DIGG THIS Rumor has it that the Federal Reserve is considering selling bonds. The legality is in question. Leaving that aside, why would the Fed do such a thing? If it did, how would such a thing work? What would be its effects? The Fed can issue non-interest bearing debt now. This is the Federal Reserve notes that we use as a medium of exchange. When the Fed buys things like Treasury bills, commercial paper, junk bonds, stocks, or many other securities, it pays by creating reserves for banks that can be cashed out, if desired, as Federal Reserve notes. … Continue reading The Fed as a Junk Bond Fund