[auston]

Yeah this part had me baffled:

“ In other words, while it’s possible for an individual bank to boost its reserves by selling assets to raise capital, it’s mechanically impossible for the entire banking industry to collectively raise its reserves industry-wide.”

Why not? I have confidence people would rally together to buy distressed bank assets at rock bottom prices.

[fuoqi]

It means that all banks will be distressed, thus destabilizing the whole system. Regulatory change plays here a role of an artificial shock (since banks have to increase their reserves), which gets smoothed by the QE. I guess an alternative could've been a gradual raise of the legal requirements, but probably such measure was too slow for the crisis conditions.

[auston]

I understood that part, what I'm saying is that why can't market forces correct that?