This is printing money and it is not inaccurate to say that they have created U.S. Dollars out of thin air to finance their asset-purchases and "lending" (a debt that will never be paid off) to the U.S. government.
* The Fed buys treasury notes and bonds from third parties, because it cannot buy them directly from the US Treasury at issuance.
* The Fed can earn and book profits from treasury securities only to the extent the US Treasury continues to make interest payments and repay principal.
* The US Treasury can pay continue to pay interest and repay principal only with money that is (a) borrowed from third parties by issuing new treasury securities, or (b) collected via taxation.
Things are this way by design, for many reasons, including the explicit goal of limiting short-term political influence over monetary policy.
* An investor acting as middleman between the Treasury selling a bond and the Fed buying it hardly matters. The Fed is supporting the price and ends up with the bond.
* Whether or not an interest payment is made to the Fed, this is money that the government has in the end. The point is that nobody outside the government gets any payments, so the debt is effectively neutralized.
I’m not sure the third point is true. Revenue from the Fed’s operations aren’t restricted funds, are they? It may add a lag, though.
It’s true that this maintains the independence of the Fed, but currently the Fed is openly advocating that Congress should spend more. They can cooperate to create and spend money when they agree that it’s a good thing.
They might not say explicitly say that this is what they’re doing, though.
* The Fed has doubled (!) the number of assets on its balance sheet by creating new monetary instruments and using a big swath of them to purchase financial assets like treasuries and mortgage backed bonds, helping maintain price stability in those and other financial assets. In fact, the Fed has created more new monetary assets during the past five-plus months than in the entirety of 2008-2009, during the worst of the global financial crisis. Source: https://fred.stlouisfed.org/series/WALCL
* The US Treasury, which must borrow funds or collect taxes in order to spend any money, has increased its spending massively during the pandemic, after the passing of significant tax cuts, so it has been incurring federal deficits as a percent of GDP at the fastest rate since WWII. Source: https://fred.stlouisfed.org/series/GFDEGDQ188S
* Tax collections have started to drop, as many sectors of the economy (restaurants, retail stores, malls, office buildings, hotels, travel companies, etc.) are now no longer profitable and have fired or furloughed millions of people. Source: https://fred.stlouisfed.org/series/W006RC1Q027SBEA (data available only as of Q2)