The bill deletes a single numbered paragraph from Section 19(b) of the Federal Reserve Act that the sponsor identifies as relating to "earnings on balances." The statutory change is narrowly drafted: it removes that paragraph and takes effect 180 days after enactment.
Though the text is short, the change directly touches the legal framework the Federal Reserve and Treasury use to account for and transfer earnings tied to reserve balances. That creates immediate operational questions for central-bank accounting, Treasury remittances, and how interest-on-reserve arrangements are treated in federal fiscal reporting.
At a Glance
What It Does
The bill amends the Federal Reserve Act by excising one enumerated paragraph in the provision that Congress uses to govern earnings on reserve balances. The deletion creates a statutory gap where a specific rule or authorization used by the Fed and Treasury currently sits.
Who It Affects
Primary actors include the Federal Reserve Board and Reserve Banks (responsible for accounting and remittances), the Department of the Treasury (recipient of Federal Reserve remittances), federally chartered member banks (whose relationships and dividends can be influenced by Fed remittance rules), and budget offices that track federal receipts.
Why It Matters
Removing a statutory provision that governs earnings on balances can change the legal basis for transfers between the Fed and Treasury, alter how interest-on-reserve practices are treated in fiscal accounts, and prompt administrative or legislative follow-ups to fill any operational or legal gaps.
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What This Bill Actually Does
This bill does one thing in statutory language: it instructs Congress to delete a specific numbered paragraph within Section 19(b) of the Federal Reserve Act—the subsection Congress uses to set out how Federal Reserve earnings on balances are handled. The deletion is not conditional or replaced by another rule; it simply removes that paragraph from the statute and phases the change in 180 days after enactment.
Because the change is surgical rather than comprehensive, its immediate impact depends on what the removed paragraph currently does in practice. Removing a statutory authorization or restriction can leave the Federal Reserve and the Treasury without the existing legal text they rely on for accounting entries and remittances.
That in turn forces both agencies to consider administrative workarounds, internal accounting revisions, or requests for clarifying legislation.Operationally, the Fed will need to decide whether existing internal policies and accounting practices can continue under the remaining statutory framework or whether procedural changes are required to reflect the deletion. The Treasury and federal budget offices will need to assess whether projected remittances or fiscal receipts change.
Market actors and member banks will watch for guidance that affects how interest on reserve balances is recorded and how those entries influence distributions, dividends, or reported Fed income.Finally, the statutory deletion opens two clear pathways: the agencies could implement interpreting guidance and administrative practice to fill the void, or Congress could follow with more detailed statutory language. Either path raises timing and legal risks—especially during the 180-day transition window the bill creates—because the practical mechanics of Fed-to-Treasury flows are tied to established accounting routines and expectations.
The Five Things You Need to Know
Sponsor and introduction: S.2499 was introduced by Senator Rick Scott (R–FL) with Senator Ted Cruz as a co-sponsor and referred to the Senate Committee on Banking, Housing, and Urban Affairs.
Short title: The bill is titled the "Fiscal Accountability for Interest on Reserves Act" (FAIR Act).
Scope: The statutory target is a single numbered paragraph within 12 U.S.C. §461(b) (Section 19(b) of the Federal Reserve Act); the bill does not add replacement text.
Effective timing: The deletion takes effect 180 days after the date of enactment, creating a defined transition window.
Bill length and form: The text is a short, single-purpose amendment—no accompanying definitions, offset provisions, or implementation instructions are included.
Section-by-Section Breakdown
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Short title
This section assigns the Act its public name—the Fiscal Accountability for Interest on Reserves Act, or FAIR Act. Short-title sections are conventionally used by advocates and agencies to reference a measure quickly; they carry no substantive legal effect but indicate the sponsor's framing of the policy objective.
Substantive deletion in the Federal Reserve Act
This is the operative clause: it amends Section 19(b) of the Federal Reserve Act (codified at 12 U.S.C. §461(b)) by striking the specified paragraph. The clause does not identify or replace any language; it removes the existing text wholesale. Practically, that erases whatever authorization, restriction, or definitional content that paragraph provided, leaving the remaining text of §19(b) intact.
Transition period and effective date
This subsection sets the amendment to take effect 180 days after enactment. The six-month window matters because it forces a discrete period in which the Fed and Treasury must prepare operationally: update accounting systems, communicate with member banks if necessary, and decide whether administrative guidance or additional legislation will be needed to address consequences of the deletion.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Congressional fiscal overseers and budget analysts — the sponsor frames the change as improving "fiscal accountability," and removing a statutory provision may prompt clearer reporting or legislative oversight of Fed remittances.
- Policymakers seeking leverage over central-bank practices — deleting statutory text can be an instrument to press the Fed for transparency or to force renegotiation of legal authorities.
- Advocacy groups focused on federal receipts — groups concerned with Treasury revenues may view the change as creating an opportunity to recover or reclassify flows that previously bypassed certain budget lines.
Who Bears the Cost
- Federal Reserve System (Board and Reserve Banks) — the Fed will carry operational and legal burdens to adapt accounting, potentially revise internal policies, and defend its interpretation of remaining statutory authorities.
- Department of the Treasury and budget offices — they must reassess projected remittances, update fiscal reporting, and coordinate with the Fed during the transition window.
- Member banks and financial market participants — if the deletion affects how interest on reserve balances is treated or reported, banks may face uncertainty about dividends, accounting entries, or market signaling until guidance is issued.
Key Issues
The Core Tension
The central dilemma is between fiscal accountability and legal-operational stability: Congress can remove a statutory hook to press for greater Treasury receipts or oversight, but doing so without replacement language risks creating legal ambiguity that complicates Federal Reserve accounting and transactional flows—forcing either administrative improvisation or further legislation under time pressure.
The bill's strength is its precision: a single, narrow deletion. Its weakness is the same.
The text does not say whether the removed paragraph is an authorization, a limit, or a definitional rule, nor does it offer replacement language. That raises three thorny practical problems.
First, administrative continuity: the Fed and Treasury operate with established accounting practices tied to specific statutory authorities; deleting one may not break those practices immediately, but it can create legal ambiguity that complicates audits, remittances, and fiscal projections.
Second, timing and transition: the 180-day window forces rapid coordination among agencies. If the paragraph currently underpins transfers or reporting, the agencies will either need to adopt interim administrative interpretations, seek expedited implementing guidance, or press Congress for clarifying legislation.
Any mismatch between operational practice and statutory text could invite legal challenges or audits. Third, central-bank independence vs. fiscal oversight: deleting statutory language that governs earnings on balances is a legislative lever that shifts the balance of legal control without specifying policy outcomes, creating risks that subsequent action will be rushed or piecemeal rather than thoughtfully designed.
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