roger w ferguson, jr : the proposed check clearing for the 21st century act speech by mr roger w ferguson, jr, vice - chairman of the board of governors of the us federal reserve system, before the subcommittee on financial institutions and consumer credit of the committee on financial services, u. s. house of representatives, 25 september 2002. * * * i would like to thank the subcommittee for inviting me to discuss h. r. 5414, the proposed check clearing for the 21st century act. this bill, which is similar to a proposal the board sent to congress late last year, removes existing legal barriers to the use of new technology in check processing and holds the promise of a more efficient check collection system. the board commends representatives ferguson and ford for introducing this bill. technological advances in check processing check processing is far more efficient than it once was. less than fifty years ago, clerks hand sorted millions of checks each day. in the 1960s, the banking industry began to use mechanical high - speed check processing equipment to read and sort checks, which had been redesigned for automated processing. today, banks, thrifts, and credit unions, which i will collectively refer to as banks, process the more than 40 billion checks that consumers, businesses, and the government write each year. legal impediments, however, have prevented the banking industry from fully using these new electronic technologies, such as digital imaging, to improve check processing efficiency and provide improved services to customers. this is because existing law requires that the original paper checks be presented for payment unless the banks involved agree otherwise. we can see how this requirement constrains technological adoption by following a check through the collection process. after a bank's customer deposits a check with his or her bank, the bank typically transports the check from the branch or atm where it was deposited to a central operations center. the check is then usually sent to one or more intermediaries - - such as a federal reserve bank or a correspondent bank - - or a clearinghouse for collection before it is ultimately delivered to the bank on which it is drawn for payment. during each step of this process, the check must be physically shipped to its destination by air or ground transportation. of course, banks can agree to accept checks electronically, but the large number of banks in the united states makes it infeasible for any one bank to obtain such agreements from all other banks or even a large proportion of them. therefore, legal changes are needed to facilitate

economic research, march ; revised november 2023 ), https : / / www. nber. org / system / files / working _ papers / w31010 / w31010. pdf. see ryan a. decker and john haltiwanger ( 2023 ), “ surging business formation in the pandemic : causes and consequences? ” paper presented at the brookings papers on economic activity conference, held at the brookings institution, washington, september 28 – 29, https : / / www. brookings. edu / wpcontent / uploads / 2023 / 09 / 4 _ decker - haltiwanger _ unembargoed. pdf. on march 25, 2024, this speech was updated to add a new footnote 6 and renumber the remaining footnotes. - 14 adjustments can ensure that inflation will return sustainably to 2 percent while striving to maintain the strong labor market. i have covered a lot of ground with you today, material that you will learn more about if you choose further study of macroeconomics, or economics more generally. i hope you will find, as i have, that this journey feeds your curiosity, sharpens your thinking, and expands your horizons. note : percent change in the personal consumption expenditures ( pce ) price index from 12 months ago. core refers to the price index excluding food and energy. the gray shaded bars indicate periods of business recession as defined by the national bureau of economic research. the nine shaded recession periods extend from april 1960 through february 1961, december 1969 through november 1970, november 1973 through march 1975, january 1980 through july 1980, july 1981 through november 1982, july 1990 through march 1991, march 2001 through november 2001, december 2007 through june 2009, and february 2020 through april 2020. source : bureau of economic analysis ; personal consumption expenditures price index via haver analytics. 2. subcomponents of personal consumption expenditures price indexes note : data extend through january 2024. the gray shaded bar indicates a period of business recession as defined by the national bureau of economic research. the shaded recession period extends from february 2020 through april 2020. source : bureau of economic analysis via haver analytics. note : percent change in various market - rate rent indexes and the housing services category of the personal consumption expenditures ( pce ) price index from 12 months ago. corelogic, realpage, and zillow measure market - rate rents — that is, rents