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The Administration opposes House passage of H.R. 4364 which would permit
the Federal Reserve to pay interest on reserves maintained at Federal
Reserve Banks.
OMB estimates that paying interest on reserves would cost taxpayers as much
as $800 million over 5 years. While this would create real additional
Federal government outlays to banks, the bill would pay for the spending
with an artificial receipt. The bill purports to pay for the spending by
requiring the Federal Reserve to transfer some earnings to the Treasury.
However, there are no new receipts to the taxpayer from this transfer. The
Federal Reserve is part of the Federal government. Its earnings are
already owned by the government, whether or not they are later transferred
to the Treasury. The transfer of the earnings therefore brings no new
receipts to the government.
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