Groans as Congress again uses Fed’s capital fund to plug holes
By John Heltman Ian McKendry
A provision tucked away in the Senate’s two-year budget deal would cut the Federal Reserve’s operating surplus by $2.5 billion, the second time in recent years that Congress has diverted Fed funds to pay for unrelated legislation. The deal announced Wednesday — which would avert a government shutdown on Thursday night and raise the debt ceiling — includes a provision that would amend the Federal Reserve Act to reduce the central bank’s operating surplus from $10 billion to $7.5 billion. …Karen Shaw Petrou, managing partner at Federal Financial Analytics, agreed the biggest problem the move poses is that there is little keeping Congress from raiding the Fed again. “The Fed’s surplus is easy money for Congress, but hard luck for the rest of us,Petrou said. “Turning a central bank into a piggy bank threatens its independence and ability to respond in a crisis.”