Merry Christmas - Unlimited Bailouts for Fannie and Freddie

Consider yourself Santa Claus for the formerly quasi-governmental institutions known as Fannie Mae and Freddie Mac. The White House announced on Christmas Eve they would eliminate the caps on bailouts for the "zombie" Government Sponsored Enterprises removing all doubt there was anything private about the institutions:

As some observers have pointed out, all the move really did was formalize what everyone has figured for decades, that the two zombie GSEs were truly organs of the federal government, and that their debts would be backed up ad infinitum.

There can be little doubt the news was released after markets closed Christmas Eve and presented as an update in order to minimize the impact of the news.  Ed Morrissey writes:

The announcement was designed to put them out of reach, just as it was designed to keep the news out of reach from the general public.  No one can seriously argue that Treasury and the White House woke up early on Christmas Eve and suddenly discovered a reason to lift the caps on the Fannie/Freddie bailout, after all.  This had to be in the works for weeks.

This leads to the larger question of why the White House chose to act unilaterally and why now.  Joe Weisenthal asked credit analyst Edward Pinto for his theories.  Pinto lists five possible reasons for the move and all portend greater involvement and control over the mortgage market:

The above actions would preserve and strengthen the government’s involvement and control over the country’s housing finance system and make it harder to reintroduce substantial private sector involvement later on.  They would also continue distortions in the marketplace leading to who knows what unintended consequences. Finally these steps would do nothing to deleverage the housing finance system, a key step in returning it to any degree of normality.

 As if the lessons of government intervention in this market haven't been clear enough already, the Obama administration plunges ahead full throttle for greater involvement and control.  Prepare yourself for a little social engineering Obama-style.  The $400 billion set aside for the mortgage market from the previous bailout still had slightly less than $300 billion available for further assistance.  As Ed Morrissey pointed out if a larger amount had been needed the administration could have merely raised the limit instead of removing all caps.  Weisenthal sees no scenario where the move restores the market to any semblance of normality and makes it more difficult to restore greater private market involvement.  There is no other conclusion but that the Obama administration has effectively taken control of the GSE's for some future purpose.

 I am betting Ed Morrissey is correct in this prediction:

 I’d bet that the Obama administration retools its foreclosure prevention programs to have Fannie and Freddie buy up the paper and forgive parts of the principal on the loans, and have taxpayers eat the losses on a massive basis.

I will gladly listen to the Obama administration offer an alternate rationale for the move but I am not holding my breath waiting for it either.