Beginning this year, federal payment recipients will receive
their government benefits through electronic funds transfer (EFT)--
what most of us call direct deposit. Although cost-cutting is the
driving force behind the move to a virtually all-electronic federal
payment system, Michael Stegman believes the initiative has a far
broader potential: to bring poor Americans into the banking
mainstream. In this book Stegman outlines how many families will
enter the mainstream banking system through EFT '99, as the program
is called. He explains in careful detail the thinking behind the
shift to EFT and the implementation of the program this year. He
also argues that, for maximum success, EFT '99 should be combined
with a program of national Individual Development Accounts (IDAs),
dedicated savings accounts for low-income people that can be used
for purchasing a first home, acquiring more education or job
training, or starting a small-business. Essentially, EFT '99 will
bring people into the banking system, and IDAs will give them an
incentive to use the system to its fullest in order to make their
money work for them and their children. There are other steps that
the government can take to boost EFT's ability to help public aid
recipients achieve self-sufficiency. It can: add a direct deposit
option to state benefits payments programs; give banks significant
additional Community Reinvestment Act Credit for establishing
accounts for EFT recipients; and regulate fees for cashing
government benefits and voluntary accounts so that people are not
charged excessively for accessing their money. This book
demonstrates that -- with careful planning and a relatively small
investment -- the government's EFT initiative can have a major
payoff in real assets and improved prospects for those who have
been, for far too long, on the fringes of the country's mainstream
banking system. Brookings Metro Series
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