A high-level Federal Reserve committee will begin consultations with bankers Friday on the central bank's future role in the retail payment system.
The panel, led by Fed Vice Chairman Alice M. Rivlin, is putting five options out for discussion. Bankers and other payment-system providers have been invited to two sessions in St. Louis, the first in a month-long series as part of a review project Ms. Rivlin is spearheading.
One of the five options is the status quo-letting the Fed continue its existing retail payment services to ensure that all banks have access.
But the four other possibilities would entail significant changes in the payments business and the Fed's part in it:
Operating existing services and entering new businesses, such as electronic check presentment, to make the payment system more efficient.
Using the Fed's clout to push consumers away from checks and toward electronic systems.
Transferring existing retail payment services to a newly created, for- profit, private operating company.
Exiting the retail payment system by liquidating equipment.
The dialogue is occurring at a time of heightened interest among bankers about retaining their control of and access to payment systems, particularly as they evolve toward electronic forms.
The Banking Industry Technology Secretariat, a recently formed division of the Washington-based Bankers Roundtable, has begun mapping strategies to keep the industry involved and in charge.
"We are very eager for input from the banking industry," Ms. Rivlin said. "We are trying to find out as much as we can about how the banking industry and other industries involved feel about the scenarios."
Fed Chairman Alan Greenspan named Ms. Rivlin in October to lead the central bank review of retail payment businesses, including check sorting, check delivery, and the automated clearing house. The Fed processed 15 billion checks and 2.1 billion automated clearing house items in 1995.
"We have laid out some key actions the Fed may take," said Sandy Pianlanto, chief operating officer at the Federal Reserve Bank of Cleveland, and the staffer in charge of the review. The five options "are tools to provoke a more in-depth discussion of the Fed's role as a provider of interbank payment services."
After this week, the Rivlin panel will convene May 16 in New York, May 23 in Atlanta, May 30 in San Francisco, and June 5 in Washington. The 12 regional reserve banks plan to hold additional meetings over the next few months. Ms. Rivlin's report is expected by the end of the summer.
At each session, eight to 10 invited guests will see Ms. Rivlin, Fed Governor Edward W. Kelley Jr., Federal Reserve Bank of New York President William J. McDonough, and Federal Reserve Bank of St. Louis President Thomas C. Melzer.
The sessions are closed to the public, Ms. Pianlanto said. "We want to make sure we are not in any way inhibiting the comments the participants would make," she said.
Bankers appear split over the options, with small institutions preferring a broader role for the Fed. Larger banks tend to want the Fed get out of way in favor of private-sector alternatives.
"The Fed should come out as a proactive provider of payment services," said Thomas J. Sheehan, president and chief executive officer of Grafton (Wis.) State Bank. "It is very important to community banks for the Fed to play a leadership role and develop the services that are required for the electronic banking age."
Without the Fed, the argument goes, community banks in remote areas would either be cut off from the payment system or have to pay unreasonably high fees for basic services from correspondent banks, said Mr. Sheehan. He is chairman of the Independent Bankers Association of America committee on bank operations and the association's representative on the Banking Industry Technology Secretariat board.
"The heartland of America is not the same as the coasts," he said. "It does not have the concentration of financial services."
The larger banks "would be inclined to rely on private institutions as much as possible," said Anthony T. Cluff, executive director of the Bankers Roundtable. "The payment system is the traditional business for large banks, and without interstate restrictions we would have had a national private check-clearing system already."
Not everyone supports the Fed's review. Rep. Henry B. Gonzalez of Texas, the ranking Democrat on the House Banking Committee, said at a recent news conference that an outside group should conduct the evaluation. "It is too much to ask someone to be detached and objective when their own interests are at stake," he said.
At a Federal Reserve Bank of Chicago conference last week, Fed Chairman Greenspan said there will be no rash decisions.
"We have to be careful in the sense that the Fed is a very major player in a lot of different circumstances," he said. "We are conscious of the fact that we are the 800-pound gorilla."
