During the financial panics in 2001 and 2008, the Fed increased the supply of reserve balances, thereby supplying liquidity to financial markets. While reserve balances eventually returned to normal levels in 2001, in 2008 the Fed continued to expand its balance sheet by conducting unconventional large-scale asset purchases called quantitative easing. Without quantitative easing, reserve balances would now be normal.
During the financial panics in 2001 and 2008, the Fed increased the supply of reserve balances, thereby supplying liquidity to financial markets. While reserve balances eventually returned to normal levels in 2001, in 2008 the Fed continued to expand its balance sheet by conducting unconventional large-scale asset purchases called quantitative easing. Without quantitative easing, reserve balances would now be normal.