Explain the Changes Made by the Fed as a Result

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The Answer is Before the financial crisis the Fed did not hold private securities on its balance sheet, so this type of asset on the Fed's balance sheet is a completely new category, representing one of the ways in which the Fed has fundamentally changed as a result of the financial crisis. One example of the type of security in this category is commercial paper, which is a type of bond with very short-term maturity issued by a financial or non-financial firm. Another example is a mortgage-backed security (MBS), which is a collection of mortgages bundled together into one bond. These collections were put together by financial firms in order to make the mortgages more attractive to investors.
Other examples in the private securities category are securities backed by student loans or automobile loans or even credit card debt. Yet another example in the private securities category is the security portfolio formerly held by financial firms such as the large insurance company AIG or the former investment bank Bear Stearns.
The final category on the Fed's balance sheet consists of direct loans to other financial institutions that are not banks that take deposits from customers. This too is a new item, first appearing on the balance sheet in 2008 during the financial crisis. These other financial institutions include brokers and dealers and insurance companies such as AIG. One particular example is the primary dealer credit facility (PDCF), through which the Fed made loans to brokers and dealers.

Explain the Changes Made by the Fed as a Result

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