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WASHINGTON-Two credit union trade associations are working to have an amendment added to either the new business checking or sterile reserves bills, which had a combined hearing last week, to continue the Federal Reserve banking fee study and to include credit unions. Last congressional session bills to permit the Fed to pay interest on reserves required from financial institutions and to allow banks to pay interest on business checking accounts were combined and also included the reauthorization of the Annual Report to Congress on Retail Banking Fees and Services of Depository Institutions, as well as adding credit unions to that study. Though the fee study amendment’s sponsor, John LaFalce (D-N.Y.), is now retired, credit union lobbyists are still hopeful the same procedure will happen again in the House. The bill was not put to a vote in the Senate last session. According to a Fed spokesperson who spoke to Credit Union Times on the condition of anonymity, “Staff is working on a report for 2002 that is expected to be released this summer but, beyond that, we don’t expect to release any more studies.” The source would not comment on whether the Fed was lobbying either way on the continuation of the study. According to CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary J. Kohn, during the hearing, which ended as deadline was nearing, Congresswoman Carolyn Maloney (D-N.Y.) asked Fed Governor Donald Kohn and Treasury Assistant Secretary for Financial Institutions Wayne Abernathy whether they objected to the inclusion of the Fed banking fee study in these bills. The Fed Governor Kohn said the Fed had no objection, while Abernathy responded that more information is almost always better. CUNA’s Kohn said they were pleased with the response. CUNA Senior Vice President of Government Affairs John McKechnie said the organization “continue[s] to advocate for its inclusion in the legislation.” CUNA lobbyists, he said, have been speaking with several members of the House Financial Services Committee-both Democrats and Republicans-who were interested in seeing the Fed’s study continue, as well as including credit unions in the report. McKechnie said Hill sources have informed him that the Fed study amendment will be introduced, but he prefers to see it in black and white. “More information is better for the consumer in terms of making decisions,” McKechnie added. NAFCU President and CEO Fred Becker wrote House Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus (R-Ala.) and others of the leadership, stating, “With its non-payment of interest on sterile reserves, Regulation D gives an unfair advantage to nonregulated financial institutions that offer checking accounts but do not have to maintain sterile reserves with the Fed. “Furthermore, NAFCU would also support including in any final bill language sought by Representative John LaFalce (D-N.Y.) in the 107th Congress and included in the House passed version of H.R. 974 and H.R. 1003 in the last Congress to make permanent the bank fee study by the Federal Reserve Board and to include credit union fees as part of that study,” Becker wrote. The bill amending Reg D (H.R. 758) would allow banks to pay interest on business accounts rather than using complex sweep accounts to pay commercial customers interest on their demand accounts. “Currently, large banks use sweep accounts to effectively pay business customers interest on their temporarily idle balances,” Bachus said in a statement. “Small banks do not have the resources and technology to offer their business customers these types of accounts. Even large banks will be helped by this legislation, since it will eliminate the costs associated with sweep accounts, which are quite high. This legislation will allow all banks to compete for business accounts on a level playing field and at a reduced cost.” Small business owners are disadvantaged by the current prohibition because they tend to bank at smaller institutions. However, credit unions are already permitted to pay interest on business accounts. The Federal Reserve also requires banks, thrifts, and credit unions to maintain cash reserves to cover potential withdrawals and to help the Fed manage monetary supply with no interest paid on these reserves. The balances on these sterile reserves have been dropping in recent years, potentially affecting the Fed’s ability to conduct monetary policy. H.R. 859 would allow the Fed to pay interest on these funds. “In the competitive financial marketplace, no one should have the free use of someone else’s money,” House Financial Services Committee Chairman Mike Oxley (R-Ohio) said in a statement. “Individual consumers pay interest when they take out a car loan, home loan, or student loan. And yet, the government wants its loans for free-it requires loans of reserves and doesn’t pay a penny of interest. Our government has always taken this privilege with other people’s money, but the free ride should end,” Oxley said. From private industry, Laurel Savings Bank President and CEO Edwin R. Maus, on behalf of America’s Community Bankers; Easton Bank and Trust Co. President and CEO R. Michael Stewart Menzies, Sr., on behalf of Independent Community Bankers of America; Hammock Publishing, Inc. President Rex Hammock, on behalf of National Federation of Independent Business; Reserve Management Co. Chairman and CEO Bruce Bent; and University of Texas Lyndon B. Johnson School of Public Affairs Professor Robert Auerbach testified. [email protected]

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