(d) 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 sub-
paragraphs (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. 5. INCREASED FEDERAL RESERVE BOARD FLEXI-
BILITY 
IN 
SETTING 
RESERVE 
REQUIRE-
MENTS.
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. 6. TRANSFER OF FEDERAL RESERVE SURPLUSES.
(a) IN GENERAL.—Section 7(b) of the Federal Re-
serve Act (12 U.S.C. 289(b)) is amended by adding at
the end the following new paragraph:
‘‘(4) ADDITIONAL
TRANSFERS
TO
COVER
IN-
TEREST
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 pur-
suant to subsection (a)(3), the Federal reserve
banks shall transfer from such surplus funds to
the Board of Governors of the Federal Reserve
System 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 sub-
paragraph (A) for fiscal years 2003 through
2007, the Board of Governors of the Federal
Reserve System 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 re-
plenish such bank’s surplus fund by the amount
of any transfer by such bank under subpara-
graph (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 sur-
plus 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.’’.
SEC. 7. RULE OF CONSTRUCTION.
In the case of an escrow account maintained at a de-
pository institution in connection with a real estate
transaction—
(1) the absorption, by the depository institution,
of expenses incidental to providing a normal banking
service with respect to such escrow account;
(2) the forbearance, by the depository institu-
tion, from charging a fee for providing any such
banking function; and
(3) any benefit which may accrue to the holder
or the beneficiary of such escrow account as a result
of an action of the depository institution described
in subparagraph (1) or (2) or similar in nature to
such action,
shall not be treated as the payment or receipt of interest
for purposes of this Act and any provision of Public Law
93–100, the Federal Reserve Act, the Home Owners’ Loan
Act, or the Federal Deposit Insurance Act relating to the
payment of interest on accounts or deposits at depository
institutions, provided, however, that nothing herein shall
be construed so as to require a depository institution that
maintains an escrow account in connection with a real es-
tate transaction to pay interest on such escrow account
or to prohibit such institution from paying interest on
such escrow account. Nor shall anything herein be con-
strued to preempt the provisions of law of any State deal-
ing with the payment of interest on escrow accounts main-
tained in connection with real estate transactions.
Passed the House of Representatives April 1, 2003.
Attest:
Clerk.