Attorney banker interview

Source

This is an actual court transcript – an interview with a banker, who is under oath, about a foreclosure. The banker was placed on the witness stand and sworn in. The borrower's attorney asked the banker the routine questions concerning the banker's education and background. Then this conversation followed:

Attorney asked "What is court exhibit A?"
Banker: "This is a promissory note."

Attorney: "Is there an agreement between Mr. Smith (borrower) and the defendant?"
The banker said, "Yes."

Attorney: "Do you believe the agreement includes a lender and a borrower?"
Banker: "Yes, I am the lender and Mr. Smith is the borrower."

Attorney: "What do you believe the agreement is?"
Banker: "We have the borrower sign the note and we give the borrower a check."

Attorney: "Does this agreement show the words borrower, lender, loan, interest, credit, or money within the agreement?"
Banker: "Sure it does."

Attorney: "According to your knowledge, who was to loan what to whom according to the written agreement?"
Banker: by saying, "The lender loaned the borrower a $50,000 check. The borrower got the money and the house and has not repaid the money."

The attorney noted that the banker never said that the bank received the promissory note as a loan from the borrower to the bank. He asked, "Do you believe an ordinary person can use ordinary terms and understand this written agreement?"
The banker said, "Yes."

Attorney: "Do you believe you or your company legally own the promissory note and have the right to enforce payment from the borrower?"
The banker said, "Absolutely we own it and legally have the right to collect the money."

Attorney: "Does the $50,000 note have actual cash value of $50,000? Actual cash value means the promissory note can be sold for $50,000 cash in the ordinary course of business."
The banker said, "Yes."

Attorney: "According to your understanding of the alleged agreement, how much actual cash value must the bank loan to the borrower in order for the bank to legally fulfill the agreement and legally own the promissory note?"
The banker said, "$50,000."

Attorney: "According to your belief, if the borrower signs the promissory note and the bank refuses to loan the borrower $50,000 actual cash value, would the bank or borrower own the promissory note?"

The banker said, "The borrower would own it if the bank did not loan the money. The bank gave the borrower a check and that is how the borrower financed the purchase of the house."

Attorney: "Do you believe that the borrower agreed to provide the bank with $50,000 of actual cash value which was used to fund the $50,000 bank loan check back to the same borrower, and then agreed to pay the bank back $50,000 plus interest?"

The banker said, "No. If the borrower provided the $50,000 to fund the check, there was no money loaned by the bank so the bank could not charge interest on money it never loaned."

Attorney: "If this happened, in your opinion would the bank legally own the promissory note and be able to force Mr. Smith to pay the bank interest and principal payments?"
The banker said, "I am not a lawyer so I cannot answer legal questions."

Attorney: "Is it bank policy that when a borrower receives a $50,000 bank loan, the bank receives $50,000 actual cash value from the borrower, that this gives value to a $50,000 bank loan check, and this check is returned to the borrower as a bank loan which the borrower must repay?"
The banker said, "I do not know the bookkeeping entries."

Attorney: , "I am asking you if this is the policy."
Banker: "I do not recall."

The attorney again asked, "Do you believe the agreement between Mr. Smith and the bank is that Mr. Smith provides the bank with actual cash value of $50,000 which is used to fund a $50,000 bank loan check back to himself which he is then required to repay plus interest back to the same bank?"
The banker said "I am not a lawyer."

Attorney: "Did you not say earlier that an ordinary person can use ordinary terms and understand this written agreement?"
The banker said "Yes."

The attorney handed the bank loan agreement marked "Exhibit B" to the banker. He said, "Is there anything in this agreement showing the borrower had knowledge or showing where the borrower gave the bank authorization or permission for the bank to receive $50,000 actual cash value from him and to use this to fund the $50,000 bank loan check which obligates him to give the bank back $50,000 plus interest?"
The banker said, "No."

The lawyer asked, "If the borrower provided the bank with actual cash value of $50,000 which the bank used to fund the $50,000 check and returned the check back to the alleged borrower as a bank loan check, in your opinion, did the bank loan $50,000 to the borrower?"
The banker said, "No."

Attorney: "If a bank customer provides actual cash value of $50,000 to the bank and the bank returns $50,000 actual cash value back to the same customer, is this a swap or exchange of $50,000 for $50,000."
The banker replied, "Yes."

Attorney: "Did the agreement call for an exchange of $50,000 swapped for $50,000, or did it call for a $50,000 loan?"
The banker said, "A $50,000 loan."

Attorney: "Is the bank to follow the Federal Reserve Bank policies and procedures when banks grant loans."
The banker said, "Yes."

Attorney: "What are the standard bank bookkeeping entries for granting loans according to the Federal Reserve Bank policies and procedures?" The attorney handed the banker FED publication Modern Money Mechanics, marked "Exhibit C".

The banker said, "The promissory note is recorded as a bank asset and a new matching deposit (liability) is created. Then we issue a check from the new deposit back to the borrower."

Attorney: "Is this not a swap or exchange of $50,000 for $50,000?"
The banker said, "This is the standard way to do it.