Small business and checking

In May, the U.S. House of Representatives passed a bill that lifts a Depression-era ban on banks’ paying interest on commercial checking accounts.

There are compelling reasons for enacting a new rule, including extra earned income for small businesses, the drivers of the economy. The House bill was passed with overwhelming and bipartisan support – a rare thing these days that should speak volumes to the Senate, which should pass the legislation.

The bill is supported by national banking associations, as well as regional executives including Larry Mayers, Fifth Third Bank’s city executive for northeast Indiana. He recently told The Journal Gazette that the Cincinnati-based corporation would be “very aggressive” in setting interest rates to attract customers. Although interest rates are at historic lows, people should remember that the financial cycle is just that – cyclical. Offering interest-bearing commercial accounts will serve both banks and businesses well as the interest rates rise.

In 1933, the rule barring banks from paying interest on business checking accounts made sense as it helped shore up a faltering industry, especially small community banks. Now the restriction makes community banks less competitive because they are unable to offer the types of services that businesses want.

Repealing the interest-payment rule is also good for large banks, according to Donald L. Kohn, a member of the Federal Reserve System’s board of governors.

The benefits gained for ending this law are apparent. The Senate shouldn’t allow the fear of change from repealing a law that should have been wiped from the books decades ago.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.