[House Report 109-326]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-326

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



 
               HURRICANE CHECK CASHING RELIEF ACT OF 2005

                                _______
                                

December 6, 2005.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Oxley, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3909]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 3909) to provide emergency authority for the Federal 
Deposit Insurance Corporation and the National Credit Union 
Administration, in accordance with guidance issued by the Board 
of Governors of the Federal Reserve System, to guarantee checks 
cashed by insured depository institutions and insured credit 
unions for the benefit of noncustomers who are victims of 
certain 2005 hurricanes, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     4
Background and Need for Legislation..............................     4
Hearings.........................................................     5
Committee Consideration..........................................     6
Committee Votes..................................................     6
Committee Oversight Findings.....................................     6
Performance Goals and Objectives.................................     7
New Budget Authority, Entitlement Authority, and Tax Expenditures     7
Committee Cost Estimate..........................................     7
Congressional Budget Office Estimate.............................     7
Federal Mandates Statement.......................................    11
Advisory Committee Statement.....................................    11
Constitutional Authority Statement...............................    11
Applicability to Legislative Branch..............................    11
Section-by-Section Analysis of the Legislation...................    11
Changes in Existing Law Made by the Bill, as Reported............    12

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE, PURPOSE.

  (a) Short Title.--This Act may be cited as the ``Hurricane Check 
Cashing Relief Act of 2005''.
  (b) Purpose.--The purpose of this Act is to reduce the suffering and 
financial difficulties of victims of 2005 hurricanes--
          (1) whose home insured depository institutions and insured 
        credit unions, or the insured depository institution or insured 
        credit union on which any check or share draft payable to any 
        such victim is drawn, are closed, or whose records are 
        otherwise inaccessible, due to certain 2005 hurricanes;
          (2) who lack access to operating automated teller machines 
        for whatever reason as a result of any such hurricane, 
        including inoperable payment networks;
          (3) who lack some or all of the requisite forms of 
        identification necessary to cash their own or a third-party 
        check or share draft; or
          (4) who are otherwise unable, by reason of any such 
        hurricane, to access amounts on deposit at an insured 
        depository institution or insured credit union.

SEC. 2. EMERGENCY AUTHORITY TO GUARANTEE CHECKS CASHED FOR VICTIMS OF 
                    CERTAIN 2005 HURRICANES.

  (a) FDIC.--
          (1) In general.--Subject to subsection (d), the Federal 
        Deposit Insurance Corporation shall establish, in accordance 
        with emergency guidance issued by the Board of Governors of the 
        Federal Reserve System under subsection (d)(1), an emergency 
        program under which an insured depository institution may 
        obtain, subject to subsection (d)(2), a commitment from the 
        Corporation to indemnify the insured depository institution for 
        any loss suffered by the institution through cashing a check or 
        share draft that--
                  (A) is presented for payment by any individual who, 
                as of August 25, 2005, resided in the State of Florida, 
                Alabama, Mississippi, Louisiana, or Texas in an area in 
                which the President, pursuant to section 401 of the 
                Robert T. Stafford Disaster Relief and Emergency 
                Assistance Act, determined, on or after August 25, 
                2005, that a major disaster exists; and
                  (B) is subsequently uncollectible,
        in an amount not to exceed $2,000 for each such check or share 
        draft.
          (2) Source of funds for payments.--Any payments required to 
        be made by the Corporation pursuant to a commitment under 
        paragraph (1) to an insured depository institution shall be 
        drawn from funds available for such purposes under subsection 
        (c).
  (b) NCUA.--
          (1) In general.--Subject to subsection (d), the National 
        Credit Union Administration shall establish, in accordance with 
        emergency guidance issued by the Board under subsection (d)(1), 
        an emergency program under which an insured credit union may 
        obtain, subject to subsection (d)(2), a commitment from the 
        Administration to indemnify the insured credit union for any 
        loss suffered by the credit union through cashing a share draft 
        or check that--
                  (A) is presented for payment by any individual who, 
                as of August 25, 2005, resided in the State of Florida, 
                Alabama, Mississippi, Louisiana, or Texas in an area in 
                which the President, pursuant to section 401 of the 
                Robert T. Stafford Disaster Relief and Emergency 
                Assistance Act, determined, on or after August 25, 
                2005, that a major disaster exists; and
                  (B) is subsequently uncollectible,
        in an amount not to exceed $2,000 for each such check or share 
        draft
          (2) Source of funds for payments.--Any payments required to 
        be made by the National Credit Union Administration pursuant to 
        a commitment under paragraph (1) to an insured credit union 
        shall be drawn from funds available for such purposes under 
        subsection (c).
          (3) Limited extension of check cashing services.--
        Notwithstanding any limitation in section 107(12) of the 
        Federal Credit Union Act with regard to field of membership, an 
        insured credit union may cash any check presented for payment 
        by any individual described in paragraph (1)(A).
  (c) Reimbursement From Federal Reserve Surpluses.--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 certain relief efforts 
        resulting from hurricanes of 2005.--
                  ``(A) In general.--Subject to subparagraph (C), from 
                the surplus funds of the Federal reserve banks 
                maintained pursuant to subsection (a)(2), the Federal 
                reserve banks shall transfer to the Board of Governors 
                of the Federal Reserve System for transfer to the 
                Federal Deposit Insurance Corporation and the National 
                Credit Union Administration, such sums as are necessary 
                to meet any payments required under subsection (a)(1) 
                or (b)(1) of section 2 of the Hurricane Check Cashing 
                Relief Act. In the event that the total amount of 
                requests for indemnification received by the Federal 
                Deposit Insurance Corporation and the National Credit 
                Union Administration exceed the maximum amount 
                specified under subparagraph (C), the sums transferred 
                to the Federal Deposit Insurance Corporation and the 
                National Credit Union Administration, respectively, 
                shall be in proportion to the amount of payments 
                required under subsection (a)(1) and (b)(1) of section 
                2 of the Hurricane Check Cashing Relief Act of 2005, 
                respectively.
                  ``(B) Allocation by federal reserve board.--Of the 
                total amount required to be paid by the Federal reserve 
                banks, the Board of Governors of the Federal Reserve 
                System shall determine the amount each such bank shall 
                pay.
                  ``(C) Maximum amount.--The total amount transferred 
                under subparagraph (A) from all Federal reserve banks 
                shall not exceed $200,000,000.
                  ``(D) Replenishment of surplus fund prohibited.--No 
                Federal reserve bank may replenish such bank's surplus 
                fund by the amount of any transfer by such bank under 
                subparagraph (A).''.
  (d) Emergency Guidance and Limitations.--
          (1) In general.--The Board, after consulting the Federal 
        Deposit Insurance Corporation and the National Credit Union 
        Administration, shall, upon the enactment of this Act, promptly 
        issue appropriate guidance--
                  (A) to carry out the purposes of this section and 
                administer the programs established in accordance with 
                this section;
                  (B) to reduce the incidence of fraud and any other 
                cause of loss to the greatest extent possible, 
                consistent with the purpose of this Act;
                  (C) to require insured depository institutions and 
                insured credit unions to exercise due diligence in 
                determining the eligibility of any check presented by 
                any individual for indemnification under this section, 
                including such measures as verification of Social 
                Security numbers and other identifying information as 
                the Board may determine to be practicable;
                  (D) to provide insured depository institutions and 
                insured credit unions with reasonable guidance, in 
                light of the emergency circumstances presented by 
                certain 2005 hurricanes, so as to meet the requirements 
                for indemnification under this section, including the 
                sharing of information on checks that have been 
                presented for indemnification; and
                  (E) notwithstanding any Federal or State law, to 
                provide for the right of the Board of Governors of the 
                Federal Reserve System, on behalf of the Federal 
                reserve banks and through the Federal Deposit Insurance 
                Corporation and the National Credit Union 
                Administration, to recover from any insured depository 
                institution or insured credit union the amount of any 
                indemnification paid to such depository institution or 
                credit union with respect to any check, to the extent 
                of the amount so paid, if the insured depository 
                institution or insured credit union collects on the 
                check.
          (2) Compliance with guidance condition.--The emergency 
        guidance issued under paragraph (1) shall require any insured 
        depository institution or insured credit union seeking a 
        commitment under subsection (a)(1) or (b)(1) to demonstrate 
        that the institution or credit union is in compliance with the 
        guidance in such manner as the Board determines to be 
        appropriate and practicable.
          (3) Per individual per institution limitation.--No specific 
        insured depository institution or insured credit union may be 
        indemnified for losses in excess of $2,000 with respect to 
        checks and share drafts presented by any one individual.
  (e) Definitions.--For purposes of this Act, the following definitions 
shall apply:
          (1) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
          (2) Insured credit union.--The term ``insured credit union'' 
        has the same meaning as in section 101 of the Federal Credit 
        Union Act.
          (3) Insured depository institution.--The term ``insured 
        depository institution'' has the same meaning as in section 3 
        of the Federal Deposit Insurance Act.
  (f) Rule of Construction.--No provision of this section shall be 
construed as affecting any right or obligation of an insured depository 
institution or insured credit union to take any action against any 
person in connection with a fraudulent check, a fraudulent negotiation 
of a check, or any other intentional act of a fraudulent or deceptive 
nature.
  (g) Effective Date.--
          (1) In general.--Subject to paragraph (2), the provisions of 
        this section shall apply to checks or share drafts presented to 
        an insured depository institution or an insured credit union 
        during the period beginning on August 25, 2005, and ending 
        November 15, 2005.
          (2) Limited extension.--The period described in paragraph (2) 
        may be extended once for an additional 60 days if--
                  (A) the Board, after consulting with the Federal 
                Deposit Insurance Corporation and the National Credit 
                Union Administration, determines that the continuing 
                impact of the 2005 hurricane disasters on financial 
                intermediation between consumers and financial 
                institutions, on payment networks, and on other forms 
                of communication require an extension of the programs 
                established under this section in order to continue to 
                meet the immediate needs of victims of the disaster; 
                and
                  (B) notice of such determination is published in the 
                Federal Register at least 5 days before the end of the 
                period described in paragraph (1).

                          Purpose and Summary

    H.R. 3909, The Hurricane Check Cashing Relief Act, as 
amended, will provide emergency authority for the Federal 
Deposit Insurance Corporation and the National Credit Union 
Administration, in accordance with guidance issued by the Board 
of Governors of the Federal Reserve System, to guarantee checks 
or share drafts cashed by insured depository institutions and 
insured credit unions for the benefit of customers who are 
victims of certain 2005 hurricanes. Specifically, H.R. 3909, as 
amended, provides certain financial institutions the incentive 
to continue their work with the victims of the recent 
hurricanes by indemnifying federally insured banks and credit 
unions that cash fraudulent or non-sufficient fund checks or 
share drafts. Institutions must continue to use due diligence 
in ensuring that checks or share drafts are legitimate and are 
collectable.
    The bill, as amended, provides that up to $200 million from 
the Federal Reserve Bank's surplus fund is available to 
indemnify federally insured financial institutions that may 
receive up to $2,000 for any check or share draft presented by 
any one individual who has resided in the areas affected by 
Hurricanes Katrina, Rita and Wilma, that is subsequently 
uncollectible between August 25, 2005, and November 15, 2005.

                  Background and Need for Legislation

    In 2005, numerous hurricanes have resulted in tremendous 
harm and damage to Alabama, Florida, Louisiana, Mississippi, 
and Texas. It has been estimated that over one million people 
have been displaced because of these hurricanes and 
approximately 500,000 individuals may have lost their jobs. 
While the economic impact is still being estimated, the 
displacement of people and the large number of affected insured 
credit unions and insured depository institutions have made 
access to cash, credit, social security checks and other 
financial services very difficult. The situation has been 
further complicated by the victim's loss of their personal 
identification and financial records.
    In early September, 2005, the House Financial Services 
Committee held a briefing for members by the financial services 
industry and Federal financial regulators in the aftermath of 
Hurricane Katrina to provide an outline of relief efforts. The 
Committee also held two hearings in response to Hurricane 
Katrina in September, 2005. The Financial Institutions and 
Consumer Credit Subcommittee held a hearing on September 14, 
2005, that focused on the financial services response to 
Hurricane Katrina and regulatory and legislative relief 
recommendations to facilitate their efforts. The Housing and 
Community Opportunity Subcommittee held a hearing on September 
15, 2005, that focused on the critical housing needs in the 
aftermath of Hurricane Katrina industry's relief efforts. Many 
recommendations were provided to the Committee at these 
hearings and H.R. 3909 addresses some of these suggestions.
    The bill is intended to reduce the suffering and financial 
difficulties for those victims of the 2005 hurricanes who are 
unable to access their home insured depository institutions or 
insured credit unions, who cannot utilize their ATMs, who lack 
some or all of the requisite forms of identification to cash 
checks or share drafts, and who cannot access their deposits at 
an insured depository institution or insured credit union by 
guaranteeing their ability to cash checks or insured share 
drafts up to $2,000 at insured depository institutions and 
insured credit unions.

                                Hearings

    The Subcommittee on Financial Institutions and Consumer 
Credit held a hearing on September 14, 2005, on ``Hurricane 
Katrina: The Financial Institutions' Response.'' The following 
witnesses testified:
          Mr. McKinley W. ``Mac'' Deaver, Executive Director, 
        Mississippi Bankers Association, representing American 
        Bankers Association;
          Mr. Ken Bordelon, President and CEO, E Federal Credit 
        Union (LA), representing National Association of 
        Federal Credit Unions;
          Mr. C. R. ``Rusty'' Cloutier, President and CEO, 
        MidSouth Bank, N.A. (LA), representing Independent 
        Community Bankers of America;
          Mr. Charles Elliott, President and CEO, Mississippi 
        Credit Union Association, representing Credit Union 
        National Association;
          Ms. Diane Casey-Landry, President and CEO, America's 
        Community Bankers;
          Mr. David Gibbons, Senior Executive Vice President 
        and Chief Risk Officer, HSBC North America (IL), 
        representing American Financial Services Association; 
        and
          Mr. Hilary Shelton, Director, Washington Bureau, 
        NAACP.
    The Subcommittee on Housing and Community Opportunity held 
a hearing on September 15, 2005, on ``Emergency Housing Needs 
in the Aftermath of Hurricane Katrina.'' The following 
witnesses testified:
          Mr. Henry A. Alvarez III, President and CEO, San 
        Antonio Housing Authority, San Antonio, TX, testifying 
        on behalf of National Association of Housing and 
        Redevelopment Officials;
          Ms. Sharon M. Daly, Senior Advisor for Public Policy, 
        Catholic Charities USA;
          Ms. J. K. Huey, Senior Vice President, IndyMac Bank, 
        Pasadena, CA, testifying of behalf of the Mortgage 
        Bankers Association;
          Ms. Kay Miller, President, T.A. Miller, Inc. and Tra-
        Dor, Inc.; Management, Shreveport, LA, testifying on 
        behalf of the Council for Affordable and Rural Housing;
          Mr. David A. Roberson, President and CEO, Cavalier 
        Homes, Inc., Addison, AL, testifying on behalf of 
        Manufactured Housing Institute and the Manufactured 
        Housing Association for Regulatory Reform;
          Ms. Nan P. Roman, President, National Alliance to End 
        Homelessness;
          Ms. Barbara Thompson, Executive Director, National 
        Council of State Housing Agencies;
          Mr. David F. Wilson, Homebuilder, Ketchum, ID, 
        President, National Association of Home Builders;
          Mr. Clanton Beamon, Executive Director, Delta Housing 
        Development Corporation, Indianola, MS, testifying on 
        behalf of the National Rural Housing Coalition;
          Mr. Jeffrey I. Brodsky, President, Related Management 
        Company, LLC, New York City, NY, testifying on behalf 
        of the National Multi Housing Council and National 
        Leased Housing Association;
          Ms. Judith A. Kennedy, President and CEO, National 
        Association of Affordable Housing Lenders;
          Ms. Michelle Norris, Senior Vice President of 
        Development, National Church Residences, testifying on 
        behalf of the American Association of Homes and 
        Services for the Aging;
          Ms. Ellen Lee, Deputy Executive Assistant for 
        Neighborhood Development, City of New Orleans, LA, 
        testifying on behalf of the National Community 
        Development Association (submitted for the record); and
          National Association of Realtors (submitted for the 
        record).

                        Committee Consideration

    The Committee on Financial Services met in open session on 
October 27, 2005, and ordered H.R. 3909, the Hurricane Check 
Cashing Relief Act of 2005, favorably reported to the House 
with an amendment by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. An amendment in the nature 
of a substitute offered by Mr. Bachus, No. 1,making various 
technical and substantive changes to the bill, was agreed to by voice 
vote. A motion by Mr. Oxley to report the bill, as amended, to the 
House with a favorable recommendation was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held hearings and made 
findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    This bill provides emergency authority for regulators to 
guarantee checks cashed by insured depository institutions and 
credit unions for the benefit of individuals who resided in the 
areas affected by Hurricanes Katrina, Rita, and Wilma as of 
August 25, 2005, in order to assist in the recovery from the 
destructive hurricanes of 2005.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 30, 2005.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3909, the 
Hurricane Check Cashing Relief Act of 2005.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Kathleen 
Gramp (for federal costs) and Barbara Edwards (for federal 
revenues).
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 3909--Hurricane Check Cashing Relief Act of 2005

    Summary: H.R. 3909 would direct the Federal Deposit 
Insurance Corporation (FDIC) and National Credit Union 
Administration (NCUA) to idemnify insured financial 
institutions for any losses resulting from certain 
uncollectible checks presented by individuals who resided in 
areas designated as disaster areas after August 25, 2005. This 
idemnification would apply to checks presented to those 
institutions from August 25, 2005, through November 15, 2005. 
Indemnification would be limited to $2,000 per individual. 
Under the bill, the Federal Reserve would be required to 
transfer up to $200 million from its surplus to cover the 
indemnification payments.
    CBO estimates that enacting this bill would increase direct 
spending for indemnification payments by about $120 million 
over the 2006-2007 period. Those outlays would be initially 
offset by a transfer of $120 million from the Federal Reserve. 
Such transfers are recorded in the budget as an increase in 
revenues. However, monies transferred from the surplus of the 
Federal Reserve would no longer be invested in securities and 
would no longer earn interest that otherwise would be 
transferred to the Treasury--as the Federal Reserve routinely 
does each year. CBO estimates that the interest earnings 
forgone would reduce revenues by about $1 million in 2006, $3 
million in 2007, and $6 million each year thereafter. 
Therefore, CBO estimates that net revenues over the 2006-2015 
period would increase by $68 million. Thus, enacting this bill 
would result in a net increase in federal deficits of about $52 
million over the 2006-2015 period, with additional revenue 
losses of about $6 million a year continuing indefinitely 
thereafter.
    H.R. 3909 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
that the mandate would result in no costs to state, local, or 
tribal governments. Hence, the mandate would not have costs 
that exceed the threshold established in that act ($62 million 
in 2005, adjusted annually for inflation). H.R. 3909 contains 
no new private-sector mandates as defined in UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3909 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                     By fiscal year, in millions of dollars--
                                 -------------------------------------------------------------------------------
                                   2006    2007    2008    2009    2010    2011    2012    2013    2014    2015
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

FDIC and NCUA...................
    Estimated Budget Authority..      30      90       0       0       0       0       0       0       0       0
    Estimated Outlays...........      30      90       0       0       0       0       0       0       0       0

                                               CHANGES IN REVENUES

Estimated Revenues..............      29      87      -6      -6      -6      -6      -6      -6      -6      -6
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted before the end of calendar year 2005. We 
assume that any insured institution in the country could seek 
reimbursement for uncollectible checks issued by individuals 
from areas in the states of Alabama, Florida, Louisiana, 
Mississippi, and Texas that have been declared eligible for any 
type of disaster assistance since August 25, 2005.

Direct spending

    The amounts paid to indemnify insured depository 
institutions and credit unions would depend on the volume of 
uncollectible checks submitted for reimbursement. CBO expects 
that requests for indemnification would equal the normal volume 
of uncollectible checks for the portion of the population 
covered by the bill, plus any extraordinary losses that may 
have occurred in the wake of Hurricanes Katrina, Rita, and 
Wilma. Based on industry surveys of check fraud, CBO estimates 
that indemnification payments could range from $40 million to 
$200 million, with a midpoint of about $120 million. Given the 
time needed to issue regulations and process requests, CBO 
assumes that most of the payments would be made in fiscal year 
2007.
    CBO expects that insured financial institutions would 
normally expect to lose about $40 million from bad checks 
issued over a three-month period from the affected areas. That 
estimate is based on a 2004 survey by the American Bankers 
Association on check fraud experienced by banks and savings 
associations (the data did not include credit unions). The 
study found that attempted check fraud totaled about $5.5 
billion in 2003, but actual losses were less than $700 million 
(or 13 percent of the attempted fraud) because of various 
controls and detection measures. Prorating those losses by 
population--17 percent of the country's population resided in 
the areas covered by the bill--suggests that the normal level 
of annual losses for this group totaled about $120 million in 
2003. Assuming losses occur evenly throughout the year, losses 
for a three-month period would have totaled about $30 million 
in 2003. Adjusting those figures to include credit unions and 
possible growth in the level of losses from 2003 through 2005 
suggests that the normal losses covered by the bill would total 
about $40 million.
    How Hurricane Katrina and other disasters affected the 
level of attempted fraud and institutions' ability to prevent 
it are very uncertain. So too is the effect of having a federal 
indemnification program, which could reduce institutions' 
incentives to investigate and prosecute check fraud. There are 
no data available at this time to determine whether costs would 
reach the $200 million limit in the bill for the Federal 
Reserve's coverage of agency costs; that amount is five times 
higher than CBO's estimate of normal losses but lower than 
CBO's estimate of the region's proportionate share of the 
routine level of attempted fraud (about $300 million, after 
adjusting for credit unions and possible growth in attempted 
fraud). Thus, the agencies' indemnification payments could 
reach the cap in the bill if there was a significant drop in 
institutions' ability to stem attempted fraud by individuals 
from the disaster areas over the designated period.

Revenues

    This bill would direct the Federal Reserve banks to 
transfer up to $200 million from their surplus funds to the 
FDIC and NCUA to cover the indemnification payments for 
uncollectible checks or share drafts presented to them by 
insured banks or credit unions. Transfers from the Federal 
Reserve System to the Treasury are classified as revenues. 
Thus, anything that affects the size of the transfers affects 
federal revenues.
    Such transfers originate with the net income of the Federal 
Reserve System. The Federal Reserve possesses a portfolio of 
assets that generates a large amount of interest income. Net 
income of the system represents the amount of the system's 
earnings less its expenses of operation. Out of its annual net 
income, the Federal Reserve pays a fixed dividend to its member 
banks, retains monies for its surplus fund, and voluntarily 
remits the remaining profits to the U.S. Treasury. The system's 
surplus fund is a stock of retained earnings accumulated over 
time and is set by the Federal Reserve each year at a level 
equal to the paid-in capital of its member banks. The surplus 
is invested in interest-earning assets and generates some of 
the income that is in turn remitted to the Treasury in 
subsequent years.
    H.R. 3909 specifies that the amount to be remitted (to 
cover the indemnification payments) would be paid from the 
Federal Reserve surplus. The bill also would prohibit the 
Federal Reserve from replenishing its surplus. Thus, any 
remittances would be in addition to the amount that CBO has 
estimated as regular annual transfers of the Federal Reserve's 
net income to the U.S. Treasury, after payment of dividends and 
retention of monies for its surplus fund.
    CBO estimates that the additional transfer under the bill 
would increase revenues by $30 million in fiscal year 2006 and 
$90 million in fiscal year 2007. However, the permanent 
reduction in the surplus of the Federal Reserve would lead to a 
decrease in investments of the Federal Reserve. This permanent 
decrease in investments would cause a drop in the investment 
income that is earned by the Federal Reserve and subsequently 
sent to the Treasury as revenues. CBO estimates that the 
revenues from the Federal Reserve would thereby be lowered by 
$1 million in fiscal year 2006, $3 million in 2007, and $6 
million each year thereafter. Thus, CBO estimates that these 
forgone interest earnings would total $52 million over the 
2006-2015 period, and an additional $6 million a year after 
2015.

Overall impact for revenue transferred from the Federal Reserve surplus

    H.R. 3909's provisions for transferring the Federal Reserve 
surplus give the appearance of financing the additional outlays 
of the FDIC and NCUA. This initial outcome is attributable to 
the fact that the Federal Reserve is treated as a 
nongovernmental entity for budgetary purposes, with its 
transfers to the Treasury counted as revenues. The proposal 
would also reduce future Federal Reserve transfers to the 
Treasury by an amount equal to the interest earned on the 
initial $120 million transfer. Over time, the reduction in 
these remissions would equal the value of the transfer to the 
FDIC and NCUA (in present value terms). But much of the loss of 
Federal Reserve payments occurs outside the budget window of 10 
years so that the initial costs of the legislation appear to be 
partially paid for. In economic terms, however, H.R. 3909 does 
not provide any new resources to the federal government to pay 
for the outlays called for by the legislation.
    Estimated impact on state, local, and tribal governments: 
H.R. 3909 contains an intergovenmental mandate as defined in 
UMRA. Section 2(d)(1)(E) would preempt any state laws that 
restrict the ability of the FDIC and the NCUA to recover 
certain funds. CBO is unaware of any state that has such a law. 
We estimate that this mandate would result in no costs to 
state, local, or tribal governments.
    Estimated impact on the private sector: This bill contains 
no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Spending: Kathleen Gramp; 
Federal Revenues: Barbara Edwards; Impact on State, Local, and 
Tribal Governments: Sarah Puro; Impact on the Private Sector: 
Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis; G. Thomas Woodward, Assistant 
Director for Tax Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title, purpose

    This section establishes the short title of the bill, the 
``Hurricane Check Cashing Relief Act of 2005.'' This section 
also specifies the Congressional purposes of the Act.

Section 2. Emergency authority to guarantee checks cashed for victims 
        of certain 2005 hurricanes

    This section directs the Federal Deposit Insurance 
Corporation (FDIC) and the National Credit Union Administration 
(NCUA) to establish, in accordance with emergency guidance 
issued by the Board of Governors of the Federal Reserve System 
(Board), an emergency program under which an insured depository 
institution and insured credit union may obtain an 
indemnification commitment from the FDIC for loss it has 
suffered (up to $2,000 for any one individual) through cashing 
a check or share draft between August 25, 2005, and November 
15, 2005, that: (1) is presented for payment by any individual 
who, as of August 25, 2005, resided in Florida, Alabama, 
Mississippi, Louisiana, or Texas in a Presidentially declared 
major disaster area; and (2) is subsequently uncollectible.
    This section also amends the Federal Reserve Act to direct 
the Federal Reserve banks to transfer from their surplus funds 
to the Board for the transfer to the Corporation or 
Administrator, up to $200 million to meet the indemnification 
requirements of this Act. This section also directs the Board 
to issue emergency guidance and limitations for the Corporation 
and Administration to implement the provisions of this section. 
The Board, in consultation with the Corporation and 
Administration, may extend for 60 days the provisions of this 
section after appropriate notice is published in the Federal 
Register of this limited extension.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                  SECTION 7 OF THE FEDERAL RESERVE ACT


                          division of earnings

  Sec. 7. (a) * * *
  (b) Transfer for Fiscal Year 2000.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Additional transfers to cover certain relief 
        efforts resulting from hurricanes of 2005.--
                  (A) In general.--Subject to subparagraph (C), 
                from the surplus funds of the Federal reserve 
                banks maintained pursuant to subsection (a)(2), 
                the Federal reserve banks shall transfer to the 
                Board of Governors of the Federal Reserve 
                System for transfer to the Federal Deposit 
                Insurance Corporation and the National Credit 
                Union Administration, such sums as are 
                necessary to meet any payments required under 
                subsection (a)(1) or (b)(1) of section 2 of the 
                Hurricane Check Cashing Relief Act. In the 
                event that the total amount of requests for 
                indemnification received by the Federal Deposit 
                Insurance Corporation and the National Credit 
                Union Administration exceed the maximum amount 
                specified under subparagraph (C), the sums 
                transferred to the Federal Deposit Insurance 
                Corporation and the National Credit Union 
                Administration, respectively, shall be in 
                proportion to the amount of payments required 
                under subsection (a)(1) and (b)(1) of section 2 
                of the Hurricane Check Cashing Relief Act of 
                2005, respectively.
                  (B) Allocation by federal reserve board.--Of 
                the total amount required to be paid by the 
                Federal reserve banks, the Board of Governors 
                of the Federal Reserve System shall determine 
                the amount each such bank shall pay.
                  (C) Maximum amount.--The total amount 
                transferred under subparagraph (A) from all 
                Federal reserve banks shall not exceed 
                $200,000,000.
                  (D) Replenishment of surplus fund 
                prohibited.--No Federal reserve bank may 
                replenish such bank's surplus fund by the 
                amount of any transfer by such bank under 
                subparagraph (A).

           *       *       *       *       *       *       *


                                  
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