For example, Greece was getting killed on their bonds: they had to pay 8%, 10%, 12% on them. Which means that in order to raise $10B now you had to promise $20B (or more) at maturity of 10 years. That was because they didn't have a central bank to buy their bonds on the secondary market and effectively reduce the supply, thus driving their price up and the interest rate down.
Here what we're seeing is that the Fed IS buying on the secondary market and the banks are aware of this. That reduces the supply of Treasury bonds (absent the Fed's intervention) which, everything else equal, drives the price up and the interest rate down.
Furthermore since the banks KNOW that the Fed will buy the bonds off of them, potentially at a small profit they don't have any problems going to the auction and buying the bonds to flip to the Fed. If the Fed dried up as a buyer of Treasurys it's entirely likely that the banks would stop buying, the auctions would be less successful and the interest rate on the bonds would go up as the price of the bonds goes down.
So what I'm arguing is that I would agree with you but only if the Fed either 1) didn't buy Treasurys on the secondary market or 2) the Fed couldn't create money to buy Treasurys from the banks who are buying them at auction. Since neither of those conditions is met, I would disagree. I would argue that they're monetizing the debt but indirectly. Just because it's indirect doesn't somehow make it not happen. It just makes it harder to follow.
But would the banks have all originated subprime loans had they not been able to repackage them and sell them? By selling the loans they were kept off the bank's balance sheet.
If the Fed is buying up all kinds of bonds and the banks know this, there's nothing preventing them from selling their older bonds which were purchased at a time when interest rates were higher (and thus bond prices were lower) and selling them at a profit to the Fed. They then need to do something with the money, why not buy some new bonds?
Just because the Fed isn't participating in the primary auction doesn't mean that they're not influencing the Treasury market in a huge way.