How Has a Decade of Extreme Monetary Policy Changed the Banking System?

To stem the financial crisis, the Federal Reserve purchased massive volumes of Treasury and government agency mortgage securities, ballooning the Fed’s balance sheet to $4.5 trillion. Throughout the recovery, the Fed kept nominal interest rates close to zero, and even now Fed policy rates are negative in real terms. Meanwhile, banks have accumulated $2.34 trillion in reserves balances that earn interest from the Fed while adapting to a myriad of new postcrisis regulations.