[Congressional Record Volume 143, Number 102 (Thursday, July 17, 1997)]
[House]
[Pages H5457-H5458]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               FEDERAL RESERVE EXERTS POWERFUL INFLUENCE

  The SPEAKER pro tempore (Mr. Rogan). Under a previous order of the 
House, the gentlewoman from New York [Mrs. Maloney] is recognized for 5 
minutes.
  Mrs. MALONEY of New York. Mr. Speaker, when the Federal Reserve 
speaks, people listen. When the Fed is about to make some sort of 
monetary decision, the world stops and watches. That is because the 
Federal Reserve System is comprised of powerful experts whose influence 
affects anyone who makes and spends money.
  Some people think the Federal Reserve's primary purpose is to conduct 
monetary policy. Little do they know that only 1,600 of the Fed's 
25,000 employees are working in monetary policy. The rest are employed 
in unrelated services, such as the transportation of paper checks.
  The Fed pays $36 million for this service, of which $17 million is a 
Government subsidy. This money, taxpayer money, could be used to reduce 
the debt.

                              {time}  1645

  The Federal Trade Commission staff said in a 1990 report that these 
subsidies drive out private competition and innovation.
  My bill would end this subsidy. It is time to ask why a giant 
Government bureaucracy is subsidized to run something that the private 
sector can run far more efficiently.
  I come before my colleagues tonight to point out another area of this 
powerful Government bureaucracy that has not received enough scrutiny, 
the Fed's fleet of 47 airplanes that ferries canceled checks back and 
forth across the country Monday through Thursday.
  Since 1980, the Monetary Control Act has required the Fed to extend 
these check-clearing services beyond its member banks to all depository 
institutions at prices without a subsidy. The purpose of the Monetary 
Control Act of 1980 was to make sure that private companies could 
compete with the Federal Reserve on a level playing field in providing 
services to the banking industry. But the Fed, to this day, insists on 
subsidizing its paycheck transportation as long as it makes up the cost 
somewhere else in its operation.
  The Democratic staff of the Committee on Banking and Financial 
Services conducted a 2-year investigation of the Fed's check-clearing 
practices and determined that, as of 1997, $17 million of the $36 
million used to run the program is subsidized by you and me, the 
American taxpayer.
  In effect, we are subsidizing an inefficient, overgrown operation 
that the private sector could provide at a lower cost and with better 
results. If this operation cannot be run more efficiently, the 
Government should check out of the check transportation business and 
concentrate on helping Americans make money, not waste it.
  I recently introduced a bipartisan bill with my colleague the 
gentleman from Washington [Mr. Metcalf]. This bill would end this 
subsidy and require the Federal Government and the Fed to operate on a 
level playing field with the private sector.
  As we enter the 21st century, with all the revolutionary changes, it 
is bad

[[Page H5458]]

public policy and downright foolish to subsidize the Fed's 
transportation of paper checks. Competition and free enterprise will 
provide lower prices and wider consumer choices in the provision of 
banking service.
  Support our bipartisan bill, the Efficient Check Clearing Act of 
1997, H.R. 2119, and help bring our Nation's central bank into the 21st 
century.

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