119-S-2113 Journalist Public Summary

Headline Summary

S. 2113 would stop the Federal Reserve from paying interest to banks on the money they keep at the Fed.

What It Does

The bill is very short: it amends the Federal Reserve Act to prohibit any “earnings” (interest) on balances that banks hold at the Federal Reserve. In plain English, the Fed could no longer pay banks interest for parking funds at the central bank. Supporters frame this as ending what they call a subsidy to large banks; opponents warn it would take away a key tool the Fed uses to steer short‑term interest rates.

Why It Matters

• Households and businesses: If the Fed lost a main lever for setting short‑term rates, borrowing costs could become less predictable for mortgages, credit cards, and small‑business loans, at least during a transition.
• Banks and credit unions: Ending these payments would likely cut a line of income—felt most by institutions that hold large balances at the Fed. That could push some banks to lend more or to move funds elsewhere, but could also squeeze earnings.
• The broader economy: Changing how the Fed runs monetary policy could affect how quickly it can respond to inflation or crises; the impact would depend on what replacement tools are used and how markets adapt.

Who’s For It

• Sponsor: Sen. Rand Paul (R‑KY), who argues the policy amounts to a bailout or subsidy for big banks and should end.
• Fiscal conservatives and some Fed skeptics, who say paying interest on bank reserves distorts markets and rewards parking cash instead of lending.
• Some community‑bank advocates, who contend large institutions benefit most from these interest payments and gain a competitive edge.

Who’s Against It

• Federal Reserve policymakers and many mainstream economists (likely), who argue these interest payments are essential for controlling short‑term rates and fighting inflation; removing them could disrupt monetary policy.
• Large bank trade groups and many financial‑industry voices, who warn it could unsettle money markets and reduce financial‑system stability.
• Lawmakers focused on preserving the Fed’s toolkit, who worry the change could make rate moves slower or less precise during shocks.

What’s Next

Status as of December 13, 2025: The bill was introduced on June 18, 2025 and read twice in the Senate before being sent to committee. A Senate committee held hearings on December 11, 2025. It remains in committee with no chamber‑wide vote scheduled yet.