H. R. 1474—16
the Secretary of the Treasury and for the management by
financial institutions of their cash and securities.
(4) It is imperative that the process for providing financial
services to the Government be transparent, and provide the
information necessary for the Congress to effectively exercise
its appropriation and oversight responsibilities.
(5) The use of direct payment for services rendered would
strengthen cash and debt management responsibilities of the
Secretary of the Treasury because the Secretary would no
longer need to dramatically increase or decrease the level of
such balances when interest rates fluctuate sharply or when
the public debt outstanding reaches the statutory debt limit.
(6) An alternative to the use of compensating balances,
such as direct payments to financial institutions, would ensure
that payments to financial institutions for the services they
provide would be made in a more predictable manner and
could result in cost savings.
(7) Limiting the use of compensating balances could result
in a more direct and cost-efficient method of obtaining those
services currently provided under compensating balance
arrangements.
(8) A transition from the use of compensating balances
to another compensation method must be carefully managed
to prevent higher-than-necessary transitional costs and enable
participating financial institutions to modify their planned
investment of cash and securities.
(b) AUTHORIZATION
OF APPROPRIATIONS FOR SERVICES REN-
DERED BY DEPOSITARIES AND FINANCIAL AGENCIES OF THE UNITED
STATES.—There are authorized to be appropriated for fiscal years
beginning after fiscal year 2003 to the Secretary of the Treasury
such sums as may be necessary for reimbursing financial institu-
tions in their capacity as depositaries and financial agents of the
United States for all services required or directed by the Secretary
of the Treasury, or a designee of the Secretary, to be performed
by such financial institutions on behalf of the Secretary of the
Treasury or another Federal agency, including services rendered
before fiscal year 2004.
(c) ORDERLY TRANSITION.—
(1) IN
GENERAL.—As appropriations authorized in sub-
section (b) become available, the Secretary of the Treasury
shall promptly begin the process of phasing in the use of
the appropriations to pay financial institutions serving as
depositaries and financial agents of the United States, and
transitioning from the use of compensating balances to fund
these services.
(2) POST-TRANSITION USE LIMITED TO EXTRAORDINARY CIR-
CUMSTANCES.—
(A) IN GENERAL.—Following the transition to the use
of the appropriations authorized in subsection (b), the Sec-
retary of the Treasury may use the compensating balances
to pay financial institutions serving as depositaries and
financial agents of the United States only in extraordinary
situations where the Secretary determines that they are
needed to ensure the fiscal operations of the Government
continue to function in an efficient and effective manner.
(B) REPORT.—Any use of compensating balances pursu-
ant to subparagraph (A) shall promptly be reported by
H. R. 1474—17
the Secretary of the Treasury to the Committee on Finan-
cial Services of the House of Representatives and the Com-
mittee on Banking, Housing, and Urban Affairs of the
Senate.
(3) 
REQUIREMENTS
FOR
ORDERLY
TRANSITION.—In
transitioning to the use of the appropriations authorized in
subsection (b), the Secretary of the Treasury shall take such
steps as may be appropriate to—
(A) prevent abrupt financial disruption to the functions
of the Department of the Treasury or to the participating
financial institutions; and
(B) maintain adequate accounting and management
controls to ensure that payments to financial institutions
for their banking services provided to the Government as
depositaries and financial agents are accurate and that
the arrangements last no longer than is necessary.
(4) REPORTS REQUIRED.—
(A) ANNUAL REPORT.—
(i) IN GENERAL.—For each fiscal year, the Secretary
of the Treasury shall submit a report to the Congress
on the use of compensating balances and on the use
of appropriations authorized in subsection (b) during
that fiscal year.
(ii) INCLUSION
IN
BUDGET.—The report required
under clause (i) may be submitted as part of the budget
submitted by the President under section 1105 of title
31, United States Code, for the following fiscal year
and if so, the report shall be submitted concurrently
to the Committee on Financial Services of the House
of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
(B) FINAL REPORT FOLLOWING TRANSITION.—
(i) IN
GENERAL.—Following completion of the
transition from the use of compensating balances to
the use of the appropriations authorized in subsection
(b) to pay financial institutions for their services as
depositaries and financial agents of the United States,
the Secretary of the Treasury shall submit a report
on the transition to the Committee on Financial Serv-
ices of the House of Representatives and the Committee
on Banking, Housing, and Urban Affairs of the Senate.
(ii) CONTENTS OF REPORT.—The report submitted
under clause (i) shall include a detailed analysis of—
(I) the cost of transition;
(II) the direct costs of the services being paid
from the appropriations authorized in subsection
(b); and
(III) the benefits realized from the use of direct
payment for such services, rather than the use
of compensating balance arrangements.
(d) TECHNICAL AMENDMENT.—The second undesignated para-
graph of section 16 of the Federal Reserve Act (12 U.S.C. 412)
is amended—
(1) in the third sentence, by inserting ‘‘or any other asset
of a Federal reserve bank’’ before the period at the end; and
(2) in the last sentence, by inserting ‘‘, or are otherwise
held by or on behalf of,’’ after ‘‘in the vaults of’’.
H. R. 1474—18
(e) EFFECTIVE DATE.—Notwithstanding section 20, this section
shall take effect on the date of the enactment of this Act.
SEC. 20. EFFECTIVE DATE.
This Act shall take effect at the end of the 12-month period
beginning on the date of the enactment of this Act, except as
otherwise specifically provided in this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.