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Feature

BookNotes Check clearing and 9/11

The transition from paper to electronic checks evolved
over 40 years, beginning in the late 1960s and early 1970s
with the creation of the ACH as an electronic payment
replacement for checks, and check truncation initiatives,
Meyerson and Walker noted. "Beginning in October 2004,
Check 21 hurdled the barriers to check truncation and
greatly accelerated the transition from paper to electronic
checks, completing the transition in just over six years by
mid-2011," they wrote.

Check 21: a blockbuster story explains the evolution of paper
to electronic checks from the perspective of two people
who played key roles in that evolution. Walker and
Check 21: Meyerson were bankers turned consultants who would
go on to shepherd the Electronic Check Clearing House
Organization (ECCHO).
A blockbuster story ECCHO was launched in 1990 by a group of the largest

check clearing banks at the time; it has since been absorbed
hose born around the turn of the century may by The Clearing House, which is owned by many of those
not realize this, but there was a time when same banks. ECCHO was a precursor to Check 21—
checks were really popular—at one point in the establishing rules around the electronic exchange of check
T 1990s, it was estimated Americans were writing information between financial institutions.
about 40 billion checks a year.
The book is peppered with anecdotes. For example, it
All of those paper items had to be deposited by hand and opens with a recounting of the impact 9/11 had on bankers
shuttled between clearing banks. There was no remote and others who had flown to Ft. Lauderdale, Fla., for an
deposit capture, nor mobile deposit. The check system, a electronic check conference. (Yes, there actually were
payment system dominated by paper throughout much of conferences those days focused on checks.)
the 20th century, needed a major technology overhaul.
It describes what it's like to work with lobbyists and find
That all began one fateful day in September 2001, when seating at congressional hearings. "One of the interesting
terrorist attacks shut down U.S. air traffic, including lessons learned about congressional hearings is the
planes used to shuttle checks between various banks and practice of paid line sitters," they wrote. "Congressional
organizations in the collection stream. At least that's where work schedules made it even more remarkable that Check
the popular narrative pegs the birth of the Check Clearing 21 passed so quickly."
for the 21st Century Act (Check 21), which was signed into
law in October 2003 and led to the eventual elimination of And the book gives props to Fed Vice Chairman Roger
paper from the check processing stream. W. Ferguson Jr. and Louise L. Roseman, the Fed's director
of reserve bank operations and payment systems, for
But as David Walker and Phyllis Meyerson explain in their their work drafting the legislation and implementing
just released book, <i>Check21: A blockbuster story</i>, regulations, and to many others for their work on the
the transportation gridlock around 9/11, which left paper necessary technologies and processes to implement the
checks to pile up in FI's back shops, spurred the Federal transition to electronic check clearing.
Reserve to take the unusual step of drafting legislation Buy book, donate to charity
that became the Check 21 Act. (The Fed had never before
proposed legislation.) Check 21: A blockbuster story, was released to coincide with
the 20th anniversary of passage of the Check 21 Act. It is
But the transition from paper to electronic check clearing a serious story told with a bit of humor, self deprecation,
had been underway already. "The Fed and the banking and some education on the inner workings of banking,
system had been working on the legislation for almost payments and Congress. The book can be downloaded
two years when the Towers fell," the authors wrote. What as an ebook or a PDF file from Tiller Endeavors (www.
9/11 did was to speed up the timeline for change. Start to tillerendeavors.com). There is no charge for the book. In lieu
finish, it took just two years to draft and get legislation of payment the authors request donations to a charity of
through Congress. It passed both houses unanimously—a the reader's choice.
remarkable feat.

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