Fannie and Freddie use much of this money to buy mortgages from Wall Street at what may be grossly inflated prices. This is a super arrangement for the banks, because they get to unload all their terrible mortgages at prices that won’t produce losses. And it’s fine for Fannie and Freddie because, well, because they have the blank check. But of course there’s no free lunch. And in this scheme, the US taxpayer is, as usual, footing the bill.
In other words, Fannie and Freddie are now doing what the Treasury wanted the original “TARP” bailout to do–use taxpayer money to help banks clean toxic assets off their balance sheets. Unlike the original TARP, however–which justifiably outraged taxpayers–no one knows or cares about what Fannie or Freddie are doing.
