119-S-2113 DC Insider Prediction Analysis

Passage Probability

Bottom line: this doesn’t have the votes in the Senate, and leadership has no incentive to spend time on it.

Rationale: The bill sits in Senate Banking (Chair Tim Scott) with no reported action since referral on June 18, 2025. A live‑fire test came when Sen. Paul offered substantially the same policy as an NDAA amendment; it failed 14–83 under a 60‑vote threshold—an unmistakable whip signal across both parties. [1]Congress.gov — S.2113 - End the Fed’s Big Bank Bailout Act (status & overview)[2]U.S. Senate Committee on Banking, Housing, and Urban Affairs — Scott Announces…[3]U.S. Senate Periodical Press Gallery — Thursday, October 9th, 2025 (Senate floo…

Institutional context reinforces the headwinds. Republicans hold unified control (Trump in the White House; GOP majorities in Senate and House), but the Senate GOP leadership is preserving the filibuster, and there is no 60‑vote coalition for stripping the Fed’s core rate‑control tool. [6]U.S. Senate — U.S. Senate: Party Division – 119th Congress[7]Office of Sen. John Thune — Thune Delivers First Remarks as Senate Majority Lea…

Substance also hurts the bill’s whip count: Chair Powell warned publicly that ending IORB would destabilize the operating framework; 2023–2024 Fed statements and audited numbers underscore IORB’s central role and the current loss/remittance dynamics, undercutting claims of immediate budget savings. [4]Reuters — Powell cautions against ending Fed power to pay IORB[8]Federal Reserve History — Interest on Reserves – background and role[9]Federal Reserve Board — Federal Reserve Board releases annual audited financial…

Obstacles

• Committee gatekeeping: Senate Banking (Tim Scott) controls the path; ranking Democrat is Elizabeth Warren. There’s no evidence of planned hearings or markups on S.2113. [2]U.S. Senate Committee on Banking, Housing, and Urban Affairs — Scott Announces…
• Floor math: Even under GOP control, 60 votes are required outside reconciliation; the 14–83 NDAA amendment vote shows lopsided opposition. [3]U.S. Senate Periodical Press Gallery — Thursday, October 9th, 2025 (Senate floo…
• Policy resistance: Powell’s testimony and Fed documentation argue IORB/ON RRP are integral to the “ample reserves” framework; removing IORB impairs rate control. [4]Reuters — Powell cautions against ending Fed power to pay IORB[8]Federal Reserve History — Interest on Reserves – background and role
• Stakeholder opposition: ABA, ICBA, and credit unions lobbied against the ban, warning of tighter credit and operational disruption—signals that moderates heed. [10]ABA Banking Journal — ABA and state associations oppose ending IORB[11]Independent Community Bankers of America — ICBA: Senate votes down amendment to…
• Reconciliation limits: CBO expects Fed remittances to be largely suspended until about 2030, weakening any near‑term score; Byrd Rule risk that policy change would be “merely incidental.” [5]govinfo — Congressional Record excerpt citing CBO on Fed remittances (suspended…[12]Web search · turn 15 #1
• Jurisdictional noise: HSGAC oversight hearings amplify messaging but don’t move the bill; Banking retains legislative jurisdiction. [13]U.S. Senate HSGAC — HSGAC hearing: The Fed’s Big Bank Welfare Program: Oversigh…

Short‑Term Consequences (next 3–6 months)

• If S.2113 advances (low‑probability): Markets would immediately handicap rate‑control alternatives; Senate leadership would likely require 60 votes, and financials lobby would mobilize again—expect quick procedural defeat or tabling. [3]U.S. Senate Periodical Press Gallery — Thursday, October 9th, 2025 (Senate floo…[10]ABA Banking Journal — ABA and state associations oppose ending IORB
• If it stalls (base case): Continued oversight theatrics (e.g., HSGAC) keep the issue in conservative media, but Fed policy remains anchored in IORB/ON RRP while the Fed has already eased and ended QT, reducing IORB outlays versus 2023 peaks. [13]U.S. Senate HSGAC — HSGAC hearing: The Fed’s Big Bank Welfare Program: Oversigh…[14]Reuters — Fed ends QT and lowers administered rates (incl. IORB) on Oct. 29, 20…
• House angle: A House companion exists (H.R.146), and Financial Services under Chair French Hill could hold messaging hearings, but Senate math still kills it. [15]Congress.gov — H.R.146 – Prohibition on IOER Act of 2025 (text)[16]U.S. House Committee on Financial Services — U.S. House Financial Services Comm…

Long‑Term Consequences (if enacted)

What changes if Congress actually bans IORB?

• Rate‑control framework: The Fed would be forced off the “floor” system; absent IORB, it would need to drain reserves dramatically or improvise via other administered rates—both paths risk volatility. Fed history and NY Fed materials outline this dependence. [8]Federal Reserve History — Interest on Reserves – background and role
• Budget optics vs. reality: Ending IORB does not deliver near‑term deficit reduction while remittances are suspended; any gains mostly arrive once remittances resume later in the decade. [5]govinfo — Congressional Record excerpt citing CBO on Fed remittances (suspended…
• Credit conditions: Bank and community‑bank groups argue the change functions as a tax on reserves, curbing credit supply; while advocacy‑driven, that risk would be priced by moderates and appropriators. [10]ABA Banking Journal — ABA and state associations oppose ending IORB[11]Independent Community Bankers of America — ICBA: Senate votes down amendment to…
• Fed communication/politics: Expect a bruising Fed‑Hill confrontation; Powell has already cautioned Congress against this path, which would likely trigger market‑structure workarounds and more Treasury‑Fed coordination. [4]Reuters — Powell cautions against ending Fed power to pay IORB

Forecast

Scenario tree anchored in current control of institutions: President Trump; Senate GOP majority; House GOP majority.

1. Base case (≈85%): No Banking markup; occasional messaging votes fail; HSGAC/other oversight continues; S.2113 expires at end of Congress. Drivers: 14–83 floor test; policy opposition from Fed and industry; no leadership push. [3]U.S. Senate Periodical Press Gallery — Thursday, October 9th, 2025 (Senate floo…[4]Reuters — Powell cautions against ending Fed power to pay IORB
2. Secondary (≈10%): House passes a narrowed version or attaches language to a broader House vehicle; Senate strips it in conference or it falls to Byrd Rule scrutiny if tried in reconciliation, given weak scoring while remittances are paused. [16]U.S. House Committee on Financial Services — U.S. House Financial Services Comm…[12]Web search · turn 15 #1[5]govinfo — Congressional Record excerpt citing CBO on Fed remittances (suspended…
3. Tail (≈5%): Study/GAO reporting requirement or transparency rider (non‑operative on IORB) survives as a compromise messaging win. Precedent: policy‑lite riders when core provisions lack 60. (Inference based on typical Senate bargaining behavior.)

Sourcing (select)

Key documents underpinning this forecast.

• Congress.gov page for S.2113; status: referred to Senate Banking (6/18/2025). [1]Congress.gov — S.2113 - End the Fed’s Big Bank Bailout Act (status & overview)
• Banking Committee leadership/priorities (Chair Tim Scott; Ranking Warren). [2]U.S. Senate Committee on Banking, Housing, and Urban Affairs — Scott Announces…
• Senate floor vote on Paul’s NDAA amendment prohibiting IORB: failed 14–83. [3]U.S. Senate Periodical Press Gallery — Thursday, October 9th, 2025 (Senate floo…
• Powell testimony cautioning against ending IORB. [4]Reuters — Powell cautions against ending Fed power to pay IORB
• Fed audited data on 2023 results and IORB expense; 2024 results coverage. [9]Federal Reserve Board — Federal Reserve Board releases annual audited financial…[17]Reuters — Fed reports smaller loss on operations in 2024
• Fed background on IORB/ON RRP framework. [8]Federal Reserve History — Interest on Reserves – background and role
• CBO projection (via Congressional Record) on remittances resuming ~2030, implying weak near‑term scores. [5]govinfo — Congressional Record excerpt citing CBO on Fed remittances (suspended…
• HSGAC hearing on IORB (12/11/2025). [13]U.S. Senate HSGAC — HSGAC hearing: The Fed’s Big Bank Welfare Program: Oversigh…
• House setting: HFSC chair; companion bill H.R.146. [16]U.S. House Committee on Financial Services — U.S. House Financial Services Comm…[15]Congress.gov — H.R.146 – Prohibition on IOER Act of 2025 (text)
• Industry opposition (ABA, ICBA). [10]ABA Banking Journal — ABA and state associations oppose ending IORB[11]Independent Community Bankers of America — ICBA: Senate votes down amendment to…
• Macro backdrop: Fed ended QT and trimmed rates in late Oct. 2025, lowering IORB. [14]Reuters — Fed ends QT and lowers administered rates (incl. IORB) on Oct. 29, 20…