Federal Reserve's Expanding Control

The Federal Reserve has significantly expanded its authority over the payment system in the United States, moving from a straightforward granting of master account access to a more discretionary process. This shift is seen as a method to control access and protect incumbent banks from emerging financial innovators, particularly state-chartered entities. Historically, the Federal Reserve allowed equal access for both state and nationally chartered banks, as mandated by the Monetary Control Act of 1980, which deemed the payment system a public good essential for maintaining competition. However, the Fed's recent changes undermine this mandate, raising concerns about anti-competitive practices and the restriction of financial innovation.