Professor Fullwiler elaborates on this confusing point: "The bank does not "use" cash to make a loan. The loan creates a deposit. If cash is withdrawn by the borrower, this reduces its deposits. So, the cash is "used" in the process of settling a borrower's withdrawal. This is the key point that confuses so many--banks don't "use" cash or reserves to make loans since those are merely bookkeeping entries. They need cash or reserves to settle withdrawals that arise from creating the loan/deposit."
Another aspect of the banks and lawyers conspiring in the initial contract is that the mortgage contract is unpayable - therefore void by law and equity. The Bank loans out, say, $100,000 and changes interest. AND then demands that the borrower pay back say $200,000 plus in the course of 20-30 years. How can every borrower pay this back? It is impossible.
In review, it is not wise for the Attorney Generals to settle with the banks over the foreclosure issue because the initial contract between the borrower and the lender is a void contract:
1. There is no consideration on the banks part - the banks did not put up any money or value on their side of the contract!
2. The banks and lawyers have tricked the borrower into believing they were lent money.
3. The banks give borrowers loans that are impossible to be paid by all.
Note: Banks can make plenty of money on the eventual transactions that the borrower makes with his or her "new" money to keep them in business.
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