The U.S. Federal Reserve discussed “a new largescale asset purchase program” commonly called “QE3.” Some members said such a program could help the economy by lowering long-term interest rates and making financial conditions, more broadly, easier. They discussed whether a new program should snap up more Treasury bonds or buy mortgage-backed securities issued by the likes of Fannie Mae and Freddie Mac.
What would the U.S. Federal Reserve do to implement QE3, how would the monetary base change, and how would bank reserves change?