Number: RL30874
Title: Proposals to Allow Federal Reserve Banks to Pay Interest on Reserve Balances: The Issues Behind the Legislation
Authors: Walter W. Eubanks, Government and Finance Division 
Abstract: This report presents some of the economic issues related to the proposal to allow Federal Reserve Banks to pay interest on reserve balances. The report begins with a discussion of the legislation itself. The second section discusses the two main purposes of reserve balances at Federal Reserve Banks. The third section analyzes the level of the various categories of reserve balances at the Fed and trends in the amounts. The fourth section describes depository institutions' reserve balance management. The fifth section explains what would be likely to happen if the Fed paid interest on reserve balances. The sixth section presents the arguments the Fed uses in support of the legislation in the 107th Congress as well as the Department of Treasury's arguments for not supporting it.
Pages: 14
Date: Updated March 5, 2002