U.S. Code > Title 12 > Chapter 50 > § 5017 - Evaluation and report by the Comptroller General
Current as of: February 2010
(a) 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.
(b) 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.
(c) Orderly transition
(1) In general
As appropriations authorized in subsection (b) 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.
(2) Post-transition use limited to extraordinary circumstances
(A) In general
Following the transition to the use of the appropriations
authorized in subsection (b), 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.
(B) Report
Any use of compensating balances pursuant to subparagraph (A)
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.
(3) Requirements for orderly transition
In transitioning to the use of the appropriations authorized in
subsection (b), the Secretary of the Treasury shall take such
steps as may be appropriate to -
(A) prevent abrupt financial disruption to the functions of
the Department of the Treasury or to the participating
financial institutions; and
(B) 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.
(4) Reports required
(A) Annual report
(i) 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
subsection (b) during that fiscal year.
(ii) Inclusion in budget
The report required under clause (i) may be submitted as
part of the budget submitted by the President under section
1105 of title 31 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.
(B) Final report following transition
(i) In general
Following completion of the transition from the use of
compensating balances to the use of the appropriations
authorized in subsection (b) 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.
(ii) Contents of report
The report submitted under clause (i) shall include a
detailed analysis of -
(I) the cost of transition;
(II) the direct costs of the services being paid from the
appropriations authorized in subsection (b); and
(III) the benefits realized from the use of direct
payment for such services, rather than the use of
compensating balance arrangements.
(d) Omitted
(e) Effective date
Notwithstanding section 20,(!1) this section shall take effect on
October 28, 2003.
Legislative History ________________________________________________________________________
U.S. Code Provisions: Bank Deposits and Collections (UCC Article 4)State Laws: Bank Deposits and Collections (UCC Article 4)
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