Summary: GAO discussed the Federal Reserve System's pricing of check clearing and related services. In an earlier report, GAO found that estimated revenue shortfalls are continuing at a rate of between $350 million to $450 million per year and there are no policies in place designed to eliminate these shortfalls. GAO had recommended ways to establish a price structure for Federal Reserve operations that would fully recover costs in a timely manner. In response to the recommendations, the Federal Reserve has: (1) ended its open-ended subsidy policy for its automated clearinghouse service; (2) improved check clearing services and raised fees; and (3) announced procedures to reduce or price interterritorial and holdover float. GAO believes that these actions can effectively eliminate the revenue shortfall problem. Competition between the Federal Reserve and the private sector has intensified for shares and profits in the check clearing market. Congress will have to deal with this problem to promote beneficial policies in both sectors. GAO also made some brief observations about float, the automated clearinghouse, and the net cost of the Monetary Control Act.
