The news that the huge government bailout of the banking sector has turned into an enormously costly mess will surprise nobody smarter than Matt Yglesias, but the details are worth pointing out:

The federal bailout for Fannie Mae and Freddie Mac could more than double in size during the next three years, according to projections from the companies’ federal regulator.

Fannie and Freddie, the federally-controlled mortgage finance giants, will likely need at least another $73 billion and perhaps as much $215 billion from taxpayers in the next three years to meet their financial obligations, the Federal Housing Finance Agency said.

You mean, having the Federal Government buy up enormous piles of underwater and fraud mortgages with no oversight, intentionally paying far more than they’re actually worth, might be *costly*?

Nah!

Dday hits the nail on the head here:

Quick question: Where are the Fannie and Freddie losses coming from? Answer: bad loans they bought. Quick question: Where did the bad loans come from? Answer: the banks.

I love this line in the piece: “The projections of additional bailouts for Fannie and Freddie are in sharp contrast to recent discussions by the Obama administration about how the bank rescue known as the Troubled Assets Relief Program, originally valued a $700 billion, is expected to cost taxpayers less than a tenth of that.” Yeah, there’s a reason for that “contrast.” It’s because the losses of TARP are being realized in Fannie and Freddie.

Here’s how this worked: the vast majority of the actual bank bailouts didn’t occur in TARP; it occurred through a wide array of other special programs that shoveled money onto banksters’ books or took off toxic garbage from those same books, along with accounting trickery like ending mark to market. (Dday pointed out some of this in an earlier piece, along with the fact that the AIG losses we’ve had to pay should count against the ‘profit’ from TARP, that a no-strings attached bailout now encourages more recklessness in future, etc)

Not that this entirely predictable turn of events will trouble Matt Ygelsias, who claimed that TARP would have a ‘negative cost’ to government. Right. Negative tens, perhaps hundreds of billions, Matt?

Or DougJ at Balloon Juice (motto: If We Say It’s Sunny, Please Bring Your Umbrella), who said of TARP (while adding a small proviso about AIG losses):

It didn’t cost $700 billion either, in the end, it’s pretty close to break even. Yeah, they should have settled AIG’s credit default swaps for 60 cents on the dollar (or something like that), but it wasn’t a pointless $700 billion give-away to fat cat bankstas.

Or Mistermix at BJ, who today was trumpeting the entirely fictional 8.25% rate of return on the bank bailouts while asking if, considering the enormous, Earth-shattering risks we took on to bailout Wall Street, perhaps we should have gotten slightly more cash.

Once again I can say I was right on this issue early thanks to Ian Welsh, who kindly took the time to explain, way back in August of 2009, why TARP’s ‘profits’ were and would always be nothing more than accounting sleight of hand:

TARP is making money because it was decided that it had to make money. So instead of forcing banks to take losses, or withdrawing special loan facilities, or ending concessionary rates, or making banks retire guaranteed bond issues and reissue them without the guarantee the banks were encouraged to “repay” TARP.

But if you think that means that the overall panolpy of government aid to banks was profitable, you aren’t looking at the whole picture. It’s like making 5 loans to your deadbeat cousin, and he pays back one while not being able to pay back the others and you say “I made a profit!” Not yet.

But I’m sure Bernanke and Geithner are pleased that so many folks have fallen for their shell game.

There’s a sucker born every minute, and half of them grow up to shill for Obama.