<p>WASHINGTON-As Congress returned from a two-week recess last week, members are diving into unfinished business, much of it related to credit unions. The House passed H.R. 1009, the Business Checking Freedom Act in its first full day back to work by voice vote, which would allow banks to pay interest on commercial checking accounts and permit financial institutions to receive interest on deposits held at the Federal Reserve. The legislation also would serve to continue the Fed Fee Study indefinitely while adding credit unions to the list of institutions surveyed. “CUNA is glad to see that Congress recognized the need to include credit unions in the important study on financial institution fees. We’ve worked for several years, and we’re grateful to Representative LaFalce for his persistence on this issue,” CUNA Vice President and Senior Legislative Counsel Gary Kohn commented. “With its non-payment of interest on sterile reserves, Regulation D gives an unfair advantage to non-regulated financial institutions that offer checking accounts but do not have to maintain sterile reserves with the Fed,” NAFCU President and CEO Fred Becker wrote in a letter to Congressman Patrick Toomey (R-Pa.), who introduced the bill. NAFCU noted that based on year-end 2001 data and employing current Regulation D tranches and ratios, 876 federally chartered credit unions held $1,364,240,199 in reserve. If the Fed were to pay interest at the current Federal Funds rate of 1.75%, then these credit unions could collectively receive $23,874,200 in interest on their deposits. The banking industry has displayed mixed feelings about paying interest on business accounts. Senators Charles Schumer (D-N.Y.) and Jack Reed (D-R.I.) have introduced similar legislation in the Senate, however, its future is not so bright there. Senate Banking Committee Ranking Member Phil Gramm (R-Texas) has been very vocal in his opposition to the measure. NAFCU Director of Legislative and Political Affairs Brad Thaler pointed out that the bill does incur a cost to the government if the Fed has to pay interest on the currently `sterile reserves.’ The House Financial Services Committee is also scheduled to mark up deposit insurance reform legislation next week, at which time Congressman Brad Sherman (D-Calif.) could bring up an amendment allowing credit unions to include alternative capital accounts in their net worth calculations. He introduced a similar amendment in the subcommittee but withdrew it in favor of raising it before the full committee. The House Financial Services Committee has also scheduled a hearing for the regulatory relief legislation championed by Committee Chairman Mike Oxley (R-Ohio) on April 25. CUNA and NAFCU will be testifying on behalf of the credit union community. [email protected]</p>

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