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 FEDERAL DEPOSIT INSURANCE CORPORATION 

+ + + + + 

 ADVISORY COMMITTEE ON ECONOMIC INCLUSION 

 (ComE-IN) 

+ + + + + 

 MEETING 

+ + + + + 

 THURSDAY 

FEBRUARY 5, 2009 

+ + + + + 

 The Advisory Committee convened at 8:30 

a.m. in the Board Room at the FDIC 

Headquarters, 550 17th Street, N.W., 

Washington, D.C., Diana L. Taylor, Committee 

Chairman, presiding. 

PRESENT

DIANA L. TAYLOR, Committee Chairman 

SHEILA C. BAIR, FDIC Chairman 

MARTIN GRUENBERG, FDIC Vice Chairman 

KELVIN BOSTON, PBS's Moneywise with Kelvin 

 Boston 

MARTIN EAKES, Self-Help/Center for Responsible 

 Lending 

LAWRENCE K. FISH, RBS America and Citizens 

 Financial Group 

REV. DR. FLOYD H. FLAKE, The Greater Allen 

 A.M.E. Cathedral of New York 
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PRESENT: (CONT.) 

ESTER R. FUCHS, Columbia University School of 

 International and Public Affairs 

RONALD GRZYWINSKI, ShoreBank Corporation of 

 Chicago 

WADE HENDERSON, Leadership Conference on 

 Civil Rights 

ALDEN J. McDONALD, JR., Liberty Bank and 

 Trust Company 

JOHN W. RYAN, Conference of State 

 Bank Supervisors 

PETER TUFANO, Harvard Business School 

ELIZABETH WARREN, Harvard Law School 

DEBORAH C. WRIGHT, Carver Bancorp, Inc. 
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TABLE OF CONTENTS 

Item Page

Welcoming Remarks........................... 4 

Update Since Last Meeting................... 8 

FDIC Unbanked Survey....................... 13 

Bank Successes in Reach the................ 76 

 Underserved 

Alliance for Economic Inclusion........... 138 

 Strategies and Successes in 

 Today's Economic Environment 

Facilitated Discussion.................... 194 

Next Steps, Concluding Remarks............ 258 

Adjourn 
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 P-R-O-C-E-E-D-I-N-G-S 

 8:48 a.m. 

 MS. TAYLOR: Good morning everybody 

and thank you all for coming. Our topic for 

today's session is strategies to increase 

access to the financial mainstream. Anyway, 

today people might wonder if that is actually 

a good thing. 

 (Laughter.) 

 MS. TAYLOR: Anyway, that is 

basically what we are here trying to do, 

getting people into the financial mainstream. 

 And as you all know, have heard, or read, the 

underserved population is huge as far as the 

banking sector is concerned. There are 

estimates all over the place, but they 

basically say that at least ten million 

households throughout the country, which is 

ten percent of the U.S. population, don't have 

a bank account. 

 And in New York City that's about 

the same thing, too. The estimate is that 
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there are about 800,000 people in the city of 

New York that are underserved by the banking 

sector out of a population of eight million. 

So I've never really discovered where those 

numbers came from, but everybody seems to sort 

of say the same estimates. And many of these 

households that are underbanked continue to 

rely on alternative financial service 

providers for their financial needs and as we 

all know that is often at a very high cost. 

It costs a lot more to use that sort of 

service in regard to those banks. 

 And the sheer size of the 

alternative financial services industry with 

more than 300 billion dollars in revenue 

transacted annually, this should be a 

tremendous incentive for banks to pursue 

underserved consumers. It is a great untapped 

revenue source, one would think. In addition 

to prospects of extending their customer base 

and doing good in their communities, that 

would be a great incentive for banks to try to 
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lure some of these people, this underserved 

population into their system. Banks are 

driven by a profit and you think there was a 

lot of profit there, so one of the things I'm 

going to be interested in hearing today is 

what are the barriers to banks actually going 

after this population and are there things 

that we can do to try and break some of those 

down? 

 So anyway our first panel today is 

going to explore exactly how banks are 

reaching out to underserved populations. The 

panel will feature a preliminary overview of 

the FDIC survey of banks efforts to serve the 

underbanked and unbanked population that 

intended to identify the challenges that banks 

face in serving the customers and highlights 

on the general strategies banks can use. 

 The second panel features several 

banks that have participated in the survey and 

they will discuss specific products they have 

used. 
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 The third panel represents a group 

of bankers and not-for-profit organizations 

most of whom are active in the FDIC's Alliance 

for Economic Inclusion or AEI effort. The AEI 

is a grass roots initiative of banks, not-forprofits, government agencies, public 

companies, philanthropic and faith-based 

groups, and others in eleven markets across 

the country that is intended to improve access 

to the financial mainstream. The AEI effort 

has been tremendously successful so far with 

nearly 1,000 members and more than 85,000 new 

bank accounts opened to date. This panel is a 

great opportunity for this committee to link 

up with the AEI members on the ground so we 

can hear firsthand of the kinds of products 

and strategies that have been proven 

successful for banks, bank partners and 

underserved consumers. 

 The afternoon session, after lunch 

we will build on the outcomes from the morning 

session and we will draw on the experience of 
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this committee to help the FDIC staff identify 

and amplify the most effective strategies for 

reaching underserved consumers. 

 As usual, a few housekeeping items: 

please remember that only committee members 

and the panelists themselves are permitted to 

speak during the presentations and that this 

meeting is being webcast, everybody remember 

that, live, and being recorded for anybody who 

wants to listen to the words of wisdom that we 

talked about today. 

 So now I am going to turn the 

presentation over to Chairman Bair who will 

take a few moments to update us on items or 

things that have transpired since our last 

meeting. 

 CHAIRMAN BAIR: Right. I just want 

to say thank you all and thank you Diana for 

your tremendous leadership for this committee. 

 I have a very good statement here that would 

probably take me about 20 minutes to go 

through, so I'm going to just provide some 
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highlights but perhaps we could hand it out 

for the public record because it really is a 

good summary of what this advisory committee 

has accomplished so far. But just to give you 

an update. 

 Our first initiative, our first 

meeting was the Small Dollar Loan pilot 

recommending that the FDIC launch a Small 

Dollar pilot program and that I think has been 

going on very well. We have 31 banks in the 

pilot. About 12,000 Small Dollar Loans have 

been made since the pilot began and most are 

profitable or at least breaking even. I think 

most of the banks participating feel that even 

if it is not turning a profit, it is good for 

relationship-building and so hopefully the 

experiences that they have gained there will 

help us convince more banks to offer this very 

important product, especially as the economy 

becomes more challenging. There will be an 

increasing need for responsibly-priced Small 

Dollar Loans. 
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 Money service businesses and some 

of the issues associated with banks doing 

business with money service businesses and 

what an MSB is and what the regulatory 

requirements are. There has been a lot of 

confusion there. And that has, I think, 

impaired the ability of banks in the low- and 

moderate-income communities to fully serve 

those who need financial services. I think we 

have made some progress with FinCEN in getting 

more clarity on what an MSB is and that work 

continues but I am optimistic that is going to 

resolve itself fairly soon. 

 We also had a forum on low- and 

moderate-income mortgage lending as you 

recall. It was a tremendously successful 

forum. A lot of very prestigious speakers who 

shared a lot of good ideas about what 

responsible, sound, sustainable mortgages 

designed for the LMI community look like or 

should look like going forward. We had some 

tremendous ideas. We put that together in a 
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financial institution letter that we sent out 

to all of our institutions and a number of the 

ideas are being implemented and the banks are 

participating in our Alliance For Economic 

Inclusion. 

 Finally on loan modifications, this 

committee also was an early advocate for wide 

scale restructuring of troubled mortgages. We 

were able to pioneer a systematic loan 

modification protocol at IndyMac bank which so 

far we have completed 10,000 loan mods and 

several more in the pipeline. We are taking 

them down to a 31 percent debt-to-income ratio 

through a combination of interest rate 

reductions, extended amortization, and 

principal forbearance. We have also put a Mod 

in a Box on our website so that other 

servicers can use this. It is a very 

simplified protocol, how to do it at the NPV 

test. The investors obviously require that 

you do a net present value test of the loan 

modification over closure value, so we have a 
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simplified process for doing that as well and 

I think it has been helpful. 

 Since then Fannie and Freddie have 

announced somewhat similar protocols. Bank of 

America, J.P. Morgan Chase, I think, and I 

hope we are migrating towards a national 

standard with at least a 31 percent debt 

income ratio. I think the affordability, the 

meaningful payment reduction, is really key to 

making sure that those and making it a lifelong. No more payment shocks are really key 

to making sure that the folks can continue to 

pay on their restructured mortgage. So I am 

very optimistic about the future of loan mods 

and certainly the new administration has 

indicated a very strong commitment to getting 

these loans restructured and preventing 

foreclosures and spending real money to do 

that. So I have high hopes that we will be 

gaining real momentum on this. 

 Finally on asset building, I think 

we had again some wonderful ideas on how to 
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facilitate savings, more savings among the LMI 

community and truly in a category of taking a 

lemon and making lemonade. We've been working 

with Peter and others on perhaps mirroring 

savings with lotteries. So I think there's a 

lot of good progress there and thank you, 

Peter, for all of your work and those of your 

students in trying to get something going 

there through FDIC partnerships and certainly 

to the extent banks can play a responsible 

role in facilitating those savings accounts 

linked to lottery participations. I think 

that would be a very helpful thing. 

 So finally, we have this wonderful 

unbanked survey that was spearheaded by Vice 

Chairman Gruenberg and Barbara Ryan which we 

are going to be hearing about now and I read 

it but I'm looking forward to the presentation 

as well. And before I think the panel starts, 

Marty, would you like to say anything? 

Barbara why don't you go ahead and take it 

away. 
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 MS. RYAN: Thank you Chairman Bair. 

 Good morning everyone. I am Barbara Ryan, 

Deputy to Vice Chairman Gruenberg. I'll be 

moderating this panel discussion on the FDIC 

survey of bank's efforts to serve the unbanked 

and underbanked and, as Chairman Bair 

mentioned, I've also been managing this 

project for the FDIC. 

 I'd like to begin by introducing my 

fellow panelists. Ed Bachelder, to my 

immediate right is director of research at 

BlueFlame Consulting and until recently was 

director of research at Dove Consulting which 

the FDIC retained in 2007 to help us design an 

administrative survey effort. Ed oversaw 

Dove's work on this project and has also 

contributed to over 230 research studies while 

at Dove Consulting including many involving 

banking and payments topics. 

 To Ed's right is Michael Barr, 

professor of law at the University of Michigan 

Law School. And Michael is a well known 
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expert, as many of you know, on financial 

matters, author of many notable publications 

concerning financial services and low- to 

moderate-income households, and Professor Barr 

serves as an advisor to the FDIC and Dove 

Consulting on this survey effort. Both of 

their bios are in your materials. 

 I'm looking for my slides now. I'm 

sorry. So over the next few minutes I am 

going to quickly review some background on the 

survey. Ed is going to share with us some of 

the results from the survey and then Professor 

Bar will share some of his thoughts on the 

implications and the recommendations related 

to the findings of the survey. And we will 

also have time for some Q and A. 

 So by way of background, the FDIC 

conducted this survey in response to a mandate 

under the Federal Deposit Insurance Reform Act 

of 2005 which requires the FDIC to conduct biannual surveys on the efforts of secured 

institutions to serve the unbanked. The 
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statute asks the Chairman of the FDIC to 

report to Congress on the results and findings 

of the survey including recommendations for 

legislative or administrative action as the 

Chairman deems to be appropriate. 

 Okay, so the Reform Acts lists a 

number of factors and questions for the FDIC 

to consider in conducting the survey. But it 

actually left pretty wide latitude in terms of 

the design of the survey. So to take a step 

back, while we don't have concise estimates of 

the numbers of the unbanked, which is defined 

as those who rarely if ever have held an 

account at an insured institution, we do know 

that it is substantial and that there are 

millions of Americans without bank accounts. 

We also know that an even larger number of 

Americans are underbanked. They have a bank 

account but they also rely on non-bank 

financial service providers such as check 

cashers and early on, the decision was made to 

focus the FDIC survey efforts not only on the 
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unbanked as the statute requires, but the 

underbanked and -- because many of the issues 

confronted by the unbanked also are faced by 

the underbanked. 

 So the FDIC conducted the first 

bank study during 2008. This survey was 

designed to address factors and questions that 

were raised in the statute. Broadly speaking 

the goals of the survey were to identify the 

extent to which banks are serving the banking 

needs of the unbanked and the underbanked, to 

identify challenges affecting the ability of 

banks to serve them, and identify innovative 

efforts that banks use to serve the unbanked 

and the underbanked. 

 The Reform Act also asked the FDIC 

to provide a fair estimate of the size and 

worth of the unbanked market. This isn't 

really a question that can be easily asked of 

banks. Many do not know the answer to that 

question. So the FDIC is addressing this 

issue with a separate survey effort, a 
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household survey, being conducted jointly with 

the Bureau of the Census. After a lengthy 

planning process, just three weeks ago the 

Census actually conducted a supplemental 

survey to its monthly current population 

survey on behalf of the FDIC. That survey was 

designed to identify the number of unbanked 

and underbanked households in the U.S., their 

demographic characteristics and the factors 

hindering their use of banks. The survey was 

administered to about 50,000 households. It 

will provide the first reliable national and 

regional estimates of the number of U.S. 

households that are unbanked and underbanked 

and the related information that we are 

seeking. And we expect to release the results 

of that survey later this year. 

 Now back to the bank survey. It 

was composed of a mail-in survey questionnaire 

sent to about 1,300 banks in three different 

size classes. The surveys were mailed out in 

the Spring of 2008 by Ed and his team at Dove 
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Consulting. Participation was voluntary and 

685 completed questionnaires were returned, 

resulting in a 54 percent response rate. The 

survey also involved 16 case studies on banks 

in order to highlight innovative efforts to 

serve the unbanked and the underbanked. And 

these banks were chosen based on a variety of 

criteria, including demonstrated evidence of 

their efforts and their successes. The survey 

instrument asked a lot of questions regarding 

the bank's education and outreach obstacles, 

access account opening issues, products and 

services offered by banks that might appeal to 

the unbanked and underbanked. 

 It is going to review some key 

survey findings in detail at a very, very high 

level. To set the stage, this is what the 

survey revealed. Again, I want to emphasize 

that the survey, this tremendous amount of 

data that we received and we still need to 

analyze a lot of this data, but at just a very 

high level what we found is that most banks, 
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the results revealed that most banks are aware 

that there are opportunities to serve 

underbanked and unbanked individuals in their 

areas. Yet relatively few have made it a 

priority and there is a tremendous untapped 

opportunity out there. While many banks do 

provide basic financial education materials -- 

certain types of efforts of outreach were 

identified as most effective by the industry 

and these such as educational sessions, 

outreach partnerships -- fewer banks 

participate in those types of efforts. We are 

going to hear more about some banks that have 

been very highly successful in those efforts 

in the next session when we get into the case 

studies. 

 We also found that most banks offer 

basic accounts, checking accounts, savings 

accounts to all customers. These are basic 

accounts, but fewer offered the sorts of 

products that are specifically tailored to the 

unbanked and the underbanked. 
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 And finally, in terms of the 

challenges, many banks are concerned about the 

profitability of serving unbanked and 

underbanked individuals. And they are also 

concerned about perceived regulatory issues 

and impediments including anti-money 

laundering regulations. So there's a lot more 

in the survey results. The report is over 300 

pages long. But before I turn to Ed I do want 

to recognize the 16 case study banks that were 

profiled in the study for their innovative 

efforts to serve this segment. I don't have 

time to go over the details of each of these 

case studies but they are grouped here under 

the category most closely matching their 

efforts. 

 Not exclusively, but 16 are listed 

on the slide. Descriptions of each bank's 

efforts are in the FDIC executive summary that 

will be released very shortly as well as 

complete written case studies are in the 

detailed report prepared by Dove Consulting, 
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those of which will be available on the FDIC 

website. And you'll hear from the four banks 

identified in red on the slide since they are 

here with us today and they are going to share 

their experiences in the next panel 

discussion. 

 And now I am going to turn this 

over to Ed and he'll provide a more detailed 

review of the survey results. 

 MR. BACHELDER: Thank you Barbara. 

 I'm Ed Bachelder. I appreciate the 

opportunity to address this committee and all 

the good work that it does and I'm delighted 

and honored to work on this national survey of 

bank's efforts to serve the unbanked and 

underbanked. 

 Before I get started, I just want 

to give a little bit of background in terms of 

methodology. The survey went out, as Barbara 

mentioned, to around 1,300 banks. For those 

who speak statistics, the sample frame had 

about 1,287 FIs that we ended up surveying out 
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of the 7,487 banks that had retail offered 

that would have branch operations for people, 

who might come in off the street. We broke 

them out in terms of three tiers. Tier one 

were the top 25 banks. Tier two were banks 

that were over a billion but not a top 25. 

And tier three were banks with assets of less 

than one billion. 

 In terms of the results we had 685 

participants but because of the stratified 

sample design, even though we have a smaller 

sample, we had a very high participation rate, 

96 percent of the top 25 banks. That gave us 

a much better representation of the industry 

than if it was a random sample. And our 

response rates, and Professor Barr encouraged 

me to mention this, is -- our response rate of 

54 percent overall is about double what you 

would typically find in a commercial survey. 

And if you just want to think very loosely 

about it, approximately 70 percent of insured 

bank assets were covered by the banks who 
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participated and responded to this study. But 

the percentages and numbers you will see in 

the report are weighted percentages that would 

reflect banks across the industry. So think 

about it as banks. But in terms of the 

coverage, be aware of that. 

 I don't know if people can see but 

if we go to slide ten and there should be a 

handout with color so people can see it. As 

Barbara mentioned, one of the first things 

that jumps out of the survey is that the 

majority of banks are aware that there are 

unbanked and underbanked individuals in their 

market areas. Specifically the tier one banks 

they all said we don't. The tier two, 90 

percent, the tier two banks have 71 percent. 

There are some who don't know but in general 

the larger banks seem to be very aware of the 

unbanked existing. Yet despite that, if you 

go across the industry study, you'll see that 

only 18 percent of banks have identified 

expanding services to these groups as a 
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priority of their business strategy. 

 We had a number of questions in 

this very long survey and we asked, we 

developed certain themes in different ways. 

But one of the areas that we explored is what 

was effective. What methods were working? 

And we had a very simple question that you can 

probably read faster than I can say, but 

essentially we were asking banks to rank or 

sort different types of programs as what was 

the most effective to less effective. And the 

number one ranking was providing financial 

education sessions as having - providing a 

benefit that leads to account relationships. 

The second one was participation with other 

organizations outside of the bank. Outreach 

going out to employers and community centers. 

 And then financial education materials were 

the fourth and targeted marketing. Targeted 

marketing is a challenge because you don't 

necessarily know where they live or who the 

customers are. A lot of challenging 
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demographics, so that could be understood, and 

then “other”. So if you think about it, those 

are the top methods. 

 If you turn to the next slide. The 

banks have indicated what they thought was 

effective but if you look at what banks are 

actually able to do and do commonly is most 

provide financial education materials. But 

they tend to do, tier 1 banks tend to provide 

the types or forms of education outreach 

viewed as most effective. So, for example, 

the left pie, does your bank provide financial 

education materials aimed at the unbanked or 

underbanked, 63 percent do. That could be a 

passive method, some literature or brochure. 

On the right hand side: do you teach literacy 

or education sessions, the more active method. 

 You can see that 47 percent of banks don't. 

And in terms of where it does occur, 35 

percent are off-premise and many banks have 

described the challenges of getting sessions 

in their own facilities so typically they have 
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to go out somewhere or a combination. So it 

is kind of, I think it is a challenge that 

banks face at that level. But, in any event, 

tier 1 banks are using that more effective 

method by their own results. 

 The next slide. Looking at some of 

the challenges for banks that serve the 

unbanked and underbanked, we asked them to 

rank what they were. On the top of list 

profitability, followed by regulatory, fraud 

concerns, high cost of customer acquisition 

and down at number five was competition from 

other service providers, which is kind of 

interesting when you think about the unbanked 

and underbanked, especially the underbanked, 

where somebody might have an account at a bank 

but chooses to cash a paycheck at a check 

cashing or facility is a very interesting 

thought. So the banks aren't reading that as 

a top barrier. And 40 percent of banks 

perceive regulatory issues as impeding their 

ability to serve this market. 
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 When asked, we had a question that 

asked about what are banks doing, what have 

they done to try and become more accommodating 

and modify their operations, retail 

operations, branches to serve the unbanked and 

underbanked. 64 percent of banks reported 

that they have modified their retail branches 

to make them more welcoming or convenient to 

the unbanked or underbanked, but the method 

that was used as I think with branches were 

including operations is the top thing that was 

mentioned was internet and mobile banking and 

that's a timely topic in financial services 

world. Mobile banking, we have to realize 

this, for some banks includes a van or going 

out to a facility. So it is not necessarily 

the cell phone that you might think about it. 

 It isn’t the cutting edge, it is the going 

out to the retirement area or the factory or 

location like that to provide services at 

specific times. 

 Adding ATMs, extending branch hours 
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is very common. Many banks have extended 

their hours and there are many that use 

supermarkets and other facilities that are 

open longer. But when you go down toward the 

bottom, you'll see new branches in LMI areas. 

 Actually really changing the branches or 

looking at non-traditional locations. That is 

used much less. Fewer banks have made efforts 

that way. 

 Next slide. So if we sort of think 

about what banks services are, then the first 

challenge for a bank is when you walk in the 

door, I don't know whether you are banked or 

unbanked. I don't know. All I know is you 

are not a customer. So for many banks it is 

either customer or non-customer. If you are a 

customer I know something about you and I have 

a lot less worry. If you are a non-customer, 

I have a lot of concerns that I need to take 

care of. Therefore, typically the services to 

non-customers, the top of the list is I'll 

cash a check that is drawn on my bank. So 
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banks will do that whether you are a customer 

or not. However, if you come to that bank 

with a local payroll check, for example, this 

will be mentioned later but 32 percent of 

banks won't cash a local payroll check unless 

it is drawn on their bank. So you have to 

think about not competing with an alternative 

financial services provider. I think that is 

an important issue to think about. And then 

in terms of making payments, 37 percent of 

banks won't do bank checks or money orders for 

people who don't have a relationship with that 

bank. They are concerned at that level and 

only six percent offer international 

remittances for non-customers. So I think 

that follow up or continuation in services 

makes sense when you think about the 

regulatory issues and the Patriot Act. 

 So then the other big challenges 

for banks serving the non-customers, 

identification. Typically it is going to 

depend upon some sort of government issued 
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photo ID. So 92 percent take their driver's 

license. And then as you drop down to other 

types of licenses, and this is spelled out in 

a lot more detail in the report, but you get 

down to 20 percent will take the matricula and 

38 percent will accept ITINs to cash a check. 

 And I mentioned the regulatory issues. 

 Next slide. So, say you are 

unbanked or underbanked. Now you have to look 

at I want to become a customer. There are 

policies and procedures I have to go through 

in order to become a customer. And some of 

these policies and procedures are wellfounded, good management but they present 

obstacles for somebody opening an account. 

So, for example, if you have a blemished 

credit history, you are going to end up 

probably going through a third party credit 

check or debit risk management program like 

the check systems. It is going to look and 

see do you have any derogatory information 

about your background. And if so, banks will 
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tend to, at that point, choose not to open an 

account or will go through a process. So 

there's a lot of hurdles if you have had 

trouble in the past getting back in. And then 

the other one is identification because the 

bank wants to make sure they know who you are, 

you know, so they can track you down. So it 

goes back to government issued IDs as the key 

item. So if you don't have that you will have 

a harder time using the bank. 

 One of the key areas of the study 

was what kind of products and services do 

banks offer for unbanked and underbanked 

individuals? And it really comes down to 

essentially most banks are going to offer a 

basic deposit account that doesn't require a 

minimum balance. Sixty-two percent offer a no 

minimum balance account and that will include 

free check writing in their most basic 

account. So if you see the pie chart, you'll 

see there is 62 percent that have no minimum 

balance required. Eight percent will take no 
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minimum if you have direct deposit and then 

another 30 percent will require a minimum 

balance. But 30, I guess the key point is 99 

percent of these accounts have overdraft 

charges that will go with it. So somebody who 

has minimal funds and isn't up on their 

account statements has a good chance of 

encountering overdraft charges which can be an 

obstacle to maintaining a bank account. 

 Next slide please. In terms of 

products, this is probably a very sleepy 

chart. But as you start going through the 

different types of products that banks offer, 

when you start getting down to those tailored 

that might be very unique to the unbanked and 

underbanked, the IDAs, eight percent of banks 

offer those and typically when a bank offers 

those, you don't count those and really don't 

count those in thousands. You may count them 

in dozens or hundreds. 

 Workplace based programs, going out 

and working at an employer site. We are 
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working at the volunteer tax assistance. They 

are trying to help people sign up for 

accounts. I think Professor Barr will 

probably want to comment about that. But I 

think the issue you want to really think about 

is for somebody who’s not doing well in their 

check system screen, what does the bank do? 

And only 25 percent of the banks in the study 

reported having an option – an account that 

they could then queue up for somebody to do. 

Today one of the panelists for one of the case 

study banks, their bank actually has something 

that's not called a second chance but an 

opportunity checking account where they 

minimize the amount of ATM withdrawals and 

deposits, no overdrafts allowed, to really 

constrain the account to get people on track 

before they let them graduate or move up to a 

more traditional account. 

 Next please. And then in terms of 

the services provided when we were asking what 

banks efforts are in terms of branch 
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strategies to serve unbanked and underbanked 

in the market areas, and the most popular item 

was check cashing. That was 49 percent of 

banks who use that as a strategy and money 

orders. Both of those are pretty big cards. 

So this is really trying to look at what 

financial service providers offer and what do 

the banks offer. And you can see that your 

numbers would be very different in terms of 

who the competition is for banks within this 

market segment. 

 There we go. So, one of the key 

challenges as we talked about, whether you are 

able to cash a check or not is whether you get 

cash when you come in with a check. If you 

look at the survey responses, you'll see that 

the funds availability for checks is in 

compliance with federal regulations but is 

pretty slow for many people relative to nonbank check cashing services. So, for example, 

36 percent of -- if you can follow the segment 

you see the green and the yellow, so 64 
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percent. So the majority of banks will give a 

personal check or business check drawn at that 

bank immediate funds availability and still 

cash that check. Other ones are going to wait 

a day. So you may not get your money. Now 

what is interesting is these are for people 

who have an account at that bank. So these 

aren't just walking in off the streets. So 

these are for their customers, established 

customers. And I believe an “established 

customer”, it meant they had an account for 

more than 30 days. So they have already had a 

cycle. Government checks, 48 percent. When 

you start going to payroll checks, you can see 

that for many banks they don't give immediate 

availability to their own customers. And then 

you can work your way through different types 

of checks that would have more and more risk 

potentially. These are for checks under 

$2,500 and are local. 

 So I think that's probably one of 

the key things to consider. That is, what is 
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the availability and the reason I bring that 

up is these are rules that were established 

many years ago before Check 21 and the check 

clearing and forwarding. So the technology 

has moved ahead in banking and the rules are 

the same. So I just suggest this might be an 

area for exploration. 

 And then the next slide. In terms 

of credit products, we found that banks offer 

few advanced products. So for example, if I 

want to get an advance on my paycheck or an 

advance on a scheduled direct deposit or 

credit card – it is targeted on individuals – 

so there aren't that many banks that offer 

products like that. Fewer than six percent 

will give an advance on funds or against an 

anticipated direct deposit and that would 

include things like government and payroll. 

And I guess the final point here is that twothirds of banks, 69 percent, offer closed and 

unsecured loans for up to $5,000 but the 

requirements make it harder for an individual 
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to, an unbanked or underbanked customer, to 

access these to avoid more costly payday 

loans. 

 So I moved right through these and 

there are some recommendations, but would you 

like to -- 

 MR. BARR: Do you want to talk 

about the FDIC recommendation first or do you 

want me to comment first? 

 MS. RYAN: I'll mention that. 

 MR. BARR: Great. 

 MS. RYAN: And then you can take 

it away. As I mentioned a few minutes ago, 

the statute requires that a report be 

transmitted to Congress and it also suggests 

that the Chairman of the FDIC make 

recommendations for legislative or 

administrative action as she deems 

appropriate. And there is one recommendation 

that the FDIC is suggesting, that you just put 

out there, which is to consider defining a 

shared national goal, government industry 
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goal, to lower the number of unbanked and 

underbanked households in the United States. 

This is not a problem that is uniquely the 

industry's or the government's. It is a 

shared problem and so that's an idea to put 

out there. It could involve, for example, 

creating a national task force to provide 

oversight and guidance, suggestion for doing 

such a thing. And of course any such goal 

would need to be based on reliable statistics 

which, as many of us know, don't currently 

exist, but hopefully we will have some better 

statistics soon on this to provide a tracking 

measurement. So that's one suggestion. I 

know that Professor Barr has thought about 

this a great deal and maybe has some more. So 

let's move into this session. 

 MR. BARR: Thank you very much, 

Barbara, and I just wanted to say thank you to 

Chairman Bair and to Vice Chairman Gruenberg 

and to the chair of the committee, Diana 

Taylor, for inviting me to participate in this 
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project overall and also for inviting me this 

morning. The FDIC's leadership on this issue, 

I think, is really extraordinary. I don't 

have to tell any of you that, but you take a 

step back and look at the range of issues 

facing the FDIC over the last few years. The 

fact that Chairman Bair has decided to make 

this a central part of her leadership I think 

is quite extraordinary so I'm thankful for 

that on behalf of everybody. I also want to 

thank Barbara. It has been just a real 

pleasure to work with the FDIC and with 

Barbara and her team on this project. It is 

just an extraordinary group of people and 

working with Ed Bachelder again has just been 

a delightful experience too. Ed and I first 

worked together more than a decade ago when 

the federal government was tasked with the 

idea of making benefit payments electronically 

under the electronic funds transfer program, 

the EFT 99. Ed was instrumental in deepening 

our understanding at the Treasury at the range 
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of issues facing unbanked federal benefit 

recipients, very much shaped the nature of the 

program that was instituted as a result of 

that. So it is a delight to be working with 

him again. 

 I want to make a couple of comments 

about highlighting a few things that both Ed 

and Barbara said, and then suggest for 

conversation a handful policy ideas building 

on the FDIC's recommendation. 

 I think there are, the central 

level of finding that I want to really focus 

on with respect to this study, which I should 

say also is, both this study and the CPS study 

that has just been done a real, scientific 

improvement. I think that one of the key 

findings from this report is that while many 

banks are engaged in lots of activity there is 

not a real focus on the kind of activity that 

is tailored particularly to the needs of lowand moderate-income households. So I think, 

in thinking about the next kinds of steps that 
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we would hope that the banking sector comes 

to, there would be a set of steps that are 

based on a deeper understanding of what works 

and what doesn't in financial education, for 

example. And what works and what doesn't in 

the development and offering of products that 

are specifically tailored to the needs of lowincome households. So these would be, for 

example, a safe and affordable bank account. 

So the basic bank account product that most 

institutions offer is a checking account with 

high risk of overdraft and high fees. And 

that kind of product doesn't work well for 

low- and moderate-income households. So I 

think we need to channel more of our energy 

away from the idea of any basic account and 

any financial education is an improvement and 

toward what is it particularly that financial 

institutions can do to offer low-income 

households a safe and affordable bank account. 

 An account without checking perhaps. An 

account without overdraft in it. An account 
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that lets them receive their income from a 

variety of sources, electronically and easily 

from federal benefits to state benefits to 

income from work. So having an efficient 

mechanism for low-income people to receive 

their income means it is less likely they are 

going to have to pay a lot of money to go to a 

check casher. We need a system that makes it 

easy for low-income people to save. I'm not 

talking about for long term purposes or 

retirement. I mean to build a cushion for in 

the case of emergencies. Too much of our 

conversation about savings is focused on long 

term goals and not enough on the need for 

short term emergency cushions. We need to 

build into our financial products automatic 

savings plans that help people build a cushion 

in their bank accounts. 

 And the third issue, which Chairman 

Bair already highlighted, is the need for a 

safer, lower cost credit product that can be 

built into these kinds of accounts. Financial 
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institutions are able to do that at lower 

costs than the non-banking industry, but have 

not really pursued this as a strategy in 

meeting the needs of low-income households in 

this way. 

 So I think there's enormous 

potential that is embedded in these survey 

findings to redirect some of the energy in the 

financial sector. 

 Let me suggest, that in addition to 

what the private sector can do, a number of 

government focused ideas for discussion. One 

of them, Ed has already highlighted. That is 

with respect to funds availability policy. 

Our funds availability policies for banks are 

a real impediment to getting more people, the 

low-income people in the financial system. 

And with the advances in technology we've seen 

in the last several years and with check 

truncation authority we should really 

seriously reevaluate, at least for the largest 

institutions that are able now technologically 
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to do better, requirements for greater speed 

and funds availability. 

 The second initiative that I think 

that we can take is with respect to 

encouraging a direct deposit. Direct deposit 

has become relatively commonplace for large 

institutions in their interactions with large 

banks for their employers. It is much less 

common for smaller banks to offer as an easy 

service for firms they do business with and 

for smaller firms to offer to their employees. 

 And a real focus on direct deposit, I think 

would bring more low-income people into the 

banking system and reduce their costs of using 

non-banks for check cashing services. 

 A third idea is to expand on the 

work that the states have already done with 

respect to electronic benefits transfers. 

There's been enormous progress in reducing the 

cost for states of getting state benefits onto 

a debit card. There has not been very much 

energy put into the incredible functionality 
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that card could have for low- and moderateincome people. If we view it not as just a 

means of transferring income payment but also 

as a means of getting other income from nonstate sources, developing automatic savings 

plan, providing other kinds of products and 

services that low-income people need. So 

there's a lot of action that could happen at 

the state level. 

 An idea also with respect to really 

moving to the level of the federal government 

there are I think three initiatives might be 

useful or in order for discussion. One of 

them is with respect to greater attention 

under the Community Reinvestment Act to 

positive innovation and services. There's not 

been very much attention paid in the services 

test at all under CRA. And in general when 

that attention is paid, it is the question, 

was there a bank branch opened or closed? 

Which is really not that relevant to is a lowincome person getting access to a financial 
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product that works for them? So I think a 

greater focus on that would help. 

 And two ideas in the tax area. One 

is that the IRS right now if I'm a low-income 

person receiving the earned income tax credit 

and I don't have a bank account, I have to 

wait six to eight weeks longer than a banked 

person to get my refund check. It puts 

enormous pressure on low-income people to take 

out expensive refund anticipation loans, which 

they do. If the IRS were to direct deposit 

their tax refund into an account that the IRS 

itself made available to a low-income person 

through the private banking industry, that is 

under a roster of banks that agree to 

participate, banks get more customers, lowincome people get into the banking system, we 

reduce the incidents of refund anticipation 

lending, and people get their money faster. 

So it is a way right now to get through the 

IRS much greater entrance into the banking 

system. And the last idea may not be 
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especially politically popular in the current 

environment, but it is to provide financial 

institutions with a tax credit for offering 

low cost, safe and affordable accounts to lowand moderate-income consumers. Our studies 

suggest that profitability is one of the key 

barriers to serving low- and moderate-income 

people. If we were to offset the affixed 

amount of the cost of opening an account for 

low-income households, we might be able to 

rather efficiently make a big difference to 

the provision of those accounts. And I think 

the dollars involved do not need to be too 

high. 

 So that's quite a long list of 

ideas. It is really designed to start a 

conversation and I again want to thank Barbara 

and Ed for their partnership on this and 

Chairman Bair for her leadership on this 

issue. 

 MS. RYAN: Thanks Michael. I 

would like to open this up for discussion and 
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before I do that I just have one thing I would 

like to mention that, in addition to it being 

a tremendous pleasure to work with Ed at Dove 

Consulting and Professor Barr, we've had a 

team here at the FDIC that's put a lot of work 

into this over the past two years. Yasmine 

Osaki, Susan Burhouse, Katherine Samolyk, Luke 

Reynolds, Angelisa Harris, Leneta Gregorie and 

David Chapman have all been working here with 

me and very involved in this issue which we 

are all quite passionate about. So with that, 

I would like to open it up for any questions 

or comments. 

 VICE CHAIRMAN GRUENBERG: I have. 

 CHAIRMAN BAIR: Vice Chairman 

Gruenberg would like to make a few comments 

then. 

 VICE CHAIRMAN GRUENBERG: I didn't 

want to preempt these guys at the offset 

because they have really done the work and I 

really think they have done, provided us with 

an outstanding piece of work here does break 
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new ground in this area. I think this is a 

big issue that to a certain extent has 

received less attention than it should have. 

Access to financial services for low- and 

moderate-income people is a huge economic 

issue both in terms of the cost of those 

services and the quality or reliability. And 

the way in which those services are provided 

have a real economic opportunity and income 

consequences for low- and moderate-income 

people. And there has been a lack of careful, 

reliable information in simply understanding 

how those services are being provided and the 

obstacles that are presented to people in 

getting access to services on a responsible 

basis. I think the real purpose here, and in 

part it was the opportunity that was created 

by this statutory requirement and the deposit 

insurance reform law was really to build a 

base of reliable information to try to develop 

what we hope will be more effective strategies 

in this area. I think this survey in a sense 
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is the first step in trying to get a handle on 

what banks are actually doing and in 

particular the case studies we are going to 

hear about in terms of innovative programs the 

financial institutions have implemented. I 

think quite importantly is this survey that 

the Census is conducting in collaboration with 

the FDIC which will be really the first 

reliable national survey of who’s unbanked and 

underbanked in the United States. Diana 

referred to it in her opening remarks. We 

have general numbers that are thrown around 

based on a variety of studies that have been 

done, none of which are really as reliable or 

far-reaching as we would like. I think with 

this survey which will be on a very large 

national sample and we'll get into some depth 

in terms of the services people used and the 

obstacles that they confront. We will really 

be able to get on a national regional even 

state-by-state and perhaps a metropolitan area 

basis who’s unbanked and the issues that they 
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confront in terms of getting access to 

services. So I think we really have an 

opportunity here both to develop the 

information and come up with some responses 

that will have an impact and I just wanted to 

make that comment and again thank the people 

here at the table and the outstanding team at 

the FDIC that's really helped put this 

together. 

 MR. McDONALD: Thank you. I would 

like to first of all congratulate you on the 

information you have provided us today from 

your survey. And in listening to your 

presentation and listening to how you went 

about the survey, one piece dawned on me that 

I'd like to ask whether or not you took into 

consideration some effort toward looking at 

the preventive side? In other words, we have 

a number of people coming into the system of 

unbanked and underbanked and those individuals 

are coming in because of some factors. And 

when I was listening to the presentation from 
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a preventive side, if we can at all possible 

look at how we could implement some type of 

educational piece into our education system, a 

lot of banks, a lot of agencies are doing 

financial education after the fact. So I was 

wondering whether or not during your survey or 

looking at alternatives whether or not some 

type of preventive piece was thought about and 

how we should go about it? That is question 

one. 

 MR. BACHELDER: Would you like a 

quick answer? 

 MR. McDONALD: Yes. 

 MR. BACHELDER: We did ask 

questions around the educational outreach how 

to do it, what types of approaches to do to 

educate people, on what levels and approaches. 

 We had questions. We also had on the 

analysis side, we did a lot of qualitative 

open-ended questions where banks would comment 

both about what they have to do to bring 

people into the bank as well as what they 
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might do to retain people who are having, who 

might have their account closed for costs 

because of having bounced too many checks. So 

programs that some banks have to try and help 

bring people back to an account where they can 

manage and stay in the system. So there is 

some comment information. So both the 

education part and some of the retention. 

 MR. McDONALD: I think where I was 

going with this was whether or not we could 

look at the educational system, whether it is 

in high school, whether it is in junior high 

school because what we need to do is get to 

the individuals before they develop these 

habits. In the banking business we are 

beginning to see a lot of problems beginning 

to come about with college students. They are 

getting into a financial problem early on with 

credit cards, which is affecting their FICO 

score, which is affecting what type of credit 

they can get, whether or not they can open an 

account. So, if we had that early education 
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and I know the banks have been doing their 

part and the agencies, such as the FDIC, and 

the whole educational component. But maybe if 

we could look at an overall universal effort 

to begin having the education system to 

incorporate something into its curriculum 

early on to begin getting these individuals to 

understand the pitfalls. That would at least 

begin to slow down the number of individuals 

going to the unbanked and underbanked 

category. 

 MR. BARR: Let me just add two 

quick things to what I had already said. I 

think you are right. We need to do better at 

financial education earlier. I think one 

significant barrier to that is the lack of 

science around what actually works in 

financial education. We spend a lot of money. 

 We all put out tons of brochures. We teach 

it in the schools and I don't think we have 

very good studies about the science and an 

effective education and finance. 
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in particular areas. The second thing I would 

say is I also think we don't want to put all 

of our weight on financial education as 

opposed to looking at the way in which we 

construct financial choices for our consumers 

to make. If we construct choices in such a 

way that it is really easy to make a bad 

choice and really hard to make a good one, all 

the financial education in the world is not 

going to be enough. 

 MS. RYAN: I would like to just 

add another point which is that the survey 

results revealed that a lot of banks are doing 

financial -- providing financial materials 

and this survey revealed that pretty clearly 

that we still have this problem. So I think 

that speaks to a certain extent by itself. It 

is also very difficult to evaluate the 

effectiveness of financial education. We did 

ask the question about effecting -- whether 

banks are attempting to evaluate what they are 
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doing. We found I believe that most banks are 

not measuring the effectiveness of it. Now to 

give credit, those that answered affirmatively 

that they are, most of them felt like it was 

effective. But that was a minority. By and 

large, most banks are doing this and we don't 

know. They are not measuring whether it is 

working or not and like I say, the starting 

point is the problem still exists. So it 

speaks to a need for something. 

 MR. McDONALD: My second point and 

observation, because I had two. On the tax 

incentive, I think that's a very good 

incentive that if you can pull something 

together, even if you had a credit against 

your FDIC fees. It is something I believe 

that would begin motivating the financial 

institutions. It would at least get rid of 

the thought of them having it as a cost factor 

and perhaps they could look at it as an income 

factor. So it might be something that you 

might want to give some serious consideration 
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to -- some type of tax incentive. I know you 

tacked it on in the end and said maybe this is 

far-fetched, but I think if we are going to 

change behavior on a large scale, I think the 

tax incentive route or some type of incentive 

route would be the most effective way to 

change the behavior of financial institutions. 

 REV. FLAKE: Thank you. First of 

all let me commend you on the survey. Just a 

point and that is in the survey of the banks 

and the analysis of what they perceive as the 

issues related to the persons coming in and 

taking advantage of what banks have available. 

 In a climate in many communities where there 

is a growing industry as it relates to check 

cashing, payday lending, and other kinds of 

sources, would it have been possible to do an 

analysis by studying some of those customers 

to find out why they used that particular 

entity as opposed to a bank? And I think some 

things that stick out to me is number one, 

they are accessible, they are open 24 hours a 
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day. They, secondly, and the big point is 

they are not worried about their money being 

held because they get their money the instant 

they take their check into those entities. 

The question then for me is, is it possible to 

go back and take a good look at how you can, 

by identifying in some measure, even if it 

means putting some persons at those places at 

certain times particularly the first of the 

month, to find out why they do that. What 

makes you spend more in terms of cashing a 

check at one of these places as opposed to 

going to the bank where the cost is much 

cheaper? Money you saved on it? Or even put 

yourself into that practice of continuing 

going to the payday lender knowing that 

ultimately you risk losing everything? I 

mean, how do we sell the safety element of the 

bank as opposed to the possibility of loss by 

virtue of how these institutions that are 

unregulated are able to function? 

 MR. BARR: Maybe I could just say 
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a word about this. So prior to this study I 

did an analysis at the household level asking 

the kinds of questions that you just described 

for 1,000 families in the Detroit metropolitan 

area not a national sample of the kind that 

FDIC is doing, but I was able to drill down 

much more in depth because of the location to 

really have an hour and a half conversation 

with people about those kinds of choices. 

First of all I am happy to make that available 

to you to look at. And second I think that it 

is important in thinking about this, that it 

is not just a focus on the cost of the nonbanking side of the equation but also on the 

other sets of alternatives to the equation. 

So if a low-income person is not -- can't cash 

their checks in a bank, or the bank is going 

to wait to pay them, or if they have a bank 

account they are going to get a lot of 

overdraft fees, we need to compare that to the 

non-financial sector. And I guess I would 

argue we have significant problems on both 
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sides of that equation, both in the banking 

and the non-banking and, if we are going to 

solve this, we have to look across the entire 

industry, not by sector. 

 MR. RYAN: I would agree with that 

and I have follow up to that: one, a comment 

and two, a request for the group. But as 

obviously we are interested in creating 

incentives here. But we do need to think 

about other policies or attempts to address 

these efforts and how certainly at the state 

level and at the federal level how this policy 

may get in the way of some of these 

objectives. So as an example, as you all 

pointed out funds availability is an issue as 

we have heard at previous meetings. There is 

a reason that low-income people want the cash. 

 There are economic reasons. They avoid fees. 

 It is an efficient way for them to manage 

their funds. There are economic decisions 

being made into trying to get cash. So, one 

of the things at the state level, the state 
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has tried to do is institutions, this came up 

in Texas, were denying the ability to cash “on 

us” checks, payroll checks, so the state tried 

to require that the banks honor those checks. 

 And then they were preempted under federal 

law from doing that. And then another example 

is the funds availability issue and in my own 

experience I have noticed that, ironically, 

Check 21 was exacerbated as that float becomes 

a much more obvious thing, many are taking 

advantage of it. So for a low-income person 

where funds availability is really a critical 

issue, and they need it now and they are 

trying to avoid fees. We need to look at how 

these policy decisions at the federal level 

have been made and how they fit together to at 

least from our perspective pull this back from 

trying to address this issue. This might not 

have been the right way to address this issue 

but there was no debate about what was driving 

the state to do this. It was just a decision 

that doesn't apply. So that would be my 
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request for the group is how do we create 

mechanisms at the federal level that one is -- 

for instance we, in the states, are 

identifying issues and trying to address them, 

but they are not the right fix and what can we 

do to the federal policy to address that 

issue? 

 MR. EAKES: I would like to have the 

panelists just comment on the tension between 

having a national goal of having less unbanked 

and underbanked and the prevalence of 

overdraft fees. It seems like to me if we 

said we want to have people have access to 

homeownership but said that the only tool you 

could use would be subprime, exploding arm 

loans. Knowing what we have just recently 

seen, we probably wouldn't feel good about 

that. We know that overdraft fees are 

anywhere between 20 and 35 billion dollars per 

year and at three or four times the entire 

payday lending industry fees. And so I am 

just curious how do we actually make an 
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initiative because it seems like to me I can't 

legitimately at least in my little arena, I 

can't ask people to sign up for a checking 

account knowing that it is going to perhaps 

end up hurting them more than it helps them. 

 CHAIRMAN BAIR: Yes, I wanted -- 

that's a good question. Your first 

recommendation was requiring banks to have a 

safe and affordable checking account. I 

wonder if you will explain a little more what 

you think an account like that would look like 

and maybe those goals need to be combined 

somehow. You are right because the last thing 

we want is for the government to be pushing 

folks into accounts where they are spending 

several hundred dollars a month on overdraft 

fees which we know is occurring in some 

places. 

 MS. TAYLOR: Actually I can just 

add one thing before you address that 

question. One of the big fights that we had 

which I don't remember, when I was banking 
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superintendent in New York was we had a rule 

in New York that you could not have charge 

fees, certain fees for overdrafts. And the 

state chartered banks came to us and said well 

the feds allow it so we have to, to be able to 

be competitive and people want that service. 

So it is an issue that is both a federal and a 

state issue and one thing that I would say 

that it is important for whatever to come up 

with this in this area to be applied across 

the board. 

 MR. BARR: First of all I think, 

Martin, you are exactly right. So I would, if 

I were sitting down across the table with a 

low-income person, I would not advise them to 

open a checking account. And so I think all 

of our energy has to be around the creation of 

the fostering of safe and affordable bank 

accounts. Then we can have a goal more people 

should have. So I don't think we should have 

a goal that we should get everybody into a 

checking account as they exist now. I think 
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that would be a significant mistake. And its 

partly on the overdraft side which is a big 

deal. It is partly on the funds availability 

side. It is partly on the other issues of 

fraud and control and other things. So I think 

absolutely what we need is a safe and 

affordable account. The key elements I think 

of a safe and affordable account are that it 

be -- not a checking account -- an account 

that is electronically based, debit card 

based; that it not have overdraft facility in 

it. I think that at the very minimum the Fed 

ought to be treating overdrafts as a Truth in 

Lending issue and not a Truth in Savings issue 

which would significantly change the way we 

think about the problem. I think that the 

FDIC's overdraft report, there is a way of 

providing a lot more light on this problem and 

the FDIC has shown a lot of leadership on the 

overdraft area under Chairman Bair. So what 

should this account look like? It needs to be 

electronically based. It needs to be debit 
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card based. No checking account. No 

overdraft. It should have a way of receiving 

income electronically through direct deposit, 

state benefits, federal benefits and income 

received. Ideally it would have an automatic 

savings feature so you sign up in advance. 

Every month I am going to put $5 of my income 

or $10 or $100, whatever that amount is, into 

a separate savings pocket in that account on 

that card that is somewhat harder to access 

than the other funds and build up savings in 

that fashion, and it could have a Small Dollar 

Loan product. So, instead of going to a 

payday lender for a short term two week loan, 

which I know I am not going to be able to 

repay in two weeks, I have in my bank account 

the possibility of getting a six-month selfamortizing loan with a decent interest rate 

because the bank is not facing very much risk. 

 I have direct deposit into the account. They 

could direct debit out of the account. I can 

get a much lower cost product to the customer 
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at lower risks at the financial institution. 

So I think on each of those dimensions -- 

transactions, savings and credit -- there is a 

way of creating a safer, more affordable 

product for low-income people than financial 

institutions could do now. 

 MR. GRZYWINSKI: This may be heresy 

in this group but it seems as though we are 

asking the question from the point of view of 

banking, okay. I guess my question would be 

whether either in this survey, or Michael, in 

the other work you have done or any other work 

anybody has done, have we ever looked at a 

question from the point of view of the 

consumer? In other words is the consumer 

making an enlightened and correct self 

interest decision? When Martin commented at 

the beginning, you used financial services 

instead of the word banking, okay. It just 

seems that if we are going to be honest with 

all of ourselves, we ought to think about what 

is the correct language here and should we be 
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thinking about ways in which banks do provide 

services through Wal-Mart, or through other 

kinds of providers and is that an additional 

vehicle? So I guess the question is, is there 

any good data anywhere that anybody here or 

anybody else has done that looks at this 

question from the consumer product. 

 VICE CHAIRMAN GRUENBERG: Ron, if 

I could comment and then perhaps Barbara would 

want to expand. In the sense of this survey 

that we are undertaking, there are a range of 

questions that both go to the financial 

services people are utilizing including the 

alternative financial service providers. So 

you ask the question from the consumer's point 

of view, that's really the other side of the 

coin of this bank survey that we have done. 

We are going to try to get some detailed 

national information on the services people 

utilize, why they are utilizing them, and the 

obstacles they find to utilizing financial 

institutions to try to gain some perspective 
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on that issue which is really key information 

to get. 

 MR. BARR: Just to follow up. I 

think that national site is going to be a huge 

improvement on what we know. In the Detroit 

area study I did, I spent a long time trying 

to address that question from the consumer 

point of view and across the banking and nonbanking sector. So, the approach that I took 

was consistent with what you described. Let's 

see what people do and why they do it not 

study why they are doing this or that in and 

out of the banking system. And they do often 

make quite good choices. So we need to decide 

how do we give them their constrained choice 

set? That is, give them the lack of good 

products that they have. So I'd like to see 

us look at how do we change the products that 

they can choose among so that they can choose 

something, you know they are making the best 

choice. The choices are bad choice because 

they are only bad choices to make. I don't 
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think we have solved the problem. One aspect 

that I want to particularly highlight because 

Ed and I did it together and this is really 

Ed's pioneering work in that area of consumer 

choice methodology. We did a study in this 

Detroit population of what kinds of particular 

products and services do low-income consumers 

want when given realistic tradeoffs among 

products. So we looked at different kinds of 

debit cards, payroll cards, payment cards, 

bank accounts. And by varying the features 

across these different accounts we were able 

to see what would be the hypothetical take 

rater. How much desire is there for different 

kinds of products and features among the 

unbanked and I'd be happy to share that with 

the FDIC and to make it publicly available at 

any financial institution that wants to use 

the model. 

 MR. TUFANO: To pick up on Martin -- 

well on this past discussion. We have done a 

national survey, 22 dimensions of financial 
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activity. And it is interesting. You cannot 

study anyone at any one time. So somebody who 

is a payday lender, conditional on being a 

payday lender, being a refund anticipation 

borrower is quite different. So there 

actually are types and so we can't actually 

think of them one at a time. 

 Tim Martin's point, we actually did 

a study on overdraft, specifically on people 

who bounced out of the system and it is 

important to understand that the consumer 

level who that is, specifically it is over 

represented by women who are heads of 

household. It is over represented in minority 

communities. It is overrepresented in the 

young and in the old, less so in the middleaged. It is also overrepresented in certain 

banking environments. So you can see the 

banks are playing a role here too. 

 And then a question for Ed, because 

I wanted some clarification. In some of the 

work that we have done, we found this curious 
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thing -- because the checking account is the 

entry point for a bank product, that folks are 

denied savings accounts who don't want 

checking accounts, just straight up want 

savings accounts and are willing to forego the 

checking part, but they are denied savings 

accounts because of check systems. 

 MR. HENDERSON: Because of what? 

 MR. TUFANO: Since the bank 

procedures won't allow them to have a checking 

account because of check systems problems. 

They are also denied the right to have a 

savings account. And we found that every time 

we sample, we seem to find that is true. But 

I could never get a sense of whether that is a 

common phenomenon. Do you have from your 

survey any insight on that? 

 MR. BACHELDER: We did ask that 

and analyzed that direction because there were 

lots of things to look at to be explored for 

the data that was gathered in terms of that 

crossing. But I guess, if you think about the 
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kinds of concerns we should get to is the 

difference the banks have in terms of how long 

they will tolerate somebody in an overdraft 

state and we had a specific question on that. 

 And the answers were basically from within a 

month, you know, within a month we are going 

to close your account to 180 days. So a real 

long range. Some banks had programs to help 

you finance your overdraft fees for a longer 

period of time to help you get back on track 

and would downshift you to a more limited 

account to retain you. But I think that entry 

point and if you just look at the customer 

proposition and these are self positions, but 

if you were to think about somebody shows up 

and they have a choice. Who do I want to do 

business with? You may look at one of these 

segments of demographics and I don't know if 

Barbara could slide back to slide 19, but if 

you look what the alternative service 

providers show. I mean what is it that they 

do? Most all of them do check cashing. Most 
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all of them will do money orders. They 

definitely want to do bill point payment. 

They are big marketers for prepaid cards where 

banks have much more restrictive policies on 

prepaid cards for example. So there is a lot 

of demographic overlay that basically if you 

pull everything up and flip it over you start 

to see the market difference because of banks’ 

regulations, approaches and business model. 

Maybe it isn't worthwhile for each bank to 

pursue all of these various, but it is enough 

 to get that front end part of the 

transactional services that people need to do 

everyday and if you are a cash based consumer 

that you were describing that is how I do my 

budgeting. I have no more money in my pocket, 

no more spending. But I think if you really 

look at how banks are not making this easy to 

do the transactional payments in a safe way, I 

think that would be one area to explore that 

might overlap the segments. 

 MS. TAYLOR: I am going to cut 
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this discussion off because we are already 

about 45 minutes behind. You guys are going 

to be at lunch, right? So we can continue 

this discussion over lunch. I know that there 

is a lot to say on this but I think we need to 

hear from the banks to learn what is actually 

happening from that point of view. 

 I just want to say thank you so 

much. This has been really enlightening and 

it is a great study. I am looking forward to 

reading it in detail and Barbara, thank you 

for your work. Thank you so much. 

 So let's go on to the next panel. 

I think it is also yours Barbara. 

 MS. RYAN: As I mentioned a little 

bit earlier, a very important component of the 

FDIC's unbanked survey was a development of 16 

case studies that highlight various strategies 

that financial institutions have employed to 

reach the unbanked and the underbanked. And 

we did these to demonstrate that opportunities 

do in fact exist for banks to serve these 
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markets both profitably and effectively. The 

case study banks themselves demonstrated an 

array of approaches. In fact, in the unique 

perspectives of their own market areas, each 

case study bank has targeted a customer base 

and has developed a strategy and the banks, 

among the 16, they represented a variety of 

sizes, geographic locals and demonstrate that 

different types of banks can successfully 

serve the unbanked and the underbanked. So 

this morning, four of the 16 case study banks 

are going to share their approaches. These 

particular institutions were chosen. They 

reflect a variety of types and sizes, types of 

approaches, sizes of banks. Our first 

panelist is from Mitchell Bank, James Maloney. 

 Mitchell Bank is a small independent 

institution located on the south side of 

Milwaukee, Wisconsin. Mr. Maloney is 

president of the bank and chairman of the 

board of the Mitchell Bank Holding Corporation 

and Mr. Maloney is also a member of the 
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Alliance for Economic Inclusion task force. 

 Our second panelist, Peter 

Mosbacher is from Amalgamated Bank, the 

Nation's only union-owned bank. Amalgamated 

has branches in New York City and four other 

states across the county. Peter Mosbacher is 

the bank's senior vice president responsible 

for developing and managing the community 

development department. And this includes 

identifying the banking and credit needs of 

the communities that the bank serve, working 

with the bank's senior management to identify 

retail branch locations, bank products, 

programs and services that respond to those 

needs. 

 Our third panelist is from 

Citibank. Victor Ramirez is a community 

relations officer for that bank and is 

responsible for developing and managing 

relationships with non-profit organizations in 

underserved areas of Los Angeles, Orange 

County and the Inland Empire. He also serves 
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as a subject matter expert for Citibank on 

various economic development topics including 

asset building strategies and he is a member 

of the Los Angeles Alliance for Economic 

Inclusion. 

 Our fourth panelist is from Monroe 

Bank and Trust, a community bank that operates 

25 full service branches in Southeastern 

Michigan. Mary Jane Town, is the bank's 

senior vice president and director of 

marketing, responsible for product 

development, public relations, corporation 

communications, advertising and promotion. 

 And with that, I look forward to 

hearing from our first case study bank, Mr. 

Maloney and Mitchell Bank. 

 MR. MALONEY: Good morning. First 

of all thank you for the invitation to come 

here today and let me also commend the FDIC 

and the Alliance for Economic Inclusion for 

maintaining the focus on these issues in these 

difficult times. As a small bank you have no 
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idea what your support does when we approach 

the directorate and shareholders with regard 

to various ideas that we have for new 

products. From your support and your focus on 

these issues is very important to us at a 

small bank and we rely on you for that and we 

thank you for it. 

 We at Mitchell Bank are part of the 

FDIC's small dollar loan pilot. That is 

really where I am going to speak about most 

this morning because that is our current 

product. We offer a whole suite of products 

to non-customers and to the unbanked and they 

have all been successfully received. But the 

pilot consists of 31 financial institutions in 

which we are all offering small dollar loans 

and we are sharing our experiences in the 

profitability of the product. We are also 

very concerned with the issues of safety and 

soundness of the product. Sheila Bair and the 

Alliance for Economic Inclusion have been 

working on this pilot for over a year and 
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Chairman Bair has been at it for many years. 

Chairman Bair, and now the FDIC, has been a 

consistent champion of the idea that banks can 

competitively and profitably offer small 

dollar loans to compete directly with payday 

lenders. This goes back to her days at the 

University of Massachusetts at Amherst and, if 

you ever want to get a real understanding of 

low cost alternatives to payday loans, I would 

ask each of you look back at the June of 2000 

study of the Annie E. Casey Foundation. A lot 

of this stuff is written and people don't 

really read it. In preparing for my remarks 

here today, I went back and reread this and I 

have to tell you that it is still very 

relevant. It identifies the issues. It 

involves the payday lending. It is small 

dollar loans and the opportunities that small 

dollar loans present to community banks is, 

even though it is four years old, it is 

informative and it discusses all of the 

current issues. Chairperson Bair has been in 
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the forefront of the issue and has 

consistently pointed out to banks that every 

user of a payday product has a checking 

account in the financial institution. They 

are our customers. They are bringing our 

customers bank -- postdated bank checks to our 

bank and cashing them and charging their 

interest rate. Now, the existence of a bank 

account is a requirement to even get a payday 

loan. We are not mining our data in our banks 

to determine which of our customers are using 

payday lenders so we can directly target them 

with the alternatives. 

 Last June the FDIC issued its 

guidelines and recommendations for small 

dollar loans and again that is listed on the 

website. And I have to tell you that what we 

have tried to do is incorporate every one of 

these recommendations and guidelines in our 

small dollar loan product. In your materials 

I have also given you a complete, which is a 

detailed description of our product. Our 
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product has evolved over time. We had to make 

changes and we've reached out to non-customers 

with this product because we were limiting it 

to our customers and that became too limited. 

 So feel free to look and use the 

description. We have spent a lot of time on 

it and it is has been evolving over the last 

year and a half. We still don't know if this, 

how this will perform and whether or not it 

can be profitable as a stand alone product. 

We have made a number of loans and all of them 

have performed extremely well, much better 

than we ever imagined. We've only had one 

loan go bad, not bad, 30 days past due or 60 

days past due and, when we looked into it, it 

was because of a mistake that CSR made in 

issuing the loan. That performance on the 

small dollar loans that was issued has been 

extremely helpful because in rolling out the 

program I have to tell you that the 

directorate and manager of the bank is very 

skeptical of whether or not this can be done. 
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develop information and a track record that 

indicates that it can be done in a safe and 

sound manner. So the FDIC believes that the 

product can be created in a cost effective, 

safe and sound manner, and it also presents 

financial institutions with an opportunity to 

address the longer term financial needs of 

their own customers. It also provides us with 

an entry point for savings encouragement. We 

need to break the cycle of repetitive rolling 

over of debt. The basic purpose of a small 

dollar loan as we see it is to break the debt 

trap and the reoccurring cycle of escalating 

loans which is part of a payday lender's 

business model. One of the things that we and 

I think the FDIC are pretty firm about is that 

these small dollar loans cannot be fee-based 

overdraft or bounce protection programs. The 

rates for those programs many times exceed the 

APRs charged by even payday lenders. They 

create a product we believe that is no better 
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and at times is worse than payday lending. 

The programs are pointed to, those programs 

are pointed to by the payday industry to 

justify their own APRs. This is particularly 

true where financial institutions allow people 

fee-based overdraft protection and actually 

allow people to make cash withdrawals using 

ATM cards over their balance, and where you 

make a mistake and a cup of coffee costs you 

$35 to $40 on that point of sale using a debit 

card. So what we need to do is to offer small 

dollar loans, fully amortizing, that people 

can pay without having to face the cliff of 

the two-week loan. 

 MR. FISH: Could you just help us 

orient your comments, Mr. Maloney. Could you 

just tell us how many loans you've made and 

what the dollar amount of the assets 

outstanding are? 

 MR. MALONEY: The total dollars 

right now, what has happened is that when we 

first got started we limited our loans to 
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customers who have been with us for six 

months. That proved to be very limiting. So 

what we did is we recently opened it up to 

non-customers and ITIN borrowers which is a 

big part of our population. Sixty to 70 

percent of our existing customers are ITIN 

borrowers. We are now up to about 25 to 30 

loans. We've had no defaults and the dollar 

amounts are basically what we see is everyone 

borrows $1,000. Our loan goes from $300 to 

$1,000, six or twelve months -- 

 MR. FISH: I understand. So the 

credit history is less than a year? 

 MR. MALONEY: Yes it is. But the 

six month loans that we've had have all paid 

on time and paid off. 

 MR. FISH: Right, I understand. 

 MR. MALONEY: Also what we do is 

we allow a savings, we require a savings 

component. Ten percent of the loan has to be 

placed into a designated savings account. We 

give it a favored interest rate, higher than 
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our normal rate for our savings account. That 

account can remain open after you pay off the 

loan. You can add any funds to that account. 

 You will always have an account at our bank 

that has a higher interest rate than the 

normal accounts. So what we are looking at is 

a fully amortizing term loan not based on 

overdraft or fee based protection. We need to 

really streamline our underwriting in the 

process making because we need to mimic what 

the people want from the payday industry. We 

want someone to be able to walk into our bank 

and get a loan within 15 minutes, which means 

at most we pull a credit report, look to make 

sure that they have a $1,000 of income and the 

customer service representative is authorized 

to issue the check or the cash on the spot 

based upon that credit score. 

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we were limiting it to customers. Now what we 

do is we open it to non-customers, the ITIN 

borrowers, which gives us the opportunity to 
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bring someone in. They need a loan. We will 

make them the loan. They have to open an 

account and they have to have direct deposit 

into that account. And we also reduce the 

interest rate if they allow us to do automatic 

transfers from that account. 

 A couple of issues have arisen 

because people don't have -- necessarily have 

credit scores. What we've done is we just 

arbitrarily said that if you don't have a 

credit score we are going to presume -- if you 

don't have a bad credit score, but you have no 

credit score, we will presume that you have a 

middle level credit score because not having 

credit isn't bad credit. The payday -- we do 

look at the credit scores. As we look here, 

these are basically the breakdown of the 

credit scores that we use and we escalate the 

rate based upon the credit scores. The payday 

industry tells us that whether or not somebody 

has a 499 credit score or a 528 credit score 

really doesn't make any difference. It is a 
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risky loan regardless. But so far we haven't 

had any problems even with the loans with very 

low credit scores. So, one of the things, 

too, is that the credit report does not track 

what people's use of payday lenders have done, 

what payday loans they have outstanding. We 

will allow people to borrow money to pay off a 

payday loan. So, now if you have a credit 

score of below 570, we initially require that 

you go through three financial education 

classes before you got the loan. Well no one 

is going to do that and so what we did, we 

made one referral for one-hour session with a 

consumer credit counselor and you establish a 

budget and we will make a loan to you 

regardless of your credit score. 

 So in the end, all of these people 

are our customers. And we can complain about 

the payday industry and what they don't offer 

but unless we have something to offer them, we 

have no right to complain. What we've learned 

about the unbanked is that they may be banking 
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financially illiterate but they know how to 

get their financial services, and they know 

the way they like to get them, and they are 

willing to pay for them. So, it is a burden 

to try and overcome some of those issues but I 

think it is something that we can do. There 

is a variety of issues with regard to Truth in 

Lending and things that we have that we've 

struggled with a little bit that makes it a 

little more costly for us to do this other 

than the payday lenders and with the consumer 

credit and the collection issues, but they are 

all issues that can be overcome. We are very 

high on the small dollar loans. We think that 

this is a great initiative and it is the 

current product that we are focusing on at 

this point. So, with that I think, is my time 

up? 

 MS. TAYLOR: If the other panelists 

here could limit their remarks to as quickly 

as they possibly can because we are really 

behind schedule. I hate to do that. 
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 MS. RYAN: Let's move on. 

 MR. MOSBACHER: Thanks Diana for 

that added pressure. You can see glimpses of 

our Depression-Era art there. Running through 

the slides clues you in. For those of you 

that don't know, we are the nation's only 

union-owned bank remaining going back to 1923. 

 We are based in New York City and as of early 

2006 under new leadership with Derrick Cephas 

as president and CEO of the bank. He hired 

myself and a whole bunch of other new senior 

team managers over the past two and a half 

years to really help transform in a short 

period of time to an urban community bank 

going into low/moderate working class 

neighborhoods both in New York City and 

nationally without losing sight of our history 

which is serving unions and union members, 

most of whom are immigrants and working class 

people. 

 We are still relatively small, 

retail-wise, although we have an institutional 
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trust division and commercial banking, real 

estate banking etc. So we are truly full 

service. But retail banking, we have 13 

branches in New York City. We are also in 

Lyndhurst, New Jersey, Pasadena, California, 

one branch in Washington, D.C. I would be 

curious to know how many of you all have seen 

it or been in there. And three supermarket 

branches in Las Vegas where the 60,000 

culinary workers reside and have asked us to 

come in because they have a toehold or a 

foothold, whatever you want to call it, into 

the Vegas market. We had to buy three 

supermarket branches from Nevada State Bank 

and our hope now is we will open a full 

service bank there in a short time. We are in 

a growth mode and Derrick has ambitious plans 

despite the severe recession to continue 

opening branches both in New York City and 

other markets. A lot of our branch expansion 

in New York City, we've been in partnership 

with Diana Taylor and the New York State 
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Banking Department, New York City 

Comptroller's Office and New York State 

Comptroller's Office. I believe New York 

State is still the only state that offers the 

special banking development districts and 

other states are looking at them. We found it 

to be a phenomenal incentive for us to locate 

into low-income, underbanked, underserved 

areas. So over the past two to two-and-a-half 

years we've opened four branches, one in the 

South Bronx, one in Long Island City, Queens, 

and another in Bed-Stuy, Brooklyn and another 

in Sunset Park, Brooklyn. We do get low 

market rate deposits for both the city and 

state. From my perspective, the advantages 

have been the partnerships and the 

introductions that have been made through the 

banking development district process -- 

meeting with local government agencies, 

meeting with local community-based 

organizations -- to get their buy-in and 

approval for this. And they in turn say, well 
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fine, but these are the things we are looking 

for as you are coming into our community. So 

the plan that we produce and submit to the 

regulators incorporates many of the ideas the 

community gives us. 

 Again, given the bank's roots, 

serving working class people, we've always 

offered totally free checking, low minimum 

balance, no charges -- 

 MR. BOSTON: Peter you may want to 

hit your slide. 

 MR. MOSBACHER: I'm sorry? 

 MR. BOSTON: You may want to hit 

your slide? 

 MR. MOSBACHER: Yes, thanks. 

Sorry. So again this is something that many 

banks are offering these days. I guess what 

is more exciting is that we recently launched 

a second chance account for either checking or 

savings accounts to help people who may have 

had some minor issues in the check system get 

back into the banking system. We do this in 
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strong partnership with a lot of our 

community-based organizations. We find that 

they are best qualified to identify potential 

clients for these second chance accounts. So 

some of the highlights of the program are the 

minimum of a cent to open checking and a 

minimum of $5.00 to open a savings, no minimum 

balance after the opening. However, only an 

ATM card will be issued and there is no 

balance protection. We strongly prefer direct 

deposit. This then migrates people into a 

full banking program including financial 

education and eligibility for a $50 bonus to 

help them establish an open-end account. 

 MR. FISH: What is no bounce 

protection? 

 MR. MOSBACHER: We offer that with 

other products but with this one we would not. 

 But if there is an overdraft that there would 

be no protection on that or a check bounce 

rather. 

 MR. FISH: I still don't understand. 
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 MS. TAYLOR: If you issue a check 

against your account and there is not enough 

money in it, it just bounces. They don't pay 

it. 

 MR. MOSBACHER: Right. We don't 

cover, right. 

 MR. FISH: So no overdraft fee but 

the check doesn't clear. 

 MS. TAYLOR: You do get charged 

for a bounced check. 

 MR. MOSBACHER: But again, it is a 

stepping stone to get people back into the 

system that normally wouldn't have the 

opportunity to get back into the system. And 

then it is a stepping stone for them to go 

into a more traditional account. 

 MR. FISH: I'm trying to understand 

what is special about this account. 

 MR. MOSBACHER: The fact that it 

is offered to folks and they do in fact appear 

on check systems and who most banks would not 

allow to open a checking and/or savings 
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account. 

 MR. FISH: Okay, but it wouldn't be 

that different from a checking account at a 

bank if a person could open the account. 

 MR. MOSBACHER: If they could. 

 MR. FISH: I understand, okay. The 

account itself isn't different. It is the 

population. 

 MR. MOSBACHER: Yes, I mean the 

account features are the same. 

 MR. FISH: I got -- 

 MR. MOSBACHER: I wouldn't brag 

too much about the account features because 

clearly no bounce protection is not something 

I am proud of but we put it in there. The 

minimum to open the account, the minimum 

balance after opening etc. and again only 

having an ATM card. But the main issue here 

is really there are so few institutions that 

are even giving check systems a look to really 

peel back the layers and say what are the 

issues here. If it is not outright fraud, 
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there is so many other things that put people 

in the check systems and disqualify them from 

opening any type of account. So I think that 

is a strong way to start to open up that door. 

 This is a fairly new -- the second 

chance account is a fairly new thing for us 

and we are rolling it out immediately in 

California where the State of California has 

opened up the Bank of California to bring in 

the unbanked and underbanked and they have 

some product descriptions that they were 

requiring banks to participate in and I think 

the second chance account did beautifully with 

their program, but we only signed the 

agreement on this about a month ago. So 

unfortunately I have no hard data to give you 

as to how we are doing. I am optimistic we 

are off to a good start. We are very proud of 

our in-house financial education program, 

which we brand, Money Sense. It was done in 

partnership with a very strong New York City 

based non-profit called the Coalition for 
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Debtor Education. There is a very strong 

focus on behavioral finance, the psychology of 

money, in terms of how money affects behavior 

and how behavior affects money, important 

issues for all of us regardless of income 

level, but particularly for low- to moderateincome people. So it does put a different 

twist on financial education and we do this 

in-branch. We do this at community centers, 

churches, etc. We do put in, we offer upon 

completion of the classes a $50 coupon that 

can be redeemed to establish a new savings 

account but it has to be redeemed after 

maintaining an account in good standing for at 

least one year. 

 With our union members we offer 

Group Advantage Banking, discounts of products 

and services, including direct deposit and 

payroll and lunchtime, what we call Lunch and 

Learn, financial education seminars tends to 

be very well received both by employer and 

employee. 
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 Very quickly, some of the 

highlights of Group Advantage Banking. It is 

direct deposit, payroll, free checking, no 

minimum balance, and savings and money market 

accounts, online banking, bill pay. We are 

part of the Allpoint Network so again no fee, 

ATM banking and reduced rates on various loan 

products and, as I mentioned earlier, the 

Lunch and Learn program. The partnership, the 

very strong partnership we have with our union 

in New York City DC 37, most of whom or all of 

them are municipal employees with New York 

City residency requirements. The union, the 

bank, New York City, HPD [Department of 

Housing Preservation and Development] and NHS 

[Neighborhood Housing Services] of New York 

City formed a partnership about five years ago 

to assist these union members in saving for 

affordable housing in New York City. It has 

been a very, very strong program. It is a 

place-based program operating out of union 

headquarters in cooperation with legal 
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services. It has put hundreds, if not 

thousands of working class city employees, 

into affordable housing in New York City. It 

does provide five percent of units in citysponsored lotteries for their homes and up to 

six percent through HPD. 

 And last but not least in Las 

Vegas, again we are relative newcomers to that 

market but working with the unions, they want 

to migrate more direct deposit of paychecks so 

we launched a payroll card product for them. 

It is an alternative to a deposit while 

meeting direct deposit requirements. And then 

we put in an ATM at the union's headquarters 

for payroll card customers to pay a reduced 

surcharge to withdraw the funds. And again 

this serves as an entry point for 

transitioning the unbanked and underbanked 

union members into mainstream banking 

activities. 

 And last but not least, real quick, 

the last strong partnership we have is with 
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New York City Housing Authority and our 

Banking Development District Branch in Long 

Island City which is surrounded by the largest 

New York City Public Housing projects anywhere 

in the city, probably anywhere in the country 

for that matter, totally underbanked area. 

Most of the housing project folks were victims 

of expensive check cashers, very little access 

to traditional banking product services. So 

we did go in and have formed a nice 

relationship with NYCHA [New York City Housing 

Authority] and with a strong local non-profit 

called ERDA, East River Development Alliance 

to offer financial education as well as a 

special program where NYCHA now allows 

unbanked residents to pay their rent at the 

bank. They can accept payments in cash for a 

small fee, process payments for remote 

capture, and transfer the payments to the 

housing authority. So that is for like $2.00 

a transaction as opposed to previously they 

were going to check cashers and paying $5.00, 
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$6.00 or $7.00 a transaction. At the same 

time we can migrate them into starter accounts 

or the second chance account or we can offer 

them the Money Sense financial education 

program. 

 MR. FISH: Peter on the second 

chance account, how long have you had it and 

what's been your charge-off experience? 

 MR. MOSBACHER: The second chance 

account is about three months old. 

 MR. FISH: Okay. 

 MR. MOSBACHER: So unfortunately 

no -- 

 MR. FISH: It will be very 

interesting I think for the FDIC in time to 

understand the charge off experience on that 

account versus a normal checking account. 

 MR. RYAN: I would be interested to 

see what you are seeing in bounced checks 

versus other accounts that you have. I kind 

of like that there is no overdraft here 

because there are consequences to bouncing a 
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check but there aren't overdraft that may in 

itself be enforcing financial literacy. 

 MR. RAMIREZ: Good morning to 

Chairman Bair and to the members of the 

advisory committee, the other panelists and 

audience. It is a pleasure and honor to be 

here and to be selected among the various 

local AEI working groups to be able to share 

some of the leadership role that the city and 

United Way has played in making a difference 

in the community. I'm so happy to be here 

although my luggage did not arrive. So please 

excuse me for my attire. It is great to be 

here. 

 A couple of years ago I heard a 

spin on a national panel and we were 

discussing ideas on helping working families 

to save part of their tax refund. And to use 

it as seed money for developing long-term 

relationships at financial institutions. And 

there were two issues that we wanted to really 

address. One was really how to increase the 
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national household savings rate and also how 

to bank the unbanked and how to become a part 

of the financial mainstream. 

 So I walked away from the 

conference with four main questions in mind. 

What kind of new model and approach do we need 

to promote financial inclusion for all 

Americans? Second, what policy options are 

worth pursuing in partnership with regulators 

and others at the federal level? Third, what 

can community organizations do to effect 

change? And fourth, what is the role of the 

private sector or financial institutions in 

providing products and services that address 

consumer needs? And because each of us 

independently by ourselves cannot really make 

the kind of impact that we can 

collaboratively, it is obvious there needs to 

be a value in order to be a value and effect, 

there needs to be a private, public and nonprofit collaboration. So the work of a local 

AEI asset building committee is a prime 
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example of such a type of collaboration 

between city, United Way of Greater Los 

Angeles, regulators and a lot of non-profits. 

 It helped us to identify the community need 

to help develop a model and to implement 

innovative savings programs such as the RampUp program which is now -- I am going to share 

with you in a moment. 

 So I think on a daily basis we need 

to ask ourselves what can financial 

institutions do to make a community impact. 

There are a lot of questions we ask ourselves 

on a daily basis. What is our role in 

community impact? There are many things that 

we could do to effect change in the community, 

I want to focus on two main areas where banks 

can make a difference. One of them is in 

helping develop products and services and by 

providing resources to support community 

organizations that really help effect that 

change. The city has invested resources in 

developing products such as the CitiEscrow 
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product that is highlighted there. It is 

really the platform that we use online to help 

support a lot of non-profits around our 

individual development accounts. We have 

thousands of accounts right now nationwide. 

We also have developed an innovative access 

account that has been recognized by regulators 

because at a low cost, very flexible checkless 

account for entry level individuals into the 

banking system. We also invested resources to 

develop our own city financial education 

program partly inspired by the FDIC's own 

Money Smart program. So, we have a great 

resource. It has a manual about this big. We 

call it the bible for financial education, CDROMs and a lot of online resources. And also 

we will be highlighting the collaborative 

relationship with United Way of Los Angeles to 

develop the actual Ramp-Up account program. 

 Other resources that Citi has been 

able to provide is financial resources, human 

resources as well as intermediary resources 
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for capacity building: financial resources in 

terms of grants and contributions to support 

the capacity and non-profits; human resources 

-- volunteerism, conducting financial 

education, even doing tax preparation services 

at the volunteer income tax assistance 

programs so training, technical assistance, 

board service; and then, through the 

intermediaries, we provide some funding for 

training for non-profits in the communities. 

 Now I like using this slide because 

it shows a simple model of asset building. I 

like to call it the cycle of asset building to 

combat the cycle of poverty. And it basically 

shows the importance of building a continuum 

of services in the community that creates 

linkages between various asset building 

programs by leveraging various resources. So 

if we invested resources to help individuals 

build their savings as you can see from the 

top number one. To help them build assets, 

build their wealth, build equity and in turn 
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they are going to be able to save more money 

and build additional assets. So that is that 

in a nutshell. 

 So our goal in Los Angeles, to make 

sure that working individuals leverage as many 

community resources as possible so that they 

have it available to them. For an example, if 

an individual comes in and learns about the 

Earned Income Tax Credit, for example, the 

marketing campaign, a grassroots effort, they 

would be able to be referred to a provider 

site and get their taxes prepared for free. 

At the provider site they would be able to get 

a bank account to directly deposit their 

refund so they don't have to use a rapid 

refund and then, hopefully, be referred over 

to an IDA program for financial education. So 

we want to make sure that no matter where an 

individual goes into this continuum of 

services, they will be able to benefit from 

the various different services that we are 

talking about. 
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 An example of this time of 

collaboration of connecting the different 

pieces, connecting the various dots is our 

work with United Way of Greater Los Angeles. 

Since 2007, we have been working with United 

Way on various programs and projects and these 

include funding the Unbanked Problem in Los 

Angeles report that helped us develop some 

strategies specific to Los Angeles on how to 

overcome some of the banking to the unbanked 

barriers to Los Angeles, and we've been able 

to use this as part of our Bank on LA campaign 

that we are working with the mayor's office as 

well as other efforts. We also helped 

establish and fund the Asset Building 

Collaborative. We call it the ABC and 

partnership with the Federal Reserve and it is 

a convening, a convening of practitioners, 

lenders and researchers on asset building 

topics specifically to Los Angeles that 

address our unique needs. We also funded the 

development of an online asset building 
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directory. This is a user-friendly online 

database where individuals can type in their 

address and also their main area of focus, for 

example, first time homeownership and they 

would be listing, getting a list of all the 

various providers in the area. The various 

topics include financial education, small 

business development, foreclosure prevention 

and free tax preparation services. Also, 

United Way of Los Angeles has recently housed 

the Los Angeles Earned Income Tax Credit 

campaign partnership and Citi has had the 

pleasure of chairing that partnership for the 

last four years. 

 And then we will be getting into 

the Ramp-Up accounts that we have partnered 

with United Way and network of their agencies. 

 And we are working in 2009 in the future. We 

are working with the City of Los Angeles, 

Federal Reserve, FDIC and a collaborative of 

other partners for launching the Bank on LA 

campaign. That was modeled after the Bank on 
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Central campaign and many others, Bank of New 

York, etc. 

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are calling the asset building specialist 

certification program. This is a training for 

individuals in the community from non-profits 

on how to leverage and how to identify various 

programs that individuals can qualify for. So 

it is a 15-week program individuals will go 

through and they will be able to refer people 

when they come into their agency. And so this 

would be a long term relationship that we are 

working with the various organizations and the 

City of Los Angeles. 

 And then finally one of our goals, 

long term goals is to be able to replicate the 

rapid account and various markets served by 

Citi and United Way. 

 I just wanted to give you a brief 

history of how the Ramp-Up account was 

developed. Citi has also supported other 

United Way programs such as the Saving for the 
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American Dream program. It is their 

individual development account. It was 

launched in 2001 and it is one of the nation's 

largest IDA programs with about 1,700 

accounts. It is the only IDA collaborative in 

Los Angeles and it currently has 18 countywide partners. They are all focused on 

homeownership, micro enterprise and postsecondary education. Their role at United Way 

is to provide program and financial support to 

other local non-profits to make sure that they 

have compliance monitoring of the federal 

grant so they collect all the data and report 

it over to the federal government. They 

provide quality assurance training to the nonprofits and capacity building for the 

organizations. And this project has been used 

as a national model by other United Ways and 

to build other local IDA programs. 

 Some of the outcomes that come out 

of this collaborative. This is data from the 

middle of 2008. There have been 85 homeowners 
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in Los Angeles County, 376 businesses have 

started or expanded, and 20 educational 

investments have been made. And an important 

note, that 28 percent of all accounts that 

have been opened have resulted in actual asset 

purchases. So it is a very good number. 

 In our discussions with United Way, 

we wanted to address some of the challenges 

with general savings programs and IDA. For 

general savings programs, we realize that we 

needed to come up with an effective savings 

program for opening new accounts. Some of the 

things that we did before, a couple of years 

ago, we were giving bonuses for new accounts 

that were opened through Citi of $25. What we 

found out is individuals would use the account 

for directly deposit receiving their account, 

they would take their refund and the $25 and 

never use the account again. So this frontloading of the incentive wasn't working. We 

were trying to figure out more of a back-end 

incentive and this is what actually led to the 
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Ramp-Up account. We saw as a result of these 

efforts, they created a lot of unfunded or 

inactive savings accounts and there were also 

very inconsistent savings patterns. We wanted 

to see how we could create long term savings 

relationships with financial institutions. 

When we looked at the IDA accounts we saw that 

this is the model that United Way was using -- 

was a high cost model. It was high cost 

because the cost of management of each account 

was pretty expensive when you looked at per 

account. There was also high touch, requiring 

a lot of case management -- individuals doing 

a lot of follow-ups, doing a lot of case 

management. It also had a low tech IDA 

structure. There was no online management 

system for looking at all of the accounts and 

trying to see who is saving at what rate. We 

were also concerned about something we called 

the discouragement factor. This was for 

individuals who completed the entire IDA 

program. They did the financial education. 
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They did the savings for two years to three 

years. At the end of the day unfortunately 

they were not able to actually purchase their 

assets for various reasons, either lack of 

credit, lack of capital, or in the case of Los 

Angeles a couple of years ago, lack of 

affordable housing. The housing costs had 

gone too high. We were also concerned about 

any unused federal and non-federal match 

dollars that were raised that were being 

unused. All of this money was being left on 

the table so we had to come up with a solution 

of what to do with this unused money. We 

didn't want to lose all this community equity 

and then give it back to the federal 

government as unused match dollars so we had 

to come up with another alternative. And then 

finally some of the guidelines that were 

surrounding the IDA program were too 

restrictive. We wanted to be more flexible 

with the income guidelines, asset test etc. 

So we were very interested in looking at a new 
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model that addressed a lot of these 

challenges. 

 And that leads us to our Ramp-Up 

account. The bank partnership with United Way 

and the leadership of Ed at the United Way we 

were able to come up and identify a product 

that is a low cost, flexible, no strings 

attached savings program that provides an 

accelerated interest rate. It is a highly 

subsidized interest rate of up to 21 percent 

APR. And this provides an incentive for 

consistent long term savings. The savings 

sector was about 15 months. It could be 

extendable for beyond that depending if the 

individual wants to save a little bit more. 

There was no minimum balance requirement, nor 

minimum monthly deposit requirement and the 

rate of interest ranges from 15 percent to 21 

percent based on the initial deposits and also 

the monthly deposits that they are making. A 

very important point is that the subsidy, the 

interest subsidy, is tax-free because the 
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funding is actually paid by United Way. They 

use their own fund-raising efforts to raise 

the money for the subsidy and so it is 

considered a grant or a match to the 

participant, so it is tax-free. So really 

that 21 percent could be compared to a 30 or 

35 percent when you look at the tax-free 

features. Individuals can withdraw the full 

savings at any time for whatever reason 

without any penalties. Purchases do not have 

to be limited to asset specific purchases such 

as homeownership, business expenses or 

education. It is very, very flexible. They 

can be transferred to other savings investment 

products such as under the IDA account or an 

IRA or a CD. Financial education is highly 

encouraged, but it is not a requirement for 

them to receive the subsidy as opposed to the 

IDA program where you need to do ten hours of 

financial education in order to qualify for 

this subsidy. Currently we are using the 

CitiEscrow account platform which is an online 
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bank account opening product as the main 

platform for opening accounts. 

 I wanted to share this basic grid. 

It shows the savings and interest rate and 

model for the actual different abilities for 

people who save. Since we are trying to 

promote this currently during tax season, we 

are encouraging individuals to make an initial 

$500 deposit from their tax refund into this 

account. Then they make a commitment to save 

over a period of the next 14 months, $40 a 

month. They will then receive an APY of 19.35 

percent and at the end of their savings goal, 

they would have accumulated savings and 

interest of $1,312. And you see right below 

that, a different model if somebody decides to 

have a larger initial deposit of $700. The 

interest rate is a little lower, 15.1 percent 

but at the end they end up saving $1,659. 

 MR. FISH: So could I open this 

account? 

 MR. RAMIREZ: No, everybody asks 
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that. I wish I would be able too. You have 

to LMI so we are looking at 60 percent of area 

meeting income for Los Angeles. So they 

qualify for the Earned Income Tax Credit they 

automatically qualify for this. 

 MR. FISH: I wasn't being cute about 

that. I'm trying to understand how you 

overcome a lot of legal issues that that 

presents. 

 MR. RAMIREZ: Legal issues in 

terms of -- 

 MR. FISH: Discrimination. 

 MR. RAMIREZ: For income levels? 

 MR. FISH: Yes. 

 MR. RAMIREZ: Well since it is a 

grant program -- 

 MR. FISH: You feel legally that you 

are on good ground that say a person earning 

$62,000 a year walks into this branch and 

wants to open that account that you can say 

no. 

 MR. RAMIREZ: I think because of 
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the purpose of the programs to help build 

assets for -- 

 MR. FISH: I am asking a legal 

question. 

 MR. RAMIREZ: We haven't had the 

opportunity to think about that. That is 

something we can definitely come back and 

consider, in terms of discrimination, right? 

 MR. HENDERSON: You have faced no 

challenges so far. 

 MR. RAMIREZ: And it has been a 

very small pilot program. The funds are 

provided by United Way, raised by money for 

helping -- 

 MS. FUCHS: It is the United Way 

piece that covers you. 

 MR. RAMIREZ: Right, we are not 

paying the subsidy. 

 MR. FISH: Why is that? 

 MS. FUCHS: Because they are a 

charitable not-for-profit and they can create 

any kind of standards they want in giving out 
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their money. 

 MR. RAMIREZ: It is part of their 

mission. 

 MR. FISH: Oh, I see. 

 MR. RAMIREZ: Yes. 

 MR. FISH: Okay, thank you. 

 MR. RAMIREZ: But a good question. 

 MR. RYAN: The interest rate is 

scalable downward based on the numbers so the 

19.5 and 15.1 on the larger amount. 

 MR. RAMIREZ: It is scalable 

because there is only a maximum savings 

incentive that we can provide per account. It 

is about $250, so the higher the initial 

deposit, the lower the interest rate, so we 

don't overpay anybody. 

 MR. RAMIREZ: The next couple of 

slides are going to show you a side-by-side of 

the Ramp-Up accounts with the IDAs. 

 MS. TAYLOR: Since I think 

everybody has this so we can sort of look at 

the comparisons ourselves. 
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 MR. RAMIREZ: Okay. 

 MS. TAYLOR: If they have 

questions about it, they can ask. So if you 

could wrap up that would be great. 

 MR. RAMIREZ: Okay. 

 MS. TAYLOR: Okay, thank you. 

 MR. RAMIREZ: The only thing I 

wanted to say about this is that Ramp-Up 

accounts are by no means supposed to replace 

IDAs. They are suppose to compliment them and 

maybe as an alternative for those who cannot 

use IDAs or aren't ready for an IDA. 

 The Ramp-Up account structure is a 

very flexible and customizable design to fit 

the needs of the community. We've tried 

various programs where we co-enrolled somebody 

with an IDA account so they had a Ramp-Up 

account and at the same time an IDA account. 

We call that a hybrid Ramp-Up account. 

Individuals who aren't able to qualify for the 

IDA asset match, they can still qualify for 

the incentive. And you are very flexible 
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depending your eligibility criteria based on 

local area income, purchase requirements etc. 

There is a lot of flexibility in this program. 

And the main highlight I wanted to focus on is 

some of the outcomes from this program. The 

pilot program was launched in 2007 in June and 

it was in effect for about 12 months. Our 

goal was to actually open up 40 accounts. We 

over-enrolled with 42 just to make sure that 

we could make up for the possible attrition 

rate. According to the accounts that were 

opened in the first two months, participants 

were co-enrolled in the IDA program. Within 

the first 90 days of the program, there were 

over $12,000 in deposits, average of $300 in 

an account. After the first 180 days there 

were $23,970 in cumulative deposits. Some of 

the numbers that we looked at was that 80 

percent of the individuals made regular 

monthly deposits and there were actually 28 

percent more savings in the Ramp-Up account as 

compared to an IDA saver, an IDA account using 
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the same population and during the same time 

period. So we had a control group to try to 

compare that. With that comparison with the 

control group, we also saw that only nine 

percent attrition rates for the Ramp-Up 

accounts versus 26 percent attrition rate for 

IDA savers. 

 And then for the second page of the 

program in the last year tax season, we opened 

up 29 accounts at the VITA sites, average $500 

tax refund used to seed the accounts. We did 

not offer the co-enroll into the IDA program 

but many were interested. The reasons we 

wanted to see if the IDAs had any effect on 

people enrolling in Ramp-Ups. We wanted to 

offer it as a separate account to look at 

that. And then in the first 90 days over 

$10,470 were made in total deposits and as of 

just a few weeks ago total cumulative deposit 

was about $29,610. And so far there have been 

two homeownership purchases that have been 

made using this savings account. 
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phase of expansion, which is what we are doing 

currently right now with this VITA season. We 

expanded into four new sites for VITA and one 

existing site, so a total of five new 

locations. So we made it throughout the whole 

county of Los Angeles. In trying to look at 

various neighborhoods of Boyle Heights, East 

LA, Pacoima, Koreatown, Pasadena -- very 

culturally diverse communities -- so we are 

trying to see if there is -- trying to measure 

any variations in outcomes in the communities 

that are served. We have a goal of 175 

accounts that should be opened by June 2009. 

Again, encouraging the use of $500 opening 

deposit using the tax refund and we’d like to 

replicate this as the next step throughout the 

whole state and hopefully have the federal 

government consider this as a national 

demonstration project in the future. Thank 

you. 

 MS. TAYLOR: Thank you. 
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 I'd like to give you a little bit of 

background on Monroe Bank and Trust. We are a 

one and half billion dollar community bank. 

We were founded in 1858 in the back of a 

drive-in store when James Buchanan was 

president. So we very proudly celebrated our 

150th anniversary last year. We have been 

trading on NASDAQ since 2003 and currently 

operate 25 branch locations. In October of 

this year, we acquired 86 million dollars in 

audits from Main Street Bank in Northville, 

Michigan. We just completed a conversion of 

those customers to MBT. And we operate under 

a slogan that we like to use, MBT banking. We 

diligently work to try to provide products and 

services to folks in our area that meet the 

needs of our market collaboratively. We are 

headquartered in Monroe, Michigan, which is 

about halfway between Toledo, Ohio and 

Detroit. Our branches are in suburban and 

agricultural areas. Sadly, you probably know 
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Detroit is the heart of the automotive 

industry and our state has been in a recession 

for over five years. We have a 10.6 percent 

unemployment rate statewide -- I know that 

number is low and will be readjusted when the 

New York bureau's numbers come out -- 9.6 

percent in Monroe and that's compared to a 

national unemployment rate of 7.2. I think 

the worst in some ways, our high school 

dropout rate in Monroe is reportedly over 20 

percent. We have a 53 percent market share in 

Monroe County, less than a percent in Wayne 

County. And in terms of our CRA assessment 

areas in Monroe, we serve one low, one 

moderate, two minority, and in Wayne County 

two low and two moderate. 

 We developed a second chance 

checking product. We recognize the need to 

help people in our communities re-establish 

good financial banking practices if we could 

or to help them improve their banking history. 

 And we also wanted to maintain consistency in 
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our branch, our front line personnel at the 

time of account opening, especially for those 

people with financial challenges. 

 So we were -- actually introduced 

the concept of the second chance checking 

product at a trade show. We decided to 

research it via our product and pricing team 

internally. We did design and watch a pilot 

February of 2008. It's design is a stepping 

stone product. The end goal is to graduate 

the customer after 12 months of solid 

financial management into a more traditional 

product such as free personal checking. This 

product seems like its features are pretty 

similar to those in Peter's. No minimum 

balance, $50 minimum to -- or I'm sorry, no 

minimum balance required, $50 minimum to open. 

There is a $10 monthly service fee. There is 

an ATM debit charge but no deposit capability 

on the card and available withdrawal limit of 

$300. We've had some success with the 

account. We had 49 accounts opened. We are 
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maintaining a 70 percent retention rate on 

those accounts and the average balance account 

is $194.57. 

 In April of this coming year, we 

plan -- or this year -- we plan to try to 

reach another segment with our launch of a 

young adult checking product. Again, the goal 

would be to graduate the young adult customer 

into a more traditional product at their 25th

birthday. Again, $50 minimum balance, $20 

worth of free ATM fees each month, ATM debit 

card with deposit capability and a $100 debit 

reward points in a rewards program that we 

have internally at account opening. 

 We think, however, that the 

critical elements for us reaching our 

customers are our financial outreach efforts 

coupled with our products. We have 

historically operated a number of programs 

including our Partnership in Education bank at 

school program that operates in 37 elementary 

schools in our markets. Our branch personnel 
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literally come in and assist children and 

parents and open student savings accounts and 

the students actually serve as the branch 

managers, customer service reps, security 

personnel etc. And currently we have 7,286 

accounts on our books, average balance of $551 

for a total of a little over 4 million dollars 

in student accounts. We also offer $15,000 

college scholarships annually for graduating 

seniors. Those seniors are selected by school 

personnel. However, the scholarship winner's 

household income cannot exceed 80 percent of 

the assessment area median family income, in 

this case $52,960. Our branch managers as 

many of the banks seem to do also conduct bank 

at work programs in area businesses for 

example. We do conduct one regularly at the 

Global Engineering Manufacturing Alliance 

plant in Dundee where our managers go onsite 

to assist with account opening and financial 

advice. We are also absolutely happy to 

assist other of our clients, customers, such 
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as IDA schools as an example, with opening 

things like health savings accounts for their 

employees when they offer high deductible 

health programs. Internally we are launching 

a program which we are calling MBTID, which 

stands for Inclusion and Diversity. We think 

that we could stand to become more diverse as 

an organization and we think that we need to 

better understand the needs of our communities 

as they change. We also utilize bank-wide a 

relationship/sales process to both our 

internal and our external customers we refer 

to as CARE, which standards for communicate, 

ask questions, refer when appropriate, and 

enjoy the results. 

 We are most proud of our ENLIST 

volunteer program now celebrating its 25th

year. The acronym stands for Employees Now 

Linked In Service Together. It started with a 

reward for top employees for volunteering 

their time and energy to serve non-profits and 

organizations with their manpower needs. Over 
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and above our annual contributions of about 

$250,000 in corporate sponsorships, our 

employees donate over 9,000 hours each year, 

serving over 100 groups. We have over 85 

percent employee participation and just last 

month ENLIST presented a check to a local nonprofit organization for over $10,000 in 

additional funds that the group raised 

throughout the year. ENLIST has been 

recognized by the Michigan Bankers 

Association, a Shining Star Award, as a 

finalist and the American Banker's Association 

Community Service Award category and we just 

recently received the Presidential Volunteer 

Service Award from the President's Council on 

Service and Civic Participation. 

 I am very excited about this 

particular initiative. This month we are 

launching MBTTeach or I'm sorry MBTeach, which 

is an extension of our ENLIST volunteer 

program. We have launched this or designed 

this to be a little more formal and strategic 
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in our approach to financial literacy 

programming in our communities. We are using 

the FDIC Money Smart curriculum. We are 

training and certifying our MBTeachers 

internally. In fact, there is a public 

speaking class going on as we speak. And we 

have been scheduling courses with non-profits, 

community organizations, etc. as requested and 

at completion of those courses we hope to open 

accounts for those individuals who attend and 

then to provide ongoing financial assistance. 

 We project that we will reach over 1,000 

students in 2009. 

 The final initiative that I would 

like to point out is The Learning Bank, which 

is tremendous collaborative opportunity. In 

April of 2008, we closed the branch that did 

operate historically unprofitably in a lowincome area. And we transferred the deposits 

to our main branch that was less than threequarters of a mile away. We didn't want to 

abandon or lease the building. So we looked 
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for alternatives and our president/CEO, Doug 

Chaffin had a vision for this. He was aware 

of a collaborative effort between Huntington 

Bank and Grand Rapids Community College called 

The Learning Corner at Wealthy. So we thought 

we could do something similar and bring in the 

partners in our community to create a similar 

model. So we conducted about six months of 

community meetings with faith-based community 

organizations, government, the community 

college, intermediate school district, local 

non-profits and we also looked at all of the 

community research and data that was available 

and reached an overwhelming consensus that all 

parties agreed to form a collaborative to 

support an educational outreach center in this 

facility, which will start providing GED prep 

and testing, particularly for the over 24 age 

group who are a little more difficult to find 

for; COMPASS testing to assist people with 

transition into college or job training; 

provide access to programs offered by 
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organizations such as the United Way, the 

Salvation Army, the Monroe County Opportunity 

Program; and of course we will be offering our 

financial literacy courses via MBTeach. And 

the State of Michigan Department of Labor and 

Economic Growth is meeting this afternoon and 

hopefully they will approve a $300,000 grant 

to fund this project. 

 So I think this is in your packet. 

 We were very pleased. It was getting very, 

very positive support in the community. 

Obviously we like positive PR as well as the 

next guy, but it was a very, very valid 

effort. 

 So in conclusion we think that we 

need multiple approaches in the communities 

that we serve and we think that we need to 

concentrate on literacy and support literacy 

with products. 

 MS. TAYLOR: Thank you. Since we 

are so far behind right now, what I would like 

to do is limit people's questions to specific 
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questions that they might have about this 

program and take a quick break and come back. 

 I want to make sure that we have enough time 

for discussion. So thank you very much. 

Anybody have specific questions? Martin? 

 MR. EAKES: Mine is not a question. 

 I just wish everybody in America could hear 

your story. You know they think of banks as 

being the bad guys and really what you have 

described is just so incredible and I know 

particularly for Mr. Maloney, I have worked 

with a lot of immigrant communities all over 

the county and you probably wouldn't even know 

how inspiring your bank has been to those 

communities for all the leadership you have 

done on ITIN over the years. I just want to 

say thank you publicly and to Victor. I've 

done a lot of work recently with Eric Eave and 

Kevin Thurn and others at Citi who have really 

taken beyond the call of duty trying to figure 

out how to modify mortgage loans and I just 

want to thank you. It is amazing what you are 
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doing. 

 MS. TAYLOR: Having been on the 

other side of some of the remarks that is high 

praise. Anybody else before we take a quick 

break. All right. Why don't we take a ten -- 

come back at like 20 after. That would be 

great and then we can get going again. 

 (Whereupon, the above-entitled 

matter went off the record at 11:12 a.m., and 

resumed at 11:26 a.m.) 

 MS. TAYLOR: For the new panel, if 

people could keep their formal remarks to a 

minimum because I really would like to have a 

discussion after this. Bob the floor is 

yours. 

 MR. MOONEY: We have here 

representatives of very successful Alliance 

for Economic Inclusion coalitions from around 

the country. As you pointed out, our 

alliances, we now have more than 1,000 

organizations that are members in eleven 

cities. They have been able to open banking 
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relationships for almost 1,000 individuals. 

 I think this morning it would be 

important for us to look at the strategies 

they used to develop those banking 

relationships. We believe that the more 

flowers in the garden that bloom the better. 

And we have here today a bouquet of success. 

 So, let me introduce our panel, 

starting with Mr. Jim Young. He is president 

and CEO of Citizens Bank and Trust. He is a 

very active, productive member of our AEI in 

the Black Belt area. Next to him is Charles 

Martin. Charles is the CRA officer at M&T 

Bank in Baltimore and a very active member of 

our AEI Black Belt area. 

 Charles is going to address how the 

AEI coalition of banks in Baltimore are 

developing jointly a small dollar loan 

program. So it is a different take on the 

individual program. 

 Bruce Gotschall is the executive 

director of NHS of Chicago and he's not -- 
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there he is. Bruce is going to discuss 

foreclosure efforts as well as a remarkable 

loan pool that is funded by local banks to 

address that issue and how they are addressing 

vacant housing. Now the reason he is going to 

talk about that relative to the Alliance for 

Economic Inclusion is that most of our 

alliances across the country are participating 

in foreclosure prevention efforts within their 

community very actively. And for Bruce's 

program, the FDIC is providing information as 

to how that qualifies for CRA credit and the 

importance of foreclosure prevention relative 

to the bank's entire program. 

 Mary Dupont is with us. We are 

delighted to have Mary. Mary has long been a 

leader of community development for the State 

of Delaware and she will overview their EITC 

campaign. Remarkably, she has unrolled that 

across 22 locations in the State of Delaware 

and as an innovative strategy here because it 

includes the provision of cash cards to 
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participants and for the refunds. 

 And finally, last but not least is 

Dora Brown, who is Senior Vice President of 

the International Bank of Commerce. Dora is 

going to discuss a very successful -- Texas 

has a robust Alliance for Economic Inclusion -

- a very successful bank school partnership to 

reach not only consumers but underserved 

families as well. 

 I think we will allow for about 

five minutes each and that will give us time 

for questions and so I think Dora, let's 

start. 

 MS. BROWN: I really want to get to 

this program. First, thank you for allowing 

me to be here because I could be at home with 

73 degree weather and not a -2 but it is a 

pleasure to be here. I'll get right to it. We 

will be talking about a school and how we take 

part in the schools. One of the ways is for 

over 12 years now we have been involved in the 

schools. There is this Sam Houston 
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Elementary, and you will see the kids at a PTA 

meeting and talked to the parents about PTA 

and then our employees become the babysitters 

so that the people can attend the PTA meetings 

and we talk to them about being able to obtain 

credit and loans and checking accounts and 

savings. This school is very unique because 

we have the mayor and the IBC bank president, 

the young lady is a more -- look at the smile 

on her face. She is the president of the 

bank. And she and along with the mayor of the 

city who have the mayor and commissioners 

welcome you to the school when you come in 

when we have programs. Here at this time I 

was having, I held a conference for several 

banks to come in. I invited several banks to 

come in so they could start the same program 

because I can't do it all. And here you see 

the tellers, they actually have a bank 

president, the tellers all the way down to the 

security guards. And the supervisors on the 

other side are telling you what a debit and a 
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credit is, how to be a teller and the ins and 

outs of being a teller. Here you actually see 

the kids at work. These are the tellers. The 

math teachers love this program because it 

teaches the kids how to not only read and 

write, but they can do the math as far as 

adding, subtracting and they have to do it 

quick because as you can see on the other side 

they got customers waiting. So they got to do 

it real quick. So the kids do their own 

ledgers. They add their deposits and 

everything goes on. As you can see again you 

see the kids in line and at the back you will 

see the customers that we have invited or the 

parents in the community, we have invited to 

come in. And the other side they are about to 

close. So, this is something that goes on 

every day and it is very exciting for the 

kids. The attendance has increased 

tremendously. The teachers say the kids want 

to come to school because they have an 

obligation. They have a responsibility. So 
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they have to go to work, yes they have to go 

to work so they don't want to miss school even 

if they are real sick. 

 They also have other areas. Not 

only a bank, they have a Target, a Wal-Mart, a 

H-E-B grocery store also. They have IRS and 

the newspaper. And here is the kids, these 

are the IRS kids. And it is really cute 

everything that they do. But these are very 

serious people. Here I am talking to the 

parents at the PTA meeting and telling them 

about the program that we are all very excited 

about and how we are teaching the kids to 

save. 

 And then the other businesses that 

I just talked about. They have the mail as 

you see up there. This young lady at the 

bottom, she's one of the Target managers and 

she was so excited to be accepted there. We 

also have Channel 5, which is the TV station 

over and the radio station and the kids make 

all the announcements every day through the 
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radio station. 

 This is really a very exciting 

school. They have a slogan that says "you 

earn it, we save it." They came with their 

own slogan for that. This is not a little 

play school. This is actually a school where 

the kids learn how to become bankers. And not 

only do they just teach the kids there, they 

go back and they teach their parents. They 

are very successful at this. This is a very 

low-income area where 90 percent of the kids, 

or the families rather, are very low-income 

and don't speak any English. The kids then 

teach the parents how to speak English. 

 But we go into the schools, talk to 

the PTAs and we counsel them. We become 

counselors to those people and teach them on 

how to be able to keep a savings account. I 

could go on and on about this but since you 

only gave me five minutes. The parents 

eventually open up accounts and I don't have 

all the numbers but I will tell you that we go 
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in as I say, we don't just tell them open a 

free checking account. We actually counsel 

the parents and tell them what they can and 

cannot do to be able to save money and to not 

have any fees and all of that in there because 

we don't want to get them in any more trouble 

than they probably already have. But we have 

found the parents who open checking accounts 

said that they actually were able to save 

money instead of just cashing a check and 

having it at home and have $5 for this and $5 

for that and have no accountability of 

anything. So in that sense, we have had a 

really good success. 

 The kids there just love it, like I 

said. I wish we had been able to show you a 

video that they have because the kids tell you 

their own job descriptions of what they are. 

This time we were not allowed to do that 

because of Texas problems. But I am very much 

involved in all the schools. We went to all 

the high schools. I have the ability to talk 
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to the superintendents. I have a really good 

rapport with all the superintendents. So we 

go to the high schools and teach the high 

school students especially about credit cards, 

how not to get in trouble with credit cards. 

I always make the example that my daughter got 

a $10,000 pre-approved credit car when she was 

in high school and we got a $1,000. We talked 

to the kids about try not to get involved with 

this. Tear those things up right away because 

you will get in trouble. You go get your 

degrees and all that, then you want a job. If 

you have bad credit, you won't be able to get 

a job, especially not in a financial 

institution. So we try very hard and talk to 

them on a one-to-one basis on it. 

 So, there is a lot of things, IBC 

is involved. We have throughout corporation, 

we are involved in a lot of the going into the 

schools and doing presentations in different 

areas to talk to the people in the underbanked 

areas and underserved areas on the things that 
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we could do for them. We have gotten a lot of 

awards, a lot of free press and everything 

where IBC is actually going out there, rolling 

their sleeves up and helping the people. 

 Before you all leave I would like 

for you to take, this is different brochures 

that we have. This is from the school, how 

they work and other things. Their life skills, 

how they earn their money and this would kind 

of show you also. 

 If anybody has any questions on how 

to get started and would like to get going on 

this program, I would love for you to give me 

a call. I put my number I think everywhere 

and we would love to get -- my goal was to 

have all this program in the McAllen schools 

because our corporate FIO has requested that 

he would like this program, he is so much into 

and gives us a lot of support that he would 

really like this to be in all our markets and 

we are in over 102 markets. So we've already 

got started on this so now we are not only 
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going to be in McAllen, Texas, which is a 

great city to be in, but we are going to be in 

Austin, McAllen, rather Houston, Oklahoma. 

So, we are in San Antonio and different areas. 

So we are really passionate about this 

program. I guess you saw that. But also we 

give a lot of free quotes and as people have 

said, we've got this right here. This is from 

the -- it came in the magazine and I just 

condensed it from one of the programs that I 

did and actually a story that Texas bankers 

did on us and also the American Bankers 

Association did another story. It has been 

all over the newspapers in different areas. I 

have the brochures on how to get started and 

then the bank on what our duties are. Thank 

you very much. 

 MR. MOONEY: Dora, thank you and 

IBC and Dora have been very active in the 

Texas AEI, so we thank you very much and we 

are going to share your information with other 

alliances around the country because we want 
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to move into high schools. Mary? 

 MS. DUPONT: Okay, well good morning 

everybody. It is a pleasure to be here. I'm 

another person who is very excited about the 

work that we are doing in Delaware. By the way 

I'm not related just in case you thought it 

was quite a coincidence. 

 (Laughter.) 

 MS. DUPONT: I passed these red 

folders here. You can read the background 

information me -- my Gateway Community 

Development Corporation and the Delaware 

Earned Income Tax Credit campaign which is on 

the first page here. And in the folder there 

is a green piece of paper that shows you our 

statistics from last year. To sum it up, our 

organization runs a statewide earned income 

tax credit campaign which is the free-tax 

preparation bundled with a whole array of 

financial services. My interest in getting 

this started was really on the financial 

service side and what I recognized eight years 
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ago was that the organizations in the country 

that at that time were most successful at 

reaching potential IDA customers were those 

who were involved in this free tax prep. So 

the whole idea is to use the tax sites as a 

front end to attract the market and then once 

they are there to capture the money moment and 

be able to offer them a whole array of 

financial services. 

 The IRS really made our job a lot 

easier three years ago when they introduced a 

new strategy to be able to split the refund. 

So now you can directly deposit your refund 

into as many as three accounts by using the 

Form 8888. So before we were simply opening 

up savings accounts to have a direct deposit 

in partnership with PNC Bank in Delaware and 

then once the 8888 came along we can now offer 

our customers an opportunity to save in more 

long term type vehicle. So put out an RFP to 

the banks and I guess I am not using my 

slides. I will just tell you the story. We 
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put out an RFP asking Delaware banks to create 

a specific product which would be a CD, six 

months minimum deposit of $250. Basically we 

designed a product that would be easy for our 

customers and appeal it to our customers to 

get into. And then we also designed a new job 

for our volunteers because as you know free 

tax programs are based on volunteer 

participation. We created the tax 

coordinator. So we have the tax preparer who 

does the taxes and the cash coordinator, oh 

there we go. And we trained our volunteer 

cash coordinators to talk to our customers 

about the products we offer. We offer savings 

accounts -- and this is all in partnership 

with local banks -- savings accounts, 

certificates and certificates of deposit. And 

by the way, we have no bankers on site. We 

are able to offer the products at all of our 

tax sites either using -- we started out with 

an 800 number and now we just do it online. 

We developed a secure website where we can go 
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up and just open up an account right online. 

Last year and then we also last started 

partnership with D2D, Peter's brainchild, to 

offer savings bonds. So it started getting 

really complicated. Now we've got savings 

accounts, CDs, savings bonds, and we also 

offer free merged credit reports with a score. 

And this year we are offering a new product 

which is a convenient cash card. And I'm very 

excited about that. I'm trying to keep an eye 

on the time here. 

 I think rather than describing 

everything because you are all bankers so you 

know what this stuff is. I think I should talk 

about the lessons learned. One is you can 

open accounts without a banker present. So a 

lot of programs around the country are limited 

in terms of using tax sites as a front end 

because they say that local banks don't have 

enough support to be able to send somebody out 

to all of these tax sites to open the 

accounts. In Delaware we have been able to do 
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it. I'm not a legal person. I'm not a 

banker. But they figured out how to do it 

legally in spite of the Patriot Act and all of 

those other limitations that we hear about all 

the time. 

 Number two, the savings accounts 

were a flop. We've opened up a lot of them 

and we've had three different banking partners 

and this is for unbanked taxpayers. We've 

opened up probably about 1,000 savings 

accounts over the past eight years and I would 

say that 90 percent of them were closed or 

they remained opened with $5 in them. And the 

big bulk of them were overdrawn. So not only 

were they closed but people ran into problems 

by overdrawing and they ended up worse than 

they started. So I don't like savings 

accounts. We still offer them because people, 

some people want them. So we try to provide 

people with what they want. 

 The CDs, they have to be an 

interesting product. Last year I was able to 
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convince one of our banks to reduce the term 

to three months and the minimum to $50. They 

decided they didn't want to do that again this 

year. So we now offer $250 at a minimum term 

of six months. And we do have some interest 

in the CDs. It actually conceived from our 

money menu. This is what everybody gets when 

they come in. So when they enter, they are 

given the money menu, we introduce the 

products. We have decided to label the CDs. 

We have Christmas CD, vacation CD, back-toschool CD, dream purchase, and debt repair. 

So we try to suggest these are things that you 

might want to use the money for later this 

year. And that really helps people to 

visualize what you might want to do in six 

months with $250. 

 Another lesson learned, everybody 

wants to know what their credit score is. 

Everybody knows that there is a problem that 

follows them around and that prevents them 

from gaining access to financial services, 
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jobs, all kinds of things in life. Credit 

scores are what I call your report card for 

life. And we have done, I only can afford 

2,500 a year. We'll do somewhere between 

15,000 and 18,000 returns, but I have to pay 

for these of course because they have the 

score. So there really is no free credit 

report. But we have developed a whole program 

just on credit, a financial education program 

called the money show and that combines 

theater and financial education. We do it for 

high school, college and adults. It is 

described in our brochure. 

 Another lesson learned is that -- 

and this has really been a tough one for me. 

I've been trying to work with banks for many 

years. I started out in micro lending and now 

I've been doing all this consumer stuff. And 

it seems to me that banks don't really have 

the infrastructure, although they have the 

desire. They don't really have the 

infrastructure, the ability to create the kind 
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of product that our customers need which is 

un- and underbanked consumers. So I'm really 

excited because I met up with some guys who 

used to be with H&R Block. They just started 

their own company called Advent Financial 

Services. Their market is my market. They 

know how to create a product that doesn't 

overdraw. You can't -- that's the main thing 

you can't bounce the account. It has direct 

deposit. It is this cash card. It is 

described here. We are calling it the 

convenient cash card and we are piloting it 

this year. It can receive a direct deposit 

from the tax return, from payroll, from 

benefits. If Michael Barr is still in the 

room, I was jumping up and down because what 

he was saying is the ultimate financial 

transactional product that people need, this 

is it. Plus not only is it ideal for 

transactions and people cannot fall into the 

same kind of traps that they will with 

traditional financial services, it is also 
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going to have a savings pouch and a credit 

line. So if you are using it for your 

payroll. I you have an established 

relationship, you can get a line of credit. 

You don't need a payday loan. So basically it 

is the trinity card. It has three in one. It 

can do everything. So hopefully I'm not being 

overly optimistic about it but I'm pretty 

excited because it is what I have been looking 

for, for a long time. 

 So I think that is it. I could go 

on and on and tell you more and more but look 

at our money menu. You don't have to give it 

back even though we do ask for them back at 

our tax sites. 

 MR. MOONEY: Thank you Mary. 

Bruce? 

 MR. GOTSCHALL: Glad to be here. 

The FDIC has been such a great partner in both 

brokerage intervention work and loan improved 

development and so forth and you can see from 

the title of this slide serving more low-
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income neighborhoods and actually a few years 

would have been serving low-income communities 

on the mend. We will stress because of the 

foreclosure and vacate properties, it is a 

whole different situation. I won't spend a 

lot of time on the background on Neighborhood 

Housings Services but I have a couple of 

slides in there. I won't spend a lot of time 

on there but we have three particular areas. 

One is foreclosure and prevention work through 

our lending services which is the loan pool 

and making loans for a range of activities and 

then the redevelopment corporation which is a 

community development corporation, real estate 

development, on neighborhood housing. The 

activity of NHS is really neighborhood 

focused. Foreclosure prevention is what I 

will focus on today. Homeownership 

Preservation Initiative which we started in 

2003 has significant results but because we 

didn't keep up with the extreme increase in 

foreclosures and the negative impact. Just to 
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give you some recent activity and the growth 

of that activity, this is partly due to the 

growth of the problem but it is also due to 

federal money has assisted us to capacity as 

well as foundations and others have stepped up 

some. We have a lot more activity, a lot more 

education, a lot more connections. It is not 

increasing as rapidly as the connection to the 

people. Some of that is time. It still takes 

three to six months just to get through the 

process of trying to get a saved or corrected 

mortgage situation, but it is very difficult. 

 On the loan modification front, a lot of 

discretion there actually. Modifications from 

our experience, we see only a third of them 

actually lower the monthly payment. They keep 

the payment the same or they add principal to 

the end and we readjust and so it really is a 

modification in change of terms but it doesn't 

improve the situation for the borrower. So 

that we think is why the discretion in mods 

demonstrates that they are not performing 
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well. But we think they are not performing 

well because of all of the information is not 

calculated and the borrower situation is not 

taken into consideration. 

 The money announcements which we 

think are great in terms of the new programs, 

from our experience, they have not yet reached 

the borrower level to really create more 

volume of saves and less mitigation efforts 

that are sustainable. We could talk about why 

mods aren't sustainable, what are the issues? 

Many people have talked about those. These 

are interpretations of what some of the causes 

might be. The securities themselves, we think 

the second one is a great big one and that 

data that is available to the service or they 

don't get full, accurate data information. We 

think help fill that gap and really do in 

situations where we get cooperation. So there 

is a number of current situations that are, I 

think, making it difficult still to move on 

the modification and sustainable mod. 
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 One kind of disturbing piece of new 

information in terms of people that we are 

seeing -- when you look at the total expenses, 

the average person we are counseling, that is 

coming to us, is -- 37 percent of their income 

goes toward expenses. It is just and it is 

gotten to the point where that is as big or 

bigger problem than the loan terms and so 

forth or the original underwriting. We think 

streamlined mods can help a good portion of 

the segment. A second tier really needs 

significant intensive counseling and budget 

work and also working with significant 

modifications of the terms of the loan to 

lower payments. Some current we have talked 

about before, a critical ingredient is the 

connection between the counselor and the 

servicer. BestFit is one tool that we use and 

other counseling organizations use to connect 

with loss mitigation people, the services that 

they have. Get away from the facts as they 

get to work-based connections which many, many 
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counselor organizations are now using this. 

We don't yet have as much acceptance from the 

services as we would like to see. It is 

something that I think is making some 

progress. 

 Moving quickly to neighborhood 

lending services, which is our licensed 

mortgage bank that provides lending for a 

range of leads to close the gap of lending and 

also combined public money with the private 

lending source to make deals work that could 

not work without public subsidies for the 

range of what we call buy, fix and keep their 

homes. The borrowers that we serve and have 

served over the years, you can see the 

demographics and income and so forth and then 

ITINS are part of our process also. Low- and 

moderate-income have a significant portion of 

that. Over the last six years, five or six 

years, we've had loan pools have generated 

about 150 million in loans and over time you 

can see the new, developing a new loan pool 
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currently right now. 150 million, a new piece 

of it is the third bullet, the loss reserve. 

Although our loans have performed very well 

over the last five or six years, in order to 

get our investors comfortable, we have set a 

premium, the loans to the lenders and some of 

that premium goes toward the reserve and then 

the MacArthur Foundation has stepped up to 

help the loss reserve -- 

 MR. FISH: Who are your investors? 

 MR. GOTSCHALL: We've got 20 and 

I've a slide here that shows those, currently 

who we have. And just as composition and 

product mix, when you look at refinance, 

purchase and home improvement, 2003-2006 you 

see 12 percent of our lending rights for our 

re-fis. In 2007 it was 53 projecting going 

forward. Actually we see a very slight 

decline in refinances over the years but this 

is as we project, what we've done and what we 

project going forward to be lending about 45 

to 50 million a year for those kinds of 
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improvements or those kinds of loans. 

 This is just a slide that we use 

with our potential investors describing why it 

is important to invest to the low- and 

moderate-income borrowers, the geographies 

that you had to get to, investment that 

couldn't be done without this kind of 

partnership from public funds. 

 Investors here, we have about 20 

investors. We have two other pools in the 

past and many repeats and a few new, still in 

progress. During this month we will be 

finalizing and closing at the end of month. 

 MR. FISH: So they are all banks? 

You don't have any non-bank? 

 MR. GOTSCHALL: No. 

 MR. FISH: And you don't have any 

financial -- you don't have check cashing 

companies? You don't have -- 

 MR. GOTSCHALL: As investors? 

 MR. FISH: As investors. 

 MR. GOTSCHALL: No, no. 
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 MR. FISH: Payday lenders, you have 

no payday lenders as investors? 

 MR. GOTSCHALL: No. We've 

historically worked with what we call 

conventional lenders. 

 MR. FISH: And why do you think that 

is that banks are your investors? 

 MR. GOTSCHALL: Well because 

historically Neighborhood Housing Services has 

been a partner with existing financial 

institutions, I think their focus on the 

communities plus I think CRA is a benefit that 

is something that is worthwhile. We did 

actually have long discussions with Goldman 

and Morgan Stanley this year but we haven't 

gotten them yet. But eventually I think we 

will. 

 CHAIRMAN BAIR: They are banks 

now. 

 MR. GOTSCHALL: So that is the 

lending front. Our redevelopment corporation, 

which is Neighborhood Housing Services -- 
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particularly what I wanted to focus on today 

was our NeighborHomes activity with buying 

vacant buildings and reselling those 

properties in targeted neighborhoods. Just as 

an example, this happened to be two years ago 

we did work. There was a block that had six 

vacant properties. They were actually FHA at 

that time. These properties we purchased and 

rehabbed with some city assistance, but also 

privately financed in terms of the sale of the 

properties at the end. Of course the current 

purchase/rehab/resale market and issues are 

significant. The market -- and we all know 

the market and credit -- the overall sales and 

all of these are very, very difficult today in 

terms of taking a building, buying it, fixing 

it and selling it to new owners. So the ideas 

of rent to single families, lease-to-purchase 

options, those things that are things that 

need to be considered on how those can add 

resources to work on the problem. I think 

that reality, different from a number of years 
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ago, used to be at the foreclosure sale there 

would be some investors bought the loan out of 

the foreclosure sale. Now almost nobody; 97 

percent of the properties go to the lender 

with no investors paying off the mortgage as 

there was before. Of course huge inventories, 

some REO lenders, you know, the attitude of 

give me an offer or what can I do? Give me an 

idea of a neighborhood in terms of the 

straight on the market, the third bullet 

point, and this was a neighborhood which 

interestingly is in the neighborhood President 

 Obama use to organize outside of Chicago. 

This is 47 listed at under $30,000 and been on 

the market 157 days. There were none in 2005 

and 2006 and ten properties listed on the 

listing service for under $15,000. So the 

market is just flooded with properties. 

Putting a presentation without a map. This is 

map over a three year period and the 

neighborhood in Chicago. You can see if you 

look on one of those blocks that we had these 
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properties that were in foreclosure -- the 

negative impact that it has on that geography. 

 So just to summarize the whole situation and 

NHS over the last number of years has done 50 

to 100 properties a year in terms of 

purchase/rehab/resale in our targeted 

neighborhoods. We are working with the city 

with the neighborhood strategy program, the 

federal government's funds for vacant building 

rehab, resale and rental that we hope can 

close the gap of appraisal and market with the 

total costs of rehab and so acquisition prices 

are coming down for REO and other kinds of 

things but the rehab process is still high and 

the markets are soft. So, that's kind of the 

situation as we see it today and the range of 

things that we are working to do to -- I guess 

one of the words is we are trying to include 

people but we are also trying to sustain 

people in the situation. Those are the things 

we are about. Thank you. 

 MR. MOONEY: Bruce, thank you. 
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The FDIC is working with the Alliance for 

Economic Inclusion to get its bank members to 

include the program. They were anyway because 

of you. Charles? 

 MR. MARTIN: How are you doing. 

Good morning everybody. I know we are coming 

up on lunch. I promise to go quick, okay. 

You guys have a pretty nice dining room. I 

would like to thank Chairman Bair and also 

thank Bob Mooney and Barry Wings for guiding 

us and the FDIC in this effort. Thanks to the 

participating banks, the foundations and the 

not-for-profit community in Baltimore. This 

has truly been a collaborative effort in 

Baltimore where we have all come together to 

try to develop a product in which we combat 

some of the predatory or payday lending that 

is going on. 

 What I think I would like to do is 

go right to the history slide here because a 

lot of the information you have heard before. 

 Again, we began our campaign in probably 
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2007. We started off with over 40 different 

members. We tried to break it off into 

different committees and you heard a lot this 

morning about data collection and research and 

so forth. One of our committees was actually 

a research and data collection committee. It 

was funded by one of the foundations. The 

work was actually done by one of the not-forprofits in Baltimore. It was under the onthe-ground footwork. People standing out in 

front of check cashers trying to figure out 

why do you use this check casher and why do 

you use this particular check casher as 

opposed to the one a block away from here and 

why don't you use banks for this particular 

purpose? So we gathered that information and 

as a result of some of that, we decided we are 

going to focus on certain target areas in 

Baltimore where this is pretty prevalent and 

come up with a small dollar loan program. The 

loan model -- and this is similar to what you 

heard this morning --there is an application 
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process. The loan ranges from $300 to $1,000. 

 We figured it would be repaid over 12 months. 

 The APR here is actually wrong. I think got 

excited and put an extra one in there. That 

should really be 7.99 and not 17.99, okay. We 

do have a savings component added to this so 

that as people repay their loan they actually 

get -- a portion of their payment gets 

deposited to a savings account. We are coming 

up with a match strategy so that we match one 

for one in terms of the dollars that the 

people save. MR. FISH: So where 

does that match come from? 

 MR. MARTIN: We are debating that 

now whether we are going to get that from the 

foundation for banks or just where that match 

will come from. That is still an item to be 

worked out and I actually have a slide. The 

last slide will talk about things that we are 

still going through. 

 Again, when I say we put banks 

together to do this, banks are cautious. So 
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we put a bunch of cautious banks together. 

 Financial education, there is a 

financial education component to this. We 

believe that financial education is definitely 

a key component to people understanding why it 

is important to save. But also when you are 

doing things with payday lending, you also 

have to change the mind set of the person in 

terms of paying on a monthly basis as opposed 

to paying every time I get my paycheck. So a 

little bit of education has to go on that. 

 Again, talk about foundation 

support. We are actually approaching 

foundations for loan loss reserves. They were 

instrumental in doing focus groups for us and 

doing surveys in terms of doing check cashing 

surveys and also surveys in terms of what 

banks in the area had to offer as it relates 

to these types of programs. They were 

instrumental in marketing. One thing we 

recognize is that if we do come up with a 

program, a workable program, it has to be 
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advertised. People have to know about it in 

order to understand how to utilize it and they 

have been instrumental in doing that, grants 

for payroll and also grants for the loan pool. 

 Our non-profit support partner, we 

chose NHS of Baltimore because we recognize 

that, as a group of banks, we probably would 

never get this done by ourselves. We needed a 

non-profit partner that we could all work with 

and who we all were currently working with 

that could actually make this product work for 

us. Again, NHS, great name of Baltimore, great 

name in many other cities -- the charter 

member of NeighborWorks, certified CDFI -- 

they are centrally located and that is 

important because people have got to be able 

to get there. Convenience is one of the 

reasons people use check cashers. They are on 

every corner. They are very, very convenient 

and everybody knows where they are. And the 

people in the check cashing operation know 

them. So NHS is similar to this. They 
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service the population that we are trying to 

reach. They are centrally located, easy to 

get to. Parking is obviously an issue because 

it is in a city and that is one of the things 

we have got to work out. They have got name 

recognition and they have a history of 

community outreach. And the other thing we 

noticed when we got in there is they have a 

lending platform that really makes this work 

for all of us. Because of the things that 

they do on the loan side, the platform that 

they have will make this product work for us. 

 Current financial partners -- and 

these partners have committed time effort and 

money to this particular project -- again it 

is not just banks up here. It is also credit 

unions that are also joining in this effort to 

make this thing work. 

 This is the flow chart and if you 

would like you can't see it this far back, but 

in terms of how this process works. A 

borrower comes in, what happens, how the 
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application flows. Who does what in order for 

the person to get the money because we are 

trying to make this convenient, efficient and 

quick in terms of making it happen. 

 Some issues to be resolved? Many 

of the banks and credit unions that are 

contributing to this effort are doing it 

through contributions which reduces the cost 

to the loan pool and not necessarily to zero 

but it reduces the cost. So we are still in 

discussions about a more affordable interest 

rate and how do we make that work. Because 

the interest earned off of the loans will go 

back into the pool to help fund the programs. 

So we can't make it too low but then again we 

can't make it too high. Maximum savings 

amount that qualifies for the match -- we got 

the issue of someone taking out a loan and 

then depositing the money in there and then 

looking for a huge match which would make us 

run out of matching dollars quickly. So we 

got that issue in terms of how we go about 
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that. Loan repayment -- monthly versus 

biweekly. That depends on how the people get 

paid and some other issues that are in there. 

Limit on the number of loans a borrower can 

take? We are looking at limiting the maximum 

amount that you can have out there at any one 

time. Bank accounts set up because all the 

banks are participating and different banks 

take different IDs in terms of opening 

accounts. We are trying to figure out a way 

that could work so all the banks benefit from 

setting up the accounts. 

 The incentives. You heard a lot of 

talk about completing the educational program. 

 We recognize that there has to be an 

incentive there for a person to complete that 

educational program. Just how do we go about 

delivering that, whether that is in the 

beginning, the end or where that goes? And 

also the question of processing a cash payment 

-- NHS is not set up to accept cash payments. 

How do we accept someone who maybe doesn't 
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have a checking account yet and does need to 

make a payment on their loan? How could we 

process that? Okay. 

 MR. FISH: How many loans have you 

made? 

 MR. MARTIN: We are still in the 

process of getting set up. So to date we have 

not made any. 

 MR. MOONEY: It is my pleasure 

and honor to introduce Mr. Jim Young who is 

the president and CEO of Citizens Bank and Jim 

if you could just update us on what's going on 

in the Black Belt Area of Alabama and 

elsewhere. 

 MR. YOUNG: I am very leery as well 

because I guess I'm the last person before 

lunch. It is good to be back in the city. 

Two weeks ago I promised myself and my wife I 

wouldn't be here again until the cherries 

blossomed or 70 degrees, whichever came first, 

but I'm happy to be back here. 

 My bank is Citizens Trust Bank in 
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Atlanta, Georgia. It was founded in 1921 with 

people with amazing foresight. It was founded 

to serve the underserved back in 1921 and they 

were obviously very proficient in what they 

were doing. The bank has survived a lot of 

turmoil, including the Great Depression, World 

War Two, social upheaval and a lot of other 

things that I'm sure people predicted the 

demise of the bank the day after it was 

started. But it had been there stock-intrade. We have 10 branch locations in a 

multi-state environment. I became president 

in 1998 as a result of a merger and we 

acquired since a failed savings and loan as 

well as an ongoing institution which was a 

thrift in Birmingham, Alabama that had been 

founded by the well known A. G. Gaston. Part 

of what A. G. Gaston had built including a 

thrift in Birmingham to provide housing, he 

also opened a branch very near his hometown in 

Utah, Alabama. I don't know how many people 

were living there then. There are only 1,800 
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there now. We had a branch in Utah, right in 

the heart of the Black Belt of this country, 

the poorest of this country. We had options, 

obviously when you make that kind of 

acquisition to be more efficient you eliminate 

those branches that are not profitable. You 

do not have the critical mass. You do not 

have the potential to ever be profitable for 

you. For us, because of our founding, we 

decided that was not the case. We would keep 

that branch open even across some modest 

amount. We market products and services 

through them. The majority of the people 

there are African-American and poverty 

stricken. So we felt it very important to 

keep that branch there even if it were not the 

highest yielding branch that we had in our 

network. 

 We got involved and always had an 

interest in helping those who were 

underserved. My bank has an outstanding CRA 

rating and those of you who think that would 
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assume that a minority bank would. Believe 

me, it is very, very difficult these days to 

get an outstanding CRA rating. I don't care 

what your heritage is or where your branches 

are located. We are very proud and take it 

very seriously. From the things we do 

everyday, I don't have an income with slides 

and income with any additional pieces. I 

wanted to be able to talk to you directly 

about what we do. I did not want to send my 

CRA person. I did not want to send my 

marketing person. I did not want to send my 

public relations person. The reason we are 

doing a small dollar loan program is because 

it is important to me. It is important to me 

because we were asked to consider being one of 

the banks that would develop a small dollar 

loan program. We were happy to try to do so. 

 We started and the thing that struck me about 

this thing and because our involvement was 

that we have a branch in Columbus, Georgia, 

which is the base for Fort Benning, Georgia. 
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And there was discussion from the Department 

of Army that their soldiers, they felt had 

become security risks and could not be 

assigned to certain tasks by larger numbers 

simply because they had fallen prey to payday 

lenders. And the fact that their credit was 

so weak that they had to utilize it that it 

eliminated what they could do in the service 

in the name of national security. And so we 

felt that if we could offer a program where 

they did not have to go to payday lending and 

find themselves in a spiral, where the more 

they paid, the more they owed, that we could 

help eliminate that. Well we were a bit naive 

about penetrating, I guess, the fort. It was 

very difficult to get our product. We had 

advertising on radio in Columbus, Georgia. We 

had gone to the base and hoped we could get 

in, in order to market that product. It was a 

small dollar loan product up to $1,500. There 

was an element of savings there. We could 

not. We did about two loans. The program had 
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major benefits if we looked at our market. We 

also recognized that there were very few, if 

any, and I didn't find any and I don't know 

today where you can walk into a bank, 

particularly a major bank, walk into a bank 

and say I'd like to borrow $1,500. You can't 

do it. It is -- and I understand why. They 

are simply not interested in. Before the ink 

is dry on the paperwork, they have lost money. 

You simply can't, if you are going to produce 

the kind of document that consumer compliance 

regulators would expect you to have, you have 

lost money. 

 And so it is a very, very tough 

thing to do. But nevertheless, I look at this 

as an opportunity. Years ago when I started 

in banking, I was assigned to the financing 

and leasing companies division at the Chase 

Manhattan Bank, my first assignment out of 

training. And I had companies like Household 

and those kinds of large finance companies. 

We were simply providing them the money in 
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bulk that they loaned out in smaller pieces. 

And I knew that there was a possibility to do 

this, but it was dependent upon volume. And 

so we were determined then that we would 

continue and we opened what we called the 

community relief loan. I had to refrain from 

calling it a main street relief loan. That was 

in line to let the American consumer know that 

somebody cared at least in our market that no 

matter what was happening in Congress, no 

matter what was happening, that we were going 

to use, whether we got taught or not, what 

resources we had to touch those. A lot of 

people who had suffered foreclosure got on a 

slippery slope simply because at some point in 

their time they only needed enough for one 

mortgage payment to bridge the time until they 

could get something else. But nobody was 

making those kinds of loans. They would tell 

you to go find your friends and family. 

 I then further decided that it 

would give me an opportunity to tap the 
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enthusiasms of younger people in my 

organization. So I stripped the program down 

and asked them to create this program. How 

would they respond to it? What would they like 

to see and what did they think was fair? How 

should we approach it? So they spent the 

summer of last year developing a program. So 

we have in fact implemented the program. A 

$1,500 minimum loan, and I have signed for 

more than that on occasion for those who have 

a further need. It is a one-year maturity 

loan, requiring monthly payments that is 

obviously a lot less than if you have to pay 

back the full balance of a loan every time you 

get paid at a significant interest rate. No 

annual fee. The debt ratio cannot be higher 

than 50 percent. I know there is some 

leniency there considering debt ratio. We 

looked for cross selling opportunities in 

savings accounts, CDs, free check. We do 

require an automatic debit. We do not require 

direct deposit. They are still free to pick 
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any bank they want. We simply want to have 

the direct deposit. We advertise heavily on 

this program, digging the program file 

financially more and more in the hole but we 

knew we had to advertise to get the message 

out. And we began to be bombarded with 

applications. We wanted to make it a simple 

process in which a decision could be made in 

one day. And we have been successful in doing 

that. We have had 400 applications. We have 

accrued 90 loans and this is since November 

when we finally rolled the program out in all 

of our markets. And yes Utah is an active 

participant in this program as well. So we 

have rolled this program out and we have some 

15 pending applications and it continues to 

grow. Are we making money on it? No. What do 

we get from it? It has been a training 

vehicle for some of my people who thought that 

their role in the bank was simply to take 

deposits and cash checking. We've been able 

to tap that and to give them an opportunity 
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and actually create a product. So they have a 

vested interest in the product and a vested 

interest in selling the product. I have not 

had much success in collaborating with nonprofits and things of that sort. It simply 

has not been a consistency there. 

 Over the years we have taught the 

Money Smart program. We were one of the few 

that began teaching the Money Smart program. 

Non-profits and churches of faith-based 

institutions would invite us in to teach and 

it was not consistent. We set up school banks 

and that was not consistent. Change and yearto-year, it was not consistent. 

 So we felt whatever activity we 

were going to do in this area, we were going 

to need to control and do ourselves. We would 

have to use our money and hopefully we would 

draw other people. And so to date, we have 

this program. It has been very, very helpful 

to us. It has been very, very helpful to the 

people we serve. We get an opportunity to sit 
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and talk with them. We had a second chance 

program and I didn't want to be a second 

chance program. I wanted the customer base to 

feel that any time they walked into any one of 

our locations, if they happened to have had a 

bad encounter with check systems, even had a 

second chance with a bank, you have a human 

being to talk to, to explain your situation. 

In many cases I was the final arbiter on 

whether somebody would get another chance. 

The reason because I was not a large bank to 

do that. And part of what we sell that major 

banks cannot sell, everybody has access to all 

of my people in the bank including me. It 

keeps me there longer hours but there is not 

someone in Atlanta or in Columbus or in 

Birmingham who says they want to speak to the 

president of the bank or the chief operating 

officer of the bank and did not have an 

opportunity to speak with him and make their 

case. The way banking was perhaps the way 

banking ought to be. So we've been successful 
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in that. To take 500 applications and comply 

in consumer compliance, it takes a lot of 

effort and it takes an energy that you cannot 

pay for. You have to have a stronger 

commitment. And so ours is a little 

different. We think we had the responsibility 

to do it and not wait until all the stars 

aligned in the sky before we take action. So 

it is working well for us. Now I have not 

done the equation to see what critical mass I 

have to get to break even. And I know that's 

an anathema to a lot of people who manage and 

run banks but that is the way I run this 

program. I don't want that focus to be there. 

 You know the total of outstanding is probably 

$100,000 to $120,000. We can run this program 

and we certainly don't expect to lose any part 

of that and, since November, the economy 

started -- we have not had one default in this 

program. We have done every loan, but we have 

not had one default. But someone who was 

going to -- we've outlawed payday lenders in 
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Georgia. They have been replaced by title 

lending. And so people begin to realize that 

what they are giving up when they do that. 

Now it is not just the interest rates that you 

pay. Now you are subject to lose the equity 

in your automobile which is significantly more 

than the interest rates and the value in those 

automobiles simply because you cannot make the 

payment in two weeks. So this is set up just 

like any other normal loan. But the banking 

system has gotten to the point that even some 

community banks is simply not attractive to 

make a loan at the levels at which you ask. 

And perhaps that is why when you hear from 

people who are in this program and asked to 

contribute and asked to create small dollar 

loan program, why they have had difficulty 

launching them and getting them off the 

ground. Because somewhere, and I don't know 

where, if it is the CFO or the CEOs and say we 

can't make money, I'm sorry. With me, it is a 

different case. I believe that we will 
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ultimately win. And you know, like a lot of 

people I have relatives, maybe distant 

relatives who would benefit from such a 

program. Either the bank lends them the money 

or I lend them. 

 They must be gainfully employed. They 

come to us with six months of evidence of 

having been employed. We like to see six 

months of consistent employment. There are a 

lot of people who are employed and found 

themselves just short of a mortgage payment, 

just short of an auto payment. But if that 

continues, it creates a problem. But if they 

can nip that in the bud, it solves the 

problem. At least that is an improvement for 

us. 

 I'm going to take one minute and 

mention one other thing I feel passionately 

about and am trying to promote. And that is 

this thing of financial literacy. Whether the 

FDIC Money Smart, Operation Hope and all of 

these things are going on, and there is a 
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requirement for, in many cases when we were 

doing the mortgage business, first-time home 

buyers, we would have a first-time home buyers 

training program. We would work them in 

Fannie Mae and we would come and give those 

lessons. It occurred to me as we began the 

talk about the bailout, TARP, a trillion 

dollars or 800 billion dollars and I've looked 

at it and looked at No Child Left Behind for 

the last four years and always wondered that 

if we can teach phys ed and require phys ed in 

our public schools. If we can teach home 

economics and I'm not -- if we can do those 

things, why is it we cannot require as part of 

the curriculum that our young children learn 

about financial literacy rather than hoping 

than a non-profit will pick it up and someone 

else will do it for a fee. Why not allocate 

part of that money or someone with a voice 

that can be heard, why not take a piece of 

this money that they are debating now over on 

the Hill and allocate to ensure that when our 
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kids come out of school, if they don't come 

out with credit card debt as someone down here 

mentioned, they come out with a savings 

account with money in it. They come out with 

an understanding of how the mortgage business 

works. They come out with an understanding of 

how the stock market works. They come out 

with an understanding of having been in an 

investment club and perhaps come out with a 

stake in life at 18 years old. We are turning 

out people who, it is cards, and we've all 

suffered and accepted blame for cards and the 

mortgage problem. Everybody with every bank 

was not at fault. There were people who knew 

they were buying more than they could afford. 

 They couldn't believe it themselves but if it 

was being sold it had to be legal so they were 

going to take it without any concern about the 

implications for them. 

 So having done what we do, we will 

continue to do, but there are many of you who 

have a voice on the Hill. Ask them to modify 
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the curriculum so that our children don't come 

out with a lack of understanding. They come 

out with a full understanding and a stake in 

America before they even go to college. It is 

a simple thing in my mind. So I thank you for 

the opportunity. Mr. Mooney knows how to 

reach me and my program. I'm a fairly 

simplistic guy. I don't like getting bogged 

down with a lot of collaborative things that 

is going to require we meet every third 

Thursday and we'll come up with something when 

you have the full capacity to do something. I 

really think we all ought to be the change 

we'd like to see. 

 MS. TAYLOR: Thank you. Does 

anybody have any questions comments? 

 MS. WRIGHT: Amen. 

 MS. TAYLOR: Amen, yes. 

 CHAIRMAN BAIR: I unfortunately 

have some meetings up on the Hill and another 

agency this afternoon. I couldn't control the 

scheduling. I may not be able to be back for 
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the discussion but a couple of areas where I 

really would like some input from the group. 

Apropos the excellent presentations we have 

had this morning is that I think we are having 

increasing success in our small dollar loan 

pilots and whether it is time to take that to 

the next step and see if we could provide 

further incentives for banks to start offering 

those types of products more broadly. 

 I am intrigued by Michael Barr's 

notion of a safe transaction account, whether 

in combination with setting goals for reducing 

the unbanked or underbanked population that 

there should be an affirmative requirement 

that banks provide that type of account. 

Maybe they do it already. It would be 

interesting to find out. Maybe that would be 

the next step. How many banks do it already 

and what the costs and success are? So those 

are two areas. And then also this check 

system issue. I've heard this a lot. It came 

up again on the survey data. I do not 
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understand why. Certainly it is prudent to 

run customers through checks and maybe to 

exclude them from a conventional checking 

account but why not a savings account? It 

seems to me -- why shouldn't everybody be 

getting a savings account. So maybe there are 

other barriers there or not and maybe that's 

another area where regulators should step in 

and say affirmatively yes, you can train for a 

checking account but not for a savings 

account. So I very much would like input on 

those specific issues and obviously anything 

you would like to recommend to us. We are 

getting a good additional baseline with our 

small dollar pilot, as well as this wonderful 

survey that Marty and Barbara have 

spearheaded, I think to make some policy 

judgments now that could lead to more 

definitive regulatory steps. So, I hope I can 

get back this afternoon but, if not, I look 

forward to getting a report about what your 

reviews are. We'll be talking over lunch too. 
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 Thank you. 

 MS. TAYLOR: Anybody else? 

 MS. DUPONT: The one thing that I 

forgot to mention about this card is that it's 

a bank product. It's currently, the bank 

that's offering it is Bancorp. But any bank 

here could offer it. So if we'd like to have 

discussions, I could connect you. So it's 

really, the card is a process just like these, 

and MasterCard is a process. It's just 

designed for this market so they don't fall 

into some of the traps. So it is a financial 

product, and it is FDIC-insured. 

 MS. TAYLOR: Okay. We have lunch 

upstairs on the 7th floor. And if everybody 

could be back in their seats by 1:30 so that 

we can have some good discussion this 

afternoon, that would be great. And panelists, 

thank you very much. 

 (Whereupon, the above-entitled matter 

went off the record at 12:32 p.m., and resumed 

at 1:44 p.m.) 
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 MR. MOONEY: Okay. What we 

wanted to do was to follow up on the 

Chairman's request before she left, and also 

to get reactions to what we heard earlier. 

 MS. MILLER: I heard three 

things. How can we increase success in the 

small dollar loan programs? Are there any 

other incentives that we could perhaps 

provide? And the Chairman indicated that she 

was sort of intrigued by this idea of having 

an affirmative requirement for some sort of 

limited access account or account being 

targeted to one bank. And then what are the 

next steps that we need to take? Where do we 

need to take the empirical information and 

findings of small dollar loan pilots and the 

unbanked survey, both the one we've got in 

front of us, and then the one forthcoming on 

the consumers? Those were the three things I 

heard. 

 MS. FUCHS: Just a quick suggestion 

on the survey. I mean I just remembered that 
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the table about the perceptions of the 

bankers, and their perceptions about why they 

can't serve this community had to do with 

profitability, and regulatory barriers, and 

fraud, and high cost of customer acquisition. 

 When I used survey data like that in other 

contexts, it's a really useful thing to do to 

match up perceptions with other indicators of 

the empirical circumstances of the reality. 

So it would be good to really understand 

whether or not there really are problems of 

profitability and problems, regulatory 

barriers, and that are these real things that 

don't fit in with the business plans that 

banks have, and if they are, then you're 

dealing with a different problem in terms of 

the kinds of solutions you'd want to put out 

there then if it's simply perceptions, and in 

fact, they can make a profit, and there really 

aren't great regulatory barriers. So you know, 

and on and on and on. So I think to the 

extent that you can provide some empirical or 
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objective indicators out there that you rank 

alongside the perceptions, you'll actually 

have a better capacity to make suggestions 

along the lines of what kinds of incentives 

and what kinds of regulations do we have to 

really put into place, and whether banks have 

to change, or are we asking banks to change 

their business plans essentially as it relates 

to profit for this constituency. 

 MS. TAYLOR: And can we do that? 

 MS. FUCHS: And can we do that? 

Right. I mean, that's a decision that has to 

be made. 

 MS. MILLER: In terms of the 

perceptions, of course the case study banks 

are going to sort of debunk some of those 

perceptions, and that was a part of the reason 

why there was the case study banks in there, 

and why we have these presentations here 

today. You know, some objections are going to 

be perceptions, and then also some banks just 

aren't really going to want to pursue this 
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line of business. But that's the whole idea 

of having case study banks and presentations 

of this sort. 

 MR. HENDERSON: Thank you. First, 

Madam Chair, I have a question which really I 

suspect goes to you and to the broader 

committee, but it's based on the conversations 

we had this morning. Let me say I found this 

to be a very enlightened set of presentations, 

very informative. And as someone who is not 

either a banker or directly involved in the 

regulation of banks, but who has an interest 

in the impact of these programs and policies 

on the constituencies that we represent, I 

thought that this was an extremely helpful set 

of presentations. I think the survey that the 

FDIC has undertaken of the unbanked or the 

underbanked, and as my friend, Larry Fish, 

refers to them, the alternatively-banked - he 

doesn't see that as being either unbanked or 

underbanked - but I thought that was very 

informative, and obviously there is more 
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information that needs to be gathered. I 

think your pilot project with the Census 

Bureau is really quite innovative. You should 

be commended for it. We have lots of 

questions that we could delve into, but 

there's a larger issue, which I think looms 

over this conversation, and I wanted to get 

your advice, Madam Chair. And that is the 

question of the role of the Advisory Committee 

in helping to develop recommendations that 

actually impact policy that is now being 

developed right here in Washington. I mean, I 

don't have to state the obvious. We are in 

the greatest financial crisis facing the 

country in the last 50 years. But in that 

crisis, there are also seeds of opportunity. 

Virtually a trillion dollars in income is 

being spent in one form or another to 

completely restructure a financial system as 

we know it today. And there are opportunities 

within that restructuring to make significant 

gains, I believe, on some of the issues which 
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have been the subject of this advisory 

committee and its role. The question is 

whether the kinds of information that is being 

generated has been put in some sort of broader 

context so that we can inform the appropriate 

policymakers on Capitol Hill, the banking and 

finance committees of the Treasury Department, 

and those in the White House who are actually 

shaping these policies, and I fear that, if we 

take too long to develop a more comprehensive 

assessment of recommendations, that we would 

make -- we'll miss that opportunity. And so 

the issue is whether the kinds of things that 

are being discussed here are assembled in a 

way that become digestible for that broader 

body, and whether there is any intent to try 

to use this information to affect the policy 

decisions that are being made right now. 

 MS. TAYLOR: I think the short 

answer to that is absolutely yes, and Marty 

I'm just going to say a few words, and then 

maybe you can speak for the Chairman, 
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chairwoman, as to what is actually being done 

with the information we get from these 

sessions. The subject matter of each of the 

sessions I think has been thought through a 

lot, and it's not an accident that this 

session is happening right, now because it 

really goes to the crux of some of the 

problems that have been inherent in the system 

which have sort of trickled, I believe up, and 

caused some of the problems that we're in 

today. So I think our role, from my point of 

view, is to elicit information, discuss among 

ourselves what we think some of the policy 

implications of that could be, some of the 

things that the FDIC could do with that 

information as far as policy construction 

goes. And I think we've seen some very good -

- heard some really good ideas here, and our 

job is to figure out what it is that the FDIC 

and regulators could do to promote some of 

those ideas, and to give the FDIC and the 

chairwoman and Marty, the co-chair or vice 
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chair the ammunition and information that they 

need to go and advocate those ideas with the 

current administration and the powers that be, 

because the chairwoman has been very much 

involved in all of these discussions. And the 

more information that she has from groups, 

such as the people that we've been talking to 

here, and the benefit of the discussion that 

we had, which is a very, very diverse group, 

she is much better, and has a lot more 

ammunition to go and -- 

 MR. HENDERSON: Can I give 

specific follow though, because it goes to 

your point, and not at all to be 

argumentative. I agree with exactly what 

you're saying. First of all, we are an 

advisory committee to the FDIC. So the 

information that we provide presumably will 

arm our chair, Sheila, and our vice-chair, 

Marty, and perhaps prepare them better to 

advance a broader agenda within the circles in 

which they function. 
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 Having said that, I question 

whether, even as the chair and the vice-chair 

of the FDIC, they have sufficient political 

power unto themselves to influence the policy 

at the highest level simply by taking forth 

our recommendations and putting them forward. 

My own experience has been that, unless there 

is an echo chamber created outside of the 

official body in which you're operating, your 

ability to have influence on some of these 

broader policy issues is quite limited. I 

think Madam Chair has already encountered 

challenges with respect to her intervention 

around the home foreclosure issue. She has 

been admirable in her advocacy. But her voice 

is a voice in the wilderness, unable to 

influence the process entirely on her own. 

And what I'm suggesting is that we represent a 

much more diverse, and to some degree 

influential, body as an advisory committee 

than simply providing recommendations to the 

FDIC alone. Case in point: I listened this 
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morning to the discussion of the survey that 

was undertaken. I thought it was tremendous, 

informative, very helpful. I asked Marty, and 

Marty can talk with us about it, I asked 

whether there had been a definitive case made 

for banking the unbanked. What was missing in 

the discussion this morning is not the survey, 

and that wasn't the purpose of that 

presentation. But it was a broader context in 

making the case for why federal policy should 

encourage banking those who are unbanked, or 

underbanked, or alternatively-banked. 

Thinking of ways to strengthen the 

presentation so that your ability to have 

impact in the appropriate venues where this 

conversation is taking place can be amplified 

beyond what the FDIC can do. And I fear that, 

notwithstanding the wisdom of the 

recommendations or, you know, the probity or 

the thoughtfulness of the presentation, there 

is a limited impact that these recommendations 

will have if they are voiced exclusively by 
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our chair or vice chair. 

 MS. TAYLOR: I'm so glad you 

brought that up. 

 MR. HENDERSON: Good. 

 MS. TAYLOR: This committee was 

formed by the FDIC. 

 MR. HENDERSON: Yes, absolutely. 

 MS. TAYLOR: So our duty is to 

advise and inform the FDIC of what goes on, 

and what we decide to discuss here. However, 

what members of this committee do with the 

information, which is also very public, is 

entirely outside of the purview of this 

committee. So if people wanted to 

individually go and advocate, as I know that 

many of us are very able to do, this committee 

has no control over what they might do with 

that. So I would say -- 

 MR. HENDERSON: I will make one 

last comment, then I'm done. I appreciate 

that. Look, we -- I worked as head of a 

coalition that operates by consensus, and so 
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the nature of that process, as you could 

imagine, is challenging on many issues. But 

there would seem to be a consensus on some 

recommendations that would come off of this 

advisory body that could have real impact as 

Congress is debating these issues. Obviously 

not everybody will reach the level of 

consensus, nor should we seek to advance a 

broad set of policies. But I certainly think 

that a targeted set of recommendations, 

prepared by a well respected, diverse group 

like this advisory body, and given voice at a 

time when the Treasury Department, the White 

House and the Hill are debating these issues, 

could have some influence. And so I'll close 

simply by saying I hope that, as we consider 

how we can be helpful to the FDIC, that we 

consider a broad range of options. 

 MS. TAYLOR: Thank you for that, 

and I think that's something that we should 

consider very closely, because it's a really 

good idea. I'm not sure where it goes -- 
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 MR. HENDERSON: I'm not either. 

 MS. TAYLOR: -- but I think it is 

a really good idea. Thank you for that. Ron? 

 MR. GRZYWINSKI: If I may, with 

all due respect, I would like to say what Wade 

has said in slightly different terms, if I 

may. The feeling here, my feeling to be 

precise, is like there's a revolution going on 

over there. As the President pointed out 

yesterday, we had an election, and the people 

spoke. And there is a revolution that is 

getting started. It feels like we're here 

having tea and crumpets while that revolution 

is getting started. This committee is about 

economic inclusion, okay? And there is going 

to be legislation on new regulatory mechanisms 

that's going to come out of the House or 

wherever it's going to come out of, okay? Is 

anybody thinking that any part of that ought 

to deal with how providers of services to lowincome people are part of that legislation, 

okay? If we have people in treasury saying, 
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you know, 2,000 community banks are going to 

fail, don't worry too much about it, okay? 

We're going to make sure that the big banks, 

the same people who brought us our problems 

are going to survive and continue, okay? 

Whereas the capacity to service the people 

that we're talking about and inclusion rests 

more with the smaller banks, the community 

banks, etc. You know, I don't hang out in 

this town, okay? So I don't really know what 

goes on here. But the point is -- 

 MS. FUCHS: You're just a country 

lawyer. 

 MR. GRZYWINSKI: Pardon? 

 MS. FUCHS: You're just a country 

lawyer. 

 MR. GRZYWINSKI: I'm just a 

country boy from the South Side of Chicago. 

 MS. FUCHS: We knew that. 

 MR. GRZYWINSKI: Born and raised. 

 So it feels like we're just, this is an 

important moment, okay? These next several 
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months are important times, and it feels like 

we do have a mandate as a committee, okay, of 

the FDIC, okay? You know, if most of these 

small banks are marketing towards your clients 

of the FDIC, if I was going to lose -- 

 But if I was going to lose a fourth 

of my market, okay, I might have an opinion 

about that. So it seems like it's within our 

mandate, but we're not quite coming to grips 

with it the way we should at what I think is a 

historic moment. 

 MR. McDONALD: I guess I'm more of 

a direct person. I agree with everything 

that's been said, and I would like to suggest 

strongly that the recommendations, or some of 

the recommendations that we've heard over the 

last four to six meetings, I mean, we've got a 

lot of information here over the last four to 

six times that we've met. And I think it is 

our duty and responsibility to perhaps look at 

gathering this information, and coming up with 

a number of policy decisions that we should 
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ask the chair and the vice-chair of the FDIC 

to put forth as policy issues for this new 

administration to consider. I agree with the 

fact that, first of all, if we are looking at 

this huge number of unbanked individuals that 

all of these banks, large and small, are 

dealing with, if we take a look at the subprime market, the sub-prime market is a result 

of the community not being properly educated 

on the financial side of this economy. So it 

does affect the FDIC. It affects the Federal 

Reserve. It affects the entire economy in 

which we live in today. So I think it's very, 

very important for us to look at some of these 

overriding issues and come out with a few 

policies that we should suggest. So I said 

earlier that I'm more direct, and I don't 

think we should let this opportunity pass us. 

 MS. TAYLOR: Can I just say 

something? I totally agree with you, and as 

the chair of this august group, and a 

consensus builder, I think it would be really 
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interesting if we could work with the FDIC 

staff to come up with some recommendations, 

not just - I think you're absolutely right - 

not just for the FDIC, which is what we've 

been doing up until now, things have been 

happening within the FDIC, but in the greater 

context. And if we could -- I think we've 

heard a lot of really good policy ideas here, 

and I can envision working with the FDIC staff 

to come up with a letter that we could all 

sign and send to the appropriate members of 

Congress and the Treasury and Regulatory 

Committee. So, and I'm hoping -- I think for 

the most part we are enough on the same page, 

and obviously everybody isn't here. And I'd 

like to have the chair's input also on this, 

which I think is very important. But I think 

that's a really good idea. 

 MS. WRIGHT: I came in a little 

late, so I may have missed some important 

context, but having served in government -- 

how do I say this appropriately? 
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 MS. TAYLOR: Just come out with 

it. 

 MS. WRIGHT: There are things, well, 

when I reported to, when I was Housing 

Commissioner, I reported to Mayor Guiliani the 

notion of my own commission coming up with 

some recommendations that may or may not be on 

the reservation would not have been 

appreciated. And so there are some things -- 

this is an official relationship between us 

and the FDIC, and there are some things that 

the FDIC can recommend, but there are also 

things that would be better recommended by 

individuals that have a strong point of view. 

 And so there may well be, to be fair to our 

chair and the folks here at FDIC, I think 

there may be a line beyond which they are not 

appropriately to go, and it doesn't mean that 

we can't go further. But I think we should be 

respectful of that. 

 MR. RYAN: I don't know if this is 

something that the FDIC would be looking to 
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do, but being in this town I sort of sense 

that, I don't feel the revolution yet. There 

are a lot of things going on right now in the 

reshaping of our financial industry, but 

they're putting out fires, and maybe not 

necessarily thinking of the consequences of 

some of the things they're doing. You know, 

from where I sit in the bank regulatory world, 

we're consolidating an industry that may 

result in a much larger swath of unbanked or 

inadequately banked individuals that's an even 

more global question. What I would ask is, 

perhaps as Bob Steel had appeared before this 

group, that maybe we would be able to have a 

dialogue to discuss with Treasury or some of 

the administration, and be able to share some 

of our thinking. And again, I fully respect 

that that may not be the function of this 

group, or what the FDIC is looking to 

accomplish, but -- 

 MS. TAYLOR: There's this group, 

and then there are the individuals who are a 
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part of this group, which will do what we see 

fit. 

 MR. HENDERSON: Let me say, first 

of all, Deborah, I completely agree with you. 

 I mean, the nature of consensus is such that 

anyone can object. And therefore consensus is 

not achieved, and you can be blocked from 

doing anything. Certainly nothing I would 

propose would be done independent of the chair 

and the vice-chair. They would have to weigh 

this. They would have to consider it. They 

would have to determine whether this was 

appropriate from their perspective, whether 

they were comfortable with it. Obviously, if 

we were to make recommendations as an advisory 

committee, it would reflect on their 

leadership, and they obviously have to take 

that into account in determining whether it's 

appropriate or inappropriate, and to whom, 

with whom it would be communicated. Certainly 

as individuals we can all make recommendations 

regarding policy, and you'll have that kind of 
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impact. 

 But I guess my point is this. 

First of all, I think it's a question that 

they should consider, and I'm proposing that 

they do so, so that's number one. Number two, 

anything that is objectionable, I mean, if 

there is no consensus, there isn't. So we 

would not do something as the collective body, 

but I think we would have made a mistake not 

to discuss it, which is why I wanted to 

present it here in the context of a 

conversation. You know, we in the civil 

rights community, which has obviously a 

broader interest, we share national concerns, 

but we are not specialized professionals in 

the banking world. And yet I am clear that 

there needs to be an opportunity impact 

assessment of every expenditure that is being 

made now, under TARP and under the stimulus 

plan, that speaks to the concerns that we 

share in common of the constituencies we 

represent. When the dust clears, if left to 
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its own devices, I'm convinced that the 

constituencies we represent will have the 

short end of the stick on almost every issue 

where a policy question is placed on the table 

about who pays, who's responsible for helping 

dig us out of this mess. And I have, you 

know, without disparaging any of the leaders 

who are currently in positions of 

responsibility, I'm very confident that they 

share the concern that we share about making 

certain that the country is righted in an 

appropriate way. I think the opportunity is 

too great to ignore, and so again, I'm simply 

suggesting that perhaps, in an appropriate 

setting, there be some discussion about the 

kinds of things that either we can recommend 

or the chair or the vice chair can recommend 

on behalf of the FDIC, but we're seeking to 

amplify our voices, their voices, and so 

that's really the purpose behind it. 

 MS. McINERNY: Madam Chair, I don't 

know if it would be helpful. I don't want to 
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interrupt the discussion, but I was thinking 

in terms of just the advisory committee 

charter, and what it says about the goals of 

the committee and so forth. 

 MS. TAYLOR: No, I think that 

would be entirely appropriate, because the 

topic of this discussion right here is -- it 

facilitates a discussion on how to amplify and 

promote, so I think that's very much on point. 

 MS. McINERNY: Looking at the 

charter, the charge of this committee is to 

provide advice and recommendations to the FDIC 

on initiatives to expand access to banking 

services by underserved populations -- so 

advice and recommendations. There's nothing 

in the charter that says the advice has to be 

consensus advice. So if the committee members 

decide that they want to provide some sort of 

advice on a document, or options, or anything 

in writing, that's certainly something you 

could do if the committee were to decide that. 

 And under the charter also, FDIC staff is 
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able to facilitate and provide support in 

terms of helping you all communicate, and 

things like that, typing things up, things 

like that. 

 MS. TAYLOR: As a start, I think 

it would be very helpful for FDIC staff to, as 

I'm sure they're going to do anywise, compile 

what we've heard today in terms of 

recommendations and serving the underserved, 

and maybe fashion it into something that we 

could all sign and send to the appropriate 

people on the Hill, for starters, and I'm sure 

that there are a lot of other ways that we 

could do this. Do you have anything you want 

to say? 

 VICE CHAIRMAN GRUENBERG: Well 

first, I mean, I don't want to preempt the 

Chairman, but I don't think I am here. You 

know, we set up an advisory committee to get 

ideas from the advisory committee. So the 

notion that you all would want to make 

recommendations is not -- so it strikes me 
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what you're suggesting is entirely appropriate 

and consistent with the charter creating the 

advisory group. And you know, it's an 

exceptional group of people with a wide array 

of backgrounds and expertise that you could 

bring to the subject, and I don't see why we 

wouldn't want the group to develop a set of 

recommendations that you could provide to us, 

and let us provide to a broader audience, as 

well. So that's -- I guess the Chairman would 

agree with that, but I don't want to -- 

 MS. TAYLOR: I'm sure she would. 

 MR. TUFANO: I think one of the 

things we've seen in the six or so meetings is 

that there's no line out there that says, FDIC 

here, and the rest of the world there. So 

we've seen, you know, when we talked about 

mortgages, that some of the problems in the 

mortgage area were not in FDIC banks, but 

beyond -- were in payment systems. It's not 

necessarily just about what happens in banks, 

but rather what happens in the money center 
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businesses, as well. So as we think about 

these recommendations, to the extent that 

we're going to be thinking broadly in terms of 

affecting policy, I think one can be focused 

just on the FDIC, but I think that would be a 

missed opportunity, because if our focus is on 

the underserved, starting from the consumer's 

perspective, then you'd want to think across 

those businesses. So for example, we heard 

today that when payday lending goes away, 

title lending pops up. These are all 

interconnected businesses, and the more that 

we can give -- to the extent that it's 

appropriate to give policy advice, which I 

think it is, then we should try to make sure 

that we're not parochially, you know, just 

focused on bank related policy advice. Now 

whoever hears this advice is free to discard 

it. But on the other hand, I think that's the 

appropriate way to think. Think in terms of 

functions, and then think of the policies with 

respect to functions. So as an example of 
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that, you might say, we believe that everyone 

should have access to a low cost, low risk 

payment system alternative. And that could 

come through an FDIC bank, or through a credit 

union, or perhaps through a non-bank entity. 

But I think if we're making clear what we're 

trying to achieve, then it might frame some of 

these policy things better, because we need 

consistency across policies. 

 MR. BOSTON: I want to follow up on 

your point, but first I want to say, if 

there's a revolution going on, Sheila is at 

the head of it. We should keep that in mind, 

in a good way. So I think a lot of things are 

happening, and a lot of the things that we 

talked about are being discussed at other 

places, and we're all proud of her work. 

 But one of my concerns is that many 

of the people who are banked today may be 

unbanked tomorrow. So I think we should also 

keep in mind about the new unserved or 

underserved that are about to be created. And 
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so we just cannot think about those we call 

low-, moderate-income, and think they're the 

only ones that we should be protecting. We 

have millions of people who are so-called 

middle class who are going to be low class or 

unemployed or whatever you want very quickly, 

and this will impact the banking community. 

So when we're thinking about our policies, 

let's not say it's just for those folks over 

there. It's for all Americans who are at 

risk, and today that's millions of Americans. 

So I just want to keep that in mind. 

 MR. MOONEY: In response, this 

discussion seems to be aligned with what the 

Chairman asked before she left, which was to 

increase the success of small dollar loans 

with more incentives. Two, she was intrigued 

by an affirmative requirement for basic 

savings and checking accounts. So we are 

talking about incentives and affirmative 

obligations and requirements that may very 

well be tied to federal programs. And I think 
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staff could research. You're right. There's 

not a plethora of recommendations out there 

concerning unbanked programs relative to the 

federal programs we're seeing now, but there 

are some that cross my desk. And even if we 

collate those, and present them for 

consideration, that would be useful. 

 MS. TAYLOR: I think it's bigger 

than that. I think it's, you know, the big 

issue is underserved populations, and how do 

you serve them in financial services, in the 

financial services arena, which brings in 

everything from protection against fraud, to 

education, to the actual services that are 

offered, to -- and that's fraud from within 

and without the system, too. The thing that 

we were discussing before is that, you know, 

there are some victims, but some of these 

victims weren't really victims. They were 

victims of their own egregious actions trying 

to take advantage of a system which finally 

stopped when mortgages or housing prices 
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stopped going up. So I think that we can 

start with the recommendation regarding 

underserved populations, or to be underserved 

populations and their interaction within the 

financial services sector, and then what 

financial institutions can do to alleviate 

that, and what the regulators can do to assist 

the financial institutions in alleviating some 

of those problems, and bringing services that 

people can actually use based on real data and 

information. And one of the things that we 

were discussing before, it is very interesting 

to hear what some people had to say about 

savings accounts. I mean, savings accounts 

have been sort of the holy grail. Everybody 

should have a savings account. Well, maybe, 

maybe not. Maybe it works, and maybe it 

doesn't. So you know, I think that we've got 

some more research to do there, too, or a 

recommendation would be to research that some 

more. 

 MR. McDONALD: I would like to just 
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expand on what Kelvin said at that end. With 

an effort to perhaps enhance the thought 

processing, gathering the information, 

Kelvin's statement basically made reference 

to, that is not only the unbanked/underbanked 

to that -- tomorrow, it's going to be middle 

America, because they are unemployed. So when 

I think in terms of just that statement alone, 

it brings me back to a comment that I made 

earlier, and Jim Young also made the comment, 

and we had no discussion on this. As a matter 

of fact, he wasn't even here when I made the 

comment about how do we get it into the 

education system. And from a broad point of 

view, the sub-prime market is a result, and 

that crossed all lines, middle America, etc., 

because of a lack of education on the issue of 

finance. Jim Young made the comment that, if 

we taught home economics or whatever in the 

school system, why not have this to be part of 

the curriculum? We've had individuals to lose 

money in the investment community where they 
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thought they were part of this whole billion 

dollar investment company, and it was because 

perhaps of a lack of education in some sense. 

So this goes across the entire spectrum. So 

my point is, from a broader perspective, and 

from a policy point of view, looking at the 

issues that we've been faced with just by 

talking about the underbanked and the 

unbanked, this issue is much broader. It goes 

to the whole community. So from a policy point 

of view, perhaps we should talk in terms, or 

look at the possibility of having something 

put in the education system, which is beyond 

the FDIC. And when we talk about -- that 

perhaps recommendations on how the FDIC could 

encourage banks to help people who are not 

banked to be banked, I think it's a much 

broader issue. So I just wanted to reemphasize the fact that we're talking about 

broader policies, and I wanted to at least 

give that as an example as to perhaps how far 

our thought process should go in developing 
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some of the recommendations, some of the 

observations, because the staff in the last 

five or six meetings, and Bob, the number of 

people you had to present. It's a wealth of 

information, a wealth of information and 

there's some common denominators, and one 

common denominator is the educational aspect. 

 MR. BECK: If I could comment on 

that, since I represent that financial 

education community. I was very struck by a 

couple of things this morning. First of all, 

I applaud the banks that presented. And if 

you look at the financial education programs 

that are out there, there's a really wide 

range of quality. And what I appreciated 

about the banks today was that they were 

volunteering their time to enhance the 

experience in the classroom in supporting a 

teacher. That is a long way from passing out 

a brochure. So I think you saw some best-inclass today. But I want to throw in a couple 

of cautions. And this is just from our world. 
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 It's a lot more than just a class. There are 

very good high school programs that are 

available from the non-profit community, 

including the program from the FDIC. There's 

some high quality things out there that 

schools can adopt and are adopting and without 

the banks and the credit unions' support, that 

wouldn't happen. There's an interesting 

couple of statistics for you. There's roughly 

40 states that have some sort of financial 

education mandate. There's less than ten that 

do anything about it as far as trying to 

measure the quality. The one thing they all 

have in common is they have no funding. So, 

recommendations from my world, including the 

President's Counsel on Financial Literary, is 

to create a mandate for schools to make sure 

that this is included, because it can be 

included in a lot of different categories. 

But the caution I think we have to throw out 

in pursuing this, which is I think a great 

idea, is that one class is not an inoculation. 
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 And just because you've finished that class 

doesn't mean you're good to go for the rest of 

your life. So it's a foundation that I happen 

to think is critical. So I strongly support 

it. But it's an ongoing process if we really 

want people to avoid having the problems we're 

seeing. So one class won't do it. But a 

continuous process from the financial 

community, from the FDIC, from a lot of 

different points, will help keep people out of 

trouble. This is not something that stops 

when you finish 12th grade. So just a word of 

caution that I wish it was that easy that we 

could just send somebody out of high school 

saying, you're good. The rules will never 

change during your economic life. So don't 

worry about it. 

 MS. TAYLOR: Ester? 

 MR. FUCHS: Yes, I just wanted to go 

back to Alden's general point. I know he used 

education as an example. I just think that 

the whole idea also that this is a 
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particularly critical moment in which we can 

have an impact is very important. And what I 

would like to see happen in this effort to 

come up with proposals is essentially a 

linkage between the issues that we've been 

discussing over the last year -- of the 

underserved community -- and the ones that are 

now being dealt with in the broader financial 

crisis out there. This is an opportunity to 

put this problem and this issue sort of center 

stage. It's not really peripheral. It's just 

-- it now can be viewed as symptomatic. You 

know, as you pointed out, there's going to be 

a lot more people underserved, a lot more 

people with this problem that usually is 

viewed as a sideline, or a sidebar, or it's 

just a sort of special group of people who are 

interested in this population. It's not a 

sidebar anymore. It's really the main event. 

And a lot of the proposals that have been 

discussed in this committee really relate to 

the larger issues of what will regulatory 
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reform look like, what kinds of incentives 

will we put on the table over the long term 

for banks and other financial institutions to 

change their behavior at the neighborhood 

level? So I would like to see this structured 

linking, this question of the what do we do 

for this population, with how this is part of 

the larger fix to the financial crisis that 

we're in. And I think that we would have 

better traction that way, and of course 

that's, insofar as Sheila can use this, I 

think, as part of what her agenda has been 

coming out of the FDIC, I think everybody 

understands that the FDIC is not going to be 

the implementer of all of the solutions to the 

current problem. But it is, she has been, and 

the FDIC has been a very important voice now, 

and I think we can help reinforce the 

credibility that they already have in that 

debate by creating this kind of linkage, and 

not sort of staying as a sidebar to the 

conversation. 
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 MS. WARREN: Thank you. I apologize 

for having to miss the whole morning. I had 

to testify, and I was assured it would be very 

short. It was not. But this is important, 

and that's why I wanted to come back and be 

here, and especially for this meeting. I just 

want to make one point as we start drawing 

this together, and that is, we talk about what 

are, in effect, the discreet recommendations. 

 They may be open-ended when we talk about 

education, but we're talking about a series of 

fairly discreet recommendations. I think we, 

because you rarely get this many good people 

together, really need to spend a minute on the 

notion that there's a systemic problem here. 

I think back to, I think it was our first 

meeting, and PROSPER presented to us. Do you 

remember? And the whole notion of maybe there 

would be this new form that would intersect 

with small loan lending, and what could that 

mean, and people-to-people, and I'm sure most 

of the people in this room know it's been shut 
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down, as have its two competing entities, 

business models, by the SEC, because it turns 

out there was an argument that this was an 

investment vehicle, rather than the way we saw 

it, which was people-to-people small loan 

access. 

 MS. TAYLOR: I see no one is 

making a comment on where the SEC ought to be 

spending their time. 

 MS. WARREN: I thought it was, I 

felt safer knowing that PROSPER had been shut 

down at the very time that Bernie Madoff was 

still going forward. But I think back to our 

early meetings on foreclosure. I think back 

to the data and the warnings, and frankly, I 

think how quaint they look even six months 

later in terms of how very serious this 

problem has turned out to be. I think about 

Kelvin's point on what job loss is going to do 

to people, what losing homes is going to do to 

people, and how that intersects with financial 

services, and how financial services will be 
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called on in ways that had not been called on 

before, how people who had been able to manage 

under one financial services, consumer 

financial services regime, may not be able to 

manage under a new regime. So all of this 

reminds me that it is a dynamic process out 

there. It's moving, and it's moving very, 

very fast. I think that Esther's point's 

right. The window may be open for a brief 

period of time to do something here, but I 

just want to be clear, there's no one who 

advocates on behalf of consumers, on financial 

products on a systematic basis. There is no 

one whose portfolio, when you open it up, says 

right up at the top, consumers, customers, 

people, families are the first thing we have 

to worry about, and we have some ability, some 

agenda to look at different financial products 

across the spectrum, because families don't 

live these, in the silos of regulatory 

agencies. 

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fee for services in another, and mortgages 

somewhere else, they just don't work that way. 

 And so I just suggest that there's been a 

real advantage to the fact that we have an 

Environmental Protection Agency that attracts 

the people who are interested in this issue, 

who have a broad portfolio to go forward on 

behalf of environmental issues, whether it's 

water, whether it's air, whether it's 

particulates, whether it's -- they have a 

really broad way to look at it. I am 

heartened by the fact that we have a Food and 

Drug Administration that does this. I am 

heartened by the fact that we have a Consumer 

Product Safety Commission that does this, and 

I just want to say, at some point, we need to 

think about this question of whether there 

should be something similar for consumers when 

we're thinking about financial products. 

Consumers are left naked in this world in 

terms of someone to think and advocate on 

their behalf in a systemic way. And God bless 
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the regulators, like Sheila, who have 

certainly moved them up in the portfolio. But 

the bottom line is, it's fractured oversight, 

it's regulatory competition that creates forms 

of arbitrage that have caused effective 

regulation to become a null set, in some 

cases. And this is our moment, statutorily 

speaking, and if we spend it advocating for 

ten specific changes, and then congratulate 

ourselves that we made a difference, and it 

will make some difference, but it's a short 

term, non-systemic difference. And that means 

that all the changes will keep occurring, and 

five years from now, ten years from now, 

twenty years from now, if we have someone as 

interested as Sheila, our successors will be 

back in this room talking about a whole new 

set of problems that have emerged, and no 

one's been there to watch out for the 

consumer. So I just wanted to put on the 

table that we should be thinking about 

systemic change, not just discreet changes. 
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 MS. TAYLOR: If you want to, and 

Marty, you know a lot more about how these 

things work than I do, but to do something 

such as you're talking about, which I think is 

an absolute fabulous idea, which is -- I think 

what you're saying basically is create a 

federal agency, or cabinet position, or 

whatever you want to call it, for consumers in 

the financial services arena. 

 MS. WARREN: Yes. 

 MS. TAYLOR: And I think that 

that's definitely worth advocating for. I 

don't know how fast it would happen, but I 

think there's some things that you can do to 

almost create the same thing without, you 

know, waiting for somebody to create a cabinet 

position. And one of the things that I worked 

on very hard when I was a banking 

superintendent was, you know, we saw what was 

going on in the mortgage industry, which was -

- and you know, when I first started there, 
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like two weeks later, the Comptroller of the 

Currency basically advocated all state lending 

and depository rules for banking institutions. 

Just a little bit of a shock. And so you 

could see right there that there were a lot of 

things that were going to fall through the 

cracks that had to do with consumers. You 

know, the whole mortgage industry, check 

cashing, money transmitting, all the rest of 

it that had very, very uneven regulation, but 

had huge impacts on the most vulnerable 

consumers. So what we did, I went to the 

Treasury Secretary at the time, which was John 

Snow, and said, look, you know, there's all 

this stuff that's going to fall through the 

cracks, so why don't you, Mr. Treasury 

Secretary, put together a committee which has 

the top of each of the agencies that touches 

financial services in it meet on a regular 

basis to talk some of the issues through, 

because if one of these entities is convinced 

to issue a regulation on something, it really 
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doesn't matter, because there are all these 

other institutions that don't have to worry 

about this one agency. So why don't we come 

up with some things that all the agencies can 

do together? And I don't know what happened 

to that. I don't think it lasted very long. 

 MR. RYAN: The first time I 

mentioned mortgage brokers, they never met 

again. 

 MS. TAYLOR: Yes, okay. Fine. 

 MR. RYAN: And that's something, 

that's a lesson that I think we need to, in 

this dialogue to consider, that Washington has 

its own issues, and you cannot expect it to 

answer everything. It becomes so compromised, 

as someone who's spent 20 years on all of 

this. And the more you consolidate this 

industry, the more compromised it gets. And 

we have an FTC. We have things that have been 

gutted, and you have to think of the history 

of those things. 

 MS. WARREN: The answer can't be, we 
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can't make things better, because if the 

answer is, we can't things better, I'm going 

to go do something else. I'm not going to 

spend the rest of the afternoon here. 

 MS. TAYLOR: No, the thing is, 

though, that there are ways to do this, and we 

need to figure out -- I think we're all agreed 

that we need to do something here, and what we 

need to discuss now is how to do it, and the 

probabilities of success, and how do you get 

people on board, and advocate for it, and that 

sort of thing. So I think there are a bunch 

of different ways. I think your ideas are 

really fair minded. So we need to figure out 

how to work it. 

 MR. HENDERSON: Well Madam Chair, 

first of all thank you for entertaining this 

conversation. It's useful, and your 

leadership in providing us with a forum where 

we're comfortable about having a discussion 

like this is much appreciated, so thank you. 

 MS. TAYLOR: However -- 
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 MR. HENDERSON: No, no, it's not a 

however. Secondly, again I think that we are 

given a unique opportunity. I mean again, the 

challenge, the crisis is certainly real, and 

it's there, it's palpable, people see it, and 

it's actually deepening. It's getting worse 

in many respects. To have an advisory 

committee named for economic inclusion to have 

been created by the FDIC is really quite 

fortuitous in terms of being able to consider 

a range of options. I think, without making a 

commitment to any particular course of action, 

to give us a charge of being expansive in our 

thinking so that we take advantage of the 

assembled work and experience of this very 

diverse group, it seems to create many 

opportunities. Now I happen to like 

Elizabeth's recommendation, because I think it 

makes sense, and having seen lesser efforts, 

you know, there's something within the civil 

rights arena, an Office of Coordination and 

Review. It's in the Department of Justice. 
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It is given the responsibility of coordinating 

various civil rights enforcement activities 

among a variety of agencies. It's been an 

utter failure. Now part of it has of course 

been the responsibility of who is in charge. 

So who, the decider, makes a difference, okay? 

So without, you know, spending a lot of time 

on that, there has to be another way of 

institutionalizing a set of changes and 

recommendations that could be helpful. So 

without, you know, reaching any conclusions, I 

simply think this conversation is worth 

having. I think there are a variety of 

proposals that could be on the table, 

certainly Elizabeth's is one, and I think it's 

a sufficiently large idea, such that it speaks 

to the value of a group like this. I think the 

recommendations of the staff, in terms of 

thinking through a set of proposals that fall, 

or recommendations that fall under that would 

be very helpful. And you have a broad charge. 

 And again, I think this issue of 
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consensus, Deborah, I want to go back to that, 

because nothing that has been proposed is 

intended to foreclose the fact that we won't 

agree on everything. And if we don't, I think 

we should be frank about that, and as you 

said, Roberta, thank you, we don't have a 

consensus requirement, but I think among 

ourselves. You know, as people of integrity, 

we should respect the differences that we 

have. I think consensus is a very useful 

tool. It takes a long time sometimes to 

achieve that result, but I think you get a buy 

in and support that enables us to take those 

voices and amplify them many times over. So 

that I know, as Elizabeth is carrying out her 

responsibilities with TARP, as I'm meeting 

with various, you know, offices within this 

area, I bring a different perspective, as do 

my colleagues. We can be, you know, we can 

amplify the impact of the FDIC's work from the 

advice that we might provide in ways that I 

think will be very useful. So that's really, 
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I think, the charge. 

 MR. RYAN: And I would fully agree 

with Peter's comments in taking a broad look 

at the industry. Someone who comes from the 

state side, I think we do need to look at all 

those components, what’s the appropriate role 

of federal rules, how they mesh together, and 

how we provide an adequate, comprehensive 

consumer protection. I strongly advocate for 

that. 

 MR. EAKES: So I wanted to just add 

to the systemic some very specific proposals, 

and see whether that would be something that 

made sense. We talked about whether or not, 

to make lifeline accounts, or something that's 

a very low cost account mandatory, which seems 

hard. I mean, it's hard to figure out how to 

do that exactly, but what you could do is FDIC 

by itself could publicize a list of the banks 

that had the highest percentage of their total 

checking accounts that met this low fee, low 

transaction cost model, and you know, we're 
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all competitive. We want to be at the top of 

whatever list gets done, and I think that 

we'll have a -- there's some way we could use 

that, you know, whether it's CRA credit, or 

publicizing, or carrots and sticks, I think 

that comparing it to the other accounts, 

assuming that we're not yet able to get rid of 

some of the fees that I'd like to get rid of, 

which is the second proposal, and that is - 

Michael Barr mentioned it - the proposal to 

have overdraft fees counted under Truth in 

Lending, which was a proposal that the Federal 

Reserve looked at. They specifically reserved 

the right to come back and look at it again. 

It's been long enough that this committee and 

the FDIC weighing in could make a real 

difference. 

 A third very specific proposal 

would be that we recommend an expansion of the 

36 percent interest rate ceiling that was 

adopted two or three years ago for military 

families under the Talent-Nelson Amendment. 
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You know, as Wade has pointed out a dozen 

times to me, if you have military members who 

were unable to be deployed because they were 

considered a security risk because they had 

payday loans that were putting them under 

stress, the same kind of issue applies for 

policemen, and teachers, and firemen, and 

nurses, and folks who are under stress because 

they've got these very high interest loans. 

And you know, there are bills being discussed. 

This was something during the FDR period that, 

you know, there was a movement to put an 

interest rate ceiling, and once you have 

something like that, then all of the 

institutions are put on a level playing field 

so that they actually, if it makes sense to 

say a checking account really should have a 

$3.00 or $4.00 a month monthly fee, that 

that's what it really does cost, rather than 

advertising that we have free checking, and 

the ten percent at the bottom of the pay every 

month end up paying all of the costs from 
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penalty fees on overdrafts. We could change 

the financial services environment with that 

proposal very, very quickly. Title lending 

would have to conform on car loans. Payday 

lending would have to conform to a lower rate. 

 And it seems like we might be able to get all 

three of those done. So mine are much more 

pedestrian than Elizabeth's, but it might 

supplement by having very specific things -- 

those three things I think we could do, and 

would make a real difference. 

 MS. TAYLOR: Actually, another 

concrete thing, too, which we talked about 

several years ago, if you recall, John, is 

having sort of a consumer national 311 number, 

where anybody who had a question about a 

financial services question could call, and 

somebody there would tell them where they 

could go to get the answer. Because as the 

superintendent of the Estate Banking 

Department, it's incredible how many people 

didn't know who -- and why would they -- who 
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the supervisor for their particular financial 

institution is. So I mean that would go -- I 

mean, I think that would go a long way, 

because people could then, they would have one 

place that they could go and get the 

information that they needed to make 

intelligent decisions about things. 

 MR. EAKES: Being a pedestrian, if 

you don't own a car is okay. 

 MS. TAYLOR: Deborah? 

 MS. WRIGHT: I think just putting 

Elizabeth's proposal on the table would create 

such incredible national dialogue, which is 

what we need to have to put the consumer right 

on the table, and have to have every part of 

Washington respond to that, because that's 

really what needs to happen. We've been 

having these conversations in silos and, 

whether it happened in that forum or not, I 

think it would force everybody to deal with 

the issue. 

 I had a smaller question on your 
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proposal, and there's no doubt you know the 

answer to this: what does the Consumer 

Protection Agency do? Because undoubtedly, 

you're going to have a series of people, maybe 

me included as the taxpayer, so the last thing 

we need is another agency. So what do they do 

now, and is it possible to reform? I think 

we're going to have to think about sort of the 

little "p" politics of how we'll actually get 

something done as opposed to just a dialogue. 

 MS. WARREN: The Consumer Product 

Safety Commission right now does physical 

products. So basically, between the Consumer 

Product Safety Commission, the Department of 

Agriculture, the Food and Drug Administration, 

maybe a couple more, literally everything you 

touch, everything you taste, everything you 

smell, is checked for safety at some level. 

Not always perfectly. We know there have been 

some terrible problems with underfunding. But 

the point is, there's someone there who has it 

as their first responsibility, and someone to 
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hold accountable if they fail to do it. That 

is not so with financial products. And I 

think the time for that -- I just want to make 

one other just very small point. In this 

context, we put the Consumer Product Safety 

Commission in effect back in the 70s, and the 

Nixon Administration was the first 

administration that embraced it, and said, 

we're going to have this thing together at a 

time when we had usury laws that were solid 

and strong at the state level. There were 

some state variation, but they were effective 

at the state level all across the country. 

And so it would be quite reasonable to say we 

found another way to deal with consumer 

financial products. We have usury laws in 

effect. We kicked the tent pole out on usury 

laws. It's gone. And so the center thing 

that held us up and said, nobody's going to go 

above whatever was your state usury law all 

in, so that there wasn't a reason to do these 

long deceptive contracts, because you just 
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never could get above where the usury cap was. 

 Once you kick that out, and don't put 

anything else in its place, that's how we end 

up with what we've got. And so I just mention 

it by way of kind of the history. I think if 

we'd been in the 1970s where we are today on 

financial products, I think at the same time 

we did a consumer physical product safety 

commission, we probably would have done a 

consumer financial product safety commission. 

Wether they would have been separate, whether 

they would have been the same agency, I don't 

know. But I don't think anybody looked around 

and said, gee, we don't care about your money, 

we only care about these other issues. 

 MR. BOSTON: I just want to say, I 

support your proposal, but I support it 

because, right now, with all the new 

regulation, and everything that's coming 

about, and there's going to be a lot of 

changes as it relates to what's going on. 

Most of us are trying to put the 
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responsibility on the consumer. No one is 

asking any financial institution to be more 

responsible about what they present to the 

consumer. Nor are we asking our government to 

make sure that we have responsible products 

given. Part of our problem right now is that 

many people thought that what they were being 

sold was something that was indeed backed up, 

supported in some way by the Federal 

Government. That they allowed -- this product 

would not be available to us as a consumer 

unless somebody in the Federal Government has 

said it was okay to be provided. So I think 

we must think about making sure that our 

financial institutions as a body, not banks 

per se, but that we have responsible financial 

products, and I think that I support what 

you're saying, because I think this will help 

us get those types of responsibilities. 

 MS. TAYLOR: In all fairness, I 

think that the individual regulators try to do 

that with their regulated institutions. The 
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problem is that there are some that fall 

through the cracks, and some are better at 

doing it than others. But that -- I think, 

you know, in all fairness, that is something 

that regulators try to do. However, 

effectively is a different story. 

 MR. RYAN: And I think that's where 

you need some of the checks and balances, and 

something that's been helpful, imperfect as it 

is, but at the state level, is we have a 

regulatory functions. But there's an AG who 

can come in, do investigations, take 

enforcement actions. And what I've seen 

evolved at the federal level is, for instance, 

the FTC had broad authority, but the banking 

regulators got to carve out bank customers as 

to the purview of the bank regulator. And we 

saw the bank regulators, to your point on the 

usury laws, preempt, allow the lowest state 

law to preempt all the other state laws. So 

it's -- I share your objective. I come at 

this with some trepidation and a little bit of 
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cynicism about how, when you have one king, 

and I know that is not what you are 

suggesting, but the challenges that that 

poses. 

 MR. EAKES: There's no reason that 

it has to be preemptive federal decision that 

states are left to be concurrent. 

 MR. RYAN: Absolutely not, but we've 

seen it evolve over time, and so it's that 

experience, once again, where these things 

were not supposed to be preemptive. We had -- 

get a little pedantic here, but with 

interstate banking and branching, that was 

clearly in the law. It says, this does not 

preempt state consumer protection laws. And 

that's where I see Washington working in 

certain ways that, when the spotlight's not 

on, are troublesome. And you need some checks 

on that. And so that is not a reason not to 

do anything, and not to try to address what we 

all agree are serious problems. 

 MR. GRZYWINSKI: At the risk of 
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not saying anything that hasn't been said, 

there's a saying, there's a quotation that 

people like to throw around in Chicago, which 

goes back about 100 years or more, although 

probably more, from Daniel Burnham. Make no 

small plans. Then you have the power to move 

men's minds in the language of the day. But 

think of the -- if I may, think of key words 

of our situation right now. Economic crisis, 

okay, which means opportunity for change. 

Mandate from the electorate, okay, means 

momentum. A president who is leading, okay? 

A committee here that says economic inclusion, 

okay? It says economic inclusion for the 

FDIC. The FDIC is at the center of the 

nation's economic system of banks, okay? The 

FDIC has a leader who has been ahead of the 

game at risk to herself, okay, and is leading 

the charge, okay? We should be doing 

everything we can to support and better arm 

that leader. We should seize the momentum, 

okay, on behalf of the American family. We 
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should not think small thoughts, okay? We 

should not be satisfied with the leavings of 

the day, okay? We are talking about the 

American middle class, everybody, okay? And 

what we have in front of us is an opportunity 

to try to create an economic safety net for 

the American family. And while I'm not the 

expert, I would say, lastly, that the law 

exists. The Community Reinvestment Act is 

written very, very broadly. The legislation 

is very broad, and there is a mandate here, I 

would argue. More would argue perhaps against 

me. But I think the pieces are there, the 

time is there, the need is there, and we ought 

to think big enough thoughts. 

 MS. TAYLOR: If I could add one 

thing to that, too. People talk about, as part 

of financial markets today, that we have a 

crisis of confidence, and the FDIC is all 

about confidence in the banking system, which 

I would just add to what you just said, but 

yes. So I think that's just that we're here 
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to be used. 

 VICE CHAIRMAN GRUENBERG: Well, we 

picked you guys because you are interesting 

and provocative, and you haven't let us down. 

 (Laughter.) 

 VICE CHAIRMAN GRUENBERG: My only 

cautionary word is that I really do think it's 

unfortunate, it would have been helpful to 

have the Chairman here to take part in this 

conversation. And on her behalf, I would 

obviously say we really need to bring this to 

her attention, and sort of work it through 

with her. 

 MR. MOONEY: We will follow 

through, Madam Chairman, and do as Marty said, 

and cover broader and less discreet 

recommendations, everything we've heard here 

today. Financial education, product safety 

issues, and development of a product, consumer 

financial product safety bureau recognition, 

and Professor Warren and I have read every 

word you have written on that subject. It's 
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quite impressive. And we all have an interest 

in that, and exploring the incentives, so we 

will do as you suggest. 

 MS. TAYLOR: I'll talk to the 

Chairman about ways that this committee could, 

with the FDIC, do some of the things that 

we've talked about here. And I think it would 

be useful for people to talk among themselves, 

too, some of the things that Wade was 

suggesting, you know, how could we have a 

broader impact? 

 Well, if nobody has anything else, 

I think we're starting to lose people. So, 

thank you all. 

 MR. McDONALD: I would just like to 

make one comment for the record. It's been 

said several times around the table about the 

Chairman's role in bringing this issue to bear 

some two and a half years ago, three years 

ago. I want to not only congratulate her, but 

to congratulate the entire staff of the FDIC 

in supporting this very, very important issue 
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that is touching the lives of millions of 

people. 

 This one issue has a significant 

effect on the quality of life. And I just 

want to say again that, thanks to the 

leadership of the FDIC for bringing this issue 

of economic inclusion to the table. We've 

debated whether or not it was just for the 

underbanked or unbanked. We now see how big 

this picture is, and as Kelvin said, it's 

America that this issue is touching. So I 

would like to thank you guys once again for a 

job well done. 

 MS. TAYLOR: Thank you. 

 (Whereupon, the above-entitled 

matter was concluded at 2:54 p.m.) 
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