While Ron Paul was trying to win votes Tuesday in Florida with his calls to “end the Fed,” one Federal Reserve official was explaining to a group of Jacksonville business people what the Fed actually does for them.
While Republican presidential candidate Paul’s ire about the Fed has been directed at its monetary policy, the Federal Reserve System also is responsible for making sure the nation’s payment system runs smoothly, said Marie Gooding, first vice president and chief operating officer of the Federal Reserve Bank of Atlanta.
In a lunch meeting of The Economic Roundtable of Jacksonville at the Fed’s Jacksonville branch, Gooding explained how the Fed is responsible for processing checks, wire transfers and the nation’s automated clearing house.
“The Fed plays a major role in each of these as well as cash,” Gooding said.
“It’s not something you give a lot of time and thought to,” she said. But she said those systems play a major role in everyone’s business. Imagine what would happen if you couldn’t clear payments for a week.
“What would be the impact to your business?” Gooding asked.
That actually happened after 9/11 and it led to changes in the way payments are processed in the United States, she said. When the nation’s transportation systems shut down after the terrorist attacks, checks couldn’t be moved throughout the country and payments were slowed.
So the federal government acted to ensure that more of the payment system was handled electronically. Most banks now take checks and transfer the information from them electronically rather than sending the paper checks through the system.
At the turn of the century, the Fed’s Jacksonville branch was one of 46 check-clearing facilities around the country that was handling 3.5 million paper items every night, Gooding said.
Now that most of the system has been automated, the check-clearing process has been consolidated into just one facility that handles only 15,000 paper items a night, she said.
Although people still write checks, more and more transactions are done electronically.
“And woe be you if you’re in the grocery store writing that check,” Gooding said.
The Fed is continuously working to make the system “better, faster, more efficient, farther reaching. That’s the bottom line,” she said.
The system is continuing to evolve. Gooding asked the business people to come up with their own visions of how to make payments.
“Let your financial institutions know,” she said. “There is no right or wrong answer here.”
Chris Oakley, vice president and regional executive of the Jacksonville Fed branch, told the attendees that he hoped Gooding’s talk would shed light on everything the Fed does.
“We hope you’ll walk out of here with your wheels turning,” he said.
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