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ABA Files Lawsuit against Federal Government over Cuts in Fed Payments to Banks

no_Balance_of_justice_scaleThe American Bankers Association (ABA) recently filed a lawsuit against the U.S. government over a 2015 federal rule that lowered the amount of payments banks receive from the Federal Reserve. The lawsuit was filed in the U.S. Court of Federal Claims and stems from a practice of the Federal Reserve of paying a 6 percent annual dividend to U.S. banks that purchase stock in regional Federal Reserve Banks. The practice has been in place since 1913.

That practice changed in 2015 when, as part of the funding for the Fast Act—an initiative to appropriate funds for highways and other transportation programs—U.S. banks with more than $10 billion in assets saw their 6 percent annual dividend rate decreased to approximately 2 percent.

Among other things, the ABA alleges that the reduction in the dividend rate paid to U.S. banks violates longstanding contracts between U.S. banks and the Federal Reserve and is an unconstitutional taking of private property without just compensation. The ABA is seeking reimbursement for what it believes was an improper reduction in the dividend interest rate.

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