SB 1648, titled the “Right-size the Federal Reserve Act,” would amend the Federal Reserve Act to constrain the size and operations of the Federal Reserve System. The bill directs the Board of Governors and each Federal Reserve Bank to provide Congress with an annual report identifying how many foreign-owned banks and financial institutions received interest on reserves or accessed Federal Reserve lending facilities. It also changes reserve requirement language in section 19 of the Federal Reserve Act, tying the requirements to a floor no lower than those in effect on March 25, 2020.
The bill’s central policy change is a new cap on the Federal Reserve Banks’ total aggregate assets: combined assets would have to be no more than 10 percent of U.S. gross domestic product, with that limit taking effect 10 years after enactment. In addition, the Board would be required to eliminate the Overnight Reverse Repurchase Facility within one year and would be barred from creating a similar facility in the future. The Board would also have to submit annual reports to Congress describing its plan and timeline for complying with these new limits and related amendments.
Impact
If enacted, the bill would materially alter the Federal Reserve Act by imposing statutory limits on Federal Reserve balance-sheet size, restricting certain reserve-related operations, and eliminating a major liquidity-management facility. It would affect the Federal Reserve Board, the 12 Federal Reserve Banks, depository institutions that hold reserves, and counterparties that use Federal Reserve lending or repurchase facilities. The reporting requirements would also increase congressional oversight of Federal Reserve interactions with foreign-owned banks and financial institutions.
Sentiment
Based on the available record, the bill appears to be introduced as a reform measure aimed at reducing the Federal Reserve’s footprint and increasing transparency, but there is no committee transcript or vote history provided to show broader support or opposition. The absence of recorded debate or votes means sentiment cannot be measured directly from legislative proceedings. The bill’s framing suggests a critical view of the Federal Reserve’s current asset size and emergency/liquidity facilities.
Contention
The likely points of contention are the proposed 10 percent-of-GDP asset cap, the mandated elimination of the Overnight Reverse Repurchase Facility, and the restrictions on future similar facilities. Supporters would likely view these provisions as necessary to shrink the Federal Reserve and limit perceived market distortions, while opponents may argue they would reduce the Fed’s flexibility to manage reserves, interest rates, and financial stability. The reporting on foreign-owned banks and reserve interest payments may also be controversial if viewed as targeting specific institutions or Fed operations without clear evidence of abuse.