uniform and consistent with the generally Accepted Accounting Principles.
Generally Accepted Accounting Principles 2003 edition published by Wiley page 41 under the section “Cash and Cash equivalents” one learns, “Anything accepted by a bank for deposit would be considered as cash. ”
Further, as pointed out in my previous post, the Federal Reserve has also been very clear in their circulars that banks do not really lend money. To understand this revelation in their official circulars one example that could be cited is a reference in statutory law. For instance the Uniform Commercial Code (UCC), which governs all oommercia1 law, (and virtually every state bas adopted and codified it in their state statues) reads in the section on commercial paper (includes promissory notes) “Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Article to the extent of the Inconsistency.” UCC IO2(c)
Further the Federal Reserve has also been very clear in their circulars that banks do not really lend money. To understand this revelation in their official circulars one example that could be cited is a reference in statutory law. For instance the Uniform Commercial Code (UCC), which governs all oommercia1 law, (and virtually every state bas adopted and codified it in their state statues) reads in the section on commercial paper (includes promissory notes) “Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of this Article to the extent of the Inconsistency.” UCC IO2(c)
So one can see that the circulars of the FED banks and the regulations of the board of governors of the FED has the power to override statutory law in commercial relations when there is a conflict between that law and the circular or regulation of the FED in a particular section.
What has the FED said, about banks lending money? I think two examples will prove the point, although many more could be offered. Federal Reserve Publication, “Modern Money Mechanics” states on pg 6 “Of course they [Banks} do not really pay out loans from the money they receive as deposits. If they did this no additional money would be created.”
So if Banks do not “really” pay out loans from the money that they receive as deposits, where do they get the money to “payout loans?” The FED tells one in no uncertain terms in the next sentence. “What they do when they make loans is to accept promissory notes in exchange for credit to the borrower’s transaction accounts.”
So an exchange occurred! Why does the “credit card” agreement and statement present it as a loan, and charge interest? The agreement never mentions that an “exchange” is happening? The FED adds fuel to the argument in their publication: “Two faces of Debt.” In this publication on pg 19 the Fed states: “depositor’s balance rises when the depository institution extends credit either by granting a loan to or by buying securities from the depositor in exchange for the note or security, the lending or investing institution credits the depositors or gives a check that can be deposited at yet another depository institution. In this case no one else loses a deposit the money supply is increased. New money has been brought into existence.”
So again the word “exchange” is being associated with the so called loan. Notice that the quote says clearly that a “depositors” balance “rises” (evidence the promise to pay is deposited) when a depository institution extends credit by granting a loan or by buying securities from a depositor. How does that happen? According to the circular “In exchange for the note” the lending institution credits your account etc.
Then we are told something that proves the bank or financial institution really did not lend their money as they implied or agreed. We are told that as a result of this transaction “no one loses a deposit” (Thus no other person who had money deposited at the institution lost any deposit) That “the money supply is increased.” And that “new money has been brought into existence.””
How was the “new money” brought into existence? By the deposit of the promissory note agreement. Now a crucial point any attorney knows, for an agreement or a contract to be valid both parties to the agreement must provide what’s called “valuable consideration.” In other words each party must provide something of value in return for the thing of value that they receive.
Now I ask what was lent that should be repaid? If according to the FED, whose regulations the bank must follow, (1) The bank did not use other depositor’s money, (2) banks do not really payout loans from this money, (3) they accept the promissory note/agreement in “exchange” for credits in a transaction (checking) account (4) and they issue a check or wire transfer from this account. What did the bank lend? The wire transfer, credit, or check is issued based upon the deposit of the promissory note. GAAP says. Anything accepted by a bank as a deposit is considered as cash. The promissory note is an asset. An asset is something that has value. It can be bought and sold.
This explains why the FED says “new money” is brought into existence with the deposit of the promissory note. It is “money” that was not in the bank or financial institution prior to the deposit of the promissory note.
Thus it is stated in the Federal Reserve publication, “Two Faces of Debt.” Pg 19 “such newly created funds are in addition to funds that all financial institutions provide in their operations as intermediaries between savers and users of savings.”,
These funds are in “addition” to the other funds. Addition means to add. The promissory note/agreement is an increase of the financial institution’s funds! Thus from an economic standpoint one is far from getting a loan, one is making a deposit. And what does the FED say about that? Again in “Two Faces of Debt.” Pg 19 “A deposit created through lending Is a debt that has to be paid on demand of the depositor, just the same as the debt rising from a customer’s deposit of checks in a bank.””
And let’s not forget, the bank paid the required reserve amount because of this cash deposit.
Clearly, under the above stated circumstances, no one is being cheated, except for the depositor never being advised he has a demand deposit owed him from the bank, as their books will prove. However he is NEVER advised of the true nature of these transactions, therefore the validity of the so called “contract” creating the entire transaction is invalid and unenforceable. There never was full disclosure, so the card holder was never given the fair chance to decide to contract.
There is no other position that can be taken according to law. The merchants were all paid, so the “washing machine” example is not valid. It is a matter of who actually paid for the machine? Clearly the bookeeping accounts reveal the compensation came from drawing down the deposit account belonging to the card holder. If the bank takes the position they deducted the amount paid to the merchant from their asset account, fine, then pay the depositor back his deposit of account. One way or the other, the true source of the accounting for these transactions comes from the deposit account, which the bank agrees is a liability owed to the depositor. There is another factor at play in this scheme, that is that every sales slip signed by the card holder at point of purchase is a promissory note, deposited as cash in the same manner as the original promissory note. If it is taken as cash, and this newly created “cash” is then credited to the merchants bank account, it becomes in addition to the already existing transaction account in the card holders name, and in effect when he is then presented with a card statement, it implies the card holder must pay again, for that which the bank already took in as cash via the signed sales receipt. The contract between the merchant and the card bank is never revealed to the card holder. Card holders purchasing an item for $100 see that amount on their statement, but not told the merchant did not receive that amount, rather something less was paid the merchant according to his agreement with the card bank, or Visa or Mastercharge. All of this is quite legal, except for the part of not telling the card holder what has really taken place in these transactions. If told, he may have decided not to enter into such a contract, but he was never given that choice, was he? I could go on, but I believe I have stated the situation as clear as can be expected. Like it or not, that is how the system works, as per the Fed publications.
In reply to Leo’s additional comments above:
1. Credit River Decision
In 1968, a Minnesota Justice of the Peace (not an actual judge, mind you) ruled that Federal Reserve Notes (aka dollar bills) are not valid currency under the U.S. Constitution. Debt elimination conspiracy-buffs love to cite this case as proof of their claims, and predictably, Leo trumpets that Credit River “HAS NEVER BEEN OVERTURNED.” However, a case need not be formally overturned on appeal in order to be discarded by the legal community as bad case law. Credit River is a “null” decision, meaning it has no impact as a case precedent. That’s because numerous other (more recent) court rulings totally contradict its conclusions. The Minnesota State Law Library has further information on this long-discredited case here:
https://www.lawlibrary.state.mn.us/askfaq.html#credit:
Here’s the money quote:
“Furthermore, the Minnesota cases cited by Plaintiff are not only unreported, but they have been vacated by the Minnesota Supreme Court in reported decisions. See In re Daly, 284 Minn. 567, 171 N.W.2d 818; Zurn v. Northwestern Nat. Bank of Minneapolis, 170 N.W.2d 600, 284 Minn. 573 (Minn. 1969); Daly v. Savage State Bank, 171 N.W.2d 218, 218, 285 Minn. 503, 503 (Minn. 1969). Plaintiff is hereby admonished she must not cite any decision under which Justice Martin Mahoney purported to question the validity of federal currency or the Constitutionality of the Federal Reserve Act, nor may she cite any opinion or decision as authoritative which no longer has authoritative status.”
The attorney involved (Daly) was later disbarred. Today, the ONLY people who pay attention to the Credit River case are those who think that paper money is unconstitutional. They are mistaken. Federal Reserve Notes are indeed lawful currency. Here’s a link to several more case citations in support of this assertion:
https://www.publiceye.org/conspire/flaherty/flaherty3.html#30
As usual, the conspiracy theorist chooses to ignore massive evidence to the contrary and clings to the one obsolete case that seems to support his preposterous claims.
2. Fractional Reserve Banking
Leo is all in a tizzy because of something called “fractional reserve banking,” a process by which banks create what economists call “checkbook money.” He presents this in a way that makes it sound like some deep dark secret, that a Federal Reserve attorney had to testify to this under oath, and so on. What a joke! Pick up any Economics 101 textbook. It’s all there in black and white. Economists refer to the money supply as M1, which includes currency in circulation plus demand deposits, inclusive of deposits created through fractional reserve banking. You can find the historical figures for the various measures of the money supply here:
https://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
Examine the figures, and you will see that the size of the money supply (M1) changes over time. From one month to the next, it might grow by, say, $50 billion. So where does that increase of $50 billion come from? Most of it comes from bank loans, which cause the money supply to expand.
Now, any first year economics student already knows all this, and there is absolutely NOTHING controversial about it whatsoever. Simply put, the creation of money through fractional reserve banking is the WAY OUR FINANCIAL SYSTEM WORKS, period. There is nothing complicated about it. If you deposit $100 cash into a bank account, the bank will keep (say) $20 on reserve and loan out the remaining $80, which would otherwise be out of circulation and sitting idle and unproductive. The person who receives the $80 loan buys stuff with it, and the person or company he/she bought from then deposits the $80 in *their* bank account. On the “new” $80 deposit, the second bank holds $16 (20%) in reserve, and puts the remaining $64 back into circulation in the form of a loan. And so on. This is how M1 expands. One way to look at it is that “new” money is created by this process. However, the expansion is temporary and conditional, and money can also be “destroyed” through the reverse of this process. (This is what happens when there is a “run” on a bank and all the loans have to be called in to meet the withdrawal demands.) Our central banking system, via the Federal Reserve, regulates this process and provides various mechanisms in support of it.
For those readers curious to learn more about the way our money supply expands and contracts through this process, I recommend this Wikipedia article on the subject:
https://en.wikipedia.org/wiki/Fractional_reserve_banking
If we did not have this system of banking, we’d be living in a financial Stone Age. Is it a perfect system? No. Can corrupt individuals or corporations screw it up? Yes. (See the mortgage crisis, for example, where excessive leverage proved to be one of the key factors causing the collapse of major companies like Lehman Brothers and Bear Stearns.) Is it the best system we have? Yes. Although it certainly has room for improvement in the form of tighter regulation and oversight, no one has proposed anything better in terms of fundamental economic structure. Does Leo offer an alternative that makes any sense? Nope.
3. The Federal Reserve Straw Man
Who’s right, Charles Phelan, or the Federal Reserve? Leo has set up a false choice, a classic Straw Man argument. There is no choice to be made here. I agree completely that banks have the power to expand the money supply through fractional reserve lending. What I dispute, however, is that this gives consumers the right to stiff their credit card banks based on Leo’s theory of “vapor money.” In fact, the Fed says the exact same thing that I do about this con game. Here’s a link to a copy of a Fed warning on this very subject:
https://www.zipdebt.com/blog/occ-warning
Seems like the Fed and I have the exact same position on “debt elimination”, doesn’t it?
4. Do Credit Card Banks Operate Fraudulently?
The entire “debt elimination” house of cards rests on the premise that the credit card banks are up to something shady, and that their contracts are unenforceable because they are fraudulent. Leo is 100% wrong on this point. There have been literally millions of court cases that prove the precise opposite, namely that credit card agreements ARE enforceable. Every single creditor judgment in a debt collection lawsuit is evidence to the exact opposite of what Leo claims.
Further, the National Bank Act specifically grants banks the power to extend loans against personal security (meaning the commitment of the individual to repay the loan), including the power to extend credit via credit cards by ruling of the OCC. Basically, credit cards are nothing more than an extension of the time-honored concept of the “letter of credit.” Here is the relevant code and case law: 12 USC §24 (Seventh); see Colorado Springs National Bank v. United States, 505 F.2d 1185, 1189-90 (10th Cir. 1974).
Money quotes from the above cited case:
“The business of the taxpayer is banking. As a national bank it is bound by, and must comply with, applicable federal statutes. Section 24, 12 U.S.C., provides in Subparagraph Seventh that a national bank may exercise ‘all such incidental powers as shall be necessary to carry on the business of banking,’ including ‘discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt,’ ‘receiving deposits,’ and ‘loaning money on personal security.’ Under the rulings of the Comptroller of the Currency, a bank may issue credit cards. See Comptroller’s Manual for National Banks, Pars, 7.7376(b) and 7.7378. The Federal Reserve Board recognizes that bank credit cards are ‘bank services.’ See 12 C.F.R. 219.104(d). In United States v. Philadelphia National Bank, 374 U.S. 321, 326, 83 S.Ct. 1715, 1721, 10 L.Ed.2d 915, the Court refers to the key role which commercial banks play in the national economy and says that commercial banking ‘describes a congeries of services and credit devices.’ Listed among the principal banking products are ‘bank credit cards.’ Ibid. at n. 5.”
“Before entering the credit card field, taxpayer made loans on accounts receivable and personal loans covering consumer transactions. For years banks, including taxpayer, have issued letters of credit. The credit card program furnishes a facility to handle these operations in a simple manner adaptable to operation through modern computers. A letter of credit is ‘a letter whereby one person requests some other person to advance money or give credit to a third person, and promises to repay the same to the person making the advancement.’ Second Nat. Bank of Toledo v. M. Samuel & Sons, Inc., 2 Cir., 12 F.2d 963, 966, cert. denied, 273 U.S. 720, 47 S.Ct. 110, 71 L.Ed. 857. The same function is performed by the handy, plastic card issued by the bank. The participating merchant honors the card in payment for merchandise, the issuing bank pays the merchant, and the card user is liable to the bank.”
5. The “Vapor Money” Theory
Leo says that I don’t have to pay for my new washing machine because the credit card bank failed to disclose the true nature of the transaction, and therefore we don’t have a valid enforceable contract. He says it was already “paid for” anyway, with “my money” that the bank “created” when they opened an account in my name. What utter nonsense!
Look, Leo, it really doesn’t matter how many words you write to support your interpretation of the law. You’re just spinning a fairy tale. The simple reality is that THE COURTS HAVE RULED AGAINST YOUR INTERPRETATION, time and time again. Nobody that matters agrees with you. You’re welcome to think that the financial system is a scam, that credit card banks conduct business fraudulently, and that the government is all a part of a big conspiracy. Knock yourself out. Go back to living on a barter system and eating roots and berries if that’s what you believe in. But you should stop saying “this is what the law says or means,” when the law says nothing of the kind and the people who interpret the law disagree with you 100% of the time!
Example: Recently, two con artists in California tried to run a vapor money scheme based on the exact principles Leo puts forth, except they tried to apply this nonsense to mortgage debts! These two thieves are now sitting in prison for running this scam on distressed homeowners, more than 600 of whom lost their houses as a result of this wonderful “legal theory.” Here’s a link to the case, The Frances Kenny Family Trust v. World Savings Bank FSB, 2005 WL 106792 (N.D. Cal. 01-19-2005):
https://www.quatloos.com/Kenny_Family_Trust.htm
Quoting from the 2005 conclusion:
“Moreover, plaintiffs’ ‘vapor money’ theory has no basis in law. It has been squarely addressed and rejected by various courts throughout the country for over twenty years. See, e.g., Nixon v. Individual Head of St. Joseph Mortg. Co., 615 F.Supp. 898 (C.D.Ind.1985); Theil v. First Federal Sav. & Loan Ass’n of Marion, 646 F.Supp. 592 (N.D.Ind.1986); In re Stickland, 179 B.R. 979 (Bankr.N.D.Ga.1995); Rene v. Citibank NA, 32 F.Supp.2d 539 (E.D.N.Y.1999); Hinz v. Washington Mut. Home Loans, 2004 WL 729239 (D.Minn.2004). Plaintiffs’ counsel completely neglected to bring these authorities to the attention of the Court. It is this kind of abuse of the judicial process (again, which the Court has seen first hand) that justifies an award of attorney’s fees against plaintiffs and their counsel.”
Not a single person using this vapor money argument has won a court case on the basis of the rubbish Leo is trying to pass of as valid legal argument. Prove me wrong, Leo. Again, I repeat my request. Give me ONE valid court case pertaining to credit card debt where the debtor won ON THE BASIS OF YOUR ARGUMENT. Put up, or shut up, already.
Well, let’s see now, where shall I begin….First I might point out that it is not my way, when having an exchange of opinions on legal matters, to “put down” through innuendo, the intelligence of the person with whom I am having the discussion as to a difference of views of various cases and opinions.
Readers of these current exchanges will no doubt notice the slick attempts at twisting what I have put forth, in an attempt to make it appear as though I have said something, when it is clear I have not. Generally this type of attack starts out with accusing someone of being on the “fringe” or most frequently the favored tactic is to accuse one of being a “conspiracy” nut, as Charles has seen fit to try and pin this label on me.
A careful reading of this exchange will no doubt reveal no references to anything “conspiratorial” in what I have put forth. Charles would have us believe everything is “hunky dory” with the banks and the way they do business, etc. How anyone in today’s world could take up the mantle of the banking industry’s legitimacy and basic “fair dealing”, and truthfulness in transacting business etc., is simply ludicrous. Just pick up any newspaper and read day after day the sickening revelations of this corrupt bunch.
That self evident truth aside, Charles is very clever in his attempt at twisting the meanings of what I have written. I referred to the “Credit River” decision because within that case was sworn statements by the Federal Reserve’s attorney admitting to how they create money for so called “loans”. Instead, Charles tries to twist the referrence to the case, not as to the truthfulness of what I said happened in that case, but rather tries to belittle any sworn statements by the Fed in that case, by reason of pointing out that it never became precedent. No case, is precedent unless upheld on appeal. Every case is effective in reality only in so far as THAT case is concerned,UNLESS it’s outcome is upheld on appeal and allowed to be published. Then these cases can be used in other similar cases as examples of how other courts ruled in similar matters. I gave accurate quotes directly from Federal Reserve publications, which anyone can read for themselves. Charles would have us look away from the “meat and potatoes” of black and white statements, and claim those, including myself, must be deluded to believe the words mean what they say. He attempts to paint me with his “put ’em all in the same catagory” method of ridicule. I have not ridiculed his point of view, as he attempts with others who disagree with his standard line of bankers diatribe. The Credit River case has never be overturned, no matter who tries to “poo poo” it. It was a case decided by jury verdict, the fact that Judge Mahoney was a Justice of the Peace does not reduce the decision in that case. We might note, that he was poisened within a few months of deciding that case. It was never appealed by the bank involved, so it couldn’t become precedent. I ask anyone who has the interest to read the entire case, and find any legal errors in anything put forth to the jury or any incorrect rulings made in the case.
Charles would have us believe there is no such thing as contract law. I say to you Charles, there is nothing OTHER THAN CONTRACT LAW. A contract containing elements of fraud, misrepresentation, failure to disclose, vitiates all contracts Ab intio, and you know it.
How you can attempt to defend as valid these thousands of fraudulent contracts, can only inforce my suspicion you are either a “plant for the banks” or simply have drunk the “coolaid”. As far as the reference to “vapor money”, would you have us believe keystroke entries on the banks computers create “real money”? There is only two kinds of so called “money”, substance and money of account. There is nothing behind bookeeping entry balances. They are just numbers of account signifying nothing. Mere figments of peoples imagination. The banks have a terrific system of creating what passes for money and is used as a medium of exchange within commerce. But in reality, it’s all a fiction. I never said what they are doing was illegal, and just because everybody will not admit the “emperor has no clothes” does not change the fact that these entries create the illusion of money out of the air. Even the Federal Reserve notes we use everyday are nothing more than illusion, They are not exchangeable for anything except by those who give them value. If anyone could turn on a printing press and make green pieces of paper having no more value than the paper they are printed on, they would do it. But ONLY THE BANKS can do that. Print a “one” on this one, and a “50” on that one etc. In order to be a true negotiable instrument a note must have an amount certain and a time certain to be paid. Is this the case with a Federal Reserve note? No, it is not. These notes are just illusions, created by a brilliant bunch of people who have control and means to enforce this nonsense.
I admire the brilliance of the people who created this monster, but that doesn’t mean I don’t know exactly what they are doing and have done all these years. Any business that is built upon fraudulent implications, and misrepresentation, is clearly not something anyone would knowingly want to support or reward. Most cases concerning the vailidity of bank operations regarding the matters we have discussed here, end up as a win on the side of the banks, you will get no argument from me on that one. If they can get you asking the wrong questions, they will give you the right answers to those questions, and you will lose the case. But, ask the “right” questions, and you will find yourself in judges chambers discussing a dismissal and settlement. (with of course agreement to seal the case) No judge in his right mind will rule against the primary basis against the banks in open court, nor allow a landmark decision which would reveal the truth for all to see. In fact, in may interest you to know there is a secret prerogitive a judge has that he may rule against anything that would tend to upset the general rule of commerce and cause kaos in the public venue, whether or not it is valid. The public stability comes first before all else. Just because most attorney’s don’t how to properly try a case and therefore lose almost every one of these credit card cases, doesn’t mean anything more than they are simply not good enough or up to the task. They are mainly in court to get summary judgments from pro se defendents who get clobbered by procedural matters. Notice I have not said that what goes on in these cases is illegal, just off point enough to lose the case. I don’t know what else can be said about the fact that all loans come from borrowing, which creates bookentry accounts from which other bookentry accounts rise and fall. No substance, no money, just keystrokes. Banks are not allowed to lend depositors money, and they don’t. They use the clever mechanism of owning the deposit as an asset, then issuing credits and deductions from that account, so techically they are not lending the depositors funds. The depositor only has an IOU from the bank for those funds, and hopes he can have it honored on demand. But it is not denied, and cannot be denied that those book entries came right out of the air.
This position is not one of my making, as Charles would have us believe, or that I am some kind “anti government conspiracy whacko”. My position has been arrived at through thorough legal research as to what has been said and decided by court after court, when such matters have been before them. Banks cannot lend credit. Bank charters do not allow them to do anything outside their charters. What they do IS outside of those charters, therefore it is considered ultra vire, in law. This means, these contracts are void, null, of no enforceability. A fact no bank wants aired in open court.
The below is not MY opinion, but is the basis for my thinking and position on these matters. Contracts make the law, period. Fraud voids all contracts, period. Not my creation, just a fact.
I submit for the readers perusal the following from my extensive legal case library:
The following court cases support the fact that the banks are fraudulently making loans:
“A national bank has no power to lend its credit.” (Farmers & Miners Bank vs. Bluefield National Bank, 11 F2d 83, 271 US 669)
“Banking Associations from the very nature of their business are prohibited from lending credit.” (St. Louis Savings Bank vs. Parmalee 95 U. S. 557)
“National Banks may lend their money but not their credit.” (Norton Grocery vs. Peoples National Bank, 144 S.E. 501, 151 Va. 195)
“Neither, as to include in its powers not incidental to them, is it a part of a bank’s business to lend its credit. If a bank could lend its credit as well as its money, it might, if it received compensation and was not careful to put its name only to solid paper, make a great deal more than any lawful interest on its money would amount to. If not careful, the power would be the mother of panics . . . Indeed, lending credit is the exact opposite of lending money, which is the real business of banking, for while the latter creates a liability in favor of the bank, the former gives rise to a liability of the bank to another.” (American Express Co. vs. Citizens State Bank, 194 NW 429)
“A bank can lend its money but not its credit.” (First National Bank of Tallapoosa vs. Monroe, 135 Ga 614, 69 SE 1123, 32 LRA)
“It is not within the statutory powers for a national bank, even though solvent, to lend its credit . . .” (First Intermediate Credit Bank vs. Herisson, 33 F 2nd 841)
“A national bank, under federal law being limited in its powers and capacity, cannot lend its credit.” (Howard & Foster Co. vs. Citizens National Bank of Union, 133 SC 202, 130 SE 758)
“Banking corporations cannot lend credit.” (First National Bank of Amarillo vs. Slaton Independent School District, Tex Civ App 1933, 58 SW 2d 870)
“There is no doubt but what the law is that a national bank cannot lend its credit or become an accommodation endorser.” (National Bank of Commerce vs. Atkinson, 55 Fed Rep 465)
“Nowhere is the express authority granted to the corporation to lend its credit.” (Gardilner Trust vs. Augusta Trust, 134 Me 191; 291 US 245)
“A national bank has no authority to lend its credit.” (Johnston vs. Charlottesville National Bank, C.C. Va. 1879, Fed Cas. 7425)
“A contract made by a corporation beyond the scope of its power corporate powers is unlawful and void.” (McCormick vs. Market National Bank, 165 U.S. 538)
“A national bank . . . cannot lend its credit to another by becoming surety, endorser, or guarantor for him, such an act is ultra vires . . .” (Merchants’ Bank vs. Baird, 160 F 642)
Despite the above court cases, Ralph Gelder, Superintendent, Department of Banks and Banking, State of Maine, said on Feb. 20, 1974, “A commercial bank is able to make a loan by simply creating a new demand deposit (so called checkbook money) through bookkeeping entry.” This is in total contradiction to what the courts have said. Yet, that is exactly how the banksters create the money to loan to its customers or to buy government bonds.
“Federal Reserve bank credit does not consist of funds that the Reserve authorities get somewhere in order to lend, but constitute funds that they are empowered to create.” (Federal Reserve Bank: Its Purposes and Functions, 1939 Edition)
“Act is ultra vires when corporation is without authority to perform it under any circumstance or for any purpose. By doctrine of ultra vires a contract made by a corporation beyond the scope of its corporate powers is unlawful.” (Community Fed S&L vs. Fields, 128 F 2nd 705)
“A bank is not the holder in due course upon merely crediting the depositors account.” (Bankers Trust vs. Nagler 229, NYS 2nd 142)
“A holder who does not give value cannot qualify as a holder in due course.” (Uniform Commercial Code 3-303.1)
“Checks, drafts, money orders and bank notes [Federal Reserve Notes] are not lawful money of the United States.” (State vs. Nealan, 48 Ore. 155)
“When an instrument [notes] lacks an unconditional promise to pay a sum certain at a fixed and determined time, it is only an acknowledgement of the debt and statutory presumptions like the presence of a valuable consideration, are not applicable.” (Bader vs. Williams, 61 A 2d 637)
“A note is not negotiable unless it is payable at a time in the future.” (Rhodes vs. Schofield, 82 So. 2d 236)
The Conspiracy Mindset Exemplified
My original post was about the conspiracy-theory mindset of true believers in “debt elimination.” As I said above, “Once you believe that the core financial system of world commerce is an insidious scam—you know, the system that has helped lift the living standard of billions of human beings around the world—then all remaining logic and critical thinking goes right out the window.”
Leo has demonstrated himself to be a fine example of such a person, with all the hallmarks of the conspiracy mindset. Yet he refuses to acknowledge what is obvious to probably 99% of the people reading this thread.
Since he has repeatedly accused me of twisting his words, I’ll quote him verbatim in what follows:
Well, my friend, you have clearly stated your belief that our entire financial system is nothing but a scam and that Federal Reserve Notes (aka dollar bills) are not lawful currency (see below excerpts). I never actually referred to you as being on the “fringe” in any of what I wrote above. But now that you mention it, these beliefs of yours do squarely place you on the “fringe.” You are at least two standard deviations out on the bell curve of consensus reality. Why? Because nobody who matters agrees with you! Not one judge, not one appellate court – nobody who’s opinion carries actual legal weight. What other definition of “fringe” is there?
Really? You must be either joking, or not paying attention to what you’ve been writing on my blog comment form. For the reader’s consideration, here are a few of Leo’s gems, quoted verbatim:
Sounds pretty conspiratorial to me, Leo. Who are “they”?
You’re describing a nationwide conspiracy here, Leo. Since there are no cases in support of your interpretation of the law pertaining to credit card contracts, your position is that no judge will allow the true facts to be heard in open court. So that would necessarily mean that EVERY case in which the appropriate paperwork was filed (by you, let’s say, since you know everything there is to know about all this), the judge has instructed the plaintiff to settle and then sealed the records. One definition of the term “conspiracy” is two or more people agreeing to act in an unlawful or fraudulent manner, and the above described scenario certainly fits this definition. You’re saying that all of the judges who have heard these cases to date have conspired to prevent the truth about our financial system from becoming public. That makes you a conspiracy theorist, dude!
The financial system has not “completely collapsed,” nor is the stock market “crooked.” What has happened is that we have experienced the popping of an enormous bubble, namely the subprime mortgage meltdown. Speculative bubbles have happened throughout history. There was the Tulip Bulb bubble in Holland in the 1600s, the South Sea Bubble, numerous stock market bubbles in the 1800s and 1900s. More recently, we had the dotcom bubble, which popped in 2000. Enron was another kind of speculative bubble, driven in large part by corruption coupled with lack of proper oversight. And now we have the epic mortgage bubble and the credit crunch. It’s just more of the same. This time, the world financial system has experienced a serious LIQUIDITY CRISIS, where the inter-bank lending of funds has dried up due to fear and uncertainty over risks. Hence the effort by the Fed to inject liquidity into the system and unclog the drains. We’re in for a rough couple of years economically, without a doubt. But we’ll survive, as we always have, and eventually the economy will prosper again.
Leo, this sounds an awful lot like you think I’m part of the conspiracy. 🙂
You really should give this one up. Let it go. It’s a non-case. JP cases in Minnesota are non-precedential *by definition*, and Mahoney was never empowered to empanel a jury in that state anyway. He exceeded his authority, which is why the decision is null. There was no more need to “overturn” this decision than there was to overturn the Dred Scot decision after the 13th Amendment was passed.
Also, where are you going with this whole “he was poisoned” thing? Are you inferring that “they” had something to do with Mahoney’s death? 🙂
Yes, folks! He DOES think I’m part of the conspiracy! Too funny, Leo. Don’t you understand that this is what ALL conspiracy-minded individuals think? That their critics are in on the big conspiracy? Anybody who has read my website material and/or listened to my audio seminar knows that I do not work for the banks, nor do I believe that everything is “hunky dory” with the these institutions. I work on behalf of consumers, good honest American citizens who are being hammered without mercy by these predatory banks. What I do is help level the playing field, with TACTICS THAT ACTUALLY WORK.
Leo, the only reason I am taking time to respond to your drivel is to make sure that consumers stay away from getting “helped” by people like YOU. I have seen the damage done when people tried to deal with their debt by denying its very existence the way you do. I’m sick and tired of cleaning up after all you “debt elimination” experts out there. Believe whatever fairy tales you like. But stop inflicting your distorted view of reality on the unsuspecting public!
A “…brilliant bunch of people who have control …”? Who are you talking about, the Trilateral Commission? The Bilderberg Group? The Illuminati? 🙂
So again, all the judges in the United States are in on the big scam. Gosh, Leo, this is sounding more and more conspiratorial to me. What do you think, readers?
Sure, and like I said before, NO COURT HAS EVER AGREED WITH YOU. The “no money lent” or “vapor money” argument has been shot down in court multiple times over the past two decades. I asked for a single case citation where a credit card debt collection case was successfully defended on the basis of your argument, and what did I get? A list of case citations that have nothing to do with what I asked for. Show me a SINGLE victory on the basis of the argument, one tiny little credit card bill that was successfully challenged in court using this method. Not even ONE, Leo? Wow. That’s some spectacular record of success you have there.
On the other hand, the courts have consistently ruled AGAINST your interpretation. So all your blather about how no judge will ever allow this matter to be heard in open court is totally FALSE. I already cited one example in my comment above. Here’s another below:
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
See 2006 Ohio 6744
Wells Fargo Bank, NA successor by merger to Wells Fargo Home Mortgage, Inc., Plaintiff-Appellee,
v.
Theresa Ward aka Theresa S. Ward et al., Defendants-Appellants.
No. 06AP-745.
Court of Appeals of Ohio, Tenth District, Franklin County.
Rendered on December 19, 2006.
“The Court concludes that the complaint is utterly frivolous and lacks any legal foundation whatsoever. Suffice it to say that all of Plaintiff’s claims stem from the same basic premise.
Plaintiff alleges that the promissory note he executed is the equivalent of “money” that he gave to the bank. He contends that Bank One took his “money,” i.e., the promissory note, deposited it into its own account without his permission, listed it as an “asset” on its ledger entries, and then essentially lent his own money back to him. He contends that Bank One did not actually have the funds available to lend to him, but instead “created” the money through its bookkeeping procedures. He further argues that because Bank One was never at risk, and provided no consideration, the promissory note is void ab initio, and Defendants’ attempts to foreclose on the mortgage are therefore unlawful.
Plaintiff offers no authority for this patently ludicrous argument. Similar arguments have been rejected by federal courts across the country. See Frances Kenny Family Trust v. World Savings Bank, No. C04-03724 WHA, 2005 WL 106792 (N.D.Cal. Jan. 19, 2005) (sanctioning plaintiffs and rejecting their “vapor money” theory); Carrington v. Federal Nat’l Mortgage Ass’n, No. 05-cv-73429-DT, 2005 WL 3216226, at 3 (E.D.Mich. Nov. 29, 2005) (finding “fundamentally absurd and obviously frivolous” plaintiff’s claim that the lender unlawfully “created money” through its ledger entries); United States v. Schiefen, 926 F.Supp. 877, 880-81 (D.S.D.1995) (rejecting arguments that there was insufficient consideration to secure the promissory note, and that lender had “created money” by means of a bookkeeping entry).
>>>>>>>>>>>>>>>>>>>>>>>>>>
What part of “utterly frivolous” and “lacks any legal foundation whatsoever” do you fail to grasp, Leo???
To all you true believers in the “vapor money” argument Leo has been writing about (endlessly, I might add), listen up, please. What you don’t seem to understand is that everything changes the MINUTE YOU USE THE CREDIT CARD. All bets are off then. You just entered into a binding contract at that point. This is because TIME enters into the equation. The SEQUENCE in which business transactions are conducted makes all the difference in the world. Say I buy a washing machine with a credit card. The merchant accepts payment for it via the card. The bank pays the merchant. I pay the bank, and the cycle of commerce is completed. The merchant takes less risk than the bank, because the bank will normally honor the merchant charges via electronic transfer. But an individual might decide not to pay the credit card bank. Who takes the hit? The bank does. Who has the greatest risk? The bank does, of course. The material fact of TRADE RISK changes the equation entirely. The bank DOES post an actual loss if the debtor defaults. To believe otherwise, especially in the face of recent news headlines, demonstrates a stubborn refusal to face reality. Banks are being hit with billions of dollars in losses (duh, hello?), and are being forced to reserve ever higher amounts toward expected additional losses. All those write-downs represent an enormous contraction of liquidity within our economy. Those are real losses, not vapor money. They represent lost capital, which equates to lost opportunities to grow our economy and help more people to prosper.
The ironic thing here is that it’s a really good thing that Leo and his pals are not in charge of our financial system. Because if they got their way, there would be no such thing as fractional reserve lending, and the current economic crisis would look like happy days compared to the worldwide economic collapse that would occur if banks were required to keep a 100% reserve requirement!
OK. Cheers for now. Oh, wait, it just dawned on me. It’s the Freemasons who are behind it all, right? Is that who you meant by “they”?
(Relax, dude. It was a joke. You need to lighten up. :-))
Charles, we seem to have a complete difference of perspective on these matters, although I can see how one could look at it as you do. Surely your viewpoint is clearly in the majority. Holding my views is admittedly not a popular one, therefore I rarely express it publicly, as most take your position “well everybody knows that just can’t be true”. “To believe as you do, one would have to believe the banking industry is totally corrupt”..etc. So, there is little point in furthering this exchange, as I once believed as you do.
It wasn’t until my investigations as to the true nature of all this compelled me to do a complete re-assessment of my previous beliefs. Part of my wake up call came when I became a member of the judicial counsel and was privy to various judiciary publications meant for judiciary “eyes only”. These were not secret, but few would have access if not subscribed. I can only surmise, being exposed to these facts of life, one would be hard put not to read case law and decisions in light of what the real intent was behind many, if not most of the decisions made in various cases involving banking, securities and credit card matters. To me, it became clear that the banking system was to be protected at all costs, that the “status quo” would be the guiding principle in all such cases, wherever possible. “Hot potato” cases were to be handled by “direction” and if not satisfactory, directed to be “settled” and sealed. Reading hundred of decisions from this point of view, has a clarifying effect on ones perspective of how the decision was reached. One just looks for opinions upon which to build a “character” of the case. Once starting down this road of legal logic, one can see what is coming at the end, and it’s supporting dicta.
So it is no wonder, if the judiciary starts out from that point of view, it is rather easy to direct the case toward that end. How many cases have I read where crucial evidence was not allowed to be heard by a jury for consideration, leaving only that which was beneficial to the banking side allowed to be used during consideration. This type of manipulation is rampant in the legal system and thus if one becomes aware of it, one can only conclude this is definetely NOT an even playing field. Quoting the resulting case law resulting from such a mind set is hardly indicative of praise. Simply because the courts have been playing this game for many years does not legitimize it’s predictable result, nor vindicate those who point to these results as “proof” of concept of the case in question. If a judge starts out with particular agenda as to the way he wants the case to go, he will find many ways during proceedings to slant it that way. Appeal is mostly ineffective, as the appeal judges are members of the same country clubs, bar associations, ELKS lodge, or Masonic groups with those who’s decisions they are supposedly investigating. Unless the question put before them is in the extreme, they have discretionas to whether to hear it or not, and many legitimate appeals are refused. Once refused, one has only one place to go, and that is the supreme court. However, I know attorney’s who quit practicing in disgust because all the supreme court has to say is they will not hear it. No place to go from there, injustice or not, the matter is dead.
So, I’ll just leave it to the readers to ponder whether or not this whole matter of working within the “system” is a charade or not.
It is my firm belief, this country is headed into a depression because of the total debasing of our currency and the back room deals created by the Federal Reserve system. No country has ever survived under a central banking system, its just a matter of time, and now, times up…
Soon the world will face up to the fact the dollar has been printed into toilet paper. This whole charade is caused by the Federal REserve system of a central bank. But how else could a bankrupt government, ours, and most others,function unless they could just continue to borrow money through sale of TBonds to finance past debts, plus interest. A formula for disaster, which now faces us. If everyone knew they had unlimited credit, they would simply buy everything in sight, and just continue to borrow to make the payments as they came due.
Ponder this readers if before this current fiasco every citizen of USA Inc. owed $4000 each because of the national debt, and now the government admits they just signed your name to an additional 4-6 trillion more, how much do each of us now owe? Somewhere I read it is $175,000 for every man woman and child, and growing each time they print more Federal Reserve notes to patch up each crisis that is discovered.
I know a lot more about all this than most, and I do not for a minute buy what the government, and the banking industry puts out. The methods that they have paid congress to pass into law protecting debtors, are not drafted by the officials submitting them, rather they are drafted by the banking industry, and given to the congressmen to introduce. Read who contributes to these congressmen’s campaign funds, and it will become clear, you get what you pay for.
Cynical, you bet I am. I took the time to investigate what is going on. Charles has many methods which work within the guidlines of controlling, getting rid of, or settling debt. However, they all fall within the rules set up by the very entities your indebted to, using their rules. I can’t buy the logic of knowing the poker game is crooked, one sided, and when having lost a lot of money by voluntarily playing in the game, using “house script”, negotiating how to pay them their gains restricted by using their rules to pay. The argument thus is only as to how one is going to pay, not whether the debt was valid from the outset. How many cases can you read where jurisdiction was challenged, and the court simply swept it aside and moved forward. Any court ignoring jurisdiction challenge and going forward is not worthy of the name “court”.
Remember, if they can get you asking the wrong questions, they will readily give those answers. Key for them is to control what questions you ask in court. If all those are directed to consistently follow the wrong trail, they will always end up where that trail was designed to lead them. The toll road. Vary from those directions, and they have the power of contempt, which is used frequently to quite the rabel.
I will not post further.
Fair enough, Leo. Thanks for posting your thoughts here. And thanks for the tone of the above comment. I needled you pretty hard in my latest comment above, and you were a good sport about it. Just for the record, I do not question your intelligence. I simply disagree with you. I look at this issue from the perspective of what WORKS for the average consumer versus what does NOT. You were trying to engage me in a debate over interpretation of the law with respect to the way our monetary system operates, while I was writing from the perspective of someone who counsels debt-stressed consumers on a daily basis. From my point of view, even if I were to concede every one of your points of interpretation (which I don’t, obviously), in good conscience I still could not recommend that consumers use your approach. We both know there are dozens of debt elimination scam operators out there, bilking people of thousands of dollars for a service they can never actually provide. Most of these victims end up with judgments against them, and many file bankruptcy in the end. I take you at your word that you are not one of those operators. But I still have to argue against anyone trying these monetary protest tactics on their own, with or without assistance from a third party. In the regular course of my workweek, I talk to a lot of people in financial trouble. I’ve spoken with hundreds of them in 2008 alone. Every single one of them was really stressed out about their financial situation. We’re talking a lot of lost sleep here. The LAST thing in the world they want is to go to court with their creditors. The average person thinks of a lawsuit as being roughly equivalent to a root canal without anesthetic. Too painful to contemplate. So knowing that the whole angle of “credit card contracts are fraudulent” brings the risk of litigation to near 100% certainty, the “debt elimination” approach is automatically inappropriate for the vast majority of people seeking relief. Again, this would all still apply even IF the courts had not already ruled against the core argument on multiple occasions, which they have. So my view is that the individuals who adopt this approach are just tilting at windmills. I’ll leave it at that. Cheers.
That was a fun albeit long read. I’ve used some of Charles’s advice just from reading his blog and reports…and thus far it’s worked for me. I fall somewhere in the middle of this Leo/Charles spectrum, though tilting much more to the side of Charles. Yes, there is a lot of fraudulent activity that goes on behind closed doors…but even this fraud is practiced within the limitations of the economic setup.
This guy Leo is desperately screaming for someone to give him the time of day…but statements like “I know a lot more about all this than most” and “Part of my wake up call came when I became a member of the judicial counsel and was privy to various judiciary publications meant for judiciary “eyes only”…doesn’t hold a lot of weight when this person will not make his full name known, nor tell us where it was he was part of this ‘judicial counsel’. Anyone can say anything on the web. I can say I know there is a cover up about Roswell…that I was on some committee and was privy to documents. I could say anything…but unless I give FACTS and names…you shouldn’t buy one word I’m saying. It doesn’t matter how much ‘research and investigation’ I’ve done. There is always enough ‘stuff’ to back up almost any claim out there…what is relevant is the legitimacy of the ‘stuff’.
Thanks, George. I always rely on Carl Sagan’s maxim: “Extraordinary claims
require extraordinary proof.” Roswell is a case in point. This was nothing more
than a (then) top secret high altitude balloon project known as Project Mogul.
Because it was hush-hush during the Cold War, the whole thing got misinterpreted
as a flying saucer event. The pictures in the paper at the time showed that it
was debris from a balloon. Not good enough for the UFO-buffs. The pictures were
faked, part of the conspiracy, etc. There were no aliens at Roswell and no flyer
saucer crashed there. But some people *need* to believe in this sort of thing.
Enough said.
Charles, the exchange was fun, if long with Leo. Though
I find that you were by far the more clear writer (Leo needs to
learn the value of paragraphs and spell-checking), I was most
pleased by your final response to Leo in which you seem to give
him a bit of due credence, if only on a theoretical basis.
After all, one can hardly dismiss the fact that the Fed does
represent a huge conspiracy. The elasticity they practice and
control may have produced prosperous times since I’ve been on
the earth, but it most certainly has created some fine down
times as well. Have we inured to it so much that we cannot see
the chains of inflation it has saddled us with?
Now, does knowing this help eliminate any of my debts? Not in
any proven way that I’m aware.
I am going through your debt settlement program because I
believe you to be a clear and practical man. Your focus is not
on theories or pie-in-the-sky notions, just plain results. This
is what anyone should want in my situation; I certainly do.
I want to give Leo the general nod, however, that the Fed and
our money system have smelled things up pretty good. What this
private bank has done was well summarized by Thomas Jefferson
when he said “…first by inflation and then by deflation
[the central bank] will rob the people of all property….”
It would be trite of me to say (ala you Charles) that it only
matters, Leo, what the courts say. That is certainly
demonstrably true. Nevertheless, the honest answer from my
position is that I am so hand-tied with living paycheck to
paycheck that I know I could never muster the doggedness to
blaze a trail using an unproven technique in court. This, even
though I might earnestly agree with it in spirit. Perhaps this
is precisely the desired result of the Fed, that we all be
sufficiently financially distracted so that we will
not arise in objection to it.
Reading the above debate was like trying to get in the middle of Andrew Jackson and Thomas Biddle at a bankers ball. I do have a couple of questions. When a credit card company(cc) sends me a card they never include a contract.Several months after you activate the card, you receive, sometimes, terms and conditions.I did a bit of research and found out you agree to thier terms when you first use their card.Is it not a legal requirement that full disclosure be made before there is a contract? They include in terms and conditions such items as they do not have to follow the rights of debtors given under UCC, a right of restrictive endorsement. It order for debtor to lose their UCC rights, do they not have to say read this, sign here? How then do the ccs have a contract? When you purchased your washing machine and gave the store your cc, they gave an entry to the store and a debt entry to you.At that time no money exchanced hands.The merchant is happy and now the cc says we need your labor to square our books.( income) Lets say you get hit by lightening and are a vegetable the rest of your life and can never pay.(you have no assets and the lightening hit your washingmachine too) Does the cc lose anything? Their books lose a debit entry,they have no monentary loss.Their bank created an entry to satisify thestore who delivered the washing machine, Where was the risk to the cc? Does not a contract require that ther be risk involved in all contracts if not performed by both parties? Thirdly, the argument can go on forever about the Federal Reserve, private,government owned,thin air money vs gold etc. Is not the CC a corporation created by the state? How and when did this corporate cc become exempt from the Constutition? They were not given by congress the power to create vapor money as the Federal Reserve does. What makes the cc exempt from Article 1 Sec 8 ? I know that Treasury printed greenbacks for Lincoln etc, and the Federal Reserve was supposed to maintain the value of the dollar with an elastic currency.When were the banks given the power to create and loan credit and charge interest on it? Perhaps I missed the Constutional ammendment? Lets just say you ask your friendly cc the above questions and swear an afivadat, and ask them to answer these questions? certified mail or by service.Will they answer these questions? I know I must be stupid to ask, but does not contract law require the above to be a contract, especially when there is no written contract signed by both parties? What happens if you send this affidavit and the cc refuse to respond to your silly questions?Does not the UCC cover all commercial contracts as adopted by all 50 states? It states that an unanswered affidavit is the same as stating the truth of the affidavit.Are the cc exempt from the UCC? If so when did this occur? I would appreciate an answer to above questions as I am trying to figure out weather to side with Biddle or Jackson. Thank you [email protected]
Here we go again, folks! Yet another Don Quixote arrives to lecture us on the fine art of tilting at windmills, in the guise of “questions” to which he already knows the answers (or thinks he does). Tony, it’s totally obvious that you already side with the monetary protestors, so please stop pretending that you are trying to be objective. I have zero interest in another one of these debates, so let’s strip away the chatter about UCC, contract law, the Federal Reserve, the Constitution, etc., and get right down to the crux of the matter. You believe “no money exchanged hands” when I used the credit card to purchase the washing machine. You are mistaken. Money did change hands. We just have very different definitions as to what constitutes money! But I see little point in further debate on the subject. You’re welcome to believe either Jackson or Biddle, and I personally don’t care either way. Believe whatever you like, but it won’t make one bit of difference in court. Go ahead and see for yourself. Rack up a bunch of debt on your credit cards and don’t make any payments. Wait until all your creditors sue you, then go to court and test your theory that credit card contracts are invalid. Let me know how you do. 🙂
Reading this blog in 2012, still relevant… and hilarious. I read most of it, but once I got to Leo’s first novella, I found it flowed better if, when I saw his name, I just scrolled down for about a mile until I bypassed his mono-paragraphic conspiracy rant.
Hey, Leo! What’s your address? I’d like to send you a new tinfoil hat for your birthday!
Chuck, thanks for visiting and glad you enjoyed this post + comment exchange. It remains one of my favorite discussions on this blog. 🙂
I have enjoyed the debate, thank you!
Did you ever stop to think that all these types of arguing with the lender about Money Protestor theories and valid contracts has a place as a facade to settle or escape debt?
In essence these programs can start a debate with the creditors that allow the debtor the much needed buffer of time to get back on their feet financially by creating leverage for a future dime on the dollar settlement without a monthly creditor payback plan. It’s similar to a magic show. The creditor is looking at your left hand while your right hand is doing all the work.
The magic is in doing proper legal asset protection planning and/or the implementation of becoming invisible so that your judgment proof and/or unavailable to be served a debt collection lawsuit. Once the leverage of being anti-collectable is in place it’s a good time to venture out to offer for a dime on the dollar settlement and get rid of the debt once and for all. (That is if the Statute of Limitations has not been exceeded time barring the debt from collection any way)
Ultimately true debt elimination is not possible but not ever having to pay a single penny to creditors is completely possible within the realm of the law.
Some good books to read:
“Lawsuit and Asset Protection”
“How to be Invisible”
“Understanding Contracts”
just to name a few.
Hank, glad you enjoyed the debate, but I would never endorse a strategy of simply hiding and doing nothing, or using bogus challenges based on contract law or monetary protest tactics. That approach can backfire big time, and it only takes one hole to sink a ship. The vast majority of consumers I’ve worked with over the years want to achieve a formal *resolution* with their creditors, not simply duck out on their obligations with a run-out-the-clock strategy.
Thanks for your response. I think we are in agreement on a few things. Hiding does nothing for you. At the same time no smart person is just going to sit there and let all of their creditors take advantage of them, sue them, take their assets and garnish their wages. (well that is basically what a bankruptcy is) It is best to workout a plan to get back on track financially while working to settle debts with creditors for as little as possible.
I would like to ask you a some questions. If you will please answer them that would be of great help to all of your blogs future readers. It would be nice to know what debt resolution strategies you think work and how to avoid the many pit falls in any debt relief plan.
If you do not have first hand experience with any of the questions please state that you dont then respond with the way you would or do help your clients with credit card debt trouble.
Have you personally ever been in a financial situation where you could not afford to pay your creditors, not because you did not want to pay but because you could not because of some unforeseen life situation?
What *resolution* as you called it did you come up with to settle the debts with your creditors? Or that you would recommend to your closes friends and family faced with such financial disasters?
What is the average settlement amount you resolved your debts for? If not for you what is your average settlement amounts for the clients you help now or have helped in the past?
Did you have to pay imputed income tax on the settlements? If no why not? In other words did you have to pay income tax on the debts that were forgiven because it was considered a taxable income or gain to you? How did this effect your tax situation?
Did you have a month to month creditor payback plan? Or did you put money aside in an escrow account or savings account to settle with creditors? What would you do if you could not afford a monthly payment plan or to put aside money for a savings account to settle with creditors?
All lot of consumers who find themselves in debt due to divorce, unexpected lawsuit, fraud of another person, ect.. are entirely dependent on what little income they do have. How would you go about helping in these situations if the person could not afford to pay creditors monthly or could not file bankruptcy because the career field they were in forbade it?
I look forward to your reply here as I genuinely want to know what you recommend or how you would or did respond to the questions asked here in real life situations.
Thanks again for providing this blog there really is a lot of bad information out there on these topics of debt elimination/debt repudiation, debt settlement, ect.. and it is nice to find an intelligent post about the topic.
Hank, in my view *resolution* of a delinquent debt equates to a *document* that puts the matter to bed permanently, meaning a settlement agreement letter that protects against any future collection activity on the account in question.
The short answer to your series of questions is that I coach people based on the specific situation they are facing financially. I have 15 years of experience at debt settlement and have personally coached thousands of consumers. I do not take a one-size-fits-all approach to debt relief. If you have the time, I suggest that you read some of the numerous blog posts and articles I’ve published on this site, and you’ll soon see where I am coming from. Most of what you are asking me has been thoroughly covered in other posts. On this blog you’ll find the settlement averages my coaching clients have achieved, success track record data, and a lot of other content that will address your questions. For the tax treatment of settlements, see my November 2009 blog post on the insolvency exemption. Most of my clients are insolvent when they settle, so do not have to pay taxes on the 1099-C income resulting from a settlement.
In my experience, there is no one “best” solution to dealing with problem debt. For one person, I might recommend they talk with a bankruptcy attorney, especially if the figures indicate probable qualification for Chapter 7. For someone else facing Chapter 13, I would typically suggest debt settlement as “plan A,” provided they have sufficient resources to settle in a reasonable timeframe. Otherwise, Ch. 13 might be a better fit, depending on the assets involved. For someone struggling with $15k of debt on multiple small balance accounts, I might suggest debt roll-up or the DMP approach, and so on. In short, every situation is different and requires analysis and thought.
Now, I have some questions for you as well:
1. Why do you tell people on your website that bankruptcy is “no longer a sure fire way to get a clean slate or fresh start”?
2. Why does your FAQ state that “the universal default clause allows for all of your creditors to increase the interest rate they are charging you on your credit cards to as much as 40%,” when the Credit CARD Act of 2010 killed universal default completely?
3. How much do you charge for your program, and when do you collect payment?
Thanks in advance for your reply.
Thanks for the heads up on the error on the website. The FAQ about universal default clause was a little outdated. Thanks for the alert I had someone update that.
To answer your question the reason why bankruptcy is no longer a sure fire way is because after the new bankruptcy reform courts have been looking to find ways to convert Chapter 7 applicants into Chapter 13. (This is yet another similar payback plan like debt settlement, debt consolidation, debt management, ect..)
What do you do if the consumer your working with does not want a 4-5 year creditor payback plan because they dont have the money or the burning desire to pay?
If you recommend someone for bankruptcy, the client could be forced into a Chapter 13 filing, they will also have to pay each of the creditors back for somewhere between 40 and 60 cents on the dollar typically, plus Trustee fees.
Not a very good plan for someone short on cash each month who wants to keep the government out of their life.
Hank, sorry, but I believe you are mistaken on the subject of bankruptcy. If you will review the data available from the American Bankruptcy Institute, you will see that historically about 70% of people who file personal (non-business) bankruptcy do so under Chapter 7, not Chapter 13. From 1994 through 2004, the average ranged from a low of 68% to a high of 72%. During 2005, as people rushed to file before the law changed, Chapter 7 filings climbed to nearly 80%, then dropped down to 58-60% for the next two years. But as we rolled forward to 2009, Chapter 7 climbed back to 71% of filings, and has stayed there. The 2011 figures show that more than 7 of 10 people were still able to file under Chapter 7. To make the statement that bankruptcy is no longer a way to gain a fresh start is simply false, and not supported by actual filing data. You may want to also update your website information on this topic.
To your question, I generally suggest debt settlement as the best alternative to Chapter 13 bankruptcy. However, I am referring to *my* method of doing debt settlement, not the broken model offered by numerous debt settlement firms. I coach people how to do this themselves, keep the fees out of it, and work as quickly as possible. If someone runs into a snag with an uncooperative collection agency, I may refer them to a NACA attorney for assistance with a FDCPA claim. I do consider Chapter 13 to be a last resort, but still appropriate in some situations. In my experience, only a small fraction of the consumers seeking debt relief are looking to simply avoid paying entirely. And in fact, I prefer not to work with individuals who are looking to run out the clock. It cuts the wrong way with my ethics. That’s just my personal view and experience. Your mileage may vary. 🙂
Banks use two seemly contradictory contracts 1) deposits are available on request and 2)Banks loan the deposit which are due on demand, with the hopes that the money is re entered into the banking system so that they may balance their books. In order to have enough money in the system to pay back the money, banks need to keep extending credit. When the credits stops, the system exponentially folds and recession / depression occurs. Housing collapse was the result of feeding easy credit to the economy causing the so-called investor euphoria. This is, in its modern version a 3 century old trick. When the economy collapses the banks pick up on the assets for pennies on the dollars. The present recession cause the general populace trillion of dollars when you take into account the differences in family networth between the boom and the burst. https://www.nytimes.com/2009/03/13/business/economy/13wealth.html
Now while some of that is because of the devaluation of home prices, there are many people who purchase homes at inflated prices, lost their jobs, lost their down payment, the monthly payments they made.
Now to complicate matters securitization come into effect: customer 1 comes into bank and deposits 100k, Banks loans the 100k for the purchase of a new home. Seller deposits the 100k bank into the bank. The bank has another 100k to loan. The cycle continues, increasing the money supply and often undermining equilibrium. There is no evidence that reserve requirements limits credit. Now the banks sells the receivables/mortgage to a special vehicle trust, in what is call a true sale. The receivables/mortgages are sold off to banks books, and the banks take this new acquire money to extend loans. Two things to note here:
1) Money exist only as an extension of credit, payment of credit is dependent on on new credit.The principal is created but never the interest.
One of the reasons why the Courts do not want to acknowledge the obvious inflationary practice, is because the bankers are well organize and control things like the judicial, the educational and television.
2) On its face you have a completely absurd system. The federal Reserve is never completely audited, How can the nations money be manage in secrecy?
Julio, I’ll ask you the same question I have asked other critics of our monetary system. What would you replace it with? If you don’t like fractional reserve lending, which has been around for a very long time, are you saying that banks should be required to reserve 100% of deposited funds? Don’t you realize we’d still be living in the Stone Age if our monetary system operated that way? You also appear to be quoting the standard conspiracy rant about how “the Federal Reserve has never been audited.” It’s simply not true. The Fed has been audited over 100 times by the GAO, and also by private accounting firms. Read Flaherty’s analysis to get some perspective on various myths about the Federal Reserve.