Some of these losses would be recaptured through taxes on the increased bank earnings r~sulting from lower reserve requirements. The net pretax annual revenue loss would thus be $133 million. Treasury would suffer an earnings loss of $543 million from this reduction, that loss is partially offset by the $410 million in fees the Federal Reserve would collect from pricing its services. Total required reserves :under this legislation would be reduced by appr~imately $8.4 billion. An additional 425 nonmembers would satisfy their reserve requirement with their vault cash. It would require that 238 large nonmember banks keep reserves at the Fed. It would also reduce the required reserves for most of the remaining 520 member banks. At the same time, it would relieve approximately 5,100 small banks that are now members of the Federal Reserve banks. This bill would make approximately 75 percent of total bank deposits subject to reserve requirements. Nonmember banks would be entitled to the same discount window privileges available to members. Louis IV (7) Any depository institution maintaining reserves would be entitled to all the privileges of membership, except that of holding stock and vC>ting for directors of a Federal Reserve bank. Federal Reserve services would be available to any depository institution willing to pay the prices established by the Fed. ( 6) The Federal Reserve would be required to institute a pricing system for Federal Reserve services. (5) The Federal Reserve Board would be authorized to require any depository institution to make reports of its liabilities and assets to the Board so that the Board may effectively discharge its responsibility to monitor and control money and credit. (4) The new reserve requirements would be phased in over a four year period, and the Board would be given authority to further waive reserve requirements for individual institutions facing particular hardships because of the reserve requirements. (3) Every other depositor_y (savings and loan associations, mutual savings banks and credit umons) would be required to hold reserves against its transaction accounts in excess of $40 million in the same ratio as applies to banks. The reserve ratios would be: Percent 13 Demand and transaction accounts_ Savings deposits (nontransactional)_ Time deposits with initial maturities of 179 days or less_ Time deposits with initial maturities of 180 days or more_ 3 6 1 (2) Every bank would receive a waiver of required reserves against its first $40 million of demand and transaction accounts and against its first $40 million of savings and time deposits to be taken in proportion to its holding of such deposits. The legislation contains the following main features: ( 1) All commercial banks would be required to hold reserves against their deposit liabilities. 3485 which I introduced in the 95th Congress. In order to facilitate early consideration of this issue I am transmitting to you at this time material pertaining to the Monetary Policy Improvement Act of 1979 which I plan to introduce when the Senate convenes. A commitment was made by the committee, however, to consider this legislation' as its first priority business during the new session of Congress. Unfortunately, time did not permit the committee to complete action on this important issue. To all members of the Oommittee on Banking, Housing and Urb(J/(1, Affairs: Last fall the committee considered several pieces of legislation that would have strengthened the ability of the Federal Reserve to implement monetary policy by requiring all banks and other depository institutions with transactions accounts of a certain aggregate size to maintain required reserves. ROBERTS, Ohief JiJconomiBt (JI) LETTER OF TRANSMITTAL Janu(lfJ"!J9,19i9. JEREMIAH BUCKLEY, Minority Staff Director STEVEN M. MCLEAN, Staff Director Federal Reserve Bank of St. LUGAR, Indiana ROBERT MORGAN, North Carolina HARRISON SCHMITT, New Mexico DONALD w. McINTYRE, New Hampshire JAKE GARN, Utah ALAN CRANSTON, California H. WILLIAMS, JR., New Jersey JOHN TOWER, Texas THOMAS J. Louis WASHINGTON : 1979 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS WILLIAM PROXMIRE, Wisconsin, Chairman JOHN SPARKMAN, Alabama EDWARD W. GOVERNMENT PRINTING OFFICE 37-517 0 Federal Reserve Bank of St.
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The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.ĩ5th Congress } 2d Session COMMITTEE PRINT SUMMARY OF THE MONETARY POLICY IMPROVEMENT ACT OF 1979 COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS UNITED STATES SENATE JANUPrinted for the use of the Committee on Banking, Housing and Urban Affairs U.S.