In this transaction the Fed buys $4 Million of securities ($2 Million each) from Your Bank and Other Bank. The banks transfer the securities to the Fed, and in payment, the Fed credits $2 Million to the Reserves accounts of each of the two banks.

This transaction adds $2 Million to the excess reserves of each bank (increasing its credit potential by $200 Million (because of the 1% effective reserve ratio).

This transaction creates no new deposits; therefore, it does not create any new money.