Bank reserves are a liability of the Fed and an asset for the banks.

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Merck says it cannot yet reasonably estimate the amount of the Vioxx liability in order to take reserves.

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The difference is that the 1979 move targeted money and, by implication, bank reserves, on the liability side of the Fed's balance sheet.

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They are promises to provide funds if called upon (technically they are what's called a contingent liability and are part of our foreign reserves).

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On the liability side of the balance sheet, to balance that, we create reserves in the banking system.

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They will decline in value, which will quickly make the Fed insolvent, and a further liability to the people of the US. So either the Fed sells the bonds and reduces bank reserves, further tightening an already tightening lending market, or it really weakens its balance sheet.

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