Congress has stumbled into a monetary policy minefield this week as the Senate continues to lurch through the reconciliation process.
Senate Commerce Committee Chair Ted Cruz (R-Texas) is pushing for a change that would end the practice of the Federal Reserve paying interest on bank reserves. That would be a titanic change for the banking industry, as well as for how the Fed has managed monetary policy since the 2008 financial crisis.
We don’t think this push will survive the reconciliation process this go-round. Senate Banking Committee Chair Tim Scott (R-S.C.) said in a statement this afternoon that such a change must go through “regular order” — not in reconciliation. But this push might have more life to it than the banking industry thinks.
