The Fed's Future in Payments
Sones, Bill, Independent Banker
Throughout the summer just ended, the Federal Reserve System has undertaken an exercise of critical interest and importance to community banks. I am referring to the work of the Rivlin Committee, headed by Federal Reserve Vice Chair Alice Rivlin, which has been conducting a fundamental review of the Fed's role in the provision of payment services to banks and other financial institutions. The question is what role the Federal Reserve should have in the provision of payment services in the future. As all community bankers know, the Fed's role in payment services (such as check clearing and ACH processing) is vital to community banks.
The Rivlin Committee, is expected to issue its report later this year. The wide range of options for the Fed's future role that the committee has considered run from discontinuing some services, such as check clearing and ACH processing, to aggressively promoting and providing electronic banking services, such as electronic check presentment and financial electronic data interchange (the electronic delivery of payment-related information that will be essential as the government moves toward making all of its payments, including vendor payments, electronically).
IBAA and community bankers have been vigilant in making their views known to the Rivlin Committee. Community bankers were well represented at the forums the committee held throughout the country in May and June. In August, on behalf of IBAA, I submitted formal written comments to the committee.
Community bankers have stressed that the Fed is the only provider that can ensure that community banks all over the nation have universal access to competitive, efficient and affordable services to enable them to meet the needs of their customers. In fact, the Monetary Control Act of 1980 mandates that Federal Reserve services be available to all depository institutions. Services from private-sector providers are not available to all, and it is unlikely that without the Fed, the private sector would step in to serve everyone. And even if the private sector did step in, it most certainly would do so at much higher prices. Most of these organizations are only interested in skimming the cream from the Fed's business, and the cream does not include community banks, as their low and often remote volumes are not attractive. …