Students of U.S. banking history typically hold that the check collection industry was excessively costly prior to 1915 and that the Fed's subsequent entry into check clearing improved efficiency. The authors propose an alternative view based on the economics of network communications...

The payment system is a communications industry in which Federal Reserve Banks, in their check collection activities, provide communication services. The history of government intervention in other communications industries offers lessons for the Fed in its efforts at payment system innovation....

The Federal Reserve competes with private providers in markets for payment services. The Fed's pricing behavior in these markets should be guided by the goal of efficiency in the provision and distribution of services. The notion of sustainable pricing provides a framework for pursuing that goal

These essays reflect much of the thinking we have done, some of it well before the financial crisis, on the sources of financial instability and the means by which public policy can promote stability. A unifying theme is that government interventions that protect creditors weaken the market...