Banks today have more than $2 trillion in excess reserves, i.e., reserves beyond what they are required to keep. (Required reserves are less than $0.2 trillion, by the way.) Before 2008, banks kept almost no excess reserves. a. There are two reasons – one big, one not as big – why excess reserves shot up so fast. Name them and explain. b. Prior to late 2008, the Fed did not pay interest on banks’ reserve accounts at the Fed. Now the Fed does. What is the Fed’s rationale for paying interest on bank reserves? c. Why, according to some people, is it not a good idea for the Fed to pay interest on bank reserves?