327 

Minutes 

of 

The Meeting of the FDIC Advisory Committee on Economic Inclusion 

of the 

Federal Deposit Insurance Corporation 

Held in the Board Room 

Federal Deposit Insurance Corporation Building 

Washington, D.C. 

Open to Public Observation 

October 9, 2013 - 9:08A.M. 

The meeting of the FDIC Advisory Committee on Economic 

Inclusion ("ComE-IN" or "Committee") was called to order by 

Martin J. Gruenberg, Chairman of the Board of Directors of the 

Federal Deposit Insurance Corporation ("Corporation" or "FDIC") . 

The members of ComE-IN present at the meeting were Robert A. 

Annibale, Global Director, Citi Microfinance and Community 

Development; Ted Beck, President and Chief Executive Officer 

(CEO), National Endowment for Financial Education; Kelvin Boston, 

Executive Producer and Host of PBS' Moneywise with Kelvin Boston; 

Jose Cisneros, Treasurer, City and County of San Francisco, 

California; Martin Eakes, CEO, Self-Help/Center for Responsible 

Lending, Durham, North Carolina; Rev. Dr. Floyd H. Flake, Senior 

Pastor, Greater Allen AME Cathedral of New York; Ester R. Fuchs, 

Professor, School of International and Public Affairs, Columbia 

University; Andrea Levere, President, Corporation for Enterprise 

Development, Washington, D.C.; Alden J. McDonald, Jr., President 

and CEO, Liberty Bank and Trust, New Orleans, Louisiana; Bruce D. 

Murphy, Executive Vice President and President, Community 

Development Banking, KeyBank National Association; Manuel Orozco, 

Senior Associate at the Inter-American Dialogue, and Senior 

Researcher, Institute for the Study of International Migration, 

Georgetown University; John W. Ryan, Executive Vice President, 

Conference of State Bank Supervisors; J. Michael Shepherd, 

President and CEO, Bank of the West and BancWest Corporation; 

Peter Tufano, Peter Moores Dean and Professor of Finance, Said 
328 

Business School, Oxford University and Founder and CEO of D2D 

Fund; and John C. Weicher, Director, Hudson Institute's Center 

for Housing and Financial Markets. 

Michael Barr, Professor of Law, University of Michigan Law 

School; Wade Henderson, President and CEO, Leadership Conference 

on Civil Rights, and Counselor to the Leadership Conference on 

Civil Rights Education Fund, Wade Henderson, President and CEO, 

Leadership Conference on Civil Rights, and Counselor to the 

Leadership Conference on Civil Rights Education Fund, and Robert 

K. Steel, Deputy Mayor for Economic Development, The City of New 

York were absent from the meeting. 

Members of the Corporation's Board of Directors present at 

the meeting were Martin J~ Gruenberg, Chairman, Jeremiah 0. 

Norton, Director (Appointive), and Richard Cordray, Director,· 

Consumer Financial Protection Bureau. Roberta K. Mcinerney, 

Designated Federal Officer for the Committee and Deputy General 

Counsel, Corporate, Consumer, Insurance, and Legislation Branch, 

FDIC Legal Division, also was present at the meeting. 

Corporation staff who attended the meeting included James L. 

Anderson, Steven 0. App, Michael W. Briggs, Susan Burhouse, 

Alexander S. Cheng, Karyen Chu, Carolyn D. Curran, Christine M. 

Davis, Patricia B. Devoti, Keith S. Ernst, Robert E. Feldman, 

Shannon N. Greco, Leneta G. Gregorie, Marianne Hatheway, Matthew 

Homer, Sally J. Kearney, Elizabeth A, Khalil, Alan W. Levy, 

Jonathan N. Miller, Robert W. Mooney, Elizabeth Ortiz, Cheh Kim, 

Yazmin E. Osaki, Mark E. Pearce, Sylvia H. Plunkett, Stephen A. 

Quick, Kristopher Rengert, Barbara A. Ryan, Luke W. Reynolds, 

Sherrie Rhine, Richard M. Schwartz, Kimberly Stock, and Lori 

Thompson. 

William A. Rowe, III, Deputy to the Chief of Staff and 

Liaison to the FDIC, Office of the Comptroller of the Currency 

also was present at the meeting. 

Chairman Gruenberg opened and presided at the meeting. He 

began by providing an overview of the meeting agenda, advising 

that the meeting would begin with a focus on the issue of 

financial education, particularly as it relates young people. He 

noted that youth financial education presents enormous 

challenges; that the FDIC's Money Smart program is one of the 

most widely used and influential programs designed to better 

prepare young people to deal with financial decisions they face 

almost immediately upon completion of their secondary education; 

and that the FDIC is in the process of developing a partnership 

October 9, 2013 
329 

with the Consumer Financial Protection Bureau ("CFPB" or 

"Bureau"), which has a statutory mandate in the area of youth 

financial education, with the partnership promising to be a 

fruitful area for cooperation. He next advised that the second 

panel would be a continuation of the Committee's discussion on 

the potential of mobile financial services to expand access to 

the banking system in response to a suggestion at the May 16, 

2013, meeting that the FDIC develop more of a strategic focus to 

its efforts in that area; that the third panel would address 

household savings and what the FDIC might be able to contribute 

to efforts to enhance savings and asset accumulation among lowand moderate-income ("LMI") households; that the luncheon speaker 

would be Steven L. Antonakes, Deputy Director, CFPB; and that the 

afternoon sessions would involve panel presentations on two 

research projects currently underway at the FDIC, one on 

community access to bank branches and another on the impact of 

minority depository institutions ("MDis") on communities. 

Next, Chairman Gruenberg introduced the moderator of the 

first panel, Elizabeth Ortiz, Deputy Director, FDIC Division of 

Depositor and Consumer Protection ("DCP"), welcoming her to the 

FDIC and noting that she had previously been the Chief Operating 

Officer of the Non-Profit Finance Fund, held senior positions in 

the New York City Department of Education, and worked for a 

number of years for Citigroup as a Vice President in its Global 

Consumer Group and Director of its Community Reinvestment Act 

("CRA") and Fair Lending practice. He also stated that it was an 

honor to have Director Cordray available for the beginning of the 

meeting and asked him to say a few words. Director Cordray first 

remarked on the importance of economic inclusion and observed how 

notable it is to have an agency like the FDIC focused on the 

issue. He then advised that the CFPB has an Office of Financial 

Empowerment; that there is a core group of people who are not in 

the banking system and may well never be; and that, therefore, a 

dual approach, with the FDIC's focus on insured depository 

institutions and the CFPB's focus on non-bank entities, 

particularly on ways to introduce the same types of consumer 

protections and relationship advantages for alternative financial 

service ("AFS") products and services as exist for depository 

institution products and services, is a beneficial one. 

Finally, he expressed pleasure that one of the meeting panels 

would address the issue of financial education, an area in which 

the Bureau is trying to generate more visible activity and 

integrate the activities of other groups such as the Financial 

Literacy and Education Commission ("FLEC"), with the hope of 

persuading people that financial education is necessary not only 

.. October. 9, 2013 
for the benefit of individuals and households, but for the 

country as well. 

330 

Then, Ms. Ortiz noted that it had been over two years since 

the Committee had discussed financial education as part of its 

formal agenda and that putting it back on the agenda was timely, 

particularly in light of the CFPB's April 2013 white paper on 

Transforming the Financial Lives of a Generation of Young 

Americans, a copy of which she advised was included in the 

meeting materials. She stated that although the Committee had 

not formally addressed financial education in recent meetings, 

the topic frequently arose in conversations related to linking 

the unbanked and underbanked to the financial mainstream, and 

that, while there was a broad range of perspectives on the topic, 

several themes had emerged. She identified those broad themes as 

a need for financial education to begin at early age, working 

with schools, teachers, and parents to bring financial education 

into the classroom as early as possible; a need to determine how 

best to promote effective and scalable education interventions 

for young people on a national level; and a need to be mindful of 

the benefits of continuing financial education, offering relevant 

content in a timely way at specific financial decision points. 

Reminding Committee members that the panel discussion was 

intended to explore ways in which the FDIC and others can help 

young people get a solid financial footing in life, she then 

introduced the panel members: Camille Busette, Assistant Director 

of the Office of Financial Education, CFPB; Laura Levine, 

President and CEO, Jump$tart Coalition for Personal Financial 

Literacy ("Jump$tart"); and Luke Reynolds, Chief, Outreach & 

Program Development, DCP. 

Ms. Busette began her presentation by stating that youth 

financial education represents not only an incredible 

opportunity, but also an incredible challenge in the United 

States today - an opportunity because there is probably no better 

place to catch future users of financial services than in their 

early days in school, and a challenge because the product 

landscape is constantly evolving and because younger people, 

rather than entering the financial system through depository 

accounts at financial institutions, are instead entering the 

financial system via a range of alternative products. She 

indicated that, as a result, she wanted to broadly discuss some 

of the policy and practical challenges associated with trying to 

advance youth financial education and also share the CFPB's 

thoughts about, and recommendations for, how the issue might be 

addressed. 

October 9, 2013 
331 

Regarding the current policy landscape, Ms. Busette 

indicated that schools typically are subject to local politics 

and local decision making, with hundreds of thousands of school 

districts nationwide and very active Parent-Teacher Associations, 

making it very challenging for federal agencies to intervene in 

an impactful way. She indicated, moreover, that changing 

curricula, increased demands on teachers, and dwindling resources 

to fill those demands represent yet another set of challenges. 

She advised that, despite the challenges, there also are 

opportunities within those challenges, which the CFPB has 

developed into policy recommendations for supporting youth 

financial capability. Prior to sharing those recommendations, 

though, she briefly listed the different types of activities on 

which the CFPB's Office of Financial Education focuses its 

financial literacy efforts, identifying them as outreach for 

partnership and outreach for impact, working with a variety of 

stakeholders throughout the financial education ecosystem to 

ensure that consumers are being reached directly; development of 

content for consumers on a variety of different topics, which is 

made available through brochures and online; research on 

effective financial education efforts, especially promising 

alternatives to conventional financial education programs, and 

appropriate ways to measure the success of those efforts; and 

identification of innovations for reaching consumers at the time 

they are making financial decisions and in a way that helps them 

successfully navigate those decisions. Expressing high hopes for 

the CFPB's financial literacy activities, she returned to her 

discussion of the Bureau's recommendations. 

Ms. Busette noted that the CFPB's recommendations for 

supporting youth financial capability were developed by Bureau 

staff after having read numerous studies and having worked with 

and talked to a variety of individuals actively involved in 

financial education efforts, many of whom she advised were 

present at the meeting. She then explained that the CFPB 

recommends that financial education concepts should be introduced 

early, they should be continuous, and there should be a special 

emphasis on navigating the financial system and making important 

decisions at the junior and senior levels in high school; that 

personal financial management questions should be included in 

standardized tests, such as tests to measure common core 

standards, the SAT, and the ACT; that there should be 

opportunities for young people to have hands-on experience during 

their elementary and secondary education years so they can 

practice their skills as they are learning, thereby optimizing 

retention; that opportunities should be created for teachers to 

get the kind of training that will increase their confidence in 

October 9, 2013 
332 

presenting financial education information and in managing their 

own finances; and that parents and other caretakers be engaged, 

through schools, libraries, and communities, in the financial 

education enterprise to enhance success. In conclusion, she 

stated that while the CFPB is a newcomer in the space, it is 

thrilled to work with a variety of federal partners to advance 

youth financial education. 

Beginning her presentation, Ms. Levine provided background 

information on Jump$tart, advising that it was founded in 1995; 

that it is coalition of 150 national partners from all sectors of 

government, including the FDIC, corporations, and non-profit 

organizations, with two of its Board members, Mr. Ryan and Mr. 

Beck, represented on the Committee; that it has 49 independent, 

affiliated state coalitions; that it is committed to advancing 

financial literacy for people of all ages, but with a special 

focus on pre-kindergarten to college-age youth; and that it is 

committed to working collaboratively. She stated that although 

Jump$tart's focus when it was founded was on raising awareness 

about the need for financial literacy, its emerging priorities 

are promoting quality financial education standards and 

encouraging measurements of effective financial education; 

fostering collaboration between stakeholders and connecting 

stakeholders with reliable financial education resources; and 

providing training and support for financial educators. 

Elaborating on the promotion of standards, she indicated that 

Jump$tart is the publisher of national standards in K-12 personal 

finance education, with the standards available to educators at 

no cost through the coalition's web site and in print through the 

FDIC; that the shift to common core state standards in 

mathematics ahd English language arts represents an opportunity 

to integrate money lessons into mathematics and language arts 

courses, a good place to start to reach younger students who may 

not be getting the hoped for standalone financial education 

courses; and that Money As You Learn, an initiative developed on 

the basis of recommendations by the President's Advisory Council 

on Financial Capability, provides tools to help educators 

integrate personal finance into common core subjects. 

Next elaborating on the theme of collaboration, Ms. Levine 

advised that Jump$tart operates the Jump$tart clearinghouse, an 

online clearinghouse of financial education resources that was 

started in 1998 and is currently undergoing a technology upgrade 

of its search and sort functions as well as an upgrade of its 

listing criteria. She further advised that Jump$tart sponsors a 

National Educator Conference, which takes place during the first 

weekend of November; provides teacher training on financial 

October 9, 2013 
333 

education; promotes networking among financial education 

teachers; offers an opportunity to thank and encourage teachers 

for their efforts throughout the year; and provides a platform to 

showcase the expertise and resources of Jump$tart coalition 

partners. She then elaborated on Jump$tart's emphasis on 

training and support for financial educators, noting that the 

Jump$tart Teacher Training Alliance ("Alliance"), formed in 2010, 

grew from an idea by Mr. Beck based on research sponsored by the 

National Endowment for Financial Education showing that teachers 

did not feel prepared to teach personal finance or to use their 

own state standards. She explained that rather than teaching 

financial educators how to teach, the Alliance approaches 

teachers as learners and instead provides them with an underlying 

knowledge of personal finance. She advised that the founding 

partners of the Alliance consisted of five non-profit 

organizations and three federal agencies, including the FDIC; 

that the Alliance was developed as a model that organizations 

across the country could use for their own teacher training 

events in an effort to promote consistency and a level of quality 

for teacher training; and that the hope was that the Alliance 

would set a standard for teacher training among those who teach 

personal finance. 

Reiterating that it was not Jump$tart's goal to itself 

conduct training, rather it was to help other organizations 

conduct teacher training more effectively using Jump$tart's 

model, Ms. Levine informed Committee members that Jump$tart had 

piloted its model for three years, and that research on the 

effectiveness of the model showed that teachers not only gained 

knowledge from the training events, but also retained the 

knowledge over six months and, more importantly, made changes in 

their own personal finance behavior, such as taking steps to 

check and improve their credit scores. She stated that, although 

the model is available as a toolkit at no cost, recipients do 

have to submit an application and stipulate to certain conditions 

such as conducting a minimum of 18 hours of training. In 

conclusion, she welcomed feedback from Committee members on 

Jump$tart's initiatives. 

Mr. Reynolds, setting the context for his remarks, 

underscored the importance of understanding what proponents of 

financial education are trying to accomplish and then identifying 

strategies and approaches that are particularly promising and 

effective. He suggested that, in general, financial education is 

used as a tool to help people build knowledge and skills to make 

informed judgments and take actions to effectively manage 

financial resources. He then pointed to reports by the 

October 9, 2013 
334 

Government Accountability Office ("GAO") that highlight the 

challenges in conducting rigorous financial education program 

evaluations; that review the results of studies on financial 

education, some of which show it to be effective and others which 

question its effectiveness; and that conclude, based on current 

research that no one single approach, delivery mechanism, or 

technology constitutes what might be considered best practices. 

He stated, however, that there is some consensus on some key 

common elements, such as timely and relevant content, 

accessability, cultural sensitivity, and an evaluation component, 

for successful financial education programs; that some research 

indicates that financial education that is conducted face-to-face 

is among the most promising; and that, more broadly, findings 

from the FDIC's longitudinal evaluation of Money Smart indicates 

that the program can be effective in helping consumers manage 

their finances, with sustainable changes in the months following 

training. With respect to young people, he advised that although 

several studies indicate that a financial education course in 

school may not translate into immediate knowledge gains as 

measured by a test, a study by Lewis Mandell, a financial 

economist, suggests that school-based financial education appears 

to have a long term impact on financial behavior, manifesting 

itself when students become adults; that some researchers suggest 

that teaching younger students with materials that are based on 

personal experience, which appeals to their emotions, may be an 

effective way to increase knowledge and alter behavior; and that 

youth based savings programs, in particular, are viewed as 

promising. 

Turning to the FDIC's Money Smart program, Mr. Reynolds 

noted that it is one approach to financial education used by many 

organizations. He explained that Money Smart is a baseline tool 

focused on helping LMI consumers master basic financial skills 

and create positive banking relationships; and that the 

fundamental principles are the same for all curricula, but with 

age-specific modules for young adults, adults, and older adults, 

with a special small business curriculum as well as a coloring 

activity book for young people between the ages of five to eight. 

Observing that while program development is one piece of the 

puzzle, and outreach is an equally important component, he 

advised that the FDIC publishes a quarterly Money Smart 

newsletter that is sent to more than 40,000 subscribers; that it 

conducts Train-the-Trainers workshops to improve the capacity of 

instructors to use the curriculum; and that it has an alliance 

with more than 1,300 organizations that have entered an agreement 

with the FDIC to use the Money Smart curricula. He then 

identified some of the features of Money Smart that set it apart 

October 9, 2013 
335 

from other financial education programs, including the ease with 

which the curriculum can be taught without any prior educational 

or banking experience; the ease with which it can be learned due 

to its being written at a sixth grade reading level; the absence 

of any copyright restrictions, allowing customization of the 

program; and its availability in nine languages. 

Mr. Reynolds next discussed the FDIC's role in the Money 

Smart program, indicating that outreach efforts are focused on 

reaching intermediaries such as financial institutions, banks, 

and credit unions, non-profits, local governmental entities, and 

others with direct access to consumers; and that the FDIC 

encourages organizations to combine Money Smart training with 

access to federally insured deposit accounts and services by 

facilitating partnerships between non-profits that use the 

curriculum and bankers who can teach the curriculum and start the 

process of opening accounts. Regarding ways for banks to work 

with schools, he noted that in 2010 the FDIC had issued Financial 

Institution Letter 80-210 identifying various approaches, 

including serving as a subject matter resource for educators on 

personal finance or banking related topics; supporting delivery 

of financial education through after school programs; and 

facilitating support for in-school savings programs; and that 

many banks, as evidenced by the results of the FDIC's 2011 

National Survey of Banks' Efforts to Serve the Unbanked and 

Underbanked, do in fact provide financial education and 

counseling in K-12 schools. With respect to in-school savings 

programs, he explained that FDIC regulations permit state 

nonmember banks to provide certain banking programs in schools 

without submitting a branch application, provided certain 

conditions are met. In conclusion, Mr. Reynolds advised 

Committee members that an assessment of the Money Smart program 

was in the works to determine what can be learned from its 

successes, what improvements can be made to put the program on a 

solid footing for the future, whether it would be useful to add a 

parent take-home guide to the young adult curriculum, and ways in 

which the program can support teachers after they receive fairly 

in-depth, comprehensive training. 

During the discussion that followed, Committee members and 

panel members touched upon a number of topics, including the use 

of technology to advance financial education, possible incentives 

and certification for financial educators, parental involvement 

in financial education efforts, and financial institution support 

of financial education programs. On the issue of using 

technology to advance financial education, Ms. Levere, 

referencing the CFPB's recommendations, noted the absence of an 

October 9, 2013 
336 

explicit policy recommendation related to technology, in response 

to which Ms. Busette stated that, despite the absence of an 

explicit technology-related recommendation, the assumption is 

that technology is probably the most important way for young 

people to engage with financial education as well as with 

financial institutions and other financial services providers, 

and that the challenge is to figure out how to marry online and 

mobile banking technology to school financial education programs 

in a responsible way to reach more youth. Although acknowledging 

its importance, Mr. Beck cautioned against an overreliance on 

technology as the sole answer to youth financial education and 

suggested that a combined emphasis on core knowledge, decision 

making skills, and use of technology would have great potential. 

Messrs. Annibale, McDonald, and Murphy were in agreement that, 

given the overwhelming amount of personal finance information 

available, the already existing distribution channel of financial 

institutions, and the need for bankers to be somewhat cautious in 

making referrals, it would be very helpful to banks if the FDIC 

or some other compositor could develop a central data repository 

to which banks could refer their clients and provide links on 

their web sites, in response to which Mr. Reynolds noted that, on 

the federal level, http://www.mymoney.gov, already provides a 

one-stop resource for federal financial education resources. 

Professor Tufano suggested that technology is not just a delivery 

mechanism for financial education; it also is a mechanism for 

researching various learning styles and for collecting metrics 

on, for example, what works and what does not and how long 

consumers will voluntarily remain on an educational web site as 

compared to attending a class. He also suggested that the trend 

toward Massive Online Open Courses ("MOOCs"), which could 

fundamentally change the face of education, also should be 

harnessed to teach financial education to consumers and personal 

finance educators. Ms. Levere cautioned that while MOOCs are 

great for certain segments of the population, there are certain 

segments that do not have access to or knowledge of MOOCs and, 

therefore, there is still a need to engage in heavy outreach to 

get people to use the products that are available. She also 

suggested the creation of a video game for purposes of youth 

financial education. 

With respect to possible teacher incentives and 

certification, Ms. Levere asked whether there were any systemwide incentives that motivate teachers to become involved in 

financial education as opposed to the somewhat punitive approach 

of requiring it as a course standard, in response to which Ms. 

Levine observed that one of the highlights of the Alliance model 

is that teachers who participate in the training report making 

October 9, 2013 
337 

positive changes in their own financial lives which, in and of 

itself, is a very powerful incentive. Mr. Annibale, noting the 

licensing requirements for various other financial advisers, 

suggested that some type of professional accreditation for 

personal finance educators would be an effective motivator, in 

response to which Ms. Levine indicated that, because of the local 

nature of education, a single nation-wide accreditation standard 

would likely pose challenges, although not necessarily 

insurmountable challenges, and that Jump$tart's teacher training 

module does give guidance to providers for offering professional 

development credits or graduate credits; and Mr. Reynolds 

indicated that it might prove worthwhile to review the findings 

of a June 2011 GAO Report, entitled Financial Literacy: A Federal 

Certification Process for Providers Would Pose Challenges. Mr. 

Murphy suggested that rather than focusing on teacher 

certification within the context of State Education Associations, 

perhaps the focus should be on some designation of competency 

that would provide a level of comfort that the individual has a 

basic level of understanding of the information they are 

delivering, in response to which Mr. Reynolds suggested that it 

could be something akin to the certificate of completion provided 

to those who complete Money Smart's computer-based instruction 

module. Finally, Mr. Beck suggested that teacher training should 

be developed into a national initiative and that the Committee 

explore development of an ongoing resource for personal finance 

educators to network with their peers. 

Committee members were unanimous on the importance of 

parental involvement in the financial education process, with Mr. 

Cisneros indicating that one of the more exciting aspects of San 

Francisco's Kindergarten to College savings program is the 

incorporation of parental involvement as a core element; with Ms. 

Busette agreeing that parents are integral to success with youth 

financial education programs, pointing to the CFPB's April 2013 

parental engagement campaign as having generated a great 

response, and sharing the CFPB's intention of developing 

additional initiatives that revolve around reaching parents 

through various community organizations such as libraries and 

faith-based organizations; and with Mr. Boston noting the 

importance of also getting grandparents involved, particularly 

for certain segments of the population such as African Americans, 

where approximately 25 percent of children live with their 

grandparents. Ms. Levine also expressed agreement with the need 

for parental involvement and, although acknowledging that 

Jump$tart had not undertaken a lot of work in the area, indicated 

that it had piloted one-day Family Financial Fitness Fairs where 
338 

a number of personal finance topics are presented that required 

children to be accompanied by at least one parent, with feedback 

from many of the parents indicating that, while they attended for 

the benefit of their children, they came away having learned more 

than they anticipated. She stated that, given the promising 

outcome of the pilot, Jump$tart would like, at some point, to 

enlarge it to scale. 

Regarding financial institution support of financial 

education programs, Mr. Annibale noted that Citibank offers 

accounts for both the Kindergarten to College savings program and 

the Knowledge is Power Program college savings program and 

advised that the bank's ability to connect access to education 

through its participation has been transformative. He suggested 

that it is important to give thought to how smaller and simpler 

platforms can be created to allow community banks, credit unions, 

and others to affordably complement the personal finance lessons 

offered by teachers. Mr. McDonald expressed his support for 

Jump$tart's National Educator Conference and suggested that one 

way to increase financial institution participation in financial 

education would be to encourage each bank to sponsor one 

teacher's participation in the conference, which he suggested 

could be easily facilitated by enlisting the aid of the state 

associations of financial institutions. 

Chairman Gruenberg commended panel members for facilitating 

an excellent discussion and advised that staff would return to 

the issue of youth financial education at the next Committee 

meeting with specific suggestions on how the FDIC, possibly in 

partnership with the CFPB, can effectively use its resources in 

this area. He noted that the FDIC had recently produced a series 

of videos to provide technical assistance to boards and 

management of small financial institutions, accessible on the 

FDIC's web site, and that it could certainly use that capability 

for teacher or parent financial education training. He also 

asked that Committee members share with staff any thoughts they 

have on engaging with and impacting schools and school systems. 

Chairman Gruenberg then announced that the meeting would 

briefly recess. Accordingly, at 10:42 a.m., the meeting stood in 

recess. 

* * * * * * * 

The meeting reconvened at 11:04 a.m. that same day, at which 

time Chairman Gruenberg introduced Jonathan N. Miller, Deputy 

October 9, 2013 
339 

Director for Policy and Research, DCP, moderator for the panel 

discussion on a "Framework for Reaching the Underserved through 

Mobile Financial Services Future Work." 

Mr. Miller recalled that over the past several meetings, the 

Committee had discussed the economic inclusion potential of 

mobile financial services ("MFS"); that at the Committee's May 

16, 2013, meeting, staff had described its plans to undertake 

research on specific technologies; but that Chairman Gruenberg 

and Committee members had raised a number of questions about the 

direction of the research and suggested that the research would 

benefit from more strategic thought about the context and 

framework for the Committee's inquiry into the use of MFS. He 

stated that after subsequent conversations with Chairman 

Gruenberg, staff was asked to develop a white paper that would 

lay out just such a framework, with the specific goal of 

discussing the economic inclusion potential and opportunities 

that MFS presents to insured depository institutions in reaching 

out to the unbanked and underbanked, while also taking into 

consideration the challenges and risks of adopting MFS 

technology. He indicated that staff had developed the white 

paper and that Matthew Homer, Policy Analyst, DCP, and Yazmin 

Osaki, Senior Consumer Research Associate, DCP, would be 

presenting the outline of the paper, the content of which was 

expected to be completed in the first quarter of 2014, and asked 

that, upon conclusion of their presentations, Committee members 

provide their input and ideas about the direction and shape the 

work should take. 

Mr. Homer then advised that he would discuss what staff 

hoped to accomplish with the white paper and the contribution it 

would make in the marketplace, after which Ms. Osaki would 

provide additional details about the specific analytic framework 

to be used for the paper. He noted that, despite the benefits of 

mainstream banking, many consumers remain unbanked and 

underbanked, and that the white paper would discuss three 

important challenges that must be overcome to expand economic 

inclusion: access to financial mainstream products, 

sustainability of banking relationships, and opportunities to 

grow financial capability and banking relationships. Briefly 

describing what MFS means for purposes of the paper, he stated 

that it referred to a set of technologies that can be used by 

consumers to access financial services using mobile devices at 

any time or place; that mobile commerce functions such as price 

comparisons and coupons would not be included within the scope of 

the paper, rather the focus would be on bank-sponsored MFS, with 

non-bank services included only to the extent that they can 

October 9, 2013 
340 

provide useful lessons learned or examples for the banking 

sector; and that bank-sponsored MFS is intended to refer to 

specific services like mobile banking that allows consumers to 

check account information, transfer funds, get account balances 

or other alerts, and make payments or access personal financial 

management tools. 

Next, Mr. Homer described the intended research approach, 

advising that staff would be conducting a literature review of 

existing industry reports, academic literature, news articles, 

and similar resources, and conducting conversations with 

stakeholders, including individuals from the banking sector, 

consumer groups, academia, and government and other sources. As 

for what the white paper would accomplish, he said that staff 

hoped to evaluate mobile financial services as a tool for 

economic inclusion, with particular attention to the potential of 

MFS to address the challenges of access, sustainability, and 

opportunity for growth; and hoped that the paper's contributions 

to the marketplace would include identification of ways in which 

MFS has the greatest potential, with emphasis on specific 

benefits arising from the factors of convenience, the high 

penetration of mobile phone use among underserved populations, 

and cost effectiveness for banks; consideration of any 

limitations of MFS, not only with respect to its effectiveness as 

a tool, but also any risks to financial institutions serving 

underserved consumers; identification of additional topics or 

areas that require further study; and the introduction of 

principles for optimizing MFS as a tool for economic inclusion, 

again with a focus on addressing the challenges of access, 

sustainability, and opportunity for growth. In closing, he 

indicated that staff anticipates that the audience for the white 

paper would be anyone interested in economic inclusion and that 

it will prove useful to bankers, technology vendors, consumer 

groups, and policymakers. 

Next, Ms. Osaki reiterated that the white paper would 

evaluate MFS from an economic inclusion perspective, noting that 

although MFS is being rapidly implemented by depository 

institutions and adopted by consumers, it really is not clear 

that it is being done in a way that considers the potential of 

MFS to meet the needs of underserved consumers. She advised 

that, as previously mentioned by Mr. Homer, the framework is 

built on the three main economic inclusion challenges of access, 

sustainability, and growth. First addressing the challenge of 

access, which she described as simply bringing customers into the 

banking system, perhaps by making banking more appealing or by 

making the onboarding process easier or more efficient, Ms. Osaki 

October 9, 2013 
341 

acknowledged that account opening via a mobile device is 

generally not currently available and indicated that the white 

paper would, therefore, research reasons for this and discuss 

ways in which mobile technology could improve account opening. 

Next addressing the challenge of sustainability, which Ms. Osaki 

described as simply keeping consumers in the banking system as 

opposed to transitioning in and out, she advised that the paper 

would look at whether and how mobile technology might be able to 

improve safety, transparency, and affordability; whether certain 

MFS features, such as mobile remote deposit capture with 

immediate funds available or person-to-person ("P2P") fund 

transfers would enhance the relevance of products to underserved 

consumers and allow them to meet their day-to-day financial needs 

in ways that reduces their reliance on AFS; whether actionable 

account management information provided by MFS, such as text 

alerts and push notifications, could help consumers avoid fees, 

prevent fraudulent activities, and increase chances for a longerlasting relationship; and whether MFS reduces the costs to banks 

of serving the underserved, thereby increasing the feasibility of 

sustainable relationships from the industry perspective. 

Addressing the final challenge of growth, which she characterized 

as an opportunity for households to increase their financial 

capability and pursue their financial goals, Ms. Osaki advised 

that the white paper would examine whether tools that track 

expenses or perhaps monitor savings goals in real time would turn 

mobile consumers into full bank customers with an opportunity to 

learn about and access a full range of bank products and 

services. Noting that in some cases personal interaction can be 

vital to the success of underserved consumers' banking 

experiences, she indicated that the paper also would explore the 

potential downsides to more digital interaction and less face-toface interaction. 

In conclusion, Ms. Osaki pointed out that there are other 

issues, such as transaction security, that are fundamental to all 

banking services, not just those directed at underserved 

consumers and that such broader issues will certainly underlie 

the framework of the white paper. Regarding the timeline for the 

paper, she advised that staff had already begun the literature 

review and conversations with stakeholders, with plans to have 

the paper completed in early 2014. In furtherance of staff's 

outreach efforts, she asked that Committee members identify 

individuals in their respective organizations who would be good 

resources. 

In the discussion that followed, Committee members offered a 

number of suggestions for the white paper. Mr. Annibale 
342 

suggested that, while its focus is on digital payments, staff 

might want to take a look at a report issued by the Bill & 

Melinda Gates Foundation, entitled Fighting Poverty Profitably: 

Transforming the economics of payments to build sustainable, 

inclusive financial systems. Observing that many emerging 

countries have been quite progressive in introducing regulations 

regarding mobile payments, he also suggested that staff look at 

the international perspective on the concept of materiality and 

the point at which it has been set as well as how one can 

differentiate account opening by limits. As an example, he 

pointed to Citibank's introduction of a mobile banking platform 

in Mexico, which was facilitated by the government's agreement to 

the concept of materiality, which has resulted in a half million 

new accounts for people who did not have bank accounts. He 

underscored the importance of a capping mechanism for those 

accounts depending on the level of Know Your Customer ("KYC") due 

diligence undertaken. Mr. Annibale also pointed out that those 

who get nervous about limited KYC due diligence should keep in 

mind that in a country like Mexico, where the majority of the 

population does not have a bank account and money is nevertheless 

moving every day, the central bank knew very little about where 

most of the cash is going in the absence of a mobile banking 

platform. He stated that at least the mobile banking platform 

produces massive amounts of information on the movement of small 

transactions, which the central bank and other regulators can 

access. Professor Tufano, agreeing with the potential for MFS to 

generate fantastic data, underscored the importance of developing 

rules and regulations in advance that will allow regulators to 

capture the data rather than having it buried inside a 

proprietary system. He also suggested that staff determine what 

lessons can be learned from mobile banking successes and failures 

outside the United States and that, perhaps, it would be useful 

to schedule presentations by representatives of Square and some 

of its competitors that have done interesting things to change 

mobile banking. 

Professor Fuchs emphasized the importance, if it turns out 

that there are linkages, particularly with respect to 

sustainability and growth, of uncovering the value of MFS not 

only to unbanked and underbanked consumers, but to financial 

institutions as well. Mr. Shepherd, noting that there is a real 

competitive issue with respect to insured depository institutions 

and AFS providers, expressed agreement that there should be a 

focus on value, whether it relates to safety, reliability, or 

some other aspect of financial services. Mr. McDonald emphasized 

the need to look at the implications for community banks of 

regulatory oversight and policy and their associated costs, and 

October 9, 2013 
343 

whether policies put in place for MFS products and services spur 

development of software by non-bank providers and how that 

affects the banking system and the movement of money. He also 

noted that Liberty Bank and Trust has implemented technology for 

online banking and lending in accordance with the best practices 

of the FDIC's Small Dollar Loan Pilot and would be happy to 

provide any related information staff needs. Mr. Ryan, also 

addressing the issue of non-bank provider challenges to control 

of the payment system by banks, recognized the tension between 

innovation and stability of the banking system and advised that 

the Conference of State Bank Supervisors was looking at the state 

and federal perspectives on the various touch points in the 

payment system and whether state or federal law should be 

applied, in response to which Mr. Miller indicated that, although 

obviously connected, the issue of non-bank challenges to control 

of the payment system is a broader one than economic inclusion 

and one that is squarely in front of the FDIC and being addressed 

in that broader context. Mr. Eakes suggested that the white 

paper include a section on potential regulatory barriers of 

bringing MFS to scale. 

Next, Keith Ernst, Associate Director, Consumer Research, 

DCP, recalled that in recent Committee meetings, members had 

heard presentations from practitioners who have developed 

innovative efforts to support household savings as well as 

representatives of organizations that have more generally played 

a supportive role; that staff had taken some time to think 

through steps the FDIC could take to support efforts to bolster 

household savings, particularly in liquid, insured accounts; and 

that the point of the panel discussion on FDIC Steps to Support 

Household Savings, was to lay out steps the FDIC could take, to 

identify some of the challenges to success in bolstering 

household savings, and to get member input and feedback on the 

issue. 

For purposes of framing the discussion, Mr. Ernst briefly 

reviewed statistics on household savings, reporting that, as 

shown by the 2011 FDIC National Survey of Unbanked and 

Underbanked Households ("Household Survey"), 30 percent of 

households do not have access to a savings account at an insured 

depository institution; that, as shown by the Federal Reserve 

Board's 2012 analysis of the 2010 Survey of Consumer Finance, 

just under 40 percent of families save regularly, with an 

additional 35 percent saving amounts "left over" at the end of 

the year; and that even among families earning $15,000 to $30,000 

a year, regular savings habits result in very different outcomes 

and resource availability, with regular savers having over $2,200 

October 9, 2013 
344 

in liquid assets, irregular savers having $1,300 in liquid 

assets, and those with no savings habits having less than $250 in 

liquid assets. He further reported that, according to recent 

research by the FINRA Investor Education Foundation, two in five 

consumers self-report an inability to come up with $2,000 in the 

event of an unexpected emergency; that, according to the Survey 

of Consumer Finances, families in the bottom three-fifths of the 

U.S. population have a median amount of $1,500 across all of 

their checking, savings, and other transaction accounts; but 

that, also according to the Survey of Consumer Finances, families 

would like to have more resources available, with households in 

the lowest income quintile identifying a median desired savings 

of $2,000, those in the second income quintile identifying a 

median desired savings of $4,000, and those in the third income 

quintile identifying a median desired savings of $5,000, which 

contrasted significantly with their respective actual median 

account holdings. Finally, with respect to the consequences of 

not having savings and other resources available, he advised that 

2012 research by the Corporation for Enterprise Development 

indicates that 43 percent of Americans could not sustain poverty 

level spending for three months if they faced income disruption; 

and that previous research by the Urban Institute has shown that 

low income families in "liquid asset poverty" are more likely, 51 

percent versus 28 percent, to face hardships such as paying bills 

on time or being able to purchase adequate food, upon a job loss. 

Moving to proposals on challenges to household savings and 

how the FDIC could help address broader adoption of savings 

habits and engagement in the building of liquid assets, along 

with some of the challenges involved, Mr. Ernst first noted that, 

despite the recognition that low household savings is a very 

large problem and the existence of numerous organizations with 

considerable expertise engaged in ongoing efforts to address the 

problem, there are limits to intermediary expertise and capacity. 

He suggested that the FDIC.might help to complement existing 

expertise and capacity by supporting efforts to convene national 

and regional conversations; clarifying technical obstacles, such 

as perceived obstacles arising from customer identification 

program requirements; and identifying and promoting promising 

practices on savings product development and marketing. He then 

noted that for consumers, savings is a difficult habit to 

sustain, particularly for households that have volatility in 

earnings and expenses, but suggested that there may be a role for 

the FDIC to develop branded materials, including mobile and 

internet capabilities, to motivate consumers, to clarify and 

simplify choices, to assist in developing a regular savings plan, 

and to help position consumers to have success in their savings 

October 9, 2013 
345 

commitments. Next, he noted that it is sometimes difficult for 

potential for-profit partners to see the opportunities they may 

realize by promoting savings to households and suggested that 

there exists an opportunity for the FDIC to motivate partners by 

conducting research into the benefits that may flow to 

institutions that promote positive savings options to consumers; 

by conducting and highlighting research, by the FDIC and others, 

into the best practices around savings programs design and 

marketing; and by clearly and consistently speaking to 

institutions about opportunities to promote savings. Finally, he 

pointed to the challenge of raising awareness among civic and 

community leaders, which he suggested the FDIC could help to 

address by enhancing some of its current data collection efforts, 

as well as by developing a communications strategy to detail 

current savings rates and identify opportunities to encourage 

strong savings habits and the benefits of such habits. He then 

opened the floor to Committee member thoughts and comments. 

During the ensuing discussion, Committee members offered a 

number of observations and suggestions, with Ms. Levere 

suggesting that it would be critical to think about what 

platforms are used to encourage savings behavior; how to build in 

savings defaults at every possible opportunity, beginning at an 

early age; how to align policy such that savings is incented in 

powerful ways; and how to formulate messages about savings in a 

way that is really informative and transforms people's 

perspectives. Mr. Weicher observed that when they first join the 

labor force, cars and checking accounts are the first assets 

obtained by most people, followed in five to 10 years by a house 

and a 40l(k) account, none of which provides much in the way of 

flexibility to address emergency situations; and suggested, 

therefore, that there is a need to revive the idea of a 

traditional savings account. Professor Tufano, noting that 

behavioral scientists have long documented the impact of a lack 

of resources on decision making, recommended that staff review 

consider the findings of a book by Eldar Shafir and Sendhil 

Mullainathan entitled, Scarcity: Why Having Too Little Means So 

Much, which shows that scarcity of financial resources reduces 

the mental bandwidth available to address other needs and, 

therefore, contributes to poor decision making. Mr. Cisneros, 

noting that there is obviously exciting research ahead, suggested 

that its real value would come down to when the information is 

transmitted to the people who need to hear it, understand it, and 

act upon it, which relates to the issue of how the FDIC can get 

civic leaders involved. Pointing to the large contingent of Bank 

On cities, he cited the Bank On and similar programs as potential 

platforms for easily integrating messages on household savings. 

October 9, 2013 
346 

Mr. Annibale observed that simply promoting savings in its own 

right is not convincing enough and suggested that savings needs 

to be tied to the issue of household vulnerability. He also 

suggested that in addressing liquid asset poverty, there is a 

need to find the right language so that it is inclusive of the 

wider percentage of the population that is vulnerable to a lack 

of savings, such as the elderly whose equity is trapped in their 

homes, without being offensive. 

Mr. Orozco stated that he had several concerns, including 

the need to better identify the importance of savings as 

instrumental to asset building; the need to better identify the 

targeted consumer segments, including the elderly, people in the 

criminal justice system, young adults between the ages of 18 and 

25, and rural populations, and to address their respective 

specific realities; and the need to identify ways to leverage 

daily transactional activity as entry points for asset building 

purposes. Mr. Boston observed that many of those in liquid asset 

poverty are the beneficiaries of federal, state, or other 

municipal assistance programs that include asset limitations 

among their eligibility criteria and suggested that, unless the 

policy implications of such restrictions are addressed, it will 

be difficult to have a major impact on a core group of consumers. 

Ms. Levere, noting that asset limitations differ at the federal 

level and from state to state level and that the Corporation for 

Enterprise Development has a wealth of information on the various 

limitations, offered to share whatever information staff may want 

on the topic. Rev. Dr. Flake suggested that, to the extent 

possible, it would be important for staff to also take into 

consideration the impact of fear and mistrust of financial 

institutions on efforts to save and on establishing banking 

relationships. 

Chairman Gruenberg then announced that the meeting would recess 

for lunch. Accordingly, at 12:14 p.m., the meeting stood in 

recess. 

* * * * * * * 

The meeting reconvened at 2:01 p.m. that same day, whereupon 

Chairman Gruenberg requested that Mr. Ernst introduce the 

presenters for the last panel of the day. 

Mr. Ernst observed that the Committee has spent a great deal 

of time exploring the issue of access to banking relationships 

and indicated that the afternoon panel would delve into the 

fundamental relationship of institutions to consumers in terms of 

October 9, 2013 
347 

branch locations and the constituencies institutions are reaching 

directly through those branches and through their lending 

activities. He then introduced panelists Karyen Chu, Chief, 

Consumer Research and Examination Analytics Section, DCP, and 

Kris Rengert, Senior Consumer Researcher, DCP, advising that Ms. 

Chu would discuss the impact on communities of MDis and Mr. 

Rengert would present more fundamental information about the 

catchment area of bank branches. He cautioned that the 

presentations, particularly Mr. Rengert's, were not intended to 

provide final answers, but to provide staff's current thinking on 

the issues and to help the FDIC and the Committee transition into 

thinking about where there might be programmatic opportunities to 

address areas that have limited branch access. 

Ms. Chu began her presentation by explaining that the FDIC 

has long recognized the importance of MDis and has historically 

taken steps to preserve and encourage minority ownership of 

insured financial institutions; that the FDIC defines MDis as 

federally insured depository institutions in which 51 percent or 

more of the voting stock is owned by minority individuals, or if 

a majority of the board of directors are minority individuals and 

the institution serves a predominantly minority community; and 

that the information she was about to present was being conducted 

in support of the FDIC's study of MDis and community development 

financial institutions ("CDFis") slated for release later in the 

year. She then reported that, in 2011, there were 185 MDis, 

nearly 50 percent, or 92, of which were Asian/Pacific Islander 

MDis, 42 of which were Hispanic White MDis, and 30 of which were 

African American MDis; and that the majority of MDis are small in 

asset size, with, for example, 53 percent of African American 

MDis in 2011 having less than $100 million in assets, as compared 

to 35 percent of non-MDI community banks, and 100 percent of 

African American MDis in 2011 having less than $1 billion in 

assets. 

Ms. Chu next explained that in order to examine MDis' impact 

on communities, staff needed to identify the geographic 

communities served by each bank and that unfortunately, the FDIC 

does not have information on every bank's market area or even 

every bank's CRA assessment area because only larger institutions 

have to report their CRA assessment area information. She stated 

that, for purposes of the impact analysis, staff had adopted the 

novel approach of estimating a service area for each bank based 

on what she characterized as a "reasonable distance" for each 

metropolitan statistical area ("MSA") and state non-MSA area, 

which is the distance for a particular MSA that, if traveled by 

90 percent of the people in that area, would result in access to 

October 9, 2013 
348 

at least one bank branch, with the reasonable distance for New 

York being much shorter than the reasonable distance for Montana, 

and then defining a bank's service area as the geography that 

lies within the reasonable distance around each of its branches. 

Continuing, she advised that looking at the estimated service 

area of each bank, the data indicate that the estimated service 

areas of MDis have higher shares of populations living in LMI 

census tracts. As an example, she reported that an 

extraordinarily high 70 percent of the population in the 

estimated service area for the median African American MDI lived 

in LMI tracts in 2011; and that the percentages also are higher 

for the median Asian/Pacific Islander and median Hispanic White 

MDis, as compared to the median non-MDI, regardless of whether or 

not the non-MDI is a community bank, with only 24 percent of the 

population of the median non-MDI, non-community bank living in 

LMI census tracts. 

Noting that access to bank branches is important to 

facilitating household access to major financial services, Ms. 

Chu advised that not only do MDis tend to locate in communities 

in which more people live in LMI census tracts but, among 

institutions that reported Home Mortgage Disclosure Act ("HMDA") 

data, MDis originated a greater share of their residential 

mortgages to borrowers who live in LMI census tracts, as compared 

to non-MDis. As an example, she pointed out that, when looking 

at data for 2011, the median African American MDI made 52 percent 

of its residential mortgage loans to residents of LMI census 

tracts, the median Asian/Pacific Islander MDI made 25 percent of 

its loans to residents of LMI census tracts, and the median 

Hispanic White MDI made 17 percent of its loans to residents of 

LMI census tracts, as compared to nine percent for the median 

non-MDI, whether the non-MDI was a community bank or a noncommunity bank. She also advised that the HMDA data show that 

MDis have been successful in their mission to serve minority 

communities, with all MDis having originated a greater share of 

their residential mortgages to minority borrowers, compared with 

non-MDis. As an example, she noted that African American MDis 

reported for 2011 that almost 67 percent of the median share of 

mortgage loans were originated to African American borrowers; 

that, despite the fact that MDis make a much larger share of 

their mortgages to minority borrowers, they generate very few 

residential mortgages, with the median African American MDI 

having originated a total of 14 mortgages in 2011; and that the 

share of mortgage loans originated by African American MDis to 

African American borrowers was actually higher than the ratio of 

African Americans to the total population in their estimated 

service areas. In conclusion, she echoed Mr. Ernst's statement 

October 9, 2013 
349 

that the results were very preliminary and represented a first 

cut examination of some of the trends and patterns for MDis, and 

indicated that staff would welcome the Committee's feedback. 

Mr. McDonald, based on his knowledge that Liberty Bank and 

Trust by itself originates approximately 600 mortgages a year and 

his familiarity with the rates at which other MDis originate 

mortgages, questioned data that show that the median African 

American MDI originated only 14 mortgages in 2011. He 

highlighted the challenges for MDis with respect to mortgage 

originations, including the difficulty of getting investors to 

buy their mortgages, the resulting higher prices and additional 

fees and overlays, and even then, the need to keep more of their 

loans on the books rather than selling them in the secondary 

mortgage market, and emphasized the importance of making certain 

that the data is correct. In this regard, he offered to work 

with staff, in response to which Ms. Chu noted that the data was 

based only on HMDA reporters; that small banks do not meet the 

reporting threshold; and that staff would nonetheless review the 

numbers and, perhaps, return to the Committee with a fuller 

explanation beyond just median measurements. Mr. McDonald also 

underscored the issue of non-MDis taking in deposits, but not 

lending back to the community, and Mr. Murphy suggested that 

perhaps majority institutions can learn from the example of MDis 

to generate more mortgage loan production in LMI areas. 

The remainder of the discussion centered on concerns 

regarding the dwindling number of MDis in particular and small 

community banks in general, as well as the many challenges facing 

those institutions. Mr. Eakes took note of the decrease in the 

number of African American MDis from 45 in 2006 to 30 in 2011, 

the number of such institutions that are underperforming, and the 

lack of new African American MDI bank charters in sufficient 

numbers to compensate for those that have closed, in response to 

which Chairman Gruenberg stated that the FDIC, along with the 

other bank regulatory agencies, is subject to a statutory mandate 

to provide support and assistance to MDis, and that, in 

furtherance of that mandate, the FDIC had appointed Robert W. 

Mooney as its National Director of Minority and Community 

Development Banking. Mr. Mooney added that each of the banking 

agencies have a program to provide technical assistance to MDis; 

that the FDIC's program is very robust, with MDI Coordinators in 

each of eight regions to provide technical assistance in a 

variety areas with the aim of improving overall performance; and 

that, among the assistance offered, are regional roundtables for 

the CEOs of MDis to come together to make recommendations on 

program improvement. Mr. Boston expressed concerns regarding the 

October 9, 2013 
350 

impact of the dwindling number of MDis on business loans, in 

response to which Ms. Chu advised that the FDIC has looked at 

commercial and industrial lending and commercial real estate 

lending by MDis and that MDis do tend to make more of such loans 

as a greater share of their assets than mortgage loans, but that 

the FDIC's ability to determine which geographic areas are the 

locus of the loans is limited because of a reliance on commercial 

real estate data that is not reported by most MDis due to their 

small asset size. 

With respect to the challenges faced by small institutions 

generally and MDis in particular, Mr. McDonald pointed to the 

challenge of toxic assets, the difficulty MDis face in attracting 

investors to buy their mortgages, and having to keep more of 

their loans in-house rather than selling them on the secondary 

mortgage market, and suggested that perhaps the data being 

gathered by_the FDIC could shed some light on the various issues 

related to mortgage lending in low census tract areas. Mr. 

Murphy suggested that perhaps larger institutions could learn 

from what the MDis are doing in the mortgage arena with an eye 

toward more loan production in LMI areas. Mr. Eakes also 

underscored the difficulties of small institutions in 

diversifying their assets, making loans due to the low spread on 

idle funds, and developing the technology to engage in the mobile 

banking arena, and suggested that the answer to those challenges 

might lie in finding a technology partner that can help bring 

economies to the scale of electronic fund transfer networks and 

an ability for an institution, for a temporary period, to buy 

whole lines from another institution. In response, Mr. Mooney 

advised that in June 2013, the FDIC hosted an Interagency 

Minority Depository Institution and CDFI Bank Conference, with 

the intent of facilitating collaborations and working 

partnerships among MDis, larger banks and non-banks, other 

institutions, and government agencies; that the conference had 

been particularly successful in facilitating collaborations and 

partnerships, with many new partnerships formed and announced as 

recently as the previous week at the National Bankers Association 

Conference; and that discussions had ranged from developing 

partnerships for the smaller MDis to collaborate with each other 

to achieve economies of scale for back office operations, to 

reduce expenses, and improve overall net interest income, to 

partnering with each other to develop products and services that 

they might not be able to offer individually. He also pointed 

out that many MDis, rather than looking for the highest 

profitability, are more focused on providing social services, an 

expectation shared by their investors and their customers; that 

their margins tend to be narrower than other institutions and, 

October 9, 2013 
351 

with some success, they are seeking out partners that can assist 

with improving those margins; and that looking ahead, given that 

many of them serve the communities hardest hit by the financial 

crisis, it is very important for those institutions to not only 

improve their performance, but to seek new modes of survival. 

Finally, he noted that, when an MDI is projected to fail, the 

FDIC works very hard to find a merger partner that preserves the 

minority character of the area being served by the successor 

institution. Professor Fuchs and Ms. Levere suggested that staff 

take a look at communities served by MDis that closed, perhaps 

including a map showing the locations of MDis in 2006 and 2011, 

and at what has since happened in those communities as it relates 

to mortgage rates. 

Mr. Ernst then expressed appreciation for the critical 

engagement by Committee members and the value of their comments 

in giving staff items for further thought and questions to 

address, and advised that staff would return to the Committee 

with additional information on the topic. 

Then, Mr. Rengert provided a brief overview of his 

presentation, advising that he would first introduce the concept 

of communities with relatively low access to bank branches, 

operationalizing the concept to explain how staff identified 

those communities; that he would then provide a look at those 

communities in terms of the characteristics of the populations; 

and that, finally, he would discuss policy relevance and what the 

FDIC would do going forward to build on the initial research. 

Addressing the motivation for the research, he indicated that 

staff wanted to better understand the locations and 

characteristics of underserved households and to focus on 

examining communities with relatively low access to bank 

branches, one important channel among many through which 

households access financial services. He defined relatively low 

access as communities, or census tracts, that are farther from a 

bank branch than tracts in the bottom 10 percent of their 

metropolitan or state's non-metropolitan area, with distance 

measured from the center of the census tract to the nearest bank 

branch; identified the source of data used for the research as 

coming from the FDIC's Summary of Deposits database and the U.S. 

Census Bureau's American Community Survey data; explained 

"reasonable distance" as the distance at which 90 percent of the 

population for each metropolitan and state non-metropolitan area 

would reach at least one bank branch if they traveled that 

distance from their community, with the community being the 

center of the census tract; and pointed out that this definition 

of reasonable distance is different from that used by other 

October 9, 2013 
352 

studies that designate a specified distance, regardless of the 

community. Noting that reasonable distance was calculated for 

each of the 300 metropolitan and each of the 50 state nonmetropolitan areas in the country, Mr. Rengert reported that 

there were significant variations, with the reasonable distance 

for metropolitan areas ranging from a low of 0.6 miles for New 

York City to a high of 23.2 miles for Flagstaff, Arizona. 

Finally, he explained that low access census tracts were those 

with no bank branch inside the census tract and no bank branch 

within a reasonable distance of its center. 

Next providing a look at low access communities, Mr. Rengert 

advised that computer analysis of the country's 72,000 census 

tracts revealed that just over 6,000 of them are low access 

tracts, with most of them, not surprisingly, being metropolitan; 

and that, interestingly, 7.5 percent of the total U.S. population 

lives in a low access tract, 7.5 percent of metropolitan 

populations live in a low access tract, and 7.3 percent of rural 

area populations live in a low access tract. He noted, however, 

that at the individual state level, there are significant 

variations, with the share of the population living within a low 

access tract statewide ranging from a high of 10 percent in South 

Carolina to a low of just over two percent in Nebraska; with the 

share of rural area populations living within a low access tract 

ranging from a high of just over ten percent in Arizona to a low 

of under one percent in Nebraska; and with the share of 

metropolitan area populations living within a low access tract 

ranging from a high of 10.5 percent in West Virginia to a low of 

just under two percent in North Dakota. He shared with Committee 

members a series of maps showing the ratio of state populations 

living in low access tracts to the U.S. population living in low 

access tracts; the share of populations living in LMI tracts for 

both metropolitan and non-metropolitan areas; the minority share 

of populations in low access metropolitan and non-metropolitan 

tracts; the share of populations living in homes where English is 

not spoken well for both metropolitan and non-metropolitan 

tracts; and the share of the adult population with less than a 

high school degree for both metropolitan and non-metropolitan 

tracts. Highlighting a few of the larger patterns shown by the 

maps, he noted that a significantly lower share of the population 

in a huge region of the Midwest and the Plains live in low access 

tracts than the country as a whole, but that a significantly 

higher share of the population in the Southwest and Southeast 

live in low access tracts than the country as a whole; that low 

access metropolitan tracts tend to be relatively better off than 

low access non-metropolitan tracts, with lower minority share, a 

smaller share of the adult population with less than a high 

October 9, 2013 
353 

school diploma, and less likelihood of being in low income areas; 

and that there is a dramatically different relationship between 

low access tracts and non-low access tracts in metropolitan areas 

versus non-metropolitan areas when looking at the variables of 

LMI tracts, minority share of the population, share of the 

population in homes where English is not spoken well by adults, 

and share of the adult population with less than a high school 

degree, with even stronger differences at individual state 

levels. 

Summarizing the key takeaways from staff's initial research, 

Mr. Rengert advised that the broad diversity that is apparent 

when looking at state level patterns for low access and non-low 

access tracts is masked at the national level; that metropolitan 

and non-metropolitan tracts appear substantially different when 

compared to their non-low access tract counterparts; and that the 

initial research provides a foundation further examination to 

better understand the characteristics of low access tracts across 

the country. He identified as next steps a more sophisticated, 

multivariate analysis to pinpoint variables associated with low 

access tracts and develop a typology of low access tracts, with 

the goal of developing an understanding of different types of low 

access tracts in different types of locations, with different 

types of populations. 

Next addressing the policy relevance of the research, Mr. 

Rengert stated that, ultimately, the research would aid 

understanding of the wide variety of very different communities 

with very different needs, and help influence policy decisions 

and inform efforts to improve the delivery of financial services 

to underserved communities. By way of example, he pointed out 

that some low access tracts are relatively affluent and it would 

be reasonable to conclude that the residents of such communities 

are suitably served by banks and other financial service 

providers, with such tracts including affluent exurban 

communities with limited commercial services overall and 

relatively affluent metropolitan communities with highly educated 

residents who are likely to use remote banking. On the other end 

of the spectrum, he pointed out that other low access tracts with 

lower-income and certain other kinds of populations are more 

likely to be negatively impacted by low access to bank branches, 

with such tracts including communities in rural or metropolitan 

areas with concentrations of lower income residents with low 

education levels and communities with concentrations of lowerincome immigrant families. In conclusion, he suggested that, 

ultimately, understanding the different types of low access 

tracts should facilitate strategically targeted efforts to 

October 9, 2013 
354 

support the provision of financial services to the underserved 

populations. 

In the brief discussion that followed, Committee members 

asked for and received clarification on the calculation of 

reasonable distance, subsequent to which Mr. Eakes inquired 

whether staff's research could be used to make state comparisons, 

for example, between the bottom 10 percent of access in South 

Carolina and the bottom 10 percent of access in a wealthier state 

such as Connecticut. In response, Mr. Rengert indicated that the 

research only makes comparisons between one group of residents in 

a state to another group of residents in that same state, and Mr. 

Ernst indicated that the research framework presents challenges 

when it comes to contrasting the overall experiences in one state 

to the overall experiences in another state. Professor Tufano 

stated that it appeared that the research was based on an 

assumption that where someone lives is more relevant than where 

they work or where they transit, which is useful if the relevant 

point of interest is mortgage lending; and suggested that, for 

different points of interests, there exists a host of data, such 

as mobile phone records that show the actual real-time location 

of people, that would allow answers to slightly different 

questions. Mr. Ernst, in response, indicated that there is some 

publicly available, non-proprietary data on commuting patterns in 

the country and other kinds of data sets that were worth looking 

into and that might have some value to the research effort. In 

answer to a question by Mr. Ryan as to whether there is any 

overlay of the information on access to bank branches on the 

state-by-state data from the Household Survey, Mr. Ernst advised 

that staff was not yet at that point in its analysis, that staff 

needed to get more comfortable understanding the measurement of 

reasonable distance, but that it could be very interesting to 

take a look at it at some future point. 

Chairman Gruenberg asked Mr. Murphy and Mr. Shepherd how 

important branch networks are for their respective institutions 

and whether they anticipated the level of importance would remain 

the same five years down the road. Mr. Murphy responded that 

KeyBank believes having a branch network is absolutely critical 

as a physical presence or an anchor to help customers and 

potential customers relate to the institution, but that the 

issues are how many branches are necessary, what they should look 

like, and how to more efficiently deliver products and services 

through multiple channels. Mr. Shepherd expressed agreement that 

Bane of the West needs branch representation, but advised that 

there may be fewer branches in some communities, although new 

branches may be opened in other communities; that the bank sees 

October 9, 2013 
355 

value with its multi-channel delivery system in being present and 

interacting with customers in their preferred manner of 

conducting business; and that the uses customers make of branches 

has shifted from routine transactions to more sophisticated 

inquiries and problem solving, which impacts branch personnel 

training and other factors as the institution shifts its model to 

customer traffic patterns. Mr. Cisneros added that branch access 

is also important when it comes to competing for new customers 

and relationships. 

Chairman Gruenberg then advised that staff would follow up 

with the Committee on the issues addressed in the morning panels 

of youth financial education, mobile financial services; and to 

report on the interest expressed by both money center and large 

regional institutions in offering transaction accounts consistent 

with the FDIC's Model Safe Accounts template. He observed that 

the key issues on which the Committee has focused its attention, 

whether they be safe transaction accounts, savings accounts, 

small dollar loans, mobile financial services, or financial 

education, really are very connected and very much a part of the 

fabric of access to financial services; and that fitting the 

pieces together helps to create a broader picture of the 

challenges and how they relate to one another, and truly 

underline the value of the Committee's work. He again thanked 

Committee members for taking the time to participate. 

There being no further business, the meeting was adjourned. 

Robert E. Feldman 

Executive Secretary 

Federal Deposit Insurance 

Corporation 

And Committee Management Officer 

FDIC Advisory Committee on Economic 

Inclusion 

October 9, 2013 
Minutes 

of 

The Meeting of the FDIC Advisory Committee on Economic Inclusion 

of the 

Federal Deposit Insurance Corporation 

Held in the Board Room 

Federal Deposit Insurance Corporation Building 

Washington, D.C. 

Open to Public Observation 

October 9, 2013 - 9:08 A.M. 

I hereby certify that, to the best of my knowledge, the attached 

minutes are accurate and complete. 

~i-~ Martin J. Gr nberg 

Chairman 

Board of Directors 

Federal Deposit Insurance Corporation