Our Federal Reserve pays banks and other depository institutions interest on the reserve funds they hold at the central bank. This practice was initially authorized by Congress in 2008 following the financial crisis as a tool to control the money supply. These interest payments have risen from $60 billion in 2022 to over $176 billion in 2023 – even while the Federal Reserve has been operating at a loss since 2022. Opponents argue that paying interest on reserves amounts to a subsidy for banks, which collect billions on funds simply by holding them at the Fed. As interest rates rise, opponents argue that the Fed can no longer afford this arrangement and that eliminating these payments could save over a trillion dollars in the next decade. Critics also question why the Fed would pay hundreds of billions of dollars to banks while issues like income inequality and national debt are pressing concerns.


Pending Legislation: S.2113 - End the Fed’s Big Bank Bailout Act
Sponsor: Sen. Rand Paul (KY)
Status: Senate Committee on Banking, Housing, and Urban Affairs
Chair: Sen. Tim Scott (SC)