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Central Banker - Fall 2003

Central Banker - Fall 2003

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Published by: Federal Reserve Bank of St. Louis on Aug 13, 2010
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10/25/2012

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INSIDE:
2
 The Eighth District’s CashRestructuring Initiative
Senate Seeks to ImproveFinancial Literacy
3
Employment Effectsof Casino Gambling
4
Regional Roundup
FRBIssues Warningabout FraudulentNote Schemes
6
FedFacts
Calendar/Events
5
What Can We Learnfrom ConsumerConfidenceSurveys?
T
he Sales and Marketingdepartments of the Fourthand Eighth Federal Reservedistricts are holding a paymentssymposium on Nov.18-19at the Opryland Hotel inNashville.All bank CEOs andkey executives are encouragedto attend this free conferenceand network with industryexperts,senior Fed officialsand other banking executives.This year’s theme is “Paymentsin a Changing World—Are YouReady?The keynote speaker is Denny Carreker,chairmanand CEO of Carreker Corp.,a leadingprovider of technologyand consulting solutions for the financial industry.Carrekewill speak on existing paymentmechanisms and future needs.Other topics that will be dis-cussed during the symposiuminclude:• how Check 21 and check-to-ACH conversion will influ-ence the payments system;• new directions in retailpayments;and• changing practices of generating revenue in thebanking industry.For more information,contactDebbie Boren at (314) 444-8496or 1-800-333-0810,ext.44-8496.To view the agenda or to register online,go to www.stlouisfed.org/financial.
Are You Ready for a Changing Payments System?
FALL 2003
News and Views for Eighth District Bankers
A
bout 60 Midwestern bankers met in St.Louisduring June to voice their opinions on opportu-nities to reduce regulatory burden.The meeting wasone of five outreach sessions sponsored by the FDICand is part of a mandated,multiyear,multiagencyeffort to identify and eliminate outdated,unnecessaryor overly burdensome bank regulations.The sessions are designed to put important issuesin front of bankers so they will participate in up-coming public comment processes.Overall,theSt.Louis session was positive,but some bankersraised a number of concerns.Many bankers from smaller institutions stated thatregulations are particularly burdensome and dispro-portionately costly for them.They expressed themost concern over certain consumer complianceregulations.They also said they would prefer nochange at all in regulations vs.small,incrementalchanges,which wouldn’t provide enough benefit tomake up for the time and money involved in alter-ing their processes.According to Julie Stackhouse,senior vice presi-dent of Banking Supervision and Regulation at theSt.Louis Fed,“There’s no ques-tionthat the regula-tory agencieswould welcome areduction in com-plex regulations.Fothe sake of the public,we want to find waysfor regulation to bemeaningful and helpful.”Issues that are cur-rently out for commentcan be found at www.federalreserve.gov/boarddocs/press/bcreg/2003/.
Banker Outreach Sessions Focuson Reducing Regulatory Burden
 
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The Cash Restructuring Initiative:It’s a Matter of Efficiency
By LeGrande Rives,first vice president of the Federal Reserve Bank of St.Louis
T
he Consumer Federation of America (CFA) released a newsurvey on July 28,which showedthat most Americans have littleor poor knowledge about creditreports and credit scores.The sur-vey found that only 25 percent of Americans knew their credit score,with minority populations,youngadults and those of low or moderateincome the least knowledgeable.Three recent bills have been intro-duced to change this.Sens.Debbie Stabenow,D-Mich.,and Michael Enzi,R-Wyo.,intro-duced a bill (S.1532) to establishthe Financial Literacy Commission.If enacted,the legislation wouldestablish one central location—mostlikely,a web site and toll-free num-ber—where consumers could accessa range of consumer informationand financial literacy programs cur-rently offered by at least 16 branchesof the federal government.The Senate Banking Committee’sranking member,Sen.Paul Sar-banes,D-Md.,and Sen.JonCorzine,D-N.J.,introduced a bill(S.1470) to establish the FinancialLiteracy and Education Coordinat-ing Committee.If enacted,thelegislation would create a commit-tee within the Treasury to better coordinate financial informationoffered by various levels of govern-ment as well as the private sector.Corzine also introduced the YouthFinancial Literacy Act (S.1181) tomake youth financial education apriority in our schools.If enacted,$100 million in grants would bedistributed to states for teacher preparation and the developmentand implementation of financial-education programs in elementaryand secondary schools.
Senate Seeks to Improve Financial Literacy
The loss of check-processing revenues would forceus to rely upon cash-processing services to supportthese two branches.That’s neither practical nor efficient so,we must discontinue Little Rock andLouisville cash-processing operations,also by theend of 2004.This move will save the St.Louis Fed approxi-mately $3.4 million a year,which is in addition tothe $4.9 million annual savings realized from thecheck re-engineering initiative.While these savingsare very important,you have my assurance that thisinitiative will not come at your expense.Financialinstitutions that process cash through either LittleRock or Louisville should notice little change intheir service.We will contract with local third-partyproviders and use their facilities,allowing institutionsto drop off and pick up cash in each city.Despite the elimination of cash- and check-processing services,the St.Louis Fed is committedto maintaining an active presence in both cities.We will expand our community outreach,eco-nomic education and community developmentactivities,and each Branch will maintain its ownboard.Our directors provide extremely valuableknowledge and insight into their businesses andregional economies,which,in turn,shape our monetary policy recommendations.As for the affected cash employees,we want themto remain with the Fed through the transition so,we’ve offered them the same retention benefits andseverance packages as our check employees.Thiswill ensure that each Branch continues to operatefully and efficiently.Once the transition is complete,the Little Rockand Louisville branches will have a small staff headedby a senior executive.We’re considering severaloptions,such as selling the branch buildings andmoving to leased quarters in both cities,but itwill take some time to work out the details.For upcoming announcements,visit our web site,www.stlouisfed.org.
Fed
itorial
W
e’ve made some difficultdecisions this year.In February,we announced that Little Rock andLouisville check-processing services willbe moving to Memphis and Cincinnati,respectively,by the end of 2004.
 
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C
asino gambling has become a major indus-try in the United States over the past twodecades, amassing revenue of $27 billionin 2001. Prior to the early 1990s,casino gambling was legal only in Nevadaand Atlantic City, N.J. Riverboat casinogambling first began in Iowa and Illinois in1991; it now exists in Indiana, Mississippiand Missouri. Additionally, Louisiana andMichigan have legalized land-based casino gam-bling within the last decade.
The primary reason many states have legalized casino gambling isbecause casinos are seen as a potential tool for economic growth.The greatest perceived benefits are:
increased employment,
greater tax revenue for state and local governments, and
growth in local retail sales.Casinos also have gained more appeal and acceptance because of:
increased fiscal pressures on state budgets during the1990-91 recession,
the fear of lost revenue to neighboring states’ casinos and
a more favorable public attitude.Recent research from the St. Louis Fed discusses several issues regardingthe potential effects of casino gambling on local employment. One issueis the casino’s location and the required skill level of its work force. Most casino jobs require skills such as accounting, dealing cards or security.If a casino is planning to move to a rural area that has few residentswith the required skills, then the casino probably will draw skilled laborfrom outside the area. If workers remain outside of the local areaand commute to the casinos, then local unemployment will remainunchanged. If, however, some of this skilled labor decides to movenear the casino, then the local unemployment rate will fall because thenumber of local residents employed has increased.It is the latter scenario that often is used as evidence that casinoshave improved local employment, but this is misleading. Unemploy-ment for the original population essentially remains unchanged—onlythe new arrivals have found employment with the casino, and this iswhat decreases the unemployment rate.Another issue is the effect of casino gambling on non-casino employ-ment. When a new casino opens, existing local businesses may close,resulting in layoffs. However, new businesses may open—ones that complement casinos, such as restaurants and hotels.Past research has provided mixed evidence, but researchers generallyagree that a casino’s impact on local business and employment dependson wherecasino patronscome from. If most casino patrons liveor work in the localarea, their patronagemay have a negative impact onlocal businesses because they can spend their money at the casino ratherthan at local businesses. However, if the casino is part of a tourist attrac-tionthat brings in patrons from outside the area, this new money mayfoster increased business activity in the local area.Our research estimated the employment effects of casino gambling infour rural counties and two urban counties, most of which are located inthe Eighth District. As a direct result of adopting casino gambling, threeof the four rural counties experienced increased household employment (the number of people in a county who are working regardless of loca-tion) and payroll employment (the number of jobs in a county, regard-less of employees’ residence). This seems to be true even though casinoemployment is usually dispersed over several counties outside the homecounty. We also found that employment gains are much greater in therural counties that have adopted casino gambling as a major or predomi-nant industry.Our research also indicates that it’s harder to detect the impact of casinogambling in urban areas because employment fluctuates more, and casinosonly constitute a small portion of total employment. However, urban casinogambling can constitute a significant portion of net payroll employment gains or losses, even though it is a minor industry.
Employment Effectsof Casino Gamblingin the Eighth District

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