Here's a link to the latest Federal Reserve Bank Balance Sheet.
The 'US Treasury, supplementary financing account' has a balance of $199,950 million as of 11 FEB 2009. This item is the balance in one of the Treasury's accounts with the Fed. The Treasury supplementary financing account was created in response to the 2008 credit crisis. That's why you see that the change in the account since 13 Feb 2008 is the same as the current balance in the account.
The US Treasury supplementary financing account is a part of factors absorbing reserve funds, other than reserve balances. What this means is that the Fed, in its role as the banker to the US Treasury, has given a credit of $199 mn to the US Treasury in an account, and the Fed has a liability to pay this amount to the Treasury.
Normally, when the US Treasury issues debt securities, it should receive the cash, and instead, here it's received a liability from the Fed. The balance in the 'Treasury cash holdings' account is $ 273 million as of 11 Feb 2009. Since 13 Feb 2008, the Treasury's cash balance at the Fed decreased marginally by $ 2 million.
This is an example of how the Fed's balance sheet expanded to provide credit to banks in response to the 2008 credit crisis. Basically, the Fed borrowed from the US Treasury and then extended credit to the banks in turn. The Treasury borrowed from the market, including foreign central banks, during 2008.
Have a look at the various items in 'total factors supplying reserve funds', which represents the Fed's assets. You get a series of items there, such as credit extended to AIG, purchases of Agencies, Mortgage Backed Securities, and so on. The money borrowed from the market in the name of the US Treasury was then lent to the Fed; the Fed then purchased MBS, and so on; in turn the Fed extended credit to the banks. The US Treasury now owes money back to the subscribers of bills and bonds; and that has to be paid mostly out of the general revenues of the Congress.
Through this route, banks have exchanged bad debts with the Fed, in return for fresh credit from the Fed, so they're no longer liable for those losses. The Fed is relying on the Treasury to payout as its bills mature. The Treasury is relying on its fiscal resources to pay those bills. The Fed will experience the losses from bad debts on its books in due course. And American taxpayers lent ~ $ 2 trillion in 2008 to banks, with no discussion on the issue in Congress. In spirit, this is a diversion of Congressional appropriations to the Federal Reserve, which is a transgression of the intentions of the Federal Reserve Act. The legal technicality probably is that the Treasury supplementary financing account can be taken as a deposit made by the US Treasury at the Fed, which in letter perhaps makes the Fed's action legal.
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