Jean Keating’s “Cracking The Code # 7”

February 2005: © Protected by common law copyright ©

The courts are operating under Statute Law. A “Statute” is defined in black’s 4th edition revised as a kind of
bond or obligation of record, being an abbreviation for “statute merchant” or “statute staple.”

Statute –merchant = is defined as a security for a debt acknowledged to be due, entered into before the chief
magistrate of some trading town, pursuant to the statute 13 Edward I. De Mercatoribus, by which not only
the body of the debtor might be imprisoned, and his goods seized in satisfaction of the debt, but also his lands
might be delivered to the creditor till out of the rents and profits of them the debt be satisfied. This was also
called a Pocket Judgment.

Statute Staple = A 1353 statute establishing procedure for settling disputes among merchants who traded in
staple towns. The statute helped merchants receive swift judgment for debt. Cf. STATUTE MERCHANT. 2.
A bond for commercial debt. A statute staple gave the lender a possessory right in the land of a debtor who
failed to repay a loan. See STAPLE.

“A popular form of security after 1285 . . . was the . . . ‘statute staple’ – whereby the borrower could by
means of a registered contract charge his land and goods without giving up possession; if he failed to pay, the
lender became a tenant of the land until satisfied . . . the borrower under a statue or recognizance remained
in possession of his land, and it later became a common practice under the common-law forms of mortgage
likewise to allow the mortgagor to remain in possession as a tenant at will or at sufferance of the
mortgage.”J.H. Baker, An introduction to English Legal History 354 (3d edition 1990).

Recognizance = A bond or obligation of record binding a person to some act as to appear in court and
subject to forfeit money if obligation is not fulfilled. Fifa = Fifa, short for the Latin phrase fieri facias (“let it
be made . . .”) was a court (execution) to the sheriff to levy on (Take) the property of a debtor in order to
satisfy a judgment (see judgment and execution dockets, above). The sheriff might typically keep track of
fifas in a Sheriff’s Fifa Docket Book. Usually written on a fill-in-the blank form, a fifa names the parties to
the court judgment and the value of property to be taken to satisfy the judgment. On the back, the sheriff or
his deputies annotate their actions in carrying out the order. The fifas were to be returned to the court
which issued them and the actions annotated on the Judgment Docket. Theoretically, the docket books
should contain everything that was noted on the fifas.
In websters 1913 dictionary the word stand is defined as being also the word statute. I believe this is
why the judge in every court always asks do you under – stand the charges being assessed against you. In the
O.E. [Old English] it is understandan, to stand under or to be subjected to or under the control of or I am
subjecting or agreeing to put my myself under the control of or putting myself under the statute or bond of
record.
I have been doing more research on our prison system via the internet and have found out some interesting
things, regarding what is really going on in the courtroom. The court is looking for an acceptance and
acceptor under 3-410 of the U.C.C. as the Principal has the primary obligation to pay or discharge any
instrument presented for acceptance. Since they are presenting a Bill of Exchange [indictment] for
acceptance. This is called an acceptance for honor, which involves a negotiable instrument especially a bill of
exchange [indictment] that has been accepted for payment. The complaint, information, or indictment is a
three party Draft, Commercial paper, or Bill of Exchange under Article 3 of the U.C.C. The Grand Jury
Foreman is the Drawer or Maker of the Indictment by his signature, the Defendant/Debtor or Straw man is
the Drawee and the State is the Payee and the live man is the Payor. What they are doing in the courtroom is
all commercial, this is in conformity to 27 CFR 72.11, where it says all crimes are commercial. What the
judge and prosecutor are doing in the courtroom is making a commercial presentment under section 3-501
(1) "Unless excused (section 3-511) presentment is necessary to charge secondary parties as follows":

(a) Presentment for acceptance is necessary to charge the drawer and endorsers of a draft where the draft so
provides, or is payable elsewhere than at the residence or place of business of the Drawee, or its date of

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payment depends upon such presentment. The holder may at his option present for acceptance any other
draft payable at a stated date;

(b) Presentment for payment is necessary to charge any endorser;

(c) in the case of any drawer, the acceptor of a draft payable at a bank or the maker of a note payable at a
bank, presentment for payment is necessary, but failure to make presentment discharges such drawer,
acceptor or maker only as stated in section 3-502 (1)(B).

If you don't accept the charge or presentment you are in dishonor for non acceptance under 3-505 of the
U.C.C. (c) and 3-501 (2) (a), (b). Acceptance is the drawer's signed engagement to honor the draft as
presented. It must be written on the draft, and may consist of his signature alone. It becomes operative when
completed by delivery or notification 3-410 of the U.C.C.

You are the fiduciary trustee of the straw man which is a Cesti Que Trust; in this capacity you have the
responsibility to discharge all his debts, by operation of law.
“All moneys of the Federal Reserve Board shall be treated as trust funds for the purpose of section 906 (a)
(2) (FOOTNOTE 1) of title 2. This section is effective for fiscal year 1986 and every fiscal year thereafter.”
TITLE 12 BANKS AND BANKING CHAPTER 14 SECTION 1772 (e). Every account is a trust, this is why
every deed, conveyance or transfer uses the words Grantor, Grantee, or Assignor, Assignee, or Transferor or
Transferee.
You are also the principal or asset holder on the private side of the accounting ledger; you are holding
the exemption necessary to discharge the debt. When they monetize debt they have to have a principal,
capital and interest is what circulates as principal and is called revenue or re-venue. Principal is where venue
lies. Revenue is a Tax debt or Tax bills. All bills when presented represent revenue, interest, capitol, or
accruals circulating from you as the principal, when it is returned back to you as capital or interest it is
called income or in-coming. This method of accounting is called the "Accrual Accounting Method" and is
represented by debits and credits. Debits are assets Credits are liabilities. The credits and liabilities have to
be in balance, this is accomplished through double bookkeeping entries or reverse bookkeeping entry. These
bookkeeping entries are the funds referred to in commercial banking. When you are in dishonor they cannot
use your exemption to pass the debt or charge through your account to obtain a discharge, so they sell your
dishonor, which has a commercial of
$ 1,000,000 dollars for each count. When social security # is assigned or issued a blank bond is issued and
when you are imprisoned the bond is filled out. This bond is called a Bid Bond, standard form 24 (REV. 10-
98) prescribed by GSA-FAR (48CFR) 53.228(a). This is also called a prison bond. These are also referred to
as contract surety bonds. The first, the bid bond, provides financial assurance that the bid has been
submitted in good faith and that the contractor intends to enter into the contract at the price bid and provide
the required performance and payment bonds. The second, the performance bond, protects the obligee from
financial loss should the contractor fail to perform the contract in accordance with the terms and conditions
of the contract documents. The Third kind of contract bond is the payment bond which guarantees that the
contractor will pay certain subcontractor, labor and material bills associated with the project.
The fourth bond and most important is the STANDARD FORM 28 (Rev. 6/2003) prescribed by
GSA-FAR (48 CFR) 53.228 (e) OMB No. 9000-0001, if you read this form carefully it says under the sworn
statement “I also depose and say that, concerning any stocks or bonds included in the assets listed below,
that there are no restrictions on the resale of these securities pursuant to the registration provisions of
Section 5 of the Securities Exchange Act of 1933. The word securities takes you back to section 8-102 (9) of
Article 8 of the UCC, which defines securities as a financial asset (i) security (ii) obligation of a person, or a
share, participation of a person or in property or an enterprise of a person, which is, or is of a type, dealt in
or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a
medium for investment; or (iii) any property held by a securities intermediary for another person in a
securities account if the securities intermediary has expressly agreed with the other person that the person
that the property is to be treated as a financial asset under this Article. As the context requires, the term
means either the interest itself or the means by which a person’s claim to it is evidenced, including a
certificated or uncertificated security, a security certificate, or a security entitlement.
The definition of “security” has three components. First, there is the subparagraph (i) test that the
interest or obligation be fully transferable, in the sense that the issuer either maintains transfer books or the

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obligation or interest is represented by a certificate in bearer or registered form. Second, there is the
subparagraph (ii) test that the interest or obligation be divisible, that is, one of a class or series, as
distinguished from individual obligations of the sort governed by ordinary contract law or by Article 3.
Third, there is the subparagraph (iii) functional test, which generally turns on whether the interest or
obligation is, or is of a type, dealt in or traded on securities markets or securities exchanges. There is,
however, an “opt in” provision in subparagraph (iii) which permits the issuer of any interest or obligation
that is “a medium of investment” to specify that it is a security governed by Article 8.

The divisibility test of subparagraph (ii) applies to the security-that is, the underlying intangible interest-not
the means by which that interest is evidenced. Thus, securities issued in book-entry only form meet the
divisibility test because the underlying intangible interest is divisible via the mechanism of the indirect
holding system. This is so even though the clearing corporation is the only eligible direct holder of the
security. The third component, the functional test in subparagraph (iii), provides flexibility while ensuring
that the Article 8 rules do not apply to interest or obligations in circumstances so unconnected with the
securities markets that parties are unlikely to have thought of the possibility that Article 8 might apply.
Subparagraph (iii)(A) covers interests or obligations that either are dealt in or traded on securities
exchanges or securities markets, or are of a type dealt in or traded on securities exchanges or securities
markets. The “is dealt in or traded on” phrase eliminates problems in the characterization of new forms of
securities
Which are to be traded in the markets, even though no similar type has previously been dealt in or traded in
the markets. Subparagraph (iii)(B) covers the broader category of media for investment, but it applies only if
the terms of the interest or obligation specify that it is an Article 8 security. This opt-in provision allows for
deliberate expansion of the scope of Article 8.
Section 8-103 contains additional rules on the treatment of particular interests as securities or financial
assets.

1. Part 5 rules apply to security entitlements, and Section 8-501 (b) provides that a person has a security
entitlement when a financial asset has been credited to a “security account.” Thus, the term “securities
account” specifies the type of arrangements between institutions and their customers that are covered by
Part 5. A securities account is a consensual arrangement in which the intermediary undertakes to treat the
customer as entitled to exercise
The rights that comprise the financial asset. The consensual aspect is covered by the requirement that the
account be established pursuant to agreement. The term agreement is used in the broad sense defined in
section 1-201(3). There is no requirement that a formal or written agreement.

1-201(3) “Agreement”, as distinguished from “contract”, means the bargain of the parties in fact, as found in
their language or inferred from other circumstances, including course of performance, course of dealing, or
usage of trade as provided in Section 1-303.

1-303. Course of performance, Course of Dealing, and Usage of Trade.

(a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that
exists if;

(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance
by a party; and

(2) the other party, with knowledge of the nature of the performance and opportunity for objection to it,
accepts the performance or acquiesces in it without objection.

(b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a
particular transaction that is fairly to be regarded as establishing a common basis of understanding for
interpreting their expressions and other conduct.

(c) A “usage of trade”is any practice or method of dealing having such regularity of observance in a place,
vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in

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question. The existence and scope of such a usage must be proved as facts. If it is established that such a
usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

(d) A course of performance or course of dealing between the parties or usage of trade in the vocation or
trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the
meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement,and may
supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of
the performance under the agreement is to occur may be so utilized as to that part of the performance.

(e) Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable
course of performance, course of dealing, or usage of trade must be construed whenever reasonable as
consistent with each other. If such a construction is unreasonable:

(1) express terms prevail over course of performance, course of dealing,and usage of trade;

(2) course of performance prevails over course of dealing and usage of trade;

And

(3) course of dealing prevails over usage of trade.

(f) Subject to Section 2-209 and Section 2A-208, a course of performance is relevant to show a waiver or
modification of any term inconsistent with the course of performance.

(g) Evidence of relevant usage of trade offered by one party is not admissible unless the party has given the
other party notice that the court finds sufficient to prevent unfair surprise to the other party.

Code of Federal Regulations]

[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR28.203-5]

[Page 541-542]

TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

CHAPTER 1--FEDERAL ACQUISITION REGULATION

PART 28_BONDS AND INSURANCE--Table of Contents

Subpart 28.2_Sureties and Other Security for Bonds

Sec. 28.203-5 Release of lien.

(a) After consultation with legal counsel, the contracting officer

shall release the security interest on the individual surety's assets
using the Optional Form 90, Release of Lien on Real Property, or
Optional Form 91, Release of Personal Property from Escrow, or a similar
release as soon as possible consistent with the conditions in
subparagraphs (a) (1) and (2) of this subsection. A surety's assets
pledged in support of a payment bond may be released to a subcontractor
or supplier upon Government receipt of a Federal district court

4
[[Page 542]]

judgment, or a sworn statement by the subcontractor or supplier that the

claim is correct along with a notarized authorization of the release by
the surety stating that it approves of such release.
(1) Contracts subject to the Miller Act. The security interest shall
be maintained for the later of (i) 1 year following final payment, (ii)
until completion of any warranty period (applicable only to performance
bonds), or (iii) pending resolution of all claims filed against the
payment bond during the 1-year period following final payment.
(2) Contracts subject to alternative payment protection (28.102-
1(b)(1)). The security interest shall be maintained for the full
contract performance period plus one year.
(3) Other contracts not subject to the Miller Act. The security
interest shall be maintained for 90 days following final payment or
until completion of any warranty period (applicable only to performance
bonds), whichever is later.
(b) Upon written request, the contracting officer may release the
security interest on the individual surety's assets in support of a bid
guarantee based upon evidence that the offer supported by the individual
surety will not result in contract award.
(c) Upon written request by the individual surety, the contracting
officer may release a portion of the security interest on the individual
surety's assets based upon substantial performance of the contractor's
obligations under its performance bond. Release of the security interest
in support of a payment bond must comply with the subparagraphs (a) (1)
through (3) of this subsection. In making this determination, the
contracting officer will give consideration as to whether the unreleased
portion of the lien is sufficient to cover the remaining contract
obligations, including payments to subcontractors and other potential
liabilities. The individual surety shall, as a condition of the partial
release, furnish an affidavit agreeing that the release of such assets
does not relieve the individual surety of its obligations under the
bond(s).

[54 FR 48988, Nov. 28, 1989, as amended at 61 FR 31652, June 20, 1996]

[Code of Federal Regulations]

[Title 48, Volume 1]
[Revised as of October 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR28.204-3]

[Page 553-554]

TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

(This book contains chapter 1, parts 1 to 51)

CHAPTER 1--FEDERAL ACQUISITION REGULATION

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

PART 28_BONDS AND INSURANCE--Table of Contents

Subpart 28.2_Sureties and Other Security for Bonds

Sec. 28.204-3 Irrevocable letter of credit (ILC).

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 (a) Any person required to furnish a bond has the option to furnish
a bond secured by an ILC in an amount equal to the penal sum required to be secured (see 28.204). A
separate ILC is required for each bond.
(b) The ILC shall be irrevocable, require presentation of no
document other than a written demand and the ILC (and letter of
confirmation, if any), expire only as provided in paragraph (f) of this
subsection, and be issued/confirmed by an acceptable federally insured
financial institution as provided in paragraph (g) of this subsection.
(c) To draw on the ILC, the contracting officer shall use the sight
draft set forth in the clause at 52.228-14, and present it with the ILC
(including letter of confirmation, if any) to the issuing financial
institution or the

[[Page 554]]

confirming financial institution (if any).

(d) If the contractor does not furnish an acceptable replacement
ILC, or other acceptable substitute, at least 30 days before an ILC's
scheduled expiration, the contracting officer shall immediately draw on
the ILC.
(e) If, after the period of performance of a contract where ILCs are used to support payment bonds, there
are outstanding claims against the payment bond, the contracting officer shall draw on the ILC prior to the
expiration date of the ILC to cover these claims.
(f) The period for which financial security is required shall be as
follows:
(1) If used as a bid guarantee, the ILC should expire no earlier
than 60 days after the close of the bid acceptance period.
(2) If used as an alternative to corporate or individual sureties as security for a performance or payment
bond, the offeror/contractor may submit an ILC with an initial expiration date estimated to cover the entire
period for which financial security is required or an ILC with an initial expiration date that is a minimum
period of one year from the date of issuance. The ILC shall provide that, unless the issuer provides the
beneficiary written notice of non-renewal at least 60 days in advance of the current expiration date, the ILC
is automatically extended without amendment for one year from the expiration date, or any future
expiration date, until the period of required coverage is institution with a written statement waiving the right
to payment. The period of required coverage shall be:
(i) For contracts subject to the Miller Act, the later of--
(A) One year following the expected date of final payment;
(B) For performance bonds only, until completion of any warranty
period; or
(C) For payment bonds only, until resolution of all claims filed
against the payment bond during the one-year period following final
payment.
(ii) For contracts not subject to the Miller Act, the later of--
(A) 90 days following final payment; or
(B) For performance bonds only, until completion of any warranty
period.
(g) Only federally insured financial institutions rated investment
grade or higher shall issue or confirm the ILC. Unless the financial
institution issuing the ILC had letter of credit business of at least
$25 million in the past year, ILCs over $5 million must be confirmed by
another acceptable financial institution that had letter of credit
business of at least $25 million in the past year.
(1) The offeror/contractor shall provide the contracting officer a
credit rating from a recognized commercial rating service as specified

6
in Office of Federal Procurement Policy Pamphlet No. 7 (see 28.204-3(h)) that indicates the financial
institution has the required rating(s) as of the date of issuance of the ILC.
(2) If the contracting officer learns that a financial institution's rating has dropped below the required
level, the contracting officer shall give the contractor 30 days to substitute an acceptable ILC or shall draw
on the ILC using the sight draft in paragraph (g) of the clause at 52.228-14.
(h)(1) Additional information on credit rating services and
investment grade ratings is contained within Office of Federal
Procurement Policy Pamphlet No. 7, Use of Irrevocable Letters of Credit. This pamphlet may be obtained by
calling the Office of Management and Budget's publications office at (202) 395-7332.
(2) A copy of the Uniform Customs and Practice (UCP) for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500, is available from: ICC Publishing, Inc., 156 Fifth
Avenue, New York NY, 10010, Telephone: (212) 206-1150, Telefax: (212) 633-6025, E-mail:
iccpub@interport.net

[61 FR 31653, June 20, 1996, as amended at 62 FR 44807, Aug. 22, 1997]

52.228-14 -- Irrevocable Letter of Credit.

As prescribed in 28.204-4, insert the following clause:

Irrevocable Letter of Credit (Dec 1999)

(a) “Irrevocable letter of credit” (ILC), as used in this clause, means a written commitment by a federally insured
financial institution to pay all or part of a stated amount of money, until the expiration date of the letter, upon
presentation by the Government (the beneficiary) of a written demand therefor. Neither the financial institution nor
the offeror/Contractor can revoke or condition the letter of credit.

(b) If the offeror intends to use an ILC in lieu of a bid bond, or to secure other types of bonds such as performance
and payment bonds, the letter of credit and letter of confirmation formats in paragraphs (e) and (f) of this clause
shall be used.

(c) The letter of credit shall be irrevocable, shall require presentation of no document other than a written demand
and the ILC (including confirming letter, if any), shall be issued/confirmed by an acceptable federally insured
financial institution as provided in paragraph (d) of this clause, and --

(1) If used as a bid guarantee, the ILC shall expire no earlier than 60 days after the close of the bid
acceptance period;

(2) If used as an alternative to corporate or individual sureties as security for a performance or

payment bond, the offeror/Contractor may submit an ILC with an initial expiration date estimated
to cover the entire period for which financial security is required or may submit an ILC with an
initial expiration date that is a minimum period of one year from the date of issuance. The ILC
shall provide that, unless the issuer provides the beneficiary written notice of non-renewal at least
60 days in advance of the current expiration date, the ILC is automatically extended without
amendment for one year from the expiration date, or any future expiration date, until the period of
required coverage is completed and the Contracting Officer provides the financial institution with a
written statement waiving the right to payment. The period of required coverage shall be:

(i) For contracts subject to the Miller Act, the later of --

(A) One year following the expected date of final payment;

(B) For performance bonds only, until completion of any warranty period; or

7
 (C) For payment bonds only, until resolution of all claims filed against the
payment bond during the one-year period following final payment.

(ii) For contracts not subject to the Miller Act, the later of --

(A) 90 days following final payment; or

(B) For performance bonds only, until completion of any warranty period.

(d) Only federally insured financial institutions rated investment grade or higher shall issue or confirm the ILC. The
offeror/Contractor shall provide the Contracting Officer a credit rating that indicates the financial institution has the
required rating(s) as of the date of issuance of the ILC. Unless the financial institution issuing the ILC had letter of
credit business of at least $25 million in the past year, ILCs over $5 million must be confirmed by another
acceptable financial institution that had letter of credit business of at least $25 million in the past year.

(e) The following format shall be used by the issuing financial institution to create an ILC:
_____________________________________________________
[Issuing Financial Institution’s Letterhead or Name and Address]

Issue Date ______

Irrevocable Letter of Credit No. ________________

Account party’s name ________________________

Account party’s address ______________________

For Solicitation No. __________ (for reference only)

To: [U.S. Government agency]

[U.S. Government Agency’s Address]

1. We hereby establish this irrevocable and transferable Letter of Credit in your favor for one or more drawings up
to United States $ ______. This Letter of Credit is payable at [issuing financial institution’s and, if any, confirming
financial institution’s] office at [issuing financial institution’s address and, if any, confirming financial
institution’s address] and expires with our close of business on ______, or any automatically extended expiration
date.

2. We hereby undertake to honor your or the transferee’s sight draft(s) drawn on the issuing or, if any, the
confirming financial institution, for all or any part of this credit if presented with this Letter of Credit and
confirmation, if any, at the office specified in paragraph 1 of this Letter of Credit on or before the expiration date or
any automatically extended expiration date.

3. [This paragraph is omitted if used as a bid guarantee, and subsequent paragraphs are renumbered.] It is a
condition of this Letter of Credit that it is deemed to be automatically extended without amendment for one year
from the expiration date hereof, or any future expiration date, unless at least 60 days prior to any expiration date,
we notify you or the transferee by registered mail, or other receipted means of delivery, that we elect not to
consider this Letter of Credit renewed for any such additional period. At the time we notify you, we also agree to
notify the account party (and confirming financial institution, if any) by the same means of delivery.

4. This Letter of Credit is transferable. Transfers and assignments of proceeds are to be effected without charge to
either the beneficiary or the transferee/assignee of proceeds. Such transfer or assignment shall be only at the written
direction of the Government (the beneficiary) in a form satisfactory to the issuing financial institution and the
confirming financial institution, if any.

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5. This Letter of Credit is subject to the Uniform Customs and Practice (UCP) for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500, and to the extent not inconsistent therewith, to
the laws of _____________________ [state of confirming financial institution, if any, otherwise state of issuing
financial institution].

6. If this credit expires during an interruption of business of this financial institution as described in Article 17 of
the UCP, the financial institution specifically agrees to effect payment if this credit is drawn against within 30 days
after the resumption of our business.

Sincerely,

_______________________
[Issuing financial institution]

(f) The following format shall be used by the financial institution to confirm an ILC:
___________________________________________________________________
[Confirming Financial Institution’s Letterhead or Name and Address]

(Date) _____________

Our Letter of Credit Advice Number _____________

Beneficiary: ___________ [U.S. Government agency]

Issuing Financial Institution: __________________

Issuing Financial Institution’s LC No.: ___________

Gentlemen:

1. We hereby confirm the above indicated Letter of Credit, the original of which is attached, issued by __________
[name of issuing financial institution] for drawings of up to United States dollars ___________/U.S. $_______ and
expiring with our close of business on _____________ [the expiration date], or any automatically extended
expiration date.

2. Draft(s) drawn under the Letter of Credit and this Confirmation are payable at our office located at
___________________.

3. We hereby undertake to honor sight draft(s) drawn under and presented with the Letter of Credit and this
Confirmation at our offices as specified herein.

4. [This paragraph is omitted if used as a bid guarantee, and subsequent paragraphs are renumbered.] It is a
condition of this confirmation that it be deemed automatically extended without amendment for one year from the
expiration date hereof, or any automatically extended expiration date, unless:

(a) At least 60 days prior to any such expiration date, we shall notify the Contracting Officer, or the
transferee and the issuing financial institution, by registered mail or other receipted means of
delivery, that we elect not to consider this confirmation extended for any such additional period; or

(b) The issuing financial institution shall have exercised its right to notify you or the transferee, the
account party, and ourselves, of its election not to extend the expiration date of the Letter of Credit.

5. This confirmation is subject to the Uniform Customs and Practice (UCP) for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500, and to the extent not inconsistent therewith, to
the laws of ________ [state of confirming financial institution].
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6. If this confirmation expires during an interruption of business of this financial institution as described in Article
17 of the UCP, we specifically agree to effect payment if this credit is drawn against within 30 days after the
resumption of our business.

Sincerely,

___________________________
[Confirming financial institution]

(g) The following format shall be used by the Contracting Officer for a sight draft to draw on the Letter of Credit:

Sight Draft

________________________
[City, State]

(Date) ______________

[Name and address of financial institution]

Pay to the order of ______________ [Beneficiary Agency] ___________ the sum of United States $____________.
This draft is drawn under Irrevocable Letter of Credit No. ______________.

___________________
[Beneficiary Agency]

____________________
[By]

On April 9, 2002 (12:18 pm) Lehman Brothers Banking Cartel in New York City agreed to provide prison
industry leader CCA (Corrections Corporation of America) with a new $ 695,000,000 senior secured credit
facility, to be combined with a $150 million notes offering. The war on terrorism has created a buzz in the
private prison industry. Less than three weeks after September 11th, a New York Post story on the for-profit
private prison industry stated, "America's new wall of homeland security is creating a big demand for cells
to hold suspects and illegal aliens who might be rounded up." In order to prosper, prison operators need to
maintain a steady flow of prisoners and prison dollars. One of the Industries tools for accomplishing this is
the American Legislative Exchange Council, a powerful right wing lobby group that helps corporations draft
and enacts "model" legislation-- for a price. Industry leaders CCA and Wackenhut have paid tens (if not
hundreds) of thousands of dollars in exchange for a privileged position on ALEC's Criminal Justice Task
Force (which CCA chairs). ALEC, in turn, not only promotes privatization, but also brags of having helped
enact "Truth in Sentencing" and "Three Strikes" laws in 25 states. In addition to investing heavily in groups
like ALEC and the Reason Foundation, the industry spends millions on campaign contributions. From 1995
to 2000, CCA, Wackenhut, and Cornell spent $520,000 in Federal elections, and in 1998, the industry spent
$540,000 on state elections, where a little money goes a long way.
Corporations work on the Fiscal Accounting Cycle because they operate using commercial debt, we as owner
principal’s work on the General Calendar Accounting Year or Cycle. New York City has a $ 6.6 billion
dollar deficit, this deficit represents unredeemed debt on the credit side of the accrual accounting system and
cannot be executed to the debit side of accrual accounting ledger, except through the principal's exemption.
New York has therefore put its bond underwriting business up for bid. This means that New York will issue
$ 6.6 billion in bonds and pay underwriters over $30, million in fees in the next fiscal year alone. Lehman
Brothers Bank will underwrite New York's $ 6.6 billion dollar deficit. An underwriter is an Insurer or one
who buys stock from the issuer with an intent to resell it to the public or an entity or person, especially an
investment banker, who guarantees the sale of newly issued securities by purchasing all or part of the shares
for resale to the public. The term underwriter derives its meaning from former British Insurance Practices.
When insuring their cargo shippers would seek out investors to insure their property. The insurers would
10
add their signatures and would write their names under those of the shipper; hence the term 'underwriter'.
Both in terms of the insurance industry and securities markets, the concept of underwriting have expanded
significantly since its inception. West Mutual Shippers Association out of Luxemburg is underwriting Social
Security Administration a surety ship contract or Bond. Now you know how they are financing the
commodities and securities market and why New York City is called the Great Whore of Babylon in the
Book of Revelations Chapter 18 verses 10-24.

The Corrections Corporation of America owns most of your prison systems and sells its stock and
shares on the New York Stock Exchange, the major stock holder is the Paine Webber Group. They have a
Dunn & Bradstreet rating and are headquartered in Nashville, Tennessee at 10 Burton Hills Blvd and can be
reached at 1-800-624-2931. Their Ticker Symbol for their stock is CXW_pb on the NYSE and CXW under
business services on the NYSE. In Berlin Germany there ticker symbol is CXW.BE and CXW.DE in
Frankfurt, Germany.
CCA later merged into PRISON REALTY TRUST, a Real Estate Investment Trust that is exempt
from corporate taxes if it meets certain conditions. This was a $4 Billion Transaction; companies acquire
U.S. Corrections Corporation. One important condition is that it distribute 95% of its income to
shareholders, a provision making REITs attractive to investors. Prison Realty Trust failed to meet those
conditions of cash flow problems; it posted a $62,000,000 loss for 1999 and was in default on the terms of its
credit facility. Wall Street was unimpressed at the company’s earlier scheme to issue junk bonds. Investors
are angry that PZN lost its REIT status and the related dividend; they are filing class actions suits against
Prison Realty Trust for false claims on Securities and Exchange Commission documents. Specifically, they
are concerned about the non-disclosure of payments by PZN to CCA. Meanwhile Prison Realty just paid a
dividend on their preferred stock (belonging to executives and institutional partners), which sent the
common stock to new lows as shareholders realized they are not likely to see dividends soon.
In April of 2000, company audits expressed doubt about the company’s solvency. Shares hit a new 52
week low of 2.12 each, down from the 52 week high of $22.37. In his book the Perpetual Prisoner Machine
[see resources], Joel Dyer notes that outside one CCA facility, there is a placard with the words “Yesterday’s
closing stock price.” Imagine the legitimacy and confidence that are lost by people driving by seeing the
stock price plummet, or even seeing “Yesterday’s Closing Stock Price: $2.12”.
Together, CCA and its spin off Prison Realty Trust, lost $265 million: “It’s a slim chance, but
bankruptcy is a possibility,” says an analyst for First Union Securities. Localities that have contracts with
the companies are concerned about whether guards will get paid, and how morale or turnover will effect
daily operations, including prison security. The private prison was offered a $200,000,000 restricting plan
from its current shareholder Pacific Life Insurance Co. The Private prison’s largest shareholder, Dreman
Value Management, was pleased at the offer: “We always maintained that the (prison) business was great,
but this has been a financial engineering disaster.”

Shareholder lawsuits still must be settled on satisfactory terms for the deal to be finalized, but the other
requirement was met when Lehman Brothers refinanced PZN’s $ 1 billion credit line. At the close of
business 26 April, the price closed below $3 a share again after briefly hitting $3.50 the previous week. Prices
through the first half of may have generally been below $3 a share. On June 7, the stock hit a new low of
$2.00 and talks started on financial restructuring to remedy default on credit line. During the next week,
stock rose $1 a share on news that their $1 billion credit line is restructured and they receive a $780,000,000
federal contract.

Instrumental in pulling off this contract was former Federal Bureau of Prisons head J. Michael Quinlan,
who is now on the Board of PZN. The Federal Contract, with guaranteed 95% occupancy rate, provided
financial resources to reject a restructuring offer from Pacific Life Insurance, but a Legg-Mason stock
analyst declared PZN an UNDERPERFORM. Quinlan is now one of the top executives in the company.

Because the stock has lost 75% of its value, two of the executives are leaving, but not without a $1.3 million
severance. Of course, there’s also been millions in attorney fees, class action lawsuits from shareholders
about the merger and management fees for restructuring. Share prices bottomed out at $0.18 –yes, 18 cents;
that really inspires confidence in the justice system. They instituted a 10 for 1 split, which does not change
the underlying financials of the company, but prevented them from being removed from the New York Stock
Exchange.

11
On February 23, 2000 Pacific Life Insurance Company submitted to the board of directors of Prison Realty
Trust a shareholder based proposal to invest in and restructure Prison Realty Trust (NYSE:PZN). The
shareholder proposal would involve additional value, less dilution and potentially higher returns for existing
shareholders of Prison Realty Trust, than the agreement Prison Realty Trust currently has with Fortress
Investment Group LLC, the Blackstone Group and Bank of America. Fortress Investment Group is a global
alternative investment and asset management firm founded in 1998 with approximately $11 billion in equity
capitol. They are located at 1251 Avenue of the Americas 16th floor New York, NY 10020 1-212-798-6100.
Fortress just recently completed the acquisition of Germany’s fourth largest residential housing company,
GAGFAH, from the German Federal Government’s social security and pension agency,
Bundesversicherungsanstalt Fuer Angestellte (or BfA). The transaction, which is valued at approximately
3.5 billion euros (U.S. $4.3 billion), includes the assumption of 1.4 billion euros of existing financing, a $1.4
billion acquisition loan, and 700 million euros of private equity capitol.

Fortress on November 15, 2004 merged with Stelmar Shipping Ltd. Stelmar is an international provider of
petroleum products and crude oil transportation services and is Headquartered in Athens, Greece, Stelmar
operates one of the world’s largest and most modern Handymax and Panamax tanker fleets with an average
age of approximately six years. Stelmar’s 40 vessel fleet consists of 24 Handymax, 13 Panamax and three
Aframax tankers.

The Blackstone group is a private investment banking firm and describes itself as a leading global
investment and advisory firm. The Blackstone Group was founded in 1985 by a group of four, including
Peter G. Peterson and Stephen A. Schwarzman.

The Blackstone Group has ties to American International Group Inc. (AIG) and Kissinger Associates,
Inc./Henry Kissinger. According to the Blackstone website, AIG acquired a 7 % non-voting interest in the
company in 1998 for $150 million”and committed to invest $1.2 billion in future Blackstone sponsored
funds.”

Blackstone has developed strategic alliances with some of the largest and most sophisticated international
financial institutions. In addition to AIG, they include Kissinger Associates, Roland Berger & Partner,
GmbH, and Scandinaviska Enskilda Banken,” the website states [1]
(http://www.blackstone.com/company/bst_group.html).

The company’s Blackstone Alternative Asset Management unit handles $1 billion in hedge funds for pension
giant CalPERS.

John Kerry Forbes 2004 campaign ‘advisor’ Roger C. Altman was Vice Chairman of the Blackstone Group
from 1987 through 1992 “where he led the firm’s merger advisory business.”

In December 2001, the Blackstone Group was appointed as Enron’s principal financial advisor with regard
to financial restructuring.

The Blackstone Group is also handling the restructuring of Global Crossing. The Blackstone Group is
located at 345 Park Avenue New York, NY 10154 USA Phone; +1 212 583 5000 Fax: +1 212 583 5712.
London location is the Blackstone Group International Limited, Stirling Square, 5-7 Carlton Gardens, 4th
Floor London, SW1Y 5AD U.K. Phone: +44 20 7451 4000 Fax: +44 20 7451 4038.

In October 2004, Kissinger Associates and APCO Worldwide announced that they had formed “a strategic
alliance”. APCO Worldwide is located at 1615 L St. N.W., # 900, Washington, D.C. phone # 1-202-778-1000.
APCO worldwide was started by Margery Kraus in 1984 and she is active on the board of Group Menatep
(chair, Advisory Board), the largest Russian holding company; Teuza Fund, a Fairchild technology venture
(Israel). Group MENATEP is an international diversified holding company and long-term Russian strategic
and portfolio investor in international financial and capital markets.

Kissinger Associates is located at 350 Park Avenue, New York. Other groups associated with Kissinger are
Kissinger McLarty Associates, Military-industrial complex and oil industry. Henry Kissinger’s real name is

12
Henry Stern, who started and trained the terrorist group the Stern Gang in Israel, which is now called the
Mossad. He trains global terrorist groups for the FBI, CIA, and the military, which are the groups running
are government at every facet of its existence.

Pacific Life, a long term investor, beneficially owns approximately 4.5 million shares of Prison Realty Trust.
The shareholder proposal by Pacific Life provides for additional value in the form of Series C Preferred
Stock (approximately $2.20 per share) to be distributed to existing shareholders, and potentially higher
future returns, along with generating between $45 to $123 million in additional cash flow to Prison Realty
Trust. Pacific Life was founded in 1868 and provides life and health insurance products, individual annuities
and group employee benefits, and offers to individuals, businesses and pension plans a variety of investment
products and services. The pacific life family of companies manages $300 billion in assets, making it one of
the largest financial institutions in America, and currently counts 65 of the 100 largest U.S. companies as
clients. Pacific Life Insurance Company is a member of the fortune 500 group.

The Prison Realty Trust [PZN], which is a real estate investment trust [REIT] and is the world’s largest
private sector owner and developer. A REIT is a company that buys, develops, manages and sells real estate
assets, REIT’s allows participates to invest in a professionally managed portfolio of real estate properties,
REIT’s qualify as pass through entities, companies who are able distribute the majority of income cash flows
to investors without taxation at the corporate level (providing that certain conditions are met). As pass
through entities, whose main function is to pass profits on to investors, a REIT’s business activities are
generally restricted to generation of property rental income. Another major advantage of REIT investment
is its liquidity (ease of liquidation of assets into cash), as compared to traditional private real estate
ownership which are not very easy to liquidate. One reason for the liquid nature of REIT investments is that
its shares are primarily traded on major exchanges, making it easier to buy and sell REIT assets/shares than
to buy and sell properties in private markets.
The origins of the real estate investment trust, or REIT (pronounced “reet”) date back to the
1880s. At that time, investors could avoid double taxation because trusts were not taxed at the corporate
level if income was distributed to beneficiaries. This tax advantage, however, was reversed in the 1930s, and
all passive investments were taxed first at the corporate level and later taxed as a part of individual incomes.
Unlike stock and bond investment companies, REIT’s were unable to secure legislation to overturn the 1930
decision until 30 years later. Following WWII, the demand for real estate funds skyrocketed and President
Eisenhower signed the 1960 real estate investment trust tax provision which reestablished the special tax
considerations qualifying REIT’s as pass through entities (thus eliminating the double taxation). This law
has remained relatively intact with minor improvements since its inception.

REIT investment increased throughout the 1980s with the elimination of certain real estate tax shelters.
Investments in real estate provided investors with income and appreciation. The Tax Reform Act of 1986
allowed REIT’s to manage their properties directly, and in 1993 REIT investment barriers to pension funds
were eliminated. This trend of reforms continued to increase the interest in and value of REIT investment.

Today, there are over 300 publicly traded REIT’s operating in the United States their assets total over $300
billion. Approximately two-thirds of these trade on the national stock exchanges.

REIT’s fall into three broad categories:

Equity REIT’s: (96.1%)

Equity REITS invest and own properties (thus responsible for the equity or value of their real estate assets).
Their revenues come principally from their property rents.

Mortgage REITs: (1.6%)

Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for
mortgages to owners of real estate, or invest in (purchase) existing mortgages or mortgage backed securities.
Their revenues are generated primarily by the interest that they earn on the mortgage loans.

Hybrid REITs: (2.3%)

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Hybrid REITs combine the investment strategies of Equity REITs and Mortgage REITs by investing in both
properties and mortgages.

Individual REITs are able to distinguish themselves by specialization. REITs may focus their investments
geographically (by region, state, or metropolitan area), or in property types (such as retail properties,
industrial facilities, office buildings, apartments or healthcare facilities). Certain REITs choose a broader
focus, investing in a variety of types of property and mortgage assets across a wider spectrum of locations.

The current REIT industry’s investment choices can be broken down by property:

• Retail 20%
• Residential 21.0%
• Industrial/Office 33.1%
• Specialty 2.3 %
• Health Care 3.8%
• Self Storage 3.6%
• Diversified 8.5%
• Mortgage Backed 1.5%
• Lodging/Resort 6.1%

Federal Prison Industries, also known by its trade name UNICOR, founded in 1934, is operated by the
Department of Justice (DOJ) and is wholly owned government corporation which employs 25 percent of the
Federal Bureau of Prisons’ sentenced inmate population. Unicor is a supplier to the military during the
current war in Iraq.

The government has also created the Prison Industrial Complex, which is composed of the following
Agencies:

Biometric Consortium
Border Research and Technology Center (BRTC)
Bureau of Alcohol, Tobacco, and Firearms (BATF)
Corrections Program Office (CPO)
Counter drug Technology Assessment Center (CTAC)
Drug Enforcement Administration (DEA)
Federal Bureau of Prisons (FBP)
Federal Prison Industries (operated by DOJ); also known as UNICOR
Immigration and Naturalization Service
National Institute of Corrections (NIC)
National Institute of Justice (NIJ)
National Law Enforcement and Corrections Technology Center (NLECTC)
National Technical Information Service (NTIS)
Office of Correctional Education (OVAE)
Office of Drug Control Policy (ODCP)
Office of Law Enforcement Standards (OLES)
Office of Law Enforcement Technology Commercialization (OLETC)
Office of National Drug Control Policy (ONDCP)
Office of Science and Technology (OS&T)
Space and Naval Warfare Systems Center, San Diego (Navy SSC San Diego)
Southwest Border High Intensity Drug Trafficking Area (HIDTA)
UNICOR
U.S. Customs Service
U.S. Department of Defense (DOD)/Biometric Management Office (BMO)
U.S. Department of Homeland Security/Border and Transportation Security Directorate (BTS)
U.S. Department of Justice (DOJ)
U.S. Parole Commission

14
Non-Governmental Entities

Alternative Monitoring Services

American Correctional Association
American Legislative Exchange Council (ALEC)
“Bed brokers”
BI Inc. (Biometric Systems)
The [Biometric Foundation]
Bobby Ross Group
Capital Correction Resources
Cornell Corrections
correctionalnews.com
corrections.com
Corrections Corporation of America (CCA)
Corrections Yellow Pages
Dominion Management
Dove Development Corporation
Earl Warren Legal Institute
Federal Extradition Agency (private)
General Security Service
Government owned/contractor operated
Iridian Technologies, Inc. (formerly IriScan, Inc.)
Juvenile and Jail Facility Management Services
Justice Policy Institute (JPI)
Justice Technology Information Network (JTIN)
Law Enforcement and Corrections Technology Advisory Council (LECTAC)
Mace Security Inc.
Management and Training Corporation
Manhattan Institute
Marriott Management Services
Misuse of labor
N-Group Securities
National Criminal Justice Commission
National Institute of Corrections (NIC)
Open Society Institute/Center on Crime, Communities and Culture
Premier Detention Services
Printrak (Motorola)
Prison Industries
The Prison Litigation Reform Act (1996)
Prison Realty Trust (merged with Corrections Corporation of America)
Prison telephone service (AT&T the Authority; BellSouth MAX, MCI Maximum Security, North American
In telecom)
R&S Prisoner Transport
“Rent-a-call (see “bed brokers”)
Scientific Applications and Research Associates (SARA)
The Sentencing Project
SENTRI/Secured Electronic Network for Travelers’ Rapid Inspection
Serco Group, Inc.
Stun Tech Inc.
TRansCor America
Urban Development Corporation
U.S. Corrections Corporation purchased by Corrections Corporation of America
Wackenhut Corporation/Wackenhut Corrections

Other Related Disinfopedia Resources

15
Biometrics
Defense contractors
Eugenics
Federal contractors
Global detention system
Global economy
Globalization
Military-industrial complex
Surveillance-industrial complex
Population control
Prison labor
Sustainable development
Timeline to global governance

External links

Wikipedia: carceral state

Wikipedia: retribution justice
Wikipedia: prison-industrial complex

Disinfopedia is an encyclopedia of people, issues and groups shaping the public agenda. It is a project of the
Center for Media & Democracy; email bob AT Disinfopedia.

American Legislative Exchange Council is owned by Paul Weyrich of the Free Congress Foundation and
receives financial support from all of your major corporations. They are the moving force and promoter of
the National Council of State Legislatures who privatize criminal statutes for financial gain and profit. They
are promoting public policy in regard to prize and capture law under the War Powers Acts. The Reason
Foundation is run by David Nott, the president and is a think tank promoting privatization of penal
institutions for financial gain they are located at 3415 S. Sepulveda Blvd. Suite 400 Los Angeles California
90034 1-310-391-2245. The Wackenhut Corporation is a U.S. based division of Group 4 Falck A/S, the
world’s second largest provider of Security Services and is based in Copenhagen, Denmark and is the
premier U.S. provider of contract services to the business, commercial, and government markets. The types
and techniques of Privatization are:

1. Contracting Out [also called Outsourcing]

2. Management Contracts
3. Public-Private Competition [also called managed competition or
market testing]
4. Franchise
5. Internal Markets
6. Vouchers
7. Commercialization [also referred to as service shedding]
8. Self Help [also referred to as transfer to non-profit organization]
9. Volunteers
10. Corporatization
11. Asset Sale or Long-Term Lease
12. Private Infrastructure Development and Operation

Cornell Corrections Inc. [NYSE:CRN] is chaired by DAVID M. CORNELL and their Company’s
concept began December 7, 1990, it was a rough business plan, yet the Dillon Read Venture Capitol became
there first investor on February 21, 1991 [They are also called Trinity Venture Capital and Shane Reihill is
the Chairman and founder. They built correctional facilities in Plymouth, Massachusetts, the other in
Central Falls, Rhode Island. They have grown 33-fold in revenues and offenders under contract since that
time. They have diversified and are now dependent upon development and have diversified into the three
sectors of the business- secure institutional, they go up to maximum security; juvenile; and pre-release. They
are the only company really in the business of aggressively growing in each of these three sectors. There

16
institutional revenues are around 42 percent, juvenile revenues approximate 40 percent and prerelease
revenues are around 18 percent. These factors represent the outsourcing phase of the prison system. This
company is currently operating in five different time zones and is headquartered at 1700 W. LOOP SOUTH,
SUITE 1500 HOUSTON, TEXAS [77027] [1-713-235-9366]. Dillion Read Venture Capital a New York based
corporation merged with SG Warburg in 1997 creating Warburg Dillion Read. London based UBS Warburg
is the investment banking division of the Swiss giant UBS, one of the largest banks in the world. It has some
40,000 employees spread across 40 countries. This bank was started by the Paul Warburg family which owns
and controls the World Bank and started the Federal Reserve System. UBS Warburg is located at 141 West
Jackson Boulevard Chicago, Illinois 60604. Privatization is the transfer of assets or service delivery from the
government sector. Prisons are nothing but warehouses for the storage of goods and chattel under
commercial law. The Warden is a Bailee or Warehouseman [before the term admiral was used He was called
Custos Maris “Warden of the Sea”] [In some ancient records He was called Capitanus Maritimarum or
“Captain or Tenant in Chief of the Maritime”] who receives personal property from another as Bailment.
The Bailer is one who provides bail as a surety for a criminal defendant’s release. Also spelled Bailor.
Bailment is the delivery of personal property by one person [the Bailor] to another [the Bailee] who holds the
property for a certain purpose under an expressed or implied-in-fact contract. Goods are tangible or
movable property other than money; especially articles of trade or items of merchandize. The sale of goods is
governed by Article 2 of the U.C.C. “Goods means all things, including specially manufactured goods, that
are movable at the time of identification to contract for sale and future goods. The term includes the unborn
young of animals, growing crops, and other identified things to be severed from real property . . . . The term
does not include money in which the price is to be paid, the subject matter of foreign exchange transactions
documents, letters of credit, letter-of-credit rights, instruments, investment property, accounts, chattel
paper, deposit accounts, or general intangibles.” U.C.C. 2-102(a) (24). Go to the Paine Webber group on any
search engine or go to www.transnationale.org/pays/USAs.htm you will see the 20 largest companies,
Aerospace, Food Chains, Credit Card Companies, Banks, Insurance, Media, Auto, Biotechnology, Chemical,
Consulting, Construction, Cosmetics, Waste Management, Defense, Retail, Conglomerate, Water,
Electricity, Appliance, Electronics, Packaging, Energy, School, Equipment, Finance, Holding, Hotels, Real
Estate, Computer, Recreational, Materials, Medical, Mining, Fashion, Motorbike, Paper, Private Person,
Pharmaceutical, Post: USPS [United States Postal Service, CNF Inc], Printing & Publishing, Advertising,
Restaurants, Healthcare, Services, Metal, Tobacco, Telecommunications, Textile Apparel, Tourism,
Transportation, and Staffing. This group is the United States of America and is the largest stock holder in
the world in Corrections Corporation of America that owns and controls the entire world prison system,
through you and is funded by your commercial dishonor. Notice that the Postal Service is involved in this.
Now you know why the United States of America is the Plaintiff in every Federal Tax Case, they own and
run the prison system. Transnational Corporations Observatory, non-profit organization created by Re’gis
Castellani in October 1999 in Marttiques [France], maintains a global profile on 10,000 Corporations.
Everything is being run under the Law Merchant under U.C.C. 1-103. Section 1775.04 of Title 17
Corporations: Partnerships of the Ohio Revised Code says “Rules of Law and Equity, including the Law
Merchant, to govern.” UCC 1-103 is quoted in the Administrative Manual of the Internal Revenue Service,
put out by CCH and says that the law of the Merchant governs all sections in the Internal Revenue Code.
Based on the above information it looks like GSA and GAO are heavily involved in the accounting aspect of
the Prison System, which explains why they are supplying all the Bond forms respecting the Bid,
Performance, Payment and Affidavit of Individual Surety. When your dishonor is sold within the United
States it has a six digit accounting # and is called a Cardinal number, when it is sold at the International
Level it goes Ordinance or Military and uses a nine digit accounting number. This is where AutoTRIS and
CUSIP come in. AutoTRIS is the Automated Forensic Traces Investigation System and was designed in the
Russian Federal Center of Forensic Science using a graphical toolkit that was developed at Automation
Designs & Solutions, Inc. for other software products. AutoTRIS is copyrighted and licensed to AD&S in the
USA and other countries of America. This program is used as a Jail Management System for Inmate
Tracking. This system also has a Law Enforcement Module and a Court Management Module for courtroom
accounting. Every metropolitan Police Department and Federal Police have this system installed in their
Vehicles and is referred to as the Criminal Justice Tracking System. Xignite, Inc. designs the software that
is used in AutoTRIS and is located at 1291 East Hillsdale Boulevard, Suite 211 – Foster City, California
94404- United States of America- 650-655-3700 or call toll free 1-866-XML-SOAP. CUSIP is the trademark
for the system that uniquely identifies securities and other instruments of general interest. The Name CUSIP
is derived from the ABA Committee on Uniform Security Identification Procedures. The CUSIP Agency is

17
the organization within the ABA [American Bankers Association] which is charged with the responsibility of
developing, enhancing, and maintaining the system and policies necessary for uniform securities
identification. CUSIP is the Trademark of Standard and Poor’s, which operates under a license agreement
with the ABA. And is located at 55 Water Street, 47th floor New York, NY 10041. Interestedly this is the
same address of the DTC Depository Trust Cooperation and The Depository Trust Company which is the
holding and settlement company for all credit card trust accounts and is the holder of all bonds and
certificated securities for all investors and which is the clearinghouse for all goods, commodities, and
securities. It is also called or referred to as the EMCC, MSCC, NSCC, DTCC, GSCC, FICC, GCN [the
Global Clearing Network] and DCC&S [Defined Contribution Clearance & Settlement]. These are the
clearinghouses for all shares and stocks sold through the CCA and the Paine Webber Group, A/K/A the
United States of American. I finally understand where the United States of America is located and who they
are and why in the Bluebook put out by the ABA [American Bar Association] they are referred to as a
foreign country. CUSIP also identifies the issuers of securities and other financial instruments within a
standard nine-character framework, and disseminating this information to the financial marketplace. I have
a form from CUSIP called a PRIVATE PLACEMENT EQUITY which identifies Mutual Funds, Preferred
Stock, Warrant and Rights. How much do you want to bet that CUSIP and DTC is the clearinghouse for all
Arrest Warrants? Which are commercial checks under Article 3 of the U.C.C.? I also have a form called a
PRIVATE PLACEMENT DEBT, which identifies for purchase Serial Bonds, Term Bonds, Currency, and
Sinking Funds. All Bonds are identified by using a CUSIP nine digit number. I have a 26 Page list with
Bonds, Treasury Bills, Notes, Freddie Mac, Ginnie Mae, Sally Mae, and Fannie Mae. They are also offering
TBAs which are futures contracts on mortgaged-backed pools. Working with the MBSCC, the CUSIP
Service Bureau developed specialized numbering scheme TBA [The Bond Market Association] mortgaged-
backed securities [Mortgage Backed Securities is ownership position in a group, or pool, of mortgage loans.
It is Bonds in which interest and principal received from this pool of mortgage loans are passed through to
the Bondholders]. TBA and CUSIPs incorporate within the number itself, a security’s mortgage type
[Ginnie Mae, Fannie Mae, Sally Mae, and Freddie Mac], coupon, maturity, and settlement month. For
financial instruments actively traded on an International basis, which are either underwritten debt issues or
domiciled equities outside the United States and Canada, the financial instruments will be identified by a
CINS [CUSIP International Numbering System] number. The CINS number was developed in 1988 by
Standard & Poor’s and Telekurs [USA] in response to the North American Securities industries need for 9
character identifier for International Financial Instruments. CINS numbers appear in the International
Securities Identification Directory [ISID Plus Services] which is co-produced by Standard & Poor’s and
Telkurs [USA].
To show how massive this system is ISID plus contains over 500,000 global financial instruments and cross
references all major national numbering systems... ISID Plus has been designed to minimize the impact on
back-office systems and operations, while facilitating cross-border communications among global custodians,
depositories, banks, securities organizations, and exchanges. CINS numbers employ the same issuer [6
characters] Issue [2 characters & check digit] concept espoused by the CUSIP Numbering System. The first
position of a CINS code is always represented by an alpha character, signifying the Issuer’s country code
[domicile] or Geographic region. The National Association of Insurance Commissioners [NAIC] in October
1988 mandated the use by issuers of a uniform private placement number [PPN] to identify investments in
their annual statements filed with the State Regulatory Authorities. Standard & Poor’s CUSIP Service was
selected by the NAIC to create, assign, and administer the PPN system primarily for the Insurance Industry.
At the International level there is EPIM [the European Pre-issuance Messaging], which is a central
messaging hub linking the parties involved in the Issuance of European Commercial Paper [ECP], including
banks, dealers, issuing and paying agents, securities depositories and numbering agencies. EPIM was
launched as a cooperative effort by Euroclear, Clearstream International, and DTCC. Omega LLC, a joint
venture company owned equally by the Depository Trust & Clearing Corporation [DTCC] and Thomson
Financial, is the leading of complete global trade management services. A unique partnership between the
securities Industries leading utility and the commercial sector, Omega is industry-backed and market-
oriented. Through its integrated suite of Intelligent Trade Management Solutions SM.
I have the Articles of Incorporation of THE ASSOCIATION of NATIONAL NUMBERING
AGENCIES or [ANNA SC] the registered office is located and established at 6, avenue de Schiphol-1140
Brussels – Belgium. The object of ANNA is to maintain and promote the standards of International
Standard ISO 6166, as amended from time to time [hereafter “the Standard”]. I bet that this standard #
6166 is the number of a man and His number is 666 and is talked about in Revelations 13; 18 and whose

18
purpose under Article 3 is to carry out any commercial, financial, or civil transactions directly or indirectly
related to the objects of ANNA. Under Article 5 ANNA has unlimited Capital through BIS [Bank for
International Settlements], CCA, ALEC, WACKENHUT, CORNELL CORRECTIONS, REASON
FOUNDATION, DILLION READ VENTURE CAPITOL, SG WARBURG, UBS WARBURG, WARBURG
DILLON READ and the PAINE WEBBER GROUP. Under Article 29 ANNA has a list of all public finds,
shares, stocks, bonds, and other securities composing ANNA’S Portfolio. I think ANNA is owned by the
Order of Jesuits out of Rome Italy, which is run by Count Hans Kolvenbach, the head General, Pontiff and
Gregorian Counsel for the Order of Jesuits and he is called the “Black Pope” and who owns and controls all
Prisons, Penal Institutions, and Banks. ANNA also assigns the ISIN [International Securities Identification
Number]. The First Character: Category [Equities, Debt Instruments, Rights, Options, Futures, Others].
The Second Character: Group within category e.g. equities into shares, preferred shares etc. The Third to
Sixth Character: attributes for further description and grouping.
The Bank for International Settlements is at the apex of all of the world’s central banks, since they
control and dictate monetary policy worldwide. In the late 1990’s they set up a new structure called the
Financial Stability Forum. Which brought together the G 7 Central Bank ministers, G 7 Finance Ministers,
their respective Securities and Exchange Commissions, the Comptroller of the Currency and FDIC, along
with the IMF and World Bank. This represents a further integration of the economies, policies and
movement of monies and investments. Further more, in addition to the Central Banks, there is the Group of
Eight which is comprised of the heads of state from the United States, Canada, Germany, Japan, Italy,
France, Great Britain, and Russia. They have been meeting since 1975 when there were only five countries.
Russia is the most recent country to join. They participate fully in every area with the exception of finance
where they only participate in financial terrorism. For 22 years, the G7 finance ministers met alone. Then in
1998 they were joined by the central bank ministers. They are private corporations established in every
country to manage and control that country’s monetary system; this makes the Treasury Secretary of the
United States a puppet of the Federal Reserve, a private corporation. The U.S. has changed the control of
our banking system by repealing the Glass-Stegall Act in 1999 that allowed banks to buy brokerage firms
and insurance companies. That set the tone for other countries to follow suit. Furthermore, with the
establishment of the World Trade Organization Financial Services Agreement which demands that all
countries allow foreign banks, brokerage firms and insurance companies to enter their market, they chipped
away at national financial sovereignty. Since the central banks hold the currency of other countries, all that
has to be done in order to destroy a country is to sell their currency at same time. Therefore as a result of the
global volatility which I believe was a result of the central bank’s selling the aforementioned countries
currencies; the Financial Stability Forum was set up as a further layer and deeper integration of the global
economies.
Also contributing to the new financial architecture is the rise of multi-national and transnational
corporations, mergers and acquisitions, country privatization of its assets such as railroads, agriculture,
banks, airlines, telephone companies, etc. Furthermore, the rise of public-private partnerships which is a
merger between government and business, also known as fascism, has contributed to a changed financial
landscape. In addition, there is the move towards a global stock exchange, the establishment of a World’s
Customs Organization and “open skies” between countries.
Why is privatizing prisons so appealing to federal, state, and local governments? As the Nation
put it: The selling point was simple: Private companies could build and run prisons cheaper that the
governments. Unfettered American Capitalism would produce a better fetter, saving cash-strapped states
millions of dollars each year” while simultaneously generating huge profits. The Nation explains this miracle
would be accomplished. “Private prisons receive a guaranteed [per diem] fee for each prisoner, regardless of
the actual costs. Each dime they don’t spend on food or medical care [for prisoners] or on wages and
training for the guards is a dime they can pocket.” Most guards in public prisons belong to the LEOU, which
is part of the American Federation of State, County, and Municipal Employees AFSCME. I have a pointed
question for you, why aren’t we as principals on the Private side of the accounting cycle using our
Exemption Priority to discharge all this Public Debt under the Uniform Exemption Act section 3 “Exempt”
means protected, and “exemption” means protection, from subjection to a judicial lien, process, or
proceeding to collect a debt. The answer is we are all double minded and do not know who we are in a
commercial setting. Every individual in Prison is in there, because of a Commercial Dishonor. “A person
who has doubts is thinking about two different things at the same time and can’t make up his mind about
anything” or as the King James Version says “A double minded man is unstable in all his ways.” James 1:8.
Let us regain and claim our honor and status as the Principal with primary responsibility on obligations for

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discharge on the public and payment on the private. Through our Exemption as Principal, we can use these
Standard form 24 Bid Bonds [ see title 48 section 28.101], Performance Bonds [see title 48 sections 28.102-1
and 28.106-3 (b)] Standard Form 25, and Payment Bonds Standard Form 25A, [see title 48 sections 28.102-1
and 28.106-3 (b)] form 28 Affidavit of Individual Surety [see title 48 sections 28.102-1 and 28.106-3 (b)],
issued by GSA under the Comptroller General, to discharge any debts. Bid Bonds are usually purchased by
Brokerage Houses, and Insurance Companies. Optional form 90, Release of Lien on Real Property [see title
48 section 28.203-5]
And Optional Form 91, Release of Personal Property from Escrow [see title 48 section 28.203-5]. These
bonds can be used to release the liens imposed by the bid, performance, and payment bonds and Affidavit of
Individual Surety.

An Irrevocable Letter of Credit under title 48 section 52.228-14 can be used in lieu of a bid bond.

(a) “Irrevocable letter of credit” (ILC), as used in this clause, means a written commitment by a federally
insured financial institution to pay all or part of a stated amount of money, until the expiration date of the
letter, upon presentation by the Government (the beneficiary) of a written demand therefor. Neither the
financial institution nor the offeror/Contractor can revoke or condition the letter of credit.

(b) If the offeror intends to use an ILC in lieu of a bid bond, or to secure other types of bonds such as
performance and payment bonds, the letter of credit and letter of confirmation formats in paragraphs (e)
and (f) of this clause shall be used.

Under section (g) of the clause at 52.228-14 the contractor can draw on the ILC using the sight draft draw up
in section (g).

By legal definition all of your Federal and State “Statutes” are Bonds or Obligations of Record and are
represented in the courtroom by the Recognizance Bond, which is a Bond of Record or Obligation for the
payment of debt.
A condensed version of what is going on is that the CCA as a corporation, creates or issues stock
certificates based on prison population, goods or chattel as they are called in commercial law. The
underwriter is the one who buys the stock from the Issuer the CCA with intent to resell it to the public or an
entity or person, which is usually an investment banker. The investment banker purchases all or part of the
shares of the stock for resale to the public in the form of newly issued investment securities based on the
shares of the stock. Brokerage Houses and Insurance Companies Bid on the Investment Securities with a Bid
Bond issued by the GSA. The Bid Bond is then indemnified by a surety company through Performance and
Payment Bonds. The Bid, Performance, and Payment Bonds are then underwritten by an Affidavit of
Individual Surety through the Banks as Investment Securities for resale to the public. The Institutional
Holders who own most of the Shares are:

1. FMR [Fidelity Management & Research Corporation 3, 084,024

shares at a value of $109,791,254 dollars.

2... Legg Mason Inc. 1,235,563 shares valued at $43,986,042 dollars.

3. Barclays Bank Pic 1, 041,671 shares valued at $37,083,487.

There are seventeen more corporations owning various amounts of shares at varying dollar values. These
can be viewed by going to http://finance.yahoo.com/q/mh?s=CXW.

The Top Insider & Rule 144 Holders are:

1. Russell, Joseph V. 64,450 shares as of 2-May-03

2. Ferguson, John D. 40,340 shares as of 2-May-03

3. Quinlan, J. Michael 28,575 shares as of 10-Sep-02

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4. Turner, Jimmy 13,817 shares as of 23-May-03

5. Horne, John R. 5,751 shares as of 29-Jun-04

As you can see by the above information, this system permeates every fabric of our society. This treatise
represents about 700 hours of brainstorming. Currently global terrorism is being funded by the prison
system and the State’s Retirement Fund go to www.DivestTerror.Org this is a 115 page treatise on the
Terrorism Investments of the 50 States.
Go to a search engine and type in U.S Courts. Go to court links and click, which shows a map of the
circuit courts, click on 7th circuit, a list of the 7th and 8th circuit courts will appear, click on Illinois Northern
District Court, then click on Clerk’s Office, then go to administrative services, then to Financial Department,
you will see Criminal Justice Act, Post Judgment Interest Rates, and list of sureties, click on sureties it will
take you to FMS.TREAS.GOV, there on left side you will see sureties listing, admitted reinsurers and forms,
click on forms and you will see Reinsurance Agreement for a Miller Act Performance Bond SF 273, and a
SF274 Payment Bond and a Reinsurance Agreement in Favor of the United States SF 275 and a list of
Admitted Reinsurers, Pools and Associations , and Lloyds’ Syndicates, you will also see a list of the
Department of the Treasury’s Listing of Approved Sureties [Department Circular 570].
U.S. District Courts are buying up the State Court default judgments, when you refuse to pay or
dishonor the debt. Contractors and Insurance Companies are bidding on the default judgments with a Bid
Bond, then a Reinsurance Company comes in and purchases a Performance Bond as a surety for the Bid
Bond. The Performance Bond is then under written by a Payment Bond, The Payment Bond is then under
written by an Affidavit of Individual Surety, this is usually done by an investment company or investment
banker. When these Bonds are pooled they become mortgage backed securities or surety bonds. They are
then put on the bond market through TBA [The Bond Association]. These bonds are also sold as investment
securities through brokerage houses or insurance companies. Securicor is one of your biggest international
securities companies and is located in South Africa and have acquired Gray Security Services. Securicor was
formed from the merger between Securicor pic and Group 4 Falk, which was completed in July 2004.
Securicor operates in 50 different countries.
Reinsurance is defined as insurance of all or part of one insurer’s risk by a second insurer, who
accepts the risk in exchange for a percentage of the original premium; this is all admiralty maritime at its
finest. Also termed reassurance. The term ‘reinsurance’ has been used by courts, attorneys, and text writers
with so little discrimination that such confusion has arisen as to what that term actually connotes. Thus it
has so often been used in connection with transferred risks, assumed risks, consolidations and mergers,
excess insurance, and in other connections that it now lacks a clear-cut field of operation. Reinsurance, to an
insurance lawyer means one thing only – the ceding by one insurance company to another of all or a portion
of its risks for a stipulated portion of the premium, in which the liability of the reinsurer is solely to the
reinsured, which is the ceding company , and in which contract the ceding company retains all contact with
the original insured, and handles all matters prior to and subsequent to loss. 13 a John Allen Appleman &
Jean Appleman, Insurance Law and Practice section 7681, at 479-80 [1976].
The laying off of risk by means of reinsurance traditionally serves three basic purposes. First,
reinsurance can increase the capacity of the insurer to accept risk. The insurer may be enabled to take on
larger individual risks, or a larger number of smaller risks, or a combination of both . . . . . . . Secondly,
reinsurance can promote financial stability by ameliorating [improving] the adverse consequences of an
unexpected accumulation of losses or of a single catastrophic losses, because these will, at least in part, be
absorbed by reinsurers. Thirdly, reinsurance can strengthen the solvency of an insurer from the point of
view of any regulations under which the insurer must operate which provide for a minimum ‘solvency
margin,’ generally expressed as a ratio of net premium income over capital and free reserves. P.T. O’Neill &
J.W. Woloniecki, the Law of Reinsurance in England and Bermuda 4 [1998].
All of the performance and payment bonds are regulated and controlled by FAR [Federal
Acquisition Regulations] which is under [48 CFR] 28.202-1 and 53.228(h). These bonds are being used in
cases where it is desired to cover the excess of a Direct Writing Company’s underwriting limitation by
reinsurance instead of co-insurers on Miller act performance bonds running to the United States. These FAR
regulations come in two volumes, volume 1 is approximately 1,326 pages volume 2 is 823 pages long. These
should be consulted and read before these bonds are used.

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 The Miller Act is found in Title 40 U.S.C.A. sections 270 a – 270d-1 and is federal law requiring the
posting of performance and payment bonds before an award is made for a contract for construction,
alteration, or repair of a public work or building. The surety company issuing these bonds must be listed as a
qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year.
I believe that the prisons are repository institutions or facilities for securities [prisoners] as
collateral for the public and national debt. The prisoners represent asset or repository money for the Bid,
Performance and Payment Bonds. The prisons are referred to as credit facilities, institutions or repositories.
They function essentially the same way that a Depository Bank does under 17 CFR section 450. The Prisons
are acting in the capacity of a fiduciary or custodian over Government Securities or otherwise for the
account of a customer, and that are not government securities brokers or dealers, as defined in sections 3 (a)
(44) of the Securities Exchange Act of 1934 (15U.S.C. 78 c (a) (43)—(44). The regulations in subchapter B are
promulgated by the Assistant Secretary (Domestic Finance) pursuant to a delegation of Authority from the
Secretary of The Treasury. The office responsible for the regulations is the Office of the Commissioner,
Bureau of the Public Debt.
Sureties and Surety Bonds are covered in Title 31 sections 9301-9309. The Bid, Performance,
Payment Bonds and Affidavit of Individual Surety fall in the category of surety bonds under these
provisions. Under section 9303 Government Obligations may be substituted for Surety Bonds. Government
Obligations are defined as public debt obligations of the United States Government and an obligation whose
principal and interest is unconditionally guaranteed by the Government.
The bid, performance, payment bonds and Affidavit of Individual Surety in addition to being sold on
the commodities and securities exchange as pooled mortgaged backed securities and cleared for settlement
through the FICC [Fixed Income Clearing Corporation], who is the holder until the Bonds are sold, are also
being pledged as collateral for funds and a line of credit at the discount window or the open-market trading
desk of Freddie Mac, Fannie Mae, Sally Mae, Ginnie Mae, or your local Federal Reserve Bank. All discount
Window advances must be secured by collateral acceptable to the Reserve Bank. The following types of
assets are most commonly pledged to secure discount window advances.

1. Obligations of the United States Treasury

2. Obligations of U.S. government agencies and government sponsored enterprises

3. Obligations of states or political subdivisions of the U.S.

4. Collaterized Mortgage Obligations

5. Asset backed securities

6. Corporate bonds

7. Money market instruments

8. Residential real estate loans

9. Commercial, industrial, or agricultural loans

10. Commercial real estate loans

11. Consumer loans

12. Check with your local Reserve Bank if you have any questions
About other types of collateral

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++The Federal
Reserve System Discount Window Collateral Margins Table includes valuation margins for the most
commonly pledged asset types. Assets accepted as collateral are assigned a lend able value [market or

22
 face value multiplied by the margin] deemed appropriate by the Federal Reserve Bank. [see the attached
schedules]

The Treasury Department issues certificates of authority to insurance companies who submit a
financial statement to the Department of the Treasury. The reinsurance company’s limitation on liability is
determined and predicated on 10% of the Policy Holders surplus retained by earnings from capitol surplus.
The published underwriting limitation is on a per bond basis but does not limit the amount of a bond that a
company may write. Companies are allowed to write bonds with a penal sum over their underwriting
limitation as long as they protect the excess amount with reinsurance, coinsurance or other methods as
specified in Treasury Circular 297, Revised September 1, 1978 [31 CFR 223.10-11.] Treasury refers to a
bond of this type as an Excess Risk. When Excess Risks on bonds in favor of the United States are protected
by reinsurance, such reinsurance is to be effected by use of a Federal reinsurance form to be filed with the
bond or within 45 days thereafter. In protecting such excess risks, the underwriting limitation in force on the
day in which the bond was provided will govern absolutely. If you read De Lovio v. Boit [ Federal Case No.
3,776], you will find out that all insurance is of Admiralty Maritime Law and The Huntress [Federal Case
No. 6,914, [2 Ware (Dav. 82) 89 says that all Revenue is of admiralty maritime law. Under King Charles 11,
revenue causes had been heard and tried in the colonies by the vice admiralty. Read pgs. 988 & 989 of the
Huntress.
Charles Townshend who passed The Townshend Act in 1767 and who was the Lord High Admiral on the
British Board of Trade caused the American Revolution due to the high Tariffs, Duties, Imposts and Excises
imposed on the Colonists on imports from London, England.
By talking with a broker named Jim McFadden for AG Edwards I found out that the Bond Register
and paying agent for the County of Cuyahoga is Frank Lamb a Trustee for Huntington National Bank at 917
Euclid Avenue Cleveland, Ohio 44115 telephone # 1-216-515-6662. I also found out that Lisa Jennings of J.P.
Morgan Bank in Cleveland, Ohio is the transfer agent for bonds her telephone # 1-216-274-1606 and Holly
Pattison of National City Bank is also a transfer agent. Her Telephone # 1-216-222-2552. I spent 30 minutes
on the phone with Robert Duke, who is the director of underwriting for the Surety Association of America
under circular 570 for the Department of the Treasury whose telephone # is 1-202-463-0600. His address is
1101 Connecticut Avenue, N.W. Suite 800 Washington, D.C. 20036.
I went through circular 570 of the Department of Treasury and called several of the admitted
reinsurance companies through their underwriting department and found out they knew absolutely nothing
about reinsurance relative to bid, performance and payment bonds. This fact leads me to believe that in
addition to being a Repository Bank with prisoners being the assets, collateral, or securities for the bid,
performance and payment bonds, the prisoners are the actual reinsurance or surety and their sentence
represents the valued and marketable risk involved with the materials, supplies and cost factors involved
with the guaranteed performance, and payment relative to the bonds. This is termed assumed risk in
insurance and represents a present peril, hazard, or danger of loss, due to their dishonor and default
judgment in court. That is why there is a penal sum or clause attached to each bond for non performance
and payment of the bonds.
Since everybody on the public or debt side is bankrupt or insolvent how can they assume a liability or risk?
They can’t that is why they have to look to the exempt priority private asset side of the accounting ledger to
assume reinsurance or risk. You can’t pay a debt or assume a risk with a debt instrument. This can only be
done with Asset Collateral through goods [prisoners] under mercantile civil and commercial law.
When a corporation wants to build or perform construction, he receives bids from a contractor, if
the contractor is awarded the bid, the corporation who is the owner and obligee, then requires that the
contractor submit a bid bond, the contractor then becomes the principal obligor. He is then required to get a
reinsurance company to act as surety on the bid bond, and then a performance bond is issued to guarantee
cost of material and supplies. The reinsurance company who is acting as surety for the bid bond also acts as
the underwriter through a payment bond. An Affidavit of Individual Surety is used as a surety for the bid,
performance, and payment bonds. The bid bond is a three party obligation with the obligee as the owner of
the bid, performance and payment bonds.
The Surety Association of America is a voluntary, nonprofit, unincorporated association of
companies engaged in the business of suretyship. SAA represents more than 500 companies that collectively
underwrite the vast majority surety and fidelity bonds in the United States, as well as a number of foreign
affiliates. SAA is licensed as a rating or advisory organization and has been designated as a statistical agent
by all the states except Texas for the reporting of fidelity and surety experience. The National Association of

23
Surety Bond Producers is the international organization of professional surety bond producers and brokers.
NASBP represents more than 5,000 personnel who specialize in surety bonding; provide performance and
payment bonds for the construction industry; and issue other types of surety bonds, such as license and
permit bonds, for guaranteeing performance. NASBP’s mission is to strengthen professionalism, expertise,
and innovation in surety and to advocate its use worldwide.

SURETY INFORMATION OFFICE National Association of

5225 Wisconsin Avenue NW, Surety Bond producers Suite
Suite 600, Washington, D.C. 20015 600 5225 Wisconsin Ave. NW,
(202) 686-7463 Fax (202) 686-3656 Washington, D.C. 20015
www.sio.org sio@sio.org

I also believe that the Bid Bonds are being used to purchase commercial items [commercial paper]
such as court judgments this is done through GSA SF form 1449 contract form and is a rated order under
DPAS [Defense Priorities and Allocations System] see 15CFR 700 this is under the National Security
Industrial Base Regulations. This is all under the Executive Branch under the President and Military.

WORD DEFINITIONS RELATIVE TO BONDS

1. HOLDER = The owner of a security. SEE BONDHOLDER.

2. TRANSFER AGENT = The person or entity that performs the transfer

function for an issue of registered municipal securities. This person or entity
may be the issuer, an official of the issuer or a third party engaged by the
issuer to act as its agent. The trustee under a trust indenture often also acts as
transfer agent. Compare: REGISTRAR. See: REGISTERED BOND;
TRANSFER; TRUSTEE.

3. REGISTRAR = The person or entity responsible for maintaining records on behalf of the issuer that
identify the owners of a registered bond issue. The trustee under a trust indenture often also acts as
registrar. Compare: TRANSFER AGENT. See: BOND REGISTER; TRUSTEE.

4. BOND REGISTER = A record, kept by a transfer agent or registrar on behalf of the issuer, that lists the
names and addresses of the holders of the registered bonds. See: BONDHOLDER; REGISTERED BOND;
REGISTRAR; TRANSFER AGENT.

5. ISSUER = A state, political subdivision, municipality, or governmental agency or authority that raises
funds through the sale of municipal securities.

6. UNDERWRITER = A Broker – dealer that purchases a new issue of municipal securities from the issuer
for resale in a primary offering. The underwriter may acquire the securities either by negotiation with the
issuer or by award on the basis of competitive bidding. Compare: PLACEMENT AGENT. See:
COMPETITIVE SALE; NEGOTIATED SALE; PRIMARY DISTRIBUTOR; PRIMARY OFFERING;
SUNDICATE.

7. SETTLEMENT = Delivery of and payment for a security. Compare: CLEARANCE. See: DELIVERY
DATE; GOOD DELIVERY.

8. CLEARANCE = The process of delivering securities from a seller to a buyer, either directly or through
their agents. Compare: SETTLEMENT.

9. BOND PROCEEDS = The money paid to the issuer by the purchaser or underwriter of a new issue of
municipal securities. These moneys are used to finance the project or other purpose for which the securities
were issued and to pay certain costs of issuance as may provided in the bond contract or bond purchase
agreement. See: NET PROCEEDS.

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10. BOND PURCHASE AGREEMENT [BPA] – The contract between the underwriter and the issuer
setting forth the final terms, prices and conditions upon which the underwriter purchases a new issue of
municipal securities in a negotiated sale. A conduit borrower also is frequently a party to the bond purchase
agreement in a conduit financing. The bond purchase agreement is sometimes referred to as the “purchase
agreement” or, less commonly, the “underwriting agreement.” See: NEGOTIATED SALE;
UNDERWRITING AGREEMENT; WRITTEN AWARD.

11. CONDUIT BORROWER = A borrower of bond proceeds in a conduit financing. See: CONDUIT
FINANCING; OBLIGOR.

12. CONDUIT FINANCING = The issuance of municipal securities by a governmental unit (referred to as
the “conduit issuer” to finance a project to be used primarily by a third party, usually a for – profit entity
engaged in private enterprise or a 501 (c) (3) organization (referred to as the “conduit borrower”). The
security for this type of issue is customarily the credit of the conduit borrower or pledged revenues from the
project financed, rather than the credit of the conduit issuer. Such securities do not constitute general
obligations of the conduit issuer because the conduit borrower is liable for generating the pledged revenues.
Industrial development bonds, multifamily housing revenue bonds and qualified 501 (c) (3) bonds are
common type’s conduit financings. See: HOUSING REVENUE BOND- Multi-family housing revenue
bonds; INDUSTRIAL DEVELOPMENT; PRIVATE ACTIVITY BOND.

13. AWARD = The official acceptance by the issuer of a bid or offer to purchase a new issue of municipal
securities by an underwriter. The date of the award is generally considered the “sale date” of an issue. See:
BID; BOND PURCHASE AGREEMENT; WRITTEN AWARD. Compare: VERBAL AWARD.

14. BENEFICIAL OWNER = The person to whom the benefits of ownership of given securities accrue, even
though the securities might be held by, or in the name of, another person or held in an account over which
another person has investment discretion. For example, a securities firm might hold securities in “street
name” in its vaults or at a securities depository, with the beneficial owners of the securities only designated
on the firm’s records. Compare: BONDHOLDER.

15. DEPOSITORY = A registered clearing agency that provides immobilization, safekeeping and book-entry
clearance and settlement services to its participants. Compare: CLEARING CORPORATION. See:
REGISTERED CLEARING AGENCY.

16. BOOK-ENTRY ONLY (BEO) or BOOK-ENTRY SECURITY- A security that is not available top
purchasers in physical form. Such a security may be held either as a computer entry on the records of a
central holder (as is the case with certain U.S. Government securities) or in the form of a single, global
certificate. Ownership interests of, and transfers of ownership by, investors are reflected solely by
appropriate books and record entries. Most municipal securities issued in recent years have been in book-
entry only form. Compare: CERTIFICATED SECURITY; IMMOBLIZED SECURITY. See: GLOBAL
CERTIFICATE.

17. GLOBAL CERTIFICATE = A single certificate sometimes referred to as a “jumbo certificate,”

representing an entire maturity of an issue of securities. Such certificates are often used in book-entry
systems. The issuer issues a global certificate that is then lodged in the facilities of a depository or other
book-entry agent and kept safely by the agent until maturity. The securities are available to beneficial
owners only in book-entry form, and no certificates can be obtained. Compare: IMMOBLIZED SECURITY.
See: BOOK-ENTRY ONLY.

18. IMMOBILIZED SECURITY = A physical security that is held in a central depository for the account of
its beneficial owner but that may be withdrawn from the depository in physical form. Immobilized securities
may be transferred when sold by entries on the records of the depository or by withdrawal of actual
certificates. Compare: BOOK-ENTRY ONLY; GLOBAL CERTIFICATE.

19. 501 (c) (3) ORGANIZATION = An organization recognized by the Internal Revenue Service as a not-
for-profit organization. A 501 (c) (3) organization can borrow funds to finance projects on a tax-exempt

25
basis through a conduit issuer. Examples include not-for-profit colleges and universities, hospitals, museums
and retirement communities. See: CONDUIT BORROWER; PRIVATE ACTIVITY – Qualified 501 (c) (3)
bonds.

20. MUNICIPAL SECURITIES = a general term referring to securities issued by local governmental
subdivisions such as cities, towns, villages, counties, or special districts, as well as securities issued by states
political subdivisions or agencies of states. A prime feature of these securities is that interest or other
investment earnings on them usually are excluded from gross income of the holder for federal income tax
purposes. Issuers of municipal securities are exempt from most federal securities laws. Compare: TAXABLE
MUNICIPAL SECURITY.

21. REGISTERED CLEARING AGENCY = An organization, registered with the Securities and Exchange
Commission pursuant to section 17 A of the Securities Exchange Act of 1934, that provides specialized
systems for the confirmation, comparison, clearance and settlement of securities transactions. See:
NATIONAL SECURITIES CLEARING CORPORATION.

22. NATIONAL SECURITIES CLEARING CORPORATION (NSCC) – A clearing corporation. See:

CLEARING CORPORATION; DEPOSITORY TRUST AND CLEARING CORPORATION.

23. CLEARING CORPORATION = A registered clearing agency that provides specialized comparison,
clearance and settlement services for its members. A clearing corporation typically offers services such as
automated comparison systems and transaction netting systems. Compare: DEPOSITORY. See:
NATIONAL SECURITIES CLEARING CORPORATION; REGISTERED CLEARING AGENCY.

24. DEPOSITORY TRUST AND CLEARING CORPORATION (DTCC) = The entity formed by the
merger of Depository Trust and National Securities Clearing Corporation. DTCC facilitates the clearance
and settlement of securities transactions.

25. AUTHORITY = A unit or agency of government, or a separately established not-for-profit entity formed
on behalf of a governmental entity, established to perform specialized functions. In some cases, authorities
have the power to issue debt that is secured by the lease rental payments made by a governmental unit using
the facilities constructed with bond proceeds. In other cases, authorities issue private activity bonds for the
purpose of making the proceeds available to qualified private entities for use as permitted under the federal
tax laws. Examples of such conduit authorities include health facilities authorities, Industrial development
authorities and housing finance authorities. An authority may function independently of other governmental
units, or it may depend upon other units for its creation, funding or administrative oversight. Authorities,
other than conduit authorities, usually are financed by service charges, fees or tolls, although they also may
have taxing powers. Conduit authorities generally are financed by fees payable by conduit borrowers, either
paid directly by the borrower or under the bond contract. See: CONDUIT ISSUER.

26. CONDUIT ISSUER = An issuer of municipal securities in a conduit financing. See: AUTHORITY;
CONDUIT FINANCING.

27. PRIVATE ACTIVITY BOND (PAB) = A municipal security the proceeds of which are used by one or
more private entities. A municipal security is considered a private security bond if it meets either of two sets
of conditions set out in section 141 of the Internal Revenue Code. A municipal security is a private activity
bond if, with certain exceptions, more than 10% of the proceeds of the issue are used for any private
business use (the “private business use text”) and the payment of the principal of or interest on more than 10
% of the proceeds of such issue is secured by or payable from property used for a private business use (the
“private security or payment test”). A municipal security also is a private activity bond if, with certain
exception, the amount of proceeds of the issue used to make loans to non-governmental borrowers exceeds
the lesser of 5 % of the proceeds or $ 5 million (the “private loan financing test”). Interest on private activity
bonds is not excluded from gross income for federal income tax purposes unless the bonds fall within certain
defined categories (“qualified bonds” or “qualified private activity bonds”), as described below. Most
categories of qualified private activity bonds are subject to the alternative minimum tax. The following
categories of private activity bonds are qualified bonds under federal tax laws:

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28. Exempt facility bonds – Private activity bonds issued to finance various types of facilities owned or used
by private entities, including airports, docks, and certain other transportation-related facilities; water,
sewer, and certain other local utility facilities; solid and hazardous waste disposal facilities; certain
residential rental projects (including multifamily housing revenue bonds); and certain other types of
facilities. Enterprise zone bonds are also considered exempt facility bonds. See: ENTERPRISE ZONE
BOND; HOUSING REVENUE BOND- Multiple-family housing revenue bonds.

29. Qualified 501 (c) (3) bonds = Private activity bonds issued to finance a facility owned and utilized by a
501 (c) (3) organization. Qualified 501 (c) (3) bonds are not subject to the federal alternative minimum tax.

30. Qualified mortgage bonds = Private activity bonds issued too fund mortgages to finance owner-occupied
residential property. Qualified mortgage bonds are often referred to as single family mortgage revenue
bonds. See: HOUSING REVENUE BOND – Single family mortgage revenue bonds.

31. Qualified redevelopment bonds = Private activity bonds issued to finance certain acquisition, clearance,
rehabilitation and relocation activities for redevelopment purposes by a governmental entity in designated
blighted areas. Qualified redevelopment bonds are payable from general taxes or from tax increment
revenues. See: TAX INCREMENT BOND.

32. Qualified small issue bonds = Private Activity bonds issued to finance manufacturing facilities. Qualified
small issue bonds may be issued on a tax- exempt basis in an amount up to $1 million, taking into account
certain prior issues, or an amount up to $10 million, taking into account certain capital expenditures
incurred during the three years prior and the three years following the issuance of such bonds.

33. Qualified student loan bonds = Private activity bonds issued to finance student loans for attendance at
higher education institutions.

34. Qualified veterans’ mortgage bonds = Private activity bonds that are general obligations of a state issued
to fund mortgage loans to finance owner – occupied residential property for veterans. The ability of states to
issue new and refunding qualified veterans’ mortgage bonds on a tax – exempt basis is limited.

INTERNATIONAL BILL OF EXCHANGE

In the Open Market Trading Desk in the Investing Trading Glossary A bill of exchange is defined as a
“General Term for a document demanding payment.” This says it all if you have wisdom and understanding,
sometimes the obvious escapes everybody.
The word Bill is an alteration of the Latin word Bulla in its mediaeval sense. In classical Latin bulla
was ” a bubble, a boss, a stud, an amulet for the neck”; whence in mediaeval Latin “a seal” especially the
seal appended to a charter etc.; thence, transferred sense, “a document furnished with a seal,” e.g. a charter,
a papal bull, and, by extension, any official or formal document, “a bill, schedule, memorandum, note,
paper,” It was in these later senses that bulla became in England billa, bille. Being a word of common use,
bulla was probably pronounced with u, passing into English y, i; though no direct evidence of this has been
found. So the Oxford English Dictionary. This explanation is not convincing, nor would it be even if ‘bill’
and ‘bull’ had originally conveyed the same or similar meanings. At least up to the end of the fourteenth
century the two words almost always carried meanings that were respectively inconsistent with each other. A
‘bull’ was a sealed document setting forth something or other in an authoritative manner. A ‘bill’ on the
other hand, so far as one can gather from the evidence of contemporary literature, seems to have carried the
meaning of a humble petition for remedy of a stated grievance. The word occurs several times in this sense,
and, as far as I can find, in this sense only, in Gower, and William Langland.

Under Title 18 sections 513 (A) the term security as defined in the Electronic Fund transfer Act under
916 (c) has been amended and moved to Title 15 section 78 (c) subsection 10, where it says that any currency,
note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not
exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise
limited is not included in this definition of a security.

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 Acceptance 4. Black’s Law Dictionary 8th edition a negotiable instrument, especially a bill of exchange, that
has been accepted for payment.
There are three elements of an acceptance 1. Honor 2. Value 3. Consideration. An acceptance
for honor is an undertaking not by a party to the instrument, but by a third party, for the purpose of
protecting the honor or credit of one of the parties, by which the third party agrees to pay the debt when it
becomes due if the original Drawee does not. This type of acceptance inures to the benefit of all successors to
the party for whose benefit it is made. Also termed acceptance supra protest; acceptance for honor supra
protest. [Cases: Bills and Notes key 71. C.J.S. Bills and Notes; Letters of Credit section 37]. “’Acceptance for
honor supra protest’ is an exception to the rule that only the Drawee can accept a bill. A bill which has been
dishonored by non-acceptance and is not overdue may, with the consent of the holder, be accepted in this
way for the honor of either the drawer or an indorser (i.e., to prevent the bill being sent back upon the
drawer or indorser as unpaid) by a friend placing his own name upon it as acceptor of the whole, or part
only, of the amount of the bill; after a protest has been drawn up declaratory of its dishonour by the Drawee.
Similarly, where a bill has been dishonoured by non-payment and protested any person may intervene and
pay it supra protest for the honor of any person liable thereon; the effect being to discharge all parties
subsequent to the party for whose honour it is paid.” 2 Stephen’s Commentaries on the Laws of England
202-03 (L. Crispin Warmington ed., 21st ed. 1950).

3-303 Value and Consideration

(a) An Instrument is issued or transferred for value if:

(1) The instrument is issued or transferred for a promise of performance, to the extent the promise has been
performed;

(2) The transferee acquires a security interest or other lien in the instrument other than a lien obtained by
judicial proceeding.

(3) The instrument is issued or transferred as payment of, or as security for, an antecedent claim against
any person, whether or not the claim is due;

(4) The instrument is issued or transferred in exchange for a negotiable instrument; or

(5) The instrument is issued or transferred in exchange for the incurring of an irrevocable obligation to a
third party by the person taking the instrument.

(b) “Consideration” means any consideration sufficient to support a simple contract. The drawer or maker
of an instrument has a defense if the instrument is issued without consideration. If an instrument is issued
for a promise of performance, the issuer has a defense to the extent performance of the promise is due and
the promise has not been performed. If an instrument is issued for value as stated in subsection (a), the
instrument is also issued for consideration.

The definition of “negotiable instrument” defines the scope of Article 3 since Section 3-102 states:
“This Article applies to negotiable instruments.” The definition in Section 3-104 (a) incorporates other
definitions in Article 3. An instrument is either a “promise,” defined in Section 3-103(a) (12), or “order,”
defined in Section 3-103 (a) (8). A promise is a written undertaking to pay money signed by the person
undertaking to pay. An order is a written instruction to pay money signed by the person giving the
instruction. Thus the term “negotiable instrument” is limited to a signed writing that orders or promises
payment of money. Money is defined in section 1-201(24) and is not limited to United States dollars. It also
includes a medium of exchange established by a foreign government or monetary units of account
established by an intergovernmental organization or by agreement between two or more nations.
[UNICTRAL CONVENTION ON INTERNATIONAL BILLS OF EXCHANGE OR INTERNATIONAL
PROMISSORY NOTES] December 8, 1988].
In Clearfield Trust Co. v. United States, 318 U.S. 363 (1943), the court held that if the United States is
a party to an instrument, its rights and duties are governed by federal common law in the absence of a

28
specific federal statute or regulation In United States v. Kim bell Foods, Inc., 440 U.S. 715 (1979), the court
stated a three prong test to ascertain whether the federal common law rule should follow the state rule. In
most instances courts under the Kimbell test have shown a willingness to adopt the U.C.C. rules in
formulating federal common law on the subject. In Kimbell the Court adopted the priorities rules of Article
9.
In 1989 the United Nations Commission on International Trade Law [UNICTRAL] completed a
convention on International Bills of Exchange and International Promissory Notes. If the United States
becomes a party to this convention, the convention will preempt state law with respect to international bills
of exchange and notes governed by the Convention. Thus, an international bill of exchange or promissory
note that meets the definition of instrument in section 3-104 will not be governed by Article 3 if it is governed
by the Convention. That Convention applies only to bills and notes that indicate on their face that they
involve cross-border transactions. It does not apply at all to checks. Convention Articles 1(3), 2(1), 2(2).
Moreover, because it applies only if the bill or note specifically calls for application of the Convention,
Convention Article 1 there is little chance that the Convention will apply accidentally to a transaction that
the parties intended to be governed by this Article.

3.104. Negotiable Instrument.

(a) Except as provided in subsections (c) and (d), “negotiable

Instrument” means an unconditional promise or order to pay a
Fixed amount of money, with or without interest or other
Charges Described in the promise or order, if it:

(1) Is payable to bearer or to order at the time it is issued or first

Comes into possession of a holder;

(2) Is payable on demand or at a definite time; and

(3) Does not state any other undertaking or instruction by the

Person promising or ordering payment to do any act in addition

(1) An undertaking or power to give, maintain, or protect

collateral to secure payment, (ii) an authorization or power to
The holder to confess judgment or realize on or dispose of
collateral or (iii) a waiver of the benefit of any law intended for
The advantage or protection of an obligor.

(b) “Instrument means a negotiable instrument.

(c) An order that meets all of the requirements of subsection (a),

except paragraph (1), and otherwise falls within the definition of a
“check” in subsection (f) is a negotiable instrument and a check.

(d) A promise or order other than a check is not an instrument if, at

the time it is issued or first comes into possession of a holder, it
contains a conspicuous statement, however expressed, to the effect
that the promise or order is not negotiable or is not and instrument
governed by this Article.

(e) An instrument is a “note” if it is a promise and is a “draft” if it is

An order. If the instrument falls within the definition of both “note
And “draft,” a person entitled to enforce the instrument may treat
It as either.

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 (f) “Check” means (i) a draft, other than a documentary draft, payable on demand
and drawn on a bank or (ii) a cashier’s check or teller’s check. An instrument may be a check even though it
is described on its face by another term, such as “money order.”

(g) “Cashier’s check” (i) means a draft with respect to which the drawer and drawee are the same bank or
branches of the same bank.

(h) “Teller’s check” means a draft drawn by a bank (i) on another bank, or through a bank.

(i) “Traveler’s check” means an instrument that (i) is payable on demand, (ii) is drawn on or payable
at or through a bank, (iii) is designated by the term “traveler’s check” or by a substantially similar term,
and (iv) requires as a condition to payment, a countersignature by a person whose specimen signature
appears on the instrument.

(j) acknowledgment by a bank that a sum of money has been received by the bank and a
promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.

Instruments are divided into two general categories: drafts and notes. A draft is an instrument that is
an order. A note is an instrument that is a promise. Section 3-104(e). The term “bill of exchange” is not used
in Article 3. It is generally understood to be a synonym for the term “draft.” Subsections (f) through (j)
define particular instruments that fall within the categories of draft or note. The term “draft,” defined in
subsection (e), includes a “check” which is defined in subsection (f). “Check” includes a share draft drawn
on a credit union payable through a bank because the definition of bank (Section 4-105) includes credit
unions. However, a draft drawn on an insurance company payable through a bank is not a check because it
is not drawn on a bank. “Money orders” are sold both by banks and non-banks. They vary in form and their
form determines how they are treated in Article 3. The most common form of money order of money order
sold by banks is that of ordinary check drawn by the purchaser except that the amount is machine
impressed. That kind of money order is a check under Article 3 and is subject to a stop order by the
purchaser-drawer as in the case of ordinary checks. The seller bank is the drawee and has no obligation to a
holder to pay the money order. If a money order falls within the definition of a tellers check, the rules
applicable to teller’s checks apply. Postal money orders are subject to federal law. “Teller’s check” is
separately defined in subsection (h). A teller’s check is always drawn by a bank and is usually drawn on
another bank. In some cases a teller’s check is drawn on a nonblank but is made payable at or through a
bank. Article 3 treats both types of teller’s checks identically, and both are included in the definition of
“check.” A cashier’s check, defined in subsection (g), is also included in the definition of “check.” Traveler’s
checks are issued both by banks and nonbanks and may be in the form of a note or draft. Subsection (i)
states the essential characteristics of a travelers check. The requirement that the instrument be “drawn on or
payable at or through a bank” may be satisfied without words on the instrument that identify a bank as
drawee or paying agent so long as the instrument bears an appropriate routing number that identifies a
bank as paying agent.
The definitions in Regulation CC section 229.2 of the terms “checks,” ”cashier’s check,” Teller’s
check,” and Travelers check” are different from the definitions of those terms in Article 3.
Certificates of deposit are treated in former Article 3 as a separate type of instrument. In revised
Article 3, Section 3-104 (j) treats them as notes.
There are some differences between the requirements of Article 3 and the requirements included in
Article 3 of the Convention on International Bills of Exchange and International Promissory Notes. Most
obviously the Convention does not include the limitation on extraneous undertakings set forth in Section 3-
104 (a)(3), and does not permit documents payable to bearer that would be permissible under Section 3-104
(a)(1) and Section 3-109. See Convention Article 3. In most respects, however, the requirements of 3-104 and
Article 3 of the Convention are quite similar.

Bankers Acceptance:
Title 12 Section 372 (a) Institutions; drafts and bills of exchange; types any member bank and any
Federal or State branch or agency of a foreign bank subject to reserve requirements under section 3105 of
this title (hereinafter in this section referred to as “institutions”), may accept drafts or bills of exchange
drawn upon it having not more than six months’ sight to run, exclusive of days of grace –

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(i) which grows out of transactions involving the importation or exportation of goods;

(ii) which grow out of transactions involving the domestic shipment of goods; or

(iii) which are secured at the time of acceptance by a warehouse receipt or other document conveying or
securing title covering readily marketable staples.

(b) Ratio limit of bills to unimpaired capital stock and surplus Except as provided in subsection (c) of this
section, no institution shall except such bills, or be obligated for a participation share in such bills, in an
amount equal at any time in the aggregate to more than 150 per centum of its paid up and unimpaired
capital stock and surplus or, in the case of a United States Branch or agency of a foreign bank, its dollar
equivalent as determined by the board under subsection (h) of this section.

(c) Authorization for special ratio limit; foreign banks The Board, under such conditions as it may
prescribe, may authorize, by regulation or order, any institution to accept such bills, in an amount not
exceeding ay any time in the aggregate 200 per centum of its paid up and unimpaired capital stock and
surplus or, in the case of a United States Branch or agency of a foreign bank, its dollar equivalent as
determined by the Board under subsection (h) of this section.

(d) Ratio limit for domestic transactions Notwithstanding subsections

(b) and (c) of this section, with respect to any institution, the
aggregate acceptances, including obligations for a participation
share in such acceptances, growing out of domestic transactions
shall not exceed 50 per centum of the aggregate of all acceptances,
including obligations for a participation share in such acceptances,
authorized for such institution under this section.

(e) Ratio limit for single entity; foreign banks security no institution
shall accept such bills, or be obligated for a participation share in
such bills, whether in a foreign or domestic transaction, for any
one person, partnership, corporation, association or other entity
in an amount equal at any time in the aggregate to more than 10
per centum of it’s paid up and unimpaired capital stock and
surplus, or, in the case of a United States branch or agency of a
foreign bank, its dollar equivalent as determined by the board
under subsection (h) of this section, unless the institution is secured
either by attached documents or by some other actual security
growing out of the same transaction as the acceptance.

(f) Exception for participation agreements

With respect to an institution which issues an acceptance, the
limitations contained in this section shall not apply to that portion
of an acceptance which is issued by such institution and which is
covered by a participation agreement sold to another institution

(q) Definitions by board

In order to carry out the purposes of this section, the board may
Define any of the terms used in this section, and, with respect to
Institutions which do not have capital or capital stock, the board
shall define an equivalent measure to which the limitations
contained in this section shall apply.

(h) Dollar equivalent of foreign bank paid-up capital stock and

surplus

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 Any limitation or restriction in this section based on paid up and unimpaired capital stock and surplus
of an institution shall be deemed to refer, with respect to a United States branch or agency of a foreign bank,
to the dollar equivalent of the paid-up capital stock and surplus of the foreign bank, as determined by the
board, and if the foreign bank has more than United States Branch or agency, the business transacted by all
such branches and agencies shall be aggregated in determining compliance with the limitation or restriction.

Bills of Exchange have not been discontinued or done away with they are called drafts, in a recent
conversation with Walker Todd exchief and legal counsel for the Federal Reserve, he divulged to me that
Reserve requirements were waived under Title 12 section 3105. Prior to this on time deposit accounts [ these
are accounts where the funds cannot be withdrawn for a fixed period of time and then only after notice]
were given an exemption as a reserve requirement and this exemption was used or tendered through a Bill of
Exchange, and was one of the instruments for loaning money. Guess what replaced the reserve requirements
under time deposits? Your exemption as the Principal on the private side. All monetized debt has to have a
Principal from which Capital and Interest circulates, this capital and interest is called accruals under
GAAP. This is where the accrual method of accounting is derived from, under this method of accounting the
debits and credits have to be in balance, this is accomplished through reverse bookkeeping entries or
matching principles. This can only be accomplished in the courtroom when you do an acceptance for honor
of the charges or charging instruments, indictment, complaint, information, or summons, then the debt,
liability, or deficit, which is represented by the charging instrument can be zeroed out by transferring the
credits or liabilities over to the debit or asset side of the accounting ledger by the clerk of the court. That’s
right bunkies, the clerk of the court is a public accountant and the docket sheet is an accounting ledger for
intermediate accounting entries and practices. They have to pass the credits or liabilities through your
account to effectuate post settlement and closure of your account, through reverse bookkeeping entries.
Why? Because the Public side is where the bankruptcy or insolvency is through contract and agreement
under The Hague Conventions and the Public Policy of [HJR 192 codified at Title 31 section 5118 2 (d).
The Social Security # on the front of your Social Security Card is assigned to the debtor or straw
man, the red number on the back of the card is your exempt priority prepaid account number and is
assigned to one of the 12 Federal Reserve Banks, designated by the letter in front of the number. There are
12 letters and 8 numbers after the letter. These letters designate which Federal Reserve district or bank is
handling your account, the 8 digit # is your account number, all charge backs should be to this bank and not
the Secretary of the Treasury, who in reality is the Secretary of the Treasury of Puerto Rico. The office of
the Secretary of The Treasury of the United States was abolished in 1920, by the Act of May 29, 1920 [ Chp.
214, 41 Stat. 654; also see 31 3301 Historical Notes and is the source for 12 USC 121. After this the real
Secretary of the Internal Revenue Code is Manual Diaz Faldana and John Snow is the Secretary of the
Federal Reserve /IMF. However on November 14, 2004 Congress reestablished the Department of The
Treasury and the office of the Secretary of the Treasury, under Chapter XII. Section 1 “Act of Congress
Establishing The Treasury Department”. This would also make John Snow the Secretary of The Treasury. I
have the legislative documentation of this. The International Monetary Fund has replaced the office of the
Secretary of the Treasury of the United States, which was or is being chaired by Nicholas Brady. The letters
below designate which district or bank is handling your account as the fiduciary trustee in bankruptcy. The
8 numbers on the front of Federal Reserve Notes have two identical series of numbers, and two letters, one is
a prefix and the other is a suffix letter, located in the upper right and lower left sections of the note. If you
study this in detail you will find out that your red number on the back of the SS card corresponds to these
serial numbers on the front of Federal Reserve Notes, they both have 8 numbers or digits. I do not think that
this is a coincidence.

A: Boston B: New York C: Philadelphia D: Cleveland

E: Richmond F: Atlanta G: Chicago H: St. Louis

I: Minneapolis J: Kansas City K: Dallas L: San Francisco

The whole problem and nothing else is that the public and national debt or deficit is not being redeemed on
the public side through your exemption on the private side. This is the reason you have run away inflation
and wars in the public realms.

32
 The reason wars are fought is to kill or execute people to cancel the debt. You will find out that
under Title 12 section 1811 and section 3104 [insurance of deposits] every demand deposit account including
checking, savings and credit card accounts are insured under the FDIA [Federal Depository Insurance Act]
through the FDIC [Federal Depository Insurance Corporation] Title 12 section 1811 (a).
When they execute the debtor to eliminate the debt, they also collect the insurance money; you are
actually worth more dead [debt] than alive. Why do you think the police are so quick to shoot people? This
executes or eliminates both the debtor and the debt, in one swift action or execution. This is all Karmic and
involves the laws of Karma, which in physics involves the Laws of Cause and Effect. This is also the occult or
hidden meaning of the scriptures in regard to salvation and redemption.
Any body who tries to run from the police is called an absconding debtor in admiralty maritime law
and may be shot or captured under the law of Prize. Read the case of J. MANRO v. Joseph
ALMEIDA 23 U.S. 473, 10 Wheat 473, 6 Led. 473, this is one of the best cases I have ever read on the
Admiralty and Civil Law and how it is being applied in the courts. Another excellent case is RAMSAY v.
ALLEGRE U.S. MD. 25 U.S. 611, 12 Wheat 611, 6 L.ED. 746, which says they must have your consent
before they prosecute you, another excellent case is LINDO v. RODNEY, 2 DOUGLAS. 613, this is an
extremely difficult case to find and research. This case is quoted in LE CAUX v. EDEN Volume 99 English
Reports Pg. 375 or at 2 DOUGLAS 595, this case was decided the 7th day of February, 1781, by Lord
Mansfield possibly one of the greatest jurist of admiralty whoever sat on the Kings Bench. “An action will
not lie at common law for false imprisonment, where the imprisonment was merely in consequence of taking
a ship as prize, although the ship has been acquitted. Lord Mansfield said “that the action a new attempt,
which, if it succeeded, would destroy the British Navy. If an action at law should lie, by the owners, and
every man on board a ship taken as prize, against the captor, and every man on board his ship, no man
would dare to take a ship.” Pg. 595 or pg. 375 of English Reports. “Besides, the argument of policy, such as it
is, does not apply in the present instance; because this defendant is captain of a letter of marque, who acts
voluntarily for his own private profit, and that of his owners; not, as officers in the Navy, under public
compulsive authority. As to the other ground, that if there is a remedy, it must not be sought in a Court of
Common Law, but in the Court of Admiralty, The inconvenience will be just as great before the judicature,
for the same multiplicity of suits may arise there.” The current Suits in Admiralty Act passed in 1920 gives
injured parties the right to sue the government in Admiralty. Title 46 appendix sections 741-752 and the
Public Vessels Act enacted in 1925 to allow claims against the United States for damages caused by one of its
vessels. Title 46 U.S.C.A. appendix sections 781-790. I have found that most people do not know the
difference between Federal Common Law and English Common Law. All the English Common Law was
grounded in substance and ownership of property through Allodial Title. The people did not have title to
anything under the current system, the only rights they have are remedies as defined in 1-201 of the U.C.C.
Federal Common Law is that decisional body of law [rules of decision] [commercial] that came out of the
Eire v. Tompkins 304 U.S 64, 58 S. CT. 817 (1938) decision. I have read over 250 Law Review articles and
only one tells you what happened in 1938. The Name of the Journal is the American Bar Association Journal
Volume 24. January, 1938, the name of the article is “What Happened to Federal Jurisprudence” by Albert
Schweppe of the Seattle Bar Association. The best article bar none is the SUPREME COURT AND THE
POST- ERIE FEDERAL COMMON LAW by John P. Ludington, LLB 31 L. ED. 2d pg. 1006. What
happened in 1938 is that they changed the Rules of Decisions under section 34 of the Judiciary Act of 1789,
from the English Common Law to the Federal Common law. Prior to this the English Common Law was
called the general federal common law. In INTERPOOL LTD v. CHAR YIGH MARINE (PANAMA) S.A.
890 F. 2d pg. 1453 (1989). It states that in maritime commercial transactions, the uniform commercial code is
taken as indicative of federal common law of admiralty. This says it all.
Another excellent case is THE CARTONA 297 Federal Reporter 1st series pg. 827. This case says you
have to have a interest or a lien before you can intervene with a claim in Admiralty under rule 24 of the
F.R.C.P.
In the United States everything started with the Civil War and the Insurrection and Rebellion Acts of
August 6, 1861 and July 17, 1862, which are still current law today under title 50 sections 212, & 213, we
have been under a military, provisional, occupational government since 1861. This is why the United States
has been divided into Internal Revenue Districts under title 26 section 7621 by the president of the United
States and is what the zip code designates.

The attached treatise and other attachments pretty well explains the IRS. Read this in conjunction with the
Insurrection & Rebellion Acts of August 6, 1861 & July 17, 1862 and the first Income Tax Act

33
approved August 5, 1861 and was repealed by section 89 of the July 1, 1862 Internal Revenue Act and
reestablished by section 90 of this Act and which imposed an income tax on the annual rents, dividends,
stocks, securities, gains, profits, salaries, from any profession, trade, employment, or vocation carried on in
the United States or elsewhere, or from any other source whatever on the income of every person residing in
the United States or any citizen of the United States. We are still under the War Powers Acts of 1840 and
1861. The Income Tax is passed on the Admiralty side of the court or military and is collected from the Prize
side of War. Section 1 of the July 1, 1862 Internal Revenue Act, established the office of the Commissioner of
Internal Revenue, under the direction of the Secretary of The Treasury, under sections 2 & 3 of this act the
president divided the States and Territories into collection districts and further under section 3 the assessor
is authorized to divide his district into convenient assessment districts. I believe that this Act was the
predecessor for title 26 section 7621, where the President divided the districts up into Internal Revenue
Districts. I believe also that the Act of March 25, 1862 chapter 50 37th Congress, "An Act to facilitate
Judicial Proceedings in Adjudications upon captured Property, and for the better Administration of the Law
of Prize" was the predecessor for the Act of June 30, 1864 c. 174 sections 29, 32, 33 of the R.S. sections 4613,
4614, 4652 and which established the law of Prize and the Prize Commissioners under title 10 sections 7651-
7681 of the Military Code of Justice.
I believe that the venue and jurisdiction of the District of Columbia was extended out into the states
through section 7621 of title 26. The IRS's return address is a Federal Regional address with a Zip Code,
which means they are in a District [Internal Revenue District] within a Federal Regional Area, designated
by a Zip Code, created by executive order 11649 and the Act of Congress creating the Zip Code approved
September 2, 1960, Public Law 86-682; 74b Stat. 578.

What Franklin Delano Roosevelt did in June of 1933, is he sold more gold contracts that the treasury had
gold, this created a marine peril or peril of the sea, because of the run on the treasury, do to the foreign gold
contracts. To avert the loss of gold, due to the run on the Treasury, Roosevelt outlawed gold and gold
contracts to avert the apparent peril or loss of gold in the Treasury. In admiralty any time cargo [gold] is
sacrificed to avert the peril of the sinking or loss of the ship, everybody who is a passenger on the ship or
vessel [the United States] has to pay for the loss or sacrifice through the doctrine of Contribution. They had
to insure or indemnify their losses through a maritime insurance policy, they accomplished this through
FICA [Federal Insurance Contribution Act], which is the insurance policy under Social Security. Everybody
who has a SS number is a Co-debtor or Co-surety for the loss of the gold or money under the public policy of
H.J.R. 192 and title 31 section 5118 (2) (d). The origins of indemnity and contribution can be traced to the
concepts of contract and restitution. The word Contribution comes from the word tribulation, which is
mentioned throughout scripture. There are four kinds of indemnity and two kinds of contribution. The four
kinds of indemnity are express agreement, (contract), implied agreement (contract), restitution indemnity,
and statutory indemnity. Contribution is either pro rata or according to the degree of fault. This is why you
have degrees of a Felony 1st, 2nd, 3rd, 4th and 5th and Misdemeanors. The SS-5 application is an express
agreement or contract, that makes you a joint Tortfeasor under the doctrine of Contribution, before you
ever go to court on any charges. When you refuse to pay the debt which you contracted to pay under the SS-
5 application, another Joint-Tortfeasor [a corporation like Wal Mart] pays your debt, and as a co-surety
Wal Mart now subrogates itself to the creditor under the doctrine of suretyship, which is the court and is
entitled to reimbursement from the creditor. This is how all of your corporations are financing their
operations, through the court and prison system. How many times have you heard a court order a defendant
[debtor] to pay Restitution to the court? Indemnity is an extreme form of Contribution. An excellent treatise
on this can be found in volume 55 pg. 1165 of the TULANE LAW REVIEW. There is also an excellent
treatise on Suretyship principles in the New Article 3 Clarifications and Substantive Changes by Neil B.
Cohen in Volume 42:2:595 of the Alabama Law Review.
Every State has passed or adopted the Joint-Tort-Feasors Act under the doctrine of Contribution.
This is basically all insurance, which is of admiralty maritime law. This is called general average
contribution in admiralty maritime law. An excellent case on Contribution is DAWSON v.
CONTRACTORS TRANSPORT CORP. 467 F. 2D 727 (1972). CIA ATLANTICA PACIFICA, S.A. v.
HUMBLE OIL & REFINING CO. 274 F. SUPP. 884 (1967) is an excellent case on general average
contributions. Grant Gilmore the co-author of the Law of Admiralty wrote Article 9 of the U.C.C. on
secured transactions. This should tell you something. Another thing that most people are not aware of is that
everybody is a merchant at law under Article 2-104 (1), because they use commercial paper in their every

34
day transactions and hold themselves by occupation as having knowledge or skill peculiar to the practices or
goods involved in the transaction or to which the knowledge or skill may be attributed. This is one of the
reasons the court never tells or disclose to you what is going on in the courtroom by way of a commercial
transaction and that you are the goods or chattel involved in the transaction, which is why it is all
commercial and why most people end up in prison or jail.
This is why in title 26 section 6305” says upon receiving a certification from the Secretary of
Health and Human Services, under section 452 (b) of the Social Security Act with respect to any individual,
the Secretary shall assess and collect the amount certified by the Secretary of Health and Human Services, in
the same manner, with the same powers, and (except as provided in this section) subject to the same
limitations as if such amount were a tax imposed by subtitle C.” The inference here is that the Secretary is
collecting an insurance premium as though it were a tax, why? Because there is no money everything is
insurance and you can’t pay a tax with a debt instrument. We as Principals own, hold, and control both sides
of the accounting ledger; the private, debit or asset side and the public, credit or debt side.
An offender is defined or called a debtor in admiralty maritime law read the case of CONTINENTAL
ILLINOIS NATIONAL BANK & TRUST CO. v. CHICAGO, ROCK ISLAND & PACIFIC RY. CO. 294
U.S. 648. Page 668 of this case a debtor is referred to has an offender.
All of your state criminal statutes have this term in their statutes or codes. In Ohio it is in title 29
section 2951.07. “If the offender [debtor] under community control ABSCONDS or otherwise leaves the
jurisdiction of the court without permission from the probation officer, the probation agency, or the court to
do so, or if the offender [debtor] is confined in any institution for the commission of any offense, the period
of community control ceases to run until the time that the offender [debtor] is brought before the court for
its further action.” An absconding debtor is defined in Black’s Law Dictionary 8th edition as a “A debtor who
flees from creditors to avoid having to pay a debt. Absconding from a debt was formerly considered an act
of bankruptcy.” The word Abscond means “To depart secretly or suddenly, especially to avoid arrest,
prosecution, or service of process. 2. To leave a place usually hurriedly, with another’s money or property.
Under Title 26 section 163 all prepaid interest is tax deductible. When you don’t use your
exemption in exchange for the debt or deficit they execute on you to eliminate the debt, in the prisons or
credit facilities as they are really called, this is called the death or debt penalty. Isn’t murder a Capital
Offense and isn’t Capital interest or accruals from you as the Principal? An exemption is intellectual
property under international law, if you don’t use it, it becomes abandoned property and the corporations
use it on a 1096 or 1098 tax return as prepaid interest to get your deduction and pass the tax on to you. A tax
is nothing but a return of capital and interest back to the principal that is why a return is called a tax return.
This is what you are paying every time you make a purchase at the retail level on a retail contract under the
truth in lending. If you look at any 1099 OID [original issue discount] or 1099 INT [interest] or 1099 PTR
[patron] which are issued by banks to corporations, these documents will list you as the Principal as the
recipient or Fiduciary Creditor and the Corporation as the payor Fiduciary Debtor. They are supposed to
return your Capital and Interest back to you as the Creditor and Prinicpal, this is what makes it a prepaid
account and tax deductible, this way they can use your exemption to pay the tax and release the merchandise
to you in exchange.
All merchandise is prepaid before it leaves the factory, what merchants are collecting at the retail
level is the tax, capital, interest, accrual or revenue on you as the principal, because you have abandoned
your exemption as the Principal. They cannot execute on a contract under the common law, because there is
no money that is why they have to do an exchange using your exemption for the debt to discharge, redeem or
effectuate post settlement and closure of your account. This is why the banks never close your account after
you have withdrawn all your money.
When you are refused access to a credit card by alleged bad credit they [the bank] are making a
claim on your account by using your exemption. They are assuming ownership of your name as the
principal; if they do settlement and closure and release the account they are giving you your deduction for
the prepaid account as the principal. The bottom line to all this is that you only have what you lay claim to.
Remember that rights are defined under 1-201 (34) of the UCC as remedies.
The Jewish Passover is just an exchange of the future to the past or the past to the future. In
other words your treasury Bill is exchanged for a Treasury Bond making the Bill a future event or Futures
Contract.
This comes from a Federal Reserve Report which says that 15 % of 100 = 85, 15 % of 85 =
72.25 etc. total 100, 85, and 72.25 and so on you get 666. Gold held in reserve is 15 % based on $100 deposit =
666, 20 % = 500 this is commodities and 10 % = 1000 and Franklin Delano Roosevelt sold more Gold

35
Contracts than the Treasury had Gold and was the reason for the passage of the Federal Reserve Act and
why they had to take gold and silver out of circulation to cover up the fraud. This is why they passed HJR
192 [Title 31 section 5118 2 (d)] and goes into the 33 % that provides funds for funding the public
municipalities.

THE PRACTICE AND JURISDICTION OF THE COURT OF ADMIRALTY

IN THREE PARTS by John E. Hall, Esquire Date: 1809

This practice was used by Proctors in the Vice Admiralty Courts in the Colonies prior to the American
Revolution and was delivered to the clerk of the Maryland district court, Phillip Moore on the 4th day of
October, 1809. The first edition was printed in 1679, a third edition was published in the year 1722 and a
new edition in 1791 of which this is a exact and faithful copy of which Lord Hardwicke considered of
“unquestionable character”. This practice is quoted in Waring v. Clarke 5 Howard, [46 U.S.] 454.

This practice was written for private viewing only and not public as evidenced by its substance.

First Part Historical Examination of Admiralty

Second Part Translation of the Praxis [practice] Supremae Curiae Admiralitalis [The High Court of
Admiralty], by Francis Clerke, who was registrar of the Court of Arches during the reign of Queen
Elizabeth:

Arches Court = In English Ecclesiastical Law a Court of Appeal belonging to the Archbishop of Canterbury,
the judge of which is called the “The Dean of Arches” because his court was anciently held in the church of
Saint Mary Le-Bow. [Sancta Maria de – Arcubus]. So named from the steeple, which is raised upon pillars
built arch wise 3 BL Commentary 64.

The court was formerly held in the hall belonging to the College of Civilians, commonly called “Doctor’s
Commons.” It is now held in Westminster Hall. It’s proper jurisdiction is only over the thirteen peculiar
parishes belonging to the Archbishop in London, but the office of the Dean of the Arches, having been for a
long time united with that of the Archbishop’s principal official, The judge of the Arches, in right of such
added office, it receives and determines appeals from the sentences of all inferior Ecclesiastical Courts within
the province.

Civilian = One who is called or versed in the Civil Law, a doctor, professor, or student of the Civil Law. Also
a private citizen, as distinguished from such as belong to the Army and Navy or [in England] the church.

Register = An officer authorized by law to keep a record called a “Register” or Registry” as the Register for
the Probate of Wills.

CURIA = In old European Law. A court. The palace, household, or retinue of a sovereign. A judicial
tribunal or court held in the Sovereign’s palace. A court of justice The civil power, as distinguished from the
Ecclesiastical. A manor; a nobleman’s house; the hall of a manor. A piece of ground attached to a house; a
yard or courtyard. Spelman. A Lord’s court held his manor. The tenants who did suit and service at the
lord’s court. A manse, Cowell.

In Roman Law

A division of the Roman people, said to have been made by Romulus. They were divided into three tribes,
and each tribe into ten curiae, making thirty curiae in all. Spelman. The place or building in which each
curia assembled to offer sacred rites. The place of meeting of the Roman senate; the senate house. The senate
house of a province; the place where the decuriones assembled. Cod. 10, 31, 2.

DECURIO = Latin. A decurion In the provincial administration of the Roman Empire, the decurions were
the chief men or official personages of the large towns. Taken as a body, the decurions of a city were charged

36
with the entire control and administration of its internal affairs; having powers both magisterial and
legislative. See 1 Spence, Eq. Jur. 54.

Some of the courts were called admiralty, others were called consular courts. The judges were called consuls
and the code which they operated by was called the consulate of the sea. These consuls were civil judges. The
district courts today possess the authority and jurisdiction of the High Court of Admiralty. The Lords
commissioners of the Admiralty, who possess the same jurisdiction as the Lord High Admiral. The Lord
High Admiral grants the office of Registrar of the Admiralty for life. In this country the clerks of the District
Courts of the United States are appointed by the Courts respectfully in which they Act, and hold their offices
at will. The term Registrar is almost synonymous with Register does this ring a bell. The Civil Law
distinguishes between a Letter and a Warrant of Attorney. The former is called a procuration, proxy,
procuracy, or procuratory with the Proxy or Procuratory ad lites, in Ecclesiastical causes. This is the same
manner in which papers are filed and authenticated in the Ecclesiastical Courts. Constitutor by roman law is
a person who by agreement becomes responsible for the payment of another’s debt, now you know why
under Article 6 Section 2, the supremacy clause of the constitution, Jay’s Treaty a commercial treaty entered
into on November 19, 1794 is the supreme law of the land under the U.S. Constitution, which was a debt
contract to preserve the debt owed to the crown under this treaty and which we still are paying for today.
Bonds were referred to as Fidejussory Security. Fidejussores were the guarantors for payment of
the Defendant [Debtor] debts. A defendant needs at least two Fidejussores, who should be bound to the
plaintiff, in the sum for which the action was instituted. A Letter Rogatory was called a patent writ [open
writ one not sealed or closed] close writ [a royal writ sealed because the contents were not deemed
appropriate for public inspection.
The Plaintiff is also obliged to find Fidejussores to these effects, viz. for the prosecution of the
suit; for the payment of the defendant’s costs if the plaintiff fail in his cause, and for the production of the
plaintiff personally as often as he may be called. As all civil and maritime cause is summary, the mode of
proceeding and the final sentencing are the same as in Ecclesiastical cases.
The commercial Courts or Tribunals on the continent of Europe were formerly called Consuls.
In France, Judges and Consuls; In Spain Priors and Consuls; In Italy, Maritime Consuls. Hence the most
ancient work, which is extant, on maritime and commercial law is called, the Consulate of the sea.
Commercial agents who are sent from one country to another are called Consuls, because they formerly had
a consular jurisdiction, or cognizance of all commercial and maritime causes between subjects of their own
nations. To these commercial and maritime Courts, therefore, commissions sub mutuoe or letters rogatory
were, in our authour’s time, usually directed; and at this day it seems that they might with propriety be
directed to the Court or Judge, of the place to which they are sent, exercising admiralty and maritime
jurisdiction.
“Before making the seizure, a full proof of the debt is to be made to the Judge according to his discretion.”
“If he be declared in contumacy [contempt] Scacc. n. 5. the judges of our day, according to custom, decree a
sequestration [removal of property from debtor] at the instance of the creditor alone, without the existence
of any suspicion. Scacc. n. 11. If nothing is proved to the Judge and nothing is sworn by the creditor, the
attachment is granted upon the simple assertion of the creditor.
Default mentioned above, “commonly signifies an offence in omitting that which we ought to
do, yet here it is taken as a non appearance in Court at a day assigned” If you don’t make an appearance
and pay the debt, you are in “contumacy [contempt] and in pain of their contumacy[contempt] be decreed to
have incurred the first default.” A loan is a maritime contract, a juratory caution in maritime law is a
court’s permission for an indigent to disregard filing fees an court costs. A suit upon juratory caution is the
equivalent of a suit in forma pauperis. The right was first recognized in United States admiralty courts in
Bradford v. Bradford, 3 F. Case 1129 (1878).
Four defaults are to be pronounced against the defendant, if he does not appear within the
term assigned to him by the Judge, before the Judge shall decree the plaintiff to be put in possession of the
goods of the defendant, which is contrary to the ancient usage of the Court of Admiralty.
“ It often happens, and especially in time of war or commotion, that your goods or vessel are
taken by enemies or pirates, and afterwards brought to this kingdom; or are possessed or detained by others
in some other manner; or the factor or agent of your correspondents in parts beyond seas, may consign
certain goods to your use or benefit, and they are detained unjustly possessed by some person. In such cases
you may obtain a Warrant to arrest the goods after this matter as your proper goods: and also a citation as
well against those in particular thus occupying or detaining, as against all others in general, who have or

37
pretend to have any interest in them, to answer you in a certain cause of a civil and maritime nature. Which
Warrant being executed and returned as above, in Tit. 33, if no one appears, the proceedings are to be in all
things as above, Tit. 31, and after the fourth default, the goods are to be adjudged to you; not for a debt as in
the former case, but the decree is to be that in pain of the contumacy [contempt] of those who have not
appeared, the goods belong to you, and being your property, you are to be put in possession of them.”
The purpose of attachment of debtor’s goods was to compel an appearance to obtain quasi
in personam jurisdiction over the Res. The fact is that until the 44th year of Elizabeth, the prize jurisdiction
was not vested in the High Court of Admiralty, but in a board of Commissioners, called “The
Commissioners for causes of depredations [plundering or pillaging].” At the time this work was authored the
Admiralty Court was merely a Civil Court of Instance. There were arguments brought on various grounds
such as infra praesidia [within the defenses] this is the international doctrine that someone who captures
goods will be considered the owner of the goods if they are brought completely within the Captor’s power.
This term is a corruption of the Roman-law term intra praesidia, which referred to goods or persons taken
by an enemy during war. Under the principle of postliminium, the captured person’s rights or goods were
restored too prewar status when the captured person returned.
The oath to hold bail was an oath of calumny [oath to support plaintiff or defendant’s good
faith and belief that there was a bone fide claim].

Instruments are for the most part two-fold either publick or private

Publick Instruments are:

1. Instrument drawn under the hand of a Notary Public, or other publick person, either in or out of Court.

2. That which is sealed with some publick or authentick seal, (though written by a private) as of a Prince,
City, University or College.

3. All writings whatsoever (though private) which are exemplified by the authority of the Judge or
Magistrate.

4. All such writings as are taken out of public registries, & c. or those made at publick acts; [that is to say,
matters of record.]

5. Those writings which are subscribed by the person and witnesses. And this is publick as to its effects.

Private Instruments are such as are made without any solemnity; and they are either:

1. Accounts

2. Private Inventories or Registers.

3. Private letters betwixt one friend and another, one tradesman and another.

An appeal of an interlocutory decree may be done either viva voce [orally or by word of mouth] before the
Judge or apud acta [recorded in writing and to appeals taken orally in front of the judge] when he delivers
the sentence or interlocutory decree, or before a notary and witnesses within the 15 days which are allowed
by the statutes of the kingdom for bringing appeals.
Consetio’s Practice of the Ecclesiastical Courts, London, 1708. This essay, although it relates to
the practice of the Ecclesiastical Court, is equally applicable to the Admiralty Courts. In respect of the
subject matter of the libel, there are only two sorts in use [pg. 123], one of which is conventional or civil, [a
conveniendo, from convening] the other criminal, [a crimine seu querimonia].

If you read Title 18 section 7 says that Citizens of the United States are Commercial Vessels. Section 7 talks
about Special maritime and territorial jurisdiction of the United States defined:

The term “special maritime and territorial jurisdiction of the United States”, as used in this title, includes:

38
 (1) The high seas, any other waters within the admiralty and maritime jurisdiction of the United States
and out of the jurisdiction of Any particular State, and any Vessel belonging in whole or part to the
United States or any citizen thereof, or to any corporation created by or under the laws of the United
States, or of any States, Territory, District, or possession thereof.

(2) Any vessel registered, licensed, or enrolled under the laws of the United States, and being on a
voyage upon the waters of any of the Great Lakes, or any of the waters connecting them, or upon the
Saint Lawrence River where the same constitutes the International Boundary Line.

I have talked to Lee Brobst and he has informed me that he has researched and checked out the fact that
all the buildings, that house the birth certificates have a stake outside the building that has a high water
mark on the stake. If you understand Admiralty Maritime Law you know that the High Water Mark
defines the jurisdiction of the Law of Admiralty. This is referred to in case law as the ebb and flow of the
tide. Ebb is the incoming or high tide and the flow is the outgoing or low tide. The tidewater limitation
has been abandoned in The Genesee Chief v. Fitzhugh, 53 U.S. (12 Howard) 443 (1851). This is because
admiralty maritime law has been brought inland through the law of trusts and is so stated in Ruling
Case Law on the Laws of Trusts.

“This power is as extensive upon land as upon water. The Constitution makes no distinction in that
respect. And if the admiralty jurisdiction, in matters of contract and tort which the courts of the United
States may lawfully exercise on he high seas, can be extended to the lakes under the power to regulate
commerce, it can with the same propriety and upon the same construction, be extended to contracts and
torts on land when the commerce is between different States. And it may embrace also the vehicles and
persons engaged in carrying it on. It would be in the power of Congress to confer admiralty jurisdiction
upon its courts, over the cars engaged in transporting passengers or merchandise from one State to
another, and over the persons engaged in conducting them, and deny to the parties the trial by jury. Now
the judicial power in cases of admiralty and maritime jurisdiction, has never been supposed to extend to
contracts made on land and to be executed on land. But if the power of regulating commerce can be
made the foundation of jurisdiction in its courts, and a new and extended admiralty jurisdiction beyond
its heretofore known and admitted limits, may be created on water under that authority, the same reason
would justify the same exercise of power on land.” – PROPELLER GENESSEE CHIEF v. FITZHUGH,
53 U.S. (12 HOW.) 443 (1851).

If you have a nexus or activity that bears a relationship to a traditional maritime activity, such as
insurance, trusts, commercial paper, or commerce you have passed or qualified under the nexus and
situs requirements. Read EXECUTIVE JET AVIATION, INC. v. CITY OF CLEVELAND, 409 U.S. 249,
268, 93 S.CT. 493, 504, 34 L.ED. 2d 454 (1972), HAASINGER V. TIDELAND ELEC. MEMBERSHIP
CORP. 781 F. 2d 1022 (4TH Cir. 1986), BLANCHARD v. AMERICAN COMMERCIAL BARGE LINES
CO., 343 F. SUPP. 920 (M.D. LA. 1972), AFF’D 468 F. 2d 950 (1972); MAYER BOAT WORKS, INC. v.
BRIGHT MARINE BASIN, INC., 265 F. SUPP. 352 (E.D. N.Y. 1966).

This has recently been changed to be the Situs or Locality test. This is one of the reasons all checks and
drafts have a water mark on them, allegedly for security purposes.

All citizens of the United States are debtors. This why under 26 CFR 1.6012.1 (a). It says that all citizens and
residents of the United States have to make returns of income to the Secretary and why a citizen or resident
of the United States, under the 4th section of the 14th amendment of the Constitution of the United States
cannot challenge the validity of the public And national debt and why under the Bankruptcy Code of Title 11
Who may be a debtor section 109 (a) “Notwithstanding any other provision of this section, only a person
that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be
debtor under this title.”

TITLE 46 SECTIONS 31301- 31343

Under CHAPTER 313 --- COMMERICAL INSTRUMENTS

39
 AND MARITIME LIENS

SECTION 31306. DECLARATION OF CITIZENSHIP

(a) Except as provided by the Secretary of Transportation, when an instrument [birth certificate]
transferring an interest in a vessel is presented to the Secretary for filing or recording, the transferee
shall file with the instrument a declaration, in the form the Secretary may prescribe by regulation,
stating information about citizenship and other information the Secretary may require to show the
transaction involved does not violate section 9 or 37 of the Shipping Act, 1916 (46 U.S.C. 808, 835).

SUBCHAPTER 11 – COMMERCIAL INSTRUMENTS

SECTION 31321. Filing, recording, and discharge

(a)(1) A bill of sale, conveyance, mortgage, assignment, or related instrument, whenever made, that
includes any part of a documented vessel [birth certificate] or a vessel for which an application for
documentation [birth certificate application] is filed, must be filed with the Secretary of Transportation
to be valid, to the extent the vessel is involved, against any person except.

Clearing under maritime law is the departure of a ship or vessel from port [hospital], after complying
with customs, health laws and other local regulations. [see clearance].

The hospital where you are born is the port or harbor of entry. Clearance is the right of a ship or vessel to
leave port or harbor [hospital]. The birth certificate is issued by the port collector [Department of Health
and Human Resources] evidencing the ship or vessel’s right to leave port or harbor [hospital].

This is one of the reasons the Secretary of Transportation is the trustee or receiver in bankruptcy and
admiralty under 46 USCS Appx section 1247.

In 1966 the Federal Rules of Civil Procedure were merged with the Admiralty maritime rules. This is
spelled out in 34 F.R.D. Federal Rules Decisions page 325. Alfred W. Knauth a charter member of the
rules committee stated this “The near approach of the common law-equity procedure to the relatively
simple and untechnical state of the traditional Admiralty Practice has produced a new series of traps and
pit-falls consisting of the remaining differences, frequently subtle in their nature, to trap the unwary . .
. 2 Benedict on Admiralty iii-iv (6th edition (Knauth) 1940).

“Admiralty practice,” said Mr. Justice Jackson, “Is a unique system of substantive law and procedure,
with which members of this court are singularly deficient in experience.” To the extent that admiralty
procedure differs from civil procedure, it is a mystery to most trial and Appellate judges, and to the non-
specialist lawyer who finds himself – sometimes to his surprise – involved in a case cognizable only on the
admiralty “side” of the court. BLACK DIAMOND S.S. CORP v. STEWART & SONS, 336 U.S. 386, 403,
69 S.CT. 622, 93 L.ED. 754 (1949).

Federal courts are authorized, in one civil action, to exercise several types of subject matter jurisdiction
historically exercised by separate courts, including courts of law, equity, and admiralty, and as a result,
single federal court has at least three separate departments – law, equity, and admiralty – each of which
has its own traditional procedures. VODUSEK v. BAYLINER MARINE CORP. 71 F. 3d 148 (4TH Cir.
1995).

CREDIT CARD TRUST ACCOUNT

NOW ACCOUNT = Negotiable order of withdrawal account, a bank

account with which the customer is permitted to write drafts against
money held on deposit.

A debit card is directly tied to Depository Trust Company [DTC] a

40
Custodial Clearing Facility owned by the major banks and security firms and monitored by various banking
regulatory agencies and the Securities and Exchange Commission. The DTC and NSCC are a integrated
holding company members that have DTC settling accounts and a DTC credit card billing facility to allow
them to have their NSCC monthly bills automatically billed to a credit card. The DTC will act as securities
depository for the securities. The securities will be issued as fully-registered securities registered in the name
of Cede & Co., which is DTC’s partnership nominee, or any other name as may be requested by an
authorized representative of DTC. Generally, one fully registered global security will be issued for each issue
securities, each in the aggregate principal amount of the issue, and will be deposited with DTC. If, however,
the aggregate principal amount of any issue exceeds $500,000 million, one certificate will be issued with
respect to each $500,000 million of principal amount and an additional certificate will be issued with respect
to any remaining principal amount of the issue.
DTC, the world’s largest depository, is a limited purpose trust company organized under the New York
Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial
Code section 8-102 (5), and a “clearing agency” registered under Section 17 A of the Securities Exchange Act
of 1934. DTC holds and provides asset servicing for over two million issues of United States and non-United
States equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that its participants deposit with DTC. DTC also facilitates the post-trade settlement among direct
participants of sales and other securities transactions in deposited securities through electronic computerized
book-entry transfers and pledges between direct participants. This eliminates the need for physical
movement of certificates representing certificates. Direct participants include both United States and non-
United States securities brokers and dealers, banks trust companies, clearing corporations, and certain other
organizations. DTC is a wholly owned subsidiary of the Depository Trust & Clearing Corporation
(“DTCC”). DTCC, in turn, is owned by a number of direct participants of DTC and members of the
National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, also subsidiaries of DTCC, as well as by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others such as both United States and
non-United States securities brokers and dealers, banks trust companies, and clearing corporations that
clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The
DTC rules applicable to its participants are on file with the SEC. More information about the DTC can be
found at www.dtcc.com.

Purchases of the securities under the DTC system must be made by or through direct participants,
which will receive a credit for the securities on DTC’s records. The beneficial interest of each actual
purchaser of security is in turn to be recorded on the direct and indirect participants’ records. Beneficial
owners will not receive written confirmation from DTC of their purchase. A beneficial owner, however, is
expected to receive written confirmations providing details of the transaction, as well as periodic statements
of their holdings, from the direct or indirect participant through which the beneficial owner entered into the
transaction. Transfers of beneficial interests in the securities are to be accomplished by entries made on the
books of direct and indirect participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their beneficial interests in the securities, except if the use of the book-entry
system for the securities is discontinued.

CC Master Credit Card Trust 11 10-K. For 12/31/97

Chevy Chase Bank, F.S.B. (the “Bank”) is the transferor and servicer under the Pooling and Servicing
Agreement dated as of June 1, 1995 (As amended and supplemented, the “Agreement”) by and between the
Bank and the Bankers Trust Company, as the trustee, providing for the issuance from time to time of one or
more Series of Asset Backed Certificates and is the originator of the Chevy Chase Master Credit Card Trust
11 (the “Registrant” or the “Trust”). The Certificates listed on page 1 hereof will be referred to collectively
herein as the “Certificates”. The Certificates do not represent obligations of or interests in the Bank. The
Bank has made application for an exemption from certain requirements. Pursuant to a letter from the
Security and Exchange Commission, Division of Corporation Finance, Office of Chief Council, dated July
31, 1989 granting the Bank’s application, the Bank is not required to respond to various items of form 10-K.
Such items are designated herein as “Not Applicable”.

41
Each of the Certificates, representing investors’ interest in the Trust, are represented by a single certificate
registered in the name of Cede & Co., the nominee of the Depository Trust Company. To the best knowledge
of the Registrant, there is no established public trading market for the Certificates.

Each of the Certificates, representing investor’s interests in the Trust, are represented by a single certificate
registered in the name of Cede & Co., the nominee of the Depository Trust Company (“DTC”), an investor
holding an interest in the Trust is not entitled to receive a Certificate representing such interest except in
certain limited circumstances. Accordingly, Cede & Co is the sole holder of record of the Certificates, which
it held behalf of approximately 50 brokers, dealers, banks and other direct participants in the DTC system at
December 31, 1997. Such direct participants may hold Certificates for their own accounts or for the accounts
of their customers. The following table sets forth, with respect to each of the Certificates, the identity of each
direct DTC participant that holds positions in such Certificates in excess of 5% of the outstanding Principal
amount thereof at December 31, 1997.

First USA Bank, National Association (the “Bank”), a direct wholly owned subsidiary of BANK ONE
CORPORATION (“BANK ONE), is the Transferor, with respect to the CC Master Credit Card Trust II
(formerly Chevy Chase Master Credit Card Trust II) (the “Trust”) under the Pooling and Servicing
Agreement dated as of June 1, 1995, among the Bank, as Transferor and Servicer, and Bankers Trust
Company, as Trustee (the “Trustee”), as supplemented and amended (the “Pooling and Servicing
Agreement”).

The Certificates listed on page 1 hereof will be referred to collectively herein as the “Certificates”. The
Certificates do not represent obligations of or interests in the Bank.

The Bank will respond only to certain items of form 10-K. In doing so, the Bank will be relying on a letter
dated July 31, 1989 from the Securities and Exchange Commission, Division of Corporate Finance, Office of
Chief Counsel to Chevy Chase Bank, F.S.B., the then Servicer of the Trust, granting the Servicer of the
Trust relief from the requirement to respond to various items of form 10-K. The items to which the Bank is
not required to respond are designated herein as “Not Applicable”.

The final payments with respect to class A Floating Rate Asset Backed Certificates, Series 1996-A and class
B Floating Rate Asset Backed Certificates, Series 1996-A were made on September 15, 2001 and November
15, 2001, respectively. Information with respect to such Certificates is only included in Item 14 (a) (i) which
contains the Summary of Annual Distributions on the Certificate holders for the year ended December 31,
2001.

There are no material pending legal proceedings with respect to the Trust, involving the Trust, the Trustee
or the Registrant. The Bank is a defendant in various lawsuits, including lawsuits seeking class action
certification in both state and federal courts. These lawsuits challenge certain policies and practices of
Bank’s credit card business. A few of these lawsuits have been conditionally certified as class actions. The
Bank has defended itself against claims in the past and intends to continue to do so in the future. While it is
impossible to predict the outcome of any of these lawsuits, the Bank believes that any liability which might
result from these lawsuits will not have a material adverse effect on the Trust.

Each of the Certificates, representing investors’ interests in the Trust, are represented by a single certificate
registered in the name of Cede & Co., the nominee for the Depository Trust Company (“DTC).

To the best knowledge of the Registrant, there is no established public trading market for the Certificates.

PRISM = Parallel Risk Management System = monitoring & risk management system for the futures
options market segment at NSCCL.

NSCCL = Is wholly owned subsidiary of NSE.

SGL = Subsidiary General Ledger.

42
U.C.C. = Law of agreement.

Docket of apparent authority.

This information came off of the 10-K form of Chase Credit Card Master Trust for 12/31/99 [formerly know
as “Chemical Master Credit Card Trust 1] (issuer) Chase Manhattan Bank USA, National Association
(depositor) (Exact name of registrant as specified in its charter) Securities are registered pursuant to Section
12 (b) of the Act. The Chase Master Credit Card Trust I (the predecessor of Chase Credit Card Master
Trust (the “Trust”) was formed pursuant to a Pooling and Servicing agreement, as amended (the
“Agreement”) between The Chase Manhattan Bank (formerly known as Chemical Bank), as seller and
servicer, and an unrelated trustee (the “Trustee”). The trust files reports pursuant to section 13, 15 (d) and
16 of the Securities Exchange Act of 1934, as amended (the Exchange Act”), submitted to the Office of Chief
Counsel on behalf of the originators of the Trust. Accordingly, responses to certain items have been omitted
from or modified in this Annual Report on Form 10-K.

The Chase Credit Card Master Trust is the Issuer of Asset Backed Certificates, Seriesn1995-2,
Series 1995-3, Series 1995-4, Series !996-1, Series 1996-2, Series 1996-3, Series 1996-4, Series 1997-1, Series
1997-2, Series 1997-3, Series 1997-4, Series 1997-5, Series 1998-2, Series 1998 -3, Series 1998-5, Series -6
Series 1999-1, Series 1999-2 and Series 1999-3.

Under Item 12 [Security Ownership of Certain Beneficial Owners and Management] of the 10-k shows the
records of the DTC system that hold positions in Certificates representing interests in the Trust equal to
more than 5 % of the total principal amount of one or more classes of Certificates outstanding on that date
as follows. There are more than a hundred banks and companies listed as beneficiaries of the trust and
Certificates.

Most important Articles of UCC in order of importance is the following:

1. Article 2 Sales
2. Article 2A Leases
3. Article 1 [General Provisions]
4. Article 8 Investment Securities
5. Article 5 Letters of Credit
6. Article 4 Bank Deposits and Collections
7. Article 4A Funds Transfers
8. Article 3 Negotiable Instruments
9. Article 9 Secured Transactions
10. Article 7 Documents of Title
11. Article 6 Bulk Sales

In order for there to be a secured interest there must be a sale, contract, or agreement under Article 2
section 2-106 (1). This means that a bill of sale must exist at the retail level.

When a baby is born a birth certificate is issued and registered with the Bureau of Vital Statistics and
is then registered with the Department of Commerce, after it is registered it becomes a Certificated Security
and is sent to the DTC [Depository Trust Corporation], where it is deposited in a Trust Company and a
Indenture trustee is appointed over the account. The trustee keeps an accounting of all of the bookkeeping
entries and the paid out interest to direct participants as investors. This same procedure is followed in the
Banking Industry on checking, saving accounts, or credit card accounts.

The Birth Certificate now becomes a certificated security, financial asset, or possessory pledge under Article
8 “Investment Securities” to perfect a security interest in the property. Along with the revision of Article 8,
significant changes have been made in the rules concerning security interests in securities. The revision
returns to the pre-1978 structure in which the rules on securities interest in investment securities are set out
in Article 9, rather than Article 8. The changes in Article 9 are, in part, conforming changes to adapt Article

43
9 to the new concept of a security entitlement. The Article 9 changes, however go beyond that to establish a
simplified structure for the creation and perfection of security interests in investment securities, whether
held directly or indirectly.
The Revised Article 9 rules continue the long established principle that a security interest in
security represented by a certificate can be perfected by possessory pledge. The Revised rules, however, do
not require that all security interests in investment securities be implemented by procedures based on the
conceptual structure of the common law pledge. Under the revised Article 9 rules, a security interest in
securities can be created pursuant to Section 9-203 in the same fashion as a security interest in any other
form of property, that is, by agreement between the debtor and secured party. There is no requirement of a
“Transfer,” “delivery,” or any similar action, physical or metaphysical, for the creation of an effective
security interest. A security interest in securities is, of course, a form of property interest, but the only
requirements for creation of this form of property interest are those set out in Section 9-203.

9-102 (65) “Promissory note” means an instrument that evidences a promise to pay a monetary obligation,
does not evidence an order to pay, and does not contain an acknowledgement by a bank that the bank has
received for deposit a sum of money or funds.

The perfection methods for security interests in investment securities are set out in Sections 9-309, 9-313,
and 9-314. The basic rule is that a security interest may be perfected by “control.” The concept of control,
defined in Section 8-106, plays an important role in both Article 8 And Article 9. In general, obtaining
control means taking the necessary steps to place the lender in a position where it can have the collateral sold
off without the further cooperation of the debtor. Thus, for certificated securities, a lender obtains control by
taking possession of the certificate with any necessary indorsement. For securities held through a securities
intermediary, the lender can obtain control in two ways. First, the lender obtains control if it becomes the
entitlement holder; that is, has the securities positions transferred to an account in its own name. Second, the
lender obtains control if the securities intermediary agrees to act on instructions from the secured party to
dispose of the positions, even though the debtor remains the entitlement holder. Such an arrangement
suffices to give the lender control even though the debtor retains the right to trade and exercise other
ordinary rights of an entitlement holder.

Except where the debtor is itself a securities firm, filing of an ordinary Article 9 financing statement is also a
permissible alternative method of perfection. However, filing with respect to investment property does not
assure the lender the same protections as for other forms of collateral, since the priority rules provide that a
secured party who obtains control has priority over a secured party who does not obtain control.

The details of the new rules on security interests, as applied both to the retail level and arrangements for
secured financing of securities dealers, are explained in the Official Comments to Sections 9-309, 9-312, 9-
313, and 9-314,

9-309 Security Interest Perfected Upon Attachment.

9-309 (6) a security interest arising under Section 2-401, 2-505, 2-711(3), or 2A508(5), until the debtor
obtains possession of the collateral;

2-401 (1) Title to goods cannot pass under a contract for sale prior to their identification to the contract
[Section 2-501].

PERFORMANCE

2-501. Insurable Interest in Goods; Manner of Identification of Goods.

(1) The buyer obtains a special property and an insurable interest in goods by identification of existing goods
as goods to which the contract refers even if the goods so identified are nonconforming and the buyer has an
option to return or reject them. Such identification may be made at any time and in any manner explicitly
agreed to by the parties. In the absence of explicit agreement identification occurs:

44
(a) when the contract is made if it is for the sale of goods already existing and identified;

(b) If the contract is for the sale of future goods other than those described in paragraph (c), when goods are
shipped, marked, or otherwise designated by the seller as goods to which the contract refers;

(c) when the crops are planted or otherwise become growing crops or the young to be born within 12 months
after contracting or for the sale of crops to be harvested within 12 months or the next normal harvest season
after contracting which ever is longer.

(2) The seller retains an insurable interest in goods so long as title to or any security in the goods remains in
the seller. If the identification is by the seller alone, the seller may until default or insolvency or notification
to the buyer that the identification is final substitute other goods for those identified.

(3) Nothing in this section impair any insurable interest recognized under any other statute or rule of law.

9-309 (9) a security interest arising in the delivery of a financial asset under Section 9-206(c);

9-312 Perfection of Security Interest in Chattel Paper, Deposit Accounts, Documents, Goods covered by
Documents, Instruments, Investment Property, Letter of Credit Rights, and Money; Perfection by
Permissive Filing; Temporary Perfection Without Filing or Transfer of Possession.

(a) [Perfection by filing permitted.]

(b) [Control or Possession of certain Collateral.]

(3) a security interest in money may be perfected only by the secured party’s taking possession under Section
9-313.

9-313. When possession by or Delivery to Secured Party Perfects Security Interest Without Filing.

(a) [Perfection by possession or delivery] Except as otherwise provided in subsection (b), a secured party
may perfect a security interest in tangible negotiable documents, goods, instruments, money, or tangible
chattel paper by taking possession of the collateral. A secured party may perfect a security interest in
certificated securities by taking delivery of the certificated securities under section 8-301.

9-314. Perfection by Control.

(a) [Perfection by Control.] A security interest in investment property, deposit accounts, letter-of –credit
rights, electronic chattel paper, or electronic documents may be perfected by control of the collateral under
Section 7-106, 9-104, 9-105, 9-106, or 9-107.

9-106. Control of Investment Property

(a) [Control under Section 8-106] A person has control of a certificated security, uncertificated security, or
security entitlement as provided in Section 8-106.

(b) [Control of Commodity contract.] A secured party has control of a commodity contract. if:

(1) the secured party is the commodity intermediary with which the commodity contract is carried; or

(2) the commodity customer, secured party, and commodity intermediary have agreed that the commodity
intermediary will apply any value distributed on account of the commodity contract as directed by the
secured party without further consent by the commodity customer.

45
(b) [Effect of control of securities account or commodity account] A secured party having control of all
security entitlements or commodity contracts carried in a securities account or commodity account has
control over the securities account or commodity account.

9-107 Control of Letter-of-Credit Right.

A secured party has control of a letter of credit right to the extent of any right to payment or performance by
the issuer or any nominated person if the issuer or nominated person has consented to an assignment of
proceeds of the letter of credit under Section 5-114(c) or otherwise applicable law or practice.

This account is a “Securities account” which under Article 8 section 8-501 (a) means an account to which a
financial asset is or may be credited in accordance with an agreement under which the person maintaining
the account undertakes to treat the person for whom the account is maintained as entitled to exercise the
rights that comprise the financial asset.”

(c) Except as otherwise provided in subsections (d) and (e), a person acquires a security entitlement if a
securities intermediary:

(1) indicates by book entry that a financial asset has been credited to the
person’s securities account;

(2) receives a financial asset from the person or acquires a financial

asset for the person and, in either case, accepts it for credit to the person’s securities account; or

(3) becomes obligated under other law, regulation, or rule to credit a financial asset to the person’s securities
account.

(c) If a condition of subsection (b) has been met, a person has a security entitlement even though he
securities intermediary does not itself hold the the financial asset.

(d) If a securities intermediary holds a financial asset for another person, and the financial asset is registered
in the name of, payable to the order of, or specially indorsed to the other person, and has not been indorsed
to the securities intermediary or in blank, the other person is treated as holding the financial asset directly
rather than as having a security entitlement with respect to the financial asset.

(e) Issuance of a security is not establishment of a security entitlement.

A “Financial asset,” is defined in 8-102 (9) as a:

(i) a security;

(ii) an obligation of a person or share, participation, or other interest in a person or in property or an

enterprise of a person, which is, or is of a type, dealt in or traded on financial markets, or which is
recognized in any area in which is issued or dealt in as a medium for investment; or

(iii) any property that is held by a securities intermediary for another person in a securities account if the
securities intermediary has expressly agreed with the other person that the property is to be treated as a
financial asset under this Article.

As context requires, the term means either the interest itself or the means by which a person’s claim to it is
evidenced, including a certificated or uncertificated security, a security certificate, or a security entitlement.

3-105 Issue of Instrument

(a) “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or
nonholder, for the purpose of giving rights on the instrument to any person.

46
 (b) An unissued instrument, or an unissued incomplete instrument
that is completed, is binding on the maker or drawer, but
nonissueance is a defense. An instrument that is conditionally
issued or is issued for a special purpose is binding on the maker
or drawer, but failure of the condition or special purpose to be
fulfilled is a defense.

(c) “Issuer” applies to issued and unissued instruments and means a

maker or drawer of an instrument.

Issuer = One who agrees, by contract to assume the risk of anothers loss and to compensate for that loss.
Also termed underwriter; insurance underwriter carrier, assurer [for life insurance].

Must have right in order to have interest, to make something public.

3-106 (d) Unconditional Promise or Order.

“If a promise or order at the time it is issued or first comes into possession of a holder contains a statement,
required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee
are subject to claims or defenses that the issuer could assert against the original payee, the promise or order
is not thereby made conditional for the purposes of section 3-104 (a); but if the promise or order is an
instrument, there cannot be a holder in due course of the instrument.”

Article 4-102. Applicability

(a) To the extent that items within this Article are also within Article 3 and 8, they subject to those
Articles. If there is conflict, this article governs Article 3, but Article 8 governs this Article.

(a) The liability of a bank for action or nonaction with respect to an item handled by it for purposes of
presentment, payment, or collection is governed by the law of the place where the bank is located. In the case
of action or non-action by or at a branch or separate office of a bank, its liability is governed by the law of
the place where the branch or separate office is located.

Article 4 A-104. Funds transfer – Definitions

In this Article:

(a) “Funds transfer” means the series of transactions, beginning with the originator’s payment order,
made for the purpose of making payment to the beneficiary of the order. The term includes any
payment order issued by the originator’s bank or intermediary bank intended to carry out the
originator’s payment order. A funds transfer is completed by acceptance by the beneficiary’s bank
of a payment order for the benefit of the beneficiary of the originator’s payment order.

(b) “Intermediary bank” means a receiving bank other than the originator’s bank or the beneficiary’s
bank.

(c) “Originator” means the sender of the first payment order in a funds transfer.

(d) “Originator bank” means (i) the receiving bank to which the payment order of the originator is
issued if the originator is not a bank, or (ii) the originator if the originator is a bank.

Official Comment

47
 1. The rules of Article 3 governing negotiable instruments, their transfer, and the contracts of the
parties thereto apply to the items collected through banking channels where no specific provision is
found in this Article In the case of conflict, this Article governs. See section 3-102 (b).

Bonds and like instruments constituting investment securities under Article 8 may also be handled by banks
for collection purposes. Various sections of Article 8 prescribe rules of transfer some of which (see sections 8-
108 and 8-304) may conflict with provisions of this Article (Sections 4-205, 4-207, and 4-208). In the case of
conflict, Article 8 governs. Amendments approved by the Permanent Editorial Board for Uniform
Commercial Code November 4, 1995. Section 4-210 deals specifically with overlapping problems and
possible conflicts between this Article and Article 9. However , similar reconciling provisions are not
necessary in the case of Articles 5 and 7. Sections 4- 301 and 4-302 are consistent with section 5-112. In the
case of Article 7 documents of title frequently accompany items but they are not themselves items. See
section 4-104(a)(9).

In addition, applicable federal law may supercede provisions of this Article. One federal law that does so is
the Expedited Funds Availability Act, 12 U.S.C. section 4001 et seq., and its implementing Regulation CC, 12
CFR Pt. 229. In some instances this law is alluded to in the statute, e.g., Section 4-215(e) and (f). In other
instances, although not referred to in this Article, the provisions of the EFFA and the Regulation CC control
with respect to checks. For example, except between the depository bank and its customer, all settlements are
final and not provisional (Regulation CC, Section 229.36(d), and the midnight deadline may be extended
(Regulation CC, Section 229.30(c). The comments to this Article suggest in most instances the relevant
Regulation CC provisions.

2. Subsection (b) is designed to state a workable rule for the solution of otherwise vexatious problems of
the conflicts of laws:

a. The routine and mechanical nature of bank collections makes it imperative that one law govern the
activities of one office of a bank. The requirements found in some cases that to hold an indorser
notice must be given in accordance with the law of the place of indorsement, since that method of
notice became an implied part term of the indorser’s contract, is more theoretical than practical.

b. Adoption of what is in essence a tort theory of the conflict of laws is consistent with the general theory
of this Article that the basic duty of a collecting bank is one of good faith and the exercise of ordinary care.
Justification lies in the fact that, in using an ambulatory instrument, the drawer, payee, and indorsers must
know that action wil be taken with respect to it in other jurisdictions. This is especially pertinent with
respect to the law of the place of payment.

b. The phrase “action or non-action with respect to nay item handled by it for purposes presentment,
payment or collection” is intended to make the conflicts rule of subsection (b) apply from the
inception of the collection process of an item through all phases of deposit, forwarding, presentment,
payment and remittance or credit of proceeds. Specifically the subsection applies to the initial act of a
depository bank in receiving an item and to the incidents of such receipt. The conflicts of rule of
Weissman v. Banque De Bruxelles, 254 N.Y. 488, 173 N.E. 835 (1930), is rejected. The subsection
applies to questions of possible vicarious liability of a bank for action or non-action of sub-agents (see
Section 4-202(c)), and tests these by the law of the state of the location of the bank which uses the
subagent. The conflicts rule of St. Nicholas Bank of New York v. State Nat. Bank, 128 N.Y. 26, 27
N.E. 849, 13 L.R.A. 241 (1891), is rejected. The subsection applies to action or non-action of a payor
bank in connection with handling an item (see Sections 4-215(a), 4-301, 4-302, 4-303) as well as action
or non-action of a collecting bank (4-201 through 4-216); to action or non-action of a bank which
suspends payment or is affected by another bank suspending payment (4-216); to action or nonaction
of a bank with respect to an item under the rule of part 4 of Article 4.

In a case in which subsection (b) makes this Article applicable, Section 4-103 (a) leaves open the
possibility of an agreement with respect to applicable law. This freedom of agreement follows the general
policy of Section 1-105.

48
Tennessee Valley Authority = Part of executive branch of Government. A government owned corporation,
created in 1933, that conducts a unified program of resource development to advance economic growth in
the Tennessee Valley region. The authorities activities include flood control, navigation development, electric
power production, fertilizer development, recreation improvement, and forest and wildlife development.
Though its power program is financially self supporting, the Authority’s other programs are financed
primarily by congressional appropriations. Under section 4 (h) of the TVC its officers can condemn real
estate in condemnation proceedings under the right of eminent domain.

U.C.C. 1-201 (37) “Signed” includes using any symbol executed or adopted with present intention to adopt or
accept a writing.

Silence is acquiescence.

8-102 (4) “Certificated Security” means a security that is represented by a certificate.

8-102 (7) “Entitlement Holder” means a person identified in the records of a Securities intermediary as the
person having a Security Entitlement against the Securities Intermediary. If a person acquires a Security
Entitlement by virtue of section 8-105 (b) (2) or (3), That person is the Entitlement Holder

8-102 (8) “Entitlement Order” means a notification communicated to a Securities Intermediary directing
transfer or redemption or redemption of a financial asset to which the entitlement has a security entitlement.

Bank must be debtor to have secured interest.

Article 8 105. Notice of Adverse Claim

(a) A person has notice of an adverse claim if:

(1) the person has notice of the adverse claim;

(2) the person is a aware of facts sufficient to indicate that there is a significant probability that the
adverse claim exists and deliberately avoids information that would establish the existence of the
adverse claim.

(3) The person has a duty, imposed by statute or regulation, to investigate whether an adverse claim
exists, and the investigation so required would establish the existence of the adverse claim.

(b) Having knowledge that a financial asset or interest therein is or has been transferred by a
representative imposes no duty of inquiry into the rightfulness of a transaction and is not notice of an
adverse claim. However, a person who knows that a representative has transferred a financial asset or
interest therein in a transaction that is, or whose proceeds are being used, for the individual benefit of the
representative or otherwise in breach of duty has notice of an adverse claim.

(b) An act or event that creates a right to immediate performance of the principal obligation
represented by a security certificate or sets a date on or after which the certificate is to be presented
or surrendered for redemption or exchange does not itself constitute notice of an adverse claim
except in the case of a transfer more than:

(1) one year after a date set for presentment or surrender for redemption or exchange; or

(2) six months after a date set for payment of money against presentation or surrender of the
certificate, if money was available for payment on that date.

(d) A purchaser of a certificated security has notice of an adverse claim if the security
certificate:

49
 (1) whether in bearer or registered form, has been indorsed
“for collection” or “for surrender” or for some other
purpose not involving transfer; or

(2) is in bearer form and has on it an unambiguous statement that it is the property of a person
other than the transferor, but the mere writing of a name on the certificate is not such a
statement.

(e) Filing of a financing statement under Article 9 is not notice

of a adverse claim to a financial asset.

Article 9-109 (5) “an assignment of accounts, chattel paper, payment intangibles, or promissory notes which
is for the purpose of collection only.

Article 9 109 (d) this article does not apply to: Article 9-109 (7) “An assignment of a single account,
payment intangible, or promissory note to an assignee in full or partial satisfaction of a preexisting
indebtness.

9-203 Attachment and Enforceability of Security Interest; Proceeds; Supporting Obligations; Formal
Requisites.

(a) [Attachment] A security interest attaches to collateral when it becomes enforceable against the
debtor with respect to the collateral, unless an agreement expressely postpones the time of
attachment.

(b) [Enforceability] Except as otherwise provided in subsections (c) through (i), a security interest is
enforceable against the debtor and third parties with respect to the collateral only if:

(1) value has been given;

(2) the debtor has rights in the collateral or the power to transfer
rights in the collateral to a secured party;

(3) one of the following conditions is met:

(A) the debtor has authenticated a security agreement that provides

a description of the collateral and, if the security interest covers
timber to be cut, a description of the land concerned.

(B) the collateral is not a certificated security and is in the possession

of the secured party under Section 9-313 pursuant to the
debtor’s security agreement.

(C) the collateral is a certificated security in registered form and the

security certificate has been delivered to the secured party
under section 8-301 pursuant to the debtor’s security
agreement; or

(D) the collateral is deposit accounts, electronic chattel paper,

investment property, letter-of-credit rights, or electronic
documents, and the secured has control under section 7-106, 9-
104, 9-105, 9-106, or 9-107 pursuant to the debtor’s security
agreement.

12 CFR 201.3 (d)

50
“Emergency credit for others. In unusual and exigent circumstances, a Federal Reserve Bank may, after
consultation with the Board of Governors, advance credit to individuals, partnerships, and corporations that
are not depository institutions if, in the judgment of the Federal Reserve Bank credit is not available from
other sources and failure to obtain such credit would adversely effect the economy.

Title grants and agreements the rate applicable to such credit will be above the highest rate in
effect for advances to depository institutions. Where the collateral used to secure such credit consists of
assets other than obligations of, or fully guaranteed as to principal and interest by, the United States or an
agency thereof, an affirmative vote of 5 or more members of the Board of Governors is required before
credit may be extended.

Article 9-311. Perfection of Security Interests in property subject to certain Statutes, Regulations, and
Treaties.

(a) [Security interest subject to other law.] Except as otherwise provided in subsection (d), the filing of a
financing statement is not necessary or effective to perfect a security interest in property subject to:
(1) a statute, regulation or treaty of the United States whose requirements for a security interest’s obtaining
priority over the rights of a lien creditor with respect to the property preempt Section 9-310(a):

THE DEPOSITORY TRUST COMPANY

RESPONSE TO THE DISCLOSURE FRAMEWORK FOR SECURITIES SETTLEMENT
SYSTEMS
JUNE 2002
-2-
Table of Contents
Disclosure Framework
Introduction ................................................................................3
I. Basic Information...............................................................4
II. Rules and Procedures of the SSS......................................14
III. Relationships with Participants.........................................16
IV. Relationships with other SSSs and Commercial
Intermediaries ..................................................................21
V. Securities Transfers, Funds Transfers and
Linkages Between Transfers.............................................24
VI. Default Procedures ..........................................................30
VII. Securities Overdrafts, Securities Lending and Back-to-Back
Transactions ....................................................................33
VIII. Risk Control Measures .....................................................38
IX. Operational Risks.............................................................47
EXHIBITS
1. Diagrams of the Organizational and Ownership Structures
of DTC.................................................................................53
2. Schedule of the Times of Significant Processing Events .........54
-3-
Introduction
The following document consists of the response made by The Depository
Trust Company (“DTC”) to the questionnaire entitled Disclosure Framework For
Securities Settlement Systems (the “Disclosure Framework”). The Disclosure
Framework was developed under the auspices of the Committee on Payment and
Settlement Systems and the International Organization of Securities Commissions.
Consistent with the purpose of the Disclosure Framework, DTC’s response
provides only a general overview of how DTC deals with certain risk management
issues. Therefore, this document should not be relied upon by DTC Participants or
others as a complete discussion of these matters.
Requests for further information may be directed to:
Ms. Diane Brennan

51
Director-Risk Management
Phone: (212) 855-3320
Fax: (212) 855-3274
-4-
I. BASIC INFORMATION
A. What is the name of the SSS?
The Depository Trust Company (“DTC”).
B. Where and in which time zone is the SSS located?
DTC’s principal offices are located in New York, New York (Eastern
Time), with operating facilities in multiple locations.
C. What functions does the SSS perform?
1. Does the SSS serve as a securities depository and/or provide securities
settlement services?
Yes. DTC serves as a custodian of the securities deposited by its
Participants and provides securities settlement services.
(a) What types of instrument are eligible for deposit at the SSS (e.g.,
debt, equities, warrants, etc.)
The following types of instruments are eligible for deposit at
DTC:
DEBT (in addition to Government and Municipal Debt)
Asset Backed Securities
Auction Rate Notes
Bank Notes
Certificates of Deposit (Retail & Institutional CDs)
Collateral Mortgage Obligations (CMOs)
Commercial Paper (CP)
Consumer Price Index-Linked Bonds (CPI Bonds)
Convertible Debt
Corporate Bonds
Deposit Notes
Discount Notes
Insured Custodial Receipts
Medium Term Notes (MTNs)
Notes/Tender Rate Notes
-5-
Variable Rate Demand Obligations (VRDOs)
Zero Coupon Bonds
EQUITY
American Depositary Receipts (ADRs)
Auction Rate Preferred Securities
Closed End Funds
Common Stock
Limited Partnerships
Preferred Stock
Rights to Purchase Securities
Unit Investment Trusts (UITs)
Units
Warrants
GOVERNMENT SECURITIES
Brady Bonds
Non-U.S. Government Debt
U.S. Treasury, Federal Agency and Government Sponsored Enterprises
Issues
MUNICIPAL SECURITIES
Auction Rate Notes
Insured Custodian Receipts

52
Municipal Bonds
Municipal Notes
Variable Rate Demand Obligations (VRDOs)
(b) What types of instrument are eligible for transfer within the SSS?
All the types of instruments listed above are eligible for transfer
among Participants of DTC by book-entry delivery within DTC.
(c) Please describe whether eligible securities are dematerialized,
immobilized or transferred physically.
Except for U.S. Treasury securities (and a small number of other
issues) which are dematerialized, eligible securities are immobilized.
-6-
(d) Does the SSS provide safekeeping for physical certificates?
Yes.
2. Does the SSS provide cash accounts and/or provide funds transfers in
conjunction with securities transfers? If so, in what currencies?
DTC provides each of its Participants with both a securities account and
a U.S. dollar money settlement account in order to permit Participants to effect
deliveries of securities against payment.
3. Does the SSS provide a trade matching service? Do others provide such
services for securities settled at the SSS?
DTC does not provide a trade matching service. Currently, most
institutional trades that are to be settled at DTC are submitted for matching to
Omgeo, a service provider that is jointly owned by DTC’s parent, The
Depository Trust & Clearing Corporation (“DTCC”), and Thomson Financial
ESG.
For trades netted in the Continuous Net Settlement (“CNS”) system of
National Securities Clearing Corporation (“NSCC”), which is also a whollyowned
subsidiary of DTCC, NSCC provides a trade matching service. The CNS
system, which is currently available only for DTC-eligible securities, continually
nets all trades due to settle the next day against each other and against prior
days’ unsettled long and short positions in the same securities. As part of
NSCC’s guarantee of settlement of marketplace transactions in CNS-eligible
securities, NSCC becomes the contra-party to each CNS transaction. NSCC
Participants obligated to deliver securities deliver them to NSCC as free bookentry
movements at DTC (referred to herein as “short covers”). Likewise,
NSCC Participants obligated to receive securities receive them from NSCC,
also as free book-entry movements at DTC (referred to herein as “long
allocations”).
4. Does the SSS provide a trade netting service (as distinct from
undertaking the settlement of securities transfers on a net basis)? Do others
provide such services for securities settled at the SSS? In either case, what
types of netting (bilateral or multilateral), if any, are performed?
-7-
DTC itself does not provide a trade netting service as defined above.
However, trades netted in NSCC’s CNS system are settled by transfers to and
from accounts at DTC. NSCC’s CNS system provides for multilateral netting.
5. Does the SSS offer a securities lending or borrowing program?
DTC provides services that facilitate securities lending and borrowing
transactions initiated by its Participants.
Securities lent by one Participant to another can be delivered by
book-entry either free or against payment. DTC’s payment order service
provides a vehicle for the transfer of cash between securities borrowers and
lenders to account for adjustments in the market value of the borrowed
securities during the period the loan is outstanding.
6. Does the SSS provide custodial and/or related services such as the
collection of interest, dividends, principal or withholding tax reclamations?

53
Which types of service are provided?
DTC collects and distributes to Participants dividend and interest
payments for securities in its custody. When permitted by an issuer’s
reinvestment plan, DTC’s Dividend Reinvestment service allows Participants,
on behalf of interested customers, to reinvest dividends on shares without
withdrawing them from DTC.
Participants can accept tender and exchange offers for securities in
their accounts and deliver them to offerors’ agents through DTC. Similarly,
DTC provides the means for Participants to exercise warrants, puts,
conversions, rights to purchase additional shares, and other rights respecting
securities in their DTC accounts.
When a security in the depository’s custody matures or is called by the
issuer, DTC presents the security for redemption and distributes the proceeds
to the appropriate Participants.
DTC’s Proxy service permits Participants to exercise voting rights on
securities in the depository’s custody. In effect, DTC’s nominee, Cede & Co.,
the holder of record, assigns each Participant the voting rights on securities
credited to that Participant’s securities account as of the record date.
-8-
With respect to withholding taxes applicable to dividends paid on
foreign ordinary shares and American Depositary Receipts in DTC’s custody,
through arrangements with the taxing authorities in certain countries DTC
provides a service for beneficial owners entitled to a reduced rate to obtain
reduced withholding at source, rather than by refund.
DTC provides services for the custody, clearance and settlement by
physical delivery of securities for which book-entry services are not made
available. These securities include certificates that the Participant desires to
have registered in its name or in the name of its customer, as well as securities
issues that cannot be made eligible for book-entry services for legal or
regulatory reasons (e.g., securities with certain transfer restrictions).
7. Does the SSS act as a central counterparty or principal to transactions
with its participants?
No.
8. Other? Please specify.
DTC offers a number of services that are related to its core custodial
and securities settlement services. For example, DTC’s Underwriting service
permits underwriters of new and secondary issues of securities to distribute
them by book-entry against payment through the depository.
Other services are described in DTC’s most recent annual report and in
other DTC publications, which can be found on DTC’s website: www.dtc.org.
D. What type of organization is the SSS?
1. Please indicate whether the SSS is a public sector or private sector
entity.
DTC is a private sector company owned by members of the financial
industry.
2. Please indicate whether the SSS is organized on a for-profit or a nonprofit
basis.
-9-
DTC is organized on a for-profit basis. However, under a policy adopted
by DTC’s Board of Directors, no dividends are paid to stockholders and each
year substantially all revenues in excess of DTC’s current and anticipated
needs are refunded to Participants.
3. What is the legal basis for the establishment of the SSS and for
securities transfers made through it?
DTC is a limited-purpose trust company organized under the New York
Banking Law, a “banking organization” within the meaning of the New York

54
Banking Law, and a member of the Federal Reserve System. DTC is also a
“clearing corporation” within the meaning of Article 8 of the New York
Uniform Commercial Code. DTC is registered as a clearing agency with the
U.S. Securities and Exchange Commission (“SEC”) pursuant to the provisions
of Sections 17A and 19(a) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).
E. Please describe and provide a diagram outlining the organizational and
ownership structure of the SSS.
Attached as Exhibit 1 are diagrams of the organizational and ownership
structures of DTC.
1. Who are the owners of the SSS?
DTC is a wholly-owned subsidiary of DTCC. DTCC, in turn, is industryowned.
Participants of DTCC, NSCC and the other registered clearing agencies
that are subsidiaries of DTCC (GSCC, MBSCC and EMCC) are allocated
entitlements to purchase the common stock of DTCC based upon their usage
of all five registered clearing agencies.
Certain participants, such as some smaller broker-dealers, have chosen
not to purchase the shares to which they are entitled. These shares are held
by their self-regulatory organizations in a representative capacity for their
members.
2. What entity or entities operate the SSS? Which functions of the SSS,
if any, are outsourced to third parties?
- 10 -
DTC carries on all of its own activities and has not outsourced its
operations to third parties.
3. Does the SSS have a Board of Directors?
Yes.
(a) What is its composition?
The following is a list of DTC’s current Directors and their
affiliations:
Bradley Abelow
Managing Director
Goldman, Sachs & Co.
Jonathan E. Beyman
Chief Information Officer
Lehman Brothers
Frank J. Bisignano
Chief Administrative Officer and Senior Executive Vice President
Citigroup/Salomon Smith Barney Corporate & Investment Bank
Michael C. Bodson
Managing Director
Morgan Stanley
Stephen P. Casper
Managing Director and Chief Operating Officer
Fischer Francis Trees & Watts, Inc.
Jill M. Considine
Chairman, President and Chief Executive Officer
The Depository Trust & Clearing Corporation
Dennis J. Dirks
Chief Operating Officer
The Depository Trust & Clearing Corporation
- 11 -
Mary M. Fenoglio
Executive Vice President
State Street Corporation
George Hrabovsky

55
President
Alliance Global Investor Services
Ronald J. Kessler
Vice Chairman
A.G. Edwards, Inc.
Catherine R. Kinney
President and Co-Chief Operating Officer
New York Stock Exchange
Peter B. Madoff
Senior Managing Director
Bernard L. Madoff Investment Securities
James H. Messenger
Chief Executive Officer
National Financial Services LLC
Eileen K. Murray
Managing Director
Credit Suisse First Boston
Thomas J. Perna
Senior Executive Vice President
The Bank of New York
Ronald Purpora
Chief Executive Officer
Garban LLC
Peter Quick
President
American Stock Exchange
Robert H. Silver
Executive Vice President and President of PaineWebber Services
UBS PaineWebber, Inc.
- 12 -
Thompson M. Swayne
Executive Vice President
JP Morgan Chase
Arthur L. Thomas
Senior Vice President and Chairman
Merrill Lynch Securities Services Division
James W. Zeigon
Managing Director
Deutsche Bank AG
(b) What are its responsibilities?
Generally, the Board of Directors is responsible for supervising
the business and affairs of DTC in order to promote DTC’s ability to
serve its Participants.
F. Please describe the financial resources of the SSS.
1. Amount of paid-in capital and retained earnings?
As of December 31, 2001, DTC had $77.8 million paid-in capital and
$24 million in retained earnings.
2. Guarantees, insurance coverage or other similar arrangements?
On occasion, DTC has required certain Participants to obtain a thirdparty
guarantee of their obligations to DTC.
DTC currently maintains insurance coverage in the following amounts:
. $650 million on premises coverage under Blanket Bond/All-Risk
policies.
. $650 million in-transit coverage under Blanket Bond/All-Risk policies
for securities in transit while in the custody of messengers or a
- 13 -

56
transportation company; additional transit coverage is available for
non-negotiable securities.
. $800 million in-transit coverage provided by the insurer of the
armored car carrier service used by DTC. DTC’s coverage under the
Blanket Bonds/All-Risk policies provides secondary coverage for
securities lost while in the custody of an armored carrier.
. $1 million under Mail Policy covering registered securities lost after
having been sent via first class mail.
. $25 million under Mail Policy covering registered securities lost after
having been sent via registered or express mail or express courier.
3. Credit lines or letters of credit?
DTC currently maintains a $1.75 billion committed line of credit with a
group of banks to provide liquidity in the event a Participant fails to pay its
daily money settlement obligation to DTC. DTC also maintains a $50 million
committed line of credit with a bank to provide funds so that DTC can
distribute principal and income payments to its Participants when the payments
are received too late to allocate on the payable date.
4. Powers to assess participants or equity holders?
DTC has the right under its Rules to apply its Participants Fund to any
uninsured loss suffered by DTC and to require its Participants to make
additional deposits to the Participants Fund in order to replenish it. Reference
is made to the discussion of DTC’s Participants Fund in Section VI below.
G. Please describe whether the SSS or its operator is subject to authorization,
supervision or oversight by an external authority.
DTC and its activities are regulated by the SEC, the Board of Governors
of the Federal Reserve System (the “Fed”), and the New York State Banking
Department.
- 14 -
II. RULES AND PROCEDURES OF THE SSS
A. Does the SSS maintain a complete list of the rules and procedures governing
the rights and obligations of participants and the duties of the SSS?
Yes. The rights and responsibilities of DTC to its Participants and of
DTC’s Participants to DTC are set forth in DTC’s Rules and Procedures.
1. How can participants obtain a copy of the rules and procedures?
DTC provides each Participant with a copy of DTC’s Rules and
Procedures. Any changes are also provided to Participants.
2. Does other documentation provided to participants (e.g., user guides)
have the same status as the rules and procedures?
Yes.
3. Describe the process for changing rules and procedures, including any
need for regulatory approval.
(a) What authority is required, and how does this differ depending on
the type of change involved?
Approval by DTC’s Board of Directors is required to amend
DTC’s Rules. Changes in DTC’s Procedures are subject to approval by
the Board of Directors or by the Chairman of the Board. None of the
amendments to DTC’s Rules and Procedures can become effective until
filed with, and approved or otherwise permitted by, the SEC (after
review by the Fed) pursuant to the standards set forth in Section 19(b)
of the Exchange Act.
(b) How are participants notified of changes in rules and procedures?
DTC notifies Participants of revisions to its Rules and Procedures
by Important Notice.
- 15 -
(c) Is there a procedure for participants or others to comment on
proposed rule changes?

57
Yes. Participants or others may submit to DTC for its
consideration their comments with respect to any proposal to revise its
Rules or Procedures. It should be noted, however, that most DTC
proposals (e.g., proposed new services) are developed in close
consultation with Participants. Written comments, if any, received by
DTC must be submitted to the SEC as part of DTC’s filing. Under SEC
procedures, the SEC also solicits comments on proposals filed by DTC.
B. Are the rules and procedures binding on the SSS as well as its participants?
Under what conditions and on whose authority can written rules and
procedures be waived or suspended by the SSS?
DTC’s Rules and Procedures are incorporated by reference into the
Participant Agreement that is executed by the Participant and DTC, and are
binding on both the Participant and DTC.
DTC’s Rules allow for the extension, waiver or suspension of any of
DTC’s Rules by the Board of Directors, the Chairman of the Board, the
President, or any Managing Director or Vice President, whenever such action
is deemed necessary or expedient.
- 16 -
III. RELATIONSHIPS WITH PARTICIPANTS
A. Please describe the types of membership offered by the SSS.
1. How do the types differ?
DTC has two categories of membership:
. Full service membership – “Participants”
. Membership for certain services only – “Limited Participants”.
Pledgees in DTC’s system are not required to be Participants.
2. Within each membership category, are all participants subject to the
same rules and procedures? Please describe important exceptions, including
both differences in rules across participants and the rationale for these
differences.
Within each membership category each Participant is subject to the
same Rules and Procedures.
While each Participant is required to make at least the minimum deposit
to DTC’s Participants Fund, a Limited Participant, depending upon whether the
services it utilizes could result in a settlement obligation to DTC, may not be
required to make a Participants Fund deposit.
B. Can participants establish accounts for their customers’ assets that are
segregated from their own asset accounts at the SSS?
Participants can request DTC to provide an additional account in DTC’s
system in order to segregate their assets from those of their customers. Such
additional accounts are subject solely to the instructions of the Participant.
1. If so, is this accomplished through a single omnibus customer account
or through a multiplicity of accounts and/or sub-accounts?
Participants have the option of segregating securities within their own
account (omnibus) or of using additional accounts.
2. Is the segregation optional or compulsory?
- 17 -
The segregation of securities is not compulsory under DTC’s Rules and
Procedures. DTC’s procedures are designed to facilitate its Participants’
segregation of securities so that they may comply with their legal or regulatory
obligations.
3. Does the fact that a sub-account at the SSS bears the name of a third
party give any rights to that third party as a participant under the rules of the
system?
No. A third party whose name may appear on an additional account has
no rights under DTC’s Rules.
C. Please describe participant requirements for each type of membership.

58
1. Are participants required to be domiciled or resident in a particular
jurisdiction?
No.
2. Are participants required to be subject to a supervisory regime? If so,
please describe.
Yes. DTC’s Participant admissions policy permits entities to become
Participants only if they are subject to regulation in their home jurisdiction.
3. Are participants required to hold an equity stake in the SSS?
No.
4. Are there financial, economic, personal or other requirements (e.g.,
minimum capital requirements, “fit and proper” tests)? If so, please describe.
Yes. DTC’s Rules set forth the basic standards for the admission of
DTC Participants. DTC’s Rules provide that the admission of a Participant is
subject to an applicant’s demonstration that it meets reasonable standards of
financial responsibility, operational capability, and character. The Rules also
- 18 -
require all DTC Participants to demonstrate to DTC that these standards are
met on an ongoing basis.
Each applicant is judged on its own merits. The extent and nature of
the business which the applicant intends to conduct through DTC is carefully
analyzed so that the likely range of settlement obligations that the applicant
will have in DTC and the degree of risk to DTC can be evaluated. DTC
analyzes the capital and financial stability of the applicant as well as the
business and market risks to which the applicant is subject and decides
whether the applicant has the financial capability to meet its likely DTC
obligations. In no case, however, does DTC admit brokers-dealers with less
than $500,000 in excess net capital or banks with less than $2 million in
equity.
DTC also evaluates the operational capability of the applicant - whether
it has the personnel, data processing capability, etc., to meet the technical
demands of interfacing with the depository.
D. Does the SSS engage in oversight of its participants to ensure that their actions
are in accordance with its rules and procedures? If so, please describe.
Yes. DTC monitors its Participants on an ongoing basis to assure that
the Participants are in compliance with DTC’s Rules and Procedures.
DTC’s Compliance Department obtains information daily from other
internal DTC departments regarding settlement, operational, or recordkeeping
problems experienced with any DTC Participant.
The Compliance Department reviews the financial condition of all DTC
Participants at least quarterly. Financial statements filed with regulatory
agencies, information obtained from other self-regulatory organizations and
information gathered from various financial publications are analyzed to assure
that the Participant continues to be financially stable. The Department also
monitors Participants’ settlement obligations, capital adequacy, and transaction
activity on a daily basis to assure that the Participant continues to be capable
of meeting its obligations to DTC.
- 19 -
E. Under what conditions can participants terminate their membership in the SSS?
Does this mark the end of all liabilities of the participant? If not, please
describe what liabilities could remain.
A Participant may terminate its membership in DTC by so notifying DTC
in writing. Notwithstanding any such termination, a Participant remains
obligated to satisfy any obligations and liabilities arising out of its membership
in DTC.
F. Under what conditions can the SSS terminate a participant’s membership in the
SSS?

59
DTC will terminate a Participant’s membership (i.e., cease to act for the
Participant) upon determining that under DTC’s Rules the Participant is no
longer qualified or is deemed to be insolvent.
In addition, DTC may terminate a Participant’s membership under any
of the following circumstances:
. The Participant has failed to make required deposits to the
Participants Fund within the required ten business day period after
demand.
. The Participant has failed to make any other required deposit with
DTC.
. The Participant has failed to pay any fine, fee or other charge
provided under DTC’s Rules or Procedures.
. The Participant has failed to meet its settlement obligation to DTC.
. The Participant’s financial or operational condition has deteriorated
to a point that its continuation as a Participant would jeopardize the
interests of DTC and its other Participants.
. DTC’s Board of Directors, or a committee authorized thereby, has
reasonable grounds to believe that the Participant or any person
- 20 -
associated with the Participant is responsible for (1) fraud,
fraudulent acts or breach of fiduciary duty, (2) making a
misstatement of a material fact or omitting to state a material fact
to DTC in connection with its application to become a Participant or
thereafter, (3) violating any Rule or any agreement with DTC or (4)
the willful violation of the Securities Act, the Exchange Act, the
Investment Company Act, the Investment Advisers Act, or any rule
or regulation thereunder.
. The Participant or any person associated with the Participant is
permanently or temporarily enjoined by order, judgment or decree of
any court or other governmental authority of competent jurisdiction
from acting as a broker, dealer, investment company, investment
adviser, underwriter, bank, trust company, fiduciary, insurance
company or other financial institution or from engaging in or
continuing any conduct or practice in connection with any such
activity, or in connection with the purchase, sale or delivery of any
security.
. The Participant or any person associated with the Participant is
expelled or suspended from a national securities association or
exchange registered under the Exchange Act.
G. Please describe the scope of the SSS’s liability to participants, including the
standard of liability (negligence, gross negligence, willful misconduct, strict
liability or other), the force majeure standard, and any limitation to the scope
of liability of the SSS (e.g., indirect or consequential damages). Where are
these liabilities and their limitations set out (e.g., in statute or contract)?
As a general proposition, DTC’s responsibilities to Participants for the
manner in which DTC’s services are provided are a matter of contract between
DTC and its Participants, and are set forth in DTC’s Procedures.
- 21 -
IV. RELATIONSHIPS WITH OTHER SSSs AND COMMERCIAL INTERMEDIARIES
A. Does the SSS maintain linkages (including sub-custodian or cash correspondent
relationships) or other relationships with other SSSs?
1. Please identify each of the other SSSs used and the type of securities
transferred via the linkages.
(a) What is the name of the other SSS? Where is it located?
(b) What securities are eligible for transfer via the linkage to the
other SSS?

60
(c) Are transfers of securities made via the linkage to the other SSS
limited to only those that are free of payment or are transfers against
payment also made via the linkage to the other SSS? If against
payment, please describe the timing of the transfers and the
corresponding payments.
(d) Does the other SSS provide custody services to the SSS and, if
so, who bears any credit or custody risks?
DTC maintains an account at the Federal Reserve Bank of New York.
Issues which are transferred over the Federal Reserve System’s securities
transfer system (e.g., U.S. Treasury securities) and which are eligible at DTC
may be transferred to and from that account free of payment.
Caja de Valores (Argentina), The Canadian Depository for Securities
Canada (“CDS”), CAVALI (Peru), Clearstream Banking Frankfurt (Germany),
CRESTCo (the United Kingdom), Hong Kong Securities Clearing Company
Limited (Hong Kong), Monte Titoli (Italy), NECIGEF (The Netherlands) and the
Tel Aviv Stock Exchange Clearinghouse (Israel) have each opened a Participant
account at DTC. Transfers of DTC-eligible securities to and from the DTC
accounts of those central securities depositories may be made free of payment
and, in the case of CDS, against payment. The Canadian, German and Swiss
(SIS Sega Intersettle) depositories provide custody services to DTC.
DTC has indirect linkages with Euroclear and Clearstream Luxemburg.
In each of those linkages, a DTC Participant acts on behalf of the SSS. That
Participant uses its DTC account to make and receive transfers of DTC-eligible
securities between DTC Participants and the SSS. The transfers at DTC to and
from the account of that Participant may be free or against payment.
- 22 -
Transfers against payment are effected in the normal manner for such
transfers at DTC. Neither SSS provides custody services to DTC.
B. Does the SSS use securities custodians (other than the other SSSs addressed
in the previous question) and/or commercial cash correspondents? Please
identify the custodians or cash correspondents used and the duties that each
performs.
In DTC’s Fast Automated Securities Transfer (FAST) Program, a number
of transfer agents hold balance certificates registered in the name of DTC’s
nominee as custodians for DTC. As securities are deposited in and withdrawn
from the DTC system, the quantities of securities represented by the applicable
balance certificates in the FAST program are adjusted accordingly.
In DTC’s Depository Facility Program, certain banks (as well as regional
offices of NSCC) hold securities overnight as custodians for DTC after the
securities have been deposited in the DTC system. The securities are shipped
to DTC on the next business day.
C. Please describe the standards used in approving or reviewing relationships with
other SSSs, custodians or cash correspondents, including any financial or
operational requirements or the presence of insurance or public supervision.
DTC ‘s Risk Management Committee, which is described in Section VIII
below, reviews linkages with other securities settlements systems, custodians
and cash correspondents in order to assess any operational and financial risks
arising from such linkages.
SEC regulations require that the form of agreement that DTC executes
with a securities custodian contain certain specified provisions relating to,
among other things, DTC’s ability to obtain its securities promptly. The form
of agreement must be filed with the SEC for approval. DTC receives reports
on the internal controls of its securities custodians from their independent
accountants or internal auditors.
Most transfer agents in the FAST Program and all banks in the
Depository Facility Program are required to carry insurance in a form and

61
amount satisfactory to DTC.
Securities and cash positions at all of DTC’s custodians and cash
correspondents are balanced and confirmed daily.
- 23 -
D. Does the SSS advance funds or securities to or on behalf of other
intermediaries such as issuing or paying agents? If so, please identify the
circumstances in which such exposure could arise.
No. DTC does not advance securities or funds to or on behalf of other
intermediaries, such as issuing and paying agents.
E. Please describe measures in place to protect the SSS and its members against
the failure of other SSSs or commercial intermediaries to meet obligations to
the SSS, including risk controls, collateral or alternative sources of funds and
securities.
As noted above, DTC does not advance securities or funds on behalf of
other intermediaries. Participant accounts maintained by securities
depositories are subject to all of DTC’s normal risk management controls,
including collateral controls, as described in Section VIII below.
- 24 -
V. SECURITIES TRANSFERS, FUNDS TRANSFERS
AND LINKAGES BETWEEN TRANSFERS
A. Please discuss whether and how settlement instructions are matched between
participants prior to processing by the SSS.
1. Is matching required for all transactions without exception?
2. What procedure is used when instructions do not match?
3. Are matched settlement instructions binding on participants?
(a) If so, please describe the consequences of failure by participants
to meet obligations (e.g., forced settlement, penalties, short positions).
(b) Please describe whether this is a feature of the SSS’s rules and
procedures or of national law or regulations.
(c) Please provide a time line indicating the points at which matched
instructions become binding, as well as any pre-matching process that
takes place.
No. Matching is not required for all transactions at DTC. A transfer of
securities at DTC can be effected on instructions to DTC only from the
delivering Participant. As described in Section I above, transfers of securities
at DTC on the instructions of NSCC are the result of matching in the NSCC
system. Broker-dealers and their institutional customers can agree on the
details of trades by using a matching service provider such as Omgeo, and
agreed-on trades can then be settled at DTC.
B. Are securities transferred within the SSS registered?
1. Who is the registrar?
2. Is it normal practice to register the securities in the name of the SSS (or
its nominee) or in the name of the beneficial owner? Are there instances in
which securities housed within the SSS are registered to neither the SSS (or
its nominee) nor the beneficial owner?
3. If the SSS offers custodial services, will it hold securities registered in
the name of the beneficial owner?
- 25 -
4. Under what circumstances does the SSS initiate registration of
securities in the buyer’s name?
5. How long does the registration process typically take? Are participants
notified when registration is complete?
6. Can securities be transferred within the SSS before registration in the
buyer’s name is complete? If so, do the rules and procedures of the SSS
provide for an unwind or reversal of such transfers in case of bankruptcy or
other events which result in the buyer’s name not being entered on the

62
register?
With the exception of securities in DTC’s custody for which book-entry
services are not available, securities certificates for registered issues
deposited in the DTC system are sent by DTC to the issuer’s transfer agent for
registration of transfer into the name of DTC’s nominee, Cede & Co. Bearer
securities can also be deposited at DTC.
A Participant depositing a security is given immediate credit for the
deposit in the Participant’s DTC account and can use that credit to effect bookentry
transactions.
For most registered securities issues, a Participant with securities on
deposit within the DTC system can withdraw the securities physically and
have them reregistered in the name of the Participant, its customer or another
party. On the instructions of the withdrawing Participant, DTC debits the
securities from the Participant’s account and instructs the transfer agent to
register the transfer of the securities into the name designated by the
Participant. The reregistered securities are then sent to the Participant or its
customer.
For transfer agents required to register with the SEC, the time period for
the registration process referred to in the preceding paragraphs is subject to
SEC rules. The registration process usually takes 2-3 days. The Participant,
upon inquiry, is able to determine when registration is complete.
A large number of registered securities issues are issued in
book-entry-only (“BEO”) form. For these issues, there are one or more global
certificates registered in the name of Cede & Co. and the issuer does not make
securities certificates available to Participants or their customers.
- 26 -
C. Please describe how securities transfers are processed within the SSS.
1. Please indicate whether the transfers are processed as debits and
credits to members’ accounts or via some other method.
2. On a continuous (real-time) basis, or in one or more batches?
3. If continuous, during what hours does the processing occur? If in
batches, at what time or times is the processing initiated and completed?
4. Do securities settlements occur daily? Please identify securities for
which settlement occurs only on specific days of the week or month.
Transfers of securities within the DTC system are processed by debits
and credits to Participants’ accounts. Some transfers are processed in
batches, and other transfers are processed on a real-time basis. The source
of the transfer instructions determines whether a batch method or real-time
method is used. For example, transfer instructions received early in the
processing day from NSCC or from a trade matching service provider such as
Omgeo are processed at that time in batches. Transfer instructions received
from Participants during the day are processed on a real-time basis. Securities
settlements occur daily. Transfers of securities delivered against payment are
effective simultaneously with payment.
Generally, deliveries of securities for value can be effected until 3:30
P.M. and free deliveries can be effected until 6:00 P.M.
D. Please describe whether final funds transfers in conjunction with the SSS are
made as debits and credits to balances held at the SSS, at one or more
commercial banks, at the central bank, or via some other method.
1. Does the SSS maintain cash accounts for its participants? Are these
accounts equivalent to deposit accounts at a commercial or central bank or do
they serve only as “cash memorandum” accounts?
2. On what entity (SSS or other) does the participant bear cash deposit
risk?
3. Under what circumstances does the SSS provide credit extensions or
advances of funds to its participants and thereby expose itself to credit risk?

63
- 27 -
4. How long can such credit extensions last? How long do they typically
last?
DTC does not maintain cash accounts for its Participants. In addition
to a securities account at DTC, each Participant has a settlement account.
During the day, debits and credits are entered into the Participant’s settlement
account. The debits and credits arise from securities transfers against
payment made and received by the Participant and from other transactions
such as principal and income payments received in respect of securities
credited to the Participant’s securities account. At the end of each day, the
debits and credits in the Participant’s settlement account are netted. Then,
DTC and NSCC net the settlement balances of each DTC Participant that is
also a member of NSCC. After netting with NSCC, DTC pays any net credit
balance in the account to the Participant, and the Participant pays any net
debit balance to DTC. Payments are made to and from DTC’s account at the
Federal Reserve Bank of New York through the Federal Reserve System’s
money transfer system (sometimes called the Fedwire system). Each
Participant must engage a Settling Bank, which is a DTC Participant bank with
access to the Fedwire system, to act on the Participant’s behalf in settling with
DTC. A Participant which qualifies as a Settling Bank may act as its own
Settling Bank. A Settling Bank is not required to pay DTC a debit balance on
behalf of a Participant and is not required to advance funds to a Participant.
DTC neither advances funds nor provides intra-day credit extensions to
its Participants.
E. Is the SSS a DVP system? If so, please describe the DVP model used according
to the models outlined in the DVP Report (see the Introduction). Please also
provide a diagram indicating the timing of events in the processing of securities
and funds transfers in the SSS. Where the SSS provides more than one
alternative for settlement processing, please provide a response for each
alternative and indicate the relative importance of each alternative.
1. Are funds transfers and securities transfers processed within the same
system or in different systems? If different, how are they linked?
(a) Please describe whether each securities transfer is linked to a
specific funds transfer on a trade-by-trade basis or on a net basis or via
some other method.
(b) Does the SSS “split” large transactions into multiple transactions
or require participants to do so?
- 28 -
2. When do securities transfers and funds transfers become final?
(a) At what time do securities transfers become final? After what
event or events?
(b) At what time do funds transfers become final? After what event
or events? Does this timing allow for same-day retransfer of funds
received in exchange for securities?
(c) If final delivery of securities precedes the final transfer of funds,
can participants dispose freely of such securities prior to funds finality?
If so, what actions will be taken if funds are not received?
(d) If final delivery of funds precedes the final transfer of securities,
can participants dispose freely of such funds prior to securities finality?
If so, what actions will be taken if securities are not received?
(e) Does the timing of finality differ depending on the type of
security transferred or the currency in which payment is to be made?
Please describe.
3. Please discuss whether participants are notified of securities or funds
transfers while they are still provisional, only when they are final, or both.
The DTC system provides a DVP mechanism. The DTC system is

64
similar to Model 2. DTC employs three principal risk management controls to
protect DTC and its Participants against the risk that a Participant will fail to
pay the net debit balance in its settlement account. Those risk management
controls, which are discussed in Section VIII below, are the collateral control,
the net debit cap control and the largest provisional net credit procedure
applicable to money market instruments (“MMIs”).
Funds transfers and securities transfers are processed within the same
system at DTC. As described in subsection D, above, when a delivery of
securities against payment is made at DTC, the corresponding debit and credit
are entered in the settlement accounts of the receiving and delivering
Participants. At the end of the processing day, the debits and credits in each
Participant’s settlement account are netted, and the net credit balance or net
debit balance is settled between DTC and the Participant. Large transactions
are not split into multiple transactions. However, there is a size limitation of
$50 million on deliveries against payment of MMIs.
- 29 -
Securities transfers at DTC are final when made, from the standpoint
of the delivering Participant. Under certain circumstances, however, the
receiving Participant can return (reclaim) the securities on the day of the
transfer or the next day.
Funds transfers over the Fedwire between DTC and a Settling Bank
acting on behalf of a Participant are final when made.
A receiving Participant is permitted to dispose of securities prior to
money settlement with DTC subject to the application of DTC’s risk
management controls, which are described in Section VIII below.
The timing of finality of securities transfers and funds transfers does not
depend on the type of security transferred. At present, all payments in DTC’s
daily money settlement are made in U.S. dollars.
Participants are notified of securities or funds transfers by DTC when
processed.
Attached as Exhibit 2 is a schedule of the times of significant
processing events.
F. Does the SSS itself “guarantee” funds or securities transfers?
1. Under what circumstances and at what point are transfers guaranteed
by the SSS?
2. What actions does the guarantee obligate the SSS to take?
3. Please indicate whether the guarantee is a feature of the SSS’s rules
and procedures or of national law or regulations.
No. DTC does not itself guarantee any funds or securities transfers
which its Participants are obligated to make.
- 30 -
VI. DEFAULT PROCEDURES
A. Please discuss the events or circumstances that would constitute default of a
participant under the rules and procedures of the SSS or that would lead the
SSS to make use of exceptional settlement arrangements or unwind
procedures.
1. Failure by a participant to meet a test of its solvency under the
applicable laws of its jurisdiction?
2. Failure to make payments or deliveries of securities within the time
specified?
3. To the extent that the rules and procedures grant discretion in the
determination of the use of default or other exceptional procedures, please
discuss where the authority to exercise such discretion resides and the
circumstances in which this authority would be used.
The conditions under which DTC will cease to act for a Participant are
set forth in Section III above. DTC will employ the default procedures

65
described below only if DTC has determined that the Participant is insolvent as
defined in DTC’s Rules (e.g., entry of a court order adjudging the Participant a
bankrupt or insolvent) or the Participant fails to settle with DTC.
B. What procedures are followed by the SSS once it has determined that a default
event has occurred or that exceptional settlement arrangements are to be
employed?
1. How and at what point are participants notified that this has occurred?
Notification of DTC’s decision to cease to act for a Participant will be
provided immediately to the SEC and to other clearing agencies in which the
Participant is also a member. DTC will broadcast such notification to its
Participants over DTC’s Participant Terminal System (PTS), publish an
Important Notice to its Participants and submit a filing to the SEC.
2. Would the SSS be expected to continue to meet all its obligations to
participants under these circumstances? Please discuss the resources in place
to ensure that this would occur (e.g., collateral, participants fund, insurance,
loss-sharing arrangements, etc.).
- 31 -
3. Please describe and provide a time line indicating the order in which
these resources would be used as well as the timing of participant notifications
and important deadlines (e.g., when the SSS’s obligations to participants would
be met, when participants would need to cover their loss-sharing obligations).
In the event that it ceases to act for a Participant, DTC will be expected
to continue to meet all its obligations, including the completion of settlement.
DTC has available liquidity resources of $2.35 billion, consisting of an all cash
Participants Fund (the “Fund”) of $600 million and a committed bank line of
credit of $1.75 billion, in order to complete settlement.
Each Participant is required to make a deposit to the Fund based upon
a sixty business-day rolling average of the Participant’s intra-day net debit
peaks. In the event that DTC becomes concerned with a Participant’s
operational or financial soundness, DTC may require an additional deposit to
the Fund. The minimum deposit is $10,000. A Participant may make a
voluntary deposit to the Fund in excess of the amount required.
In addition to being a liquidity resource, the Fund is available to satisfy
any uninsured loss incurred by DTC, including a loss resulting from a
Participant’s failure to settle. In the event of such loss, DTC would first charge
the loss to that Participant’s deposit to the Fund (including its voluntary
deposit, if any). If the loss exceeded the failing Participant’s deposit, DTC
could charge the excess to its retained earnings or pro rata to the required
Fund deposits of all other Participants. Should DTC make a charge against a
Participant’s required deposit to the Fund (pro rata or otherwise), the
Participant must make an additional deposit to the Fund in an amount equal to
the charge.
If the Fund is applied to a loss, DTC is required to notify the SEC and
each Participant promptly thereafter. Each Participant’s obligation to make an
additional deposit to the Fund will be reflected as a debit in its money
settlement account on the business day following such notification.
4. Please describe all conditions under which provisional transfers of
securities or funds could be unwound by the SSS.
- 32 -
(a) How and on what authority would a decision to unwind securities
or funds transfers be made by the SSS?
(b) When and how would participants be notified of a decision to
unwind provisional securities or funds transfers?
(c) How long would participants have to cover any debit positions in
their own securities or funds accounts resulting from an unwind?
(d) In the event of an unwind, would all transfers be unwound or

66
would only a subset of transfers (e.g., only securities purchases or only
those of a subset of participants) by unwound?
(e) If only a subset of transfers, what procedure would be followed
to determine which transfers and in what order?
In the event of a Participant’s failure to settle, DTC will first use the
Fund (including any voluntary deposits) as a liquidity resource to complete
settlement. If the Fund is not sufficient, DTC will borrow from its line of credit
banks, pledging collateral securities in the failing Participant’s account. These
funds will ordinarily be restored on the day following the failure to settle, when
the failing Participant pays DTC. The failing Participant has until 10:00 A.M.
on that day to wire the necessary settlement funds, including interest, to
DTC’s account.
If the Participant fails to wire the necessary settlement funds, DTC is
authorized to sell the collateral securities in the failing Participant’s account.
5. Can bankruptcy or insolvency be declared retrospectively in the SSS’s
jurisdiction (e.g., under a “zero-hour” rule), and could this cause provisional
securities or funds transfers to be unwound?
No.
6. Please describe any circumstances in which transfers of securities or
funds that were defined as final in response to question V.E.2 above would
ever be unwound.
Transfers of securities or funds so defined are final.
- 33 -
C. Has a participant in the SSS ever been declared in default or become insolvent?
1. Have loss-sharing procedures been invoked?
2. Please describe whether any of these defaults or insolvencies resulted
in losses for the SSS or its participants and how they were absorbed.
Since the creation of the depository in 1973, DTC has never suffered
a loss resulting from a Participant default or insolvency and has never made a
charge against the Participants Fund.
VII. SECURITIES OVERDRAFTS, SECURITIES LENDING
AND BACK-TO-BACK-TRANSACTIONS
A. Is it possible for debit positions (overdrafts) in securities accounts at the SSS
to arise?
Yes. Debit positions (i.e., short positions) can occur.
1. Under what conditions could such debit positions occur?
Normally, since deliveries are not processed by DTC unless the
delivering Participant has a sufficient quantity of securities credited to its
account prior to the delivery, a Participant cannot overdraw its account at
DTC. However, two processes initiated externally can cause short positions
to arise.
. Deposit Rejects: Most short positions are the result of deposit
rejects. As described in Section V above, a Participant depositing
a registered security at DTC is given immediate credit for the
deposit in the Participant’s DTC account, and the deposited
certificate is sent by DTC to the issuer’s transfer agent for
registration of transfer into the name of DTC’s nominee. If the
transfer agent refuses to register the security in the name of DTC’s
nominee, the deposited certificate rejected by the transfer agent is
returned to the Participant and the quantity of the deposited security
is deducted from the Participant’s DTC account. If that deduction
results in a negative position in the Participant’s account (a “short
position”), the Participant is required to provide a cash security
deposit to DTC (the “short position penalty”) equal to 130% of the
market value of the deposited security (marked to the market each
day) until the matter is resolved.

67
- 34 -
. Partial Call Lotteries: Under DTC’s Procedures relating to a call (i.e.,
redemption) of part of an issue, DTC allocates the called securities
by means of an impartial lottery, based upon Participants’ net long
positions as of the close of business on the day prior to the
publication of the call notice. For the vast majority of partial calls
of callable securities on deposit with DTC, the depository does not
receive notice of the call in advance of the publication date and,
therefore, must run its lottery after publication date. To the extent
that, because of deliveries effected by a Participant between the
publication date and the date DTC is able to allocate called
securities to its account, the Participant’s remaining long position is
less than the amount allocated, the Participant will be left with a
short position.
(a) Do these conditions always result in debit positions in securities
accounts rather than failed transactions? If not, please explain the
basis for differential treatment by the SSS.
The processes described above result in short positions only, and
do not create failed transactions.
(b) Are these situations covered explicitly by the rules and
procedures of the SSS?
Yes.
2. How long can such debit positions last? How long do they typically
last?
While theoretically there is no limit to the time short positions can be
outstanding, short positions in debt securities (which represent the vast
majority of short positions at DTC) can be outstanding at most until the
securities are redeemed or mature. Currently, the average age of a short
position at DTC is between seven and eight days.
3. How are debit positions in securities accounts prevented, rectified or
managed?
DTC discourages short positions by charging the short position penalty
until the position is covered. DTC also has a number of procedures to help
reduce and eliminate short positions, particularly those that are outstanding for
- 35 -
long periods because, for example, the issues are difficult to purchase on the
open market. The following briefly describes a few of these procedures:
. A Participant having a short position in a particular security as the
result of a rejected deposit is permitted for a limited period of time
to reverse book-entry deliveries of that security effected by the
Participant between the date of the deposit and the date of the
reject. If a book-entry delivery is reversed under this procedure, the
settlement obligations of the parties are reopened (i.e., the
Participant that reverses the book-entry delivery will still have an
obligation to deliver to the receiving Participant securities in
settlement of the original transaction).
. A Participant having a short position in a particular security as the
result of the partial call allocation process is permitted for a limited
period of time to reverse book-entry deliveries of that security
effected by the Participant between the publication date and the
allocation date. If a book-entry delivery is reversed under this
procedure, the settlement obligations of the parties are re-opened.
. DTC permits a Participant having a short position in a particular
security to use DTC’s facilities to communicate with other
Participants having long positions in that security in order to arrange
to purchase a sufficient quantity to cover the short position.

68
. With respect to a Participant short position that has been
outstanding for 90 days or more, DTC itself is authorized to
purchase a sufficient quantity of the security to cover the short
position, using the Participant’s short position penalty to fund the
purchase price.
4. What procedures would be followed by the SSS in case the debit cannot
be rectified (e.g., failure by a participant with a debit balance in a securities
account or unavailability of the securities in the market).
(a) Application of loss-sharing provisions allocating the loss to
participants?
(b) Absorption of the loss by the SSS?
(c) Other? Please specify.
- 36 -
The short position penalty would be available to cover the
obligation of a failing Participant. In the extremely unlikely event that
the short position penalty and the failing Participant’s deposit to the
Participants Fund are not sufficient to cover any loss suffered by DTC,
DTC’s retained earnings as well as the Participants Fund (involving loss
sharing by Participants on a pro rata basis) would be available for such
loss.
B. Under what circumstances does the SSS provide for the lending of securities
to ensure settlements?
1. Is the process for lending securities automatic? If not, please describe
the procedures used by the SSS to determine whether a securities loan will be
made.
2. At what point are participants notified that securities are being lent to
them in order to complete their settlements?
3. Which securities on deposit at the SSS are eligible for lending? Do
participants have the option to make securities available for lending or is it
mandatory?
4. Are lent securities identified by the SSS with specific participants as
lenders or only with a common pool of securities available for lending? Does
the participant whose securities are lent become a principal to the transaction?
DTC itself does not provide for the lending of securities to ensure
settlements. However, as described in Section I above, DTC provides services
that facilitate securities lending by its Participants and their customers.
C. How does the SSS settle back-to-back transactions?
1. Under what conditions are delivery instructions by participants receiving
and redelivering securities on the same day under back-to-back transactions
settled for same-day value?
(a) Only if the participant has securities on deposit with the SSS that
have been received pursuant to a final securities transfer?
(b) If the participant has securities on deposit with the SSS that have
been received pursuant to a provisional securities transfer?
- 37 -
(c) Before securities have been received either provisionally or
finally, but when a matched receipt instruction exists for the same or
greater value? Is such a practice limited to markets where matching is
binding?
(d) Before securities have been received either provisionally or
finally, but when a third party has promised to deliver to the SSS
securities of the same or greater value? Must the provider of the
guarantee have itself received the securities through a final transfer?
Please describe how the SSS evaluates such promises, and whether
they are addressed by the written rules and procedures of the SSS.
(e) Other? Please specify.

69
2. Please describe limits or controls in place with respect to any of the
above arrangements for the settlement of back-to-back transactions, including
limits on amounts involved or related to the liquidity of the underlying
securities.
3. Under what conditions are payment instructions by participants in the
SSS under back-to-back transactions settled for same-day value? Can
participants use the proceeds of an on-delivery of securities without the need
for an extension of credit?
DTC does not settle “back-to-back” transactions as defined herein.
However, a Participant receiving a delivery of securities intra-day is able to
redeliver those securities for same-day value in advance of final settlement so
long as DTC’s collateral, net debit cap and Largest Provisional Net Credit
(“LPNC”) controls applicable to both the redelivering Participant and the
counterparty to the redelivery are satisfied. These controls are described in
Section VIII below.
- 38 -
VIII. RISK CONTROL MEASURES
A. Please describe the roles and responsibilities of those areas of the SSS
responsible for risk management and control.
DTC has a Risk Management Committee (the “Committee”) to evaluate
and coordinate the risk management activities within the organization. The
Committee is composed of nine officers, representing the following areas:
Finance, Auditing, Information Services, Operations, Risk, International,
Systems Processing and Legal. DTC’s General Counsel acts as Chairman.
The Committee reports to the Audit Committee of DTC’s Board of
Directors.
1. Please describe the process for the internal review of risk management
policies and procedures.
DTC continually performs risk assessments of its operations, data
processing systems, communications networks and facilities. Whenever a new
or expanded service is proposed, the project is reviewed by members of senior
management. Risk assessment is a crucial element of such reviews. In
appropriate cases, a project may be subject to risk assessment reviews by the
Committee, attorneys, internal auditors and DTC’s independent accountant.
2. Is there a risk management policy that addresses the review and
approval of new products and services offered by the SSS? At what level of
the organization is risk management approval given for a new product or
service?
As a matter of DTC practice, before being offered, a new product or
service must receive risk management approval by DTC’s Chief Operating
Officer, President or Chairman.
3. Does the SSS have a risk management function with clear independence
from and authority over operational marketing functions?
Yes. The Committee is independent from the operational and marketing
functions.
- 39 -
4. Does the Board of Directors review risk management policies and
procedures? Does the Board have a risk management or audit committee?
Yes. DTC’s Board of Directors has an Audit Committee whose
responsibilities include the review of DTC’s risk management policies and
procedures.
B. Please describe any internal or external audits or supervisory/regulatory
examinations that are performed with respect to the SSS. For each such audit
or examination, please address the following questions.
1. Who performs the audit or examination?
DTC’s Internal Audit Department and its independent accountant

70
regularly review the adequacy of DTC’s internal controls, procedures and
records. In addition, the Federal Reserve Bank of New York, the New York
State Banking Department, and the Securities and Exchange Commission
routinely examine the depository.
2. What is the scope of the audit or examination?
(a) Please indicate whether and how it addresses the sufficiency of
and compliance with internal controls.
Evaluations of DTC’s financial statements and internal controls
over securities and related monies processed and/or held for
Participants and others are conducted on a periodic basis. Such
examinations cover all critical processing areas of the operation, as well
as the data processing environment.
(b) Please indicate whether and how it addresses the SSS’s
compliance with its own rules and procedures.
All examinations are designed to test for compliance with DTC’s
Rules and Procedures. Any instances of noncompliance are reported to
senior DTC management and are corrected.
3. What is the frequency of the audit or examination?
- 40 -
DTC’s independent accountant, the Federal Reserve Bank of New York
and the New York State Banking Department each conduct annual reviews.
The Securities and Exchange Commission conducts an annual inspection
of DTC’s data processing areas and has conducted an inspection of selected
operating areas every other year.
DTC’s Internal Audit Department conducts, on a rotation schedule, an
annual audit of all critical areas.
4. Are audit or examination reports available for review by participants?
DTC’s independent accountant issues a report on internal controls
which is provided to all Participants and interested third parties.
C. Please discuss whether the SSS has the capacity to value (i.e., mark to market)
the securities that it holds.
1. Please describe how these valuations are used by risk control systems
at the SSS.
DTC monitors the value of the securities used as collateral to support
a Participant’s net settlement debit. The collateralization control is meant to
assure that DTC has available sufficient collateral to cover the Participant’s net
settlement debit in the event that it fails to settle.
2. How frequently are securities revalued?
Daily.
3. What are the sources for security valuations?
(a) What outside price or data sources are used?
DTC attempts to obtain an end-of-day price in an automated
format from a third-party vendor for each of its eligible securities. In
the case of CMOs, which are complex, highly interest-rate-sensitive
securities, DTC attempts to obtain pricing data from two outside
sources. In addition, pricing data is supplied by lead underwriters for
new issues not yet priced by a vendor.
- 41 -
(b) If pricing models are used, please describe how the models are
chosen and how the model inputs are obtained.
The above vendor data is supplemented with DTC’s mainframebased
pricing models for Money Market Instruments.
D. Please discuss whether the SSS has a lien on the securities held in or
transferred through it.
1. Does the lien apply only to the securities owned by the participants
themselves or does it extend to the securities beneficially owned by customers

71
of participants?
2. Under what circumstances and in what manner would such a lien allow
the SSS to use the securities?
As indicated above, the goal of DTC’s collateralization control is to
assure that DTC has access to sufficient collateral of the Participant to cover
any net debit in its money settlement account. Collateral includes: (1) the
Participant’s deposit to the Participants Fund; (2) securities in the Participant’s
account that the Participant has designated as collateral; and (3) securities that
have been delivered intra-day to the Participant’s account against payment.
DTC is not aware of the beneficial ownership of securities credited to
the accounts of its Participants, including securities that are treated as
collateral. DTC’s Rules give DTC the right to pledge such collateral securities
to DTC’s line of credit banks in the event of a Participant failure to settle.
In the event that a failing Participant is insolvent and unable to pay its
settlement debit, DTC is authorized to sell the collateral securities in order to
cover that debit.
E. Please discuss the circumstances in which the SSS requires collateral to limit
or mitigate risks.
1. Does the SSS manage its own collateral system?
Yes. DTC manages its own collateral system.
- 42 -
2. Does the SSS share a collateral system with another SSS or payment
system?
No. DTC does not share its collateral system with any other SSS.
DTC and NSCC have entered into a limited cross-guaranty agreement
which provides, with respect to CNS long allocations, a DTC guarantee either
to return the securities to NSCC or to compensate NSCC for these securities
if the receiving DTC Participant (which is also a member of NSCC) redelivers
the securities. DTC’s guarantee eliminates a potential NSCC risk. Not giving
collateral value to long allocations, together with the collateral controls
applicable in DTC’s system, mitigates DTC’s risk in providing this guarantee.
3. Can collateral at the SSS be posted and returned on the same day?
Yes. Collateral can be returned to the Participant intra-day as long as
the returned collateral is excess (i.e., at the time of the return the Participant’s
net debit with DTC is fully supported by other collateral acceptable to DTC).
4. What types of transaction at the SSS involve the use of collateral?
Transactions that are processed in DTC’s end-of-day net settlement
system are subject to DTC’s collateral requirements.
5. What are the policies with regard to the type of collateral used or
haircuts required?
All types of securities that are eligible for deposit may be used as
collateral.
The collateral value attributed to securities is equal to the prior business
day’s closing market price, less a haircut as determined by DTC. Because DTC
may have to finance a Participant’s failure to settle, the haircut structure takes
into consideration market fluctuations and the haircuts imposed on DTC by
DTC’s line of credit banks. Securities that are not acceptable to the banks
receive no collateral value in DTC’s system.
6. How are collateral valuation methodologies developed and reviewed?
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A security’s haircut is determined by the application of criteria relating
to security type, rating, market price and whether the security is traded on an
exchange (including NASDAQ). DTC’s haircuts range from 2% to 100%.
DTC’s haircut policy is reviewed at least annually, usually in conjunction with
the renewal of its agreement with its line-of-credit banks. DTC’s Risk
Management Committee is responsible for approving any changes in the

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established haircut levels. The market values of collateral securities are
monitored daily based upon price and rating data provided by independent
sources.
7. To what extent are collateral policies described in the written rules and
procedures of the SSS?
DTC collateral policies are described in DTC’s Procedures.
F. Please describe the SSS’s use of limits on exposures to monitor or control risks.
1. Please explain the types of limit used and the exposures to which they
apply.
DTC’s principal risk would arise from the failure of one or more of its
Participants to settle their net debit obligations with DTC at the end of a
business day. In order to assure that DTC is able to complete settlement on
the day of a Participant failure, DTC maintains liquidity resources of $2.35
billion, including a cash Participants Fund and a committed line of credit. DTC
also employs net debit caps, collateral requirements and the Largest
Provisional Net Credit (“LPNC”) control.
DTC’s settlement system imposes net debit caps on all Participants.
Each Participant’s net debit is limited throughout the processing day to a net
debit cap that is the lesser of four amounts: (1) a net debit cap based on the
three largest net debits that each Participant incurs over a rolling three-month
period; (2) an amount, if any, determined by the Participant’s Settling Bank;
(3) an amount, if any, determined by DTC; or (4) $1.8 billion (an amount that
is $550 million less than the amount of DTC’s total liquidity resources).
As discussed above, DTC’s system requires that a Participant’s net
settlement debit be fully collateralized.
- 44 -
The LPNC control is designed to address risks associated with DTC’s
processing of maturity payments on MMIs. For most securities that pay
principal at maturity, for example corporate or municipal bonds, DTC receives
maturity proceeds from the issuer’s paying agent by Fedwire and does not
credit these proceeds to Participants until they are received. For MMIs,
however, maturities are handled differently. The issuer’s paying agent must
be a DTC Participant. Early on the maturity date, maturity proceeds are
automatically debited to the paying agent’s Participant account and credited
to the accounts of Participants that have positions in the MMI. Until 3:00 P.M.,
however, these debits and credits are only provisional because the paying
agent has until that time to inform DTC of its refusal to pay for the maturity.
In such a case, DTC would invoke MMI issuer failure procedures which entail
reversing all of that day’s activities in the issuer’s MMI, including any new
issuances that day. All of these reversals would be processed without regard
to the system’s collateral and net debit cap controls.
To help limit the risk to DTC arising from the combination of an issuer’s
failure and a Participant’s failure to settle, DTC established the LPNC control.
This control operates by prohibiting the Participant prior to 3:00 P.M. from
using the largest net settlement credit it has received with respect to any
single MMI issuer. This credit is not available as collateral, nor is it used in the
calculation of the Participant’s net debit. The LPNC control is lifted after 3:00
P.M. in the absence of a refusal to pay.
2. Do the limits apply to all participants and/or to other SSSs with which
the SSS is linked? What are the exceptions to the limits?
The risk management controls apply to all Participants, including other
SSSs that participate in DTC’s system.
3. Do limits apply to participants individually or in the aggregate or both?
Risk management controls are applied to Participants on an individual
basis.
4. Do limits apply to implicit as well as explicit extensions of credit or

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securities (e.g., when on-deliveries of securities are permitted pursuant to
provisional but not final delivery of securities)?
Reference is made to information provided in response to subsection
V.E. above.
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5. Does the SSS automatically reject transactions that exceed limits or is
compliance determined ex post?
DTC’s collateral monitor control systematically reviews each
transaction to assure that if completed there will be enough collateral in the
accounts of both the deliverer and the receiver to support the net debit of
each.
If a completed transaction will result in a net settlement debit that is
either not fully collateralized or exceeds the Participant’s net debit, the
transaction will be automatically blocked and pended.
6. How are limit policies developed and reviewed?
DTC’s Risk Management Committee is responsible for developing limit
policies. These policies are reviewed by DTC senior management and by the
Audit Committee of DTC’s Board of Directors. DTC’s Compliance Department
is responsible for the application of these policies.
7. To what extent are limit policies described in the written rules and
procedures of the SSS? Where does additional authority to set or amend limit
policies reside?
DTC’s limit policies are described in its written Procedures. The
authority to set or amend these policies coincides with the authority to amend
DTC’s Procedures (as described in Section I above).
G. Please describe other controls to mitigate or reduce risks at the SSS.
1. Does the SSS or its participants have the capacity to monitor
participants’ accounts continuously during processing?
Each DTC Participant has the capability to monitor its own account on
a real-time basis. DTC has the capacity to monitor all of its Participants’
accounts on a real-time basis.
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2. Is there a special risk control regime that the SSS would apply to a
participant known to be experiencing financial difficulties?
DTC maintains relationships with other self-regulatory organizations so
that there is an exchange of vital information concerning Participants’
operational and financial soundness. In the event of financial inadequacy, DTC
carefully monitors a Participant’s daily activity and may exercise its right under
its Rules to limit the Participant’s access to DTC services. Depending upon the
circumstances, DTC could take the following possible courses of action:
. Increase the Participant’s required deposit to the Participants Fund.
. Lower the Participant’s net debit cap.
. If the troubled Participant is a primary market maker or the specialist
in an issue or issues, DTC could raise the haircuts in its collateral
valuation of those securities.
. Require the Participant to settle its net debit earlier in the day.
. Request that the Participant arrange to clear its transactions through
another DTC Participant and itself retire as a Participant.
3. Does the SSS maintain or administer loss-sharing arrangements other
than those applicable to events of default and addressed in Section VI above?
Are these loss-sharing pools pre-funded by participants?
No. DTC does not maintain or administer loss-sharing arrangements
other than as described in Section VI above.
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IX. OPERATIONAL RISKS
A. Please provide assessments of the operational reliability of the computer and

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other systems used by the SSS, including any criteria that the SSS uses
internally for this purpose.
1. What is the percentage uptime of the systems used by the SSS?
(a) Whole system overall?
(b) Broken down by major components (e.g., communications
network, central processing facility)?
(c) During critical processing periods?
2. Has the SSS experienced major operational problems during the past
two years?
(a) Have settlements been delayed, been disrupted or otherwise
failed because of operational problems during this period?
(b) Please describe the nature of any such problems.
DTC conducts self-assessments of the operational reliability of the
depository’s computer and other systems, including communications networks,
and reports the monthly results quarterly to the DTC Board of Directors.
These reliability reports include hardware, software applications, on-time
settlement performance and terminal systems performance. Definitions of
these metrics follow:
. “Hardware Availability” is defined as the readiness of production
system hardware to process deliveries and complete settlement.
The period measured is 8:00 a.m. to 5:00 p.m., which covers peak
Participant use. Outages are measured whenever a failure occurs
that affects mission-critical systems that in turn delay Participant
processing.
. “Software Availability” is defined as the ability of DTC’s software
to operate without downtime. The period measured is 8:00 a.m. to
5:00 p.m., which covers peak Participant use. Outages are
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measured whenever a failure occurs that affects mission-critical
systems that in turn delay Participant processing.
. “On-Time Settlement Performance” is achieved if settlement cut-off
and payment of credits are not later than 15 minutes beyond
scheduled times and key prior cut-offs are not 30 minutes late.
. “Participant Terminal Availability” is defined as the availability of
DTC’s Participant Terminal System (PTS) terminal network in
Participant locations. The period measured is 8:00 a.m. to 5:00
p.m., which covers peak Participant use.
Over the period January 2000 through December 2001, the systems
used by DTC were available at a rate of 99.85% overall and 99.865% during
critical period processing, in both cases exceeding DTC’s goals. Statistics for
critical period processing (between 8:00 a.m. and 5:00 p.m.) for major systems
components are as follows -- Hardware Availability, 99.98%; Software
Availability, 99.85%; On-Time Settlement Performance, 99.865%; Participant
Terminal Availability, 99.866%.
DTC has not experienced any major operational problems during the
past two years. DTC has never experienced a failure in its daily settlement.
B. Please describe contingency or disaster recovery planning at the SSS.
1. Does the SSS have a formal plan for business continuity in place?
2. Is this plan available for review by participants?
3. How often is this plan tested? Does this involve participants in the SSS?
4. What are the major elements of the business continuity plan?
5. How long would it take the SSS to resume operations if primary systems
become unusable?
DTC maintains an alternate data center and has a state-of-the-art
disaster recovery capability. This capability provides for full recovery of DTC’s
entire system within one hour, with no loss of data. The system uses a remote

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data facility under which mainframe-based disk drives connected to the
production mainframe immediately replicate any changes to disk drives on the
- 49 -
back-up system located at a separate site. Thus, in the event of a disaster at
the primary production site data center, the back-up mainframe at a secondary
site would be initialized for production using a complete duplicate set of
production files maintained at the back-up site.
Extensive physical and environmental control systems are used in both
the data centers. Backup emergency generators and an uninterrupted power
supply are available and tested periodically. A command center for monitoring
key environmental control systems is staffed 24 hours a day, seven days a
week. Any potential problems result in an alarm sounding and trigger
supervisory intervention. DTC periodically operates its production system and
communications network from its alternate data center. New program code
is extensively tested through established certification procedures before being
moved to the production environment.
Internal systems contingency and disaster recovery testing is conducted
weekly. Each weekend DTC tests the system by comparing a portion of the
data between the two sites. The recovery processes are documented and
practiced by DTC staff. DTC also switches primary and alternate processing
sites on a quarterly basis thereby testing the disaster recovery processes with
every Participant that utilizes the remote access capabilities of the depository.
Most of the depository’s business processes rely on operational
activities as well as computer facilities. To ensure its ability to sustain
business processes in the event of fire, flood, civil disturbance, or any other
contingency affecting its operating premises, the depository has developed a
Business Continuity plan; this plan is tested on an ongoing basis. The plan
addresses a single catastrophic failure, such as the loss of one building. The
plan details how critical operational units would displace less urgent functions
in the event the critical operation’s facilities were not available.
DTC conducts disaster recovery tests for each mission critical operation
on an ongoing basis. Testing varies from tabletop testing to actually closing
departments and resuming operations at the contingency site.
The details of the disaster recovery plan are not available for review
except by DTC’s regulators.
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C. What are the key features of the internal controls covering operations and
security at the SSS (e.g., change controls or those covering remote access)?
1. Please describe controls or security procedures in place to ensure that
the SSS acts only on authentic settlement instructions from valid participants.
2. Are internal operational and security controls included in the internal
and/or external audits of the SSS?
3. Are internal operational and security controls covered by regulatory
requirements applicable to the SSS?
Annual risk assessments include the review of DTC’s primary data
centers, the integrity of DTC’s computer processing, and possible security
breaches.
In addition to verification procedures in place permitting Participants to
verify that only valid settlement instructions have been received for compared
trades, electronic access to DTC’s computers is generally controlled via leased
lines and dial-in/call-back networks. User ID and password authentication is
required in order to help prevent unauthorized transactions from entering DTC
systems, to prevent security breaches and to establish accountability for
transactions entered. In many cases, instantaneous confirmation of recorded
transactions is available to Participants through PTS. Access to sensitive PTS
functions requires the authorization of a DTC officer. All systems activity is

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logged and is available for reporting purposes as the need arises. Security
violation reports are monitored and appropriate follow-up action is taken.
Formal escalation procedures exist for reporting, investigating and resolving
attempted security violations. The use of sensitive computer console
commands is restricted via a console security system.
All securities transactions are included on daily activity statements
given to Participants. Participants are responsible for reporting to DTC any
problems with recorded transactions, and reported differences are followed up
until resolved by DTC personnel.
A variety of measures are taken by DTC to protect the Data Center and
Communications areas.
The systems development and maintenance activities also are
controlled through the use of a separate test machine. An independent
Certification Unit is responsible for transferring all application programs from
test to production libraries and source code is recompiled prior to being moved
- 51 -
into production. Finally, standards and procedures over the certification
process have been developed, documented and adherence by employees is
required.
DTC works diligently to eliminate the possibility of access to sensitive
data and records by unauthorized users and programs. Unauthorized access is
prevented through awareness, organizational structure, prevention,
accountability, and violation monitoring. The goal of DTC’s internal control
structure is to ensure that the integrity of our production systems is never
jeopardized. In addition to the authentication and access procedures described
above, the internal control structure includes:
. A high-level Security Committee, which addresses key areas of risk
associated with Information Services and directs that appropriate
actions be taken to minimize risk; and
. An extensive Information Services Security Policy Statement
(distributed to all employees annually), which helps ensure the
accuracy and integrity of company data, the confidentiality of
proprietary, personal, and other sensitive data, the continuance of
data processing in the event of an emergency, company-wide
awareness of the need for data security, and management
participation in implementing the data security policy.
DTC’s internal operational and security controls are included in the
internal and external audits of DTC and are covered by the regulatory
requirements applicable to DTC. For example, the depository is subject to the
SEC’s Automation Review Policy (ARP), under which the SEC evaluates various
aspects of DTC’s data processing environment, including:
. Capacity planning processes.
. Systems development methodologies.
. Contingency planning processes.
. Security assessments.
In this connection, SEC technical staff makes annual on-site visits to DTC and
confers with DTC staff from time-to-time throughout the year.
In addition to the internal and external audits described above, DTC has
from time-to-time retained outside consultants to provide independent
assessments of DTC’s systems and systems security.
- 52 -
D. Does the SSS impose minimum operational or performance standards on third
parties (e.g., communications providers)?
1. How does the SSS ensure that such standards are met on a continuing
basis and what sanctions are available to the SSS if they are not?
2. How would the SSS allocate losses incurred due to operational problems

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caused by third parties?
DTC imposes both operational and performance standards on its
software vendors as part of its contractual agreements. Actual performance
against standards is monitored as part of DTC’s ongoing systems reliability
analysis and reporting.
In the event that losses are incurred by the depository as the result of
operational problems caused by systems or applications software packages or
external data provided by vendors (third parties), DTC will pursue a claim
against the vendor. If DTC’s claim is not fully satisfied, any remaining losses
not covered by DTC’s insurance will be satisfied from DTC’s retained earnings
or the Participants Fund.
Attachments
- 53 -
EXHIBIT I

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5946- 16
Ming the Mechanic
The NewsLog of Flemming Funch

The unknown 20 trillion dollar company 2003-10-30 17:37

13 comments

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 by Flemming Funch

There is a busy little private company you probably never have heard about, but
which you should. Its name is the Depository Trust & Clearing Corporation. See
their website. Looks pretty boring. Some kind of financial service thing, with a
positive slogan and out there to make a little business. You can even get a job there.
Now, go and take a look at their annual report. Starts with a nice litte Flash
presentation and has a nice message from the CEO. And take a look at the numbers. It turns out that this company
holds 23 trillion dollars in assets, and had 917 trillion dollars worth of transactions in 2002. That's trillions, as in
thousands of thousands of millions. 23,000,000,000,000 dollars in assets.

As it so turns out, it is not because DTCC has a nice website and says good things about saving their customers
money that they are trusted with that kind of resources. Rather it is because they seem to have a monopoly on what
they do. In brief, they process the vast majority of all stock transactions in the United States as well as for many
other countries. And - and that's the real interesting part - 99% of all stocks in the U.S. appear to be legally owned
by them.

In the old days, when you owned stocks you would have the stock certificates lying in your safe. And if you
needed to trade them, you needed to get them shipped off to a broker. Nowadays that would be considered very
cumbersome, and it would be impractical to invest via computer or over the phone. So the shortcut was invented
that the broker would hold your stocks instead of you. And in order for him to legally be able to trade them for you,
the stocks were placed under their "street name". I.e. they're in the name of the brokerage, but they're just holding
them in trust and trading them for you. And you're in reality the beneficiary rather than the owner. Which is all fine
and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any
longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of
"Cede and Company" or "Cede & Co" or some such variation. And the broker might tell you that it is just a
fictitious name, and will explain why it is really more practical to do that than to put it in your name.

The problem with that is that it appears that Cede isn't just some dummy name, but an actual corporation that
DTCC controls. And, well, if you ask anybody about this, who actually knows about it, they will naturally tell you
that it is all a formality. To serve you better, of course. And, well, maybe it is. DTCC seems like a nice and friendly
company. It is a private company, owned by the same people (major U.S. banks) who own the Federal Reserve
Bank. And if they all stick to their job, and just keep the money and your stocks flowing smoothly, I'm sure that is
all well and good. But if somebody at some point should decide otherwise, and there's a national U.S. emergency
and/or the U.S. government becomes unable to pay its debts, well, they might just not give you your stocks back.
Because legally they own them. Something to think about.

An fascinating article about this whole thing is here. I will include it at the bottom too, in case it should disappear.
Not that I can vouch for or agree with everything the guy is saying, and some of it is a little whacko, but obviously
he's been researching this quite a bit. You'll find very little about it on the net otherwise.

The Unknown $19 Trillion Depository Trust Company

by Anthony Wayne

Part I of II

This exclusive report is a compilation of interviews and background research from October 1995 through April
1999.

The Depository Trust Company (DTC) is the best kept secret in America. Headquartered at 55 Water Street in New
York City, the average American has no clue that this financial institution is the most powerful banking
corporation in the world. The general public has no knowledge of what the DTC is or what they do. How can a
private banking trust company hold assets of over $19 trillion and be unknown? In a recent press release dated
April 19, 1999, the Depository Trust Company stated:

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The Depository Trust Company (DTC) is the world's largest securities depository, holding nearly $19 trillion in
assets for its Participants and their customers.... Last year, DTC processed over 164 million book-entry deliveries
valued at more than $77 trillion.

In dealing with the trust department of Midlantic Bank, N.A. in New Jersey [now PNC Bank, N.A.], this writer
was authorized, as trustee and power of attorney, to transfer original trust assets comprising of common stocks and
bonds to a new trust set up in another jurisdiction. An Assistant Vice President from the Trust & Financial
Management Office of Midlantic Bank said to me "it will take at least 6 weeks to do this as the majority of the
stocks and bonds are not held in the name of the trust". This same Midlantic Bank Assistant V.P. also stated in a
letter dated November 17, 1995, "Of the 11 municipal bonds, 8 are held in book entry only. This means they
cannot be physically re-registered with a certificate sent to the new trustees." (* these are not the actual figures
quoted in the letter in order to protect the privacy of the account holder, at their request. Also, we were asked not to
name the Midlantic Assistant V.P. in order to protect her privacy Rights. We respect these requests with full moral
compliance). In disbelief, I brought this matter to the attention of our research assistants at the Christian Common
Law Institute [formerly the North Bridge News] and we began our lengthy investigation into the matter. After 3
years, the can of worms we've opened up should frighten every American. With the advent of reported Y2K
computer glitches and the possible collapse of our 'paper asset' economy, every person who has a stock or bond in
their portfolio had better read this report and act on the information we are disclosing here.

In November 1995, after encountering numerous "no comments" and a myriad of "that's not my department"
excuses via telephone, I eventually spoke with Mr. Jim McNeff who told me his position was Director of Training
for the DTC. He said he'd been employed there for 19 years and was "very proud" of his employer. During my
initial telephone interview, either Jim's employer or some other unknown person or persons were illegally listening
or taping our telephone conversation according to the electronic eavesdropping equipment we have installed on our
end. Why did anyone feel it was necessary to illegally record our conversation without advising us? Was some
federal alphabet agency monitoring DTC calls to safeguard National Security? That in itself is suspicious enough
to warrant a big red warning flag.

Jim informed me back then (1995) that "the DTC is the largest limited trust company in the world with assets of $
9.1 trillion". In July 1998, I spoke with Ms. Rose Barnabic of the DTC Finance Department who said that "DTC
assets are currently estimated at around $11 trillion". As of April 19, 1999, the DTC itself has stated that their
assets total "nearly $19 trillion" (see above). Mr. McNeff had also stated "the DTC is a brokerage clearing firm and
transfer center. We're a private bank for securities. We handle the book entry transactions for all banks and brokers.
Every bank and brokerage firm must secure their membership with us in case they become insolvent, so your assets
are secure with DTC". Yes, you read that correctly. The DTC is a private bank that processes every stock and bond
(paper securities) for all U.S. banks and brokerage houses. The big question is this; Just who gave this private bank
and trust company such a broad range of financial power and clout?

The reason the public doesn't know about DTC is that they're a privately owned depository bank for institutional
and brokerage firms only. They process all of their book entry settlement transactions. Jim McNeff said "There's
no need for the public to know about us... it's required by the Federal Reserve that DTC handle all transactions".
The Federal Reserve Corporation, a/k/a The Federal Reserve System, is also a private company and is not an
agency or department of our federal government, according to the 1998 Federal Registry. The Federal Reserve
Board of Governors is listed, but they are not the owners. The Federal Reserve Board, headed by Mr. Alan
Greenspan, is nothing more than a liaison advisory panel between the owners and the Federal Government. The
FED, as they are more commonly called, mandates that the DTC process every securities transaction in the US. It's
no wonder that the DTC (including the Participants Trust Company, now the Mortgage-Backed Securities Division
of the DTC) is owned by the same stockholders as the Federal Reserve System. In other words, the Depository
Trust Company is really just a 'front' or a division of the Federal Reserve System.

"DTC is 35.1% owned by the New York Stock Exchange on behalf of the Exchange's members. It is operated by a
separate management and has an independent board of directors. It is a limited purpose trust company and is a unit
of the Federal Reserve." -New York Stock Exchange, Inc.

Now, let's see how this effects the average working American family. If you're not aware how the system works,
you should visit or call a stock broker or bank and instruct them you want to purchase some shares of common

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stock or a small municipal bond, for example. They will set up a brokerage account for you and act as your agent
with full durable power of attorney (which you must legally sign over to them) to conduct business on your behalf,
upon your buy or sell instructions. The broker will place your stock or bond purchase into their safekeeping under
a "street name". According to Mr. McNeff of the DTC, no bank or broker can place any stock or bond into their
firm's own name due to Federal Trade Commission (FTC) and Security and Exchange Commission (SEC)
regulations.

The broker or bank must then send the transaction to the DTC for ledger posting or book entry settlement under
mandate by the Federal Reserve System. Remember, since your bank or broker can't use their name on the
certificate, they use a fictitious street name. "Since the DTC is a banking trust company, we can't hold the
certificates in our name, so the DTC transfers the certificates to our own private holding company or nominee
name." states Mr. McNeff. The DTC's private holding company or street name, as shown on certificates we have
personally examined from numerous certificate holders, is shown as either "CEDE and Company", "Cede
Company" or "Cede & Co". We have searched every source known to learn who CEDE really is, but have been
unable to get any background information on them. Is Cede Company fictitious or is their identity perhaps a larger
secret than DTC? We must presume that the information Mr. McNeff gave us was correct when he confirmed that
Cede Company was a controlled private holding company of the DTC. We have now found the following proof
that CEDE is real from the Bear Stearns internet site:

NEW YORK, New York - March 16, 1999 - Bear Stearns Finance LLC today announced that it will redeem all of
the 6,000,000 outstanding 8.00% Exchangeable Preferred Income Cumulative Shares, Series A ("EPICS") of Bear
Stearns Finance LLC, liquidation preference of $25.00 per Series A Share, CUSIP number G09198105. All of the
Series A Shares are held by Cede & Co., as nominee of The Depository Trust Company, and the payment of the
redemption price will be made to Cede & Co. by ChaseMellon Shareholder Services, LLC, as paying agent, whose
address is: 85 Challenger Road, Ridgefield Park, New Jersey 07660.

The banks and brokers are merely custodians for their clients. By federal law (SEC), they cannot hold any assets in
the customer's name. The assets must be held in the name of DTC's holding company, CEDE & Co. That's how
DTC has more than $19 trillion dollars of assets in trust... or is it really in "trust" if the private Federal Reserve
System is technically holding it in their "unknown" entity's name? Obviously, if stock and bond certificates you've
purchased aren't in your name, then the "holder" (the Federal Reserve System) could theoretically refuse to
surrender them back to you under a "national emergency" according to the Trading with the Enemy Act (as
amended). Is this the collateral being held by the private Federal Reserve System to pay off the national debt owed
to them by our federal government, first initiated by Lincoln's debt bonds of 1864?

According to Mr. McNeff, the DTC was a former member of the New York Stock Exchange (NYSE), and "Our
sister company is the National Securities Clearing Corporation... the NSCC" (they have since merged). He was
correct since we now know that the NYSE holds 35.1% of the "ownership" of the DTC on behalf of their NYSE
members. Simply put, the Depository Trust Company absolutely controls every paper asset transaction in the
United States as well as the majority of overseas transactions, and they now physically hold (as of April 1999) 99%
of all stock and bond book-entrys in their street name, not the actual owner's names. If you have stock or bond
certificates in your name buried in your back yard or under your mattress, we suggest you keep them there. If not,
it might be very wise to cancel your brokerage account and power of attorney status, re-register the stocks and
bonds in your name (if you still can), and keep them hidden where only you know their location. Otherwise, you
have absolutely no control over them (see Part II of our exclusive research report on the DTC for more information
on beneficial ownership status). However, getting a stock or bond certificate these days is not so easy if possible at
all:

"For the most part, issuers know little about the role of the Depository Trust Company (DTC). The DTC was
created in 1973 as a user-owned cooperative for post-trade settlement. Our members are banks and broker/dealers,
whom we refer to as participants. We handle listed and unlisted equities, including 51,000 equity issues and
170,000 corporate debt issues, equating to more than 78% of shares outstanding on the New York Stock Exchange
(NYSE). We also have more than 95% of all municipals on deposit.

In the 1980s, the "Group of 30" [business leaders] recommended that stock certificates be eliminated, because
physical certificates create risk. The Securities Exchange Commission (SEC) issued a concept release in 1994 to

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gradually decrease certificates, providing optional direct registration on the books of the issuer instead of a
certificate.... this enhances the portability of shares between transfer agents and brokerage accounts. With the direct
registration system, brokers transmit instructions to purchase through DTC, which the issuer or transfer agent then
registers, so shares can be delivered electronically." -John D. Faith, Manager, Corporate Trust Services, The
Depository Trust Company (1996)

Now we're about to reveal to you the most shocking discovery we came across during our research into this matter.
Most of us remember a few years back the purported computerized selling of stocks that resulted in Wall Street's
"Black Monday":

Dow Dives 508.32 Points in Panic on Wall Street

"The largest stock-market drop in Wall Street history occurred on "Black Monday" -- October 19, 1987 -- when the
Dow Jones Industrial Average plunged 508.32 points, losing 22.6% of its total value. That fall far surpassed the
one-day loss of 12.9% that began the great stock market crash of 1929 and foreshadowed the Great Depression.
The Dow's 1987 fall also triggered panic selling and similar drops in stock markets worldwide" -Source: Facts on
File World News CD ROM

The stock exchanges had dramatic record losses, and a record volume of shares were traded on that infamous
Monday in October 1987. We all asked ourselves how computers could have done this by themselves without
someone knowing about it. After all, someone has to program a computer to tell it what to do, what not to do, or
even when to do or not do it.

During my telephone conversation, Mr. McNeff was trying to assure me that they [the DTC] have "never lost a
certificate or made a mistake in a book ledger transaction". In attempting to give me an example of how
trustworthy the DTC is when I asked him how he could back up such a statement, he replied "DTC's first
controlled test was 4 or 5 years ago. Do you remember Black Monday? There were 535 million transactions on
Monday, and 400 million transactions on Tuesday". He was very proud to inform me that "DTC cleared every
transaction without a single glitch!". Read these quotes again: He stated that Black Monday was a controlled test.
Black Monday was a deliberately manipulated disaster for many Americans at the whim of a controlled test by the
DTC.

What was the purpose of this test? Common sense tells you that you test something before you intend to use it. It's
quite obvious that the stock markets are going to 'crash and burn' at some future date and for some 'unknown'
reason since the controlled test was so successful. Was this just one of the planned tests for a Y2K internationally
planned worldwide economic meltdown? The Great Depression is about to be repeated, and it will be as deliberate
and manipulated as the first one that began with the stock market crash of 1929. We are, without a doubt, on the
brink of the Mother of all economic Depressions. As of May 3, 1999, the Dow Jones Industrial Average (DJIA)
went above a record 11,000 points. Just prior to the 1929 stock market crash, Wall Street was posting record prices,
record earnings, and record profits.... just like the scenario we are experiencing today. Will Y2K be a manipulated
and deliberate a financial meltdown? Too many facts already support this probability.

On June 7, 1995, the federal government issued a new regulation requiring stock and bond certificate transfers to
be cleared in three days instead of the previous five day time period. It coincided with the infamous Regulation CC
that purportedly gave us faster three day availability of funds from deposited checks. This means that brokers and
banks must get your stock or bond transaction into the street name (Cede & Co.) of the DTC within 3 working
days. That's hard to do considering banks claim it takes 3 or more days to clear a check that you've submitted to
pay for a stock purchase. But, there's a reason for this new regulation and it coincides with the introduction of the
new FRS "dollars".

On February 22, 1996, "the DTC will flip the switch" according to Mr. McNeff. "What switch?", I asked. "This is
the day that clearing house funds will no longer be accepted for stock or bond transactions" was my reply from
Jim. "Instead, only Fed Funds will be accepted". Fed Funds, or a Fedwire, are electronic computer ledger debit
transfers between Federal Reserve System member banks. No checks or drafts have been allowed from that day,
just as Mr. McNeff accurately stated. This is more commonly called a 'cashless transaction'. I call it the reality of
the mark of the beast. This is the manifestation of the new international god, the New World Order [I prefer the

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term 'New World DISorder' as a more accurate description].

Consider this my fellow Christian Americans: All pension funds and other institutional 'managed funds' are
comprised of paper asset investments such as stocks, bonds, and mutual funds. These certificates are technically in
the name of DTC's private holding company, CEDE and Company. The DTC is owned by the private Federal
Reserve System owners (Click for a complete list of names). Congress has attempted, on no less than two
occasions since 1995, to pass legislation allowing pension funds to be used by the government as purported 'loans'.
All the Federal Reserve System has to do is hand it over. But, what happens to the people counting on those
pension fund investments in order to feed themselves in their retirement? Too bad for them.... they're out of luck
because for the 'good of the nation', they may be forced to share or relinquish their lifetime of hard-earned wealth.
This can be done without the consent of Congress under an Executive Order based on the War and Emergency
Powers Act and a state of National Emergency, just like we are already under (See further Executive Orders).
Since the Federal Reserve System already holds our stocks and bonds in their fictitious DTC "street name", CEDE,
then perhaps they'll cash them in for the federal government's failure to repay the loans that have become way
overdue. Heck, some of Lincoln's gold backed bonds from 1864 have not been repaid yet.... and for a reason.

On March 6, 1933, all bullion gold and gold coins were forcibly taken from the hands of private citizens (see New
York Times). Under the War Powers Act, President Roosevelt declared a national emergency touted as a "Banking
Holiday". It was declared due to the deliberately calculated stock market crash that preceded the Great Depression.
Where did this gold end up? Into the hands of the Federal Reserve System owners. The majority is stored in the
impervious rock vaults they own beneath New York City. Is it any surprise that the DTC physically holds all the
remaining non-book entry issued stock and bond certificates in the same place?

Technically, our entire nation is still under the Executive Order declaration of the War Powers Act and in a
continual state of national emergency (See Clinton's 1994 Executive Order 12919). The President can enforce any
new emergency at any time under Executive Order or Presidential Directive. In 1995, we [the former North Bridge
News] published that we expected a new national "dollar" emergency to be declared within a year or two. Just like
we thought at the time, they have now blamed it on the purported drug dealers who are allegedly destroying our
currency by money laundering schemes.

Since late 1996, old U.S. $100 FRB notes issued by the Federal Reserve Bank are being exchanged for new $100
FRS issued by the Federal Reserve System. These new notes have scanable magnetic platinum encryption on the
plastic strips embedded inside the bills. The U.S. Treasury claims this is for "the blind". Now, new $20 and $50
FRS's are replacing the older notes as well. What people don't realize is that very soon, the older FRB notes will no
longer be 'legal' and there will be a penalty for hoarding them. This is what happened to those Americans holding
gold and gold coins after 1933.

"We are most gratified with the successful introduction of the new $100 and $50 notes and look forward to the
same success with the new $20s," Chairman Greenspan said. For the first time, a machine-readable capability has
been incorporated for the blind. A new feature in the $20 will facilitate the development of convenient scanning
devices that could identify the note as a $20. -U.S. Treasury, Office of Public Affairs, RR-2449 released May 20,
1998.

Why new paper 'money' and for what purpose? Because the new FRS notes in your pocket can be scanned and
whoever scans them can know exactly how much money you have on you. The older FRB notes are not encoded to
do this. This writer knows firsthand of at least one machine, manufactured by Diebold, Inc. (a/k/a InterBold) that
scans the money in your pockets, wallet or purse no different in theory than a credit card scanner, but much more
sophisticated. I participated in a 'test' of this machine at a U.S. international airport in 1998. To me, it looks much
like the standard metal detector scanners you walk through at all airports. I was asked (by who I believe was a U.S.
Treasury Agent, as he introduced himself and flashed his ID quickly in my face so I couldn't read it) if I had any of
the new $100 or $50 bills in my pockets. I looked in my wallet and saw I had one new $100 FRS note. I told him
"yes", then he said "Good, but don't tell me how much". After saying he would "really appreciate it" if I would help
them with a test, he asked me to walk through what looked like a typical airport scanner. No beeps. No noise. No
sound at all. He looked at a computer screen and said "Do you have a new $100 bill?". When I confirmed that was
true, he thanked me and told me to please move on. I tried to ask him how the machine knew that, but he ignored
my question. I took a good look at the scanning system and believe I have now spotted them at Kennedy, Atlanta,

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Miami and Los Angeles airports.

The odd part about this is that these machines seem to all be located in the customs areas where you enter the U.S.
from a foreign country. Obviously, they want to know if someone is carrying more than $10,000 into the U.S.
Common sense dictates that they should be more concerned about people leaving with more than $10,000 if they're
really trying to thwart the drug dealers.... until you begin to realize that there must be some other hidden agenda:
They are apparently going to stop money from entering the U.S. for a reason.

Will the President call for the confiscation of all gold bullion and bullion coins as Roosevelt did? Who will end up
with it? The Federal Reserve System owners, just like before. Since June 1998, international gold supplies have
been so low that some private Swiss Banks have been paying a premium above the market wholesale value for
gold bullion. This was confirmed to us by a gold and diamond mining Chief Executive from Rex Mining in
Guinea, West Africa, who supplies raw gold to a major Swiss Banking company smelter and processor The spot
gold market has been manipulated to keep the price low so that the Federal Reserve System owners can purchase
all that is available through their various trusts and corporations. World gold availability on the open market is now
at a record low and mining production of gold is also at a record low output.

What happened to 'supply and demand' with gold and silver? Normally, when supply is high the price decreases.
When supply is low, precious metal prices increase. Perhaps the private FED will peg the new dollar to gold prices,
as many experts have already speculated. What will stocks and bonds purchased with old dollars be worth then?
Pennies to the dollar, so to speak. Who ends up being the only winner? The Federal Reserve System stockholders.
They control the circulation amounts of paper money in the U.S. Combine that with the new scanner to stop large
amounts from entering into the U.S., and the scenario amounts to a planned shortage of paper FRS notes, the
banning of the older FRB notes, and the soon to be astronomical price of gold which most Americans will be
forbidden to have or hoard, once again. The facts we've presented in this report all point to this.

People will be at the mercy of the federal government for daily food and for jobs. Checks are soon to be totally
phased out. Banks issue ATM debit cards and tell you they must charge more for your account if you use a real live
human teller instead of the machine. The switch is being turned on. This is not speculation. This is the truth of
reality. It's already been tested, and their new system works. Just ask Jim McNeff of the DTC.

The day has come when you must decide to accept or reject the beast and the New World Disorder.

Part II of II-

You don't own your Stocks....or any of your Bonds...The Depository Trust Company does.
by Anthony Wayne

In Part I of this series, excerpts of which were first published in November 1995 by the former North Bridge News,
we exposed The Depository Trust Company (DTC) as the Unknown $ 9.1 Trillion Company. It appears that our
startling discoveries of the inner-workings of the DTC had only scratched the surface. We'd like to add more fuel
to this blazing fire by further exposing the DTC and those behind it.

The Depository Trust Company has grown since October 1995. On July 1998, this amount was estimated by a
DTC employee at more than $11 Trillion. As of April 19, 1999, the DTC itself has stated in a press release that
their asset value is nearly $19 trillion. In 3 1/2 years, their assets increased nearly $ 10 Trillion. That's a lot of
stocks and bonds supposedly held in trust. The latest trend over the past ten years is for stock and bond brokers to
offer "book-entry ownership" only. Every book-entry stock or bond is literally owned by the DTC. Since 1985,
most bond and many stock issuers have converted from the issuance of certificates to book-entry systems
administered and controlled by the DTC. As of March 1999, the National Securities Clearing Corporation (NSCC)
and the Participants Trust Company (PTC) are now merged into the DTC. Practically, there isn't one stock or bond
issued that is not controlled by the DTC.

If you purchase any stock or bond through a broker, it is being held for you under a "street name" by the DTC

85
unless you have specifically requested to hold the certificate yourself. If you have a book entry stock or bond, you
won't be issued a certificate. It's important to note that you have purchased that particular stock or bond without
becoming a registered holder of the actual stock or bond certificate. Instead, you have become a beneficial owner.
The difference between the two is like night and day. Take the time to absorb and understand the following
definitions:

REGISTERED HOLDER- A Registered Holder literally possesses, owns, and holds, his stock or bond with his
name appearing on the face of the certificate. The company that issued the certificate has registered the owner's
(holder's) name on their official books. This is the safest way to own a paper asset. You literally possess the fully
registered certificate and only you can transfer or sell it. By all Rights and definition of law, you are the owner.
You have it, you hold it, you possess it, and you keep it. You have the complete control over it.

BENEFICIAL OWNER- A Beneficial Owner is nothing more than a beneficiary, "One who is entitled to the
benefit of a contract"- A Dictionary of Law, 1893. All book-entry stocks and bonds you purchase make you the
beneficial owner, not the registered holder. The owner of a book-entry stock or bond is the entity or name that it is
registered under.

The DTC owns that bond or stock, not you. Rather than in your name, it's registered (as the legal Registered Owner
or agent) in their "street name", Cede & Company. (In the past, it may have been registered in your broker's street
name, but this is no longer allowed). The DTC is the Registered Owner - holder - of your stock or bond. The DTC
is the legal property-holder, share-holder, stock-holder, owner and purchaser. Your name appears nowhere on the
book entry or certificate as the actual owner. Instead, you have been designated by the legal registered owner, the
DTC, as the Beneficial Owner. This means that your lawful Rights in that stock or bond are confined to that of a
successor or heir.

At the University of Utah College of Law, we found the following examination question about Cede & Co.:

The common stock of LargeCo, Inc. is publicly traded on the New York Stock Exchange. Over 2/3rds of the shares
are registered on LargeCo's books in the name of Cede & Co. Cede is a depository company which holds the shares
as nominee on behalf of brokerage firms, mutual funds and other active traders. The brokerage firms in turn are
also nominees with respect to some of the shares, which they hold on behalf of their customers. Nominees, such as
Cede and brokerage firms holding for customers, view the customer as the beneficial owner of the shares and
consider the customer to be the one with the right to vote the shares; mutual funds, however, view the fund as the
owner of the shares it holds and vote the shares themselves.

Most of the remainder of LargeCo's stock (26% of the total) is held by the Large family, which is still actively
involved in management. LargeCo is aware that the beneficial owner of about half the stock registered in Cede's
name is the Small family, who live next door to the Larges in downtown Rome, and that the remainder of the Cede
stock is beneficially owned by several well known mutual funds.

According to the DTC, under the US Security and Exchange Commission (SEC) rules, you only have the right to
"receive proceeds or other advantages as the beneficiary". You are not the owner... you are the consignee, "One
who has deposited with a third person an article of property for the benefit of a creditor"- A Dictionary of Law,
1893. In legal terms, you are considered the heir presumptive or heir at law to the stock or bond you paid for. The
DTC controls, possesses as creditor, holds and owns your book-entry stock or bond. This is a difficult pill to
swallow for those who have placed their assets in stocks and bonds over the past decade. Your broker sends you a
fancy accounting every month of your purported holdings, along with dividend and interest payments paid. The
fact is, you only receive the benefit of ownership (interest and dividends) without holding title to your property.
You are at the mercy of the registered owner, the DTC. If you don't believe this is true, then call your broker right
now and ask them who's name is listed as the Registered Holder of your book-entry stocks and bonds. If you're
lucky, the broker will tell you "why of course you're the Beneficial Owner", then you'll know the truth. He may
emphasize to you that the stocks and bonds are being held in "safe keeping" for your own protection. This is broker
language for "your stocks and bonds are held by the DTC in their street name as the creditor".

From J.P. Morgan's internet site:

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Registered and beneficial shareholders

There are two types of shareholders: registered, who hold an ADR in physical form, and beneficial, whose ADRs
are held by third-parties and are listed under a "nominee" or "street" name.

Registered shareholders are listed directly with the issuer or its U.S. transfer agent. The transfer agent handles the
record-keeping associated with changes in share ownership, distribution of dividend payments, and investor
inquiries; it also facilitates annual meetings. An issuer's depositary bank can provide the identities of registered
shareholders on a regular basis. However, this may not provide the level of shareholder identification required for a
successful investor relations effort. Registered shareholders are typically individual investors who have physical
possession of their share certificates, generally in lots of 100 shares or fewer. The registered list also includes
nominee names such as Cede & Co., which represent the aggregate position of the Depository Trust Company
(DTC), the primary safekeeping, clearing, and settlement organization for securities traded in the United States.
DTC uses electronic book-entry to facilitate settlement and custody rather than the physical delivery of certificates.

Beneficial shareholders, which can include individual as well as institutional investors, do not have physical
possession of their certificates; third-party broker-dealers or custodian banks hold their securities on their behalf.
These shares are said to be held in street name because they are kept with the DTC in the name of the broker-dealer
or the custodian bank - not the underlying shareholder. Lists of beneficial shareholders who do not object to
disclosing their holdings are available from banks and broker-dealers. These lists, called NOBO for Non-Objecting
Beneficial Owner, typically provide the names of individual investors.

To help identify institutional investors, who do not usually disclose their holdings, issuers use publicly available
filings. Large holders, including investment managers, are required to make periodic filings - such as 13-F, 13-G,
and 13-D - with the Securities and Exchange Commission (SEC) disclosing the name and value of the positions in
their portfolios.

Which brings us to the street name used, registered, and designated by the DTC as the registered owner of over $19
Trillion (USD) of our stocks and bonds... CEDE & Co. Everyone in the brokerage business keeps pronouncing this
name as "See Dee" and Company, but it's spelled C-E-D-E and pronounced "Seed". This is where the real irony
comes.

According to Black's Law Dictionary, Sixth Edition, 1990, the word Cede is defined as "To yield up; to assign; to
grant; to surrender; to withdraw. Generally used to designate the transfer of territory from one government to
another". In the Black's 1951 Fourth Edition, it lists the following as supportive case law; Goetze v. United States,
C.C.N.Y., 103 Fed. 72.

Have you made the connection yet? Your book-entry stocks and bonds and all stock and bond certificates
purchased through your broker and held by them under your brokerage account are owned by CEDE &
COMPANY (the DTC) as the registered owner. You have surrendered, assigned and granted ownership to
someone else other than yourself. Their name says it all.

How ironic and sarcastic can they be?

"CEDE- To surrender possession of, especially by treaty. See Synonyms at 'relinquish'." -American Heritage
Dictionary of the English Language, 3rd Edition of 1992

If Americans had any idea that they have relinquished the lawful ownership of their stocks and bonds to someone
or something else, there would be a revolution. In a sense, that's why we are exposing this paper asset scam to you.
The point is, now that you know the truth, do something about it and get your assets back into your name.

Our suggestion to you is this: If you don't literally have every stock and bond registered certificate in your
possession, then promptly call your broker and tell him you want all your securities transferred and re-registered
into your name as the Registered Holder and Owner. If he says he can't do that because your stock or bond is a
book-entry transaction only, we strongly suggest, for your own security, that you sell your book-entry assets

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immediately. Don't let the broker tell you that it's "safer" for you if they keep your certificates. Remember, you
know the truth. Even if all your stock and bond certificates were burned in a fire, the process to have them replaced
is simple. If someone were to steal your certificates, you simply report them stolen to the company that issued them
and they're automatically cancelled, just like a stolen credit card. Replacement certificates are then issued to
replace the lost or stolen originals.

Most people don't realize that when they open a brokerage account, they have entered into an contractural
agreement allowing the broker to assign the stocks and bonds to an undisclosed creditor, the DTC. (We suggest
you read the small print on your brokerage agreement). This gives the broker your express written permission to
place all your securities into the ownership of the DTC. Your broker is an agent for the DTC through mandatory
Securities and Exchange Commission regulations and mandates by the Federal Reserve System private bank. Your
broker represents them, not you. Your brokerage account is nothing more than a ledger of accounting. It reflects no
assets held in your name. The assets are registered in a "street name" that is not you or your name. Sure.... you
receive the interest and dividends, but you do so as a beneficiary to the real owner. Your brokerage account in no
way, shape, or manner reflects who literally owns your securities. What you own is a brokerage account and
nothing more.

A greater consideration is just exactly who does the DTC hold these securities for? As the owner, who has the DTC
pledged these securities to? Our research points to the Federal Reserve System, an international private banking
cartel with major offices found in Moscow, London, Tokyo, and Peking. By treaty with the United Nations and in
compliance with the Bretton Woods Agreement, the DTC under regulation of the Federal Reserve System has
pledged all those stocks and bonds to the International Monetary Fund (IMF). These are the same paper securities
found in your IRA and pension fund accounts, as well as in your brokerage account. Remember, you don't own
them.... you're just a beneficiary.

The truth is, the securities you purchased and paid for with your hard earned money is collateral for the United
Nations which is backed by the Federal Reserve System and it's associated agencies, such as the International
Monetary Fund. Is it any wonder that the UN can operate year after year with increasing budgets, but without
sufficient funds? The UN has nearly $19 Trillion of backing and reserves, thanks to millions of duped Americans.
We are financing the New World Dis-Order with our stocks and bonds.

[< Back] [Ming the Mechanic] [Add a comment]

13 comments

31 Oct 2003 @ 14:33 by waalstraat : The way I see it

DTC is merely stocking up for our falling.............

31 Oct 2003 @ 17:44 by koravya : Thanks for this Info

I appreciate it,
and so the Economics students
I share it with.
Clearly, we all need to know
what kind of scenario we may be looking forward to.

6 Nov 2003 @ 09:14 by Stefanti @80.137.195.30 : Weak

The more I learn about the "free" global economy over the years, the more unbelievable it looks and the more
weaker I feel. What to do with the information now? Sell the few shares I hold? This sort of information makes
long term planning increasingly difficult.

Stefan Thiesen

6 Nov 2003 @ 14:17 by ming : Investing

Well, if the little secret mentioned above actually resulted in all stocks being confiscated, the world economy would
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crash. So, I don't really think that's what anybody has in mind. More likely it is being used as a collateral. So, I
wouldn't really change my investment habits based on this. Diversification is always good, of course, so don't just
have stocks.

10 Nov 2003 @ 03:13 by Stefanti @80.137.206.87 : Investing

Well Ming - what I mean also is that by simply buying stocks, we all seem to hand over incredible power to an
organization of tremendous size and with totally dubious goals and no democratic legitimation whatsoever.

10 Nov 2003 @ 05:29 by ming : Handing over power

Yeah, but it is worse than that. By just using national currencies for anything whatsoever we all hand over
incredible power to essentially the same unelected bunch of people. So, if we are to create an alternative, it would
have to cover most aspects of what we need, or you'll just be feeding another arm of the same monster. We'd need
an economic system that isn't tied in at all with dollars and the stock market and banks, but that would fill the same
needs that are met for us from those. I.e. an easy way of gathering and transporting and storing and exchanging
tokens of value. And that is not as unlikely a battle as it might seem. If somebody came up with some expanded
PayPal type of scheme that really worked better than the alternatives, and which we could trust, and which was
anchored into different bedrock, lots of people wouldn't look back at all.

22 Dec 2003 @ 14:11 by tony @68.14.28.235 : dtc/cede

Bank deposits appear to be similar to stock "deposits" with cede. Check your state laws. For instance, in MA, funds
on general deposit in a bank are the property of the bank. The bank account is the property of the depositor, and the
relationship between the depositor and the bank is that of creditor to debtor. If you have your property in the hands
of a third party, the third party might unlawfully (without a court order) deprive you of your asset. Of course you
can then sue them, if you can still afford to do so!

26 Jun 2004 @ 15:02 by hscott @68.52.209.126 : Trying to verify

I checked out the DTC annual report and cannot find the numbers you suggest. Their Asset column for 2002 shows
$17.9 Billion NOT $23 Trillion as you state. And the Liability column shows approximately the same value, which
would make sense if they are holding securities in trust.

Where exactly did you get the $23 Trillion dollar number?

26 Jun 2004 @ 16:05 by ming : Verification

Glad you're checking it out. Well, part of the trick is that DTC (which handles stock transfers) is a separate
company from CEDE (which is the legal owner), but CEDE is a wholly owned subsidiary. The way I understand it.
But let me see again where I found the number ... Yeah, the document called DTC Consolidated Financial
Statements shows 17.9 billion in assets. I think it was the annual report. Which has changed since last year and now
shows the 2003 report. ... So, it says its subsidiaries settled transactions worth $923 trillion, and it says that values
of securities on deposit is 24.6 trillion, which sounds like that 23 trillion number for 2003 rather than 2002. Hm, I
do seem to remember them saying it more directly, and using the word "assets". But it was in a somewhat
promotional piece (like the annual report), where they were bragging about it, rather than in their actual financial
statement.

Anyway, a key to the argument is what the relation is between DTC and CEDE. If DTC owns CEDE and CEDE
legally owns those now 24.6 trillion - that's what's remarkable. Even if everybody involved will say that "oh, it is
just a formality, and of course it really is the stock holders' stocks". Oh, even if they didn't own them, it should be
major news that they're even holding that amount of stocks for anybody. But the truly earth-shattering part would
be the CEDE part.

Unfortunately, the relationship between DTC and CEDE, or even the factual existence of CEDE, is based on
heresay and rumors. I.e. I haven't seen any documentation of it. And obviously DTC don't even mention CEDE as
far as I can see.

Even if they do own CEDE, and CEDE does own all the stocks, I don't find it surprising that they can get away
with ignoring it in their actual financial statement. If the auditors even knew that, they would probably be quite
content with the explanation that, oh, it is just stuff we're temporarily holding, and it is of course all the customer's
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money. All seems logical and reasonable. Except for that it isn't, if the legal reality, when it comes down to it, is
that they own it and the customers don't.

28 Jun 2004 @ 09:38 by hscott @68.52.209.126 : re: verification

I understand your concern but from a pure accounting perspective the $23 trillion dollars in assets would be offset
by exactly the amount in liabilities such that in terms of book value its a wash. Neither company is "worth" $23
trillion. This facility is absolutely necessary in order to have a liquid marketplace and that liquidity is a big portion
of the grease that keeps the machine of our economy moving. The best thing that could be done to stabalize the
markets and defend us from bubbles that ultimately burst would be to eliminate the taxation of dividends. If all
companies paid dividends, that would be a throttle switch which prevents irrational pricing. PE ratios would be held
in check by Dividend Yeilds because stockholders would have two sources of value, the equity value of the stock
AND the stream of cash flows from dividends. The lack of dividends by most companies is what creates upward
price pressure beyond a rational valuation of a company because that's the only way a person can make a return in
the markets. Every trade has a seller who think the stock is capped out and a buyer who thinks it has upside
potential.

28 Jun 2004 @ 14:07 by ming : Economy

It is probably very useful to have mechanisms like that in the economy. And, I'm sure, normal proper accounting
wouldn't count the $23 trillion as an asset, even if it is in CEDE's name some or all of the time. For most people it
matters not very much if CEDE owns their stocks, because they let you trade them and get the money. A bit like
how most everything else works in the money system. You put your money in the bank without much hesitation,
because you expect that you can use it when you feel like it, and most of the time you can. You trust the paper
money others give you, even though it is only pieces of paper, because you expect them to convert to stuff you
want, any time.

But it can also get to look a bit like musical chairs. It is no problem at all as long as the music keeps playing. We
hope it doesn't stop, and maybe it won't. But if it does, one might suddenly become painfully aware of a lot of small
print one didn't pay attention to. Like that one's stocks are owned by somebody else. And I understand that it works
in a very similar way the ownership of real estate and of motor vehicles. I'll have to write about that some other
time. But, essentially, unless you have a land patent on your land, it is really owned by a government agency.
Which gracefully lets you live there and use it and act like you're buying and selling it. Likewise with a car. There's
a certain piece of paper that most people don't know about that the factory sends to the government, unless you
insist that they don't and give it to you instead. Which legally (again, just as a formality, to serve you better) gives
the government the ownership, so they can then issue you a pink slip which gives you the right to use it, including
the ability to transfer that right to somebody else (=selling it).

30 Nov 2004 @ 18:03 by Kent @63.85.201.10 : Necessity? Any accountability to me?

hscott said:
"This facility is absolutely necessary in order to have a liquid marketplace and that liquidity is a big portion of the
grease that keeps the machine of our economy moving."

Let's assume your premise is correct; does the need also justify ignoring individual investors (me)? While I am not
"old", I have been around long enough to know when something is not on the up-and-up. Why avoid me?

This clearinghouse has no advocates for the individual investor. Its secondary reason for existence has become that
of feeding the financial community whose livelyhood depends upon betting on the future values of stock.
Translation: it benefits those who expect something for nothing.

See my link above for my frustrating trial with this "necessary facility".

21 Dec 2004 @ 18:42 by di @66.139.39.158 : other trillion companies?

What information! Thank you for all of the details.

Your Name:

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(or email)
Subject:

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opentopia
UCC is not law. Three elements of law Rules and Regulations, Authority, Control. Article 1 is General
Provisions. Article 2 Sales, Article 3 Negotiable Instruments. Article 4 is Bank Collections. Article 5 Letters
of Credit, Article 8 Investment or Entitlement Securities. There has to be a sale or contract under Article 2
before there is a secured interest. Title 22 section 286, U.S. became member of IMF [International Monetary
Fund]. Under Buck Act all States became an arm of the United States Government. Agreements are
implied, remedies are written. Understand comes from the old French word which means to stand under.
Bank commits deceptive trade practices by pretending to lend you there Capital and Interest or money. Law
is remedy. Claims court is where common law is. Entitlement Rights under Article 8 are Four major issues
to understand under code as ascertained by Professor Grant Gilmore who wrote the book, the law of
admiralty and Article 9 and they are 1.) Attachment 2.) Control 3.) Perfection and 4.) Enforcement. Must
be a Creditor and Debtor. Debtor has Entitlement Rights. Debtor had to have right, title, and interest in
order to pass it to secured party or creditor. If bank claims ownership, where did they get ownership ?, it
had to be sold to them by debtor. When Did bank tell you that you were selling them note ? What did they
give to you for note ? Did I, just give you the note so I could get a loan of Capital and Interest ? Debtor is
defined in Article 9-102 (28) “(A) as a person having an interest [ownership], other than a security interest
or other lien, in the collateral, whether or not the person is an obligor.”
Organic Act of 1871 created District of Columbia and Bureau of Vital Statistics, where the
Birth Certificate is registered is an agency of District of Columbia or United States. Consent comes from
Accord.
Attachment is the most aspect of UCC. Perfection equals filing. Filing Makes security agreement
public filing. Entitlement is only valid if value has been given. If the Bank gave value where did they get it
from ? Debtor collector must have entitlement rights in order to collect a debt. Possession is subject to
provisions of Article 4-210. In order to have attachment rights they must be seller. 1.) Perfection
[Attachment] 2.) Possession 3.) Control [Attachment] 4.) Priority [who is first ?] Attachment is paramount.

Article 9-102 (29) “Deposit account” means a demand, time, savings, passbook, or similar account
maintained with a bank. The term does not include investment property or accounts evidenced by an
instrument. Signed shows intent. 1-201 (370). Who has first control and attachment ?. The Debtor does.

1.) Attachment

2.) Entitlement

3.) Control

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4.) Priority

They have to prove there case or claim. You have to use cut off rule. Priority rule is purchaser or bill of sale,
which gives attachment rights. Promissory Note is order for payment, there is no sale agreement. Article 3 is
governed by Article 4. Promissory Note is order to pay.

Article 4A 104 (c) defines payment order “Originator” means the sender of the first payment order in a
funds transfer.

Security Intermediary is Bank.

3.105. Issue of Instrument.

(a) “Issue” means the first delivery of an instrument by the maker or drawer, whether to a holder or
nonholder, for the purpose of giving rights on the instrument to any person.
(b)

How are you entitled to stand here as the Plaintiff ? How can you have a lien on something that was never
sold ?

Loan Originator

Will the real bank please stand up ?

All Banks are nothing but a servicer or laundering machine and not Lenders, they are under a pooling and
service agreement through a parent Trust Company for transferred Certificated Securities [also known as
promissory notes] from you as the Originator under Article 4A-104 of U.C.C. [means the sender of the first
payment order in a funds transfer] or Issue under 3-105 (a) of the U.C.C. being ” the first delivery of an
instrument by the maker or drawer, whether to a holder or nonholder, for the purpose of giving rights on
the instrument to any person” and 3-105 (c) “Issuer” issued and unissued instruments and means a maker or
drawer of an instrument.”
Under 4-102 Applicability (a) “To the extent that items [commercial paper] within this Article are also
within Articles 3 and 8, they are subject to those Articles. If there is a conflict, this Article governs Article 3,
but Article 8 [Investment Securities] governs this Article.”
All banks file a Registration Statement Form S-3 under the Securities Act of 1933 with the Commodity
& Securities Exchange, this form under Exhibit 4.3 states “UNLESS AND UNTIL IT [PROMISSORY
NOTE] IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS
NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY [55 WATER STREET, NEW YORK,
NEW YORK] TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF

ANY BANK OR NONBANK SUBSIDIARY OF BANK ONE CORPORATION AND ARE NOT INSURED
BY THE FEDERAL DEPOSITORY INSURANCE CORPORATION, THE BANK INSURANCE FUND OR
ANY GOVERNMENTAL AGENCY.

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Under an indenture agreement the bank is to make interest payments at maturity on the principal to the
person in whose name the note or one or more predecessor Securities is registered at the close of business on
the Regular Record Date for such interest. Any such interest not punctually paid or duly provided for shall
forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the
person in whose name this note [or one or more Predecessor Securities] is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Holder of this Note not less than 10 days prior to such Special Record Date, or
be paid at any time in any other lawful manner not inconsistent with the requirements of any securities.
The word lender is defined in Mortgage Banking terms from the Mortgage Bankers Association as a
“person or entity that originates mortgage loans.” This is a reiteration of section 4A104 (c).

The Investment Company Act of 1940 section 8 (a) requires all investment companies organized or created
under the laws of the United States to register with the Securities Exchange Commission by filing a
Notification of Registration Form N-8A. For purposes of the Act, unincorporated investment organizations,
such as trusts, funds, or any organized groups of persons, are regarded as distinct entities. In such cases it is
the trust, the fund or other unincorporated entity must file an individual notification of registration. This is
true even though such entities have been created under and pursuant to the same indenture of trust or
contract of custodianship, or have the same corporate trustee, investment adviser, manager depositor, or
distributor of their securities.

Attention is further directed to the fact that a trust or other form of organization which issues periodic
payment plan certificates and the assets of which are securities issued by an investment company is itself an
investment company, and has such must file a notification of registration independent of that of the
investment company the securities of which constitute its assets.
Investment Companies must also file a FORM S-3 REGISTRATION STATEMENT under section
12 of the Commodities Securities Exchange Act of 1934 as amended.

3-105 (a) “Issue” means the first delivery of an instrument by the marker or drawer, whether to a holder or
nonholder, for the purpose of giving rights on the instrument to any person.

(c) “Issuer” applies to issued and unissued instruments and means a maker or drawer of an instrument.

4A104. Funds Transfer-Definitions

In this Article:

(a) “Funds transfer” means the series of transactions, beginning with the originator’s payment order, made
for the purpose of making payment to the beneficiary of the order. The term includes any payment order
issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment

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order. A funds transfer is completed by acceptance by the beneficiary’s bank of a payment order for the
benefit of the beneficiary of the originator’s payment order.

(b) “Intermediary bank” means a receiving bank other than the originator’s bank or the beneficiary’s bank.

(c) “Originator” means the sender of the first payment order in a funds transfer.

(d) “Originator bank” means (i) the receiving bank to which the payment order of the originator is issued if
the originator is not a bank, or (ii) the originator if the originator is a bank.

Issuer is defined in the Securities Exchange Act of 1933 section 2 (4) as every person who issues or
proposes to issue any security; except with respect to certificates of deposit, voting-trust certificates, or
collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated
investment trust not having a board of directors (or persons performing similar functioning) or of the
fixed, restricted management, or unit type, the term “issuer” the person or persons performing the acts
and assuming the duties of depositor or manager pursuant to the provisions of the trust or other
agreement or instrument under which such securities are issued; except that in the case of an
unincorporated association which provides by its articles for limited liability of any or all of its members,
or in the case of a trust, committee or other legal entity; except that with respect to equipment-trust
certificates or like securities, the term “issuer” means the person by whom the equipment or property is
to be used; and except that with respect to fractional undivided interests in oil, gas, or such right or of
any interest in such right (whether whole or fractional) who creates fractional interests therein for the
purpose of public offering.

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