Letter in Opposition to the Federal Reserve’s consideration to operate a Real-Time Gross Settlement system
The Honorable Jerome H. Powell Chairman
Board of Governors of the Federal Reserve System 20th Street and Constitution Ave., NW Washington, DC 20551
Dear Chairman Powell
We write to express strong opposition to the Federal Reserve’s consideration to operate a Real-Time Gross Settlement system and urge the Federal Reserve to reevaluate any entrance into the payments and settlement industry. We share a deep concern that the Fed’s proposal will directly compete with the private sector’s established Real-Time Payments system and additional emerging technologies and raise concerns of the ability to protect customers data.
In 2013, the Federal Reserve released a paper titled “Payment System Improvements” which encouraged industry collaboration to enhance the efficiency of the US payment system over the next decade. In 2015, the Federal Reserve announced the formation of the Faster Payments Task Force, with the objective of creating a system that benefits customers of all banks, credit unions, and payment processors, regardless of size and assets. Two years later, the Task Force released the first of two reports which explicitly stated, “Ultimately, implementation of proposals will be driven by the private sector.” The private sector’s real-time payment system became operational in November 2017, however, less than a year later, the Federal Reserve sought comments for “Potential Federal Reserve Actions to Support Interbank Settlement of Faster Payments.”
On its face, it appears the Federal Reserve is flip-flopping on its previously stated position to directly compete with the private sector. Worse, the Fed seems content with providing a public option for payments while also serving as the regulator of the financial institutions that invested, built and operate the Real-Time Payments system. The Fed has also been mute on assuring financial institutions and their customers that any government run system would be able to protect personal identifiable information from bad actors. As recently as September 2017, another financial regulator was hacked with the market bearing the consequences of inadequate security. The Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval system was infiltrated allowing the hackers to view, trade and profit from corporate filings not-yet made public.
In the Task Force’s Second Report, the vision is clear: “a payment system in the United States that is faster, ubiquitous, broadly inclusive, safe, highly
secure, and efficient by 2020.” The Real-Time Payments system shares this vision. However, if the Federal Reserve enters the market with its own Real- Time Gross Settlement system, it is hard to imagine how this will be achieved by the end of the decade, considering the Fed has yet to indicate how long and at what cost it will take to realize this vision. We, the undersigned organizations, oppose the any entrance by the Federal Reserve into the real- time payment market.
Sincerely, Grover Norquist
President, Americans for Tax Reform
President, Council for Citizens Against Government Waste
President, National Taxpayers Union
Director, Finance, Insurance and Trade Policy, R Street Institute
Kristina Pusok, Ph. D.
Director of Policy and Research, American Consumer Institute
Vice President for Strategy and Sr. Fellow, Competitive Enterprise Institute
Andrew F. Quinlan,
President, Center for Freedom and Prosperity
President, American Commitment