New Interest Payment Plan Asked by Fed: Fed's Proposal Aimed at Membership
The Federal Reserve Board, In a new proposal aimed at preserving its membership base, has urged Congress to allow it to pay interest on the first $100 million in reserve requirements, the chairman of the House Banking Committee revealed yesterday.</br></br>in exchange for the interest payments, all banks would be required to belong to the Federal Reserve System.</br></br>Rep. Henry S. Reuss (D-tVis.) disclosed the latest Fed position in announcing plans to introduce legislation when the new Congress convenes next month to deal with the bank membership problem.</br></br>Unlike the central bank proposal, however, Reuss would only require the nationÛªs largest banks to meet the Fed's reserve requirementsÛÓbanks with more than S100 million in deposits, Reuss estimates that 95 percent of the nationÛªs 14,618 banks would be completely free of the need to hold reserves with the central bank.</br></br>Under the new bill, the large banks would have their reserve requirements with the Fed substantially reduced. Reuss said that instead of having to keep an amount equal to 16.25 percent of checking account deposits in reserve, large banks would only be required to set aside 9.5 percent of checking account deposits.