[House Report 108-439]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-439

======================================================================

 
PROVIDING FOR CONSIDERATION OF H.R. 1375, FINANCIAL SERVICES REGULATORY 
                           RELIEF ACT OF 2003

                                _______
                                

   March 17, 2004.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Mr. Sessions, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 566]

    The Committee on Rules, having had under consideration 
House Resolution 566, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for the consideration of H.R. 1375, 
the Financial Services Regulatory Relief Act of 2003, under a 
structured rule. The rule provides one hour of general debate 
equally divided and controlled by the chairman and ranking 
minority member of the Committee on Financial Services. The 
rule waives all points of order against consideration of the 
bill (except those arising under provisions of the 
Congressional Budget Act of 1974 other than section 302(f), 
prohibiting consideration of legislation providing new budget 
authority in excess of a committee's 302(a) allocation of such 
authority).
    The rule provides that the amendment in the nature of a 
substitute recommended by the Committee on Financial Services 
and the Committee on the Judiciary now printed in the bill 
shall be considered as an original bill for the purpose of 
amendment, and shall be considered as read. The rule waives all 
points of order against the committee amendment in the nature 
of a substitute (except those arising under provisions of the 
Congressional Budget Act of 1974 other than section 302(f), 
prohibiting consideration of legislation providing new budget 
authority in excess of a committee's 302(a) allocation of such 
authority).
    The rule makes in order only those amendments printed in 
this report accompanying the resolution. The rule provides that 
the amendments printed in this report may be considered only in 
the order printed in this report, may be offered only by a 
Member designated in this report, shall be considered as read, 
shall be debatable for the time specified in this report 
equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be 
subject to a demand for a division of the question in the House 
or in the Committee of the Whole. The rule waives all points of 
order against the amendments printed in this report.
    Finally, the rule provides one motion to recommit with or 
without instructions.

                  SUMMARY OF AMENDMENTS MADE IN ORDER

    (Summaries of amendments derived from information provided 
by the sponsor.)
    1. Oxley: Manager's Amendment. (1) Limits de novo branching 
for ILCs to those whose business is more than 85% financial in 
nature and, in the case of ILCs whose business is less than 85% 
financial in nature, limits branching to those ILCs who had 
Federal deposit insurance before October 1, 2003; (2) Makes 
technical revisions to section 303 requested by the NCUA; (3) 
Makes technical revisions to section 213 requested by OTS; (4) 
Strikes section 107; (5) Strikes section 214; (6) Strikes 
section 613; and (7) Makes technical changes to section 405 
requested by the SEC. (20 Minutes)
    2. Waters: Strikes section 609 of the bill. Section 609 
reduces the minimum waiting period from 15 calendar days to 5 
calendar days for banks and bank holding companies to merge 
with or acquire other banks or bank holding companies after the 
Department of Justice has approved a bank merger. The amendment 
preserves the existing 15 calendar day waiting period. (10 
minutes)
    3. Bachus: Strikes section 614 relating to the liability 
standards applied to third-party independent contractors 
working for a bank. (10 minutes)
    4. Weiner: Prohibits commercial banks from charging a fee 
to the depositor of a check that is returned for insufficient 
funds. (10 minutes)
    5. Jackson-Lee: Expressing the sense of Congress that in 
situations where a requesting agency obtains expedited action 
to approve a merger transaction application between multiple 
depository institutions, that careful consideration is placed 
on the impact that the transaction will have on affected 
communities and customers of any or all of the applicant 
institutions. (10 minutes)
    6. Kelly/Toomey: Adds new title at the end of the bill 
which removes the prohibition on banks from paying interest on 
business checking accounts and would allow the Federal Reserve 
to pay interest on so-called ``sterile'' reserves. The language 
of the amendment is similar to the text of H.R. 758, the 
Business Checking Freedom Act, which passed the House in April 
of 2003, by voice vote. (10 minutes)

                    TEXT OF AMENDMENTS MADE IN ORDER

 1. An Amendment To Be Offered by Representative Oxley of Ohio, or His 
                   Designee, Debatable for 20 Minutes

  Page 9, strike line 3 and all that follows through page 10, 
line 2 (and redesignate subsequent sections and any cross 
reference to any such section and conform the table of contents 
accordingly).
  Page 31, line 2, strike ``main'' and insert ``home''.
  Page 31, strike line 3 and all that follows through page 32, 
line 13 (and conform the table of contents accordingly).
  Page 37, strike lines 16 and 17 and insert the following new 
heading:
  ``(b) Additional Investment Authority.--
  Page 37, line 18, strike ``A Federal'' and insert ``In 
addition to any investments otherwise authorized, a Federal''.
  Page 47, after line 5, insert the following new paragraphs 
(and redesignate the subsequent paragraph accordingly):
          (2) Interstate branching by subsidiaries of 
        commercial firms prohibited.--Section 18(d)(3)) of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828(d)(3)) is 
        amended by adding at the end the following new 
        subparagraph:
                  ``(C) Interstate branching by subsidiaries of 
                commercial firms prohibited.--
                          ``(i) In general.--If the appropriate 
                        State bank supervisor of the home State 
                        of any industrial loan company, 
                        industrial bank, or other institution 
                        described in section 2(c)(2)(H) of the 
                        Bank Holding Company Act of 1956, or 
                        the appropriate State bank supervisor 
                        of any host State with respect to such 
                        company, bank, or institution, 
                        determines that such company, bank, or 
                        institution is controlled, directly or 
                        indirectly, by a commercial firm, such 
                        company, bank, or institution may not 
                        acquire, establish, or operate a branch 
                        in such host State.
                          ``(ii) Commercial firm defined.--For 
                        purposes of this subsection, the term 
                        `commercial firm' means any entity at 
                        least 15 percent of the annual gross 
                        revenues of which on a consolidated 
                        basis, including all affiliates of the 
                        entity, were derived from engaging, on 
                        an on-going basis, in activities that 
                        are not financial in nature or 
                        incidental to a financial activity 
                        during at least 3 of the prior 4 
                        calendar quarters.
                          ``(iii) Grandfathered institutions.--
                        Clause (i) shall not apply with respect 
                        to any industrial loan company, 
                        industrial bank, or other institution 
                        described in section 2(c)(2)(H) of the 
                        Bank Holding Company Act of 1956--
                                  ``(I) which became an insured 
                                depository institution before 
                                October 1, 2003 or pursuant to 
                                an application for deposit 
                                insurance which was approved by 
                                the Corporation before such 
                                date; and
                                  ``(II) with respect to which 
                                there is no change in control, 
                                directly or indirectly, of the 
                                company, bank, or institution 
                                after September 30, 2003, that 
                                requires an application under 
                                subsection (c), section 7(j), 
                                section 3 of the Bank Holding 
                                Company Act of 1956, or section 
                                10 of the Home Owners' Loan 
                                Act.
                          ``(iv) Transition provision.--Any 
                        divestiture required under this 
                        subparagraph of a branch in a host 
                        State shall be completed as quickly as 
                        is reasonably possible.
                          ``(v) Corporate reorganizations 
                        permitted.--The acquisition of direct 
                        or indirect control of the company, 
                        bank, or institution referred to in 
                        clause (iii)(II) shall not be treated 
                        as a `change in control' for purposes 
                        of such clause if the company acquiring 
                        control is itself directly or 
                        indirectly controlled by a company that 
                        was an affiliate of such company, bank, 
                        or institution on the date referred to 
                        in clause (iii)(II), and remained an 
                        affiliate at all times after such 
                        date.''.
          (3) Technical and conforming amendments.--Section 
        18(d)(4) of the Federal Deposit Insurance Act (12 
        U.S.C. 1828(d)(4)) is amended--
                  (A) in subparagraph (A) by striking ``Subject 
                to subparagraph (B)'' and inserting ``Subject 
                to subparagraph (B) and paragraph (3)(C)''; and
                  (B) in subparagraphs (D) and (E), by striking 
                ``The term'' and inserting ``For purposes of 
                this subsection, the term''.
  Page 47, line 21, insert ``or are applicable to an insured 
State nonmember bank under section 18(d)(3) of the Federal 
Deposit Insurance Act'' after ``Revised Statutes of the United 
States''.
  Page 51, line 4, insert before the semicolon at the end ``and 
inserting the following new paragraph''.
  Page 51, after line 4, insert the following new paragraph:
          ``(5) Applicability to industrial loan companies.--No 
        provision of this section shall be construed as 
        authorizing the approval of any transaction involving a 
        industrial loan company, industrial bank, or other 
        institution described in section 2(c)(2)(H) of the Bank 
        Holding Company Act of 1956, or the acquisition, 
        establishment, or operation of a branch by any such 
        company, bank, or institution, that is not allowed 
        under section 18(d)(3).''.
  Page 58, line 19, insert ``(i)'' after ``section 
38(e)(2)(E)''.
  Page 88, strike line 1 and all that follows through the 2 
items following line 15 on page 94 (and redesignate subsequent 
sections and any cross reference to any such section and 
conform the table of contents accordingly).

                              ----------                              


 2. An Amendment To Be Offered by Representative Waters of California, 
               or Her Designee, Debatable for 10 Minutes

  Page 84, strike line 1 and all that follows through line 13 
(and redesignate subsequent sections and any cross reference to 
any such section and conform the table of contents 
accordingly).
                              ----------                              


 3. An Amendment To Be Offered by Representative Bachus of Alabama, or 
                 His Designee, Debatable for 10 Minutes

  Page 94, strike line 16 and all that follows through line 20 
(and redesignate subsequent sections and any cross reference to 
any such section and conform the table of contents 
accordingly).
                              ----------                              


4. An Amendment To Be Offered by Representative Weiner of New York, or 
                 His Designee, Debatable for 10 Minutes

  Page 67, after line 13, insert the following new section (and 
conform the table of contents accordingly):

SEC. 410. CERTAIN CHECK DISHONORMENT FEES PROHIBITED.

  (a) In General.--Section 607 of the Expedited Funds 
Availability Act (12 U.S.C. 4006) (relating to miscellaneous 
provisions) is amended by adding at the end the following new 
subsection:
  ``(f) Fees on Dishonored Checks.--
          ``(1) Receiving depository institution.--In the case 
        of a check drawn on an account at an originating 
        institution which is dishonored by the originating 
        institution due to the lack of sufficient funds in such 
        account to pay the check, a receiving depository 
        institution may not impose any fee on the depositor, in 
        connection with such check, due to such dishonorment.
          ``(2) Rule of construction.--No provision of this 
        section shall be construed as affecting any intervening 
        depository institution or the costs of the services 
        provided by such depository institution.''.
  (b) Effective Date.--The amendment made by this section shall 
apply after the end of the 180-day period beginning on the date 
of the enactment of this Act.
                              ----------                              


 5. An Amendment To Be Offered by Representative Jackson-Lee of Texas, 
               or Her Designee, Debatable for 10 Minutes

  Page 83, line 4, strike the closing quotation marks and the 
2nd period.
  Page 83, after line 4, insert the following new subparagraph:
                  ``(C) Sense of the congress.--It is the sense 
                of the Congress that, when a requesting agency 
                requires expeditious action on an application 
                for a merger transaction, consideration should 
                be made as to the impact the merger transaction 
                will have on corporate and individual customers 
                in an effort to ensure that no harmful effects 
                will result from the merger transaction.''.

                              ----------                              


 6. An Amendment To Be Offered by Representative Kelly of New York, or 
                 Her Designee, Debatable for 10 Minutes

  Page 108, after line 14, insert the following new title (and 
redesignate the subsequent title and sections and conform the 
table of contents accordingly):

                  TITLE VII--BUSINESS CHECKING FREEDOM

SEC. 701. SHORT TITLE.

  This title may be cited as the ``Business Checking Freedom 
Act of 2004''.

SEC. 702. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED FOR ALL 
                    BUSINESSES.

  (a) Section 2 of Public Law 93-100 (12 U.S.C. 1832) is 
amended--
          (1) by redesignating subsections (b) and (c) as 
        subsections (c) and (d), respectively; and
          (2) by inserting after subsection (a) the following:
  ``(b) 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 
subsection (a)(2) to make up to 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 subsection 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) Effective at the end of the 2-year period beginning on 
the date of the enactment of this Act, section 2 of Public Law 
93-100 (12 U.S.C. 1832) is amended--
          (1) in subsection (a)(1), by striking ``but subject 
        to paragraph (2)'';
          (2) by striking paragraph (2) of subsection (a) and 
        inserting the following new paragraph:
          ``(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
          (3) in subsection (b) (as added by subsection (a) of 
        this section) by striking ``and is not a deposit or 
        account described in subsection (a)(2)''.

SEC. 703. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED.

  (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 amended to read 
        as follows:
  ``(i) [Repealed]''.
          (2) Home owners' loan act.--The first sentence of 
        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 amended to read as follows:
  ``(g) [Repealed]''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall take effect at the end of the 2-year period beginning on 
the date of the enactment of this Act.

SEC. 704. 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 
new paragraph:
          ``(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 prescribe 
                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 institutions defined.--For 
                purposes of this paragraph, the term 
                `depository institution', in addition to the 
                institutions 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) Consumer Banking Costs Assessment.--
          (1) In general.--The Federal Reserve Act (12 U.S.C. 
        221 et seq.) is amended--
                  (A) by redesignating sections 30 and 31 as 
                sections 31 and 32, respectively; and
                  (B) by inserting after section 29 the 
                following new section:

``SEC. 30. SURVEY OF BANK FEES AND SERVICES.

  ``(a) Annual Survey Required.--The Board of Governors of the 
Federal Reserve System shall obtain annually a sample, which is 
representative by type and size of the institution (including 
small institutions) and geographic location, of the following 
retail banking services and products provided by insured 
depository institutions and insured credit unions (along with 
related fees and minimum balances):
          ``(1) Checking and other transaction accounts.
          ``(2) Negotiable order of withdrawal and savings 
        accounts.
          ``(3) Automated teller machine transactions.
          ``(4) Other electronic transactions.
  ``(b) Minimum Survey Requirement.--The annual survey 
described in subsection (a) shall meet the following minimum 
requirements:
          ``(1) Checking and other transaction accounts.--Data 
        on checking and transaction accounts shall include, at 
        a minimum, the following:
                  ``(A) Monthly and annual fees and minimum 
                balances to avoid such fees.
                  ``(B) Minimum opening balances.
                  ``(C) Check processing fees.
                  ``(D) Check printing fees.
                  ``(E) Balance inquiry fees.
                  ``(F) Fees imposed for using a teller or 
                other institution employee.
                  ``(G) Stop payment order fees.
                  ``(H) Nonsufficient fund fees.
                  ``(I) Overdraft fees.
                  ``(J) Deposit items returned fees.
                  ``(K) Availability of no-cost or low-cost 
                accounts for consumers who maintain low 
                balances.
          ``(2) Negotiable order of withdrawal accounts and 
        savings accounts.--Data on negotiable order of 
        withdrawal accounts and savings accounts shall include, 
        at a minimum, the following:
                  ``(A) Monthly and annual fees and minimum 
                balances to avoid such fees.
                  ``(B) Minimum opening balances.
                  ``(C) Rate at which interest is paid to 
                consumers.
                  ``(D) Check processing fees for negotiable 
                order of withdrawal accounts.
                  ``(E) Fees imposed for using a teller or 
                other institution employee.
                  ``(F) Availability of no-cost or low-cost 
                accounts for consumers who maintain low 
                balances.
          ``(3) Automated teller transactions.--Data on 
        automated teller machine transactions shall include, at 
        a minimum, the following:
                  ``(A) Monthly and annual fees.
                  ``(B) Card fees.
                  ``(C) Fees charged to customers for 
                withdrawals, deposits, and balance inquiries 
                through institution-owned machines.
                  ``(D) Fees charged to customers for 
                withdrawals, deposits, and balance inquiries 
                through machines owned by others.
                  ``(E) Fees charged to noncustomers for 
                withdrawals, deposits, and balance inquiries 
                through institution-owned machines.
                  ``(F) Point-of-sale transaction fees.
          ``(4) Other electronic transactions.--Data on other 
        electronic transactions shall include, at a minimum, 
        the following:
                  ``(A) Wire transfer fees.
                  ``(B) Fees related to payments made over the 
                Internet or through other electronic means.
          ``(5) Other fees and charges.--Data on any other fees 
        and charges that the Board of Governors of the Federal 
        Reserve System determines to be appropriate to meet the 
        purposes of this section.
          ``(6) Federal reserve board authority.--The Board of 
        Governors of the Federal Reserve System may cease the 
        collection of information with regard to any particular 
        fee or charge specified in this subsection if the Board 
        makes a determination that, on the basis of changing 
        practices in the financial services industry, the 
        collection of such information is no longer necessary 
        to accomplish the purposes of this section.
  ``(c) Annual Report to Congress Required.--
          ``(1) Preparation.--The Board of Governors of the 
        Federal Reserve System shall prepare a report of the 
        results of each survey conducted pursuant to 
        subsections (a) and (b) of this section and section 
        136(b)(1) of the Consumer Credit Protection Act.
          ``(2) Contents of the report.--In addition to the 
        data required to be collected pursuant to subsections 
        (a) and (b), each report prepared pursuant to paragraph 
        (1) shall include a description of any discernible 
        trend, in the Nation as a whole, in a representative 
        sample of the 50 States (selected with due regard for 
        regional differences), and in each consolidated 
        metropolitan statistical area (as defined by the 
        Director of the Office of Management and Budget), in 
        the cost and availability of the retail banking 
        services, including those described in subsections (a) 
        and (b) (including related fees and minimum balances), 
        that delineates differences between institutions on the 
        basis of the type of institution and the size of the 
        institution, between large and small institutions of 
        the same type, and any engagement of the institution in 
        multistate activity.
          ``(3) Submission to congress.--The Board of Governors 
        of the Federal Reserve System shall submit an annual 
        report to the Congress not later than June 1, 2005, and 
        not later than June 1 of each subsequent year.
  ``(d) Definitions.--For purposes of this section, the term 
`insured depository institution' has the meaning given such 
term in section 3 of the Federal Deposit Insurance Act, and the 
term `insured credit union' has the meaning given such term in 
section 101 of the Federal Credit Union Act.''.
          (2) Conforming amendment.--
                  (A) In general.--Paragraph (1) of section 
                136(b) of the Truth in Lending Act (15 U.S.C. 
                1646(b)(1)) is amended to read as follows:
          ``(1) Collection required.--The Board shall collect, 
        on a semiannual basis, from a broad sample of financial 
        institutions which offer credit card services, credit 
        card price and availability information including--
                  ``(A) the information required to be 
                disclosed under section 127(c) of this chapter;
                  ``(B) the average total amount of finance 
                charges paid by consumers; and
                  ``(C) the following credit card rates and 
                fees:
                          ``(i) Application fees.
                          ``(ii) Annual percentage rates for 
                        cash advances and balance transfers.
                          ``(iii) Maximum annual percentage 
                        rate that may be charged when an 
                        account is in default.
                          ``(iv) Fees for the use of 
                        convenience checks.
                          ``(v) Fees for balance transfers.
                          ``(vi) Fees for foreign currency 
                        conversions.''.
                  (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect on January 
                1, 2004.
          (3) Repeal of other report provisions.--Section 1002 
        of Financial Institutions Reform, Recovery, and 
        Enforcement Act of 1989 and section 108 of the Riegle-
        Neal Interstate Banking and Branching Efficiency Act of 
        1994 are hereby repealed.
  (d) Technical and Conforming Amendments.--Section 19 of the 
Federal Reserve Act (12 U.S.C. 461) is amended--
          (1) in subsection (b)(4) (12 U.S.C. 461(b)(4)), by 
        striking subparagraph (C) and redesignating 
        subparagraphs (D) and (E) as subparagraphs (C) and (D), 
        respectively; and
          (2) in subsection (c)(1)(A) (12 U.S.C. 461(c)(1)(A)), 
        by striking ``subsection (b)(4)(C)'' and inserting 
        ``subsection (b)''.

SEC. 705. 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. 706. TRANSFER OF FEDERAL RESERVE SURPLUSES.

  (a) In General.--Section 7(b) of the Federal Reserve Act (12 
U.S.C. 289(b)) is amended by adding at the end the following 
new paragraph:
          ``(4) Additional transfers to cover interest payments 
        for fiscal years 2003 through 2007.--
                  ``(A) In general.--In addition to the amounts 
                required to be transferred from the surplus 
                funds of the Federal reserve banks pursuant to 
                subsection (a)(3), the Federal reserve banks 
                shall transfer from such surplus funds to the 
                Board of Governors of the Federal Reserve 
                System for transfer to the Secretary of the 
                Treasury for deposit in the general fund of the 
                Treasury, such sums as are necessary to equal 
                the net cost of section 19(b)(12) in each of 
                the fiscal years 2003 through 2007.
                  ``(B) Allocation by federal reserve board.--
                Of the total amount required to be paid by the 
                Federal reserve banks under subparagraph (A) 
                for fiscal years 2003 through 2007, the Board 
                of Governors of the Federal Reserve System 
                shall determine the amount each such bank shall 
                pay in such fiscal year.
                  ``(C) Replenishment of surplus fund 
                prohibited.--During fiscal years 2003 through 
                2007, no Federal reserve bank may replenish 
                such bank's surplus fund by the amount of any 
                transfer by such bank under subparagraph 
                (A).''.
  (b) Technical and Conforming Amendment.--Section 7(a) of the 
Federal Reserve Act (12 U.S.C. 289(a)) is amended by adding at 
the end the following new paragraph:
          ``(3) Payment to treasury.--During fiscal years 2003 
        through 2007, any amount in the surplus fund of any 
        Federal reserve bank in excess of the amount equal to 3 
        percent of the paid-in capital and surplus of the 
        member banks of such bank shall be transferred to the 
        Secretary of the Treasury for deposit in the general 
        fund of the Treasury.''.

SEC. 707. RULE OF CONSTRUCTION.

  In the case of an escrow account maintained at a depository 
institution in connection with a real estate transaction--
          (1) the absorption, by the depository institution, of 
        expenses incidental to providing a normal banking 
        service with respect to such escrow account;
          (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 
        subparagraph (1) or (2) or similar in nature to such 
        action,
shall not be treated as the payment or receipt of interest for 
purposes of this Act and any provision of Public Law 93-100, 
the Federal Reserve Act, the Home Owners' Loan Act, or the 
Federal Deposit Insurance Act relating to the payment of 
interest on accounts or deposits at depository institutions, 
provided, however, that nothing herein shall be construed so as 
to require a depository institution that maintains an escrow 
account in connection with a real estate transaction to pay 
interest on such escrow account or to prohibit such institution 
from paying interest on such escrow account. Nor shall anything 
herein be construed to preempt the provisions of law of any 
State dealing with the payment of interest on escrow accounts 
maintained in connection with real estate transactions.

                                
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