Core Viewpoint - The Federal Reserve should aim for a smaller balance sheet and reform its monetary policy implementation mechanisms [1] Group 1: Balance Sheet Management - The Federal Reserve should maintain a balance sheet that keeps reserve balances close to scarcity levels rather than abundant levels [1] - Returning to an actively managed balance sheet will better reflect market pressures and operational issues [1] Group 2: Market Volatility - Allowing moderate fluctuations in the money market can enhance understanding of market clearing points [1] Group 3: Asset Composition - The Federal Reserve should hold only Treasury securities on its balance sheet, with a slight preference for short-term securities over aligning completely with the overall market's maturity structure [1] - This approach would provide greater flexibility for the Federal Reserve [1] Group 4: Mortgage-Backed Securities - The Federal Reserve should consider actively selling its holdings of mortgage-backed securities (MBS) [1]