NEW YORK (Reuters) - The U.S. Federal Reserve, led by Chairman Ben Bernanke, is formally asking Congress for authority to pay interest on commercial bank reserves starting this year, the Wall Street Journal reported on Wednesday.
The Federal Reserve's move is an attempt to wield more control over interest rates and better leverage to fight the credit crunch, the report said.
Earlier this week, senior central bank staffers talked about the topic with congressional committees that oversee the Fed, the Journal said, citing people familiar with the talks.
Key Democratic and Republican lawmakers would view the request positively, people familiar with the talks said, adding that quick passage of the request is uncertain given the political sensitivity of any steps that could help banks.
Bernanke is expected to ask for the new authority in writing soon, the report added.
Congress gave the Federal Reserve permission to pay interest on reserves in 2006 but it delayed the effective date of the legislation until 2011 to put off the cost to the Treasury, the Journal said.
Federal Reserve staffers have pointed to two ways Congress could go forward -- allow the Fed to pay interest on all reserves at a cost of about $150 million a year, according to people briefed on the estimates, or let it pay interest only on reserves in excess of banks' required minimum.
The second option would cost only about $30 million a year, the report said.
The Fed would like Congress to act before its August break to allow the measure to be implemented by year-end, the newspaper said.
The Federal Reserve did not immediately respond to an e-mail seeking comment.
(Reporting by Aarthi Sivaraman; Editing by Tomasz Janowski)
