Last December, when Paul O'Neill resigned as treasury secretary, the rumor mill churned out a number of potential nominees — including one Charles Schwab. John Snow of CSX got the nod, but the mere prospect of Mr. Schwab going to Washington set us to thinking: What would Schwab do? Here, then is a report from Secretary Schwab's first press conference — that never happened.
Thank you, Mr. President, for your confidence in me. I also would like to thank the Senate for confirming me as your new secretary of the Treasury. Ladies and gentlemen of the media, please allow me the opportunity to make a brief statement; then, I will be glad to address all of your questions.
I would like to use this auspicious occasion to announce some major changes to the department. What we intend to do is to completely modernize the banking system — a process began by Merrill Lynch CEO-turned-Treasury secretary Don Regan. Of course, the old guard wasn't able to complete the vision. And so the mantle has passed to me — as usual. In keeping with President Bush's wishes for a more efficient government, the Treasury will relinquish its status as a not-for-profit public institution. At the beginning of the next fiscal year, the Treasury will engage the process of incorporating itself, with an eye toward an eventual IPO.
Naturally, this move will require some adjustments in the way the department serves U.S. citizens. Oh, we'll still issue government securities. And, we'll still seek to upgrade our electronic funds transfer system — I believe you all are aware of my devotion to technology. And we'll still go after terrorist moneymen. More important, the Treasury needs to improve its market segmentation. As such, the first strategic move under my watch will be the phasing out of most services to taxpayers with a personal net worth under $500,000. It pains us to do so, but projections show the cost of serving this segment will far outstrip the revenues it will generate. More details will follow.
With that, I welcome your questions. Yes, the gentlemen in the first row.
Q: Secretary Schwab …
A: Please — call me “Secretary Chuck.”
Q: Um, Secretary Chuck, what will become of taxpayers who have a personal net worth of less than $500,000? Suppose they have a T-Bill they need to redeem. What then?
A: We've just begun thinking about that issue. The most likely scenario is that we'll serve the unprofitable segments online. Twenty-five transactions for free per year, modeled on family assistance programs and the way they distribute benefits through ATMs. That sort of thing.
Q: Secretary Chuck, a follow-up: What happens if these citizens need to contact the department more than 25 times?
A: They could do so — but then, of course, we'd assess transaction fees. Again, we're still in the embryonic stage on this one, our top priority really being rich people. But our thinking goes something like this: We have to try to encourage profitable customer behavior. We feel fees and charges will encourage low-end customers to quickly accumulate the kind of personal wealth that will allow them to pay the fees we will no longer require of them when they are rich.
Q: Mr. Secretary, the Treasury Department controls dozens of important agencies, from the Bureau of Engraving to the Customs Department to the Bureau of Alcohol, Tobacco and Firearms. What are your plans for these agencies?
A: Fair question. Let me address it by detailing our plans for the ATF. Though taxing “sin” certainly can be a lucrative endeavor, we believe that becoming a provider of sin commodities is a far better use of government resources. As such, we plan to break the ATF into three independent bureaus, each of which will begin selling the item it regulates. There are preliminary plans to issue tracking stocks for these bureaus, but that's down the road. We're running low on time here. Last question please.
Q: Can you comment on the rumor that the Bureau of Engraving and Printing will impose a service fee on the use of currency and coinage?
A: Well, I prefer to think of it as a “convenience surcharge,” much like the fee you pay to get cash from many ATMs. The good news is that the affluent citizen will be able to get a discount on that commission.
Thanks for your time. I look forward to a bright financial future for this country, and for this organization.
John Kador is the author of Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry.