Davis Polk Financial Institutions practice head Margaret Tahyar was quoted in the American Banker discussing three recent federal court decisions that give the Federal Reserve broad discretion over which banking may access its financial services, which include the ability to deny or revoke this access.

Margaret believes the ultimate decisions reached in the three cases will come down to statutory interpretation. But that such a debate is not the ideal forum for addressing the key question of what entities should be able to engage in payments in the 21st century.

“I make a clean break in my mind between the policy question of whether non-traditional banks, fintechs or payment companies should get master accounts - is that a good policy idea - and what the statute actually says,” Margaret notes said. “We’re having this legalistic fight when what we should really be asking ourselves is: Who should have access to a master account?”

The article notes that the Fed’s challengers will have to continue mounting a legal battle while also attempting to engage in banking without access to the nation’s payments system.

“The Fed’s been playing the delay game, and so far they’ve done it really effectively,” she said. “So far, they’re winning.”

Will the Fed’s master account victories stand the test of time?American Banker (April 4, 2024) (subscription required)