Magazine article American Banker

House Banking Approves Measure to Let Banks Pay Business Checking Interest

Magazine article American Banker

House Banking Approves Measure to Let Banks Pay Business Checking Interest

Article excerpt

WASHINGTON -

The House Banking Committee approved a bill Wednesday that would let banks pay interest on business checking accounts -- but not until three years after enactment.

In the interim, banks would be granted broader powers to "sweep" funds from interest-bearing accounts to business checking accounts. Some big banks have used so-called sweep accounts for years to avoid a Depression-era ban on paying interest to commercial checking customers.

House Banking Committee Chairman Jim Leach said current law, which had been adopted to prevent banks from recklessly bidding for business customers, is anticompetitive and cuts off a source of funds that could bolster sagging deposits at small banks.

"It is time Congress gets out of the protectionism business that ... is proving to be blatantly counterproductive," the Iowa Republican said.

Banking industry officials praised the legislation.

"We strongly support the bill, and we are optimistic that it will pass the House very quickly," said Edward L. Yingling, chief lobbyist for the American Bankers Association.

"This has been a top priority for us and we are glad to see it moving through the House," said Diane M. Casey, president of America's Community Bankers. Her group had favored quicker implementation, "but if that's what it takes to get the bill moving, we can live with three years."

Despite industry support and a noncontroversial voice vote in House Banking, sources said that partisan politics is likely to keep the bill from being enacted this year. House Republicans are reportedly reluctant to send any banking bills to the Senate, out of concern that Democrats there will try to attach consumer privacy amendments. …

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