Right-size the Federal Reserve Act

Key Points

• The bill would cap the Federal Reserve's total assets at no more than 10% of U.S. GDP, forcing a massive reduction from the current level of roughly $6.7 trillion. This limit would take effect 10 years after the bill becomes law, giving the Fed a decade to wind down its holdings.
• The Fed would no longer be allowed to pay interest on excess reserves, meaning banks would only earn interest on the minimum amount of cash they are required to hold. This eliminates a major income stream for large banks, including foreign-owned institutions operating in the U.S.
• The bill reinstates reserve requirements that were dropped to zero in March 2020. Banks would once again need to keep a minimum amount of cash on hand, returning to pre-pandemic rules.
• The Overnight Reverse Repurchase Facility must be shut down within one year, and the Fed is barred from creating any similar program. This removes a key tool the Fed uses to manage short-term interest rates.
• The Fed and each Federal reserve bank would have to report annually to Congress on how much interest they pay to foreign-owned banks and financial institutions. This adds a new layer of transparency and congressional oversight.