WASHINGTON - Today, the House of Representatives passed H.R. 758, the Kelly-Maloney "Business Checking Freedom Act" which allows banks to pay interest on business checking accounts. The legislation, introduced by Reps. Sue Kelly (R-NY) and Carolyn Maloney (D-NY), is a high priority for small business and has been endorsed by the National Federation of Independent Businesses (NFIB) and the Chamber of Commerce.

"It is simple common sense that small businesses should be allowed to accrue interest on their checking accounts" argued Maloney. "Small businesses are the job creating engine that powers the American economy and this legislation puts their checking account holdings to work for them."

The prohibition on interest on business checking accounts was enacted in the Great Depression to limit competition that was feared could lead to bank failures. Today, given the global nature of financial services, interstate banking, and advances in technology, these limits only distort competition and force businesses to seek out alternative interest bearing opportunities that are often not available to small businesses. Additionally, the prohibition on paying interest on consumer checking accounts was repealed by Congress more than 20 years ago and has been a success. The Kelly-Maloney bill allows payment of interest on all business checking accounts two years after the bill is enacted.

The legislation also allows the Federal Reserve to pay interest on "sterile reserves." These are reserves private banks hold at the Federal Reserve which the Fed can manipulate as a tool of monetary policy. This provision is endorsed by Federal Reserve Chairman Alan Greenspan.

The legislation passed the House by voice vote and now moves to the Senate.

####