This Is Why the Fed Is Paying Interest to Big Banks
Q&A on a Fed practice that mystified congressmen today.
Key Takeaways From Janet Yellen's Comments
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Federal Reserve Chair Janet Yellen ran into a bipartisan buzzsaw today over why the Federal Reserve is paying interest to banks on the trillions of dollars in reserves that they hold at the Fed. She tried repeatedly to supply the central bank's reasoning but didn't seem to make a dent.
"Please, please explain," Representative Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee, said at one point. Committee Chairman Jeb Hensarling (R-Texas) said the Fed's interest-paying policy "can distort resource allocation and constrain economic opportunity."