Search results

1 – 2 of 2
Click here to view access options
Book part
Publication date: 18 March 2014

John A. James and David F. Weiman

The increased use of checks in nonlocal payments at the end of the nineteenth century presented problems for their clearing and collection. Checks were required to be paid…

Abstract

The increased use of checks in nonlocal payments at the end of the nineteenth century presented problems for their clearing and collection. Checks were required to be paid in full (at par) only when presented directly to the drawn-upon bank at its counter. Consequently, many, primarily rural or small-town, banks began to charge remittance fees on checks not presented for collection in person. Such fees and the alleged circuitous routing of checks in the process of collection to avoid them were widely criticized defects of the pre-Federal Reserve payments system. As the new Federal Reserve established its own system for check clearing and collection, it also took as an implicit mandate the promotion of universal par clearing and collection. The result was a bitter struggle with non-par banks, the numbers of which initially shrunk dramatically but then rebounded. A 1923 Supreme Court decision ended the Fed’s active (or coercive) pursuit of universal par clearing, and non-par banking persisted thereafter for decades. Not until the Monetary Control Act of 1980 was universal par clearing and true monetary union, in which standard means of payment are accepted at par everywhere, achieved.

Click here to view access options
Article
Publication date: 12 February 2018

Ashish Lall

The purpose of this paper is to provide a comprehensive historical review of the role of the Federal Reserve in retail payments in the USA.

Abstract

Purpose

The purpose of this paper is to provide a comprehensive historical review of the role of the Federal Reserve in retail payments in the USA.

Design/methodology/approach

It reviews the literature on the role of the Federal Reserve and assessments of its involvement.

Findings

In addition to its oversight and operational role, the Federal Reserve has conducted R&D and facilitated technology adoption. It has provided effective competition to the private sector without subsidies.

Research limitations/implications

The Federal Reserve has served the public interest and private networks have benefited from the “visible hand” of government.

Practical implications

Migration to electronic payments will likely change its role from an operator to setting standards for safety and security.

Originality/value

The historical review provides context against which the future strategy of the Federal Reserve may be assessed.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

1 – 2 of 2