Madam Speaker, I yield myself as much time as I may consume. I rise today in support of H.R. 758, the Business Checking Freedom Act of 2003. By repealing the prohibition on the payment of interest on demand deposits, this bill will repeal…
Madam Speaker, I yield myself as much time as I may consume.
I rise today in support of H.R. 758, the Business Checking Freedom Act of 2003. By repealing the prohibition on the payment of interest on demand deposits, this bill will repeal the last vestige of interest rate controls enacted in the 1930s during the Depression. This prohibition long ago ceased to serve any useful purpose and has imposed unnecessary costs on banks and their business customers, particularly small banks and businesses that cannot afford sophisticated cash management products. The repeal of this prohibition is long overdue.
For institutions that cannot offer demand deposits, however, the bill includes a provision added as a result of an amendment that I cosponsored with the gentleman from California (Mr. Royce), the gentleman from Massachusetts (Mr. Frank), the ranking member, and others that permits depository institutions to offer interest-bearing negotiable order of withdrawal, or NOW, accounts to their commercial customers. This provision will allow institutions such as industrial loan companies to offer the same type of interest-bearing account to business customers that they have long been able to offer to individuals, nonprofit organizations and public entities.
I think it is important to note this provision does not permit industrial companies to offer demand deposits. As has been the case since the enactment of the Competitive Banking Equality Act of 1987, ILCs would continue to be prohibited from offering demand deposits. Moreover, ILCs will continue to be subject to the same safety and soundness regulations by the FDIC and by their State regulators as under current law.
There is no indication that State regulators will allow their chartering authority to be used in an inappropriate manner. I note, for example, that State authorities in the past have rejected applications by some commercial companies to establish ILCs where there were concerns about how the charter would be used.
H.R. 758 also will permit the Federal Reserve Board to lower the reserves it currently requires on transaction accounts, such as demand deposits and NOW accounts, and to pay interest on the reserve balances that depository institutions are required to maintain. While providing these cost savings for banks, the bill will require the board to conduct an annual survey on a broad range of bank fees and services and to report to Congress on trends in the cost and availability of retail banking services. This survey will provide Congress the information we need to determine the extent to which retail customers receive the benefit from the cost savings we are creating with this bill.
H.R. 758 is a good, balanced bill that resulted in benefits for both banks and
their customers. I recommend passage of this bill.
I want to thank the gentleman from Alabama (Mr. Bachus), the subcommittee chairman, and the gentleman from Vermont (Mr. Sanders), the ranking member, for this bill. I want to recognize that the gentleman from Ohio (Mr. Oxley), the chairman of the full committee, and the gentleman from Massachusetts (Mr. Frank) for their support of this, as well; and I want to acknowledge the lead sponsors of this bill, which are the gentlewoman from New York (Mrs. Kelly), the gentlewoman from New York (Mrs. Maloney), the gentlewoman from West Virginia (Mrs. Capito), the gentleman from California (Mr. Sherman), and the gentleman from Kansas (Mr. Moore).
Madam Speaker, I reserve the balance of my time.
Mr. Speaker, I yield myself 1 minute to address a couple of the concerns that have been raised.
First of all, there is nothing in this bill that creates new authority to offer accounts to businesses. So while the Federal Reserve did suggest that we are altering the structure of banking in the United States, the institutions raised already can offer ILCs. Tyco already has one. So this bill talks about parity. It talks about banks and industrial corporations both offering interest on business checking accounts. That is all this bill does.
There is a broader discussion about the validity of the ILCs. That is not what this bill is about. It is about offering two entities to have parity in terms of offering the same service.
And let me mention one other point in this regard, and that is in terms of the concern about mixing of banking and commerce. FDIC Chairman Powell has stated that he does not have any safety or soundness concerns relating to this provision of the bill.
Mr. Speaker, I yield 4 minutes to the gentlewoman from New York (Mrs. Maloney).
Mr. Speaker, I reserve the balance of my time.
Mr. Speaker, I reserve the balance of my time.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this is a piece of legislation that is overdue. The notion of eliminating interest on business checking accounts is something that seems like common sense. I was a small businessman before I came to Congress, and it never seemed to make sense to me is that this prohibition existed. We are talking about removing some inefficiencies that exist in our financial marketplace. That is why this legislation has such strong bipartisan support. I encourage Members to pass this legislation.
Mr. Speaker, I yield back the balance of my time.