[Pages H1107-H1111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

BUSINESS CHECKING FREEDOM ACT OF 2002

Mr. TOOMEY. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1009) to repeal the prohibition on the payment of interest
on demand deposits, as amended.
The Clerk read as follows:

H.R. 1009

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 ``Business Checking Freedom
Act of 2002''.

SEC. 2. 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``(i) [Repealed]''.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``(g) [Repealed]''.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. 3. INTEREST-BEARING TRANSACTION ACCOUNTS AUTHORIZED FOR
ALL BUSINESSES.

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.''.

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 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.--Section 1002 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811
note) is amended to read as follows:

``SEC. 1002. 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.

[[Page H1108]]

``(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, 2004, and not later than
June 1 of each subsequent year.
``(4) Transition provision.--Notwithstanding section
4(c)(3) of the Business Checking Freedom Act of 2002, the
Board of Governors of the Federal Reserve System shall, on an
interim basis, continue to comply with the requirements for
the bank fee survey under the amendment made to this section
by section 108 of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 for reports submitted to the
Congress under this section not later than June 1, 2003,
except that the Board shall incorporate within any such
report, to the extent possible, any additional information on
any credit card fee or charge that is available to the Board
even though such information is not required by such
amendment.
``(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) Amendment to the truth in lending act.--
(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, 2003.
(3) Repeal of sunset provision.--Section 108 of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994
is hereby repealed.
(4) Nonapplicability of other provision of law.--Section
3003(a)(1) of the Federal Reports Elimination and Sunset Act
of 1995 (31 U.S.C. 1113 note) shall not apply to any report
required to be submitted under section 1002(b) of Financial
Institutions Reform, Recovery, and Enforcement Act of 1989.
(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. 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. 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 2002 through 2006.--
``(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 2002
through 2006.
``(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 2002 through 2006, 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 2002 through 2006, 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 2002
through 2006, 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. 7. 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.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Pennsylvania (Mr. Toomey) and the gentleman from Texas (Mr. Gonzalez)
each will control 20 minutes.
The Chair recognizes the gentleman from Pennsylvania (Mr. Toomey).

General Leave

Mr. TOOMEY. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on this legislation and to insert extraneous materials on the bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Pennsylvania?
There was no objection.
Mr. TOOMEY. Mr. Speaker, I yield myself 5 minutes as I rise today in
support of H.R. 1009, the Business Checking Freedom Act of 2002.
Let me begin by saying that as a former small business owner, I have
seen firsthand just how challenging it can be to run and operate a
small business and the endless headaches that come with playing so many
roles: making a payroll every Friday, complying

[[Page H1109]]

with an almost endless amount of regulation, paperwork, and taxes.
It is an unfortunate fact that regulation itself, applied equally to
large and small entities, is more burdensome to the smaller businesses,
because they just have fewer resources with which to meet the needs of
the regulatory environment and to cover the overhead costs. Despite
these obstacles, many small businesses are thriving.
What I think we can do here in Congress is ask ourselves, Are there
ways that we can help these businesses to thrive, help them expand
their bottom line, help them to hire more workers, become more
productive, and contribute more to our economy? I think we can do that
by fostering an environment where the free enterprise market system can
thrive. Part of that means eliminating unnecessary regulation. That is
something we can do today.
It may be hard to believe for many folks, but we actually have a law
on the books today that prohibits banks from even having the option of
offering to pay interest on the checking accounts held by businesses
with those banks. It is actually illegal for a bank in America to pay
interest to a business that keeps a balance in its checking account.
Now, this has implications. The inability of depository institutions
to pay interest on these business checking accounts really hurts all
sectors of our economy, but the harm is especially pronounced on small
businesses. Specifically, it means that the small florist shop in
Pennsburg, Pennsylvania, cannot earn any interest on the hard-earned
balance that they have to keep in their checking account to pay the
bills. Over the course of a year or two, that could mean several
hundred dollars. In time it could mean the difference between making a
payroll and not making a payroll.
It means the auto mechanics shop on Northampton Street in Easton,
Pennsylvania, cannot earn the interest on their hard-earned checking
account balance, and that could make the difference in investing in the
latest technology for diagnostic equipment for car repairs.
Now more than ever, a change in this law would be very helpful to
businesses as they struggle through this economic slowdown and try to
get this economy moving again.
Today, what Congress can do to help is we can pass H.R. 1009, the
Business Checking Freedom Act of 2002. The bill contains several
commonsense reforms; but most importantly, it eliminates the ban on the
payment of interest on business checking accounts that is currently
imposed on banks after a 2-year transition period. The ban has been in
effect since the Great Depression. Frankly, it was probably never a
very good idea, but it is certainly long overdue for appeal now; and
today is our chance to abolish this ban.
Support for this bill is nearly universal. The U.S. Chamber of
Commerce, the NFIB, the America's Community Bankers, the National
Association of Federal Credit Unions, the Association for Financial
Professionals, and the Independent Insurance Agents of America are just
a handful of the independent organizations that support this bill.
In addition, on March 19 of this year, President Bush announced that
repealing the prohibition on business interest checking would be
included as part of his small business legislative plan.
In addition to the President, the Federal regulators support this
legislative change as well. In their 1996 joint report, ``Streamlining
of Regulatory Requirements,'' the Board of Governors of the Federal
Reserve System, the FDIC, the Office of the Comptroller of the
Currency, and the Office of Thrift Supervision stated that they believe
that the 1933 statutory prohibition against payment of interest on
business checking accounts ``no longer serves a public purpose.''
There is another important feature that I would like to touch on
briefly in this bill, and that is that in addition to providing small
business with much-needed relief, H.R. 1009 would authorize a payment
of interest on certain reserves that banks are required to maintain at
the Federal Reserve, the so-called ``sterile reserves.'' Just as it
makes no sense to prohibit banks from paying interest on business
checking, it also makes no sense to continue to prohibit the Federal
Reserve from paying interest to banks on their sterile reserves.
Federal Reserve Chairman Alan Greenspan has testified before our
committee, the Committee on Financial Services, that repealing the
prohibition against paying interest on sterile reserves would have the
additional benefit of facilitating the Federal Reserve's management of
U.S. monetary policy. In part because the Fed pays no interest on these
Reserves, balances at Federal Reserve banks have declined dramatically
in recent years. The Federal Reserve believes that paying interest on
these reserves would have the effect of stemming that decline and
thereby enhancing their ability to conduct monetary policy.
I would like to thank the gentleman from Ohio (Mr. Oxley), the
chairman of this committee, and the gentleman from New York (Mr.
LaFalce), the ranking member, for their strong support of this bill and
for bringing it to the House floor today. I would also like to thank
the gentlewoman from New York (Mrs. Kelly) and the gentleman from
Pennsylvania (Mr. Kanjorski) for their contributions, their support,
and their leadership on this legislation. I believe this legislation is
long overdue. I am hopeful that the other Chamber will soon bring it up
as well. I urge my colleagues to pass this pro-small business, pro-
small bank, pro-free market legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. GONZALEZ. Mr. Speaker, I yield myself such time as I may consume.
I rise in strong support of H.R. 1009. This legislation repeals an
outdated prohibition against banks paying interest to their business
customers on their checking accounts, and we support it wholeheartedly.
The repeal of the ban on interest-bearing checking accounts
represents another important step in the modernization of our financial
services industry. This ban was adopted in the Great Depression out of
fear that banks seeking business accounts would bid against each other
with higher interest rates and, thus, contribute to bank insolvencies.
Federal banking agencies have all concluded that the ban no longer
serves a useful public purpose and that it is outdated in this modern
financial services environment.
Mr. Speaker, H.R. 1009 promotes healthy competition within the
financial services community for commercial checking accounts, which
can only benefit the business community, particularly the small
business community, with more efficient, cost-effective financial
services.
Current law and market conditions prevent many small businesses from
obtaining easy access to interest-bearing checking accounts, while many
larger businesses and their banks have found a way around the interest
prohibition through complicated sweep accounts and other devices. This
legislation would end this discrepancy between small and large
businesses and, ultimately, increase the efficiency of the Nation's
economy.

{time} 1530

I do share the concerns of many of my colleagues on the Committee on
Financial Services that the Federal Reserve sterile reserve interest
payment provisions of this bill may contribute to the budget deficit.
But I believe that H.R. 1009, on balance, makes an important and
necessary contribution to the long-term health of our Nation's economy.
I would also like to note that this bill includes a Democratic-
sponsored provision that will provide an annual assessment by the
Federal Reserve of the fees charged retail bank accounts. With fees
representing an ever-growing share of bank earnings, an annual survey
of retail bank fees is, in my view, increasingly important.
Mr. Speaker, I believe H.R. 1009 makes an important contribution to
improving the financing opportunities for many small businesses across
the country.
Mr. Speaker, I urge my colleagues to vote for the bill, and I reserve
the balance of my time.
Mr. TOOMEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to thank the gentleman from Texas (Mr.
Gonzalez) for his leadership and support of this legislation.
Mr. Speaker, I yield 3 minutes to the gentlewoman from Illinois (Mrs.
Biggert).

[[Page H1110]]

Mrs. BIGGERT. Mr. Speaker, I want to thank the gentleman from
Pennsylvania for yielding this time to me, and for agreeing to engage
in a colloquy on section 7 of the Business Checking Freedom Act of
2002.
I also want to thank him for including in this bill section 7, rule
of construction. This provision addresses the treatment of certain
services and benefits provided by banks in connection with escrow
accounts for real estate closing transactions. It makes certain that
the current legal definition of interest and the existing legal
treatment of real estate closing escrow transactions remain the same.
Under current Federal law and regulations, particularly the Federal
Reserve's regulation Q, banks may provide depositors with services and
benefits, instead of interest. I originally asked that a similar
provision be included in H.R. 974 in committee.
My interest in the issue stems from my experiences handling real
estate closings early in my legal career and seeing firsthand the
importance of regulation Q. I am grateful that adjustments are being
made in the current version, and that the bill is moving forward.
Section 7 is especially important to title insurance companies,
agents, and attorneys, who, like other businesses, often receive free
or lower-cost bank services instead of interest on their real estate
escrow accounts.
By not treating such services and benefits as constituting the
payment of interest, the Federal Reserve ensures a real estate closing
system that benefits both those who are delivering real estate services
and those borrowers who receive the ultimate benefits of more
efficient, lower-cost services.
In my legal practice, I became very familiar with these types of
arrangements, and can attest to the fact that they facilitated and made
more efficient the real estate closing process.
I strongly support this provision of the bill, and would ask the
gentleman from Pennsylvania (Mr. Toomey) if he is of the same view
regarding the intent of this provision.
Mr. TOOMEY. Mr. Speaker, will the gentlewoman yield?
Mrs. BIGGERT. I yield to the gentleman from Pennsylvania.
Mr. TOOMEY. Mr. Speaker, I would tell the gentlewoman, having
supported this provision since we first considered this bill last year,
I assure the gentlewoman that I agree with her. This provision
rightfully preserves the current status of real estate escrow accounts
held in connection with real estate closing transactions, and
specifically in services and benefits that banks may provide instead of
interest on such accounts.
Mrs. BIGGERT. I thank the gentleman for this clarification, Mr.
Speaker.
Mr. GONZALEZ. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
Mr. TOOMEY. Mr. Speaker, I yield such time as he may consume to the
gentleman from Alabama (Mr. Bachus), chairman of the Subcommittee on
Financial Institutions and Consumer Credit.
Mr. BACHUS. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, I rise in strong support of H.R. 1009. I first want to
commend the gentleman from Pennsylvania (Mr. Toomey) for bringing this
legislation to the floor. This is important legislation.
Members will recall that the House passed legislation very similar to
this, which the gentleman from Pennsylvania (Mr. Toomey) sponsored back
in April of last year. Then, at the end of last year, we passed the
terrorist insurance legislation. We passed several other important
pieces of legislation designed to get the economy going, designed to
eliminate unnecessary regulations, to stimulate growth, to create jobs,
and to end the recession in our regulations.
This legislation, like the terrorist insurance legislation that
President Bush strongly urged the other body to get to work in passing,
has not been passed by the other body. It is time that we sent this
legislation out with a strong vote and a strong message to the other
body to get to work passing this legislation and other important
legislation.
This legislation had strong bipartisan support. I want to commend the
gentleman from Texas (Mr. Gonzalez) and the gentleman from Pennsylvania
(Mr. Toomey). In speaking on this legislation, they basically have
already outlined to this House amply why we need this legislation.
Mr. Speaker, this is critically important to small businesses. Large
corporations use sweep accounts. They use sophisticated computer
programs and complex programs to earn interest on their commercial
deposits. Small business owners do not get those same benefits.
Money center banks can attract deposits from large corporate
customers. They promise them, through sweep accounts, that they will be
compensated for the use of their money. Our small community banks do
not do this, or it would cost them a great expense to do this.
This legislation would simply enable the small businesses, whether it
is a florist, a body shop, an auto body shop, a law firm, a doctor's
office, a beauty shop, it will allow them to get the same benefits that
large corporations are getting today.
It will also allow the small community banks to attract deposits. We
all know that that is key for the small banks or community banks in
attracting deposits, keeping those deposits and keeping those monies in
the local communities.
Again, I want to commend the gentleman from Pennsylvania (Mr. Toomey)
and the other party, the minority party, the gentleman from
Pennsylvania (Mr. Kanjorski) and the gentleman from Texas (Mr.
Gonzalez).
Also, finally, I want to commend the gentlewoman from New York (Mrs.
Kelly) for her work on this bill, and the chairman of the full
committee, the gentleman from Ohio (Mr. Oxley).
Mr. TOOMEY. Mr. Speaker, I yield such time as he may consume to the
gentleman from California (Mr. Royce).
Mr. ROYCE. Mr. Speaker, I thank the gentleman for giving me this
time, and I rise in strong support of the bill offered by the gentleman
from Pennsylvania (Mr. Toomey), which is titled H.R. 1009, the Business
Checking Freedom Act.
Mr. Speaker, this bill really follows in the footsteps of
groundbreaking legislation that we already passed in the House of
Representatives when we repealed outdated Depression era constraints on
the financial services industry and moved to move that industry into
the 21st century.
Giving banks the ability to pay interest on business checking
accounts has been endorsed by the President as part of his small
business agenda. The Federal Reserve Board also has long supported
efforts to allow banks to offer interest on demand accounts, and the
measure enjoys a broad base of industry support, including support from
the National Federation of Independent Businesses, from the U.S.
Chamber of Commerce, from America's Community Bankers, from the
National Association of Federal Credit Unions, from the Association of
Financial Professionals, and from the Independent Insurance Agents of
America.
The inability of depository institutions to pay interest on business
accounts hurts all sectors of the economy and decreases the overall
competitiveness of the American markets. This legislation gives small
businesses the jumpstart they need to create new jobs and improve the
economy while removing burdensome regulations from small banks and
allowing the market to work. I think that is the point that the author,
the gentleman from Pennsylvania (Mr. Toomey), makes so well.
Mr. Speaker, I strongly encourage all of my colleagues to support
this legislation and to strike a victory for the American economy. I
recognize that many businesses, by the way, maintain what are called
``now accounts.'' Those that do will not receive this benefit. I hope
that in the future, as this legislation moves, the restriction on
interest on corporate now accounts is also repealed.
Lastly, I just want to thank the gentleman from Pennsylvania (Mr.
Toomey) for the opportunity to speak in support of his important bill.
Mr. TOOMEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I think the case has been made very clearly that it is
long past time to repeal this really archaic Depression era law that no
longer serves any useful purpose, if it ever did.

[[Page H1111]]

I urge my colleagues to support this bill.
Mr. OXLEY. Mr. Speaker, the legislation the House considers today
represents the Financial Services Committee's continuing efforts to
modernize America's laws so that they promote economic growth and the
free market. Today's legislation is but one of many needed reforms to
ensure that outdated thinking doesn't stifle the competitive forces of
markets, and the changes made by H.R. 1009 are long overdue.
Under current law, small businesses are the only entities which must
leave their capital lying idle in non-interest bearing accounts. The
Business Checking Freedom Act of 2002 corrects this problem. This
change is simply common sense, which is why a similar measure sponsored
by Representative Kelly was passed by this body over a year ago.
Unfortunately, as has been the case with so many important reforms
passed by the House this Congress, the other body has refused to take
up Representative Kelly's bill for consideration. While the other body
waits, millions of small businesses across America are denied the
opportunity to earn interest, which they could put towards hiring more
workers and improving their operations.
H.R. 1009 is an important reform that will have tangible effects on
our economy. That's why the President included these reforms in his
plan for revitalizing small business and entrepreneurship. It is also
why Federal Reserve Chairman Alan Greenspan supports this bill. By
passing this legislation today the House will continue to demonstrate
its leadership in improving our laws to reflect the realities of the
21st century.
Mr. Speaker, it is time for the other body to follow our lead. I
thank Representative Toomey for his outstanding leadership in this
area. His efforts will help small businessmen and women across America,
and as Chairman of the Financial Services Committee I am grateful. I
urge all of my colleagues to support H.R. 1009.
Mr. TOOMEY. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
The SPEAKER pro tempore (Mr. Walden of Oregon). The question is on
the motion offered by the gentleman from Pennsylvania (Mr. Toomey) that
the House suspend the rules and pass the bill, H.R. 1009, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.

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