Congress moves to handcuff the Fed's crisis-fighting tools

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 3-year Treasury maturity cap significantly shortens the duration of Fed holdings, potentially reducing the Fed's influence over longer-term interest rates and its ability to manage the yield curve during monetary policy operations.
• Annual reporting on Fed impact on the middle class and small business lending creates a new political accountability mechanism that could influence Fed independence and decision-making, as Congress may use these reports to pressure policy changes.

Who it affects

The reporting requirements could increase transparency and accountability for Fed policy effects on ordinary Americans and small businesses, which is a public benefit. However, the investment restrictions may constrain the Fed's ability to conduct monetary policy during crises (particularly the mortgage-backed security ban, which was critical during 2008 and COVID), potentially harming citizens through reduced economic stabilization capacity. The net effect depends on whether transparency gains

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)

Named in the bill

Federal Reserve Board, Federal Open Market Committee (FOMC), Federal Reserve Banks, U.S. Congress, Treasury Department, Mortgage-backed securities market, Small business lending sector

Where it stands

• May 7, 2025 — Introduced · Congress.gov: “Introduced in Senate”
• May 7, 2025 — Referred to Senate Committee on Banking, Housing, and Urban Affairs · Congress.gov: “Read twice and referred to the Committee on Banking, Housing, and Urban Affairs”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.