The ‘lending’ techniques they use are beyond brilliant! It appears they are lending money, but in reality the value is supplied by the person obtaining the loan. The lender does not own the promissory note because they sold it to the Federal Reserve / mortgage-backed securities market.
They made an exchange - the promissory note’s face value for the Federal Reserve Notes face value. Therefore, in the bank’s own accounting books - they still have a liability to you! Federal Reserve Bank publications admit that this is how bank loans truly work, believe it or not!
“Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could ‘spend’ by writing checks, thereby ‘printing’ their own money.” Modern Money Mechanics, pg 3.
All commercial instruments such as promissory notes, credit agreements, bills of exchange, or checks are defined as legal tender or money by the statutes such as 12 U.S.C. 1813(i)(1); U.C.C. §1-201(24), §3-104, §8-102(9), §§9-102)9), (11), (12)(B), (49), (64). These statutes further define a promissory note to be negotiable (e.g. sellable) because it is a financial asset, and therefore legal tender to fund an account.
12 U.S. Code § 372 is the law that gives lenders the right to convert a promissory note into Federal Reserve Notes under the citation, “Any member bank and any Federal or State branch or agency of a foreign bank ... may accept drafts or bills of exchange drawn upon it.”