Question 1

The theory is that they will buy the treasuries from banks. This increases the bank's liquidity - by $300 billion collectively.

This gives the banking system $300 billion in cash to invest. It does improve their balance sheet and liquidity position.

In theory they are supposed to use this money to fund loans and these new loans will be used by businesses to expand their operations.

This will probably not have much impact on loans for two reasons:

1) The banks don't want to lend it because they are afraid of their customer's profitibility prospects in the current downturn.

2) The bank's profitable customers don't want to borrow it because they are worried about their own prospects for future profitibility and in some cases viability. They are not looking to expand, they just want to survive.

Please understand I am speaking about the macro picture. There are always individual exceptions.

Question 2.
The Fed purchases drive up the prices of the bonds and thereby depress yields. When the Fed stops competing, the bond investors will be able to buy bonds at lower prices and thereby make more money.

The completion of the plan without extending it indicates the Fed believes that the additional liquidity is no longer needed. This means they think the financial system is functioning adequately.

It also means the Fed thinks the economy is improving.

It also means they are beginning the "removal of accommodation". Removing the accommodation will help to reduce the magnitude of future inflationary pressures.
Source(s):
Personal experience
30 years a banker and 50 years a Fed watcher.

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