The Department of the Treasury manages the government's finances, including tax collection, and advising on policies." Its mission is to "Maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government’s finances and resources effectively." When necessary, the Department of Treasury is responsible for "printing money," to make sure there is an adequate supply. It doesn't print money to control the economy. - Duties & Functions of the U.S. Department of the Treasury
The Treasury manages Social Security funds. Are these funds simply a handout by us to the government to use as it sees fit, as some allege? Not at all. "The reserves are funded from dedicated tax revenues and interest on accumulated reserve holdings, which are invested in Treasury securities." In other words, the funds are invested in interest bearing Treasury Securities so they accumulate interest, increasing the Social Security fund. - Social Security Trust Fund Cash Flows and Reserves
In 2013, "The [Social Security] account began the year with $85 billion in operating cash and ended the year with $88 billion, an increase of $3 billion."
The National Debt. Does the Treasury or Fed print money to finance the National Debt? No. It allows the public to buy bonds that accrue interest, to finance the debt. "The debt is sold in the form of securities to both domestic and foreign investors, as well as corporations and other governments. U.S. securities issued include Treasury bills (T-bills), notes and bonds, as well as U.S. savings bonds. There are both short-term and long-term investment options, but short-term T-bills are offered regularly, as well as quarterly notes and bonds." - A Look At National Debt And Government Bonds
The Federal Reserve operates independently of the US Treasury, but any excess funds the Fed has, are turned over to the US Treasury. The Fed is self-financed, and is not supported financially by the Treasury. It is responsible for selling Treasury Securities.
The Fed is responsible for overseeing the banking system, not to control it, but to make sure it remains healthy by not over-leveraging itself or running out of money by overextending itself.
So the Fed sets the amount of deposited money that banks must hold in reserve and not loan out. It also makes short (overnight) loans to banks when they loan out more than they have, but this is overnight only, and doesn't affect the money supply.
In general, deposits are loaned out, and then the borrower redeposits the funds in another bank, and the bulk of this is loaned out, and on and on. This gives a multiplier effect of around 10X. So a dollar deposited puts around $10.00 into the economy.
The Fed also has responsibility for controlling inflation and for maintaining high levels of employment. It does these functions by controlling the money supply to banks.
"The process works this way: If the Fed decides to increase the money supply, its open-market manager buys back treasury securities from private dealers, paying for them by simply crediting their bank accounts. It does not transfer any actual cash. (This power distinguishes it from all other financial institutions and gives it its clout.) The dealers' banks now have more money to lend, and these loans ultimately find their way into more banks, which pass a portion of them on to additional borrowers. The Fed's initial purchase thus has a multiplier effect as money ripples throughout the economy. Of course, the process is reversed when the Fed sells off some of its securities, because it in effect deducts the price from the purchasers' accounts, leaving their banks with fewer deposits.
"The main idea is that the Fed's accounting maneuvers, not switching the printing presses on and off, produce increases or decreases in the money supply. " - The Federal Reserve System
To achieve this important 10X multiplier effect in the economy, which makes our economy expansive, the Fed increases the money supply to securities dealers, which goes to banks as deposits.
Does the Fed "print money" to do this, pulling the money out of thin air? It could. But it doesn't need to because it simply buys back securities, and it has substantial income. "The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations.
"Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate). " Open market operations income amounted to $28.959 billion in 2005. - Where does the Federal Reserve get the money to fund its operations? - Federal Reserve Bank of San Francisco.
How does Quantitative Easing (QE) work? The Fed uses the money that the regional banks have on reserve to buy back treasury securities from private dealers. This increases the money supply. In 2015, around $4.5 trillion had been used in QE, leaving around $1 trillion on reserve. The Fed cannot print an unlimited amount of money.
By controlling the money supply, The Fed guards us against very destructive inflation that severely affected our economy in the 1970s. And it helps us get to full employment. And it prevents the economy from superheating.