“Too Big to Fail” has become a part of our national consciousness. Absent from the TBTF narrative is the story of the modernization and the end of the “Food Stamp” as we have known it.

One of the largest financial institutions and federal bailout recipients in our country, JPMorgan Chase, is currently responsible for the doling out of welfare to the United States population. When did this happen? And why?

The Electronic Benefits Transfer (EBT) idea was part of the 1990s’ welfare reform, and the USDA was tasked with removing Food Stamps from circulation. Many veterans of the Food Stamp Program will attest to the embarrassing nature of the Food Stamp itself. A friend once told me that when he pulled them out of his pocket in line at the grocery store, it was as if the whole world went into “slow motion.”

However, saving social welfare recipients from embarrassment was not the goal when creating the EBT system. It was designed primarily to reduce costs and fraud, such as the huge problem of the illegal sale of stamps. EBT allows welfare beneficiaries to swipe their card at almost all Point of Sale terminals (the terminals in grocery stores). This allows all transactions to occur digitally in the same way a debit card is linked to a checking account. Money spent is deducted from a family’s total benefit and participants can check their balance using a toll free number. While not perfect, EBT has prevented fraud by printing the head of the household’s name clearly on the card and when coupled with a Photo ID, makes it harder to play the system. Most state EBT programs also issue cash assistance, unemployment benefits, and Women, Infants and Children assistance through EBT cards.

Today, 99 percent of all welfare transactions are made using Point of Sale terminals. More than 9.3 percent of the population receives money from the Supplemental Nutrition Assistance Program (SNAP, AKA Food Stamps) through these cards.

States are given discretion in choosing their EBT service provider. In almost every case, this provider is a private corporation (Indiana very recently ditched IBM in favor of state control of modernization functions). According to the USDA website, 28 out of the 50 states have EBT programs being run by JPMorgan Chase Electronic Financial Services (EFS). The remainder of these state EBT systems are mostly split between two other companies, Affiliated Computer Services and e-Funds, recently acquired by Fidelity National Information Services.

JPMorgan is by far the largest provider of services to American citizens, providing services to the largest states like California, Pennsylvania, New York and Florida. JPMorgan Chase inherited its EBT contracts from Citigroup in 2003 after JPMorgan Chase bought Citicorp EFS (incidentally, this was after Citigroup had an antitrust lawsuit filed against it in 1998 for allegedly attempting to monopolize the EBT market).

A majority of states have decided that contracting with JPMorgan EFS for EBT services is a good use of taxpayer dollars. Americans must believe that JPMorgan Chase can accomplish this task in a more streamlined fashion than the government. However, JPMorgan Chase’s bailout was a result of its involvement in the toxic asset swapping that kicked-off the current financial crisis. Regardless of JPMorgan’s speedy repayment of its $25 billion in TARP money, the use of these institutions for the execution of basic social services brings up many questions about this country’s choice of contractors and its ability to sustain itself in their absence. Has our social infrastructure become so complicated that our state governments cannot handle basic governmental functions like feeding the poor even though electronic banking is now ubiquitous? Is it safe to conclude that JPMorgan Chase will never be allowed to fail, because without it, the American social safety net would have a gaping hole in it?

Welfare, including unemployment benefits, is set to grow significantly over the next few years. The question now is twofold: whether these institutions were bailed out, in part, because of welfare’s growing importance, and whether we want a massive financial institution running our welfare system? Regardless, it is clear that institutions TBTF now put food on the table for nearly 10 percent of Americans.