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President Clinton Unveils ``First Accounts``

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Office of the Press Secretary

For Immediate Release January 13, 2000

January 13, 1999

President Clinton today announced a new initiative -- First Accounts -- to bring the "unbanked" into the financial mainstream. The President said that his FY 2001 budget for the Treasury Department will include $30 million to pilot strategies to help low- and moderate-income Americans benefit from basic financial services that most of us take for granted - like bank accounts and ATMs. The initiative involves three components:

  • First Accounts: The Treasury Department will work with financial institutions to encourage the creation of low-cost bank accounts.
  • ATMs: The Treasury Department will work with financial institutions to expand access to automatic teller machines in safe, secure, and convenient locations, including U.S. Post Offices, in low-income neighborhoods that often lack even these basic services. These ATMs will give low-income residents the ability to deposit earnings and pay bills, safely, securely, and at low cost. This program will build on a small pilot recently begun with a financial institution placing ATMs in post offices in neighborhoods in Baltimore, MD and Tallahassee, FL.
  • Financial Education: The Treasury Department will work with community-based partners and other organizations to educate low-income Americans about the benefits of having a bank account, managing household finances, and building assets.

Too Many Americans Are Without Banking Services. It is estimated that 11 million low-income American families do not have bank accounts. The Federal Reserve estimated that 25 percent of all low-to-moderate income families in 1995 (those earning less than $24,000) had no bank account - about 11 million families. Other studies put the number higher and lower. For low income Americans, the costs of a traditional savings or checking account may seem too high for the small sums they have; branches and ATMs may not be convenient to their neighborhoods; and the benefits of savings may be poorly understood.

Families without Bank Accounts are at an Economic Disadvantage. A 1998 survey found that among Earned Income Tax Credit claimants who used volunteer tax preparation services in Chicago, 44 percent used a check cashing service to cash their EITC refund check. Some estimate that low-income families could pay more than $15,000 in fees for paying bills and cashing checks in this way.

Bank Accounts Can Help Families to Save and Manage Their Money. Even controlling for income and other factors, low-income individuals with bank accounts are 43% more likely to have positive net assets than those without. Banks may learn that First Account holders are good customers for other banking products. The Federal Reserve found that, in 1995, of families earning less that $24,000 annually who had bank accounts, 45% owned a credit card, 18% had a first mortgage, 19% had an automobile loan, and 13% had a certificate of deposit.

Reaching the Unbanked that Other Initiatives Cannot Reach. The First Accounts initiative complements Treasury’s Electronic Transfer Accounts (ETAs) -- a low-cost, electronic banking account for "unbanked" federal benefit recipients. Since the ETA was launched in July 1999, over 400 financial institutions with over 2500 locations have committed to offer the ETA. The ETA offers the unbanked a basic transactional account at a price that is viable for banks and that low-income federal benefit recipients can afford. Many of the estimated 11 million low-income "unbanked" families could benefit from increased access to banking services, but will not be eligible to participate in the ETA program because they are not federal benefit recipients.

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