Final answer:
The Federal Reserve Bank lowered the reserve requirement during the 2008-2009 Great Recession, resulting in a large increase in excess reserves held by the commercial banking system. This helped increase the money supply and stimulate lending and economic activity.
Step-by-step explanation:
The large increase in the excess reserves held by the commercial banking system during the second half of 2008 was a result of the actions taken by the Federal Reserve Bank during the 2008-2009 Great Recession. As part of its expansionary monetary policy, the Federal Reserve Bank lowered the reserve requirement, which is the amount of money banks are required to hold in reserves. By reducing the reserve requirement, banks were allowed to hold a larger portion of their deposits as excess reserves, which in turn increased the money supply and helped stimulate lending and economic activity.