FedAccounts billed as gift to bankers. Many are dubious.
By Neil Haggerty
Senate Banking Committee Chairman Sherrod Brown has spent months advocating for his legislation to offer all consumers free government-backed digital bank accounts available through bank branches and U.S. Postal Service offices. While the proposal has been met with widespread opposition from the banking industry, Brown argues the legislation will not only bring new customers into bank branches, but also help smaller banks build their technology infrastructure….Skeptics of Brown’s proposal have argued that it wouldn’t necessarily increase banks’ account holders or lending opportunities, because the deposits in the accounts would ultimately be held at the Federal Reserve. Karen Petrou, managing partner at Federal Financial Analytics, said that the proposal could pull customers away from traditional bank accounts. “The big decision that customers will make is bank versus Fed,” said Petrou. “The overall proposal really reconstructs the window into the payment system in favor of the central bank, which is a hard competitor to beat.” And bankers continue to lobby against the proposal.