Congress quietly removes a Federal Reserve earnings rule—effect unclear
H.R. 4789 — FAIR Act · Filed by Warren Davidson (R-OH) · Introduced Jul 29, 2025 · Referred to committee
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What it does
This bill removes a provision from the Federal Reserve Act that governs how the Federal Reserve handles earnings on reserve balances held by banks. The bill strikes Section 19(b)(12) of the Federal Reserve Act, effective 180 days after enactment. The specific effect depends on what that provision currently says—the bill itself does not restate it—but the operative mechanism is a deletion of an existing rule about Fed earnings distribution.
Why we flagged it
The bill is a narrow technical amendment to Federal Reserve Act Section 19(b)(12) governing reserve balance earnings. Its true functional effect—whether it redirects Fed earnings, alters bank compensation, or shifts fiscal flows—depends entirely on the content of the struck provision, which the bill does not restate.
What the text implies
- Striking Section 19(b)(12) may alter the distribution of Federal Reserve earnings between the Fed, banks, and the U.S. Treasury, with cascading effects on federal revenue and monetary policy independence.
- The 180-day delayed effective date suggests the Fed and banking sector may need time to adjust operations or accounting practices in response to the rule change.
The full analysis lists 3 implications of this text.
Who stands to gain
commercial banks (if Section 19(b)(12) currently restricts their earnings on reserves)