[Congressional Record Volume 149, Number 174 (Tuesday, November 25, 2003)]
[Senate]
[Pages S16010-S16011]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HAGEL (for himself and Ms. Snowe):
  S. 1967. 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; to the Committee on Banking, Housing, and Urban Affairs.
  Mr. HAGEL. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1967

       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 2003''.

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

       (a) In General.--Section 2(a) of Public Law 93-100 (12 
     U.S.C. 1832(a)) is amended by inserting after paragraph (2) 
     the following:
       ``(3) 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 and is not a deposit or account described 
     in paragraph (2) 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. 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.''.
       (b) Conforming Amendments.--
       (1) In general.--Section 2(a) of Public Law 93-100 (12 
     U.S.C. 1832(a)), as amended by subsection (a), is further 
     amended--
       (A) in paragraph (1), by striking ``but subject to 
     paragraph (2)'';
       (B) by amending paragraph (2) to read as follows:
       ``(2) No provision of this section may be construed as 
     conferring the authority to offer demand deposit accounts to 
     any institution that is prohibited by law from offering 
     demand deposit accounts.''; and
       (C) in paragraph (3), by striking ``and is not a deposit or 
     account described in paragraph (2)''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect on the date which is 2 years after the date 
     of enactment of this Act.

     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 2 years after the date of 
     enactment of this Act, the Secretary of the Treasury and the 
     Federal banking agencies shall issue joint final regulations 
     authorizing the payment of interest and dividends on 
     transaction accounts at depository institutions that are 
     subject to regulation by those entities.
       (2) Contents.--Regulations required by this subsection 
     shall--
       (A) establish the scope of the authorization described in 
     paragraph (1) and the types of transaction accounts to which 
     that authorization shall apply; and
       (B) include any appropriate limitations, exceptions, or 
     restrictions on that authorization, consistent with the 
     purposes of this section.
       (3) Effective date of regulations.--The regulations 
     required by this subsection shall take effect not later than 
     2 years after the date of enactment of this Act.
       (4) Definitions.--As used in this subsection--
       (A) the terms ``depository institution'' and ``transaction 
     account'' have the meanings given such terms in subparagraphs 
     (A) and (C), respectively, of section 19(b)(1) of the Federal 
     Reserve Act (12 U.S.C. 461(b)(1)); and
       (B) the term ``Federal banking agency'' has the meaning the 
     term 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) 2 years 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.

[[Page S16011]]

     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.

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