Congressional Hearings |
|
Statement of Chuck Hagel
U.S. Senate Committee on Banking, Housing, and Urban Affairs
"Consideration of Regulatory Reform Proposals"
June, 22 2004
|
| Washington, D.C. - Mr. Chairman, I want to thank you for
holding today’s hearing. I also want to thank Senator Crapo for his
leadership in addressing regulatory reform. For four Congresses now, I
have advocated and introduced legislation to repeal the ban on banks
paying interest on business checking accounts. While this prohibition
applies to all banks and businesses, it targets and discriminates
against small banks and small businesses. That is why Senator
Snowe, who chairs the Small Business and Entrepreneurship Committee, and
I introduced the Interest On Business Checking Act last year.
|
Big banks can currently circumvent the prohibition and
offer alternative accounts, called sweep accounts. These sweep
accounts allow big banks to effectively provide their customers
with interest-bearing checking accounts. Unfortunately, small banks
find it hard to offer these accounts, because they are costly to
provide. Additionally, small businesses find it hard to afford
these accounts because large banks usually require businesses to
maintain large balances in the accounts.
|
Complicating matters is the growing impact of nonbanking
institutions that offer deposit-like money accounts to individuals
and corporations alike. Large brokerage firms have long offered
interest on deposit accounts they maintain for their customers. This
places these firms at an advantage over community banks that can't
offer their corporate customers interest on their checking accounts. While
I support business innovation, I don't believe it's fair when any
business gains a competitive edge over another due to government
interference through over-regulation.
|
Passage of this bill will remove one of the last vestiges of an
obsolete interest rate control system. Abolishing the statutory requirement
that prohibits businesses from owning interest bearing checking accounts will
provide America's small business owners, farmers, and farm cooperatives with a
funds management tool that is long overdue.
|
Passage of this bill will ensure America's entrepreneurs can compete effectively
with larger businesses. My experience as a businessman has shown me,
firsthand, that it's extremely important for anyone trying to maximize
profits to be able to invest funds wisely for maximum efficiencies.
|
Repealing this ban has already passed the House this year and has
passed the Senate Banking Committee in previous Congresses. Unfortunately, there
has been some disagreement as to how to address this legislation with
respect to Industrial Loan Corporations or ILCs. Mr. Chairman, the bill
which I introduced last year, leaves the decision to be determined by the
regulator.
|
I'm pleased to say that repealing the ban has the strong support of America's
Community Bankers, the National Federation of Independent Businesses, and the
U.S. Chamber of Commerce. It also has the support of many of the banks,
thrifts, and small businesses in my home state of Nebraska.
|
Mr. Chairman, this is a straightforward bill that will do away with an
unnecessary regulation that burdens American business. It is an \
important tool to strengthen the nation’s engine of job growth — the
small businesses that are important customers for small banks. This
legislation also fits into the regulatory reform efforts being undertaken by
this Committee. Thank you.
|
