Curious I dug up the current amended version of The Federal Reserve Act of 1913.
I have been reading and, as you might expect it is dense, but so far I have found it to be riddled with phrase "not less than zero". It was amended at some point to clarify that the rate "may be zero" but they may be precluded by law from going negative.
An interesting footnote is that in 1922 Congress had to rewrite the Act to prevent Benjamin Strong, President of the NY Fed, from being indicted when he unofficially and unilaterally scrapped the gold standard and aggressively engaged in what the Fed now calls "open market operations" as a method for stabilizing prices and domestic economic stability. Congress obliged the Fed at the time but one can only wonder if they would be so accommodating for Ms. Yellen.
Short takeaway: expect a MAJOR lawsuit the moment the Fed tries to go negative, as well as a preliminary injunction to refrain from NIRP until a hearing can be held. No matter the initial outcome expect it to rocket up to the Supremes.
The Supremes are political. They will do what their parties tell them to do. That means to me that they’ll approve anything the Fed says is ‘necessary’.
Negative interest rates seem to me to be a way to confiscate digits that are being held in their vaults. After all, you don’t park a car in a lot without expecting to pay, they will say.
To prevent a reversion to cash in safes, they’ll have to find an argument against cash. It will be “easily stolen”, I suppose.
Would they argue before Scotus that they are providing a parking location, and that a fee is not unrealistic at all?