[Congressional Record Volume 151, Number 70 (Tuesday, May 24, 2005)]
[Extensions of Remarks]
[Pages E1070-E1071]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 BUSINESS CHECKING FREEDOM ACT OF 2005

                                 ______
                                 

                               speech of

                         HON. MICHAEL G. OXLEY

                                of ohio

                    in the house of representatives

                          Monday, May 23, 2005

  Mr. OXLEY. Mr. Speaker, I rise in strong support of H.R. 1224, the 
Business Checking Freedom Act of 2005, which repeals antiquated banking 
laws that prohibit banks from paying interest on business checking 
accounts and the Federal Reserve from paying interest on funds that 
banks and other depository institutions are required by law to maintain 
at the Federal Reserve Banks.
  Mr. Speaker, it may surprise some of our colleagues to know that 
since 1933, banks have been unable to pay interest on business checking 
accounts. The law was originally intended to ensure that larger banks 
did not use higher interest payments to lure deposits away from small, 
rural banks to fund stock market speculation. While at the time this 
law may have been wise public policy--although even that is debatable--
in the year 2005 it is a relic of a financial world that no longer 
exists.
  There is little doubt that now, with the current complex and 
competitive nature of the financial services industry, all depository 
institutions would benefit from the ability to offer business checking 
accounts and are more than able to manage the potential risks involved.
  In fact, as the financial services industry grows more competitive 
and more complex, antiquated laws that limit the competitive capacities 
of financial institutions only harm the customer's ability to find 
appropriate financial solutions. Repealing the ban on interest on 
business checking accounts will free banks to compete for business 
customers on a level playing field, and promote the development of bank 
products and services geared toward a small business clientele that is 
ill-served by the current prohibition.
  In addition to providing small businesses with much-needed regulatory 
relief, H.R. 1224 would authorize the payment of interest on certain 
reserves that depository institutions are required to maintain at the 
Federal Reserve. Current law prohibits such payments, thereby imposing 
a ``hidden tax'' on depository institutions and placing them at a 
competitive disadvantage relative to non-bank financial firms and 
foreign banks that are not subject to the same reserve requirements. 
If, under the Federal Reserve Act, banks, thrifts, and credit unions 
are required to hold funds against transaction accounts, simple 
fairness dictates that the Federal Reserve should be required to pay 
interest on those reserve balances. Federal Reserve Chairman Alan 
Greenspan has testified on numerous occasions that repealing the 
current prohibition would have the additional benefit of facilitating 
the Federal Reserve's management of U.S. monetary policy.
  The bill also contains a hard fought compromise by Mr. Gillmor of 
Ohio and Mr. Frank of Massachusetts that addresses the authority of 
industrial loan companies (ILCs) to offer interest-bearing accounts to 
their business customers. The provision specifies that an ILC which 
obtained deposit insurance prior to October 1, 2003, is authorized to 
pay interest on a business account, provided the ILC is owned by the 
same parent company that owned it as of that date. Other ILCs could 
also offer such interest-bearing accounts, provided that at least 85 
percent of the gross revenues of their parent company and other 
affiliates were derived from activities that were financial in nature 
or incidental to a financial activity during at least three of the 
prior four calendar quarters.
  Mr. Speaker, legislation substantially similar to H.R. 1224 has been 
approved by this body on several prior occasions, including twice in 
the last Congress. The Bush administration has previously endorsed 
authorizing banks to pay interest on business checking accounts. In 
addition, H.R. 1224 is strongly supported by all segments of the small 
business community, including the National Federation of Independent 
Business and the U.S. Chamber of

[[Page E1071]]

Commerce, and by America's Community Bankers.
  I want to conclude by thanking two valued Members of the Financial 
Services Committee, the gentlelady from New York, Mrs. Kelly and Mr. 
Gillmor from Ohio, who have worked tirelessly over several Congresses 
to advance this legislation, as well as our Ranking Minority Member, 
Mr. Frank, who has contributed greatly to this legislation and has been 
strongly supportive of the overall effort on this bill.
  Mr. Speaker, I urge all of my colleagues to vote in favor of H.R. 
1224.

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