U.S. Senators Ted Cruz (R-Texas) and Rick Scott (R-Fla.) have introduced the Fiscal Accountability for Interest on Reserves (FAIR) Act, a bill that would remove the Federal Reserve’s authority to pay interest on bank reserves.
Senator Cruz stated, “The Federal Reserve’s authority to pay interest on reserves rewards big banks—including large foreign banks—at the expense of all Americans. The FAIR Act replaces this authority—reducing the deficit, allowing more small businesses to access capital, and putting the Fed back on a path of fiscal responsibility. The Fed should not be in the business of increasing foreign banks’ profits, and I strongly urge my colleagues to pass this bill without delay.”
Senator Scott added, “The Federal Reserve under Jay Powell’s leadership has been a failure to the American people – it has failed to provide stability, transparency or accountability Americans deserve from the central bank, and has failed to use dollars in the best interests of the American people. Our bill, the FAIR Act, is a great step to refocusing the Fed on American families by stopping their ability to pay interests to banks on reserves when these dollars could be used to fund the government, benefit American families, and pay down the nation’s $37 trillion debt crisis. Jay Powell has already downplayed inflation, rubber-stamped reckless policies, and has fostered a culture of corruption and mismanagement costing taxpayers trillions, while putting the interests of all others before American families. We must force change at the Federal Reserve to put families’ best interest first, bring accountability to the Federal Reserve, and restore fiscal sanity to the nation – my FAIR Act is a great step and I urge my colleagues to pass this ASAP.”
A companion version of this legislation was introduced in the House by Representative Warren Davidson (R-Ohio-08). Davidson said, “The Federal Reserve should not pay interest on banks’ reserves. It robs the Treasury, and perhaps worse, it distorts markets. If banks want returns, they should deploy their capital by making loans. Market economies need capital, not central planning. I’m glad to sponsor the House version of the Fiscal Accountability for Interest on Reserves Act to end this nonsensical practice.”
Since 2008, payments made by the Federal Reserve as interest on bank reserves have totaled over $580 billion. Most of these costs were incurred during President Biden’s administration; in 2024 alone more than $186 billion was paid out in interest payments. These funds primarily benefited larger banks with significant holdings at the Fed; between 40% and 50% of total payments went to foreign banks.
Ted Cruz recently won re-election in 2024 against Colin Allred with 53.1% of votes compared to Allred’s 44.6%.
