Home > 106th Congressional Bills > H.R. 3184 (eh) For the relief of Zohreh Farhang Ghahfarokhi. [Engrossed in House] ...H.R. 3184 (eh) For the relief of Zohreh Farhang Ghahfarokhi. [Engrossed in House] ...
108th CONGRESS
1st Session
H. R. 3183
To provide for direct and accurate compensation to financial
institutions for providing various critical depositary and financial
agency services for or on behalf of the United States, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 25, 2003
Mr. Oxley (for himself and Mr. Frank of Massachusetts) introduced the
following bill; which was referred to the Committee on Financial
Services
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A BILL
To provide for direct and accurate compensation to financial
institutions for providing various critical depositary and financial
agency services for or on behalf of the United States, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Depositary Services Efficiency and
Cost Reduction Act''.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) The Secretary of the Treasury has long compensated
financial institutions for various critical depositary and
financial agency services provided for or on behalf of the
United States by--
(A) placing large balances, commonly referred to as
``compensating balances'', on deposit at such
institutions; and
(B) using imputed interest on such funds to offset
charges for the various depositary and financial agency
services provided to or on behalf of the Government.
(2) As a result of sharp declines in interest rates over
the last few years to record low levels, or the public debt
outstanding reaching the statutory debt limit, the Department
of the Treasury often has had to dramatically increase or
decrease the size of the compensating balances on deposit at
these financial institutions.
(3) The fluctuation of the compensating balances, and the
necessary pledging of collateral by financial institutions to
secure the value of compensating balances placed with those
institutions, have created unintended financial uncertainty for
the Secretary of the Treasury and for the management by
financial institutions of their cash and securities.
(4) It is imperative that the process for providing
financial services to the Government be transparent, and
provide the information necessary for the Congress to
effectively exercise its appropriation and oversight
responsibilities.
(5) The use of direct payment for services rendered would
strengthen cash and debt management responsibilities of the
Secretary of the Treasury because the Secretary would no longer
need to dramatically increase or decrease the level of such
balances when interest rates fluctuate sharply or when the
public debt outstanding reaches the statutory debt limit.
(6) An alternative to the use of compensating balances,
such as direct payments to financial institutions, would ensure
that payments to financial institutions for the services they
provide would be made in a more predictable manner and could
result in cost savings.
(7) Limiting the use of compensating balances could result
in a more direct and cost-efficient method of obtaining those
services currently provided under compensating balance
arrangements.
(8) A transition from the use of compensating balances to
another compensation method must be carefully managed to
prevent higher-than-necessary transitional costs and enable
participating financial institutions to modify their planned
investment of cash and securities.
SEC. 3. AUTHORIZATION OF APPROPRIATIONS FOR SERVICES RENDERED BY
DEPOSITARIES AND FINANCIAL AGENCIES OF THE UNITED STATES.
There are authorized to be appropriated for fiscal years beginning
after fiscal year 2003 to the Secretary of the Treasury such sums as
may be necessary for reimbursing financial institutions in their
capacity as depositaries and financial agents of the United States for
all services required or directed by the Secretary of the Treasury, or
a designee of the Secretary, to be performed by such financial
institutions on behalf of the Secretary of the Treasury or another
Federal agency, including services rendered before fiscal year 2004.
SEC. 4. ORDERLY TRANSITION.
(a) In General.--As appropriations authorized under section 3
become available, the Secretary of the Treasury shall promptly begin
the process of phasing in the use of the appropriations to pay
financial institutions serving as depositaries and financial agents of
the United States, and transitioning from the use of compensating
balances to fund these services.
(b) Post-Transition Use Limited to Extraordinary Circumstances.--
(1) In general.--Following the transition to the use of the
appropriations authorized under section 3, the Secretary of the
Treasury may use the compensating balances to pay financial
institutions serving as depositaries and financial agents of
the United States only in extraordinary situations where the
Secretary determines that they are needed to ensure the fiscal
operations of the Government continue to function in an
efficient and effective manner.
(2) Report.--Any use of compensating balances pursuant to
paragraph (1) shall promptly be reported by the Secretary of
the Treasury to the Committee on Financial Services of the
House of Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate.
(c) Requirements for Orderly Transition.--In transitioning to the
use of the appropriations authorized in section 3, the Secretary of the
Treasury shall take such steps as may be appropriate to--
(1) prevent abrupt financial disruption to the functions of
the Department of the Treasury or to the participating
financial institutions; and
(2) maintain adequate accounting and management controls to
ensure that payments to financial institutions for their
banking services provided to the Government as depositaries and
financial agents are accurate and that the arrangements last no
longer than is necessary.
(d) Reports Required.--
(1) Annual report.--
(A) In general.--For each fiscal year, the
Secretary of the Treasury shall submit a report to the
Congress on the use of compensating balances and on the
use of appropriations authorized in section 3 during
that fiscal year.
(B) Inclusion in budget.--The report required under
subparagraph (A) may be submitted as part of the budget
submitted by the President under section 1105 of the
title 31, United States Code, for the following fiscal
year and if so, the report shall be submitted
concurrently to the Committee on Financial Services of
the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate.
(2) Final report following transition.--
(A) In general.--Following completion of the
transition from the use of compensating balances to the
use of the appropriations authorized in section 3 to
pay financial institutions for their services as
depositaries and financial agents of the United States,
the Secretary of the Treasury shall submit a report on
the transition to the Committee on Financial Services
of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate.
(B) Contents of report.--The report submitted under
subparagraph (A) shall include a detailed analysis of--
(i) the cost of transition;
(ii) the direct costs of the services being
paid from the appropriations authorized under
section 3; and
(iii) the benefits realized from the use of
direct payment for such services, rather than
the use of compensating balance arrangements.
SEC. 5. TECHNICAL AMENDMENT.
The 2d undesignated paragraph of section 16 of the Federal Reserve
Act (12 U.S.C. 412) is amended--
(1) in the 3d sentence, by inserting ``or any other asset
of a Federal reserve bank'' before the period at the end; and
(2) in the last sentence, by inserting ``, or are otherwise
held by or on behalf of,'' after ``in the vaults of''.
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