The Fed's Unrealized Losses

The Fed bought a thousand for an asset that right now only has a market price of 620. If it sells that asset, which let's say it's risen and valued at $670, now all it can do is absorb $670 of reserves out of the system. Whereas if it had been more frugal and only lent up to the actual market value of the collateral, then it wouldn't have lent so much into the system in the first place.