By Kate Davidson 

A 2015 law that tapped the Federal Reserve to help pay for new highway spending had "little effect" on Fed operations and "no immediate effect" on membership in the Fed system, a government watchdog said Friday.

The law reduced the Fed's capital surplus account and lowered the dividend the Fed pays on stock owned by banks in exchange for membership, changes that freed up billions of dollars Congress used to offset federal highway spending.

In a report released Friday, the Government Accountability Office warned further changes to the stock ownership requirement could have "wide-ranging policy implications" for the Fed's structure, and could diminish the autonomy and independence of the 12 regional Fed banks.

The GAO said dividend payments to the 85 banks subject to the change -- those with more than $10 billion in assets -- fell by nearly two-thirds in the first half of 2016, compared with the first half of 2015. But as of December, it found no shifts in membership of banks in the Fed system.

"Some member banks affected by the rate change told GAO they had a few concerns with it and some said they might try to recoup the lost revenue, but none indicated they would drop membership," the report said.

The Fed and the banking industry strongly objected to the provision when Congress considered it, and a major banking trade group filed a lawsuit over the dividend reduction earlier this month.

The American Bankers Association, joined by Seattle-based Washington Federal, said the law violates the contract between the Fed and its members, who are required to purchase stock in regional Fed banks. They receive a 6% dividend payment in return, which was reduced under the highway bill.

Chairwoman Janet Yellen told the Senate Banking Committee in July 2015 that the measure could result in a drop in bank membership in the Fed system, and later said tapping the Fed to help pay for unrelated federal spending programs would set a dangerous precedent.

The banking industry has also supported a measure that would eliminate the stock requirement altogether, which some lawmakers have argued the Fed no longer needs.

ABA President and Chief Executive Rob Nichols said Friday it is too early to speculate on what individual Fed member banks may do in response to the dividend cut, but "facts are facts."

"We believe the dividend cut was an illegal taking that has harmed many banks across the country, and have turned to the courts to protect their economic and legal rights," he said.

A Fed spokesman declined to comment.

GAO said modifying the stock requirement could result in the removal or a change in regional bank boards of directors, which could limit diversity and centralize monetary policy decision-making at the Fed board in Washington.

It could also eliminate the private corporate characteristics of the regional banks and convert them to government entities, which could reduce their financial independence, GAO said. It could also remove the authority of the regional banks to conduct open market operations and other activities relating to its job as the fiscal agents for the federal government -- activities critical to the Fed.

"Assuming that the policy goals -- independence, balance of power, and geographical diversity -- reflected in the original private-public Federal Reserve structure remain important, the implications of modifying the stock ownership requirement and therefore the Federal Reserve structure could be considerable," the report said.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

February 24, 2017 17:10 ET (22:10 GMT)