The Fed will tax the banks until government loan demand is met

Perhaps better than anyone else at the Fed, Mr. Quarles understands the role that liquidity requirements play in propping-up banks' demand for excess reserves, and how those requirements foiled the Fed's attempt to get the quantity of such reserves substantially below its crisis-era peak.

It is the law.  Central banking in the USA is a tax agent.  It collects the siegniorage tax from the bond industry. The only way to reduce the tax is to keep excess reserves about equal to treasuries held on the balance sheet.

Reducing the Fed's balance sheet, he says, is worth the effort because it will ultimately make its policies more credible.

The Fed will credibly bring the bank up to and through the point of supporting Treasury default. It is the Law.  Balance sheet cannot reduce because Congress would miss it prior obligations. Its the law. The Fed is a perfectly credible central bank and will participate in currency devaluation as needed, its the law.  The law. Anybody getting a clue?