It’s removing the current market value of the 10B Treasury note.
Would you like to change your answer?
Where did the 10B in cash come from?
10B was given to the bank, and in exchange the bank encumbered 10B in treasuries and promised to give 10B back when they mature.
So where did the 10B come from? The treasuries are still there.
Before: 10B in treasuries
After: 10B in treasuries and 10B in cash (and 10B in the form of a promissory note).
So again, where did that 10B in cash come from?
The feds. Note the basis for my statement is that Treasury note you can think of as an exchangable paper you can barter for its face value of 7B or so.
So by the Fed giving 10 billion to the bank and taking the paper they are adding (10-7) 3B in new cash.
I may be totally wrong because I don’t understand all the mechanics, derivatives, and so on that this operation actually involves.
That’s not how it works.
The 10B are new money, unless they came from someone not the FED (notes are not money).
See the barter argument. Also yeah the Fed will probably issue a new note for 10B which removes exactly that from the economy.