Caskey in Fringe Banking notes;"The fourth and final theme that emerges from this study is that insufficient resources are devoted to regulating and monitoring fringe banking markets." (Page9) Carr and Schuetz in 'Financial Services in Distressed Communities: Framing the Issue, Finding Solutions' estimated that "fringe banking services had gross revenues of $78 billion in 2000--and nowhere is there an accurate accounting of such." The lack of accurate and reliable data on fringe banking contradicts what we know of Fed Chairman Greenspan who has a predilection for statistics, even obtuse or what some would consider irrelevant statistics. It is well known in the financial community that Greenspan gets up at 5 AM each morning and spends two hours in the bathtub pouring over statistics. Consider the following anecdote by Justin Martin in Greenspan The Man Behind the Money :

One story--perhaps apocryphal, perhaps not--held that Greenspan, while attending a party, happened to notice that the host had the latest U. S. Statistical Abstract. He snatched it up, plunked down in the corner, and was lost to the world f"Stories began to circulate about Greenspan's epic capacity for data grabbing. or the duration of the evening. Edgar Fiedler, an economist at Bankers Trust during the 1960's, remembers colleagues saying of Greenspan: 'Alan takes apart the industrial production index before breakfast just as a setting up exercise.' Meanwhile, Frank Ikard, the Washington Representative for the American Petroleum Institute, described Greenspan as the 'kind of person who knew how many thousand flat-head bolts were used in a 1964 Chevrolet and what it would do to the economy if you took out three of them.' "page 63

Given all this, a person that would know what effect a reduction in flat-head bolts in the manufacture of a car would have on the economy--Why does he ignore the effect of poor people having to pay more for financial services on the economy? Why are there no statistics kept by the Federal Reserve on Fringe banking? There are no records or statistics kept on Fringe banking, or the consequences upon the poor, or the economy, or on anything else, because Greenspan does not want to know--either because he does not care or he does not want to draw attention to or provide information to activists for the poor.

Not only are statistics on fringe banking and the un-banked sparse, what little data we have is inaccurate. The Survey of Consumer Finance put out by the Federal Reserve is one place where records are kept on the financial wherewithal of consumers. According to the Federal Reserve the number of Americans that are un-banked had decreased to 9.5% by 1998 (the latest year of the survey). There is a distinction made between un-banked and lacking a checking account. Per the 1998 Survey of Consumer Finance:

"In 1998, 90.5% of Americans had some type of transactions account--a category comprising checking, savings and money market deposit accounts, money market mutual funds, and call accounts with brokerage firms." Page 8

"A possible weakness of this survey is that it over-samples wealthy individuals and contains only a small sample of poorer people who are more likely to be unbaked."

"Using the Survey on Income and Program Participation (SIPP), the authors find that 20 percent of American households and 45 percent of black households do not have basic transaction accounts, and discretionary asset holdings other than housing are minuscule for the bottom quarter to half of the population. Furthermore, the authors reveal, a large proportion of American households have very low assets: more than half of all households possess less than $5000 in financial assets. Poor families, then, are outside the mainstream banking system and have accumulated few, if any, financial assets." (Quoted From the summary found on the Chicago Federal web page on the un-banked.)

In his book Fringe Banking John Caskey concluded that a persons' economic well being was one of the prime determinants in whether one had a bank account. In the chapter 'Explaining the Boom in Fringe Banking' he notes:

"First, the 1980's there was a marked decline in the use of banks among lower-income households and households headed by nonwhites, the young, and the less well educated. This decline spurred demand for payment services unlinked to banks' deposit services and for consumer loans to people unable to pass the credit screening procedures of mainstream financial institutions. Second, the decline in account ownership mainly reflected a deterioration in the economic situation of household in the lower end of the income distribution. Over the 1980's. the incomes of millions of these households fell, reducing their ability to save and, their need for banks deposit services. Third, the decline in account ownership was exasperated by increases in fees on deposit accounts with small balances." Page 106

An analysis of income trends for the 1990's shows that many American made little progress and some digressed. The 1990's boom, the longest in America's history, did not help the lowest paid workers until the end of the expansion 13)(Footnotes), which some would say was a function of the Federal Reserve 14)(Footnotes) . According to Isaac Shapiro and Robert Greenstein in 'The Widening Income Gap', Center on Budget and Policy Priorities, September 4, 1999, between 1977 about when financial deregulation began to 1999 the bottom 40% of Americans did not fair well:

"Among the bottom fifth of households, after-tax income has declined nine percent. Among the next-to-the-bottom fifth, income has been stagnant over this period. These adverse developments for the lower parts of the income scale have occurred even though federal tax rates for these households have fallen, largely as a result of substantial expansions of the Earned Income Tax Credit." 15)(Footnotes)For more.

Clearly the number of un-banked Americans did not fall as the Federal Reserve contends but probably and may have risen given the decline in the economic well being of the bottom 40% of Americans and rising bank fees. There are other factors that may have contributed to the distorted numbers. For example, fringe bankers have started to provide services that duplicate bank services and some users of fringe banking may in fact have what may be considered a bank account . There is also the government EFT (Electronic Funds Transfer) initiative to pay recipients of government transfer payments electronically which began in 1999 and may have skewed the 1998 numbers in anticipation as check cashing and other fringe banking services began offering EFT accounts.

Lets face it the Federal Reserve has no interest in helping the poor or disadvantaged as Martin Mayer (The Fed) notes;

"Discrimination against low-income people in lending operations was a subject guaranteed of be of no interest to the Federal Reserve System. The fed could never be the agency of choice for a program to compel banks to invest in the ghetto." page 289

"(T)he Fed lawyer most involved with the new law suggested to me that check-cashing shops were just fine for city slums, and noted that in the Fed's surveys a lot of the people who used cash-checking shops had bank accounts somewhere but preferred the convenience of the storefront shop." Page 293

This lack of interest for the consumer, or the little person, continues as Tom Schlesinger of Financial Markets Center, points out in "Consuming Interest: Who's Advising the Federal Reserve on Consumer Issues?':

"During the past two years, the explosive growth in subprime credit and overall household borrowing has fueled a resurgence of interest in consumer lending practices. Yet citing budget concerns, the Federal Reserve recently trimmed the size of its main advisory group on consumer protection issues. And according to a new Financial Markets Center analysis, membership in the Fed's consumer Advisory Council is tilting more towards financial industry interests."

The number of money service businesses continues to outpace the number of banks unmitigated while Greenspan continues his pro bank free market version of financial deregulation. Although Greenspan took some heat for the slowing economy in the immediate post September 11th period his stature and power continues to grow. The Federal Reserve was given supervision of the Airline Industry Bailout after the terrorist acts; But terrorism might be the key that unlocks the blinders the public has had about fringe banking!