Federal Reserve

Federal Reserve Pays Banks Tens of Billions in Interest on Reserves

Lingering subsidy from the bailout

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Sometimes, it seems that there is no end to the helping hands that always seem to be reaching out to Wall Street institutions, often holding cash generated from the tax payments of Joe and Jane Main Street.

So it is with the interest that the Federal Reserve pays on the reserves that banks keep at the central bank, an amount that could top $77 billion each year by the end of 2015, according to Bloomberg.

The fact that the Fed pays any interest at all on excess reserve funds that banks leave in its care may seem strange, but it is a direct result of the passage of the Emergency Economic Stabilization Act of 2008, the legislation that made the great bank bailout possible.

(H/T Sevo)