The indespensible Matt Tiabbi has looked into the Government takeover of the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac, and found it odd.

Not only is it odd, but it runs completely counter to the normal way that the Treasury Department handled rescues during the financial crisis.

For the bailouts of both the auto companies and AIG, the Secretary of the Treasury Timothy “Eddie Haskell” Geithner could not get the government out of those businesses, but with Fannie and Freddie, they retained a permanent ongoing interest:

In August 2012, a few months before Barack Obama told Mitt Romney the Eighties had called and wanted their foreign policy back, the U.S. government made a momentous and little-discussed decision. It unilaterally changed the terms of the bailout of Fannie Mae and Freddie Mac, seizing all of the companies’ profits.

The government originally insisted on a 10 percent annual dividend in exchange for what ultimately became a $187 billion rescue. In 2012, the government quietly changed that 10 percent deal to one in which the state simply seized all profits. Government regulators euphemistically described this as “fully capturing financial benefits.” The press paid almost no attention to this event.

………

They had gone bust during the crash years for a variety of reasons, mostly due to incompetent and corrupt management. But by the summer of 2012, with the real estate market in recovery, the companies weren’t bust anymore. On the contrary, they were about to start making money again – enormous piles of it, in fact.

The government has always insisted it didn’t know this. Not just in the summer of 2012 but numerous times since, officials have insisted that they needed 100 percent of Fannie and Freddie’s profits because they wanted to protect taxpayers from likely future losses, and because Fannie and Freddie would otherwise be unable to pay back what they owed.

Mario Ugoletti, a special adviser to the director of the federal housing agency, said in 2013 of the companies’ debts that it was “unlikely that [Fannie and Freddie] would be able to meet that amount consistently without drawing additional funds from Treasury.”

But documents just released in a court case show that the government privately believed just the opposite before it made its historic decision to “sweep” the GSE revenues.

One key document is a memo from Mary Miller, assistant Treasury secretary for the financial markets, to then-Treasury Secretary Tim Geithner. Dated December 11th, 2011, Miller writes to Geithner that “Freddie is expected to be net income positive by the end of 2012, and Fannie by the end of 2013.”

………

The only reason this story is hitting the headlines at all this week is because the government’s 2012 decision triggered an all-out pitched battle between two investor groups. Those who bet on Fannie and Freddie’s revival were wiped out by the government’s 2012 decision, while those who shorted the firms have made fortunes.

The documents that came out this week were released in a lawsuit brought by Fannie and Freddie shareholders who believe that the government stole billions of dollars in profits from them.

Well, that last bit explains cui bono, doesn’t it.

I’m wondering if the firm Warburg Pincus, where Geithner secured a job as president, had short positions on Fannie and Freddie, but I am a cynical SOB.

Then I decided to put on my cynical hat, and thought perhaps the Obama administration was attempting to move the GSE’s function, and their government backing, to Wall Street, so as to privatize the profits and socialize the risks, to benefit the finance industry at the expense of ordinary Americans.

This did seem to be the modus operandi of the Obama and his Evil Minions^™, and that the easiest way to take down the GSE’s would be to eliminate the major constituency for the supporting them, their investors.

It appears to have worked:

Lurking underneath the scandal derisively termed “Fanniegate” is a monstrous struggle for future profits. The fight here is not just about the profits generated by the GSEs, but what to do about them generally. Finance lobbyists have successfully forged a bipartisan consensus that the companies need to be privatized. Essentially, Wall Street wants to step into the shoes of Fannie and Freddie.

In most versions of GSE reform currently winding their way through Congress, the same too-big-to-fail banks that blew up the mortgage markets in 2008 would assume most of the responsibilities of Fannie and Freddie. Crucially, securitized mortgages would continue to enjoy government backing under many of these proposals.

Privatized profits, socialized losses. Who doesn’t love that formula?

It would be the ultimate triumph for Wall Street, and the ultimate shocker ending to the crash era. After nearly blowing up the planet with a mortgage bubble and getting bailed out by taxpayers, banks would now be handed control of the real estate markets and granted permission to reap massive profits trading government-backed mortgages until the end of time.

I kind of hope that it’s petty corruption by Geithner, who, after all, is a rather petty fellow, because the other alternative is that the policies of the Obama administration with regard to the finance industry were at their core ineluctably evil.

The counter argument to this theory is the massive program of prosecuting the Wall Street banksters for their crimes, but even George W. Bush prosecuted more aggressively than the Obama administration did.