A Republican senator’s plan to take away the Federal Reserve’s power to pay banks interest on cash they park on central bank books could cause chaos for monetary policy implementation if it were implemented, market participants said.
In recent days, Senator Ted Cruz of Texas has been speaking about this power and his desire to see it ended as part of what he views as an effort to save money by the federal government. Stripping the Fed of the longstanding power would save the government $1 trillion, Cruz said in a CNBC interview last week. The senator said then that he did not know if it was likely his effort would work but that it was certainly possible.
On Wednesday, Bloomberg reported that Cruz had also lobbied President Donald Trump, who has long been at odds with the Fed, as well as Republican colleagues, about his idea. “We’re agonizing trying to find a $50 billion cut here and there. This is over a trillion dollars, big dollars in savings,” Cruz told Bloomberg, saying of the payments, “half of it is going to foreign banks, which makes no sense.”
Michael S. Derby | Yahoo Finance