dissenting.
11 U.S.C. § 547 permits a bankruptcy trustee to avoid (ie., recover) certain payments made to creditors within the 90-day pre-petition period, but only if the transferred funds were property of the debtor and not of some third party. Begier v. I.R.S., 496 U.S. 53, 58, 110 S.Ct. 2258, 2262, 110 L.Ed.2d 46 (1990); In re Moskowitz, 13 B.R. 357, 359 (Bankr.S.D.N.Y.1981); 4 Collier on Bankruptcy ¶ 547.03, at 547-[23-25] (15th ed. 1992). In this case, as the panel’s thoughtful opinion clearly demonstrates, it is no simple matter to determine who owned the money that was provisionally credited to the Debtor’s account and then transferred by the Bank, at the Debt- or’s behest, to Baker & Schultz. Because I believe that the money was, at all relevant times, the Bank’s property rather than the Debtor’s, I respectfully dissent.
To resolve the question of ownership in this context, we focus upon the degree to which the Debtor, as opposed to the Bank, had control over the funds at issue. In re Royal Golf Prods. Corp., 908 F.2d 91, 94 (6th Cir.1990); In re Bohlen Enter., Ltd., 859 F.2d 561, 565 (8th Cir.1988); In re Hartley, 825 F.2d 1067, 1070 (6th Cir.1987); Coral Petroleum, Inc. v. Banque Paribas-London, 797 F.2d 1351, 1359 n. 6 (5th Cir.1986); Smyth v. Kaufman, 114 F.2d 40, 42 (2d Cir.1940); 4 Collier ¶ 547.03, at 547-28. The panel’s answer to this question rests in large part upon its characterization of the Debtor’s check kiting scheme as an unauthorized loan from the Bank to the Debtor. I agree with this characterization, Williams v. United States, 458 U.S. 279, 281 n. 1, 102 S.Ct. 3088, 3089 n. 1, 73 L.Ed.2d 767 (1982), but suggest that it is not dispositive of the question posed. The cases and commentary recognize that the proceeds of loans used to satisfy debts owed other creditors are not necessarily deemed “property of the debtor” under § 547. See, e.g., Coral Petroleum, 797 F.2d at 1356; Grubb v. General Contract Purchase Corp., 94 F.2d 70 (2d Cir.1938) (L. Hand, J.); In re Sun Railings, Inc., 5 B.R. 538 (Bankr.S.D.Fla.1980); 4 Collier ¶ 547.03, at 547-[26-27], The fact that the Debtor “borrowed” money from the Bank matters, but, to reiterate an observation already made, what really matters is the extent to which the Debtor exercised dominion over the loaned funds.
Suppose, to take an example, that the Debtor drove to the Bank, made out a loan, left with the proceeds, and allocated them to whomever it pleased. Under this scenario, the Debtor would have exercised control sufficient to give rise to a property interest. That was the situation in Johnson v. State, 304 N.E.2d 555 (Ind.App.1973), cited by the panel in support of the proposition that borrowed money is the borrower’s own money. See Op. at 1532-33. Johnson took out an automobile loan in the form of a check, cashed it, and spent the proceeds on items other than the automobile that was to have secured the loan. There can be no doubt, as the state court held, Johnson, 304 N.E.2d at 561, that the loan proceeds were Johnson’s property. This is true even though Johnson, owing to the security *1538agreement backing up the loan, was not legally entitled to do what he pleased with the cash. Johnson, having obtained actual possession of the proceeds, had actual power to decide who would receive the proceeds and, importantly, whether to disburse them at all. But borrowed money is not always the borrower’s own money. Suppose that the Bank lent the Debtor money for the purpose of paying off a designated creditor by directly transferring the funds from the Bank to the creditor. Under this scenario, the Debtor would have exercised little control over the loan proceeds, and hence would not have attained a property interest therein. 4 Collier H 547.-03, at 547-[26-27] (citing authorities).
The distinction between these two scenarios depicts, in a nutshell, the essence of both the “earmarking” doctrine and the “depletion of the debtor’s estate” doctrine. These doctrines are more closely related than my colleagues suggest in their discussion at pp. 1533-37 supra. If a third party earmarks — meaning designates and allocates — funds to satisfy the debt owed a particular creditor, the debtor never really obtains a property interest in the earmarked funds, and hence transferring the funds does not diminish the debtor’s estate. Hartley, 825 F.2d at 1070; In re Taco Ed’s, Inc., 63 B.R. 913, 925 (Bankr.N.D.Ohio 1986). Such transactions involve nothing more than a swap of creditors; the third party merely replaces the transferee as the debtor’s new creditor, with no adverse impact upon the quantity or quality of the assets held, or increase in the liabilities owed, by the debtor. Coral Petroleum, Inc., 797 F.2d at 1356; In re Grabill Corp., 135 B.R. 101, 111 (Bankr.N.D.Ill.1991). Absent any loss of the debtor’s property or depletion of its estate, other creditors are not harmed, and hence there is no real reason under § 547 to avoid the preference. Continental and Commercial Trust & Savings Bank v. Chicago Title & Trust Co., 229 U.S. 435, 443-44, 33 S.Ct. 829, 831, 57 L.Ed. 1268 (1913); Bohlen Enter., Ltd., 859 F.2d at 568 (McMillian, J., dissenting); In re Titan Energy Corp., 82 B.R. 907, 909 (Bankr.S.D.Ohio 1988); cf. First Nat’l Bank v. Phalen, 62 F.2d 21, 22 (7th Cir.1932).1 It does not matter whether Baker & Schultz calls its legal theory “earmarking” or “no depletion of the estate,” for here the two mean essentially the same thing.
This doctrinal discussion might appear to sidestep the question of when earmarking occurs, or whether an estate is depleted, but the ultimate focus upon property interests and control has remained implicit throughout. Concluding that loaned funds have been earmarked is just a shorthand way of saying “the new creditor, rather than the debtor, controlled the disposition of the funds.” See, e.g., Coral Petroleum, 797 F.2d at 1359. Concluding that a debt- or’s estate has not been diminished when a third party pays off a debt owed an old creditor is shorthand for “the transferred funds were never the debtor’s property because the debtor never had the power to *1539allocate them to other creditors.” See, e.g., Hartley, 825 F.2d at 1070.
It is important, then, to determine who exercised control, and to what extent, over the money transferred from the Bank to Baker & Schultz. In this context, I suggest that control has two components: first, the power to designate which party will receive the funds; and, second, the power to actually disburse the funds at issue to that party. In other words, control means control over identifying the payee, and control over whether the payee will actually be paid. In re Howdeshell of Ft. Myers, 55 B.R. 470, 474 (Bankr.M.D.Fla.1985); In re daggers, 48 B.R. 33, 36-37 (Bankr.W.D.Tex.1985); 4 Collier 11547.03, at 547-28. The Debtor, who designated Baker & Schultz as the payee of its $121,345.11 check, certainly had the first aspect of control.
My colleagues conclude that the Debtor also had the second aspect, which I henceforth will call dispositive control. They find it difficult, however, to pinpoint precisely when the Debtor obtained such control. It could not have been after the Bank honored the Debtor’s check by transferring $121,345.11 to Baker & Schultz, who after the transaction enjoyed complete dominion over the disputed funds. The trustee, however, argues that because the Bank gained a security interest in the funds after transfer of the provisional credit to Baker & Schultz, see Ind.Code Ann. §§ 26-1-4-208(1) and 26-1-4-212(1), the security interest must have attached to something, and that something was the Debtor’s property interest in the disputed funds. But this argument confuses matters. If, as in this case, a bank honors a check supported only by a provisional credit, and the credit fails to become final, the Indiana Code permits the bank, now a creditor, to seek recourse from the check writer (Debtor), not the holder (Baker & Schultz). Brushing aside some tangential technical matters, suffice it to say that the Debtor had no control over, and hence no property interest in, the particular $121,345.11 obtained by Baker & Schultz.
Accordingly, if the Debtor ever had dis-positive control over the transferred funds, it had to have been prior to the transfer to Baker & Schultz. At that point in time, the Debtor had a provisional credit of $125,000 based upon its deposit with the Bank of a (bad) check in that amount, as well as final credit of $163.58. Was this provisional credit the Debtor’s property? The panel, albeit with some hesitation, suggests no in certain passages. See Op. at 1531 (“By itself, such provisional credit might not evidence an interest of the Debtor in property.”), and 1535 (“Our present holding is one step removed from the proposition that provisional credit, by itself, gives rise to a property interest.”). This conclusion, absent the hesitation, is surely correct. The Bank was under no legal obligation to make good on any checks written against the provisional credit. It was entitled to wait until the $125,000 check cleared. Ind. Code Ann. § 26-l-4-213(4)(a) (West 1980);2 see J. White & R. Summers, Uniform Commercial Code § 18-2 (3d ed.1988) (describing traditional bank practice of putting a “hold” on an account balance supported by a deposited but as yet uncollected check); H. Bailey, Brady on Bank Checks ¶ 18.1 (6th ed. 1987); United States v. Cronic, 900 F.2d 1511, 1516 (10th Cir.1990). The Debtor could request, but not direct, the Bank to honor its check to Baker & Schultz because the check was written on insufficient funds. That the Bank complied with the Debtor’s request by transferring funds to Baker & Schultz was a matter of grace extended the Debtor by the Bank. This is all a way of saying that the Debtor never had dispositive control over the provisional credit.
In other passages, however, my colleagues imply that, yes, the Debtor did have such dispositive control. When describing the “economic substance” of the check kiting scheme, they liken the Debt- or’s situation to that of the borrower in State v. Johnson, supra. See Op. at 1532 *1540(“The situation is the same as if the Debtor had gone to the Bank, taken out a five-day loan in cash and used the cash to pay his creditor, Baker & Schultz.”). Somewhat earlier, they state that “[t]he Debtor surely had something of value during the period when the Bank was extending the provisional credit.” Op. at 1531. I respectfully suggest that these detours inaccurately characterize the nature of the check kiting scheme, and lead the panel to disregard its assertion that account holders have no property interest in provisional credits. It is true, as I observed above in discussing State v. Johnson, that an individual who literally “takes out” a loan has a full property interest in the loan proceeds. The reason is that the individual has both components of control, namely power over designation and disposition. But any analogy to the Debtor misfires, for cash in hand— whether obtained through a loan, a gift, a paycheck, or whatever — is different than a provisional credit with regard to dispositive control. One can disburse cash freely (although, as in the case of Johnson’s car loan, perhaps not legally) without permission. In contrast, one can disburse a provisional credit only if the bank consents, which it does not have to do. Simply stated, the difference between the Debtor’s loan and Johnson’s loan is that the Bank directly delivered, earmarked if you will, the loaned funds to the Debtor’s creditor (i.e., Baker & Schultz), while Johnson’s bank gave him the loaned funds, thus furnishing him the unfettered opportunity to deliver the funds to whomever he pleased. The panel does not address this crucial distinction in its response to this dissent. See Op. at 1533 n. 9.
The panel’s statement that the provisional credit represented “something of value” to the Debtor seems more plausible. But that value, one learns from reading what immediately follows, relates exclusively to the first component of control, the power over designation: “Instead of writing a check to Baker & Schultz...., the Debtor could have written several checks, paying off each of its creditors on a pro rata basis. Alternatively, the Debtor could have purchased a 40-foot yacht. The point is that the Debtor exercised significant control ... in choosing to pay off a single creditor.” Op. at 1531; see also Op. at 1536. This begs the question, of course, of who held dispositive control, the answer to which, I maintain at the risk of beating a dead horse, was the Bank. Without dispositive control, any “value” supposedly inherent in the provisional credit was illusory. The Debtor, for all practical purposes, was in the same position as any prospective lender seeking a particular amount of credit from the Bank. Both could ask the Bank to deliver on their behalf a specific amount of money to a particular third party. That the Debtor had something called a provisional credit, or that the Bank at times honored checks supported by nothing more than a provisional credit, is immaterial. In re Frigitemp Corp., 34 B.R. 1000, 1015-16 (S.D.N.Y.1983) (Sofaer, J.), aff'd, 753 F.2d 230 (2d Cir.1985). Essential is the fact that the Bank does not have to lend money either to the holder of provisional credit or to the random prospective lender. A bare provisional credit is no more a property interest than is the bare hope that the Bank will satisfy any request for a loan, which is to say not at all.
It should be clear that the Debtor had dispositive control over the transferred funds neither before nor after the' transfer. My colleagues seem to implicitly acknowledge this, for after exploring the issue in some depth, they ultimately conclude that the Debtor obtained a property interest “[a]t the moment ... the Debtor’s payment to Baker & Schultz was achieved,” namely when the Bank honored Debtor’s check to Baker & Schultz. Op. at 1535. Control, in other words, vested instantaneously at the time of transfer. But it would have had to have vanished immediately thereafter, or maybe at the same time. It might be of some philosophical interest to ponder what actually happened, if anything, at this existential moment, but any such exercise would provide a slim reed upon which to rest a conclusion that the Debtor exercised any kind of dispositive control over the transferred funds.
*1541There is a much simpler explanation for what happened here. The Bank never made the provisionally credited funds available for the Debtor’s general use. It exercised dispositive control at all points prior to the time Baker & Schultz took possession. When the Bank made the funds available — which was at the precise time of transfer to Baker & Schultz, for recall that the Bank could have legally refused to honor the check any time before then — it was for the sole benefit of one party, Baker & Schultz. As a result, the funds were never “property that would have been part of the [Debtor’s] estate had [they] not been transferred before the commencement of bankruptcy proceedings.” Begier, 496 U.S. at 58, 110 S.Ct. at 2263. The Debtor merely asked the Bank to loan it money on the strength of its provisional credit, and the Bank, as a matter of grace, complied. In other words, the Bank directed the funds to Baker & Schultz, assuming that party’s position as one of the Debtor’s unsecured general creditors. The Debtor’s other creditors — all of whom, incidentally, were in far less deep than Baker & Schultz and now the Bank — were not harmed by this switch in creditors, a switch which had no effect upon the Debtor’s estate. In re Castillo, 39 B.R. 45, 46-47 (Bankr.D.Colo.1984). Perhaps they were harmed slightly by the Debtor’s designation of Baker & Schultz as the recipient of its rubber check, but no more than other creditors in this type of earmarking situation, which is to say not in a way recognized under § 547. Continental & Commercial Trust, 229 U.S. at 443-44, 33 S.Ct. at 831. The Bank was certainly harmed, but no more than any other third party lender left holding the bag after paying off old creditors. The Bank did not have to honor the check the Debtor gave Baker & Schultz. In fact, no bank should have honored a $121,345.11 check written against $163.58 in actual funds and a $125,000 provisional credit. The fact that the Bank did so provides no basis in law or equity to avoid more than $163.58 of the transfer to Baker & Schultz under § 547.
I would affirm the decision of the district court.
. The panel suggests, in dicta, that the traditional practice of examining whether a transfer depleted a debtor’s estate to determine whether the transfer was of "an interest of the debtor in property" conflicts with § 547 and prevailing Supreme Court interpretations thereof. See Op. at 1536 n. 13. I believe this suggestion is mistaken. Saying that a transfer did not diminish a debtor’s estate is the equivalent of saying that the debtor did not transfer any of its property that was to have become part of the bankruptcy estate, as the Supreme Court recently made clear:
Because the purpose of [§ 547] is to preserve the property includable within the bankruptcy estate ... ‘property of the debtor’ subject to [§ 547] is best understood as that property that would have been part of the estate had it not been transferred before the commencement of bankruptcy proceedings. For guidance, then, we must turn to § 541, which delineates the scope of 'property of the estate’ and serves as the post-petition analog of § 547(b)’s ‘property of the debtor.’
Begier, 496 U.S. at 58-59, 110 S.Ct. at 2263. Accordingly, requiring that, to avoid a transfer, the debtor’s estate must have been diminished is not, as the panel contends, "a separate ‘implicit’ requirement” of § 547, see Op. at 1536 n. 13, but rather is a way of checking whether the transfer involved the debtor’s property. The venerable rule that property rights are a matter of state law, most recently restated in Barnhill v. Johnson, — U.S. -, 112 S.Ct. 1386, 1389, 118 L.Ed.2d 39 (1992), is fully consistent with this approach.
. Indiana modified this provision on April 5, 1989, after the events giving rise to this dispute occurred. As such, the new statutory language does not apply to this case.