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S Y S T E M :


















The Federal Reserve System

is responsible for formulating and implementing U.S. monetary policy.

It also supervises banks and bank holding companies, and provides financial services to depository institutions and the
federal government.
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks in the United States that, together with the
Board of Governors in Washington, D.C., constitute the Federal Reserve System.
The Cleveland Bank, including its branch offices in Cincinnati and Pittsburgh and its check processing center in
Columbus, serves the Fourth Federal Reserve District (Ohio, western Pennsylvania, the northern panhandle of West Virginia,
and eastern Kentucky).
It is the policy of the Federal Reserve Bank of Cleveland to provide equal employment opportunities for qualified persons
regardless of race, creed, color, national origin, age, gender, or disability.

They are overlooked and underappreciated,
are effective and efficient.

yet they

They have endured and evolved, and yet are

ripe for improvement and innovation. They form an invaluable infrastructure
for our nation’s economy, supporting countless users at any given time. Their
innumerable entrances, routes, and off-ramps serve many voyagers embarked on
vastly different journeys.

They are our nation’s payments systems. And like our nation’s transportation
systems, their capabilities are constantly being upgraded, even as participants
continue to rely on them every day. However, improving our payments systems
will not be achieved without successfully confronting a myriad of challenges and
obstacles along the way.

This year’s Annual Report essay focuses on these challenges and opportunities
from the perspectives of various payments systems participants. As discussed in
the essay, the continuing evolution of our nation’s payments vehicles is both
desirable and inevitable.

However, while the route taken by each transaction

may be clear, the entire system’s development path is not. The travelers, through
their choices, will determine the itinerary.



When people think about the Federal Reserve Bank of Cleveland, most often they are
considering our responsibilities for conducting monetary policy or supervising commercial
banking organizations. Sometimes we are recognized for our community-based activities,
such as the Cleveland Residential Mortgage Credit project, which we wrote about in last
year’s Annual Report.
Rarely does the public pay much attention to our role in the nation’s payments system.
This is ironic, since the largest number of our employees work in operations geared to
processing checks, shipping cash, executing electronic payments, and servicing the U.S.
Treasury’s financial needs. In another sense, however, I am gratified that our paymentsrelated activities go unnoticed, because the inattention signals a high level of confidence that
the operations are functioning very well.
Though we are pleased with our progress in delivering reliable and efficient payments
services, we recognize that the industry is changing. Payments in the United States are
slowly evolving from paper-based to electronic-based transactions. But recent developments
in technology, interstate banking and branching,bank consolidation,and the entry of new
competitors in the payments industry provide a basis for thinking that the pace of change
will quicken.
This year’s essay explores the payments systems through the unique perspectives
of its many participants,including the Federal Reserve. For some, these changes will be
threatening; for others, the changes will provide exciting opportunities. At the Federal
Reserve Bank of Cleveland, we believe that constructive participation in the payments
system requires an understanding of both its current challenges and its prospects.


G.Watts Humphrey, chairman
Jerry L. Jordan,president
Sandra Pianalto, first vice president
David H. Hoag, deputy chairman

Last year, we achieved significant
results throughout the Bank.


completed and occupied an operations
center adjacent to our main building in
downtown Cleveland. This state-ofthe-art facility will enable the Bank’s
check, data processing, cash, electronic
payments, and information technology
functions to provide superior products
and services to our customers. We were able to complete the move without any adverse
consequences for our customers. Renovation of our historic main building began in earnest
after the completion of the operations center, and we are on schedule to finish renovating and
occupying the building in time for the Bank’s seventy-fifth anniversary this August.
We also embarked on Transformation 2000, a multiyear initiative led by 150 employees
to examine critically everything that we do, how we do it, and why we do it. Through the
transformation process, we are identifying outmoded practices, replacing them with new
activities, and learning how to work better with one another and with our customers. The
skills and tools that our employees have gained will enable us to improve our operations in
payments, banking supervision, and monetary policy continually. One of the key initiatives
directly resulting from the effort was the consolidation of our Pittsburgh office’s currency
processing into Cleveland and the relocation of the Bank’s noncash operations to the
Jacksonville Branch of the Federal Reserve Bank of Atlanta.



Further demonstrating our interest in improving the payments system,Sandra Pianalto,
first vice president and chief operating officer of our Bank,served as staff director of the
Committee on the Federal Reserve in the Payments Mechanism, a g roup appointed by
Federal Reser ve Chairman Alan Greenspan to examine the Federal Reserve’s role in the
payments system. Sandy provided leadership in many aspects of the project;her guidance,
influence, and expertise undoubtedly contributed to the Committee’s success.
All of the past year’s successes have been guided by the 23 directors of our Cincinnati,
Cleveland, and Pittsburgh offices, as well as by the members of our Business and Community
Bank Advisory Councils. I thank them for their valuable, dedicated service and expert
counsel. I would particularly like to acknowledge Jerry A.Grundhofer, chairman,president,
and CEO of Star Banc Corporation, who completed his term on the Cincinnati Board ,a n d
Christine J. Toretti, president of the S. W. Jack Drilling Company, who served on the
Pittsburgh Board.
Finally, I would like to express my personal gratitude to the officers and staff of the
Federal Reserve Bank of Cleveland,whose tireless efforts over the past year enabled us to
accomplish so much. The entire Bank truly rose to the challenge of meeting demanding
annual performance goals while the special building,transformation,and Rivlin Committee
projects were under way. Their creativity, energy, and commitment have made 1997 a
successful year and have positioned us well to meet the challenges of the future.

Jerry L. Jordan






o p p o rt u n i t i e s

You take one last look in the store’s three-way mirror. The jacket fits; you’ll take it. Your salesperson
nods approvingly and asks,“How will you be paying?”
Do you freeze, meticulously considering your payment options, weighing the relative economic
and social costs involved in writing a check, paying cash, or using “plastic”?
Probably not. Most likely, you perform a few rapid-fire mental calculations (“How much money
is in my wallet?” “What’s the balance in my checking account?”) and promptly relay your decision to
the waiting salesperson.
Nowadays,consumers can use debit and credit card s ,c a s h ,c h e c k s ,s m a rt card s ,t r aveler’s checks,
and money orders. Not to mention ATM transactions, direct payments via the automated clearinghouse (ACH), and telephone- and PC-based home banking. What is often referred to as “the payments
system” is actually a collection of many individual payments mechanisms, each operating to ensure the
timely and orderly transfer of value.
Ubiquitous, yet nearly invisible to the end-user, our nation’s payments infrastructure is a marvel
of institutional collaboration and technological sophistication. Few even think of payments products
and services as an industry, but over 1.5 billion transactions totaling more than $3.3 trillion are
processed daily. Today, a transaction can be handled from across the country almost as easily as from
across the street.
The vast majority of people know little about the complexity of the payments services they use
every da y. To nearly everyone, payments seem to “just work.” But without reliable and accessible
mechanisms, the most commonplace transactions of everyday life would become more timeconsuming,cumbersome, expensive, and risky.
Each of the payments methods used by consumers, businesses, and governments is supported by a
collection of institutions, laws, and technologies that combine to transfer value reliably from one party
to another. Payments providers compete with one another and face strong incentives to innovate,
just as in any other industry. A variety of mechanisms exist simultaneously in the marketplace because
each fulfills certain needs. Their efficiency and reliability can be enhanced, but only if users are
willing to bear the added cost or to embrace new, less costly technologies. Ultimately, payments
methods reflect the interaction of providers and consumers.

For reasons discussed in this essay, many people think the payments industry will change
dramatically over the next several decades, with replacement of existing payments methods by entirely
new electronic systems. Others are skeptical, expecting only a continuing evolution of existing
systems to ward more substantial reliance on electronic components. Whatever the nature of the
transformation, both producers and users of payments services will have had to surmount several
obstacles. This essay will consider some of the challenges and opportunities facing payments systems
participants, including the Federal Reserve. It will also show that by taking an active interest,
consumers, businesses,bankers,emerging providers,and the Fed can each influence how payments
will be made in the future. Finally, it will explain why — even as the Federal Reserve prepares to
provide more direction on payments issues — the Fed must work with its competitors.


Payments systems enable one party in an economic transaction to transfer purchasing power
to another. Payments systems typically have three components:an issuer of the payment vehicle;
financial accounts held by the transacting parties; and a process that moves funds between their
accounts, including procedures for resolving problems that may arise in the transfer.
The check is the vehicle in one familiar paper-based system. It requires that the transacting
parties maintain accounts at depository financial institutions (“banks”). Buyers pay for their purchases
with pieces of paper that instruct the collecting banks to obtain funds from paying banks when checks
are presented. The sooner a check is sent to the paying bank, the sooner the funds are released to the
collecting bank. In servicing their customers, collecting banks therefore must incur costs to send the
checks to paying banks. The greater the face value of the check, the larger the expenses they are
generally willing to incur for faster collection. Last year, the banking industry spent roughly $4 billion
to sort, bundle, truck, and fly 64 billion checks around the country.
Even cash, the most prevalent method in retail transactions, requires considerable resources
to operate as an effective payments system. Cash exchanges transfer purchasing power directly and
instantaneously, eliminating the expensive collection process required by checks. Nevertheless, cash is
expensive to mint and print, and costly to keep in circulation. On behalf of the U.S. Treasury, the
Federal Reserve issues cash, spending $650 million annually to make, store, and ship currency, as well
as to detect and destroy unfit currency. Banks and businesses pay additional sums each year to collect,
count,safeguard, and transport bills and coinage.
Electronic payments systems such as debit cards,smart cards,and ACH transfers,economize on
resources by requiring neither the collection process of paper checks nor the expensive issuing and
distribution system of cash. For example, the total cost of issuing a check — the cost to the payer,
payee, and banking system — is roughly $3 per item. In contrast, the cost of making the same
payment via automatic debit through the ACH network is about half as much. Considering that


Options abound.

People often find themselves at transactional

crossroads. Check, cash, debit card, credit card, or money order? What matters
most — convenience, cost, float, or payment finality? People differ, and the same
person may not even make the same choice twice.

64 billion checks were written in the United States last year, this difference is substantial, but it is the
price participants are willing to pay to use checks rather than a less costly system.
Compared to paper-based methods, new electronic systems are not yet used extensively
for retail payments,apparently due to costs or attributes that have been inhibiting their widespread
adoption. How have “high-cost” paper systems held these “low-cost” systems at bay? To better
understand the choices being made, we need to consider the needs and incentives of the various
payments systems participants.


The most important point to grasp about the consumer’s perspective is that the person

initiating a retail transaction rarely pays an explicit price to use that payments service, let alone a price
reflecting the true underlying cost of processing each transaction. With service seemingly “free,”
consumers focus on the convenience and other qualitative aspects of a vehicle as they assemble a set of
payments methods for their use.
Despite decades-long predictions of a “cashless society,” the overwhelming majority of consumer
transactions are still initiated with cash. Cash (coin and paper currency unless otherwise noted) is a
universally accepted transaction vehicle that affords virtually complete privacy — an attribute many
consumers value highly. Moreover, cash typically is available for no fee from one’s bank. To deter
routine check writing for cash in bank branches — an expensive distribution method — banks
market ATM use as a low-cost,convenient alternative.
Also, despite predictions of the check’s demise, from the consumer’s point of view it offers
portability, control, and convenience, not to mention the benefits of float. Bank customers cite
numerous reasons for clinging to checks as a favored payments instrument,including inertia (“My
work offers direct deposit, but I just never bothered to sign up for it”),entrenched attitudes (“I like
the feeling of personally depositing my paycheck”),and flexibility (“By using checks,I can vary the
timing and amounts of my monthly bill payments”).
While checks are often preferred by consumers,nearly half of all checking accounts would be
unprofitable for depository institutions if considered in isolation from other aspects of the banking
relationship. Their handling costs exceed the interest earned on lending out the deposits. Yet banks
have traditionally made consumer checking accounts very attractive — in many cases offering
low-cost or free checking. Banks recently have become bolder about instituting pricing policies that
discourage check writing, but consumers strongly resist fees.
At the same time, consumers are well known for constantly demanding easier, faster access to
products and services. We have become accustomed to the convenience of dial-up library collections,
movies on demand, drive-through oil changes, and ATMs that allow banking anytime and anywhere.
Consumers who appreciate the convenience of ATM cash appear more willing to accept charges for
using the service, especially fees for using machines owned by banks other than their own.


General-purpose credit cards provide an example of a convenient transaction vehicle that
consumers have eagerly embraced. Strictly speaking, credit cards do not fit our definition of a payments
system because their use does not result in the transfer of value from one party to another; that occurs
when the consumer settles the credit card obligation,usually by check.
Typically, consumers pay no fee to obtain and use a credit card. Merchants support the system
by paying transaction fees to the credit card companies. Initially, some merchants resisted the use of
credit cards for small-dollar purchases, and a few tried to establish a lower price schedule for consumers
paying with cash or checks. These efforts proved to be very unpopular with consumers, and merchants’
resistance declined when they saw that accepting credit cards actually expanded their customer base.
The credit card experience demonstrated that consumers like to have a variety of payments
methods available to them, as long as they pay no transaction fee. They are willing to pay annual fees
for credit card s ,h owever, if the cards are bundled with other services they desire. Consumer interest
in devices other than cash, checks, and credit cards is also growing,spurred by the time constraints
of workplace and household responsibilities. Increasingly, payments service providers recognize that
consumers are open to new methods, but marketing realities cause providers to expect that merchants
will bear the direct costs of the systems’ operations.
Consumers can influence decisions about new payments methods,switching their patronage to tell
providers which product features they like, and which they don’t. Consumers, of course, should be
open to new ways of doing business and should recognize that providers might be willing to furnish
additional services if consumers would switch to lower-cost payments alternatives, such as debit cards
instead of checks.


Businesses are more likely than consumers to focus on the cost of using a payments

vehicle, both because it is expensive to integrate payments into other internal accounting, information,
and control systems and because they are more likely to face explicit transaction fees. While cash and
checks offer consumers tremendous advantages, these instruments can cause headaches for businesses.
To understand the inefficiency of handling currency, one need only examine a typical consumermerchant transaction, where cash gets counted at least five times, and sometimes six: By the consumer;
then by the store clerk who puts the money into the till; then by the store manager, who totals the
receipts at the end of the day. Next, a bank teller counts the money in the merchant’s daily deposit;
then the bank’s accounting department reconciles the cash receipts. Finally, if the bank sends the funds
to a storage depot like a Federal Reserve Bank, the money is counted on arrival.
Understandably, merchants might become enthusiastic about smart cards that reduce the massive
costs of handling checks and cash. Some visionaries foresee the day when consumers will use these
stored-value cards to pay for nearly every transaction — buying a newspaper, booking an airline
flight, renting a movie, and feeding parking meters and pay phones. About the size and shape of credit
cards,smart cards contain an embedded microprocessor and memory chip. Monetary value is loaded,


reloaded,and transferred by slipping the cards into ATMs, PCs,special phones, point-of-sale card
readers,and palm-size “electronic wallets.” Simpler versions of stored-value cards are already being
used as prepaid telephone cards and bus passes.
Unlike online credit and debit card s ,s m a rt cards require no connection between a bank and the
point of sale, and there are no time-consuming PIN codes to bother with. Thus,customers can move
faster through checkout lines and avoid processing fees.
According to one research firm, the use of smart cards is expected to grow rapidly. But mass
acceptance of the cards will probably depend on consumers’ tolerance of regular downloading fees —
perhaps 50 cents to $1 — and merchants’ willingness to replace or retrofit older point-of-sale terminals
with smart-card-compatible equipment. While acknowledging the cost savings and greater efficiencies
of paperless transactions, many retailers may not be keen on investing in new equipment or training
personnel in an uncertain technology until forced by competition or lured by falling equipment prices.
Businesses increasingly turn to the Internet as a source of commerce, but even more will do so as
service prov i d e rs ,d evelopers, and other interested parties address and resolve fundamental issues.
These include establishment of standard processes for buying and selling products and services,
development of transport and privacy methods that will enable secure commercial exchanges, and
formulation of user-friendly protocols for ordering, online payment, and service delivery. Making
headway will undoubtedly take experimentation.
The prospect of paperless commerce also has substantial attraction in the business-to-business
marketplace. While significant cost savings are currently being realized by the use of electronic funds
transfer methods, businesses continue to depend on checks, and not simply because their customers use
them. About 40 percent of the 64 billion checks written are drafted by businesses. Of these, half were
for business-to-business transactions. A recent study estimated that if businesses could convert as little
as 10 percent of all their current paper-based payments to electronic payments,annual cost savings
would be $15 billion. Some of these savings would result from lower mailing expenses, while others
would accrue from reduced processing error rates.
Businesses can benefit from electronic payments and receipts in ways other than saving money
directly on transactions costs. Electronic payments methods, like the ACH network, accelerate cash
inflows, improve earnings potential of operating capital, and precisely control cash disbursements.
By using electronic payments mechanisms, businesses can avoid the vagaries of the postal system.
Electronic payments would also reduce check fraud, which costs businesses and banks billions of
dollars annually.
Businesses already have invested considerable resources in software systems linking information
about orders,shipments,inventory, tax obligations,and payroll. The ability to add information for
payments made and payments received will bring greater efficiencies, control, and customer service.
Systems that link these data together are called electronic data interchange (EDI), and a number of large


Challenges breed opportunity.

Challenges are invitations for

innovation. Roadblocks are made to be driven around; obstacles are opportunities
to pave new paths. What at first looks like a detour may eventually become the
preferred route.

businesses are using EDI to transmit order and invoice information as well as payments. Because
businesses typically see a payback from incorporating electronic payments into their other financial
practices,they are likely to adopt these products before consumers do.
The federal government may be more enlightened than the business sector in seeing the
benefits of electronic payments. Starting January 1, 1999,the Treasury will require that nearly all
of the approximately 1 billion federal payments — to individuals as well as businesses — must be
made electronically. By reducing the number of checks it issues,the government estimates it will
save about $420 million over the next five years.
As a general matter, businesses face stronger incentives than consumers to maintain records about
both expenditures and receipts. Payments providers know that businesses are receptive to viewing their
electronic services as information tools that lead to more efficient, secure business operations, or as
a means through which merchandisers can broaden their customer base. If electronic payments are
marketed creatively, businesses are likely to pay for them to a degree that consumers simply will not.

Banking Institutions

The landscape of banking is changing. In years ahead, traditional retail banking

— branch services, ATMs, and checkbooks — will inevitably shift toward electronic means such as
ACH, online banking, and point-of-sale technology. This will bring banks face-to-face with issues
related to networks and service providers.
Competition for transaction volume has resulted in commoditization of banking’s financial
service products,spurring nonbank players to enter the market. And now the payments business is
heating up. Recognizing that the retail payments industry is ripe for electronics,software developers
and third-party payments processors are targeting key segments of the payments cycle. In many
instances,emerging participants — motivated by the profit potential of their high-margin products —
are willing to sustain initial losses to capture market share.
Banks,while realizing that reliable payments products are a key element in pr oviding excellent
customer service, may be tempted to view their payments services as adjuncts — provided mainly to
support and facilitate their core financial services and risk management products. Going forward,
banks must decide how much capital to allocate to making their existing paper-based payments
structure more efficient versus how much to invest in new technologies such as smart cards, or
whether to outsource some of their payments services. And just as the payments race gains speed,
banks find themselves preoccupied with other pressing concerns,including consolidation,interstate
banking and branching,and the century date change.
The growth of check volume is expected to level off during the next several years, as banks divert
customers to new technologies, but the reality is that checks will be here for some time to come.
Providing check services may contribute to the profitability of banks, but the return on investment is
low. Recent actions by a number of banks to curtail their correspondent banking check services would


seem to confirm this. With its electronic funds transfer mandate, the Treasury has signaled its view that
paper checks are outmoded. Some banks are questioning the wisdom of selling check processing
services to other financial institutions, preferring instead to service only their own depositors. Banks will
simultaneously be promoting electronic payment mechanisms and pursuing strategies to improve the
efficiency of check processing, most likely through electronic check presentment (ECP) and truncation.
Community banks share the same concerns as larger banks, but the size differentials pose an
additional challenge for smaller institutions. Payments operations generally exhibit scale economies,
resulting in lower unit costs for larger banks. Small banks may be constrained by lack of capital with
which to implement new technologies,many of which have high fixed production costs. For example,
community banks nearer to metropolitan areas are particularly susceptible to losing customers to large
banks which have invested capital in proprietary systems that allow customers to bank from home.
The challenge for community banks is not only to keep abreast of changing technologies, but also
to ensure their access to new payments networks. They have managed to do this in the check system
with access to the universal collection service offered by the Federal Reserve Banks. Similarly, the
major credit card brands have been open to community banks.
If any bank is to preserve its role in the payments industry, it must expect to ally itself with other
depository institutions in networks, with third-party service providers that may offer network software
and enlist members, and with the Federal Reserve for interbank settlement. Clearly, in the coming
years, all banks must identify and exploit opportunities to achieve industry-wide efficiencies and
economies of scale. To their credit, some banks have been experimenting with point-of-sale electronic
debits and with home banking. The technology to support these initiatives exists; the challenge lies in
better marketing and customer incentives. Banks that worry about retaining their retail deposit base
are looking for ways to offer consumers and businesses the particular payments solutions that will
satisfy their unique needs for privacy, information, and convenience.

Emer ging Pr oviders

As the number of households with computers continues to grow (from the

current level of about 40 million), a throng of telecommunications companies, retailers,software firms,
and other emerging providers are scrambling to develop and market PC-based home banking services
to banks and their customers. More than in the past, a special function of emerging nonbank providers
will be the design and marketing of network services.
The payoff could be enormous: Nearly 16 billion credit card,utility, insurance, and mortgage bills
are delivered to U.S. households each year.The average consumer receives 10 to 12 bills per month,
spending about two hours to pay by check. For some consumers ,p aying bills by computer could cut
that time substantially.
Nonbank firms see enticing opportunity in adapting their proprietary technologies to payments
applications. Emboldened by their competitive cost structures and aggressive business attitudes,


entrepreneurial firms are muscling their way into the payments marketplace, providing “niche”
services such as electronic bill presentment and remittance processing. Major growth in electronic
commerce depends on the development of advanced systems that offer customers benefits at least equal
to those they currently receive from paper-based payments instruments, at lower prices. This requires
bank accounts, software, and hardware, as well as a telecommunications system to replace the postal
service and the land and air couriers now transporting paper.
The Internet holds great promise as a transportation medium for electronic payments that
would not require either paper checks or cash. Emerging providers are marketing convenient,easy
access to a variety of products and services,to be coupled with a means of effecting payments. The
basic idea is to view the Internet as a very large electronic communication and distribution system.
The development of payments applications may be expensive, but the returns will be large if these
applications can draw business to the Internet. What’s required is that sets of participants come
together with a need to pay one another and with the compatible software for doing so.
One large software firm, in partnership with a payments processor, is readying a Web-based service
for delivery and payment of bills that is designed to make bill-paying as convenient as possible.
The partnership’s innovations are generating interest for two reasons. Users will not have to access a
particular Website to retrieve their bills, since the Internet will be used to push bills to consumers. In
addition,technology has advanced from preauthorized bank drafts — automatic debits from checking
accounts — to bill-paying services that enable consumers to transmit full or partial payments whenever
they choose.
The costs of the service will be borne by billers, who would expect to save money by having their
bills delivered electronically. Although the software firm has described its bill payments service as a
boon to banks wishing to enlarge their online presence, some bankers perceive emerging providers as
a threat to banks’ traditional role as the primary financial conduit between customers and businesses.
By serving as a pipeline for customer billing and payments activity, third-party firms will gain access
to potentially valuable information about consumers’ financial profiles and purchasing practices. Such
information is coveted by banks because it is useful for determining market preferences and
buying trends.
While technology firms are setting the pace for development of electronic payments systems,
some banks are coming together to respond to the challenge of nonbank providers. One very large
consortium of 18 major North American banks, an information technology company, and a credit card
network is working to develop a secure mechanism for interactive banking and electronic commerce
over the Internet. Using the technology company’s operating platform, the consortium is expected to
offer end-to-end service.
At first glance, it might appear that the turf battle over electronic payments would not matter much
to banks, which would still retain the deposits used to make payments. Aren’t these electronic systems


Efficiency is essential.

Moving payments traffic efficiently is a

crucial goal for service providers and a baseline expectation of their customers.
Speedy, reliable payments mechanisms support the needs of our dynamic economy.

just going to alter the flow of bill presentment and payments instruction? Possibly. Consider,
however, that participating banks will have to be parts of a network with interfacing software. If they
are not, their depositors may migrate to other institutions that belong to the network. Ultimately,
the account relationship itself becomes a commodity, with customer benefits coming from the services
carried by the payments network provider. Nationwide branch banking, of course, makes a different
scenario possible, with one or a few banks creating their own electronic payments systems.
A recent study predicts that by 2000, 13 million Americans will pay bills online. Right now,
Internet payments systems are still in their infancy, and as with business-to-business Internet commerce,
several barriers prevent widespread acceptance of Internet banking. Issues related to consumer
protection, disclosure and assignment of participant liability, and privacy must be addressed by
regulators and legislators. In addition, encryption standards are needed to ensure security. New
payments systems require a solid institutional structure if they are to be trusted and widely used.
The process of adopting industry standards and protocols will undoubtedly be enhanced if banks
collaborate actively with nonbank providers. By working together to ensure the interoperability of
their respective systems,banks and third-party firms can best implement new payments technologies.

The Federal Reser ve

In its roles as a provider of payments network services and as the final

settlement point of interbank payments,the Federal Reserve str ives to bring integrity, accessibility,
and efficiency to the nation’s payments systems. Prior to 1981,the Federal Reserve provided ACH,
check processing,and wire transfer services to member banks that held reserve balances, but did not
explicitly charge for these services.
With the Reserve Banks playing such a key role in the payments system, yet escaping
conventional market discipline in their use of resources,Congress wanted to be sure that appropriate
incentives existed for innovation and efficiency. To that end, the Depository Institutions Deregulation
and Monetary Control Act of 1980 (MCA) encouraged competition between the Federal Reserve and
private-sector providers of payments services, dramatically reconfiguring the landscape of the payments
system. The MCA requires Reserve Banks to charge fees for their payments services — fees that must,
over the long run,be set to recover all direct and indirect costs. It also subjects every depositor y
institution,not just member banks,to reserve requirements and equal access to the Federal Reserve’s
payments services.
Nearly 20 years have elapsed since passage of the MCA, and striking new developments are
taking place in the U.S. financial services industry. Consolidation and interstate branching are
altering the structure of the banking industry, blurring the line between banks and other financial
service institutions. Nonbanking service providers are actively entering the payments processing
arena,spurred by innovations in technology as well as the e volving payments needs and preferences
of consumers and businesses.


Responding to these changes, Federal Reserve Chairman Alan Greenspan appointed a committee
in October 1996 to conduct a fundamental review of the payments services that the Fed provides to
depository institutions. Headed by Federal Reserve Vice Chair Alice Rivlin, the Committee studied
the Fed’s role in payments and considered how alternative stances might affect the integrity, efficiency,
and accessibility of payments systems as we approach the twenty-first century.
The Rivlin Committee concentrated its attention on the Fed’s role in the retail payments systems
used by consumers and businesses, focusing particularly on check collection and ACH services. The
Committee hosted a series of national and regional forums with participation from more than
450 institutions, including depository institutions, clearinghouses and other nonbank service providers,
consumers, retailers, and academics. It also analyzed how different payments markets would be
affected if the Federal Reser ve were to adopt various competitive postures.
Most forum participants thought the Federal Reserve should continue to provide check
collection and ACH services, while striving to enhance the efficiency of both systems. The majority
concluded that the Federal Reserve should play a more active role in bringing together the players in
retail payments services to identify and address barriers that might be preventing conversion to more
efficient payments systems. In addition, many participants asked the Fed to assume a leadership role in
moving the payments industry toward the advanced electronic systems of the future. The Committee
concurred with these viewpoints.
In setting its direction, the Federal Reserve faces a number of challenges and opportunities. By
now, some of the challenges should be clear. The “payments system” comprises several distinct
networks serving a large number of participants with diverse needs. Moreover, despite the fact that
electronic payments products may have some pure cost advantages over traditional paper-based
methods,our nation nonetheless continues to rely heavily on cash and paper checks — vehicles that
for the most part require a lot of handling and transportation.
Factors such as convenience, risk, and price bear on the choice of payments services. Vehicles
seeking to supplant current payments methods will have to deliver even more value to consumers and
businesses than today’s marketplace can supply. Since all payments products compete against one
another, price reductions or enhanced features in one system are likely to affect the fortunes of others.
For example, to the extent that the Federal Reserve improves the paper-based check system or the
ACH, it raises the bar for providers of debit cards and other electronic payments products.
Quite apart from reaching conclusions about which payments services it should provide directly
or support indirectly, the Federal Reserve will be challenged to forge working relationships with the
various participants. Although a number of nonbank providers engage in payments services, the vast
majority of retail payments flow through the Federal Reserve and bank-maintained networks.
As payments systems evolve, nonbanks may become significantly more involved in
payments systems operations than they are today. Should this happen, the Federal Reserve will need


to consider how these developments affect its own role as the central bank for settlement of interbank
payments, as well as whether they compromise the efficiency, reliability, and accessibility of payments
systems as a whole. To take but one example, suppose people become comfortable holding balances
on account with trusted merchants,instructing them via the Internet to transfer those balances on their
behalf to make a payment. Would account holders have any recourse if the merchant failed? Should
merchants be permitted to hold accounts at the Fed?
More efficient,convenient methods of making payments need not involve totally new systems.
A payments evolution could also offer great opportunities for the Federal Reserve as a service
provider. As long as the public remains enthusiastic about initiating payments with paper checks,
it makes sense to keep looking for ways to increase the efficiency of check processing past the point
of sale. The Federal Reserve has considerable expertise in capturing information electronically
from checks, then speeding it ahead of the paper item. Electronic check presentment (ECP)
without truncation enables processing to eventually be completed more quickly, but does not really
affect the amount of paper handling. Truncating checks early reduces handling substantially, but a
suitable electronic substitute for the canceled check needs to be available if truncation is to gain
wider acceptance in the market.
To meet this need, the Fed has begun capturing digital images of checks, which can be used for
processing and then archived for future reference. With ECP, truncation, and imaging, the total costs
of reading,sorting, and transporting checks are being significantly reduced. Many pilot projects are now
under way, aimed at examining the feasibility of an operation that uses images for forward, return,and
exception item processing.
Information technology and telecommunications trends also seem to favor image products. Fast
transmission of clear images requires considerable bandwidth, while archiving demands a great deal of
storage space. Fortunately, the prices of both services have been falling over time, and these trends are
expected to continue for some period. If the cost of imaging equipment should drop far enough, it
might even become profitable to scan most checks at capture sites closer to the banks of first deposit.
The Fed is already delivering some imaging products, but greater market penetration depends on
high volumes and broad participation. Full realization of the benefits of ECP and imaging requires that
any collecting bank be able to transmit presentment information to any paying bank, without having
to transport the physical items. The Federal Reserve, which presents checks to more than 14,000
financial institutions nationwide today, is clearly the dominant provider on such a geographic
scale. Thus, the Fed is in an excellent position to enhance the ultimate viability of this network,
and could seek opportunities to build image volume through pricing incentives relative to its paper
check products.
In its experience with retail electronic payments, the Fed has seen a steady increase in the volume
of ACH transactions in the last 10 years, reaching approximately 4 billion payments in 1996. Despite
this significant growth, ACH transactions represent only about 5 percent of all noncash payments.


Collaboration is key.

Clashes and collisions only act to inhibit the

progress of all participants. To reach their destinations quickly and safely,
payments participants must interact in a coordinated, cooperative manner.

Increased usage can be stimulated through education, pricing, and marketing initiatives. The Federal
Reserve has consistently maintained competitive pricing for its ACH products, and it has long-range
plans to drive fees lower for items both received and originated.
Over the past several years, the Fed has participated in education and marketing efforts aimed
at promoting public awareness of the advantages of electronic fund transfers. Nevertheless,surveys
show that many consumers believe the process of originating ACH transactions is cumbersome and
inflexible. If ACH is to realize its growth potential, the Federal Reserve must work together with banks
and third-party providers to supply product improvements that increase customers ’c o n t rol over the
timing of their payments and make it easier to initiate one-time transactions. As has already been
shown,there are sufficient numbers of these payments to encourage emerging payments providers to
want a part of that business.



The Federal Reserve’s presence in today’s payments services marketplace carries both challenges
and opportunities. Payments systems providers operate under the discipline of the marketplace,
with its pressures to keep costs low, customer service high,and innovation rapid. These forces are
especially strong in an environment of fast-paced technological change. Since payments systems
provide alternative methods for transferring purchasing power, they compete against one another.
Consequently, factors that lead people to favor certain products typically do so at the expense of
others. No one’s survival is guaranteed.
Despite the popularity of today’s most prevalent retail payments vehicles, computer software and
telecommunications clearly offer many dramatic new trajectories for the evolution of payments
systems. Individual media (such as cash, checks, debit cards, and ACH) are really quite distinct from
one another in form, circulation, and legal characteristics. These systems accomplish the same
objective, but through different means and with different social costs. Going forward, even if more
retail payments move to electronic forms, a variety of systems will probably still exist.
Choice is the cornerstone of our economic system. In this essay, we have explained how
everyone involved in the payments industry will affect its development through their own choices.
We hope that our explanation will help make these choices more informed ones.
The U.S. payments systems will evolve unpredictably, yet with some predictable consequences.
We may not know which products will enjoy widespread acceptance 20 years from now, or who the
dominant service providers will be. But consumers of those services will enjoy more convenience and
get greater value if these systems remain accessible, safe, and efficient, a goal that the Federal Reserve
Bank of Cleveland continually strives to achieve.


Officers and Consultants
As of December 31,1997

Michael F. Bryan
Jerry L. Jordan

Rayford P. Kalich

President & Chief Executive Officer

Sandra Pianalto

Vice President
Banking Supervision and Regulation,
Credit Risk Management, Data Services

First Vice President &
Chief Operating Officer

Robert W. Price

Charles A.Cerino
Senior Vice President
Cincinnati and Columbus Offices

Lawrence Cuy
Senior Vice President
Information Technology,
Financial Management

Vice President
Check Collection, ACH, Funds Transfer,
Electronic Delivery Services

Assistant Vice President & Economist

William D. Fosnight
Assistant Vice President &
Assistant General Counsel

Joseph G. Haubrich
Consultant & Economist

David E.Rich

Barbara H.Hertz

Senior Consultant
Information Technology Services

Assistant Vice President
Cincinnati Office
Facility/Information Technology Services,
Registered Mail, EEO

Edward E.Richardson
Vice President

Stephen H. Jenkins

R.Chris Moore
Terrence J. Roth

Senior Vice President
Banking Supervision and Regulation,
Credit Risk Management, Data Services

Vice President

Samuel D. Smith

Robert B. Schaub

Senior Vice President
Business Continuity Planning,
Information Security

Vice President
Pittsburgh Office

Assistant Vice President
Banking Supervision and Regulation

William J. Major
Assistant Vice President
Check Collection

Laura K.McGowan

Edward J. Stevens

Assistant Vice President
Corporate Secretary &
Community Affairs Officer
Corporate Communications &
Community Affairs

Senior Consultant & Economist
Financial Services Research Group

Stephen J. Ong

Donald G.Vincel

James B. Thomson

Assistant Vice President
Banking Supervision and Regulation

Senior Vice President
Unisys IPS development, EEO Officer

Vice President & Economist
Financial Services Research Group

Robert F. Ware

Joseph C. Thorp

Senior Vice President
Cleveland Operations
ACH, Funds Transfer, Electronic
Delivery, Cash Services functions

Vice President

Susan G. Schueller
Mark S. Sniderman
Senior Vice President &
Director of Research
Corporate Communications &
Community Affairs,Research

David E.Altig

Vice President & General Auditor

Kimberly L.Ray
Robert Van Valkenburg
Vice President
Financial Management Services

Vice President & Economist

Peggy A.Velimesis

Andrew J. Bazar

Vice President
Human Resources

Senior Consultant
Information Technology Services

Jake D. Breland
Vice President
Banking Supervision and Regulation

Andrew C. Burkle, Jr.
Vice President
Banking Supervision and Regulation

Assistant Vice President
Pittsburgh Office
Check Collection, Marketing,Automation,
General Services,EEO

John P. Robins
Banking Supervision and Regulation

Andrew W. Watts
Vice President & General Counsel

William J. Smith

Charles F. Williams

Assistant Vice President
Human Resources

Vice President
Cincinnati and Columbus Offices
Check Collection, Accounting,
Support Services,Ordinary Mail

Assistant Vice President
Banking Supervision and Regulation

James A.Blake

Henry P. Trolio

Information Technology Services

Assistant Vice President
Information Technology Services,
Deputy EEO Officer

Terry N. Bennett
Vice President
Information Technology Services

James W. Rakowsky
Assistant Vice President
Facilities, Business Continuity Planning,
Building Transition

Gregory L.Stefani

Raymond L.Brinkman
David P. Jager
Vice President
Cash,Securities/Fiscal, Custody Control

Assistant Vice President
Pittsburgh Office

Darell R. Wittrup
Assistant Vice President

Consultants are highly skilled employees who contribute to attaining the Bank’s goals through their specialized professional or technical skills.

Directors: Cleveland
As of December 31,1997

G. Watts Humphrey, Jr.

I.N. Rendall Harper, Jr.

Chairman & Federal Reserve Agent
GWH Holdings, Inc.
Pittsburgh, Pennsylvania

President & CEO
American Micrographics Co. ,I n c.
Monroeville, Pennsylvania

Tiney M.McComb
David H.Hoag
Deputy Chairman
Chairman & CEO
The LTV Corporation

David A.Daberk o
Chairman & CEO
National City Corporation

David S. Dahlmann
President & CEO
Southwest National Corporation
Greensburg, Pennsylvania

Chairman & President
Heartland BancCorp

Michele Tolela Myers
Denison University
Granville, Ohio

David L.Nichols
Chairman & CEO
Mercantile Store s ,I n c.

Federal Advisory
Council Representative
As of December 31,1997

Robert Y. Farrington
Former Executive Secretary–Treasurer
Ohio State Building and
Construction Trades Council

Robert W. Gillespie
Chairman & CEO

David A.Daberk o, I.N. Rendall Harper, Jr., G.Watts Humphrey, Jr.,David H.Hoag,
Michele Tolela Myers,David L.Nichols,David S. Dahlmann,and Tiney M.McComb


Directors: Cincinnati
As of December 31,1997

George C. Juilfs

Thomas Revely III

President & CEO
Newport, Kentucky

President & CEO
Cincinnati Bell Supply Co.

Judith G. Clabes

Chairman & CEO
Kentucky Textiles,Inc.
Paris, Kentucky

Wayne Shumate
President & CEO
Scripps Howard Foundation

Phillip R.Cox
Cox Financial Corporation

Jerry A.Grundhofer
Chairman,President & CEO
Star Banc Corporation

Jean R.Hale
President & CEO
Community Trust Bank, N.A.
Pikeville, Kentucky

Phillip R.Cox, Jean R.Hale,Thomas Revely III,
Wayne Shumate, Judith G. Clabes,and George C. Juilfs

Directors: Pittsburgh
As of December 31,1997

John T. Ryan III

Edward V. Randall,Jr.

Chairman,President & CEO
Mine Safety Appliances Company
Pittsburgh, Pennsylvania

PNC Bank Foundation
Pittsburgh, Pennsylvania

Charles E.Bunch

Chairman & CEO
Trigon Incorporated
McMurray, Pennsylvania

Peter N. Stephans
Senior Vice President
Strategic Planning and Corporate Services
PPG Industries,Inc.
Pittsburgh, Pennsylvania

Gretchen R.Haggerty
Vice President & Treasurer
USX Corporation
Pittsburgh, Pennsylvania

Thomas J. O’Shane
Chairman,President & CEO
First Western Bancorp, Inc.
New Castle, Pennsylvania

Charles E.Bunch, John T. Ryan III, Gretchen R.Haggerty,
Thomas J. O’Shane, and Peter N. Stephans

Comparative Financial Statements

Statement of Condition
(in millions)

For the year ended:
December 31,1997
December 31,1996

Gold certificates
Special drawing rights certificates
Items in process of collection
U.S. government and federal agency
Investments denominated in
foreign currencies
Accrued interest receivable
Interdistrict settlement account
Bank premises and equipment,net
Other assets
Total assets













Liabilities and Capital

Federal Reserve notes outstanding,net
Depository institutions
Other deposits
Deferred credit items
Statutory surplus transfer due U.S.Treasury
Interdistrict settlement account
Accrued benefit cost
Other liabilities
Total liabilities

Capital paid in
Total capital
Total liabilities and capital

These statements are prepared by Bank management.Copies of full and final financial statements,complete with footnotes,are available by
writing to the Corporate Communications & Community Affairs Department of the Federal Reserve Bank of Cleveland, P.O. Box 6387,
Cleveland,OH 44101,or by calling (216) 579-2001 (key in 1-5-3).

Comparative Financial Statements

Statement of Income
(in millions)

For the year ended:
December 31,1997
December 31,1996
Interest income:
Interest on U.S. government securities
Interest on foreign currencies
Total interest income



Other operating income (loss):
Income from services
Reimbursable services to government agencies
Foreign currency losses,net
Government securities gains,net
Other income
Total other operating loss

(165 )
(89 )

(109 )
(33 )

Operating expenses:
Salaries and other benefits
Occupancy expense
Equipment expense
Cost of unreimbursed Treasury services
Assessments by Board of Governors
Other expenses
Total operating expenses







Net income prior to distribution
Distribution of net income:
Dividends paid to member banks
Transferred to surplus
Payments to U.S. Treasury as interest on
Federal Reserve notes
Payments to U.S.Treasury as required by statute
Total distribution





Statement of Changes in Capital
(in millions)

Balance at January 1,1996 (5,175,336 shares)

Capital Paid In

Net income transferred to surplus
Statutory surplus transfer to the U.S.Treasury
Net change in capital stock issued (674,545 shares)
Balance at December 31,1996 (5,849,881 shares)
Net income transferred to surplus
Statutory surplus transfer to the U.S.Treasury
Net change in capital stock issued (1,132,457 shares)
Balance at December 31,1997 (6,982,338 shares)






Total Capital
(7 )





Cleveland Building Project

The Bank’s new Operations Center was completed on time, with occupancy occurring in the
February-March time frame. The move, which involved our major operations areas, was made with
no disruption in service to customers. Renovation of the main office building was also begun, with
completion scheduled for summer 1998.


Payments Services

■ The check function — the Cleveland Fed’s largest operation — succeeded in matching its costs and
revenue, achieved the lowest unit cost in the Federal Reserve System, and met all of the System’s key
quality measures (only one other Reserve Bank accomplished the last of these goals). The Bank also
led the System in electronic check penetration, with 41 percent of all items processed.
■ The Cleveland Fed’s Pittsburgh office — one of five regional processing sites for savings bonds —
continued to serve the U.S.Treasury. The efficiency and effectiveness of the savings bond operation
were enhanced in se veral ways,including the introduction of a high-speed image capture platform
that streamlined the EZ Clear work flow and reconcilement process, and a scanning pilot for
automating data input from savings bond applications. Pittsburgh also served as the test site and first
implementation site for software developed to support the anticipated rollout of an inflation-indexed
savings bond.

The Bank implemented a number of new automated systems and strategic initiatives, including
a new national book-entry system, a new statistics and reserves system, an expanded funds transfer
format, expanded funds transfer hours, and a single-account structure for the interstate banking


The Bank contributed to the System’s effort to achieve operational efficiencies through
consolidation by moving its government check and noncash operations to other Reserve Banks.
Within the District,the Pittsburgh office’s currency processing operation was consolidated into the
Cleveland unit,while funds transfer, ACH, and book-entry securities functions were merged into
one unit in Cleveland.


As the System’s project office for Unisys support, the Cleveland Fed continued to coordinate
activities between Unisys Corporation and other Reserve Banks, using the Unisys platform to set the
strategic direction and develop the requirements for the next-generation check processing system.


The Bank developed and began implementing a plan which ensures that we are adequately
addressing the ramifications of the century date change for our automated systems.


FirstVice President Sandra Pianalto served as staff director for the Committee on the Federal
Reserve in the Payments Mechanism, which undertook a fundamental review of the Fed’s role
in the payments system. Alternative roles for the Federal Reserve were developed and discussed with
payments system participants. The final report concluded that for the foreseeable future, the Fed
should continue its role in check processing and ACH services, while striving to enhance the
efficiency of both.







Supervision and Regulation

■ The Bank successfully carried out its supervisory objectives and responsibilities using a risk-based
examination approach. The function remained the most cost-efficient in the System, based on assets
supervised. In addition, department staff developed new off-site analysis and reporting procedures for
small shell bank holding companies that both enhanced our supervision and reduced the burden on
Fourth District financial institutions.
■ Banking Supervision and Regulation staff, in collaboration with employees from other areas
of the Bank, were substantially involved in efforts to ensure a smooth, effective transition to
interstate banking and branching. Using valuable input from District financial institutions affected
by the legislation,staff members developed standards to guide future consolidation/merger activities
throughout the Federal Reserve System.
■ In conjunction with other regulatory agencies, the Cleveland Fed participated heavily in the
formulation of interagency Year 2000 supervisory programs. Initiatives included the development of
Year 2000 examination guidelines and a Systemwide training class for examination staff. In addition,
the Bank sponsored several interagency conferences throughout the District to raise overall awareness
about the century date change issue.

The discount function improved its oversight of account management practices, strengthened
initial information systems, and enhanced its communications with Fourth District financial
institutions,especially late in the day. These initiatives helped District depositories reduce their use
of interday credit by more than 50 percent.


Monetary Policy / Research

Our staff of Research economists had 17 articles accepted in outside scholarly journals,conference
volumes, and books.


■ Bank publications included multiple articles on key issues in the areas of monetary policy, fiscal
policy, labor markets, financial markets, and banking.
■ The Research Department sponsored high-level conferences on comparative financial systems,
microeconomic and macroeconomic perspectives on the aggregate labor market, and asset pricing and
the term structure of interest rates. In addition, proceedings of the 1996 conference on the dynamic
effects of monetary policy were published in the Journal of Money, Credit and Banking.
Quality Improvements

■ The Cleveland Fed began a Bankwide transformation effort to ensure readiness for the next
century. Our focus on customers,quality, continuous improvement,and teamwork across functions
will be maintained, while g reater emphasis will be placed on the use of business process analysis
and innovation. This ongoing effort will enable the Bank to be more responsive to change and
opportunities in the future.

Customers once again participated in an annual Quality Assessment Survey. Results showed that,
as in past years, the Bank maintained its ability to meet or exceed customer expectations across all
services. The survey process provided information that will be invaluable in our continuing effort to
achieve even higher levels of customer satisfaction.



Business Advisory Council

William H.Braun

Norman S. Graves

F. James McCarl

Custom Rubber Corporation

President & CEO
National Metal Processing,Inc.
Richmond, Kentucky

President & CEO
Beaver Falls, Pennsylvania

Margo E.Broehl

James D. Kiggen

Gerald M.Miller

Attorney at Law
Wooster, Ohio

Chairman & CEO

Chairman & Managing Partner
Miller–Valentine Group

Robert M.Cleveland
Vice President
Woodford Feed Company, Inc.
Versailles, Kentucky

Elizabeth N. Kraftician

Jeanette C. Prear

President & CEO
Touchstone Research Laboratory, Ltd.
Triadelphia,West Virginia

President & CEO
Day-Med Health Maintenance Plan, Inc.

Cheryl L.Krueger

Steven C. Thomas

President & CEO
Cheryl & Company
Westerville, Ohio

President & CEO
Mulach Steel Corporation
Leetsdale, Pennsylvania

Daniel B. Cunningham
Long -Stanton Manufacturing Co. ,I n c.

James W. Liken
President & CEO
Liken Home Medical, Inc.
Pittsburgh, Pennsylvania

Community Bank Advisory Council

Charles Beach,Jr.

John O. Finnan

William C. Sonntag

Peoples Exchange Bank
Beattyville, Kentucky

Chairman,President & CEO
Peoples Bank of Northern Kentucky
Crestview Hills, Kentucky

President & CEO
The First National Bank of Slippery Rock
Slippery Rock, Pennsylvania

Michael N. Clemens

Jeffrey A.Maffett

Philip S. Swope

President & CEO
Commerce Exchange Bank

President & CEO
Eaton National Bank and Trust Company

Chairman,President & CEO
Chippewa Valley Bank

James R.Drenning

Benjamin T. Pugh

Carlos E. Watkins

President & CEO
The Merchants National Bank of Kittanning
Kittanning, Pennsylvania

Premier Financial Bancorp, Inc.
Vanceburg, Kentucky

Vice Chairman
First-Knox National Bank


Ronald L.Solomon

Paul G. Wreede

President,Director & CEO
First West Virginia Bancorp, Inc.
Wheeling,West Virginia

President & CEO
The Commercial Bank

This annual report was prepared by the Corporate Communications & Community Affairs Department of the Federal Reserve Bank of Cleveland.
For additional copies of this annual report, contact the Corporate Communications & Community Affairs Department, Federal Reserve Bank of Cleveland,
P.O. Box 6387, Cleveland, OH 44101, or call 1-800-543-3489 or (216) 579-2001.
The annual report essay is also available electronically through the Cleveland Fed’s home page on the World Wide Web:


1 4 5 5 E A ST 6 T H S T R EE T

44 114

( 216 ) 57 9-200 0

C I N C I N N AT I , O H

45 202

(513 ) 72 1-478 7

7 1 7 G R A N T ST R E E T
P I TT S B U R G H , PA 1 5 2 1 9
( 412 ) 26 1-780 0

9 6 5 K I N G S M IL L PA R K W AY
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432 29

T H E

compliments of

Ruth M. Clevenger
Community Affairs Manager