Senators Rick Scott and Ted Cruz have written an opinion piece in the Washington Examiner, urging support for their proposed Fiscal Accountability for Interest on Reserves (FAIR) Act. The senators argue that the legislation would prevent the Federal Reserve from spending $1 trillion over the next ten years on interest payments to banks for reserves held at the central bank.
In their op-ed, Scott and Cruz state, “…the president has another opportunity to make the nation’s central bank work for, not against, the American people. He can support our bill, the Fiscal Accountability for Interest on Reserves Act, to end a pricey Fed policy that sends billions of dollars each year to big banks and squeezes working-class Americans with higher interest rates.”
They explain that prior to 2008, the Federal Reserve did not pay interest on required reserves held by banks. However, after Congress granted this authority during the financial crisis, banks—including foreign institutions—began earning significant returns by depositing cash at the Fed.
The senators highlight that under President Joe Biden’s administration, total interest paid by the Fed to banks increased by more than 3,000%, reaching nearly half a trillion dollars. They warn that these payments could total another $1 trillion in the coming decade and emphasize that these funds ultimately come from taxpayers.
Scott and Cruz write: “…the Fed’s interest payments hurt every American. These dollars belong to taxpayers to invest in what matters to them and support their ambitions and success. Instead, they are going to support big banks, both here and abroad.”
They further contend that such payments restrict economic growth because money parked at the Fed is not being invested in local businesses or communities.
“Our bill would end this farce. The FAIR Act repeals the Fed’s permission to make these interest payments — period,” they say.
The senators assert that if enacted, their legislation would effectively serve as an interest rate cut sought by former President Donald Trump while making life more affordable for families making large purchases.
“This reform is urgently needed and long overdue. The FAIR Act would end the Fed’s operating losses, lead to more federal revenue over the next decade, give job creators better access to capital, and bring down interest rates for everyday Americans…and allow…people to seize their American dream,” they conclude.
The full op-ed can be read in the Washington Examiner.
