I think the Fed is simply increasing the M1 money supply. This has been a common practice primarily using treasury bonds and notes.
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The FED's 1st Lever: Open Market Operations
The most common lever used by the FED is open market operations. This refers to FED purchases or sales of US government treasury bonds or bills. The "open market" refers to the secondary market for these types of bonds. (The market is called secondary because the government originally issued the bonds at some time in the past.)
When the FED purchases bonds on the open market it will result in an increase in the money supply. If it sells bonds on the open market, it will result in a decrease in the money supply.
Here's why.
A purchase of bonds means the FED buys a government treasury bond from one of its primary dealers. This includes one of 23 financial institutions authorized to conduct trades with the FED). These dealers regularly trade government bonds on the secondary market and treat the FED as one of their regular customers. It is worth highlighting that bonds sold on the secondary open market are bonds issued by the government months or years before, and will not mature for several months or years in the future. Thus, when the FED purchases a bond from a primary dealer, in the future when that bond matures, the government would have to pay back the FED who is the new owner of that bond.
When the open market operation (OMO) purchase is made, the FED will credit that dealer's reserve deposits with the sale price of the bond (let's say $1 million). The FED will receive the IOU (i.e., bond certificate) in exchange. The money used by the FED to purchase this bond does not need to come from somewhere. The FED doesn't need gold or other deposits, or anything else to cover this payment. Instead the payment is created out of thin air. An accounting notation is made to indicate that the bank selling the bond now has an extra $1 million in its reserve account.
At this point there is still no change in the money supply. However, because of the increase in its reserves, the dealer now has additional money to lend out somewhere else, perhaps to earn a greater rate of return. When the dealer does lend it, it will create a demand deposit account for the borrower and since a demand deposit is a part of the M1 money supply, money has now been created.
As shown in all introductory macroeconomics textbooks, the initial loan, once spent by the borrower is ultimately deposited in checking accounts in other banks. These increases in deposits can in turn lead to further loans, subject to maintenance of the bank's deposit reserve requirements. Each new loan made, creates additional demand deposits and hence leads to further increases in the M1 money supply. This is called the money multiplier process. Through this process, each $1 million bond purchase by the FED can lead to many multiples of an increase in the overall money supply.
The opposite effect will occur if the FED sells a bond in an OMO. In this case, the FED receives payment from a dealer (as in our previous example) in exchange for a previously issued government bond. (It is important to remember that the FED does not issue government bonds, government bonds are issued by the US Treasury department. If the FED were holding a mature government bond the Treasury would be obligated to pay off the face value to the FED, just as if it were a private business or bank.) The payment made by the dealer comes from its reserve assets. These reserves support the dealer's abilities to make loans and in turn to stimulate the money creation process. Now that its reserves are reduced, the dealer's ability to create demand deposits via loans is reduced and hence the money supply is also reduced accordingly.
A more detailed description of open market operations can be found in this NY Fed Fedpoint. (http://www.ny.frb.org/aboutthefed/fedpoint/fed32.html)
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http://internationalecon.com/Finance/Fch40/F40-5.php
Marking debt obligations to market is important for short-term holders of debt, if holding to maturity the holder will get face value of the debt assuming no default. If over 5 - 10 - 15- 25 - 30 or so years you think the US real estate market is going to evaporate to zero,there will be no return of the debt, otherwise there will be some return of that debt. If the real estate market drops 50%, the hold of that debt can expect a 50% return of the debt. If the real estate market goes up or is in a range of no default, that debt will be returned plus the interest. Right now the real estate market in most areas has not lost that much value.