Small Business Interest Checking Act of 1998

Summary: Small Business Interest Checking Act of 1998 - Amends the Federal Deposit Insurance Act to provide that any depository institution may permit:  (1) the owner of any interest-bearing or dividend-earning account to make up to 24 transfers per month, for any purpose, to another account of the owner in the same institution; and (2) the owner of any deposit or account (negotiable order of withdrawal, or NOW, account) to make withdrawals by negotiable or transferable instruments for the purpose of making payments to third parties. 
Amends the Federal Reserve Act, the Home Owners' Loan Act, and the Federal Deposit Insurance Act to repeal the proscription against interest payments on demand deposits.  Amends the Federal Reserve Act to:  (1) mandate quarterly payment of interest on depository institution reserve requirement balances; and (2) authorize a reduction to zero percent of the mandatory ratios for such reserve requirements (which would thus eliminate such reserve requirements).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Interest Checking Act 
of 1998''.

SEC. 2. 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 on which 
interest or dividends are paid to make up to 24 transfers per month, 
for any purpose, to another account of the owner in the same 
institution. Nothing in this subsection shall be construed to prevent 
an account offered pursuant to this subsection from being considered a 
transaction account (as defined in section 19(b) of the Federal Reserve 
Act (12 U.S.C. 461(b)) for purposes of such Act.''.

SEC. 3. AMENDMENTS RELATING TO SAVINGS AND DEMAND DEPOSIT ACCOUNTS AT 
              DEPOSITORY INSTITUTIONS.

    (a) NOW Accounts Authorized for All Businesses.--Section 2 of 
Public Law 93-100 (12 U.S.C. 1832(a)(2)) is amended to read as follows:

``SEC. 2. WITHDRAWALS BY NEGOTIABLE OR TRANSFERABLE INSTRUMENTS FOR 
              TRANSFERS TO THIRD PARTIES.

    ``Notwithstanding any other provision of law, any depository 
institution (as defined in section 3 of the Federal Deposit Insurance 
Act) may permit the owner of any deposit or account to make withdrawals 
from such deposit or account by negotiable or transferable instruments 
for the purpose of making payments to third parties.''.
    (b) Repeal of Prohibition on Payment of Interest on Demand 
Deposits.--
            (1) Federal reserve act.--Section 19 of the Federal Reserve 
        Act (12 U.S.C. 371a) is amended by striking subsection (i).
            (2) Home owners' loan act.--The 1st 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 of the 
        Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by 
        striking subsection (g).
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2004.

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 to meet the reserve requirements of this 
                subsection applicable with respect to such depository 
                institution shall 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)(B), in a 
                        Federal reserve bank by any such entity on 
                        behalf of depository institutions which are not 
                        member banks.''.
    (b) Technical and Conforming Amendment.--
            (1) Section 19(b) of federal reserve act.--Section 19(b)(4) 
        of the Federal Reserve Act (12 U.S.C. 461(b)(4)) is amended by 
        striking subparagraph (C).
            (2) Section 19(c) of federal reserve act.--Section 
        19(c)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(c)(1)(A)) 
        is amended 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) of the Federal Reserve Act (12 U.S.C. 461(b)(2)) 
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),''.