w w w . s t l o u i s f e d . o r g
The Cash Restructuring Initiative:It’s a Matter of Efficiency
By LeGrande Rives,first vice president of the Federal Reserve Bank of St.Louis
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.
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.