SAN FRANCISCO — San Francisco Federal Reserve Bank President John Williams said Wednesday night the Fed should fully replace the "Operation Twist" Treasury security purchases which are due to expire in December by expanding its "QE3" asset purchase program.

That would mean that the Fed would continue to buy a total of $85 billion per month of bonds — $40 billion of mortgage backed securities plus $45 billion of long-term Treasury securities, all financed by the creation of new bank reserves.

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