The Christmas Eve Taxpayer Massacre

The WSJ has appropriately dubbed Obama's despicable de facto takeover of Fannie Mae and Freddie Mac to pursue his redistributive social policy by eliminating the maximum amount which the Treasury was allowed to contribute to the lenders. (I thought he would do it through Citi and B of A, but they were smart enough to repay the TARP, so Obama lost his opportunity there.)

The loss cap is being lifted because the government has directed both companies to pursue money-losing strategies by modifying mortgages to prevent foreclosures. Most of their losses are still coming from subprime and Alt-A mortgage bets made during the boom, but Fannie reported last quarter that loan modifications resulted in $7.7 billion in losses, up from $2.2 billion the previous quarter.

The government wants taxpayers to think that these are profit-seeking companies being nursed back to health, like AIG. But at least AIG is trying to make money. Fan and Fred are now designed to lose money, transferring wealth from renters and homeowners to overextended borrowers.

Even better for the political class, much of this is being done off the government books. The White House budget office still doesn't fully account for Fannie and Freddie's spending as federal outlays, though Washington controls the companies. Nor does it include as part of the national debt the $5 trillion in mortgages—half the market—that the companies either own or guarantee.

And best of all, Fannie and Freddie executives are all exempt from compensation levels that are forced upon other banks. Thanks to Obama, Frank and Dodd, Fannie and Freddie will redistribute up to $1 trillion to homeowners that never should have been allowed to own a home.