What led to Interest on Reserves being paid (called IOER, then IORB)?

IOER, then IORB when reserve requirements were dropped, was introduced in the Emergency Economic Stabilization Act of 2008. “The Emergency Economic Stabilization Act of 2008 (EESA) accelerated the authority for the Federal Reserve to pay interest on depository institutions’ reserve balances. It moved the effective date forward from October 1, 2011, as originally scheduled in a 2006 act, to October 1, 2008. ” The 2006 Act, the “Financial Services Regulatory Relief Act of 2006“, was passed with the ability of the Fed to pay interest on reserves in order to level the playing field between small and large banks. It was meant only for required reserves as the legislative history of its author, Idaho Senator Mike Crapo, makes clear. All previous academic literature including Fed literature on this was for the payment of interest only on required reserves. These required reserves were only 1% of all deposits when the 2008 crisis hit. The reserve drawdown during the bank run of 2008 led to negative Fed reserves not counting liquidity swaps. So the problem was that even though the 2006 Act is designed for interest on required reserves, when it was written up it states that the Fed can pay “interest on reserves”. It did not include the word required even though that was the intent. Given the negative reserves of 2008, the Fed decided to have the legislative effective date moved up to asap in 2008, and then decided to pay interest on all reserves. This has led to the subsequent buildup.