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September 17, 2013 at 1:45 pm
#17991
jmherbenerModerator
Yes, commercial banks bought Treasuries in the past and hold a substantial portfolio of them. For the week ending Sept. 4, 2013, commercial banks were holding $1,760.6 billion in “Treasury and Agency Securities.”
http://www.federalreserve.gov/releases/h8/current/
The Fed is not permitted to buy Treasury securities directly from the Treasury. It must buy them in the “open market” and thus, the phrase “open market operations.”