Banks received a reprieve in the House version of a transportation bill passed last week, but the Federal Reserve would take the hit instead.
The House bill would pay for highway spending by liquidating an account at the Fed meant to protect the central bank from the possibility of losses.
Doing so would hurt the central bank as well as taxpayers, in the Fed's view.
"Using the resources of the Federal Reserve to finance fiscal spending sets a bad precedent," a representative for the Fed told the Washington Examiner. "It infringes on the independence of the central bank and weakens fiscal discipline."
The provision tapping the fund replaced two provisions for raising funds at the cost of banks. One would have cut the dividends paid by the Fed to certain member banks, which are required to own stock in the Fed. Another would have diverted fees paid to the government-sponsored enterprises Fannie Mae and Freddie Mac for insuring mortgage-backed securities.
"We support any approach that keeps the dividend in place," said James Ballentine, the American Bankers Association's executive vice president of congressional relations and political affairs. "This overwhelming vote in the House is a clear indication that members on both sides of the aisle understand that arbitrarily altering the Federal Reserve dividend is bad public policy."
The amendment, from House Financial Services committee member Randy Neugebauer, R-Texas, spared banks over a certain size from seeing the dividend on their stock in the Fed cut from 6 percent to 1.5 percent. But at the same time, it could cause trouble for the Fed if the Senate passes it.
The amendment would liquidate the surplus capital account of the Federal Reserve System, which currently amounts to $29.3 billion.
The account is an arcane feature of the Federal Reserve System, which is both a government agency and a government-chartered independent central bank.
Private-sector banks that are part of the system are required to buy stock in the 12 regional banks that make up the Fed. They receive dividends, but don't otherwise make profits that the Fed might make on its $4.5 trillion portfolio.
Instead, the Fed remits profits to the Treasury. In 2014, it sent nearly $97 billion to taxpayers.
Because it can always create new reserves, the Fed is not in danger of losing money and having to look to taxpayers or its shareholders for a bailout.
Nevertheless, significant losses for the Fed could pose a few problems, including the appearance of creating reserves to finance those losses. Such a maneuver could threaten the credibility of the Fed's commitment to stable prices, Carnegie Mellon economist Marvin Goodfriend noted in a piece written last year for Economic Policies for the 21st Century, a conservative think tank.
In the same article, Goodfriend recommended that the Fed boost its surplus capital to $100 billion to prepare for possible losses that could come about as it moves to raise interest rates and normalize its swollen balance sheet.
Nevertheless, drawing down the Fed's surplus capital account is attractive for Congress because it provides a quick fix to the problem of how to pay for transportation spending without raising the gasoline tax.
Liquidating it would not have an effect on the government's fiscal standing, a 2002 Government Accountability Office analysis concluded.
Doing so would create a one-time boost of revenues, the GAO said, but "would have no significant long-term effect on the budget or the economy."
The effect would be negligible because, while the liquidation of the account would boost revenues in the short-term, it would lead the Fed to give smaller profits to the Treasury in the future.
Whatever the fiscal effects of the maneuver, the Fed does not want to be drawn into Congress' budget disputes.
"Some recently have proposed that the Fed be used to provide revenue to fund specific government initiatives, which amounts to quasi-fiscal policy, that is using Fed revenues to finance expenditures that should be paid for with taxes," Fed Vice Chairman Stanley Fischer said at a speech in Washington Wednesday night. "This has manifold implications not only for central bank independence as well as for the quality of fiscal policy decisions."
Aaron Klein, director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center, agreed that it was "unwise" to use the account to fund highway spending.
"The Federal Reserve is not Congress's piggy bank to use to fund the topic de jour — even when it comes to making wise investments like those in infrastructure," Klein said in an email. "We should instead have some public discussion, debate, analysis over what the surplus account is meant for and what its appropriate level is."