24. Federal Reserve · Notable
Stop paying interest on excess reserves
Printed page 735 24. Federal Reserve
“Stop paying interest on excess reserves. … The Federal Reserve should immediately end this practice and either sell off its balance sheet or simply stop paying interest so that banks instead lend the money.”
What has happened
- Not started
The Federal Reserve still pays interest on reserve balances and has not stopped or proposed to stop. The implementation note of July 29, 2026 records that "the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 3.65 percent, effective July 30, 2026"; the rate has been adjusted at meeting after meeting through the window — 3.90 percent from October 30, 2025 — but the practice itself is untouched, and it remains the Board's primary tool for steering the federal funds rate within its target range. Neither branch of the Quote's alternative was taken: the balance sheet was not sold off either, and its reduction was concluded on December 1, 2025.
Research log
What was searched, and what didn’t count as evidence
Research notes
Terminology note for a later pass: “interest on excess reserves” (IOER) as a distinct rate was abolished in 2021, when the Board consolidated IOER and the interest rate on required reserves into a single interest rate on reserve balances (IORB). The practice the Quote objects to — paying banks interest on balances held at the Federal Reserve — continues under the new name, so a keyword search for “interest on excess reserves” returns nothing (a Federal Register full-text search for the quoted phrase since 2025-01-20 returns 0 documents) while the thing itself is in every implementation note. This is the playbook §1.1 rename trap.
Ending it would also require repealing section 19(b)(12) of the Federal Reserve Act, which authorizes the payments; no bill does.
- Action
- eliminate
- Object
- Interest on excess reserves (IOER)
- ID
- 2015