WASHINGTON - The Federal Reserve appears to be getting out of the consumer-related information business. Following the cancellation of the Banking Fee Study (CU Times Oct. 20, 1999) the Fed has now followed up by canceling the Functional Cost Analysis (FCA) report, which shows the cost of providing services such as installment loans, mortgage loans, other installment loans, share drafts (checking accounts), credit cards, money market deposit accounts, certificates of deposit and safety deposit boxes for banks, savings and loans and credit unions. "It is a very valuable tool for us," said CUNA Vice President of Economics and Statistics Mike Schenk, of the FCA, "and for anyone interested in keeping a pulse on the banking industry. I use it quite a bit, and credit unions find it interesting to see that information. There is only one place to find publicly comparable data, and it's the Federal Reserve." That point of view was equally shared by Dr. Tun Wai, chief economist of NAFCU. "The FCA is near and dear to NAFCU's heart," he said, " because we spearheaded credit union participation in it." Credit unions were included in the FCA beginning eight years ago, at a time when the Federal Reserve was polling financials about the report's value to them, and made some changes as a result of what was learned from conducting numerous focus groups and other input. The result was that the report was made more valuable and the information more accessible to financials. "I remember when I had meetings with the San Francisco Fed," recalled Wai, "I related one criticism we heard that it was too complicated and burdensome. But the Fed listened, and made it simpler. It was handled, and so now it seems to be the wrong time to cancel it." Why then, is it being canceled? "I can't say for sure, except that the Fed may have budgetary issues they have to address," responded Wai. "Although, usually, when the economy does well (as it is now doing) financial institutions aren't as concerned with cost controls- everyone is making money-but when the belt tightening starts to happen, you look around and you really need valuable information that benchmarks the cost of what you're doing with what everyone else is doing. It's just a matter of not knowing what you've lost until it's gone." Information contained in the FCA may, in part, be available from other sources; for example, Sheshunoff provides some reports that may be combined to effectuate the information, but Wai pointed out that the cost, especially for smaller institutions, may be prohibitive. Then, too, there is the matter of the 800 pound gorilla. That being the respect for the objectivity of the Federal Reserve. Arguably, no other Washington, D.C. institution commands the stature of the Fed. The Fed may be positioning itself solely as the central bank, and the purveyor of monetary policy, while slowly distancing itself from the various reports that both financial institutions and consumers find so valuable. But the wisdom of taking such action just as the financial modernization act is falling into place, and with it the creation of massive, financial supermarkets owned by a dwindling number of banks remains to be seen. The effort to get the Fed to restore the Bank Fee Study may now be combined with a push to get Congress' attention focused on FCA's cancellation as well, noted several sources. The Bank Fee Study was a valuable tool for consumers in deciding where to conduct their banking, and was cited by numerous consumer organizations like U.S. Public Interest Research Group, (U.S. PIRG) Consumers Union and the Consumer Federation of America. CUNA made great hay of it as well, as it typically showed that credit unions charge fewer and lesser fees compared to national banks. Together with the cancellation of a study that provided valuable internal pricing costs to financial institutions, it may be a compelling argument to make before members of the House and Senate Banking Committees. Ed Mierzwinski of U.S. PIRG told Credit Union Times that canceling the fee study was an "arrogance on the part of the Fed. It shows an arrogance on the part of Alan Greenspan and the Fed for giving consumers and other researchers the information they need to document the fact that bigger banks and more mergers only make for bigger fees and more charges. We will work very hard to see that the industry's reform efforts are balanced by other proposals, such as the continuance of the fee study." He added that several members of the House Banking Committee are already committed to seeing that happen, particularly Rep. Maxine Waters (D-Calif.). "I'm not sure how much political capital we're willing to expend to see these studies continued," noted Schenk, while pointing out that CUNA sent a letter to House Banking Committee Chairman Jim Leach (R-Iowa) in August that urged his support to retain it. Leach offered legislation to extend the study, but it has not seen any action since. In an election year, its prospects may be dimming. Mike Moebs, chairman of Moebs $ervices, the Lake Bluff, Ohio, research firm that actually provides the Bank Fee Report data to the Fed offered the analogy of the Federal Reserve as the "cop in a world filled with traffic lights, stop signs and speed limits." Voluntary controls only work so far, he noted, and "we'll always need traffic controls. The Fed is the best choice of cop. The private sector can't wear a badge and gun." The estimated cost of the FCA study is near the $1 million mark, with the Bank Fee Study coming in at less than $82,000. The Federal Reserve did not return Credit Union Times' telephone calls seeking comment on the matter. -
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