Clinton Seeks to Subsidize Basic Bank Services

The Clinton administration is proposing a $30-million plan to help millions of low-income people open low-cost, basic bank accounts, Treasury Secretary Lawrence Summers said Monday.

An estimated 10% of U.S. households, or about 10 million families, do not have bank accounts, in part because of rising bank and ATM fees, the closing of bank branches in poor city neighborhoods and rural towns, and distrust of banks in general. Those without bank accounts are predominantly poor and minority and often elderly or disabled, according to government officials.

The administration has expressed concern about this “unbanked” population for some time, saying they often fall prey to storefront check-cashing services that charge excessive fees.

The so-called First Accounts plan will be proposed to Congress this week, Summers said in a speech to the Consumer Bankers Assn., an industry group. It would provide subsidies such as tax incentives to banks, thrifts and credit unions to offer low-cost, “no-frills” checking accounts for lower-income people.

Banks also would get subsidies for expanding automated teller machines in poorer neighborhoods, a service that banks have complained is too expensive, and Internet banking for lower-income people.

The proposal also includes a public education campaign for financial literacy in poorer communities.

During congressional debate last year on major banking legislation, some liberal Democrats, led by Rep. Maxine Waters (D-Los Angeles), pushed for an amendment that would have required banks to offer low-cost accounts for low-income people.

The Clinton proposal, by contrast, wouldn’t require banks to offer the accounts but would give them a financial incentive to do so. It may have stronger prospects for passage.

Frank Torres, legislative counsel for Consumers Union, said his group supports the Clinton proposal, but added: “It’s a shame that we actually have to pay the banks to do this.”