George W. is president of the newly chartered national bank, the Golddust. George has been presented with several interesting investment opportunities during the past week, but a review of the balance sheets indicates that reserves are not sufficient to allow the Golddust to make the loans. The promise of profits is very tempting even though some risk is involved. Based on current interest rates, George calculates he will need collateral valued at about $2 million for the size loan he wants. The net worth of the Golddust currently stands at $1 million. George applies for a loan with the Fed, but it is denied. Which of the following is the MOST LIKELY reason?
Based on the information in the previous question, in order to raise the reserves of banks above the $1 million mark, the Fed should probably: