[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1586 Introduced in Senate (IS)]








109th CONGRESS
  1st Session
                                S. 1586

  To allow all businesses to make up to 24 transfers each month from 
interest-bearing transaction accounts to other transaction accounts, to 
    require the payment of interest on reserves held for depository 
  institutions at Federal reserve banks, to repeal the prohibition of 
         interest on business accounts, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 29, 2005

    Mr. Hagel (for himself, Ms. Snowe, and Mr. Reed) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
  To allow all businesses to make up to 24 transfers each month from 
interest-bearing transaction accounts to other transaction accounts, to 
    require the payment of interest on reserves held for depository 
  institutions at Federal reserve banks, to repeal the prohibition of 
         interest on business accounts, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Interest on Business Checking Act of 
2005''.

SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED FOR ALL 
              BUSINESSES.

    Section 2(a) of Public Law 93-100 (12 U.S.C. 1832(a)) is amended by 
adding at the end the following:
            ``(3)(A) Notwithstanding any other provision of law, any 
        depository institution may permit the owner of any deposit or 
        account which is a deposit or account on which interest or 
        dividends are paid to make not more than 24 transfers per month 
        (or such greater number as the Board of Governors of the 
        Federal Reserve System may determine by rule or order), for any 
        purpose, to another account of the owner in the same 
        institution.
            ``(B) An account offered pursuant to this paragraph shall 
        be considered a transaction account for purposes of section 19 
        of the Federal Reserve Act, unless the Board of Governors of 
        the Federal Reserve System determines otherwise.''.

SEC. 3. AUTHORIZATION OF INTEREST-BEARING TRANSACTION ACCOUNTS.

    (a) Repeal of Prohibition on Payment of Interest on Demand 
Deposits.--
            (1) Federal reserve act.--Section 19(i) of the Federal 
        Reserve Act (12 U.S.C. 371a) is repealed.
            (2) Home owners' loan act.--Section 5(b)(1)(B) of the Home 
        Owners' Loan Act (12 U.S.C. 1464(b)(1)(B)) is amended by 
        striking ``savings association may not--'' and all that follows 
        through ``(ii) permit any'' and inserting ``savings association 
        may not permit any''.
            (3) Federal deposit insurance act.--Section 18(g) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828(g)) is repealed.
    (b) Joint Rulemaking Required.--
            (1) In general.--Not later than 90 days after the date of 
        enactment of this Act, the Federal banking agencies shall issue 
        joint final regulations implementing the provisions of 
        subsection (a).
            (2) Effective date of regulations.--The regulations 
        required by this subsection shall take effect not later than 90 
        days after the date of enactment of this Act.
            (3) Definitions.--As used in this subsection, the term 
        ``Federal banking agency'' has the same meaning as in section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813).
    (c) Effective Date of Repeal.--The amendments made by subsection 
(a) shall become effective on the earlier of--
            (1) 90 days after the date of enactment of this Act; or
            (2) the date on which final regulations required to be 
        issued under subsection (b) become effective.

SEC. 4. PAYMENT OF INTEREST ON RESERVES AT FEDERAL RESERVE BANKS.

    (a) In General.--Section 19(b) of the Federal Reserve Act (12 
U.S.C. 461(b)) is amended by adding at the end the following:
            ``(12) Earnings on reserves.--
                    ``(A) In general.--Balances maintained at a Federal 
                reserve bank by or on behalf of a depository 
                institution may receive earnings to be paid by the 
                Federal reserve bank at least once each calendar 
                quarter at a rate or rates not to exceed the general 
                level of short-term interest rates.
                    ``(B) Regulations relating to payments and 
                distribution.--The Board may promulgate regulations 
                concerning--
                            ``(i) the payment of earnings in accordance 
                        with this paragraph;
                            ``(ii) the distribution of such earnings to 
                        the depository institutions which maintain 
                        balances at such banks or on whose behalf such 
                        balances are maintained; and
                            ``(iii) the responsibilities of depository 
                        institutions, Federal home loan banks, and the 
                        National Credit Union Administration Central 
                        Liquidity Facility with respect to the 
                        crediting and distribution of earnings 
                        attributable to balances maintained, in 
                        accordance with subsection (c)(1)(A), in a 
                        Federal reserve bank by any such entity on 
                        behalf of depository institutions.
                    ``(C) Depository institution defined.--For purposes 
                of this paragraph, the term `depository institution', 
                in addition to any institution described in paragraph 
                (1)(A), includes any trust company, corporation 
                organized under section 25A or having an agreement with 
                the Board under section 25, or any branch or agency of 
                a foreign bank (as defined in section 1(b) of the 
                International Banking Act of 1978).''.
    (b) Authorization for Pass Through Reserves for Member Banks.--
Section 19(c)(1)(B) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(B)) 
is amended by striking ``which is not a member bank''.
    (c) Technical and Conforming Amendments.--Section 19 of the Federal 
Reserve Act (12 U.S.C. 461) is amended--
            (1) in subsection (b)(4),
                    (A) by striking subparagraph (C); and
                    (B) by redesignating subparagraphs (D) and (E) as 
                subparagraphs (C) and (D), respectively; and
            (2) in subsection (c)(1)(A), by striking ``subsection 
        (b)(4)(C)'' and inserting ``subsection (b)''.

SEC. 5. INCREASED FEDERAL RESERVE BOARD FLEXIBILITY IN SETTING RESERVE 
              REQUIREMENTS.

    Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 
461(b)(2)(A)) is amended--
            (1) in clause (i), by striking ``the ratio of 3 per 
        centum'' and inserting ``a ratio not greater than 3 percent 
        (and which may be zero)''; and
            (2) in clause (ii), by striking ``and not less than 8 per 
        centum,'' and inserting ``(and which may be zero),''.

SEC. 6. TREATMENT OF CERTAIN ESCROW ACCOUNTS.

    (a) In General.--In the case of an escrow account maintained at a 
depository institution for the purpose of completing the settlement of 
a real estate transaction, activities described in subsection (b) shall 
not be treated as the payment or receipt of interest for purposes of 
this Act or any other provision of law relating to the payment of 
interest on accounts or deposits maintained at depository institutions, 
including such provisions in--
            (1) Public Law 93-100;
            (2) the Federal Reserve Act;
            (3) the Home Owners' Loan Act; or
            (4) the Federal Deposit Insurance Act.
    (b) Exclusions.--For purposes of subsection (a), activities 
described in this paragraph are--
            (1) the absorption, by the depository institution, of 
        expenses incidental to providing a normal banking service with 
        respect to an escrow account described in subsection (a);
            (2) the forbearance, by the depository institution, from 
        charging a fee for providing any such banking function; and
            (3) any benefit which may accrue to the holder or the 
        beneficiary of such escrow account as a result of an action of 
        the depository institution described in paragraph (1) or (2) or 
        a similar action.
                                 <all>