55

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

February 5, 2 a a 9 - 8: 3 a A. M .

The meeting of the FDIC Advisory Committee on Economic

Inclusion (UComE-IN" or UCommittee") was called to order by ComEIN Chairman Diana L. Taylor.

The members of ComE-IN present at the meeting were: Diana L.

Taylor, ComE- IN Chairman and immediate past New York State

Superintendent of Banks; Ted Beck, President and Chief Executive

Officer, National Endowment for Financial Education; Kelvin

Boston, President, Boston Media, LLC; Martin Eakes, Chief

Executive Officer, Self-Help Credit Union, Durham, North

Carolina; Lawrence K. Fish, Chairman , Citizens Financial Group,

Inc.; 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; Ronald

Grzywinski, Chairman, ShoreBank Corporation of Chicago; Wade

Henderson, Executive Director, Leadership Conference on Civil

Rights; Alden J. McDonald, Jr., President and Chief Executive

Officer, Liberty Bank and Trust, New Orleans, Louisiana; John W.

Ryan, Executive Vice President, Conference of State Bank

Supervisors; Peter Tufano, Sylvan C. Coleman Professor of

Financial Management, Harvard Business School, and Senior

Associate Dean and Director of Faculty Development; Elizabeth

Warren, Leo Gottlieb Professor of Law, Harvard Law School; and

Deborah C. Wright, Chairman and Chief Executive Officer, Carver

Federal Savings Bank, New York, New York. Roberta K. McInerney,

Designated Federal Officer for the Committee and Federal Deposit

Insurance Corporation (UCorporation or FDIC") Acting General

Counsel, was also present at the meeting. Committee members

Manuel Orozco, Senior Associate at the Inter-American Dialogue,
56

and Senior Researcher, Institute for the Study of International

Migration, Georgetown University; and Maria Otero, President and

Chief Executive Officer, ACCION International, were absent from

the meet ing .

Members of the Corporation's Board of Directors present at

the meeting were Sheila C. Bair, Chairman, and Martin J.

Gruenberg, Vice Chairman. Corporation staff who attended the

meeting included Ruth R. Amberg, Valerie J. Best, Lee Bowman,

Susan E. Burhouse, Christine M. Davis, M. Alise DeLeon, Diane L.

Ellis, Robert E. Feldman, Tiffany K. Froman, Leneta G. Gregorie,

Angelisa M. Harris, William F. Harral, Alan W. Levy, Rae-Ann

Miller, Skip Miller, Tariq A. Mirza, Robert W. Mooney, Pamela C.

Nelson, Janet V. Norcom, Debra L. Novak, Sylvia H. Plunkett, Luke

W. Reynolds, Claude A. Rollin, Barbara A. Ryan, Katherine A.

Samolyk, Jesse o. Villarreal, Cathy Wright, and Nann E. Wright.

Ed Bachelder, Director of Research, BlueFlame Consulting,

LLC; Michael Barr, Professor, Uni versi ty of Michigan Law School;

Dora I. Brown, Senior Vice President, International Bank of

Commerce, Laredo, Texas; Mary Dupont, Executive Director,

Nehemiah Gateway CDC; Bruce Gotschall, Executive Director,

Neighborhood Housing Services of Chicago; James P. Maloney,

Chairman, Mitchell Bank, Milwaukee, Wisconsin; Charles Martin,

CRA Officer, M&T Bank, Oakfield, New York; Peter Mosbacher,

Senior Vice President, Amalgamated Bank, New York, New York;

Victor Ramirez, Community Relations Officer, Ci tibank, National

Association, Las Vegas, Nevada; Mary Jane Town, Senior Vice

President & Director of Marketing, Monroe Bank and Trust, Monroe,

Michigan; and James E. Young, President & CEO, Citizens Trust

Bank, Atlanta, Georgia, were also present at the meeting.

Committee Chairman Taylor opened and presided at the

meeting. After Committee Chairman Taylor welcomed ComE-IN

members and provided an overview of the meeting agenda, Chairman

Bair provided an update on the status of initiatives arising from

previous meetings of the Committee, including progress on the

Corporation's affordable small-dollar loan pilot; progress, in

coordination with the Financial Crimes Enforcement Network, on

obtaining more clarity on what constitutes a money service

business (UMSB") and the regulatory requirements for financial

institutions doing business with an MSB; progress, working with

Peter Tufano and others, to explore the potential for leveraging

state lotteries to encourage saving and the extent to which

financial institutions can playa role in prize-linked savings

programs; and the Corporation's issuance, on September 4, 2008,

of a Financial Institution Letter on Best Practices from the

FDIC's Forum on Mortgage Lending for Low- and Moderate-Income

Households. Chairman Bair further reported that the Committee's

February 5, 2009
57-'"

early advocacy for wide-scale restructuring of troubled mortgages

seemed to be gaining momentum, with the Corporation having

pioneered a systematic loan modification protocol at IndyMac

Federal Bank, F.S.B., Pasadena, California, and having developed

and posted on the Corporation's web site a Loan Modification

Program Guide (also known as uMod-in-a-Box") for use by other

mortgage servicers. She then concluded her update on economic

inclusion initiatives by calling attention to the Corporation's

recently completed survey on Banks' Efforts to Serve the Unbanked

and Underbanked (UBank Survey"), the results of which she

indicated would be presented by members of the first meeting

panel, moderated by Barbara A. Ryan, Deputy to the Vice Chairman.

After introducing her fellow panelists, Ed Bachelder,

Director of Research, BlueFlame Consulting, and Michael Barr,

Professor, Uni versi ty of Michigan Law School, Ms. Ryan provided a

brief overview of the Bank Survey, noting that the survey was

mandated by the Federal Deposit Insurance Reform Conforming

Amendments Act of 2005 (UReform Act"), which requires that the

Corporation conduct biennial surveys on the efforts of insured

depository institutions to serve the unbanked, report to Congress

on survey findings, and make recommendations for appropriate

legislative action; and that the survey goals were to identify

the extent to which banks are serving the banking needs of the

unbanked and underbanked, challenges affecting the ability of

banks to serve those populations, and innovative efforts used by

banks to meet the financial services needs of the unbanked and

underbanked. She also noted that the Reform Act requires the

Corporation to provide a fair estimate of the size and worth of

the unbanked market, which she indicated was being explored in a

separate study conducted jointly with the Bureau of the Census as

a supplement to its January 2009 Current Population Survey, with

anticipated publication of survey results in the second half of

2 a a 9. wi th respect to the Bank Survey, Ms. Ryan provided

prel iminary background on the survey design, methodology, and

response rates; the case studies of 16 participating banks that

highlighted innovative efforts to serve the unbanked and

underbanked; and the high-level survey findings. Among the highlevel findings she identified were that most banks are aware of

significant populations of unbanked and underbanked in their

service areas, yet relatively few have made it a priority to

target those markets; that many banks offer some basic financial

education materials, but fewer engage in the types of outreach

efforts identified by the banking industry as most effective; and

that, while most banks offer basic checking and savings accounts

to all customers, few offer the types of products that are

specifically tailored to the needs of unbanked and underbanked

customers.

February 5, 2009
58

Next, Mr. Bachelder expanded on the survey methodology and

the survey findings, including the most effective outreach

methods , perceived challenges to serving the financial services

needs of the unbanked and underbanked, services provided for noncustomers who may be unbanked or underbanked, and account opening

policies and practices. Regarding survey findings, he reported

that participants identified effective outreach methods, in order

of most effective to least effective, as providing financial

education sessions, participating with other organizations to

offer financial services, outreach to employers and community

organizations, financial education materials, and targeted

marketing; and that participants identified challenges to serving

unbanked and underbanked individuals, in rank order, as profi tabili ty issues, regulatory barriers, fraud concerns, the

high cost of customer acquisition, and competition from

al ternati ve service providers. Mr. Bachelder further indicated

that, because of regulatory concerns about providing payment

services to non-customers, most participants limited such

services to cashing checks drawn on the bank itself, with only

slightly more than a third offering bank checks or money orders

and only 6 percent offering international remittances; that

account opening requirements, including third-party check screens

and acceptable forms of identification, present significant

obstacles to establishment of banking relationships with the

unbanked; and that, while most banks offer basic checking

accounts, with free check writing and no minimum balance

requirement, the overwhelming maj ori ty charge a per- item

overdraft fee.

wi th respect to recommendations arising from the survey, Ms.

Ryan advised that the Corporation's recommendations in its report

to Congress would include defining as a shared governmentindustry goal a reduction in the number of unbanked and

underbanked individuals and households in the United States, with

possible creation of a national task force to provide oversight

and guidance and reliable and regular reporting of statistics on

the number of unbanked and underbanked households.

Professor Barr then offered more specific recommendations

for industry and government action. On the industry side, he

suggested that the banking sector focus on developing and

offering products uniquely tailored to the financial services

needs of low-income households based on a deeper understanding of

what works for that population, with emphasis on efficient

mechanisms for receipt of income, and systems that facilitate

saving, particularly building a cushion for emergencies, and

safer, lower-cost credit products. On the government side, he

suggested a re-evaluation of the funds availability policy;

encouraging smaller insured financial institutions to offer

February 5, 2 a 09
59

direct deposit for firms with which they do business and

encouraging smaller firms to offer it to their employees;

expansion of the work already accomplished by states in the area

of electronic benefits transfers, with more emphasis on

development of automatic savings plans and provision of other

services needed by low-income individuals and households;

modification of the service test under the Community Reinvestment

Act (UCRA") to recognize innovation in development of products

and services that meet the financial services needs of low-income

individuals and households; establ ishment by the Internal Revenue

Service, through a consortium of participating banks, of accounts

for direct deposit of tax refunds for low- income individuals

wi thout bank accounts receiving the earned income tax credit; and

establishment of a tax credit for insured financial institutions

offering safe and affordable accounts to low- and moderate-income

(ULMI") consumers to offset the profitability issues associated

wi th such accounts.

Concluding the presentation, Ms. Ryan identified and thanked

the members of the team of Corporation employees who worked on

the survey. Vice Chairman Gruenberg also thanked Mr. Bachelder,

Professor Barr, and members of the Corporation team for their

outstanding work and underscored the opportunity presented for

the Corporation to expand available information on the unbanked

and underbanked populations and to facilitate development of

meaningful responses that have a positive impact on their access

to financial services.

During the discussion that followed, Committee and panel

members explored, among other things, the extent to which early

financial education, at the elementary, middle, and high school

levels would serve to decrease the numbers of unbanked and

underbanked; the irony of the Check Clearing for the 21st Century

Act (UCheck 21") having exacerbated the issue of funds

availabili ty; the tension between a national goal of reducing the

number of unbanked and underbanked and the prevalence of

overdraft fees; and possible features of a safe and affordable

bank account for the unbanked and underbanked. Regarding

features of a safe and affordable account, Professor Barr

suggested that, rather than a checking account with an overdraft

facility, such an account would be debit-card based; have an

electronic direct deposit mechanism for receipt of income,

including state and federal benefits; include an automatic

savings feature that is harder to access than other funds; and,

perhaps, provide access to a small-dollar loan product. With

respect to Professor Barr's earlier recommendation for tax

incentives to encourage bank-provided financial services to meet

the needs of the unbanked and underbanked, Alden J. McDonald,

Jr., President and Chief Executive Officer, Liberty Bank and

February 5, 2009
60

Trust, New Orleans, Louisiana, suggested an alternative might be

a credit against deposit insurance assessment fees.

Ms. Ryan, continuing to act as moderator, next provided an

overview of the second panel, which she indicated would highlight

some of the successes of case study banks in working with their

communities to open deposit accounts, provide small-dollar loans,

and deliver financial education. She introduced as members of

the panel James P. Maloney, Chairman, Mitchell Bank, Milwaukee,

Wisconsin; Peter Mosbacher, Senior vice President, Amalgamated

Bank, New York, New York; Victor Ramirez, Community Relations

Officer, Citibank, National Association, Las Vegas, Nevada; and

Mary Jane Town, Senior Vice President & Director of Marketing,

Monroe Bank and Trust, Monroe, Michigan.

Mr. Maloney began by providing a brief overview of the

history and operations of Mitchell Bank, noting that the bank is

one of 31 participants in the Corporation's Small-Dollar Loan

Pilot program. He then identified the features of the smalldollar loan offered by Mitchell Bank, which he observed were

patterned after those recommended by the Corporation, advising

that initially the loans were offered only to bank customers, but

have since been offered to non-customers and ITIN (income tax

identification number) borrowers; that the loan amounts range

from $300 to $1,000, with terms of six to 12 months; that the

loans include a required savings component, with 10 percent of

the loan amount placed into a designated savings account, paying

a higher than normal interest rate; that loan underwriting is

highly streamlined, requiring a credit report and verification of

income of at least $1,000; and that applicants with credit scores

below 570 are offered a loan if they complete a one-hour session

with a credit counselor and establish a budget. With respect to

ITIN borrowers, Mr. Maloney advised that borrowers are required

to open a direct deposit account and are offered a reduced

interest rate if they allow automatic loan payments from the

account. He concluded by expressing his belief that the

challenges associated with small-dollar loans, such as state and

federal consumer protection laws, are surmountable.

Mr. Mosbacher provided a brief overview of the history and

operations of Amalgamated Bank, and a discussion of the

incentives provided by New York State's special banking

development districts for creation of partnerships with local

government agencies and community-based organizations to locate

in and develop products and services to meet the needs of lowincome, underbanked, and underserved areas. He then explained

several of the bank's economic inclusion initiatives, including

its Second Chance Account, designed to help individuals who have

learned from previous mistakes, get back into the banking system,

February 5, 2009
61

which can be opened for as little as $5 for savings and $.01 for

checking, and requires no minimum balance after opening, offers

no bounce protection, and provides only for issuance of an ATM

card; its uBank on California" initiative which, in partnership

wi th various local and state offices, financial institutions,

state and federal regulatory agencies, and community

organizations, aims to help the unbanked in California to enter

the financial mainstream by opening starter bank accounts; its

Money Sense Financial Education Program, developed in partnership

with the New York-based Coalition for Debtor Education, which has

a strong focus on behavioral finance, is offered at community

centers and churches, and which, upon completion, offers

participants a $50 coupon that can be redeemed after establishing

and maintaining in good standing for one year a new checking

account. Mr. Mosbacher ended his presentation by discussing some

of the specifics of a few of Amalgamated Bank's partnerships with

unions, governments, and community based organizations, and the

highlights of Amalgamated Bank's Group Advantage Banking Program,

which he noted offers a variety of free and discounted banking

services, made available at a customer's place of business,

including direct deposit, payroll services, free checking, nominimum balance savings and money market accounts, no-fee ATM

banking, and reduced rates on various loan products.

Next, Mr. Ramirez focused on what he considers the two main

areas in which banks can make a difference in increasing the

national household savings rate and facilitating entry into the

financial mainstream of the unbanked and underbanked. He

identified those areas as working to develop products and

services that foster economic inclusion and providing resources

to support community organizations which are uniquely positioned

to help effect the change. As examples of product development,

he cited the CitiEscrow Account, developed by Citibank that

provides non-profit organizations with a simplified mechanism for

management and oversight of individual development accounts

(UIDAs"); the Access Account, developed to provide a low-cost,

flexible checkless account for entry level individuals in the

banking system; and the Ramp-Up Program, developed in 2007 in

collaboration with United Way of Los Angeles, to provide a lowcost, flexible, no-strings attached savings program that offers

an incentive for consistent, long-term savings in the form of

higher subsidized interest rates of up to 21 percent. After

noting that the Ramp-Up account is intended to complement, not

replace IDAs, Mr. Ramirez expanded on the account features,

advising that it offers a 15-month, extendable savings cycle,

requires no minimum balance or minimum monthly deposit

requirement, and provides a tax-free interest subsidy.

Summarizing the results of the pilot and second phase of the

Ramp- Up Program, he explained that it has proved to be highly

February 5, 2009
62

effective, with higher savings rates and lower attrition rates

when compared to IDAs. As examples of providing resources to

support community organizations, Mr. Ramirez noted Citibank's

investment of financial resources in the form of grants and

contributions to support the capacity of non-profit

organizations; human resources in the form of volunteerism,

conducting financial education seminars, and providing tax

preparation services; and intermediary resources through

provision of training and technical assistance.

Ms. Town, after briefly explaining the history of Monroe

Bank & Trust (uMBT") and providing demographics on the

communities it serves, described some of the bank's programs

aimed at underserved markets. Among the initiatives she

discussed were the MBT Opportunity Checking Account, a second

chance account for those recovering from financial difficulties;

a soon-to-be launched Young Adult Checking Account, designed to

graduate young adult customers into more traditional accounts on

their 25th birthdays; and MBT outreach and education programs,

such as its Bank At School and Bank At Work programs. Noting

that the features of the MBT Opportunity Checking Account are

similar to those of Amalgamated Bank's Second Chance account, she

listed some of the account features as a $50 minimum deposit to

open the account, with no minimum balance thereafter, a low $10

monthly service fee, and availability of an ATM card with no

deposit capability and a daily withdrawal limit of $300. Other

initiatives discussed by Ms. Town included MBT's Employees Now

Linked in Service Together (UENLIST") Volunteer Program, which

started with awards for top employees volunteering their time to

help meet the manpower needs of non-profits and now has an

employee participation rate of over 85 percent; the soon-to-be

launched MBTeach program, a more formal extension of the ENLIST

program that will train and certify MBTeachers to teach the FDIC

Money Smart curriculum; and The Learning Bank, a collaborative

effort between MBT, Monroe County Community College, Monroe

County Opportunity Program, the Monroe County Intermediate School

District, the Southeast Michigan Community All iance, and the

State of Michigan Department of Education, to utilize a former

MBT branch building to offer GED preparation and testing, COMPASS

testing to assist with transition into college or job training,

and financial literacy courses via MBTeach for low-income,

underserved individuals.

Committee Chairman Taylor then announced that the meeting

would recess briefly. Accordingly, at 11: 12 a. m., the meeting

stood in recess.

* * * * * * *

February 5, 2009
63

The meeting reconvened at 11: 26 a. m. that same day,

whereupon Committee Chairman Taylor introduced Robert W. Mooney,

Deputy Director, Consumer Protection and Community Affairs, FDIC

Division of Supervision and Consumer Protection (UDSC"), the

moderator of the third panel on Alliance for Economic Inclusion

(UAEI") Strategies and Successes in Today's Economic Environment.

Mr. Mooney provided an overview of the progress of AEI

coalitions, indicating that they currently involve more than

1,000 organizations in eleven cities around the country and have

been able to establish banking relationships for almost 85,00 a

individuals. He then introduced panel members Dora I. Brown,

Senior Vice President, International Bank of Commerce ("IBC"),

Laredo, Texas; Mary Dupont , Executive Director, Nehemiah Gateway

CDC; Bruce Gotschall , Executive Director, Neighborhood Housing

Services of Chicago; Charles Martin, CRA Officer, M&T Bank,

Oakfield, New York; and James E. Young, President & CEO, Citizens

Trust Bank, Atlanta, Georgia.

Ms. Brown began with a discussion of IBC's Banking Literacy

Program, offered as part of a micro-society at Sam Houston

Elementary School, where students operate various businesses and

government agencies, including a grocery store, a newspaper,

television and radio stations, retail stores, and IBC' s

Houstonville Bank. She explained that IBC Bank at Houstonville

is fully staffed by students, from bank president to tellers to

security guards, who are trained on the daily functions of the

bank by IBC; that the bank is open on a daily basis; that the

program teaches students real life work skills; that school

attendance has increased dramatically because of the excitement

generated by the program; and that the program offers an

opportuni ty for IBC to interact with parents at PTA meetings,

offer financial counseling services, and eventually establish

banking relationships with parents through the opening of

checking and savings accounts. Ms. Brown indicated that, in

addition to IBC's involvement with the IBC Bank at Houstonville,

bank staff frequently offers financial education at the high

school level, with particular emphasis on use of credit cards.

Ms. Dupont then summarized the statewide earned income tax

credit (UEITC") campaign in Delaware sponsored by the Nehemiah

Gateway CDC (uGateway"), advising that it provides free

preparation of tax returns bundled with an array of financial

services such as savings accounts, certificates of deposit

(UCDs"), savings bonds, free credit reports, and cash cards in partnership with local banks. She further advised that, in

addition to having tax preparers on site, the campaign requires

on-site, trained volunteer cash coordinators, whose duties

include promoting the various savings products to clients.

February 5, 2009
64

Focusing the remainder of her discussion on lessons learned from

managing the campaign, Ms. Dupont identified those lessons as

follows: (1) EITC programs need not be limited in their financial

services offerings by the lack of on-site bank personnel because

with a secure web site, accounts can be opened on-line; (2)

savings accounts have proved unsuccessful, with approximately 90

percent of such accounts ultimately closed or maintained with

minimal balances and a significant number being overdrawn; (3)

CDs that are labeled to reflect future potential uses for the

underlying funds (e. g., Christmas, vacation, back-to-school, debt

repair) help clients to visualize what they will do with the

funds when the instrument matures; (4) everyone is interested in

knowing their credit score and Gateway has used that interest to

develop a financial education program focused exclusively on

credi t; and (5) although banks have a desire to serve unbanked

and underbanked consumers, they really do not have the

infrastructure to develop the kinds of products that meet their

needs. With respect to the latter lesson, she mentioned that a

newly formed company, Advent Financial Services, has created a

product similar to the ideal product described by Mr. Barr during

the first panel discussion, a cash card to be piloted this year

that allows for direct deposit from a tax return, has a savings

component and a credit line, and cannot be overdrawn.

Next, Mr. Gotschall discussed the Homeownership Preservation

Initiative (UHOPI") started in 2003 by Neighborhood Services of

Chicago (UNHS"), a loan pool funded by local banks to provide

loans to low and moderate income borrowers and neighborhoods, and

NHS's efforts to buy and rehabilitate vacant properties in

targeted neighborhoods. Regarding HOPI, he advised that there

has been significant growth in foreclosure prevention acti vi ties,

due in part to the rise in foreclosures and in part to an

increase in organizational capacity from additional funding, but

that, thus far, the majority of loan modifications result in a

change in terms without actually lowering the borrower's monthly

payment. Regarding the loan pool, he advised that NHS, through

its licensed mortgage bank, has generated approximately $150

million in loans to LMI families to purchase, refinance, or

improve their homes, and has arranged a new 2009 loan pool, with

20 investors, to generate another $150 million in loans over a

three-year period. In closing, he advised that NHS, through its

Redevelopment Corporation has purchased 50 to 100 properties a

year over the past several years to purchase, rehabilitate, and

resell properties in targeted neighborhoods, but that, currently,

the costs to rehabilitate remain high, while markets are soft.

Mr. Martin provided an overview of the small -dollar loan

program being developed by the Baltimore AEI, stating that

participating banks, non-profit organizations, and foundations

February 5, 2009
65

had collaborated to develop a product to combat predatory loans

extended by payday lenders. Describing the components of the

loan, he reported that loan amounts range from $300 to $1,000,

with a repayment period of 12 months and a 7.99 percent interest

rate; that it includes a savings component, with a portion of the

loan payment deposited into a savings account; that after the

loans are fully paid, the total savings amount is matched with

AEI funds; and that borrowers are required to attend two free

financial literacy classes offered by NHS of Baltimore. Mr.

Martin closed his remarks by identifying several issues still in

need of resolution, including discussions about changes to the

interest rate to make it more affordable, but still sufficient to

be reinvested in the pool to help fund the program; the need to

establish a maximum match to avoid quickly depleting matching

funds; whether to allow biweekly versus monthly payments to

accommodate the frequency of borrower income payments; and

determining the timing of borrower incentives.

Concluding the panel presentations, Mr. Young briefly

recounted his experience in the banking industry and the history

of Citizens Trust Bank. He then explained the features of the

bank's small-dollar loan program, indicating that the maximum

loan amount is $1,500; that the loans have a one-year maturity,

no annual fee, and a reasonable rate of interest; that although

direct deposit is not required, there is a strong emphasis on

automatic debit of monthly loan payments from any account of the

borrower's choosing; and that the borrower's debt ratio cannot be

higher than 50 percent. He reported that since the program was

rolled out in November 2008, the bank has funded 90 loans, none

of which has defaulted, with a total outstanding amount between

$100,000 and $120,000. In closing his remarks, Mr. Young

underscored the work of Citizens Trust Bank in teaching the

FDIC's Money Smart Program, stressed the importance of financial

literacy, and requested that those with a voice on Capitol Hill

to lobby for a legislative mandate to modify school curricula to

include financial education.

Chairman Bair informed Committee members that, due to

prescheduled engagements, she was unlikely to return for the

afternoon session. She took note of increasing success in the

small-dollar loan pilot and suggested that it may be an

appropriate time to take the next step and look at al ternati ves

for further incentives for insured financial institutions to

begin offering such products on a broader scale. She also

expressed interest in Professor Barr's ideas for a safe

transaction account for underserved populations and the need to

explore whether insured financial institutions already provide

such accounts and, if not, whether there should be an affirmative

requirement that they do so. Finally, she observed that while it

February 5, 2009
66

is prudent for banks to perform checks on potential new

customers, there remained a question whether discovery of factors

that exclude potential customers from opening a conventional

checking account should also exclude customers from opening a

savings account and, if not, whether regulators should take

affirmati ve steps to address the issue. Chairman Bair requested

that the Committee, in the event she could not return during the

afternoon session, provide input on those specific issues.

Committee Chairman Taylor then announced that the meeting

would recess for lunch. Accordingly, at 12 :32 p.m., the meeting

stood in recess.

* * * * * * *

The meeting reconvened at 1: 44 p. m. that same day, whereupon

Mr. Mooney advised that the focus of the afternoon session would

be for staff to hear the reactions of Committee members to the

three specific issues identified by Chairman Bair as well as

reactions to the earlier panel presentations.

During the discussion that followed, Committee members were

uniformly appreciative of information imparted during the earlier

panel presentations and particularly complimentary of the

Corporation's leadership, under the direction of Chairman Bair

and Vice Chairman Gruenberg, on the issue of economic inclusion

as well as the Corporation's work in completing the Bank Survey.

The remainder of the discussion focused on next steps for the

Committee, with members addressing a number of issues, including

whether the Committee's work could and should be used to inform

current policy discussions on the restructuring of the financial

regulatory system; whether the Committee needs to reach a

consensus on any recommendations it makes; and the nature of any

potential recommendations by the Committee.

There was a general consensus among Committee members that

the current crisis in the financial sector and the push for

regulatory reform provide a unique opportunity to ensure that

whatever remedies are fashioned incorporate proposals that foster

economic inclusion and that the Committee is perfectly positioned

to weigh in on the debate. On the issue of consensus, Roberta K.

McInerney, Designated Federal Officer for the Committee and FDIC

Acting General Counsel, advised that, based on the Committee

charter, the Committee's charge is to uprovide advice and

recommendations to the FDIC on initiatives to expand access to

banking services by underserved populations" and noted that the

charter contains no requirement for consensus. Regarding

potential recommendations, a number of suggestions were made,

including the following: a financial education mandate that would

February 5, 2009
67

make financial literacy courses an integral part of the nation's

education system; that regulatory reform include incentives for

financial institutions to address the financial services needs of

LMI individuals and households; that the administration create a

new federal agency to protect consumers in the area of financial

services and products, similar to the Consumer Products Safety

Commission; that the FDIC publicize a list of insured financial

institutions that have a high concentration of low fee, low

transaction cost checking accounts as a means of fostering

competition to offer such products; that the recently enacted 36

percent interest rate ceiling on loans to military families be

extended to all loans; and that overdraft fees be included in

Truth In Lending Act disclosures.

vice Chairman Gruenberg suggested that the conversation be

brought to Chairman Bair's attention before deciding how to

proceed. Committee Chairman Taylor indicated that she would

discuss the results of the afternoon session with Chairman Bair

to determine the appropriate course of action with respect to the

recommendations. In the meantime, she asked that Corporation

staff compile the list of recommendations offered by the

Commi ttee. Mr. Mooney indicated that staff would follow through

on the request.

There being no further business, the meeting was adj ourned.

~4

Executive Secretary

Federal Deposit Insurance

Corporation

And Committee Management Officer

FDIC Advisory Committee on Economic

Inclusion

February 5, 2009
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 i D. C .

Open to Public Observation

February 5 i 2009 - 8: 30 A. M .

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

minutes are accurate and complete.

Sheila C. Bair 2(~

Chairman

Board of Directors

Federal Deposit Insurance Corporation

Dated: May 29, 2009