Following the financial crisis of 2007-2009, banks had a glut of excess reserves. Because of this extraordinary amount of excess reserves being held by banks, What did the Fed do to drain these excess reserves?
1) The Fed increased interest rates to encourage banks to lend out their excess reserves.
2) The Fed decreased interest rates to discourage banks from holding excess reserves.
3) The Fed implemented open market operations to sell government securities and reduce the amount of excess reserves in the banking system.
4) The Fed provided additional liquidity to banks to encourage lending and reduce excess reserves.