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A Forthcoming Tax on the Federal Reserve?

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Author Topic: A Forthcoming Tax on the Federal Reserve?  (Read 79 times)
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« on: July 25, 2015, 08:43:56 pm »

Well--there are two things to say about this:  1) it isn't really a tax on the Federal Reserve or its members---it more like a reduction on their interest rate; and 2) it isn't likely to pass.

But here's the thing: how many people knew that the member banks of the Federal Reserve buy their way into the club and then get a 6% return on that investment for having done so? 

At The Hill website in "Banks Revolt Over Plan to Kill $17B Payout", the reporter writes:
When banks join the Federal Reserve system, they are required to buy stock in the central bank equal to 6 percent of their assets. However, that stock does not gain value and cannot be traded or sold, so to entice banks to participate, the Fed pays out a 6 percent dividend payment.

The Senate proposal says it would slash that “overly generous” payout to 1.5 percent for all banks with more than $1 billion in assets. While the summary language outlining the proposal said that change would only impact “large banks,” industry advocates argued that banks most would identify as small community shops could easily have assets in excess of that amount.

Banks are working to mobilize against the provision, even as lawmakers are pushing to pass a highway bill before program funding expires at the end of the month.

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