End the Fed’s Big Bank Bailout Act
- Bill Number
- S. 2113
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-12-11: Committee on Homeland Security and Governmental Affairs. Hearings held.
- Last Updated
- 2026-01-29T16:15:02Z
AI-Generated Summary
Summary of S. 2113: End the Fed's Big Bank Bailout Act
Purpose
This bill aims to prevent Federal Reserve banks from paying interest on funds (known as reserves) that commercial banks and other depository institutions hold at the Fed. It seeks to eliminate what the bill's title describes as a "bailout" for large banks by stopping these interest payments.
Key Provisions
- Amendment to the Federal Reserve Act: The bill modifies Section 19(b) by replacing paragraph (12) with a new rule.
- Prohibition on Earnings: Federal Reserve banks are explicitly barred from paying any interest or earnings on balances held by or for depository institutions (such as commercial banks) at the Fed.
Significant Changes to Existing Law
- Under current law, the Federal Reserve has authority to pay interest on excess reserves (funds banks keep at the Fed beyond what they need for daily operations). This practice began in 2008 to help manage the financial crisis and has been a key tool for influencing short-term interest rates.
- The bill would completely eliminate this authority, removing the Fed's ability to pay interest on these reserves and reverting to a pre-2008 framework where no such payments occur.
Potential Impacts
- On Government Agencies: The Federal Reserve would lose a primary monetary policy tool used to set interest rates and stabilize the banking system, potentially complicating efforts to control inflation or support economic growth during downturns.
- On Citizens: Indirect effects could include changes in how banks set loan and savings rates, possibly leading to higher borrowing costs for consumers or businesses if banks pass on lost income. It might also influence overall economic stability by altering how the Fed responds to recessions.
- On International Relations: Minimal direct impact, though changes to U.S. monetary policy could indirectly affect global financial markets and the dollar's role as a reserve currency.
Main Stakeholders Affected
- Depository Institutions: Banks and credit unions would lose interest income on their reserves at the Fed, potentially reducing their profits and affecting how they manage liquidity.
- Federal Reserve System: The central bank would face constraints on its policy options, requiring alternative methods to implement monetary decisions.
- Broader Economy: Businesses, consumers, and investors could experience ripple effects through changes in credit availability and interest rates.
Notable Legal, Constitutional, or Political Implications
- Legal: This change would limit the Federal Reserve's statutory powers under the Federal Reserve Act without altering its core mandate for monetary policy or financial stability. It could invite legal challenges from banks arguing it impairs their operations or contracts.
- Constitutional: No direct constitutional issues, as Congress has broad authority over banking and currency under Article I, but it might raise questions about the balance of powers between Congress and the independent Federal Reserve.
- Political: The bill reflects debates over the Fed's role in supporting large banks, potentially fueling discussions on reducing government intervention in finance. As an introduced bill referred to the Senate Committee on Banking, Housing, and Urban Affairs, its passage would depend on broader congressional priorities around economic policy and bank regulation.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Recent Actions
- 2025-12-11: Committee on Homeland Security and Governmental Affairs. Hearings held.
- 2025-06-18: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2025-06-18: Introduced in Senate
Bill Versions
- End the Fed’s Big Bank Bailout Act — issued 2025-06-18 — PDF (2 pages)