ROI of the Federal Reserve Act
This bill, titled the Regular Order for Investments of the Federal Reserve Act (ROI Act), would impose tighter limits on the Federal Reserve’s asset purchases and holdings, require GAAP-based accounting for the Fed’s filings, and add new annual reporting to Congress on social and credit-related effects of Fed policy. Specifically, it would restrict the Fed’s ability to buy longer-term Treasuries, mortgage-backed securities, or equities acquired after enactment, and it would mandate GAAP compliance and mark-to-market valuations in relevant filings. In addition, the bill requires annual reports from the Board and the Federal Reserve Banks analyzing (a) the status of the middle class and how Fed policies affect its growth, and (b) the impact of Fed actions on small business lending and lines of credit since 2000, including how the Fed’s balance sheet and reserves influence credit availability. Potential impact includes reduced flexibility in the Fed’s asset portfolio, greater congressional oversight and transparency, and potential effects on monetary policy operations, Fed earnings/remittances, and credit markets. The combination of investment constraints and new accounting/valuation standards would likely be a significant shift in how the Fed manages risk and reports its activities.
Key Points
- 1Requires annual reports to Congress on the middle class and on the impact of Fed actions on small business lending since 2000, including analysis of balance sheet components and interest on reserves.
- 2After enactment, restricts Fed investments: no purchases of Treasury bills with maturities beyond 3 years; no mortgage-backed securities; and no direct or indirect ownership of common stock acquired after enactment.
- 3Establishes new accounting principles requiring GAAP (generally accepted accounting principles) for filings by the Board, the FOMC, and Federal reserve banks.
- 4Mandates mark-to-market valuations for certain financial estimates in specified reports/audits to reflect current market values.
- 5Creates a unified framework under a new Section 33 and clarifies that these financial and reporting requirements apply going forward, with a focus on transparency and accountability.