Open Market Operations by the Fed are ongoing adjustments to how they want to manipulate you and me. Currently they want us to believe that they are powerful and inflationary. Their last FOMC statement indicated that they would intercede to regenerate inflation to counteract debt contraction. Expansion of the Fed Open Market portfolio is a net increase of reserves.
The following link is the latest available Fed Balance Sheet. Looking at the report the following items are of interest to Open Market Operations:
Securities held outright are the SOMA, or the Open Market portfolio
Agency Securities are Fannie Mae, Freddie Mac and Federal Home Loan Bank
MBS Securities are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is the remaining principal balance of the underlying mortgages.
Buying Treasuries with maturing MBS is a wash as far as bank reserves and Monetary Base.
Securities Held Outright decreased by 2.7B in the week ending 9/22. This is contraction of reserves.
The bottom of the report is the Total Factors Supplying Reserve Funds. This contracted by 2.7B for the week.
The Fed is reducing, not increasing it's net portfolio, but is shifting from risk assets to Treasuries. The Monetary Base effect is contractionary. Bernanke is speaking inflation while the Fed institution is moving to reconstitute it's portfolio to it's traditional composition. It's moving too slowly if 2011 is to be a return to credit contraction. It will eat some of it's MBS and this assumes that Fannie and Freddie are able to maintain par on their own securities.