The Fed's Entry into Check Clearing Reconsidered

31 Pages Posted: 26 Nov 2012

See all articles by Jeffrey M. Lacker

Jeffrey M. Lacker

Federal Reserve Bank of Richmond

Jeffrey Walker

Independent

John A. Weinberg

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 1999

Abstract

Students of U.S. banking history typically hold that the check collection industry was excessively costly prior to 1915 and that the Fed's subsequent entry into check clearing improved efficiency. The authors propose an alternative view based on the economics of network communications industries. Their view is that a desire to attract members to the fledgling Federal Reserve System motivated the Fed's entry into check clearing. One step in accomplishing this goal was the granting of a competitive advantage for the Reserve Banks, which shifted the allocation of common costs associated with check collection.

Suggested Citation

Lacker, Jeffrey M. and Walker, Jeffrey and Weinberg, John A., The Fed's Entry into Check Clearing Reconsidered (1999). FRB Richmond Economic Quarterly, vol. 85, no. 2, Spring 1999, pp. 1-31, Available at SSRN: https://ssrn.com/abstract=2129899

Jeffrey M. Lacker

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8279 (Phone)
804-697-8461 (Fax)

HOME PAGE: http://www.richmondfed.org

John A. Weinberg

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8205 (Phone)
804-697-8255 (Fax)

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