Today the Fed announced that is rebating the Treasury approximately $78B it made from interest on the investments it owns on behalf of the "American People".
FY2010 interest payments by the treasury were $410B. That means the Fed not only has the largest custodial holdings of treasuries in the world (~$1T) thereby providing much needed demand in the treasury market, it also materially reduces the interest payments of the United States government by the tune of 19%.
As the Fed continues to expand its balance sheet, expect interest rebates to soar above $100B per annum and likely reduce interest payments the Treasury has to make by over 25%.
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