Throughout the history of this great country, elected officials have occasionally passed laws that are relevant to society at that point in time but are totally irrelevant years later.
Unfortunately, once a law is on the books it rarely comes off. Lawmakers spend far more time writing new legislation than reviewing old bills. As a result, many laws sit on the books in obscurity because enforcement would be ridiculous.
For example, several laws still exist in Boston regarding Boston Common (now a lively, big-city park) that surely made good sense in the 1600s or 1700s, but are ludicrous today:
– No one may cross the Boston Common without carrying a shotgun in case of bears.
– Anyone may let their sheep and cows graze in the public gardens/commons at any time except Sundays.
– Duels to the death are permitted on the common on Sundays , provided the governor is present.
– Women may not wear heels over 3 inches in length while on the common.
Laws like these seem funny to us. They’re strictly entertainment. (Visit www.dumblaws.com for more like those above.) It doesn’t matter that they are still on the books, because they are not enforced.
But some old laws that are not applicable to today’s society and economy are still enforced. And those are laws that should be repealed; there is no excuse not to.
Business Account Interest
For example, Congress has an opportunity this year to do away with an old law preventing banks from offering interest on business checking accounts. It’s a law that was passed during the Depression and is completely irrelevant in today’s economy. The unintended consequence of this law is a business banking structure that favors large companies over small ones.
Large firms have an ability to “make money on money” with a practice called sweep accounts: whatever money is left in their business account at the end of the day is swept into the stock market overnight, in essence earning interest until the next business day.
It is a service offered by large banks to large companies. The large banks have the financial structure in place that makes it viable and profitable for them, while the large businesses have the cash reserves to make this practice low-risk in terms of their cash flow needs.
Small businesses cannot take advantage of sweep accounts because their funds are “swept out” on a daily basis by the needs of their business: payroll, supplies, new inventory, etc. Their cash-flow scenario is very tight, very different from a large company. By the same token, small banks are not able to offer sweep accounts on a cost-effective basis because they don’t have enough big customers to make setting up the infrastructure worthwhile.
Big Business Benefits
So big business is getting around the outdated law by using sweep accounts while small businesses and banks are stuck complying with an old law that doesn’t make any sense.
Allowing interest on business checking accounts wouldn’t cost the government a single dime. In fact, the Federal Reserve has endorsed the idea. It would benefit both small businesses and their small banking brethren, not to mention our overall economy which is driven by the engine of small business.
Bills to correct this outdated law have been introduced but the new chairman of the Senate Banking Committee , Sen. Paul Sarbanes from Maryland , has not yet shown an interest in them.
One wonders why. Rarely is a piece of legislation so clear-cut, so non-controversial. Repealing the outdated law would create a win-win situation.
If you agree that some old laws are not funny at all, give your members of Congress a call and tell them that there is no reason to wait; this one needs to be taken off the books now, giving small firms the basic right to earn interest on their hard-earned money.
Faris is president of the National Federation of Independent Businesses.
