"THE POP CULTURE GOVERNMENT CONSPIRACY THEORY"

Here is some very interesting information that every American should know. This posting is lengthy due to the addition of multiple court cases for which bankers are telling of their practices, under oath. Long story short, its been a practice for over 50 years for banks to loan money of which has no basis. The banks were broke 50 years ago and they are broke now. We have all been fooled by mortgages, home values, net worth (on paper), and currency in general. It is of very little value, literal pennies on the dollar and now nothing at all. Please educate yourself & read on. The only hope we have to rebuild America is by educating ourselves and banding together...

10 things your bank won't tell you

Do you assume that your bank serves your best interests? That a big bank's products are better? That your online account information is accurate? Don't believe any of it.

1. "Our branches are there to sell you, not serve you."

In the late 1990s, bank branches were considered outmoded relics soon to be replaced by ATMs and Internet banking. But just the opposite happened. In 1998, there were 89,000 bank branches in the U.S., and by 2007, there were 97,000.

Why? The industry realized that consumer banking is profitable and that despite the predictions of Silicon Valley wonks, the main criterion consumers use in choosing a bank is proximity, SNL Financial analyst Jennifer Payne says.

But branches aren't just about convenience; they're a bank's primary sales floor. Brochures for services as varied as retirement accounts and home loans are on display, and everyone from the teller on up is trained to make a sale. That's because in the current low-interest-rate climate, it's harder to generate revenue from interest alone.

Many players in the industry have been trying to boost fee- and service-based income, so if a teller sees you have a mortgage, he might suggest you meet with a loan officer to discuss a home-equity loan. Greg McBride, a senior financial analyst at Bankrate.com, says, "The more products a customer has with a bank, the more likely he is to stay with that bank."

2. "Our fees will only go up."

With the economy in a slump and big losses crippling in the mortgage market, banks are looking for reliable revenue streams. Hence punitive fees -- for overdrawing your account, say, or using a competitor's ATM -- are increasing. The average ATM service charge doubled between 1998 and 2007, and overdraft fees brought in $17.5 billion in revenue in 2006, up from $10.3 billion in 2004, according to the Center for Responsible Lending.

Rubecca Hegarty, a married mother of three in Woodridge, Ill., says she often pays upward of $100 a month in overdraft fees to JPMorgan Chase because, like most banks, it changes the order of purchases so that large debts get paid first, increasing the likelihood that customers will incur fees on smaller purchases. Chase says it does this because big payments like a mortgage are more important to consumers and so get priority.

.Revenue from penalties can be addictive for banks, Harvard Business School professor Gail McGovern says, but "they're going to face problems from angry customers, which leads to big call-center bills, employee dissatisfaction and turnover."

Indeed, that anger has reached the ear of federal lawmakers. Starting in July 2010, sweeping consumer protections will rein in many of the banking industry's most controversial practices.

3. "We change our interest rates all the time."

Regardless of what your credit card agreement says, you can never be sure how much interest banks will charge you. For example, nearly all cards have a default rate -- as high as 30% -- which banks apply when you've done something wrong, usually after two late payments in 12 months. But some banks have cut that to one late payment, says Curtis Arnold, the founder of CardRatings.com.

Banks can also change the terms of your agreement, raising rates when they like (though you can opt out and pay off the balance at the old rate as long as you never use the card again). Bank of America did that recently, upping many cardholders' rates from 10% or 12% to 27% or more, even though they'd done nothing wrong.

A Bank of America representative says the company periodically reviews the credit risk of its accounts and adjusts rates accordingly, adding that in the past year 94% have had no increase.

4. "College campuses are gold mines for us."

Students are the customers of the future, and banks are increasingly courting them, often right on campus. More than 120 universities have cut deals with banks to issue student ID cards that are also ATM and check cards. Schools can make millions from these deals, sometimes even taking a small cut of individual purchases.

Students are also a hot market for credit card issuers, and banks will make private deals with alumni associations to get contact information for students, parents and even people buying tickets to university athletic events. Card companies cut deals to set up booths on campus.s

"Universities don't negotiate on behalf of students," Manning says. "They're negotiating the best deal for the university."

A representative for the National Association of Independent Colleges and Universities says not to blame schools, as banks would market to students anyway, and universities at least try to get the best rates they can for students.

5. "In debt? The courts won't help."

Since the late 1990s, banks have been including mandatory-arbitration agreements in their contracts for many of their products, including auto loans, checking accounts, home-equity loans and credit cards. Such agreements prohibit you from suing and instead require you to use an arbitrator -- someone picked by the arbitration firm named in your card contract to hear the dispute and decide the outcome.

Though these clauses were originally designed to thwart class-action suits, the banks have also been using them for debt collection, says Paul Bland, an attorney with consumer-advocacy group Public Justice. There are even times when consumers, often victims of identity theft and unaware of the debt, aren't present when awards are handed down against them.

A recent suit against an arbitration firm brought by the San Francisco city attorney noted that arbitrators ruled in favor of banks in 100% of the 18,045 California cases brought against consumers from January 2003 through March 2007.

."From the consumer perspective, it's a nightmare," Bland says. If a bank brings arbitration against you, hire a lawyer and request a hearing in person.

6. "We're excited about your trip to Europe, too!"

It's bad enough that the dollar has struggled in recent years against most major currencies, but when you travel overseas, every transaction comes with big fees attached. Take out cash from an ATM in London, and you'll get hit with a foreign-transaction fee, plus a fee for using a competitor's ATM. All told, it can cost up to $7 just to withdraw $200.

It's a stash of cash, but how much do you need? And why should this take priority over other savings goals? .Credit card purchases aren't much better. Visa and MasterCard charge 1% of the purchase price for converting currency. And the issuing banks may take another cut, which can bring the total to 3% of your purchase price, says CardRatings.com's Arnold. "If people don't travel overseas very often, they just don't think about it," he says.

The best thing to do is determine which of your cards charges the lowest overseas-transaction fee. For people who travel a lot, Arnold recommends a Capital One credit card, which charges no overseas-transaction fees (and even declines to pass on Visa and MasterCard's 1% fee to customers).

Also, ask your bank about partnerships with foreign banks. Bank of America, for example, partners with Barclays Bank, saving its customers $5 per withdrawal from Barclays' ATMs in the United Kingdom.

7. "For all the fine print, we don't disclose very much."

Bank documents come loaded with small type detailing terms and conditions. But good luck finding out exactly what you're signing up for when you open an account.

In 2007, the Government Accountability Office sent investigators to see how well banks explained their fees and other conditions to potential customers. Though banks are required by law to make this information available, the GAO said one-third of the branches it surveyed didn't provide the required information. Worse, more than half didn't have any fee information on their Web sites.

Nessa Feddis, a senior counsel at the American Bankers Association, questions the report's methods -- banks failed the test if investigators waited more than 10 minutes for the information -- and defends the lack of data online. Banks are afraid of leaving old, inaccurate information on their sites if terms change, she says. But without details on fees, consumers can't make informed choices.

"Banks are not complying with the law," says Ed Mierzwinski, the consumer program director with the U.S. Public Interest Research Group. "People need more information so they can shop around for the best deal."

http://www9.pair.com/

Top 10 things debt collectors
don't want you to know.

1. The More You Pay, the More They Earn. Collectors get commissions - usually 30 to 50% - on money they bring in, which often double or triple their salaries. This means they have a strong incentive to press for a big "down payment" from you, even if this deepens the cycle of debt. Collectors hoping for a big commission may claim that the boss insists on a big down payment. In fact, blaming it on a mythical manager is designed to deflect your anger away from the collector.

2. Payment Deadlines Are Phony. Payment deadlines set by collectors are meaningless. Collectors simply want to create a sense of urgency, because the longer it takes to get you to pay, the less chance there is of collecting the debt.

3. They Don't Need a 'Financial Statement'. Collectors often claim they need a "financial statement" from you, so they can work out a realistic repayment plan. You'll notice, though, that the information they ask for - bank account numbers, references, place of employment - is far more than they need for that purpose. They're fishing for information that will help them find you if you move or sue you if you don't repay the debt.

4. The Threats Are Inflated. Collectors always graphically detail the disastrous consequences of failing to pay a debt. "Your credit rating will be ruined," they warn. (Not mentioning that it's probably already not so good, since a collection company is after you.) "Your personal possessions, including your car, could be seized and sold at a public auction!" (Never mind that this virtually never happens; it's illegal in some states and impractical because of the expense.) Probably 95% of the time, collectors go after only bank accounts and wages.

5. You Can Stop Their Calls. You have the right, under federal law, to tell a collection agency to stop contacting you. Just do it in writing, and contacts must stop, unless they're to tell you that collection efforts have ended or the agency is going to take a specific action (like filing a lawsuit) against you.

6. They Can Find Out How Much You Have in the Bank. A collector who has your bank account and social security numbers can probably easily find out the balance of the account. Because big banks now have automated account inquiry systems, the collector doesn't even have to speak to a human being; all it takes is a phone call to the automated voice-mail service. When the account number and social security numbers are punched in, the computer promptly supplies an up-to-the-minute account balance.

7. If You're Out of State, They're Out of Luck. Collection agencies routinely call out-of-state debtors to demand payment. But if a creditor has sued you and won, you are probably safe from enforcement action if you bank and work outside the state where the lawsuit was filed. That's because to collect, the collection agency must transfer the judgment to your state, which is prohibitively time-consuming and expensive.

8. They Can't Take It All. Certain income, such as social security, pensions and 75% of your take-home pay, is exempt from enforcement action. You can file a claim of exemption from a garnishment of the other 25% of your wages if it would cause you or your family severe hardship.

9. They May Not Know a Thing. Sometimes a collection agency lawyer, trying to collect a judgment debt, sends questions on a court form asking about your income and assets. (These are called "post-judgment interrogatories" or "information subpoenas.") This is good news for you - it means that the agency has no information and is hoping you will be intimidated enough by this legal questionnaire to complete it. Many people do, because the forms list sanctions, such as fines, for not doing so. But normally, it is too expensive and time-consuming for an agency to go to court and force compliance.

10. You Can Pay Student Loans in Installments. If you are behind on student loans, you can apply for what every collection agency hates: "reasonable and affordable payments" under the 1992 Higher Education Act. If you can document financial hardship, a collection agency must accept as little as $10 per month for at least six months. As long as you make the payments, you are eligible for Title IV Student Aid, and you can continue the payments unless your circumstances change.

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WHAT BANKS DON'T WANT YOU TO KNOW
Compiled and Edited by Peter Cook, M.Sc. C.M.E. (c) 1993

The following post is from a booklet published by Monetary Science Publishing. It is it the record of testimony given in a suit brought at common law in Minnesota in 1968 -- not all that long ago.

INTRODUCTION

Explaining what the banks don't want you to know may shatter most of the public's religiously entrenched assumptions about money and banking. What the general public "thinks" it knows about money and banking is largely based upon a collection of canards gleaned from TV, radio, newspapers and their own personal experiences with money and banking.

There is no academic curriculum that offers an intellectively [sic] comprehensive course in the modern "Credit Money" mechanism and banking. There is no academic or news media that explains the awesome power possessed in having access to clearing your own checks. If you and I could clear our own checks, through our own operated check-clearing house, we could then create "checkbook" money to buy/pay for our investments, just like the banks do. Checkbook or Credit Money is not a cash currency "representing" money. Credit Money, better
known as Bank Credit, is a cash currency "substitute" that circulates in the marketplace by means of checks as cash.

In the following pages you will find where high bank officials admitted that banks do create checkbook "deposit credits" to the credit of their clients' checking accounts, as their loans and investment payment funds. You will also learn how an attorney has successfully voided a bank foreclosure, because the bank admitted creating the checkbook "credits" as the funds it loaned to its client.

Even though attorney Jerome Daly was forced into a disbarment procedure for challenging the bankers' recondite practices, he successfully demonstrated that any knowledgeable attorney in the bank "credit money" mechanism in a just court can successfully challenge the bankers' unrelenting foreclosure of homes, businesses, farms and mills.

-- Peter Cook, M.Sc., June 3, 1993
------------------------------------------------

A LANDMARK DECISION

Reprinted in part from The Daily Eagle, Issue of Feb. 7, 1969

The fate of companies and individuals -- and governments is entirely at the mercy of banks. Their power is stupendous, both in creating and granting of loans, but in their arbitrary recall, with or without notice. This Court decision in the United States may well be the beginning of the end of some of their powers.

A Minnesota Trial Court's decision holding the Federal Reserve Act unconstitutional and void; Holding the National Banking Act unconstitutional and void; Declaring a mortgage acquired by the First National Bank of Montgomery, Minnesota in the regular course of its business, along with the foreclosure and the Sheriff's Sale to be void. This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all U.S. and State bonds held by the Federal Reserve, National and State Banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself, his country, and to the people of the world, for that matter, to study this decision very carefully and to understand it. For upon it hangs the question of freedom or slavery.

On May 8, 1964 the writer Mr. Jerome Daly executed a Note and Mortgage to the First National Bank of Montgomery, Minnesota, which is a member of the Federal Reserve Bank of Minneapolis. Both Banks are private owned and are a part of the Federal Reserve Banking System.

In the Spring of 1967 Mr. Daly was in arrears $476.00 in the payments on this Note and Mortgage. The Note was secured by a Mortgage on real property in Spring Lake Township in Scott County, Minnesota. The Bank foreclosed by advertisement and bought the property at a Sheriff's Sale held on June 26, 1967. Mr. Daly made no further payments after June 26, 1967 and did not redeem within the 12 month period of time allotted by law after the Sheriff's Sale.

The Bank brought an action to recover the possession to the property in the Justice of the Peace Court at Savage, Minnesota. The first 2 Justices were disqualified by Affidavit of Prejudice. The first by Mr. Daly and the second by the bank. A third one refused to handle the case. It was then sent, pursuant to law, to Martin V. Mahoney, Justice of Peace, Credit River Township, Scott County, Minnesota, who presided at a Jury trial on December 7, 1968. The Jury found the Note and Mortgage to be void for failure of a lawful consideration and refused to give any validity to the Sheriff's Sale. Verdict was for Mr. Daly with costs in the amount of $75.00.

EVIL PRACTICE

The president of the Bank admitted that the Bank created the money and credit upon its books by which it acquired or gave as consideration for the Note; that this was standard banking practice, that the credit first came into existence when they created it; that he knew of no United States Statutes which gave them the right to do this. This is the universal practice of these banks.

Mr. Morgan appeared at the trial on December 7, 1968 and appeared as a witness to be candid, open, direct, experienced and truthful. He testified to 20 years of experience with the Bank of America in Los Angeles, the Marquette National Bank of Minneapolis and the Plaintiff in this case. He seemed to be familiar with the operations of the Federal Reserve System.

He freely admitted that his Bank created all of the Money or credit upon its books with which it acquired the Note and Mortgage of May 8, 1964. The credit first came into existence when the Bank created it upon its books. Further he freely admitted that no United States law gave the bank the authority to do this. There was obviously no lawful consideration for the Note. The Bank parted with absolutely nothing except a little ink.

NOTE: It has never been doubted that a Note given in a Consideration which is prohibited by law is void. It has been determined, independent of Acts of Congress, that sailing under the license of an enemy is illegal. The emission of Bills of Credit upon the books of these private corporations, for the purposes of private gain is not warranted by the Constitution of the United States and is unlawful.

No complaint was made by the bank that the bank did not receive a fair trial. From the admissions made by Mr. Morgan, the path of duty was made direct and clear for the jury. Their verdict could not reasonably have been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, comfortable to the laws in this Court on December 7, 1968.

The Justice who heard the case handed down the opinion attached and included herein. Its reasoning is sound. It will withstand the test of time. This is the first time the question has been passed upon in the United States. I predict that this decision will go into the history books as one of the great documents of American history. It is a huge cornerstone wrenched from the temple of Imperialism and planted as one of the solid foundation stones of Liberty.

COURT MEMORANDUM

The issues in this case were simple. There was no material dispute on the facts for the jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions, incorporated under the laws of the United States, are in the law to be treated as one and the same bank, did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.

THE CREDIT RIVER CASE...

STATE OF MINNESOTA

COUNTY OF SCOTT

IN JUSTICE COURT

TOWNSHIP OF CREDIT RIVER

MARTIN V. MAHONEY, JUSTICE

First National Bank of Montgomery,

Plaintiff,

vs. JUDGE & DECREE

Jerome Daly, Defendant.

The above entitled action came on before the Court and a Jury of 12 on December 7, 1968 at 10:00 A.M. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel Theodore R. Mellby. Defendant appeared on his own behalf.

A Jury of Talesmen were called, empanelled and sworn to try the issues in this Case. Lawrence V. Morgan was the only witness called for Plaintiff and Defendant testified as the only witness in his own behalf.

Plaintiff brought this as a Common Law action for the recovery of the possession of Lot 19, Fairview Beach, Scott County, Minn. Plaintiff claimed titled to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in default at the time foreclosure proceedings were started.

Defendant appeared and answered that the Plaintiff created the money and credit upon its own books by bookkeeping entry as the consideration for the Note and Mortgage of May 8, 1964 and alleged failure of consideration for the Mortgage Deed and alleged that the Sheriff's sale passed no title to Plaintiff.

The issues tried to the Jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the Note for almost 3 years.

Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private Bank, further that he knew of no United States Statute or Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the Consideration and that Defendant was estopped from doing so.

At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant.

Now therefore, by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1978, the Constitution of the United States and the Constitution and laws of the State of Minnesota not inconsistent therewith:

IT IS HEREBY ORDERED, ADJUDGED & DECREED:

1. That Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office.

2. That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.

3. That the Sheriff's sale of the above described premises held on June 26, 1967 is null and void, of no effect.

4. That Plaintiff has no right, title or interest in said premises or lien thereon, as is above described.

5. That any provision in the Minnesota Constitution and any Minnesota Statute limiting the Jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has Jurisdiction to render complete Justice in this Cause.

6. That Defendant is awarded costs in the sum of $75.00 and execution is hereby issued therefore.

7. A 10 day stay is granted.

8. The following memorandum and any supplemental memorandum made and filed by this Court in support of this Judgment is hereby made a part hereof by reference.

BY THE COURT
Dated December 9, 1968

MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA

----------------------------------------------------------

MEMORANDUM

The issues in this case were simple. There was no material dispute on the facts for the Jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions Incorporated under the Laws of the United States, are in the Law to be treated as one and the same Bank, did create the entire $14,000.00 in money or credit upon its own books by bookkeeping entry. That this was the Consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. See Anheuser-Busch Brewing Co. v. Emma Mason, 44 Minn. 318, 46 N.W. 558. The Jury found there was no lawful consideration and I agree. Only God can create something of value out of nothing.

Even if Defendant could be charged with waiver or estoppel as a matter of Law this is no defense to the Plaintiff. The Law leaves wrongdoers where it finds them. See sections 50, 51 and 52 of Am. Jur 2d. "Actions" on page 584 -- "no action will lie to recover on a claim based upon, or in any manner depending upon, a fraudulent, illegal, or immoral transaction or contract to which Plaintiff was a party."

Plaintiff's act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the Law to support any thing or upon which any lawful rights can be built.

Nothing in the Constitution of the United States limits the Jurisdiction of this Court, which is one of original Jurisdiction with right of trial by Jury guaranteed. This is a Common Law Action. Minnesota cannot limit or impair the power of this Court to render Complete Justice between the parties. Any provisions in the Constitution and laws of Minnesota which attempt to do so are repugnant to the Constitution of the United States and are void. No question as to the Jurisdiction of this Court was raised by either party at the trial. Both parties were given complete liberty to submit any and all facts and law to the Jury, at least in so far as they saw fit.

No complaint was made by Plaintiff that plaintiff did not receive a fair trial. From the admissions made by Mr. Morgan the path of duty was made direct and clear for the Jury. Their Verdict could not reasonably have been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, comfortable to the laws in this Court on December 7, 1968.

BY THE COURT

December 9, 1968
/s/ MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA

TESTIMONY OF:

RONALD GRAHAM, Vice President and General Counsel of the Federal Reserve Bank of Minneapolis taken Wednesday February 11, 1970 in the disbarment proceedings brought by the Minnesota State Board of Law Examiners against Jerome Daly to have Mr. Daly disbarred from the practice of law. This Testimony was taken under oath:

Wednesday, February 11, 1970
Approximately 2:30 p.m.

(Whereupon, the following proceedings were duly had:)

MR. DAVIS: Mr. Graham.
ROLAND D. GRAHAM
------ -- ------

being first duly sworn, testified
as follows on behalf of the Petitioner on:

BY MR. DAVIS:

Q. Will you state your full name please.
A. I am Roland D. Graham, G-r-a-h-a-m.

Q. Your address, Mr. Graham?
A. My address is 73 South Fifth Street, Minneapolis: Federal Reserve Bank of Minneapolis.

Q. What is your profession?
A. I am an attorney.

Q. By whom are you employed?
A. I am Vice-President and General Counsel of the Federal Reserve Bank of Minneapolis.

Q. Are you licensed to practice law in the state of Minnesota?
A. Yes sir.

Q. For how long a time have you been counsel for the Federal Reserve Bank of Minneapolis?
A. I have been general counsel for the Federal Reserve Bank of Minneapolis since 1966; however, I was on the staff of the legal department of the bank since 1959.

Q. In the course of your duties with the Federal Reserve Bank of Minneapolis, have you had occasion to be involved in litigation with one Jerome Daly?
A. Yes.

Q. Have you received any inquiries from other agencies of government or other persons within the banking group concerning these actions commenced by Mr. Daly?
A. Well, we received several inquiries with respect to the actions commenced against our bank and especially by other Federal Reserve Banks and the Board of Governors; we kept them constantly informed of the progress in these cases as it occurred. And there was an occasional inquiry made with reference to theses cases from our office, yes.

Q. Do you have any compilation or list of inquiries that were made either to you or to the board, the Federal Reserve Board?
A. I have a compilation of inquiries that were made and letters sent out by the Board of Governors and the Treasury Department with reference to a case arising in Credit River, Minnesota, involving the constitutionality of the Federal Reserve System.

Q. Do you have that letter with you?
(WHEREUPON, Petitioner's Exhibits 66 and 67 were duly marked for purposes of identification.)

Q. I show you Petitioners Exhibit Number 66, will you identify that for the Court?
A. This is a letter dated September 2, 1969, addressed to me from Mr. Robert Sanders, Assistant General Counsel of the Board of Governors of the Federal Reserve System. And Mr. Sanders sent me this list at my request, in which it contains a list of a number of responses made by the Board of Governors and the Treasury Department, in connection with inquiries received by them, certain congressional offices, relating to a case arising out of Credit River, Minnesota, and arising as a result of a publication, primarily of a publication distributed, reporting that case, entitled Myers' Finance Review.

Q. And I show you Petitioner's Exhibit 67 and ask you to identify that.
A. This is a subsequent Xerox copy of some articles that were referred to in that letter, which also were the basis of inquiries that we received.

CROSS-EXAMINATION

Mr. Jerome Daly's cross-examination consisted of two arguments. The first part of his argument was to elicit confirmation from Mr. Ronald D. Graham, a qualified spokesman for the Federal Reserve banks, that the Federal Reserve banks and the commercial banks do create Deposit (checkbook) Money on their books as their lending and investing money media.

The second part of Mr. Daly's argument was the convertibility of the pocket paper currency into gold and/or silver is a separate argument, and irrelevant to the mechanics of Deposit (checkbook) Money creation.

Therefore, to make it easier for the reader to understand the mechanics of where and how bank Deposit (checkbook) Money (generally referred to as "credit" is created -- all questions and answers referring to currency convertibility were edited (left) out.

BY MR. DALY:
-----------

Q. You say you have been with the Federal Reserve Bank for how long?
A. For ten years, approximately ten years.

Q. And you are a Vice President of the bank?
A. Yes sir.

Q. And you say that you have been in the practice of law in the state of Minnesota?
A. Yes sir.

Q. And also in the United States District Court?
A. Yes sir, for the state of Minnesota.

(WHEREUPON, Respondent's Exhibit J was duly marked for purposes of identification.)

Q. Showing you Respondent's Exhibit J, I will ask you if you can identify that.
A. Respondent's Exhibit J is a publication put out by the Board of Governors of the Federal Reserve System explaining its purposes and functions.

Q. And what issue is that?
A. According to this, this is an issue that was published in 1963.

Q. Are you familiar with that, Respondent's Exhibit J?
A. I am familiar with its publication; I could not cite it, all the language; but I am familiar with its publication.

Q. Have you looked it over?
A. Yes.

Q. Generally, do you agree that the statements in there are true?
A. As to the functions and so forth, yes, sir.

Q. That is the official publication of the Board of Governors, is it not true?
A. Yes.

MR. DALY: I offer in evidence Exhibit J.
MR. DAVIS: No objection.
THE COURT: It will be received.

Q. Now, your Federal Reserve Banks, there are twelve of them in the United States, aren't there?
A. That is correct.

Q. And more or less the head bank is in New York, is it not?
A. There is a Federal Reserve Bank of New York, that represents a second Federal Reserve District; it is a separate incorporated bank, separate from the other eleven banks, yes.

Q. Now, by the way, these Federal Reserve Banks have employees, do they not?
A. Yes, they do.

Q. And there are none of these employees on Civil Service?
A. No, sir.

Q. That is a true statement, is it not?
A. Yes, sir.

Q. You are not on Civil Service, yourself?
A. No, sir.

Q. And the Federal Reserve banks pay taxes to the state for the real estate they are situated upon?
A. Yes, sir.

Q. And the Federal Reserve banks are owned by the member banks, are they not?
A. I don't know what you mean by owned, Mr. Daly.

Q. I withdraw the question. The Federal Reserve corporation is a corporation organized and existing by virtue of the laws of the United States, is that correct?
A. That is correct.

Q. And the member banks are required to subscribe to so much stock?
A. That is correct.

Q. But this is non-voting stock, isn't that correct?
A. They have a right to elect six of the directors of the Federal Reserve bank.

Q. I didn't mean that; it is a stock that doesn't actually carry any rise to ownership with it, isn't that correct?
A. The Federal Reserve stock, owned by member banks of the Federal Reserve System, represent the capitalization they put into the system required by law and it gives them certain limited rights as to the election of directors on the Board of the reserve banks. However, in the event of dissolution of any Federal Reserve bank, they are only entitled to their reserves, the amount of capitalization they have put into the reserve bank. And after the reserve banks have paid all of the liabilities and expenses, all the residuals go into the United States Government.

Q. And the member banks, like the First National here in Minneapolis; Northwestern National; they have a right to use the services of the Federal Reserve bank?
A. Yes, we do provide services for them, yes.

Q. And the First National Bank of Montgomery is one of your member banks?
A. Yes, sir.

Q. Now, calling your attention to page seventy-five in that book, will you read the last two paragraphs out loud.
A. The last two paragraphs?

Q. I think that is what I want.
A. The commercial banks as a whole can create money only if additional reserves are made available to them. The Federal Reserve System is the only instrumentality endowed by law with discretionary power to create (or extinguish) the money that serves as bank reserves or as public's pocket cash. Thus, the ultimate capability of expending or reducing the economy's supply of money rests with the Federal Reserve.

New Federal Reserve money, when it is not wanted by the public for hand-to-hand circulation, becomes the reserves of member banks. After it leaves the hands of the first bank acquiring it, as explained above, the new reserve money continues to expand into deposit money as it passes from bank to bank until deposits stand in some established multiple of the additional reserve funds that Federal Reserve action has supplied.

Q. Now, the mechanics, can you explain the mechanics by which the Federal Reserve bank runs its open market committee.
A. Runs its open market committee?

Q. Yes.
A. The open market committee is not a committee of the Federal Reserve Banks, Mr. Daly. It consists of seven members of the Board of Governors of the Federal Reserve System and five of the seven -- five of the twelve presidents of the Federal Reserve banks.

Q. And the seven members of the Board of Governors?
A. Yes, sir.

Q. Will you explain to the Court what their function is?
A. The function of the Federal Open Market Committee is to meet and
make policy with reference to the purchase or sale of government
securities by Federal Reserve Banks.

Q. Now, can you elaborate on that.
A. The purchase and sale of government securities by Federal Reserve Banks, under the direction of the Open Market Committee, is a device, one of the monetary tools used by the Federal Reserve System to expand on one of the Federal Reserve --

Q. Expand or reduce the reserves?
A. Yes.

Q. Now does the Federal Reserve Bank expand its reserves?
A. The reserves of the commercial banks?

Q. Or its own reserves?
A. The action taken with reference to the Open Market Committee and expansion of the commercial bank reserves that are required to be held in the Federal Reserve banks in their own vault, by expanding reserves of the commercial banks. This then takes out of circulation or the ability of commercial banks to expand loans or investments.

Q. So that seven members of the Board of Governors and the twelve presidents of the Federal Reserve banks have the control over the volume of credit that is made available to the public?
A. The Open Market Committee, which consists of five of the twelve presidents of the Federal Reserve banks and the seven members of the Board of Governors, directs policy with reference to the sales or purchase of the government securities on the open market, which expands or contracts the ability of commercial banks to make loans and investments.

Q. And this has a direct bearing upon the amount of money that is available to the public?
A. It would have a direct bearing on the amount of money and supply of credit available.

Q. Now, the Federal Reserve Bank actually creates credit on its books, does it not?
A. The only way in which it creates credit is by its discount policy, in which it may credit, by making a temporary loan and credit the reserve account of that individual bank.

Q. It can credit the account of the individual bank by making a loan to the bank?
A. Yes, sir, this is a loan that is repaid.

Q. And when the Federal Reserve bank makes the loan or that credit first comes into existence, is when they manufacture it on the books?
A. It is a credit to their reserve?

Q. And it first comes into existence at that time?
A. These are temporary loans.

Q. And it doesn't make any difference if it is temporary or long term, the first time it comes into existence is when it is credited on the books of the bank?
A. Yes, sir.

Q. And as a practical matter, this credit never leaves the books of some bank; it is transferred by check entry from one bank to another?
A. The effect of that particular transaction may or may not be transmitted through the banking system, I don't know.

Q. What percentage of the volume of business was done by check in this country?
A. I don't know the figure, Mr. Daly, I don't know the breakdown upon demand deposits and currency at the present time.

Q. Now, when a member bank makes a loan, what is the percentage of so-called reserves that they are supposed to have on hand?
A. That is determined by the Board of Governors of the Federal Reserve System and it varies at what the Board decides.

Q. What is it at present?
A. It is kind of a multiple breakdown at present; my recollection is reserves are seventeen per cent reserve requirement; a sixteen per cent for the country banks, which are required to have a lower reserve.

Q. In other words, when say like the First National Bank of Montgomery wants to make a loan of one hundred dollars; if it has a reserve of seventeen dollars on deposit with our bank, it can make a loan of a hundred dollars?
A. If the reserve bank decides to lend it, yes, this is discretionary.

Q. If the First National Bank decides to lend it?
A. Now, now, an application for a loan or discount from the Federal Reserve Bank may be made; in discretion with the Federal Reserve Bank, if it feels it is an appropriate borrowing.

Q. Does the First National Bank of Montgomery, do they have to get the permission of the Federal Reserve Bank of Minneapolis before they can make a loan?
A. They make application for a loan and they can be turned down if the Federal Reserve Bank in Minneapolis did not deem it a good loan.

Q. To an individual?
A. They only make loans and discounts to banks.

Q. I am talking about the individual citizen that walks into a bank and wants to borrow ten thousand dollars from the bank out in the country.
A. All right.

Q. Does that bank out in the country also create money on its books?
A. That bank may make a loan to that individual if it has the funds available to make that loan.

Q. Does that bank, the commercial banks can also create credit on their books?
A. To the extent that the reserve or equity at the position permits them to make a loan in accordance with their policy. They can do this by issuing a cashier's check, which is a liability in the bank or do so by crediting the deposit account of that individual.

Q. To what extent can they do that?
A. I guess I don't follow your question.

Q. Is there a limit upon them? Is there a limit to the extent that they can do that?
A. The ultimate limit to which they would be restricted would be determined by the amount of reserves they are required to hold back, dependent upon what the reserve requirements, as established by the Board of Governors of the Federal Reserve System, are.

Q. So, there is a percentage of limit?
A. Yes.

Q. They also create credit on their books?
A. To the extent they can make loans or investments.

Q. And this credit first comes into being when they create it?
A. When the credit is made tot he account of the customers, they have thus created a loan to the customer in the form of a deposit balance. Now, this may be drawn upon to pay off perhaps creditors of the individual, that is making the loan.

Q. But in any event, this is the first time that this credit comes into existence, they create it on their books?
A. Yes.

Q. So, in effect, the books of the member banks amount to a bill of credit, do they not?
A. What is your definition of a bill of credit, Mr. Daly?

Q. There has been some argument about that, isn't that right?
A. Yes.

Q. But at any rate, the credit is manufactured on the books though?
A. There is a credit on the account of the customers, either that he is given in disbursed funds by means of a cashier's check or some
other.

Q. Now, have you had a chance to read over my publication, the Daly Eagle?
A. I don't remember if I have read it through or not, Mr. Daly.

Q. Have you attempted to read it?
A. I believe I did read it at one time; but I don't recall all the language in it.

Q. There is a picture of a note in here, on page twelve, a one dollar Federal Reserve note?
A. Yes, sir.

Q. Is this a sample of what is in circulation?
A. As currency.

Q. Yes.
A. It appears as though it is a Federal Reserve note, yes, sir.

Q. Well, that is a reasonably accurate portrayal, is that right?
A. Yes.

Q. Your bank acquires United States obligations by creating credit on its books, do they not?
A. I guess you might say by creating credit as permitted under the policy of the Federal Reserve, yes.

Q. But the physical notes themselves, they are made up by the Bureau of Printing and Engraving?
A. That is correct.

Q. And that is under the control of what, the Treasury Department?
A. I believe it is the Treasury Department.

Q. The notes themselves, you get these notes in denominations from one dollar up to ten thousand dollars, is that right?
A. I don't believe there is a ten thousand dollar bill in circulation; but we get them in the various denominations now permitted by law.

Q. And your bank gets them for the cost of printing?
A. We get them, yes; these are the actual physical notes, yes, for the cost of printing; but they are issued as a liability to the Federal Reserve Bank of Minneapolis or whatever Federal Reserve Bank is involved.

Q. Well, now, I believe you indicated that you had some correspondence from the head office of the Board of Governors of the Federal Reserve System?
A. Yes, sir.

Q. With your self, for purposes of following it to the Bar Association, is that right?
A. This arose, because I had heard that there was some testimony being given before the Ethics Committee with reference to the Credit River proceeding. I talked to Mr. Orren with the Ethics Committee and indicated I had a number of telephone calls with respect to the Credit River proceeding and I acknowledged they had received a number of inquiries down at the Board, at the Treasury Department, arising out of the Myers' Finance Publication.

Q. This is Myers' Finance Review?
A. Yes.

Q. From Calgary, Alberta, Canada?
A. Yes, sir.

Q. Did you ever see his review before this?
A. Before today? I had seen copies of a publication, I believe, that was dated May 27, 1969.

Q. May 27, 1969?
A. Yes, sir.

Q. And this is the first publication in which he published it, is that right?
A. Published what, I am sorry.

Q. This story with reference to the Credit River verdict?
A. I don't know, Mr. Daly, I just saw the May 27th issue.

(WHEREUPON, Respondent's Exhibit K was marked for purposes of
identification.)

Q. Do you recognize that as a copy that you saw?
A. Yes, sir.

Q. And how soon after May 27th of 1969 did you see that?
A. The only one I recollect was a publication that came out, I believe, in June. I don't subscribe to the publication.

Q. Well, it is fair to say that you gentlemen that are counsel for the Federal Reserve banks and the general counsel for the Board of Governors, you are keeping very close tab on this dispute?
A. Well, as a matter of information, yes, yes.

Q. And you have since 1963?
A. I have transmitted all the information down to the Board of Governors, with reference to the suits, yes.

Q. And by the way, the Board of Governors of the Federal Reserve System are independent of the control by Congress, are they not?
A. No sir, that is not true.

Q. Well, can you elaborate on why it is not true?
A. The Federal Reserve System was established by Congress under the Federal Reserve Act, by legislation enacted by Congress.

Q. But at the present time, Congress exercises no control over them?
A. Are you talking about control over the decisions, policy decisions made by the Federal Reserve?

Q. Right.
A. There is specific law I am aware of that any Congressman can effectuate a policy decision upon the Federal Reserve.

Q. That is what I am driving at.
A. Yes.

Q. And the Board of Governors of the Federal Reserve System controls volume of credit that is put into circulation?
A. The policy decisions of the Board of Governors, Mr. Daly, influence the supply of money and credit in the country, yes; I think that is a fair statement.

Q. And that, under the present laws, is independent of any act of Congress?
A. The policy decisions, I am aware of, are not subject to any Congressional mandate, that is correct.

Q. And the determination of the interest rate is not subject to any Congressional mandate?
A. No sir, I think the determination of the interest rate is a result of the marketplace, are you talking about?

Q. Actions of the Open Market Committee?
A. Actions of the Open Market Committee could have an influence on the level of interest rates.

Q. Isn't that set by basically, it is set or controlled, that is the prime rate is set and controlled by the Board of Governors?
A. The prime rate, no.

Q. Pardon me?
A. No.

Q. What do they do with reference to the interest rate?
A. The only interest rate, I think you are referring to, is a discount rate, established by the Federal Reserve banks. The discount rate is established initially by the Board of Directors of Federal Reserve banks, subject to review and determination by the Board of Governors. The discount rate is the rate charged against member banks of the Federal Reserve System, who make loans or discounts at Federal Reserve banks.

Q. Isn't it pure and simple, the rate of interest that the Federal Reserve bank charges the member banks for the credit that they create on their books?
A. Would you repeat that one?

Q. To use simple language: Isn't the rate of interest that the Federal Reserve bank charges the member banks for credit they create on their books?
A. This is for loans or advances given to member banks, yes.

Q. And these loans and advancements are created on the books of the Federal Reserve bank?
A. The making of a loan or discount is effected of a credit to the reserve account of a member bank.

Q. When they create the credit on their books, it comes into existence?
A. Yes.

Q. This discount rate is set by the Board of Governors of the Federal Reserve System?
A. The discount rate is initially set by the Boards of Directors of reserve banks, independently; they are subject to review and determination of the Board of Governors in the Federal Reserve System.

Q. So if all of the member banks get together and agree to set the discount rate, that is the federal reserve banks get together and set the discount rate, the Board of Governors doesn't have anything to say about it?
A. They have to approve a discount rate.

Q. And the people in charge of the Federal Reserve banks are not, none of them are government employees as such?
A. Of the Federal Reserve banks?

Q. Right.
A. None of them are under Civil Service, no.

Q. And none of them are government employees as such then?
A. No, sir, they are not under Civil Service.

MR. DALY: I think that is all the questions I have.

THE END OF MR. JEROME DALY'S CROSS-EXAMINATION.
--------------------------------------------------------------

The Federal Reserve Bank of Boston in a 1977 publication titled: "The Federal Reserve, Putting It Simply", writes:

"The most important thing to understand about money is that money is artificial -- that is to say, that money is entirely a man-made creation. It isn't an element of nature (such as gold or silver). It is simply a creation of civilized man: it always has been and it always will be."

It is also important to understand that all *artificial* money, better known as "Bank Credit", is created by the commercial banks, first in the form of *checking account* "deposit credits" -- either as bank expenditures, bank loans, or bank investment monies -- and most Bank Credit money remains and circulates in that *deposit credits* form by means of checks -- until some is (temporarily) converted into physical cash currency notes.

The Treasury's Engraving and Printing Bureau tailor-prints the Federal Reserve notes cash currency for the 12 Federal Reserve banks at the cost of printing, about 2 cents per note. The Federal Reserve banks then distribute the cash currency amongst the commercial banks by charging it to their (Fed provided) reserve accounts.

The banks then distribute the cash currency amongst the general commerce and public, by exchanging their obtained cash currency for the public's checking or savings account *deposit credits*. In other words, the general public gets its cash currency from banks, or from someone who got it from some bank by having it charged, either to his checking or savings account.

---------------------------------------

PRESIDENT OF THE BANK OF ENGLAND...

Quoting Sir Josiah Stamp at the time he was president of the Bank of England and president of the English Railway System. His directorates filled several pages of WHO'S WHO. In the late 1920s, in an informal talk to about 150 history, economics and social science professors, at the University of Texas Josiah Stamp explained the following:

"Banking was conceived in iniquity and born in sin... The bankers own the world. Take it away from them, but leave them the power to create money and control credit, with a flick of the pen they will create enough money to buy it back again... Take this power away from bankers and all great fortunes like mine (he was the second richest man in Great Britain) will disappear, and they ought to disappear, for this world would then be a happier and better world to live in. My sons should not object. They are well educated, and should be willing to take their places in the business world and forge their own fortunes... But, if you want to continue to be slaves of bankers and pay the cost of your own enslavement, then let the bankers continue to create money and control credit... However, as long as governments will legalize such things, a man is foolish not to be a banker."
From: LEGALIZED CRIME OF BANKING
By: S. W. Adams, Money Analyst

http://www9.pair.com/

Top 10 things debt collectors
don't want you to know.

1. The More You Pay, the More They Earn. Collectors get commissions - usually 30 to 50% - on money they bring in, which often double or triple their salaries. This means they have a strong incentive to press for a big "down payment" from you, even if this deepens the cycle of debt. Collectors hoping for a big commission may claim that the boss insists on a big down payment. In fact, blaming it on a mythical manager is designed to deflect your anger away from the collector.

2. Payment Deadlines Are Phony. Payment deadlines set by collectors are meaningless. Collectors simply want to create a sense of urgency, because the longer it takes to get you to pay, the less chance there is of collecting the debt.

3. They Don't Need a 'Financial Statement'. Collectors often claim they need a "financial statement" from you, so they can work out a realistic repayment plan. You'll notice, though, that the information they ask for - bank account numbers, references, place of employment - is far more than they need for that purpose. They're fishing for information that will help them find you if you move or sue you if you don't repay the debt.

4. The Threats Are Inflated. Collectors always graphically detail the disastrous consequences of failing to pay a debt. "Your credit rating will be ruined," they warn. (Not mentioning that it's probably already not so good, since a collection company is after you.) "Your personal possessions, including your car, could be seized and sold at a public auction!" (Never mind that this virtually never happens; it's illegal in some states and impractical because of the expense.) Probably 95% of the time, collectors go after only bank accounts and wages.

5. You Can Stop Their Calls. You have the right, under federal law, to tell a collection agency to stop contacting you. Just do it in writing, and contacts must stop, unless they're to tell you that collection efforts have ended or the agency is going to take a specific action (like filing a lawsuit) against you.

6. They Can Find Out How Much You Have in the Bank. A collector who has your bank account and social security numbers can probably easily find out the balance of the account. Because big banks now have automated account inquiry systems, the collector doesn't even have to speak to a human being; all it takes is a phone call to the automated voice-mail service. When the account number and social security numbers are punched in, the computer promptly supplies an up-to-the-minute account balance.

7. If You're Out of State, They're Out of Luck. Collection agencies routinely call out-of-state debtors to demand payment. But if a creditor has sued you and won, you are probably safe from enforcement action if you bank and work outside the state where the lawsuit was filed. That's because to collect, the collection agency must transfer the judgment to your state, which is prohibitively time-consuming and expensive.

8. They Can't Take It All. Certain income, such as social security, pensions and 75% of your take-home pay, is exempt from enforcement action. You can file a claim of exemption from a garnishment of the other 25% of your wages if it would cause you or your family severe hardship.

9. They May Not Know a Thing. Sometimes a collection agency lawyer, trying to collect a judgment debt, sends questions on a court form asking about your income and assets. (These are called "post-judgment interrogatories" or "information subpoenas.") This is good news for you - it means that the agency has no information and is hoping you will be intimidated enough by this legal questionnaire to complete it. Many people do, because the forms list sanctions, such as fines, for not doing so. But normally, it is too expensive and time-consuming for an agency to go to court and force compliance.

10. You Can Pay Student Loans in Installments. If you are behind on student loans, you can apply for what every collection agency hates: "reasonable and affordable payments" under the 1992 Higher Education Act. If you can document financial hardship, a collection agency must accept as little as $10 per month for at least six months. As long as you make the payments, you are eligible for Title IV Student Aid, and you can continue the payments unless your circumstances change.
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Return to list of posts10 things your bank won't tell you
Do you assume that your bank serves your best interests? That a big bank's products are better? That your online account information is accurate? Don't believe any of it.

Latest Market Update
January 20, 2010 -- 16:30 ET [BRIEFING.COM] Disregard for a large batch of better-than-expected earnings reports gave way to a stiff bout of selling pressure that put stocks on track for their worst loss in more than two months. However, financials were able to garner support... More
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.Article Tools
E-mail to a friend.Tools Index.Print-friendly version.Site Map.Article Index.Discuss in a Message Board.Digg This ..By SmartMoney
1. "Our branches are there to sell you, not serve you."

In the late 1990s, bank branches were considered outmoded relics soon to be replaced by ATMs and Internet banking. But just the opposite happened. In 1998, there were 89,000 bank branches in the U.S., and by 2007, there were 97,000.

Why? The industry realized that consumer banking is profitable and that despite the predictions of Silicon Valley wonks, the main criterion consumers use in choosing a bank is proximity, SNL Financial analyst Jennifer Payne says.

But branches aren't just about convenience; they're a bank's primary sales floor. Brochures for services as varied as retirement accounts and home loans are on display, and everyone from the teller on up is trained to make a sale. That's because in the current low-interest-rate climate, it's harder to generate revenue from interest alone.

Many players in the industry have been trying to boost fee- and service-based income, so if a teller sees you have a mortgage, he might suggest you meet with a loan officer to discuss a home-equity loan. Greg McBride, a senior financial analyst at Bankrate.com, says, "The more products a customer has with a bank, the more likely he is to stay with that bank."

2. "Our fees will only go up."

With the economy in a slump and big losses crippling in the mortgage market, banks are looking for reliable revenue streams. Hence punitive fees -- for overdrawing your account, say, or using a competitor's ATM -- are increasing. The average ATM service charge doubled between 1998 and 2007, and overdraft fees brought in $17.5 billion in revenue in 2006, up from $10.3 billion in 2004, according to the Center for Responsible Lending.

Rubecca Hegarty, a married mother of three in Woodridge, Ill., says she often pays upward of $100 a month in overdraft fees to JPMorgan Chase because, like most banks, it changes the order of purchases so that large debts get paid first, increasing the likelihood that customers will incur fees on smaller purchases. Chase says it does this because big payments like a mortgage are more important to consumers and so get priority.

More from MSN Money and SmartMoney
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10 things museums won't tell you
10 ways to simplify your financial life
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10 things your airline won't tell you
.Revenue from penalties can be addictive for banks, Harvard Business School professor Gail McGovern says, but "they're going to face problems from angry customers, which leads to big call-center bills, employee dissatisfaction and turnover."

Indeed, that anger has reached the ear of federal lawmakers. Starting in July 2010, sweeping consumer protections will rein in many of the banking industry's most controversial practices.

3. "We change our interest rates all the time."

Regardless of what your credit card agreement says, you can never be sure how much interest banks will charge you. For example, nearly all cards have a default rate -- as high as 30% -- which banks apply when you've done something wrong, usually after two late payments in 12 months. But some banks have cut that to one late payment, says Curtis Arnold, the founder of CardRatings.com.

Banks can also change the terms of your agreement, raising rates when they like (though you can opt out and pay off the balance at the old rate as long as you never use the card again). Bank of America did that recently, upping many cardholders' rates from 10% or 12% to 27% or more, even though they'd done nothing wrong.

Video on MSN Money
Everyone needs an emergency fund

It's a stash of cash, but how much do you need? And why should this take priority over other savings goals? ."There's no clarity on what criteria can lead a bank to raise interest rates," says Robert Manning, the director of the Center for Consumer Financial Services at the Rochester Institute of Technology. "It's a black box."

A Bank of America representative says the company periodically reviews the credit risk of its accounts and adjusts rates accordingly, adding that in the past year 94% have had no increase.

4. "College campuses are gold mines for us."

Students are the customers of the future, and banks are increasingly courting them, often right on campus. More than 120 universities have cut deals with banks to issue student ID cards that are also ATM and check cards. Schools can make millions from these deals, sometimes even taking a small cut of individual purchases.

Students are also a hot market for credit card issuers, and banks will make private deals with alumni associations to get contact information for students, parents and even people buying tickets to university athletic events. Card companies cut deals to set up booths on campus.
10 things your bank won't tell you
Do you assume that your bank serves your best interests? That a big bank's products are better? That your online account information is accurate? Don't believe any of it.

Latest Market Update
January 20, 2010 -- 16:30 ET [BRIEFING.COM] Disregard for a large batch of better-than-expected earnings reports gave way to a stiff bout of selling pressure that put stocks on track for their worst loss in more than two months. However, financials were able to garner support... More
advertisement
.Article Tools
E-mail to a friend.Tools Index.Print-friendly version.Site Map.Article Index.Discuss in a Message Board.Digg This ..By SmartMoney
1. "Our branches are there to sell you, not serve you."

In the late 1990s, bank branches were considered outmoded relics soon to be replaced by ATMs and Internet banking. But just the opposite happened. In 1998, there were 89,000 bank branches in the U.S., and by 2007, there were 97,000.

Why? The industry realized that consumer banking is profitable and that despite the predictions of Silicon Valley wonks, the main criterion consumers use in choosing a bank is proximity, SNL Financial analyst Jennifer Payne says.

But branches aren't just about convenience; they're a bank's primary sales floor. Brochures for services as varied as retirement accounts and home loans are on display, and everyone from the teller on up is trained to make a sale. That's because in the current low-interest-rate climate, it's harder to generate revenue from interest alone.

Many players in the industry have been trying to boost fee- and service-based income, so if a teller sees you have a mortgage, he might suggest you meet with a loan officer to discuss a home-equity loan. Greg McBride, a senior financial analyst at Bankrate.com, says, "The more products a customer has with a bank, the more likely he is to stay with that bank."

2. "Our fees will only go up."

With the economy in a slump and big losses crippling in the mortgage market, banks are looking for reliable revenue streams. Hence punitive fees -- for overdrawing your account, say, or using a competitor's ATM -- are increasing. The average ATM service charge doubled between 1998 and 2007, and overdraft fees brought in $17.5 billion in revenue in 2006, up from $10.3 billion in 2004, according to the Center for Responsible Lending.

Rubecca Hegarty, a married mother of three in Woodridge, Ill., says she often pays upward of $100 a month in overdraft fees to JPMorgan Chase because, like most banks, it changes the order of purchases so that large debts get paid first, increasing the likelihood that customers will incur fees on smaller purchases. Chase says it does this because big payments like a mortgage are more important to consumers and so get priority.

More from MSN Money and SmartMoney
Your 5-minute guide to banking
10 things museums won't tell you
10 ways to simplify your financial life
10 things your ticket broker won't tell you
Ditch your bank for a credit union
10 things your airline won't tell you
.Revenue from penalties can be addictive for banks, Harvard Business School professor Gail McGovern says, but "they're going to face problems from angry customers, which leads to big call-center bills, employee dissatisfaction and turnover."

Indeed, that anger has reached the ear of federal lawmakers. Starting in July 2010, sweeping consumer protections will rein in many of the banking industry's most controversial practices.

3. "We change our interest rates all the time."

Regardless of what your credit card agreement says, you can never be sure how much interest banks will charge you. For example, nearly all cards have a default rate -- as high as 30% -- which banks apply when you've done something wrong, usually after two late payments in 12 months. But some banks have cut that to one late payment, says Curtis Arnold, the founder of CardRatings.com.

Banks can also change the terms of your agreement, raising rates when they like (though you can opt out and pay off the balance at the old rate as long as you never use the card again). Bank of America did that recently, upping many cardholders' rates from 10% or 12% to 27% or more, even though they'd done nothing wrong.

Video on MSN Money
Everyone needs an emergency fund

It's a stash of cash, but how much do you need? And why should this take priority over other savings goals? ."There's no clarity on what criteria can lead a bank to raise interest rates," says Robert Manning, the director of the Center for Consumer Financial Services at the Rochester Institute of Technology. "It's a black box."

A Bank of America representative says the company periodically reviews the credit risk of its accounts and adjusts rates accordingly, adding that in the past year 94% have had no increase.

4. "College campuses are gold mines for us."

Students are the customers of the future, and banks are increasingly courting them, often right on campus. More than 120 universities have cut deals with banks to issue student ID cards that are also ATM and check cards. Schools can make millions from these deals, sometimes even taking a small cut of individual purchases.

Students are also a hot market for credit card issuers, and banks will make private deals with alumni associations to get contact information for students, parents and even people buying tickets to university athletic events. Card companies cut deals to set up booths on campus.s
10 things your bank won't tell you
Continued from page 1

Latest Market Update
January 20, 2010 -- 16:30 ET [BRIEFING.COM] Disregard for a large batch of better-than-expected earnings reports gave way to a stiff bout of selling pressure that put stocks on track for their worst loss in more than two months. However, financials were able to garner support... More
advertisement
.Article Tools
E-mail to a friend.Tools Index.Print-friendly version.Site Map.Article Index.Discuss in a Message Board.Digg This ..The problem? Mounting credit card debt among college kids, for one.

"Universities don't negotiate on behalf of students," Manning says. "They're negotiating the best deal for the university."

A representative for the National Association of Independent Colleges and Universities says not to blame schools, as banks would market to students anyway, and universities at least try to get the best rates they can for students.

5. "In debt? The courts won't help."

Since the late 1990s, banks have been including mandatory-arbitration agreements in their contracts for many of their products, including auto loans, checking accounts, home-equity loans and credit cards. Such agreements prohibit you from suing and instead require you to use an arbitrator -- someone picked by the arbitration firm named in your card contract to hear the dispute and decide the outcome.

Though these clauses were originally designed to thwart class-action suits, the banks have also been using them for debt collection, says Paul Bland, an attorney with consumer-advocacy group Public Justice. There are even times when consumers, often victims of identity theft and unaware of the debt, aren't present when awards are handed down against them.

A recent suit against an arbitration firm brought by the San Francisco city attorney noted that arbitrators ruled in favor of banks in 100% of the 18,045 California cases brought against consumers from January 2003 through March 2007.

More from MSN Money and SmartMoney
Your 5-minute guide to banking
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."From the consumer perspective, it's a nightmare," Bland says. If a bank brings arbitration against you, hire a lawyer and request a hearing in person.

6. "We're excited about your trip to Europe, too!"

It's bad enough that the dollar has struggled in recent years against most major currencies, but when you travel overseas, every transaction comes with big fees attached. Take out cash from an ATM in London, and you'll get hit with a foreign-transaction fee, plus a fee for using a competitor's ATM. All told, it can cost up to $7 just to withdraw $200.

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Everyone needs an emergency fund

It's a stash of cash, but how much do you need? And why should this take priority over other savings goals? .Credit card purchases aren't much better. Visa and MasterCard charge 1% of the purchase price for converting currency. And the issuing banks may take another cut, which can bring the total to 3% of your purchase price, says CardRatings.com's Arnold. "If people don't travel overseas very often, they just don't think about it," he says.

The best thing to do is determine which of your cards charges the lowest overseas-transaction fee. For people who travel a lot, Arnold recommends a Capital One credit card, which charges no overseas-transaction fees (and even declines to pass on Visa and MasterCard's 1% fee to customers).

Also, ask your bank about partnerships with foreign banks. Bank of America, for example, partners with Barclays Bank, saving its customers $5 per withdrawal from Barclays' ATMs in the United Kingdom.

7. "For all the fine print, we don't disclose very much."

Bank documents come loaded with small type detailing terms and conditions. But good luck finding out exactly what you're signing up for when you open an account.

In 2007, the Government Accountability Office sent investigators to see how well banks explained their fees and other conditions to potential customers. Though banks are required by law to make this information available, the GAO said one-third of the branches it surveyed didn't provide the required information. Worse, more than half didn't have any fee information on their Web sites.

Nessa Feddis, a senior counsel at the American Bankers Association, questions the report's methods -- banks failed the test if investigators waited more than 10 minutes for the information -- and defends the lack of data online. Banks are afraid of leaving old, inaccurate information on their sites if terms change, she says. But without details on fees, consumers can't make informed choices.

"Banks are not complying with the law," says Ed Mierzwinski, the consumer program director with the U.S. Public Interest Research Group. "People need more information so they can shop around for the best deal."

--------------------------------------------------------------------------------

WHAT BANKS DON'T WANT YOU TO KNOW
Compiled and Edited by Peter Cook, M.Sc. C.M.E. (c) 1993

The following post is from a booklet published by Monetary Science Publishing. It is it the record of testimony given in a suit brought at common law in Minnesota in 1968 -- not all that long ago.

INTRODUCTION

Explaining what the banks don't want you to know may shatter most of the public's religiously entrenched assumptions about money and banking. What the general public "thinks" it knows about money and banking is largely based upon a collection of canards gleaned from TV, radio, newspapers and their own personal experiences with money and banking.

There is no academic curriculum that offers an intellectively [sic] comprehensive course in the modern "Credit Money" mechanism and banking. There is no academic or news media that explains the awesome power possessed in having access to clearing your own checks. If you and I could clear our own checks, through our own operated check-clearing house, we could then create "checkbook" money to buy/pay for our investments, just like the banks do. Checkbook or Credit Money is not a cash currency "representing" money. Credit Money, better
known as Bank Credit, is a cash currency "substitute" that circulates in the marketplace by means of checks as cash.

In the following pages you will find where high bank officials admitted that banks do create checkbook "deposit credits" to the credit of their clients' checking accounts, as their loans and investment payment funds. You will also learn how an attorney has successfully voided a bank foreclosure, because the bank admitted creating the checkbook "credits" as the funds it loaned to its client.

Even though attorney Jerome Daly was forced into a disbarment procedure for challenging the bankers' recondite practices, he successfully demonstrated that any knowledgeable attorney in the bank "credit money" mechanism in a just court can successfully challenge the bankers' unrelenting foreclosure of homes, businesses, farms and mills.

-- Peter Cook, M.Sc., June 3, 1993
------------------------------------------------

A LANDMARK DECISION

Reprinted in part from The Daily Eagle, Issue of Feb. 7, 1969

The fate of companies and individuals -- and governments is entirely at the mercy of banks. Their power is stupendous, both in creating and granting of loans, but in their arbitrary recall, with or without notice. This Court decision in the United States may well be the beginning of the end of some of their powers.

A Minnesota Trial Court's decision holding the Federal Reserve Act unconstitutional and void; Holding the National Banking Act unconstitutional and void; Declaring a mortgage acquired by the First National Bank of Montgomery, Minnesota in the regular course of its business, along with the foreclosure and the Sheriff's Sale to be void. This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all U.S. and State bonds held by the Federal Reserve, National and State Banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself, his country, and to the people of the world, for that matter, to study this decision very carefully and to understand it. For upon it hangs the question of freedom or slavery.

On May 8, 1964 the writer Mr. Jerome Daly executed a Note and Mortgage to the First National Bank of Montgomery, Minnesota, which is a member of the Federal Reserve Bank of Minneapolis. Both Banks are private owned and are a part of the Federal Reserve Banking System.

In the Spring of 1967 Mr. Daly was in arrears $476.00 in the payments on this Note and Mortgage. The Note was secured by a Mortgage on real property in Spring Lake Township in Scott County, Minnesota. The Bank foreclosed by advertisement and bought the property at a Sheriff's Sale held on June 26, 1967. Mr. Daly made no further payments after June 26, 1967 and did not redeem within the 12 month period of time allotted by law after the Sheriff's Sale.

The Bank brought an action to recover the possession to the property in the Justice of the Peace Court at Savage, Minnesota. The first 2 Justices were disqualified by Affidavit of Prejudice. The first by Mr. Daly and the second by the bank. A third one refused to handle the case. It was then sent, pursuant to law, to Martin V. Mahoney, Justice of Peace, Credit River Township, Scott County, Minnesota, who presided at a Jury trial on December 7, 1968. The Jury found the Note and Mortgage to be void for failure of a lawful consideration and refused to give any validity to the Sheriff's Sale. Verdict was for Mr. Daly with costs in the amount of $75.00.

EVIL PRACTICE

The president of the Bank admitted that the Bank created the money and credit upon its books by which it acquired or gave as consideration for the Note; that this was standard banking practice, that the credit first came into existence when they created it; that he knew of no United States Statutes which gave them the right to do this. This is the universal practice of these banks.

Mr. Morgan appeared at the trial on December 7, 1968 and appeared as a witness to be candid, open, direct, experienced and truthful. He testified to 20 years of experience with the Bank of America in Los Angeles, the Marquette National Bank of Minneapolis and the Plaintiff in this case. He seemed to be familiar with the operations of the Federal Reserve System.

He freely admitted that his Bank created all of the Money or credit upon its books with which it acquired the Note and Mortgage of May 8, 1964. The credit first came into existence when the Bank created it upon its books. Further he freely admitted that no United States law gave the bank the authority to do this. There was obviously no lawful consideration for the Note. The Bank parted with absolutely nothing except a little ink.

NOTE: It has never been doubted that a Note given in a Consideration which is prohibited by law is void. It has been determined, independent of Acts of Congress, that sailing under the license of an enemy is illegal. The emission of Bills of Credit upon the books of these private corporations, for the purposes of private gain is not warranted by the Constitution of the United States and is unlawful.

No complaint was made by the bank that the bank did not receive a fair trial. From the admissions made by Mr. Morgan, the path of duty was made direct and clear for the jury. Their verdict could not reasonably have been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, comfortable to the laws in this Court on December 7, 1968.

The Justice who heard the case handed down the opinion attached and included herein. Its reasoning is sound. It will withstand the test of time. This is the first time the question has been passed upon in the United States. I predict that this decision will go into the history books as one of the great documents of American history. It is a huge cornerstone wrenched from the temple of Imperialism and planted as one of the solid foundation stones of Liberty.

COURT MEMORANDUM

The issues in this case were simple. There was no material dispute on the facts for the jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions, incorporated under the laws of the United States, are in the law to be treated as one and the same bank, did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.

THE CREDIT RIVER CASE...

STATE OF MINNESOTA

COUNTY OF SCOTT

IN JUSTICE COURT

TOWNSHIP OF CREDIT RIVER

MARTIN V. MAHONEY, JUSTICE

First National Bank of Montgomery,

Plaintiff,

vs. JUDGE & DECREE

Jerome Daly, Defendant.

The above entitled action came on before the Court and a Jury of 12 on December 7, 1968 at 10:00 A.M. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel Theodore R. Mellby. Defendant appeared on his own behalf.

A Jury of Talesmen were called, empanelled and sworn to try the issues in this Case. Lawrence V. Morgan was the only witness called for Plaintiff and Defendant testified as the only witness in his own behalf.

Plaintiff brought this as a Common Law action for the recovery of the possession of Lot 19, Fairview Beach, Scott County, Minn. Plaintiff claimed titled to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in default at the time foreclosure proceedings were started.

Defendant appeared and answered that the Plaintiff created the money and credit upon its own books by bookkeeping entry as the consideration for the Note and Mortgage of May 8, 1964 and alleged failure of consideration for the Mortgage Deed and alleged that the Sheriff's sale passed no title to Plaintiff.

The issues tried to the Jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the Note for almost 3 years.

Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private Bank, further that he knew of no United States Statute or Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the Consideration and that Defendant was estopped from doing so.

At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant.

Now therefore, by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1978, the Constitution of the United States and the Constitution and laws of the State of Minnesota not inconsistent therewith:

IT IS HEREBY ORDERED, ADJUDGED & DECREED:

1. That Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office.

2. That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.

3. That the Sheriff's sale of the above described premises held on June 26, 1967 is null and void, of no effect.

4. That Plaintiff has no right, title or interest in said premises or lien thereon, as is above described.

5. That any provision in the Minnesota Constitution and any Minnesota Statute limiting the Jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has Jurisdiction to render complete Justice in this Cause.

6. That Defendant is awarded costs in the sum of $75.00 and execution is hereby issued therefore.

7. A 10 day stay is granted.

8. The following memorandum and any supplemental memorandum made and filed by this Court in support of this Judgment is hereby made a part hereof by reference.

BY THE COURT
Dated December 9, 1968

MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA

----------------------------------------------------------

MEMORANDUM

The issues in this case were simple. There was no material dispute on the facts for the Jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions Incorporated under the Laws of the United States, are in the Law to be treated as one and the same Bank, did create the entire $14,000.00 in money or credit upon its own books by bookkeeping entry. That this was the Consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. See Anheuser-Busch Brewing Co. v. Emma Mason, 44 Minn. 318, 46 N.W. 558. The Jury found there was no lawful consideration and I agree. Only God can create something of value out of nothing.

Even if Defendant could be charged with waiver or estoppel as a matter of Law this is no defense to the Plaintiff. The Law leaves wrongdoers where it finds them. See sections 50, 51 and 52 of Am. Jur 2d. "Actions" on page 584 -- "no action will lie to recover on a claim based upon, or in any manner depending upon, a fraudulent, illegal, or immoral transaction or contract to which Plaintiff was a party."

Plaintiff's act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the Law to support any thing or upon which any lawful rights can be built.

Nothing in the Constitution of the United States limits the Jurisdiction of this Court, which is one of original Jurisdiction with right of trial by Jury guaranteed. This is a Common Law Action. Minnesota cannot limit or impair the power of this Court to render Complete Justice between the parties. Any provisions in the Constitution and laws of Minnesota which attempt to do so are repugnant to the Constitution of the United States and are void. No question as to the Jurisdiction of this Court was raised by either party at the trial. Both parties were given complete liberty to submit any and all facts and law to the Jury, at least in so far as they saw fit.

No complaint was made by Plaintiff that plaintiff did not receive a fair trial. From the admissions made by Mr. Morgan the path of duty was made direct and clear for the Jury. Their Verdict could not reasonably have been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, comfortable to the laws in this Court on December 7, 1968.

BY THE COURT

December 9, 1968
/s/ MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA

TESTIMONY OF:

RONALD GRAHAM, Vice President and General Counsel of the Federal Reserve Bank of Minneapolis taken Wednesday February 11, 1970 in the disbarment proceedings brought by the Minnesota State Board of Law Examiners against Jerome Daly to have Mr. Daly disbarred from the practice of law. This Testimony was taken under oath:

Wednesday, February 11, 1970
Approximately 2:30 p.m.

(Whereupon, the following proceedings were duly had:)

MR. DAVIS: Mr. Graham.
ROLAND D. GRAHAM
------ -- ------

being first duly sworn, testified
as follows on behalf of the Petitioner on:

BY MR. DAVIS:

Q. Will you state your full name please.
A. I am Roland D. Graham, G-r-a-h-a-m.

Q. Your address, Mr. Graham?
A. My address is 73 South Fifth Street, Minneapolis: Federal Reserve Bank of Minneapolis.

Q. What is your profession?
A. I am an attorney.

Q. By whom are you employed?
A. I am Vice-President and General Counsel of the Federal Reserve Bank of Minneapolis.

Q. Are you licensed to practice law in the state of Minnesota?
A. Yes sir.

Q. For how long a time have you been counsel for the Federal Reserve Bank of Minneapolis?
A. I have been general counsel for the Federal Reserve Bank of Minneapolis since 1966; however, I was on the staff of the legal department of the bank since 1959.

Q. In the course of your duties with the Federal Reserve Bank of Minneapolis, have you had occasion to be involved in litigation with one Jerome Daly?
A. Yes.

Q. Have you received any inquiries from other agencies of government or other persons within the banking group concerning these actions commenced by Mr. Daly?
A. Well, we received several inquiries with respect to the actions commenced against our bank and especially by other Federal Reserve Banks and the Board of Governors; we kept them constantly informed of the progress in these cases as it occurred. And there was an occasional inquiry made with reference to theses cases from our office, yes.

Q. Do you have any compilation or list of inquiries that were made either to you or to the board, the Federal Reserve Board?
A. I have a compilation of inquiries that were made and letters sent out by the Board of Governors and the Treasury Department with reference to a case arising in Credit River, Minnesota, involving the constitutionality of the Federal Reserve System.

Q. Do you have that letter with you?
(WHEREUPON, Petitioner's Exhibits 66 and 67 were duly marked for purposes of identification.)

Q. I show you Petitioners Exhibit Number 66, will you identify that for the Court?
A. This is a letter dated September 2, 1969, addressed to me from Mr. Robert Sanders, Assistant General Counsel of the Board of Governors of the Federal Reserve System. And Mr. Sanders sent me this list at my request, in which it contains a list of a number of responses made by the Board of Governors and the Treasury Department, in connection with inquiries received by them, certain congressional offices, relating to a case arising out of Credit River, Minnesota, and arising as a result of a publication, primarily of a publication distributed, reporting that case, entitled Myers' Finance Review.

Q. And I show you Petitioner's Exhibit 67 and ask you to identify that.
A. This is a subsequent Xerox copy of some articles that were referred to in that letter, which also were the basis of inquiries that we received.

CROSS-EXAMINATION

Mr. Jerome Daly's cross-examination consisted of two arguments. The first part of his argument was to elicit confirmation from Mr. Ronald D. Graham, a qualified spokesman for the Federal Reserve banks, that the Federal Reserve banks and the commercial banks do create Deposit (checkbook) Money on their books as their lending and investing money media.

The second part of Mr. Daly's argument was the convertibility of the pocket paper currency into gold and/or silver is a separate argument, and irrelevant to the mechanics of Deposit (checkbook) Money creation.

Therefore, to make it easier for the reader to understand the mechanics of where and how bank Deposit (checkbook) Money (generally referred to as "credit" is created -- all questions and answers referring to currency convertibility were edited (left) out.

BY MR. DALY:
-----------

Q. You say you have been with the Federal Reserve Bank for how long?
A. For ten years, approximately ten years.

Q. And you are a Vice President of the bank?
A. Yes sir.

Q. And you say that you have been in the practice of law in the state of Minnesota?
A. Yes sir.

Q. And also in the United States District Court?
A. Yes sir, for the state of Minnesota.

(WHEREUPON, Respondent's Exhibit J was duly marked for purposes of identification.)

Q. Showing you Respondent's Exhibit J, I will ask you if you can identify that.
A. Respondent's Exhibit J is a publication put out by the Board of Governors of the Federal Reserve System explaining its purposes and functions.

Q. And what issue is that?
A. According to this, this is an issue that was published in 1963.

Q. Are you familiar with that, Respondent's Exhibit J?
A. I am familiar with its publication; I could not cite it, all the language; but I am familiar with its publication.

Q. Have you looked it over?
A. Yes.

Q. Generally, do you agree that the statements in there are true?
A. As to the functions and so forth, yes, sir.

Q. That is the official publication of the Board of Governors, is it not true?
A. Yes.

MR. DALY: I offer in evidence Exhibit J.
MR. DAVIS: No objection.
THE COURT: It will be received.

Q. Now, your Federal Reserve Banks, there are twelve of them in the United States, aren't there?
A. That is correct.

Q. And more or less the head bank is in New York, is it not?
A. There is a Federal Reserve Bank of New York, that represents a second Federal Reserve District; it is a separate incorporated bank, separate from the other eleven banks, yes.

Q. Now, by the way, these Federal Reserve Banks have employees, do they not?
A. Yes, they do.

Q. And there are none of these employees on Civil Service?
A. No, sir.

Q. That is a true statement, is it not?
A. Yes, sir.

Q. You are not on Civil Service, yourself?
A. No, sir.

Q. And the Federal Reserve banks pay taxes to the state for the real estate they are situated upon?
A. Yes, sir.

Q. And the Federal Reserve banks are owned by the member banks, are they not?
A. I don't know what you mean by owned, Mr. Daly.

Q. I withdraw the question. The Federal Reserve corporation is a corporation organized and existing by virtue of the laws of the United States, is that correct?
A. That is correct.

Q. And the member banks are required to subscribe to so much stock?
A. That is correct.

Q. But this is non-voting stock, isn't that correct?
A. They have a right to elect six of the directors of the Federal Reserve bank.

Q. I didn't mean that; it is a stock that doesn't actually carry any rise to ownership with it, isn't that correct?
A. The Federal Reserve stock, owned by member banks of the Federal Reserve System, represent the capitalization they put into the system required by law and it gives them certain limited rights as to the election of directors on the Board of the reserve banks. However, in the event of dissolution of any Federal Reserve bank, they are only entitled to their reserves, the amount of capitalization they have put into the reserve bank. And after the reserve banks have paid all of the liabilities and expenses, all the residuals go into the United States Government.

Q. And the member banks, like the First National here in Minneapolis; Northwestern National; they have a right to use the services of the Federal Reserve bank?
A. Yes, we do provide services for them, yes.

Q. And the First National Bank of Montgomery is one of your member banks?
A. Yes, sir.

Q. Now, calling your attention to page seventy-five in that book, will you read the last two paragraphs out loud.
A. The last two paragraphs?

Q. I think that is what I want.
A. The commercial banks as a whole can create money only if additional reserves are made available to them. The Federal Reserve System is the only instrumentality endowed by law with discretionary power to create (or extinguish) the money that serves as bank reserves or as public's pocket cash. Thus, the ultimate capability of expending or reducing the economy's supply of money rests with the Federal Reserve.

New Federal Reserve money, when it is not wanted by the public for hand-to-hand circulation, becomes the reserves of member banks. After it leaves the hands of the first bank acquiring it, as explained above, the new reserve money continues to expand into deposit money as it passes from bank to bank until deposits stand in some established multiple of the additional reserve funds that Federal Reserve action has supplied.

Q. Now, the mechanics, can you explain the mechanics by which the Federal Reserve bank runs its open market committee.
A. Runs its open market committee?

Q. Yes.
A. The open market committee is not a committee of the Federal Reserve Banks, Mr. Daly. It consists of seven members of the Board of Governors of the Federal Reserve System and five of the seven -- five of the twelve presidents of the Federal Reserve banks.

Q. And the seven members of the Board of Governors?
A. Yes, sir.

Q. Will you explain to the Court what their function is?
A. The function of the Federal Open Market Committee is to meet and
make policy with reference to the purchase or sale of government
securities by Federal Reserve Banks.

Q. Now, can you elaborate on that.
A. The purchase and sale of government securities by Federal Reserve Banks, under the direction of the Open Market Committee, is a device, one of the monetary tools used by the Federal Reserve System to expand on one of the Federal Reserve --

Q. Expand or reduce the reserves?
A. Yes.

Q. Now does the Federal Reserve Bank expand its reserves?
A. The reserves of the commercial banks?

Q. Or its own reserves?
A. The action taken with reference to the Open Market Committee and expansion of the commercial bank reserves that are required to be held in the Federal Reserve banks in their own vault, by expanding reserves of the commercial banks. This then takes out of circulation or the ability of commercial banks to expand loans or investments.

Q. So that seven members of the Board of Governors and the twelve presidents of the Federal Reserve banks have the control over the volume of credit that is made available to the public?
A. The Open Market Committee, which consists of five of the twelve presidents of the Federal Reserve banks and the seven members of the Board of Governors, directs policy with reference to the sales or purchase of the government securities on the open market, which expands or contracts the ability of commercial banks to make loans and investments.

Q. And this has a direct bearing upon the amount of money that is available to the public?
A. It would have a direct bearing on the amount of money and supply of credit available.

Q. Now, the Federal Reserve Bank actually creates credit on its books, does it not?
A. The only way in which it creates credit is by its discount policy, in which it may credit, by making a temporary loan and credit the reserve account of that individual bank.

Q. It can credit the account of the individual bank by making a loan to the bank?
A. Yes, sir, this is a loan that is repaid.

Q. And when the Federal Reserve bank makes the loan or that credit first comes into existence, is when they manufacture it on the books?
A. It is a credit to their reserve?

Q. And it first comes into existence at that time?
A. These are temporary loans.

Q. And it doesn't make any difference if it is temporary or long term, the first time it comes into existence is when it is credited on the books of the bank?
A. Yes, sir.

Q. And as a practical matter, this credit never leaves the books of some bank; it is transferred by check entry from one bank to another?
A. The effect of that particular transaction may or may not be transmitted through the banking system, I don't know.

Q. What percentage of the volume of business was done by check in this country?
A. I don't know the figure, Mr. Daly, I don't know the breakdown upon demand deposits and currency at the present time.

Q. Now, when a member bank makes a loan, what is the percentage of so-called reserves that they are supposed to have on hand?
A. That is determined by the Board of Governors of the Federal Reserve System and it varies at what the Board decides.

Q. What is it at present?
A. It is kind of a multiple breakdown at present; my recollection is reserves are seventeen per cent reserve requirement; a sixteen per cent for the country banks, which are required to have a lower reserve.

Q. In other words, when say like the First National Bank of Montgomery wants to make a loan of one hundred dollars; if it has a reserve of seventeen dollars on deposit with our bank, it can make a loan of a hundred dollars?
A. If the reserve bank decides to lend it, yes, this is discretionary.

Q. If the First National Bank decides to lend it?
A. Now, now, an application for a loan or discount from the Federal Reserve Bank may be made; in discretion with the Federal Reserve Bank, if it feels it is an appropriate borrowing.

Q. Does the First National Bank of Montgomery, do they have to get the permission of the Federal Reserve Bank of Minneapolis before they can make a loan?
A. They make application for a loan and they can be turned down if the Federal Reserve Bank in Minneapolis did not deem it a good loan.

Q. To an individual?
A. They only make loans and discounts to banks.

Q. I am talking about the individual citizen that walks into a bank and wants to borrow ten thousand dollars from the bank out in the country.
A. All right.

Q. Does that bank out in the country also create money on its books?
A. That bank may make a loan to that individual if it has the funds available to make that loan.

Q. Does that bank, the commercial banks can also create credit on their books?
A. To the extent that the reserve or equity at the position permits them to make a loan in accordance with their policy. They can do this by issuing a cashier's check, which is a liability in the bank or do so by crediting the deposit account of that individual.

Q. To what extent can they do that?
A. I guess I don't follow your question.

Q. Is there a limit upon them? Is there a limit to the extent that they can do that?
A. The ultimate limit to which they would be restricted would be determined by the amount of reserves they are required to hold back, dependent upon what the reserve requirements, as established by the Board of Governors of the Federal Reserve System, are.

Q. So, there is a percentage of limit?
A. Yes.

Q. They also create credit on their books?
A. To the extent they can make loans or investments.

Q. And this credit first comes into being when they create it?
A. When the credit is made tot he account of the customers, they have thus created a loan to the customer in the form of a deposit balance. Now, this may be drawn upon to pay off perhaps creditors of the individual, that is making the loan.

Q. But in any event, this is the first time that this credit comes into existence, they create it on their books?
A. Yes.

Q. So, in effect, the books of the member banks amount to a bill of credit, do they not?
A. What is your definition of a bill of credit, Mr. Daly?

Q. There has been some argument about that, isn't that right?
A. Yes.

Q. But at any rate, the credit is manufactured on the books though?
A. There is a credit on the account of the customers, either that he is given in disbursed funds by means of a cashier's check or some
other.

Q. Now, have you had a chance to read over my publication, the Daly Eagle?
A. I don't remember if I have read it through or not, Mr. Daly.

Q. Have you attempted to read it?
A. I believe I did read it at one time; but I don't recall all the language in it.

Q. There is a picture of a note in here, on page twelve, a one dollar Federal Reserve note?
A. Yes, sir.

Q. Is this a sample of what is in circulation?
A. As currency.

Q. Yes.
A. It appears as though it is a Federal Reserve note, yes, sir.

Q. Well, that is a reasonably accurate portrayal, is that right?
A. Yes.

Q. Your bank acquires United States obligations by creating credit on its books, do they not?
A. I guess you might say by creating credit as permitted under the policy of the Federal Reserve, yes.

Q. But the physical notes themselves, they are made up by the Bureau of Printing and Engraving?
A. That is correct.

Q. And that is under the control of what, the Treasury Department?
A. I believe it is the Treasury Department.

Q. The notes themselves, you get these notes in denominations from one dollar up to ten thousand dollars, is that right?
A. I don't believe there is a ten thousand dollar bill in circulation; but we get them in the various denominations now permitted by law.

Q. And your bank gets them for the cost of printing?
A. We get them, yes; these are the actual physical notes, yes, for the cost of printing; but they are issued as a liability to the Federal Reserve Bank of Minneapolis or whatever Federal Reserve Bank is involved.

Q. Well, now, I believe you indicated that you had some correspondence from the head office of the Board of Governors of the Federal Reserve System?
A. Yes, sir.

Q. With your self, for purposes of following it to the Bar Association, is that right?
A. This arose, because I had heard that there was some testimony being given before the Ethics Committee with reference to the Credit River proceeding. I talked to Mr. Orren with the Ethics Committee and indicated I had a number of telephone calls with respect to the Credit River proceeding and I acknowledged they had received a number of inquiries down at the Board, at the Treasury Department, arising out of the Myers' Finance Publication.

Q. This is Myers' Finance Review?
A. Yes.

Q. From Calgary, Alberta, Canada?
A. Yes, sir.

Q. Did you ever see his review before this?
A. Before today? I had seen copies of a publication, I believe, that was dated May 27, 1969.

Q. May 27, 1969?
A. Yes, sir.

Q. And this is the first publication in which he published it, is that right?
A. Published what, I am sorry.

Q. This story with reference to the Credit River verdict?
A. I don't know, Mr. Daly, I just saw the May 27th issue.

(WHEREUPON, Respondent's Exhibit K was marked for purposes of
identification.)

Q. Do you recognize that as a copy that you saw?
A. Yes, sir.

Q. And how soon after May 27th of 1969 did you see that?
A. The only one I recollect was a publication that came out, I believe, in June. I don't subscribe to the publication.

Q. Well, it is fair to say that you gentlemen that are counsel for the Federal Reserve banks and the general counsel for the Board of Governors, you are keeping very close tab on this dispute?
A. Well, as a matter of information, yes, yes.

Q. And you have since 1963?
A. I have transmitted all the information down to the Board of Governors, with reference to the suits, yes.

Q. And by the way, the Board of Governors of the Federal Reserve System are independent of the control by Congress, are they not?
A. No sir, that is not true.

Q. Well, can you elaborate on why it is not true?
A. The Federal Reserve System was established by Congress under the Federal Reserve Act, by legislation enacted by Congress.

Q. But at the present time, Congress exercises no control over them?
A. Are you talking about control over the decisions, policy decisions made by the Federal Reserve?

Q. Right.
A. There is specific law I am aware of that any Congressman can effectuate a policy decision upon the Federal Reserve.

Q. That is what I am driving at.
A. Yes.

Q. And the Board of Governors of the Federal Reserve System controls volume of credit that is put into circulation?
A. The policy decisions of the Board of Governors, Mr. Daly, influence the supply of money and credit in the country, yes; I think that is a fair statement.

Q. And that, under the present laws, is independent of any act of Congress?
A. The policy decisions, I am aware of, are not subject to any Congressional mandate, that is correct.

Q. And the determination of the interest rate is not subject to any Congressional mandate?
A. No sir, I think the determination of the interest rate is a result of the marketplace, are you talking about?

Q. Actions of the Open Market Committee?
A. Actions of the Open Market Committee could have an influence on the level of interest rates.

Q. Isn't that set by basically, it is set or controlled, that is the prime rate is set and controlled by the Board of Governors?
A. The prime rate, no.

Q. Pardon me?
A. No.

Q. What do they do with reference to the interest rate?
A. The only interest rate, I think you are referring to, is a discount rate, established by the Federal Reserve banks. The discount rate is established initially by the Board of Directors of Federal Reserve banks, subject to review and determination by the Board of Governors. The discount rate is the rate charged against member banks of the Federal Reserve System, who make loans or discounts at Federal Reserve banks.

Q. Isn't it pure and simple, the rate of interest that the Federal Reserve bank charges the member banks for the credit that they create on their books?
A. Would you repeat that one?

Q. To use simple language: Isn't the rate of interest that the Federal Reserve bank charges the member banks for credit they create on their books?
A. This is for loans or advances given to member banks, yes.

Q. And these loans and advancements are created on the books of the Federal Reserve bank?
A. The making of a loan or discount is effected of a credit to the reserve account of a member bank.

Q. When they create the credit on their books, it comes into existence?
A. Yes.

Q. This discount rate is set by the Board of Governors of the Federal Reserve System?
A. The discount rate is initially set by the Boards of Directors of reserve banks, independently; they are subject to review and determination of the Board of Governors in the Federal Reserve System.

Q. So if all of the member banks get together and agree to set the discount rate, that is the federal reserve banks get together and set the discount rate, the Board of Governors doesn't have anything to say about it?
A. They have to approve a discount rate.

Q. And the people in charge of the Federal Reserve banks are not, none of them are government employees as such?
A. Of the Federal Reserve banks?

Q. Right.
A. None of them are under Civil Service, no.

Q. And none of them are government employees as such then?
A. No, sir, they are not under Civil Service.

MR. DALY: I think that is all the questions I have.

THE END OF MR. JEROME DALY'S CROSS-EXAMINATION.
--------------------------------------------------------------

The Federal Reserve Bank of Boston in a 1977 publication titled: "The Federal Reserve, Putting It Simply", writes:

"The most important thing to understand about money is that money is artificial -- that is to say, that money is entirely a man-made creation. It isn't an element of nature (such as gold or silver). It is simply a creation of civilized man: it always has been and it always will be."

It is also important to understand that all *artificial* money, better known as "Bank Credit", is created by the commercial banks, first in the form of *checking account* "deposit credits" -- either as bank expenditures, bank loans, or bank investment monies -- and most Bank Credit money remains and circulates in that *deposit credits* form by means of checks -- until some is (temporarily) converted into physical cash currency notes.

The Treasury's Engraving and Printing Bureau tailor-prints the Federal Reserve notes cash currency for the 12 Federal Reserve banks at the cost of printing, about 2 cents per note. The Federal Reserve banks then distribute the cash currency amongst the commercial banks by charging it to their (Fed provided) reserve accounts.

The banks then distribute the cash currency amongst the general commerce and public, by exchanging their obtained cash currency for the public's checking or savings account *deposit credits*. In other words, the general public gets its cash currency from banks, or from someone who got it from some bank by having it charged, either to his checking or savings account.

---------------------------------------

PRESIDENT OF THE BANK OF ENGLAND...

Quoting Sir Josiah Stamp at the time he was president of the Bank of England and president of the English Railway System. His directorates filled several pages of WHO'S WHO. In the late 1920s, in an informal talk to about 150 history, economics and social science professors, at the University of Texas Josiah Stamp explained the following:

"Banking was conceived in iniquity and born in sin... The bankers own the world. Take it away from them, but leave them the power to create money and control credit, with a flick of the pen they will create enough money to buy it back again... Take this power away from bankers and all great fortunes like mine (he was the second richest man in Great Britain) will disappear, and they ought to disappear, for this world would then be a happier and better world to live in. My sons should not object. They are well educated, and should be willing to take their places in the business world and forge their own fortunes... But, if you want to continue to be slaves of bankers and pay the cost of your own enslavement, then let the bankers continue to create money and control credit... However, as long as governments will legalize such things, a man is foolish not to be a banker."
From: LEGALIZED CRIME OF BANKING
By: S. W. Adams, Money Analyst

"THE POP CULTURE GOVERNMENT CONSPIRACY THEORY"

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