Congress moves to strip banks of Fed interest income—but who pays?

What it does

This bill amends the Federal Reserve Act to prohibit Federal Reserve banks from paying interest on the reserve balances that commercial banks hold at the Fed. Currently, banks earn interest on these deposits; the bill eliminates that income stream entirely, reducing a revenue source that has grown substantially since the 2008 financial crisis.

Why we flagged it

The bill's sole operative mechanism is a prohibition on Federal Reserve interest payments to depository institutions on their reserve balances. It is a straightforward regulatory restriction, not a subsidy, carve-out, or commemorative measure.

What the text implies

• Banks may offset lost Fed interest income by raising fees on consumer accounts, reducing lending, or tightening credit standards, shifting costs to ordinary depositors and borrowers.
• The bill does not specify what happens to the interest the Fed would have paid — it may remain with the Fed, reduce Fed remittances to the Treasury, or affect monetary-policy transmission.
• Elimination of interest on reserves may reduce the Fed's ability to manage short-term interest rates and liquidity during financial stress, potentially complicating future crisis response.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill removes a subsidy to large banks, which could reduce moral hazard and encourage market discipline — a public-interest argument. However, banks may pass costs to consumers through higher fees, reduced lending, or tighter credit conditions, and the bill does not redirect the foregone interest to public benefit or deficit reduction, leaving the net effect on ordinary people unclear.

Named in the bill

Federal Reserve, Federal Reserve banks, depository institutions, Section 19(b) of the Federal Reserve Act

Where it stands

1 cosponsor: 1 Independents.

• Jun 18, 2025 — Introduced · Congress.gov: “Introduced in Senate”
• Jun 18, 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”
• Dec 11, 2025 — Hearing held · Congress.gov: “Committee on Homeland Security and Governmental Affairs. Hearings held”

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

Money around this bill

1 lobbying clients named this bill on 4 disclosure filings across 3 quarters, Dec 2025 to Jun 2026. Those filings disclosed $108,500 in lobbying spend. A filing names 13 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Rand Paul, the sponsor, reported $94,645 in PAC receipts in the 2026 cycle.

• National Beer Wholesalers Association — $108,500 on 4 filings

Lobbying Disclosure Act filings through Jul 8, 2026. A filing shows who paid to lobby on a bill it names, not what changed.