Agreed w/ Riten for all the above points with one exception...
Fed has the authority right now to issue and buy back treasuries (it is not the Treasury Dept that handles this)... That coupled w/ the reserve requirement for the bank means that the Fed has the huge impact in the liquidity... and what are those treasuries collateralize with? The taxpayers money of course ( or in general faith on the revenue stream of the U.S. govt)... extending this further, I think that last point above is somewhat valid...