This blog post from EconoBrowser is very interesting. It traces the recent moves by the Federal Reserve by analyzing changes in it's balance sheet. What's interesting is the recent additions to the balance sheet on the asset side under various acronyms pertaining to recent "credit facilities" (cash loans to banks against their crappy assets) as well as their investment in Bear Stearns under the name "Maiden Lane".
The author asks, how could the Fed "buy" all this stuff without a corresponding increase in "currency in circulation" or in "reserves"? The Fed created a line item in their balance sheet called "Treasury Supplement" following an obscure press release quoted in the post. The upshot is that the Treasury is effectively placing cash with the Fed obtained in a "supplemental" auction of T-Bills with which the Fed turns around and loans this cash against "private assets", i.e., the crappy debt discussed above. This allows the Fed to explode its balance sheet without having to "create" money immediately. I imagine that if the markets stabilize they will quietly unwind this and if it doesn't they will "monetize" it by creating money to cover losses.
Basically, this is yet another example of how through complicated mechanisms, the Federal Reserve and the Treasury operate to redistribute risk and losses (through inflation) to the people who least deserve it: American taxpayers who pay their bills.