WASHINGTON A bipartisan trio of House Financial Services Committee members plan to introduce legislation today that would let banks pay interest on business checking accounts as early as next year and expand sweep accounts in the interim.
In conjunction with a financial institutions subcommittee hearing scheduled for today, Reps. Pat Toomey, R-Pa., and Paul E. Kanjorski, D-Pa., are reintroducing legislation that stalled last year in the Senate. It would, a year after its enactment, repeal a Depression-era prohibition on interest-bearing commercial accounts.
A witness speaking on behalf of Americas Community Bankers is expected to endorse the legislation. Bankers representing the American Bankers Association, Independent Community Bankers of America, and the Financial Services Roundtable are expected to support repeal but to urge lawmakers to delay the effective date until three years after enactment, at the earliest.
The Financial Services Committee is expected eventually to merge the Toomey-Kanjorski bill with one that Rep. Sue Kelly, R-N.Y., plans to introduce today that would quadruple, to 24 per month, the number of times banks could sweep funds overnight from non-interest-bearing commercial checking accounts into interest-bearing accounts. Many banks use sweep accounts as a way to get around the ban on paying interest for business checking balances.
Rep. Kellys bill also would authorize the government to pay interest on required and excess reserves that banks and thrifts deposit with the Federal Reserve. In addition it would let the central bank adjust the level of required reserves, which Fed Chairman Alan Greenspan recently said he supports.
Witnesses scheduled for todays hearing include Fed Governor Laurence H. Meyer and Donald V. Hammond, acting under secretary for domestic finance at the Treasury Department. Bankers set to testify include: James E. Smith, chairman and chief executive officer of Citizens Union State Bank and Trust in Clinton, Mo.; David A. Bochnowski, chairman and CEO of Peoples Bank of Munster, Ind.; Thomas P. Jennings, senior vice president and general counsel of First Virginia Banks; and Robert Gulledge, president and CEO of Citizens Bank of Robertsdale, Ala.