I

106TH CONGRESS

1ST SESSION H. R. 1435

To allow depository institutions to offer negotiable order of withdrawal accounts to all businesses, to repeal the prohibition on the payment of

interest on demand deposits, to require the Board of Governors of the

Federal Reserve System to pay interest on certain reserves, and for

other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 15, 1999

Mr. METCALF (for himself, Mr. LEACH, and Mr. KANJORSKI) introduced the

following bill; which was referred to the Committee on Banking and Financial Services

A BILL

To allow depository institutions to offer negotiable order

of withdrawal accounts to all businesses, to repeal the

prohibition on the payment of interest on demand deposits, to require the Board of Governors of the Federal

Reserve System to pay interest on certain reserves, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Small Business Bank5 ing Regulatory Relief Act of 1999’’.
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1 SEC. 2. AMENDMENTS RELATING TO SAVINGS AND DEMAND

2 DEPOSIT ACCOUNTS AT DEPOSITORY INSTI3 TUTIONS.

4 (a) INTEREST-BEARING TRANSACTION ACCOUNTS

5 AUTHORIZED FOR ALL BUSINESSES.—Section 2 of Public

6 Law 93–100 (12 U.S.C. 1832) is amended—

7 (1) by redesignating subsections (b) and (c) as

8 subsections (c) and (d), respectively; and

9 (2) by inserting after subsection (a) the fol10 lowing:

11 ‘‘(b) INTERACCOUNT TRANSFERS.—

12 ‘‘(1) IN GENERAL.—Notwithstanding any other

13 provision of law, any depository institution may per14 mit the owner of any deposit or account on which in15 terest or dividends are paid to make up to 24 trans16 fers per month, for any purpose, to another account

17 of the owner in the same institution.

18 ‘‘(2) RULE OF CONSTRUCTION.—No provision

19 of this subsection shall be construed as preventing

20 an account offered pursuant to this subsection from

21 being considered a transaction account (as defined

22 in section 19(b) of the Federal Reserve Act (12

23 U.S.C. 461(b)) for purposes of such Act.’’.

24 (b) NOW ACCOUNTS AUTHORIZED FOR ALL BUSI25 NESSES AFTER SEPTEMBER 30, 2001.—
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1 (1) IN GENERAL.—Effective on the date pro2 vided in paragraph (3), section 2 of Public Law 93–

3 100 (12 U.S.C. 1832) (as amended by subsection

4 (a) of this section) is amended to read as follows:

5 ‘‘SEC. 2. WITHDRAWALS BY NEGOTIABLE OR TRANSFER6 ABLE INSTRUMENTS FOR TRANSFERS TO

7 THIRD PARTIES.

8 ‘‘(a) IN GENERAL.—Notwithstanding any other pro9 vision of law, any depository institution (as defined in sec10 tion 3 of the Federal Deposit Insurance Act) may permit

11 the owner of any deposit or account to make withdrawals

12 from such deposit or account by negotiable or transferable

13 instruments for the purpose of making payments to third

14 parties.

15 ‘‘(b) ESCROW ACCOUNTS.—With respect to an escrow

16 account, a lender or servicer shall pay interest on such

17 account only if such payments are required by—

18 ‘‘(1) a contract between the lender or servicer

19 and the borrower; or

20 ‘‘(2) a specific statutory provision of the law in

21 effect in the State in which the property which is se22 cured by the loan is located requires the lender or

23 servicer to make such payments.’’.

24 (2) REPEAL OF PROHIBITION ON PAYMENT OF

25 INTEREST ON DEMAND DEPOSITS.—
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1 (A) FEDERAL RESERVE ACT.—Section

2 19(i) of the Federal Reserve Act (12 U.S.C.

3 371a(i)) is amended to read as follows:

4 ‘‘(i) [Repealed]’’.

5 (B) HOME OWNERS’ LOAN ACT.—The 1st

6 sentence of section 5(b)(1)(B) of the Home

7 Owners’ Loan Act (12 U.S.C. 1464(b)(1)(B)) is

8 amended by striking ‘‘savings association may

9 not—’’ and all that follows through ‘‘(ii) permit

10 any’’ and inserting ‘‘savings association may

11 not permit any’’.

12 (C) FEDERAL DEPOSIT INSURANCE ACT.—

13 Section 18(g) of the Federal Deposit Insurance

14 Act (12 U.S.C. 1828(g)) is amended to read as

15 follows:

16 ‘‘(g) [Repealed]’’.

17 (3) EFFECTIVE DATE.—The amendments made

18 by this subsection shall take effect on October 1,

19 2001.

20 SEC. 3. PAYMENT OF INTEREST ON RESERVES AT FEDERAL

21 RESERVE BANKS.

22 (a) IN GENERAL.—Section 19(b) of the Federal Re23 serve Act (12 U.S.C. 461(b)) is amended by adding at

24 the end the following new paragraph:

25 ‘‘(12) EARNINGS ON RESERVES.—
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1 ‘‘(A) IN GENERAL.—Balances maintained

2 at a Federal reserve bank by or on behalf of a

3 depository institution to meet the reserve re4 quirements of this subsection applicable with re5 spect to such depository institution shall receive

6 earnings to be paid by the Federal reserve bank

7 at least once each calendar quarter at a rate

8 not to exceed the rate earned on the securities

9 portfolio of the Federal Reserve System during

10 the preceding quarter.

11 ‘‘(B) REGULATIONS RELATING TO PAY12 MENTS AND DISTRIBUTION.—The Board may

13 prescribe regulations concerning—

14 ‘‘(i) the payment of earnings in ac15 cordance with this paragraph;

16 ‘‘(ii) the distribution of such earnings

17 to the depository institutions which main18 tain balances at such banks or on whose

19 behalf such balances are maintained; and

20 ‘‘(iii) the responsibilities of depository

21 institutions, Federal home loan banks, and

22 the National Credit Union Administration

23 Central Liquidity Facility with respect to

24 the crediting and distribution of earnings

25 attributable to balances maintained, in ac-
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1 cordance with subsection (c)(1)(B), in a

2 Federal reserve bank by any such entity on

3 behalf of depository institutions which are

4 not member banks.’’.

5 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

6 (1) Section 19(b)(4) of the Federal Reserve Act

7 (12 U.S.C. 461(b)(4)) is amended by striking sub8 paragraph (C).

9 (2) Section 19(c)(1)(A) of the Federal Reserve

10 Act (12 U.S.C. 461(c)(1)(A)) is amended by striking

11 ‘‘subsection (b)(4)(C)’’ and inserting ‘‘subsection

12 (b)’’.

Æ