I
105TH CONGRESS
2D SESSION
H. R. 4082
To allow depository institutions to offer interest-bearing transaction accounts
and 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
JUNE 18, 1998
Mrs. KELLY introduced the following bill; which was referred to the
Committee on Banking and Financial Services
A BILL
To allow depository institutions to offer interest-bearing
transaction accounts and 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 pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Small Business Inter-
est Checking Act of 1998’’.
SEC. 2. INTEREST-BEARING TRANSACTION ACCOUNTS AU-
THORIZED 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 follow-
ing:
‘‘(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 INSTI-
TUTIONS.
(a) NOW ACCOUNTS AUTHORIZED FOR ALL BUSI-
NESSES.—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 TRANSFER-
ABLE INSTRUMENTS FOR TRANSFERS TO
THIRD PARTIES.
‘‘Notwithstanding any other provision of law, any de-
pository institution (as defined in section 3 of the Federal
Deposit Insurance Act) may permit the owner of any de-
posit 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 IN-
TEREST 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 sen-
tence 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.—Sec-
tion 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 Re-
serve 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 re-
quirements of this subsection applicable with re-
spect 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
PAY-
MENTS AND DISTRIBUTION.—The Board may
prescribe regulations concerning—
‘‘(i) the payment of earnings in ac-
cordance with this paragraph;
‘‘(ii) the distribution of such earnings
to the depository institutions which main-
tain 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 ac-
cordance 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 sub-
paragraph (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 FLEXIBIL-
ITY 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),’’.
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