A bill to allow all businesses to make up to 24 transfers each month from interest-bearing transaction accounts to other transaction accounts , to require the payment of interest on reserves held for depository institutions at Federal reserve banks, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Business Checking Freedom Act of 
2003''.

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 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. 3. 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) 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. 4. 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. 5. 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 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 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.''.

Summary: Business Checking Freedom Act of 2003 - Amends Federal law to authorize interest-bearing transaction accounts for all businesses, permitting up to 24 transfers per month to another account of the owner in the same institution. Authorizes the payment of interest by a Federal reserve bank at least quarterly on balances maintained there on behalf of a depository institution. Amends the Federal Reserve Act to revise the ratio of reserves a depository institution must maintain against its transaction accounts, permitting a ratio of zero. Directs the Federal Reserve banks in FY 2003 through 2007 to transfer to the Board for transfer to the Secretary of the Treasury, for deposit in the general fund, additional surplus funds equal to the net cost of their interest payments to depository institutions.