Good morning and welcome to our witnesses
I want to congratulate Senators Shelby and Mack for their work on S. 1405. They have put together legislation that a majority of members on the Committee support- no small feat.
I am particularly interested in today's hearing. Last October Senator Reed and I introduced the Small Business Banking Act of 1997. The purpose of that bill is to repeal the prohibition on payment of interest on corporate checking accounts. This provision is now part of S. 1405.
Passage of S. 1405 will remove one of the last vestiges of the obsolete interest rate control system. Abolishing the statutory requirement that prohibits incorporated 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 S. 1405 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.
Large brokerage firms have long offered interest on deposit accounts they maintain for their customers. This is a positive thing. However, it is now time to give this same authority to banks and thrifts. I am a firm believer that competition will benefit the consumer. While I understand there are some banks that are worried this change will raise their cost of funds, I firmly believe that the benefits of offering this new product will ultimately strengthen banks.
I noted with interest Chairman Greenspan's reaction to a House idea of increasing to 24 the number of withdrawals permitted in money market deposit accounts. I agree with the Chairman that we need to completely eliminate the ban on corporate checking interest. Interim solutions will not give the Fed the flexibility it needs when conducting monetary policy. This highlights the importance of moving forward with section 102 of the Shelby-Mack proposal.
I look forward to hearing from the witnesses.
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