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The Federal Reserve has been successful in implementing a fundamental advance in monetary policy by paying interest on reserves and providing ample reserves. Reserves are accounts that banks have at the Fed, and before 2008, the Fed paid no interest on reserves. The Fed's ability to provide liquidity and maintain financial stability has been proven, as banks holding ample reserves are less likely to experience bank runs. The objections and concerns about paying interest on reserves have been disproven, as banks holding more reserves do not lend less, and inflation has remained stable. The Fed's control over the short-term interest rate has been demonstrated, and the new regime has eliminated credit crunches and recessions. While there is room for improvement, the Fed's current system is commendable. [Extracted from the article]