Richmond Fed President says Fed dividends shouldn't be used in highway bill
Congress passed a bill that would take away any amount more than $10 billion in the Fed's account and transfer us it for a transportation bill.
He outlines the changes in an article on the Richmond Fed website and laments that the Richmond Fed will no longer pay a 6% dividend to member banks.
"Under the traditional framework, member banks had to buy stock in their regional Reserve Bank equal to 3 percent of their capital and surplus (the "paid in" amount), while another 3 percent was "on call." Since this paid-in stock wasn't generating returns for member banks, the Fed paid an annual dividend of 6 percent. The new law, however, cuts the dividend for large banks from 6 percent to the annual yield of the 10-year Treasury note, which presently is below 2 percent."
So wait? The Richmond Fed was paying a 6% dividend? That's outrageous.
