More Evidence That the Federal Reserve Is Superfluous

While the Federal Reserve is most notable for its role in monetary policy, the autonomous Fed plays an active role in regulating banking institutions. When not beefing up its balance sheet through quantitative easing, the Fed is quietly seeking to expand its scope of operations, especially in the area of electronic payments networks. Despite a vibrant and competitive private market, the Fed initiated efforts to increase its presence in the electronic payments sector with the publication of the "Payment System Improvement-Public Consultation Paper" in September 2013.

Electronic payments networks allow banking institutions to settle accounts through appropriate credits and debits that facilitate transactions in the marketplace. The Automated Clearing House (ACH) network emerged to replace paper checks in a variety of transactions, from direct deposits of paychecks to recurring payments such as mortgages and utility bills. It is now capable of handling one-time transactions as well. In 2013 the ACH cleared $38.7 trillion in transactions. The Reserve Banks and the Electronic Payments Network are the two national ACH operators.