Inside This Issue
May 2, 2008
Volume 26, Number 5

Feature Articles and Resources


Economy and Interest Rates

Investment Performance Benchmarks
  • Performance Benchmarks
    • 10-Bill Index
    • Money Market Fund Index
    • LGIP Index
    • Key Rates: Cash Markets
    • Relative Value Yield Chart

Bank on San Francisco: Welcoming Every San Franciscan into the Financial Mainstream

By José Cisneros

What would your financial picture look like if you didn't have a bank account? Would your family be able to save and build assets if you paid 3 to 10 percent of your income simply to access your own money? How well would you sleep at night if you knew all of your life savings were stashed under the mattress?

An estimated 50,000 San Francisco households (or 15 percent of the city's households) are “unbanked,” meaning they live without access to basic financial services, such as a checking or savings account. This problem has the biggest impact on minorities. In fact, 50 percent of African Americans and Latino adults living in San Francisco do not have a checking or savings account.

Families that rely on check cashers spend approximately 5 percent of their income each year to cash checks and pay bills. They are charged between 3 to 10 percent of the value of their check just to access their own hard-earned money. Because they do not have a bank account, these families are unable to build assets and save for the future, are more likely to become a crime victim, and are more vulnerable in emergencies. In the event of an emergency, such as a fire or an earthquake, families risk losing everything and will be unable to access their funds from another location.

In response to this very obvious need for better financial products for our residents, the city created Bank on San Francisco. The Bank on San Francisco initiative is a collaborative effort of the Treasurer's office, the Federal Reserve Bank of San Francisco, the non-profit EARN, and 15 local banks and credit unions. San Francisco is the first city in the nation to address the problems faced by the unbanked, and help them transition into the financial mainstream.

In late 2005, Mayor Gavin Newsom and I challenged every bank and credit union in San Francisco to partner with the city to create a new initiative called Bank on San Francisco. One year later, the initiative emerged as a coalition of 15 banks and credit unions united around the ambitious goal to bank 10,000 unbanked San Franciscans during the first two-years of this project. Less than a year into the program, the program already exceeded this goal. Through Bank on San Francisco we have opened 11,000 checking accounts and helped set those families back on the road to financial security. In light of this, we have reset our goal to 20,000 new accounts by the end of 2008.

What Is The Social Cost Of Not Having A Bank Account? Like most cities, San Francisco is a city of two different financial services systems. In one, people may choose from a variety of institutions to safely save and access their income, obtain loans to buy homes and build businesses, and create financial stability and prosperity. But for many San Franciscans, there are seemingly insurmountable obstacles to accessing this system. So they turn to the other system, comprised of check cashers, payday loan providers, pawn shops, auto title lenders, and rent-to-own stores. These alternative providers charge high fees and can mire individuals in a cycle of debt—even if they work hard and earn a paycheck week after week. Individuals are hard-pressed to build savings and assets if they rely on check cashers to conduct their financial lives. This problem is not unique to San Francisco. In fact, one in four Californians—and an estimated 22 million Americans—are “unbanked,” meaning they lack access to a basic checking or savings account.

Without a bank account, people pay more to conduct their daily financial lives. In addition, families without accounts do not have a safe place to keep their money. They walk around with wads of cash in their pockets or keep it at home in a coffee can. Robberies are more prevalent around check cashers, especially on payday. Unbanked individuals are especially vulnerable in the event of a disaster. Shockingly, 70 percent of Hurricane Katrina evacuees did not have bank accounts. Their savings washed away with the rest of their belongings, and without direct deposit they had no way to access their money from another location.

A bank account is the first step to financial security. Without one, it's harder to get well-priced car loans, credit cards, or mortgages—the exact financial tools needed to climb the economic ladder. When San Francisco created our program, no other major American city had launched a comprehensive policy initiative to bring its unbanked residents into the financial mainstream. Cities are well-positioned to play a catalytic role in working with banks, community groups, and other stakeholders to build an inclusive financial system. To this end, we worked with financial institutions to develop a program to address the needs of unbanked San Franciscans and to reach the following goals:

  • Increase the supply of starter account products for the low-income unbanked market.
  • Raise awareness among unbanked consumers about the benefits of account ownership.
  • Provide quality money management education to San Franciscans.
  • Clamp down on the proliferation of check cashers and payday lenders.
  • Raise city-wide awareness of the unbanked problem and potential solutions.

We now have 15 partners, working together on this issue: Bank of America, Bank of the West, Citibank, Mission Area Federal Credit Union, Mission National Bank, Northeast Community Federal Credit Union, Patelco Credit Union, San Francisco Federal Credit Union, Spectrum Federal Credit Union, Sterling Bank and Trust, Union Bank of California, United Commercial Bank, US Bank, Washington Mutual, and Wells Fargo.

Why Are So Many People Unbanked? Focus groups conducted with unbanked consumers in San Francisco reveal that they would prefer to have a bank account than to use check cashers, but have serious concerns about the cost of a bank account, or are worried they will be denied an account because they have made mistakes with a bank account in the past. Others believe that without a Social Security card or California State ID, they are simply not eligible for an account. In addition to these “hard” barriers to banking, some believe they simply do not make enough money to have a bank account, or fear they will be insulted or made unwelcome if they enter a mainstream bank or credit union branch.

The reality is that many financial institutions simply do not have a suitable product to help everyone be successful in banking, and those that do have a hard time getting the word out in the community. Through Bank on San Francisco, we worked with banks and credit unions to develop products that would address the needs of the unbanked market. As a result, all of the banks and credit unions participating in the program have agreed to the following baseline criteria:

  • Offer a low-cost or no-cost product with no minimum balance requirement. The structure of many accounts—with high minimum balances and fees—is a key factor keeping the unbanked out of the financial mainstream.
  • Adapt internal systems to allow customers on ChexSystems to open “second chance” checking accounts. If you make a mistake with a checking account, you will find yourself on the national ChexSystems register – and unable to open an account for seven years! Bank on San Francisco partners have agreed to waive ChexSystems and work with clients to help them open a second chance account, and get back into the mainstream.
  • Accept the Mexican Matricula and Guatemalan Consular identification cards as primary ID. For many immigrants, the barrier to opening an account is having the proper documentation.
  • Expand marketing in targeted, low-income neighborhoods. Increase the visibility of appropriate products in San Francisco and develop new strategies to reach unbanked customers in low-income neighborhoods.
  • Provide a minimum of four financial management training sessions in the community per year.
  • Partner with nonprofits in San Francisco to identify customers ready to enter the financial mainstream.

Bank on San Francisco is an unprecedented attempt to address a serious, yet solvable, social problem. Through an innovative partnership that draws on the strengths of local and federal government agencies, for-profit banks and credit unions, and a wide range of community partners, Bank on San Francisco is poised to become the first comprehensive program in the nation to address the needs of the unbanked and set thousands of families on the road to financial security. I am proud of the work we are doing here in San Francisco, and I hope to continue to build on these groundbreaking efforts and create an environment of financial empowerment throughout our community.

If you would like more information, please visit

José Cisneros is the treasurer of the City & County of San Francisco and is a member of the GFOA Committee on Cash Management.

Useful Resources on the Unbanked

Bank on San Francisco

Other Related Programs

Articles and Conferences

Five Myths About the Payment Card Industry Data Security Standard

By Walt Conway

It was inevitable. Governments, businesses, hospitals, and universities nationwide are working to comply with the Payment Card Industry Data Security Standard (PCI DSS). Unfortunately, these entities sometimes get misleading advice or simply wrong information. The purpose of this article is to dispel five common myths surrounding PCI compliance. These five myths can waste valuable time and resources or, more seriously, leave you vulnerable to a security breach.

PCI DSS was created to protect cardholder data. If you are a merchant that stores, processes, or transmits cardholder data, you must comply with the standard. This means that the growing number of state, county, and municipal governments accepting payment (i.e., credit and debit) cards for fees, fines, or services is included. It also means that all payment channels (whether face-to-face, mail, fax, or e-commerce) are within scope of PCI DSS.

Myth 1: “I've outsourced my card processing, so I'm PCI compliant.” If only it were this easy. Outsourcing your card processing to a third-party can simplify your compliance effort. It can be a great strategy with a good partner. However, outsourcing by itself is not enough to make you compliant.

First confirm that your vendor is PCI compliant. If the vendor is not, you need to re-think the relationship. After that, remember you are still the merchant. You receive and process cardholder data when you print daily transaction summaries, receive reports from your processor, or process chargebacks. You likely have stacks of paper receipts containing card numbers. You still have some compliance work to do.

The good part is that outsourcing can make PCI compliance easier. Your compliance effort then can focus on policies and procedures.

Conclusion: Outsourcing has advantages, but it is not a panacea. If you decide to outsource major parts of your card processing, be sure to verify that your vendor or application is PCI compliant.

Payment Application Best Practices (PABP) and Compliant Service Providers

Visa developed a set of Payment Application Best Practices (PABP) to encourage software vendors to develop secure payment applications. If you need, say, a parking lot or event management application, you can check this list to find software solutions that will not prevent you from becoming PCI compliant.

Using a PABP application does not by itself assure a merchant of achieving compliance. It still has to be installed and maintained properly. The list is version-specific, so be sure you are installing the correct, PABP-certified version. Finally, being on this list says nothing about the software's functionality, only that the application meets the PABP criteria.

Soon the PABP will migrate from Visa to the PCI Security Standards Council where it will be folded into the standard. It will then be re-named PA DSS to reflect the change.

Service providers must have their PCI compliance validated by a qualified, outside assessor. Use this list of compliant service providers to find PCI compliant third-party payment application service providers.

Myth 2: “PCI compliance is just another Information Technology (IT) project.” This myth reflects a misunderstanding of the risks involved. First, PCI compliance is not a “project” with a start and finish date. Rather, it is a process (some call it a journey) that requires ongoing commitment and resources. Second, compliance is a business issue (not merely a technology issue) that affects the entire government. The risks of a data compromise are both financial and reputational as noted in the recent Treasury Management Newsletter article, “The Payment Card Industry Data Security Standard: Where to Begin.”

PCI compliance calls for a multidisciplinary approach including both treasury and IT—and often your audit, legal, and purchasing departments, too.

Conclusion: Compliance is a business issue affecting the entire government. While IT has an important role, it is not the only—or necessarily even the lead—player.

Myth 3: “I'm a small merchant, so I only have to meet some PCI requirements.” Every merchant has to comply with all the requirements regardless of their size. The only difference is how you validate compliance.

You are assigned a merchant level based on your card activity. The largest, Level 1 merchants generally need to file a Report on Compliance validated by an outside qualified security assessor (these are vetted by the PCI Council). Level 2, 3, and 4 merchants can self-assess their compliance. Either way, each merchant must meet each of the requirements in the standard. The big difference is that if you are a Level 1 merchant, it will cost you more to validate your compliance.

Conclusion: PCI compliance is “pass/fail.” You need to meet all the requirements no matter how big or small a merchant you are. By the way, if you suffer a security breach, you will be moved to Level 1 regardless of your transaction volume.

Self-Assessment Questionnaire for PCI Compliance

The self-assessment questionnaire is a tool used by merchants to self-validate their PCI compliance. There are four versions of the self-assessment questionnaire. Which one is right for you depends on how you process payment cards.

Self-Assessment Questionnaire Type
# of Questions to be Answered
Card-not-present (e-commerce or mail/telephone-order) merchants, all cardholder data functions outsourced. This would never apply to face-to-face merchants.
Imprint-only merchants with no electronic cardholder data storage; and stand-alone terminal merchants, no electronic cardholder data storage
Merchants with point-of-sale systems connected to the Internet, no electronic cardholder data storage
All other merchants
(Full DSS)

Merchants not storing cardholder data electronically are eligible for Self-Assessment Questionnaire Types A, B, and C, which are shorter and easier to complete than Type D. So your choice is either don't keep cardholder data or expect to spend a lot of time answering questions.

Myth 4: “PCI DSS is unreasonable with inflexible requirements.” PCI is a prescriptive standard. This means it specifies both what is to be achieved and how it is to be done. As a result it is easy to be overwhelmed by the volume of PCI documents and supporting material. A closer look, though, will show that PCI contains nothing that is not a best practice already. Its elements are familiar to finance and IT professionals. Governments practicing good security will find they already meet most PCI requirements.

In a situation where for good business reasons you cannot implement a control requirement in the manner specified, you may implement a “compensating control” to satisfy the requirement by other means. The key to developing a compensating control is to focus on the intent of the original control requirement, and then show how the original objective is accomplished by other means.

Conclusion: There is nothing alien or even particularly new in the PCI standard. The option of using “compensating controls” provides merchants some flexibility in meeting the standard.

Myth 5: “The card industry requires me to keep cardholder data.” This is perhaps the biggest and most stubborn myth of all. You do not need to store cardholder data anywhere in your government. There is no requirement to store cardholder data from either PCI or the card brands (American Express, Discover, JCB, MasterCard, and Visa). The payment card industry actually is doing everything in its power to discourage you from retaining cardholder data.

We have to distinguish between payment data and cardholder data. You need to keep payment information including the transaction date, amount, and the last 4 digits of the card (which are not “cardholder data”). If there is a disputed transaction, you have enough information to work with your processor to resolve the dispute.

The new self-assessment questionnaires reinforce your not storing cardholder data, particularly electronically. If you qualify to use one of the simpler versions, you will simplify your PCI compliance greatly.

Conclusion: You do not need to retain cardholder data. Your PCI mantra should be: “If you don't need it, don't keep it.”

There is one final point about PCI DSS. By implementing these security practices you will create business processes that will serve your government well across all your operations. Therefore achieving PCI compliance is not only a requirement, it makes good business sense.

Walt Conway is an independent e-commerce consultant based in San Francisco who conducts PCI training and edits the PCI blog for the Treasury Institute for Higher Education; he also is the National Association of College and University Business Officers representative to the PCI Security Standards Council. (

Useful Resources on PCI Compliance

Treasury Management Newsletter

Blogs, Wikis, and Forums

Card Associations

Other Resources

Cash Management Sessions at the GFOA Annual Conference

The upcoming GFOA conference in Fort Lauderdale, Florida on June 15–18, 2008, will include the following sessions related to investing and treasury management. More information on the conference is available on the GFOA Web site.

  • How Safe Are Money Market Funds? Almost 40 years ago, when money market funds were invented, investors flocked to them for better returns and a high degree of safety. What happens when money market funds put their cash into investments such as collateralized debt obligations (CDOs) backed by subprime mortgage loans? This panel will discuss the safety of money market fund investing, what these funds really invest in, and why some investors are scrambling for Treasuries. Presenters will also discuss investment alternatives for public investors.

  • Efficient On-Line Bill Paying: Best Practices for Billers. This session will focus on on-line bill paying methods that streamline the process for billers as well as customers. Hear from practitioners and technical experts how to improve back-office processes for on-line bill paying. The session will feature approaches that replace manual payment notifications and fund transfers with fully electronic transactions.

  • New Technologies for Public Investing: Online Platforms and Other Tools. Using new technologies, cash and investment managers can save time and improve information flow and analysis. Speakers will present information on online platforms for investing, technologies for tracking and reporting results, and analytic tools. Attend this session to hear about leading investment software products and approaches to securely and efficiently execute electronic trades.

  • Cutting Edge Practices for Government Investors. This session will cover what cutting edge investors are doing right now. Speakers will explore benchmarking and how it can help manage risk and return, explain asset/liability-driven investing and discuss the feasibility of getting a rating for your government's investment portfolio

  • Liquidity and Core Portfolios in Today's Market: Tips From the Experts. The economy and financial markets are always changing. How will tightened credit, fluctuating interest rates, inflation, and recession worries affect government portfolios? Speakers will address these questions, identify economic trends, and provide useful, practical ideas for managing your portfolio.

  • Intergovernmental Cooperation in the Treasury Function. This session will explore how governments are reducing their costs in the treasury function by working together. Speakers will discuss intergovernmental cooperation and pooled purchases in areas such as lockbox services, cashiering and treasury workstations, as well as other banking services.

  • The Internal Control Environment for Public Funds. How can a solid internal control environment foster ethical investment behavior? This session will cover a range of issues including maintaining openness and transparency in investment transactions, effectively communicating investment results to overseers, avoiding inappropriate activities and maintaining arms-length relationships with vendors, accepting accountability and responsibility for the investment program, and safeguarding its component parts.

  • The Challenges of Selecting a Broker/Dealer. Government officials entrusted with public funds must protect monies from losses and mitigate risks of selecting unsuitable broker/dealers. This session will offer successful methods for selecting a broker/dealer you can work with. Speakers will discuss important steps in the process including defining internal selection processes, performing due diligence, and establishing a competitive procedure, highlighting guidance from GFOA recommended practices and a new GFOA publication, An Introduction to Broker-Dealer Relations.

  • Revenue Collection Tips and Traps (discussion group). Do you have a revenue source that is difficult to collect? Find out if other finance officers have had the same difficulty and the solutions they have found. Share revenue collection tips, traps, and stories with colleagues across the nation.

  • Communicating Investment Performance to Elected Officials (discussion group). It can be a challenge communicating investment performance information to a city council or other elected officials. Often, elected officials are unfamiliar with the terms and complexity of public investing. Go to this roundtable to learn tips from your colleagues and to share some of your own.

Economy and Interest Rates
Panel of Economists
Interest Rate Outlook





Fed Funds 2.00

2.00 - 2.00

2.00 - 2.00

2.00 - 2.00
30-day prime bank (CD) 2.05

1.80 - 2.30

1.80 - 2.30

1.80 - 2.30
3-month T-bill yield 1.60

1.45 - 1.75

1.55 - 1.75

1.60 - 1.80
5-year Treasury note


2.95- 3.20


3.10 - 3.60


3.25 - 4.30

10-year Treasury note 3.82

3.70- 4.20

3.75 - 4.50

3.90 - 4.80
The Treasury Management newsletter's panel of eminent institutional economists projects interest rates for the first day of each forecast month. Averages are the midpoints between the arithmetic mean and the median of individual projections. The low and high individual forecasts illustrate the range.

Interest rate forecast panelists

Eugenio J. Alemán

Wells Fargo Bank

Scott J. Brown

Raymond James & Associates

John Silvia

Wachovia Securities


John Silvia of Wachovia Securities predicts that a turnaround in the housing market will begin in six months for most of the U.S., but will not occur for one to three years in the states of Florida, Arizona, Nevada, and California. Silvia expects that the downturn in the economy as a whole will be over by July, but the recovery will be weak.

Is Housing Near a Bottom?

This month Treasury Management asked its panel of economists how close a turnaround is in the housing sector. We also asked if the current downturn in the economy will be brief or more protracted.

According to Scott Brown of Raymond James, the housing sector is nowhere near a bottom on the national level. Although the affordability of housing is improving, it will be some time before median household income is back in line with median home prices. Brown expects that the current slowdown in the economy will be relatively shallow, but the recovery will likely be drawn out (like the previous two recessions). Oil prices are a major wildcard and could either kick-start or restrain consumer spending.

Eugenio J. Alemán of Wells Fargo Bank predicts that the housing market's recovery will start sometime in the first quarter of 2009. However, the recovery will be very slow because of lingering credit issues. Alemán states that the length of the current downturn in the economy will depend on the evolution of inflation and the ability of the Fed to keep inflationary expectations at bay.

Lacy Hunt of Hoisington Investment Management states that the U.S. economy is likely to be in a protracted period of restrained consumer spending. Hunt notes that real wealth is now declining and has not yet reached the bottom. He expects that the real loss in wealth could be about $7 trillion. (This assumes that home prices fall only 30 percent from their peak, while stock prices rise 10 percent from the first quarter level, and inflation is 2 percent per year.) The loss in wealth, rising unemployment, poor economic conditions, and a higher (more typical) consumer saving rate could lead to a multi-year contraction in real consumer spending. He adds that it is not a stretch to predict an extended quasi-recessionary period.

Snapshot of Economy and Interest Rates

Economic Summary




Economic Growth      
Real GDP growth
Annual rate, constant dollars
IV Q '07
III Q '07
Year Ago
Retail sales
$ billions
Year Ago
Industrial production index
Change, monthly and annually
12 mo. chg.
Leading indicators index
Change, monthly and annually
12 mo. chg.
New housing starts
Thousands of units, annualized
Year Ago
Purchasing Management Index
Institute for Supply Management


Year Ago
Consumer price index
Change, monthly and annually
12 mo. chg.
Producer price index
Change, monthly and annually, seasonally adjusted
12 mo. chg.
GDP price deflator
Annual rate
IV Q '07
III Q '07
Year Ago
Unemployment rate
Year Ago
Money market fund maturities
Average portfolio maturity
(Money Fund Report Averages TM)
April 15
44 days
Mar 18
43 days

April '07
41 days

Moving Averages
6-Month Treasury Bill

2-Year Treasury Note

10-Year Treasury Note

Investment Performance Benchmarks
The Public Investor 10-bill index
Quarterly/Monthly Return
Annualized Returns Since
Jan.1, 2007
Jan. 1, 2006
Jan. 1, 2007
Jan. 1, 2008


Mar. 1, 2008
April 1, 2008
May 1, 2008
The money market fund index
Annualized Returns Since
Average Return
Jan.1, 2007
Jan. 1, 2006
Jan. 1, 2007 4.85%
4.39% 2.78%
Jan. 1, 2008 4.21%
4.74% 4.16%
Mar. 1, 2007 3.19%
4.59% 4.15%
April 1, 2008 2.87%
4.48% 4.14%
May 1, 2008 2.30%
4.35% 4.11%
S&P Rated LGIP Index
7-day yield
30-day yield
Maturity (Days)
April 18, 2008
Key Rates: Cash Markets
Rate 4/25/08 Year Ago
Fed funds 2.31 5.25
CDs: Three months 2.94 5.33
CDs: Six months 3.10 5.31
BAs: One month 2.90 5.28
T-bills: 91-day yield 1.32 4.84
T-bills: 52-week yield 1.91 4.92
Commercial paper, dealer-placed, 3 months 2.88 5.30
Bond Buyer 20-bond municipal index 4.68 4.26
Tax-exempt notes 1.69
Relative Value Yield Chart

Moving Averages - The four-week moving averages are calculated as a simple average of Friday closing yield quotations for the most recently offered six-month Treasury bill (discount basis), two-year Treasury note, and 10-year Treasury note. Moving averages are used by analysts to monitor trends and trend changes. Generally, interest rates are increasing (prices falling) when the moving average yield is rising and the current rate exceeds the moving average. Conversely, current yields below a declining moving average are associated with lower interest rates (high prices on fixed-income securities). Some market timers buy (or sell) longer maturities when current market yields fall below (or penetrate above) their moving averages.

The Public Investor 10-bill index - This index consists of 10 hypothetical Treasury bill investments, with an average maturity of approximately 80 days. Every other Thursday, a T-bill matures and proceeds are reinvested alternately in the three-month and six month T-bills. This rolling index provides a benchmark for evaluating cash management portfolios with biweekly payment and payroll requirements. The original value of the index was 97.6765 on July 1, 1984.

The money market fund index - This index is the simple average of Money Fund Report Averages ™ seven-day money market fund indexes, as reported for the two weeks closest to the end of each month. The annualized return is calculated using these rates for a four-week period centering on the first of each month. The results should simulate returns from passive investment in an average money market fund.

S&P Rated LGIP Index
- This index is comprised of local government investment pools that are rated AAAm or AAm by Standard & Poor's and represents pools that strive to maintain a stable net asset value.

Executive Director/CEO:   Jeffrey Esser Editor:   R. Gregory Michel

The Treasury Management newsletter is published monthly by the Government Finance Officers Association (GFOA), 203 N. LaSalle Street, Suite 2700, Chicago, IL 60601. (312/977-9700; e-mail: Annual subscription rates are $55 for active GFOA members, $70 for associate GFOA members, and $85 for nonmembers. For reprint permission contact GFOA.

The information and opinions printed herein are from sources believed to be reliable, but GFOA makes no guarantee of accuracy. Opinions, forecasts and recommendations are offered by individuals and do not represent official GFOA policy positions. Nothing herein should be construed as a specific recommendation to buy or sell a financial security.

Government Finance Officers Association of the United States and Canada
[Treasury Management Archive ] [ Feedback ] [ e-Store ]