Congress moves to handcuff the Fed's crisis-fighting tools
S. 1647 — ROI of the Federal Reserve Act · Filed by Rick Scott (R-FL) · Introduced May 7, 2025 · Referred to committee
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What it does
This bill requires the Federal Reserve to submit annual reports to Congress on how its policies affect the middle class and small business lending, and restricts the Fed's investment authority by prohibiting purchases of long-term Treasury bills (over 3 years), mortgage-backed securities, and common stock. It also mandates that the Fed use standard accounting principles and mark-to-market valuations in its financial reporting.
Why we flagged it
The bill's core function is twofold: it imposes new reporting obligations on the Fed (transparency angle) and simultaneously restricts the Fed's investment and asset-purchase authority (policy constraint). The title 'ROI of the Federal Reserve Act' is somewhat opaque—'ROI' suggests return-on-investment framing, but the bill is actually about constraining Fed operations and demanding accountability reporting, not measuring financial returns.
What the text implies
- The mortgage-backed security purchase ban removes a critical tool the Fed used during the 2008 financial crisis and COVID-19 pandemic to stabilize housing markets and credit availability. This constraint could impair the Fed's ability to respond to future financial emergencies.
- Mark-to-market accounting requirements may force the Fed to report unrealized losses on its balance sheet more aggressively, potentially creating political pressure to liquidate assets at unfavorable times or constraining future policy flexibility.
The full analysis lists 4 implications of this text.
Who stands to gain
Regional and community banks (reduced Fed competition in lending markets); Short-duration bond traders (if Fed shifts to shorter-maturity purchases); Hedge funds and asset managers (potential volatility from constrained Fed policy tools)