So we continue to prop up the housing market, probably because it provides the only positive economic news lately. Is this good for the long-term economy? I dunno, I guess it depends on how talented you are at pretending:

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.

The administration faced a congressionally mandated deadline of Dec. 31 to increase the amount of aid it could provide to Fannie Mae and Freddie Mac, which together have already received $111 billion in assistance.

Treasury said Thursday that its decision did not mean the firms would need $200 billion or more apiece, but that it instead was seeking to assure markets that the government would stand behind the companies. In a statement, Treasury said the move "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."

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First question, why is this man on my television screen instead of sitting in a jail cell somewhere? Karl Rove first claims that the stimulus package didn't work even though as Pat Garofalo over at the Think Progress' The Wonk Room noted:

...the Congressional Budget Office found that it has created or saved 600,000 to 1.6 million jobs, with plenty of punch still to come.

Rove is then asked by Greta Van Susteren if the Bush administration is responsible at all for the shape the economy is in. Rove tries to blame the economy melting down on Fannie and Freddie and on Chris Dodd and Barney Frank--it's all their fault! This is the same crap Rove was peddling in his Wall Street Journal column back in January. Barry Ritholtz does a nice job of debunking Rove's nonsense here--Karl Rove’s Factually Challenged Housing Revisionism.

VAN SUSTEREN: Here's the problem with what you suggest. I mean, that may be the suggestion for the economy, and I don't mean to suggest that decisions are made on politics. But to be sort of practical and realistic, the fact that there will be an election next November, if they cut the corporate tax, as you say, for big corporations, accelerate depreciation for small businesses, the first thing I would do as an opponent is saying, Well, he finally came around to the Republican thinking. And it took him a year or so or a year behind the ball on this in terms of the role of the recession. Plus, we've spent all this money in the stimulus package and we've got ourselves now in a huge spending situation. So you know, that solution may help the economy, but doesn't that make him more vulnerable politically?

ROVE: Well, it does say that he changes course. But I mean, look, it's not working. We were told that if we did nothing, unemployment would go to 8 percent. We did exactly what the president wanted, his $787 billion stimulus bill, and unemployment has gone to 10 percent. We've gone from a situation -- when he came into office, there were 142.1 million Americans working. Today there are 138.5 million Americans working. We did what he said and it has not gotten appreciably better.

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NY Times:

Precisely one year ago, we lucky taxpayers took over Fannie Mae and Freddie Mac, the mortgage finance giants that contributed mightily to the wild and crazy home-loan-boom-turned-bust. In that rescue operation, the Treasury agreed to pony up as much as $200 billion to keep Fannie in the black, coughing up cash whenever its liabilities exceed its assets. According to the company’s most recent quarterly financial statement, the Treasury will, by Sept. 30, have handed over $45 billion to shore up the company’s net worth.

It is still unclear what the ultimate cost of this bailout will be. But thanks to inquiries by Representative Alan Grayson, a Florida Democrat, we do know of another, simply outrageous cost. As a result of the Fannie takeover, taxpayers are paying millions of dollars in legal defense bills for three top former executives, including Franklin D. Raines, who left the company in late 2004 under accusations of accounting improprieties. From Sept. 6, 2008, to July 21, these legal payments totaled $6.3 million.

With all the turmoil of the financial crisis, you may have forgotten about the book-cooking that went on at Fannie Mae. Government inquiries found that between 1998 and 2004, senior executives at Fannie manipulated its results to hit earnings targets and generate $115 million in bonus compensation. Fannie had to restate its financial results by $6.3 billion.

Almost two years later, in 2006, Fannie’s regulator concluded an investigation of the accounting with a scathing report. “The conduct of Mr. Raines, chief financial officer J. Timothy Howard, and other members of the inner circle of senior executives at Fannie Mae was inconsistent with the values of responsibility, accountability, and integrity,” it said.

That year, the government sued Mr. Raines, Mr. Howard and Leanne Spencer, Fannie’s former controller, seeking $100 million in fines and $115 million in restitution from bonuses the government contended were not earned. Without admitting wrongdoing, Mr. Raines, Mr. Howard and Ms. Spencer paid $31.4 million in 2008 to settle the litigation.

When these top executives left Fannie, the company was obligated to cover the legal costs associated with shareholder suits brought against them in the wake of the accounting scandal.

Now those costs are ours. Between Sept. 6, 2008, and July 21, we taxpayers spent $2.43 million to defend Mr. Raines, $1.35 million for Mr. Howard, and $2.52 million to defend Ms. Spencer.“I cannot see the justification of people who led these organizations into insolvency getting a free ride,” Mr. Grayson said. “It goes right to the heart of what people find most disturbing in this situation — the absolute lack of justice.”

If you haven't been following Alan Grayson, he has been an absolutely stalwart progressive in the House and really pushing for sensible reform to prevent another economic meltdown.

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Sen. John McCain told CNN's John King that he's not in favor of a public health insurance option because he believes it would lead to a government takeover of health care. "[Public option proposals] remind us all of Fannie Mae and Freddie Mac. So I've not seen a public option that meets the test of what would not eventually lead to a government takeover," said McCain.

McCain believes that President Obama has failed the test of bipartisanship and the "Blue Dogs" will eventually "roll over a play dead" on their opposition to health care reform.

Update. Transcript below the fold.

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Krugman suggests we shouldn't be all that happy just yet over the results of the stress tests:

Can the economy recover even with weak banks? Maybe. Banks won’t be expanding credit any time soon, but government-backed lenders have stepped in to fill the gap. The Federal Reserve has expanded its credit by $1.2 trillion over the past year; Fannie Mae and Freddie Mac have become the principal sources of mortgage finance. So maybe we can let the economy fix the banks instead of the other way around.

But there are many things that could go wrong.

It’s not at all clear that credit from the Fed, Fannie and Freddie can fully substitute for a healthy banking system. If it can’t, the muddle-through strategy will turn out to be a recipe for a prolonged, Japanese-style era of high unemployment and weak growth.

Actually, a multiyear period of economic weakness looks likely in any case. The economy may no longer be plunging, but it’s very hard to see where a real recovery will come from. And if the economy does stay depressed for a long time, banks will be in much bigger trouble than the stress tests — which looked only two years ahead — are able to capture.

Finally, given the possibility of bigger losses in the future, the government’s evident unwillingness either to own banks or let them fail creates a heads-they-win-tails-we-lose situation. If all goes well, the bankers will win big. If the current strategy fails, taxpayers will be forced to pay for another bailout.

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John Ensign on Hardball still blaming Fannie and Freddie and the Community Reinvestment Act for the economic crisis and claiming that government spending didn't get us out of the depression. I think Ensign and his buddy Boehner need to spend a little less time in the tanning bed thinking of new ways to attempt to revise history and take cheap political shots at entities they don't like and a little more time actually trying to get this country back on track and out of the mess we're in.

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Hallelujah. This plan not only offers help for families in foreclosure, but also for owner-occupants of underwater mortgages. True, it doesn't address the root cause of inflated housing values (and that must be addressed at some point), but it's a smart, comprehensive plan of attack - and as a whole, a very good beginning. Color me impressed:

MESA, Ariz. — President Obama pledged on Wednesday to help as many as 9 million American homeowners refinance their mortgages or avert foreclosure, an initiative he said would shore up distressed housing prices, stabilize neighborhoods and slow a downward spiral that he said was “unraveling homeownership, the middle class, and the American Dream itself.”

The plan, more ambitious than many housing analysts had expected, was unveiled by Mr. Obama in a high school gymnasium here, in a community that is among the nation’s hardest hit by the foreclosure crisis.

“This plan will not save every home, but it will give millions of families resigned to financial ruin a chance to rebuild,” the president told the crowd. “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”

The plan has three basic components. One would help homeowners who continue to make loan payments on time, but are paying high interest rates and would otherwise not be able to refinance because they do not have enough equity or their houses are worth less than they borrowed. A second would assist people who are at risk of foreclosure by providing incentives to lenders to alter the terms of loans to make them substantially more affordable to struggling homeowners. The third would try to assure there is plenty of credit available for mortgages by giving $200 billion of additional financial backing to Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies.

The announcement came a day after Mr. Obama signed his $787 billion economic recovery package, and administration officials like Timothy F. Geithner, the Treasury secretary, made the case that they will work in tandem. In announcing the housing plan, Mr. Obama struck a populist note, criticizing speculators and “lenders who knowingly took advantage of homebuyers” with the same vehemence he used in going after Wall Street bankers for giving themselves bonuses as their companies were seeking government help.

“It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell,” he said, adding, “And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

The plan will take effect March 4, when the administration publishes detailed rules explaining it. Most of the plan can be enacted by Mr. Obama though his executive powers, although part of it — including changing the bankruptcy laws to allow homeowners to seek changes to their mortgages through bankruptcy proceedings — will require legislation. Mr. Geithner said the administration is already in discussions with lawmakers on how to proceed.

In allowing homeowners who are not delinquent to qualify, the plan marks a sharp break from the housing policies of Mr. Obama’s predecessor, George W. Bush. Mr. Geithner and the new Housing secretary, Shaun Donovan, said the administration’s research had determined that, with 10 percent of American homeowners either in foreclosure or in danger of it, it was better to intervene early.

Bill O'Reilly brings Barney Frank on with one goal in mind: to get him to admit that he's responsible for the failure of Fannie Mae and Freddie Mac, and therefore the millions of dollars that obviously Bill O'Reilly Americans lost when they went under and the stock market dropped in response. Frank was having none of it, and the result was as instant internet classic. Here are a few of the best exchanges:

O'REILLY: You're a coward. You blame everybody else. You're a coward.

FRANK: Bill, here's the problem with going on your show. You start ranting. And the only way to respond is almost to look as boorish as you. But here's the facts....

[...]

FRANK: I'm not going to be bullied by your ranting. You can rant all you want, you're not going to shut me up! The problem was that we passed in 1994, in fact.

O'REILLY: Now we're back to 1994. This is bull. This is why Americans don't trust the government.

FRANK: No, this is why your stupidity gets in the way of rational discussion.

This is Bill's MO. He goes into an interview with one goal in mind and goes ballistic when his guest shoots it down. The past couple of weeks have turned Barney Frank into one of my new favorite Congressmen. These two should have their own show. Kinda like Crossfire, only entertaining.

Full transcript below the fold for those of you who can't stand more than 7 seconds of Bill O'Reilly.

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  How lucky for McSame that the "suspending" of his campaign has distracted the mainstream ("ooh, look at that shiny object!") media from discussing further Palin's substance-free meetings with foreign heads of state and Rick Davis' continuing ties to Freddie Mac.

Luckily, unlike John McCain, we here in the blogosphere are capable of juggling more than one ball in the air.  Lindsay Beyerstein has done some basic investigation (remember when the mainstream media practiced journalism?) and found that the McCain campaign, is just not being honest: 

The McCain campaign claims that campaign manager Rick Davis separated from his lobbying firm, Davis Manafort, in 2006:

In fact, the allegation is demonstrably false. As has been previously reported, Mr. Davis separated from his consulting firm, Davis Manafort, in 2006. As has been previously reported, Mr. Davis has seen no income from Davis Manafort since 2006. Zero. Mr. Davis has received no salary or compensation since 2006. Mr. Davis has received no profit or partner distributions from that firm on any basis -- weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual or annual -- since 2006. Again, zero. Neither has Mr. Davis received any equity in the firm based on profits derived since his financial separation from Davis Manafort in 2006.

This record, which I retrieved from the Virginia State Corporations Commission shows that Davis is still an officer/director of Davis Manafort, Inc. He is also currently the clerk/treasurer of Davis Manafort Partners, Inc.

Corporate officers/directors don't necessarily get paid and don't necessarily "receive equity" based on the profits of the corporation. But whether Davis has been paid, or received any equity based on Davis Manafort's profits since 2006 is a separate question from whether he retains a connection to the firm.

And as Newsweek cited, "the arrangement was approved by Hollis McLoughlin, Freddie Mac's senior vice president for external relations, because 'he [Davis] was John McCain's campaign manager and it was felt you couldn't say no.'"

  The implosion of Wall Street last week resulted in a near-death crisis for John McCain's presidential campaign. His post-Palin bump eviscerated, McCain was staggered by the re-emergence of the economy as the dominant issue in the 2008 election. His daily-changing positions revealed that McCain, a man who has repeatedly admitted his ignorance of economics, is struggling to cope with his diminished presidential prospects. Armchair psychologists might call the process John McCain's five stages of grief over the economy.

Denial. McCain's refusal to confront the realities of the failing Bush economy has long roots and was again on display last Monday. McCain, who has frequently described the economic slowdown as "psychological," for at least the 18th time proclaimed the "fundamentals of our economy are strong." As the Dow plummeted over 500 points, McCain reacted to the white-hot crisis on Wall Street by comically announcing his support for a 9/11-style commission to study the causes of and make recommendations to address the meltdown. Willing to kick the can down the road with his since forgotten 9/11 panel idea, McCain also took a head-in-the-sand position in opposing the government rescue of teetering insurance giant AIG:

"We cannot have the taxpayers bail out AIG or anybody else."

Anger. Sadly, McCain's denial of the obvious produced an immediate backlash from the press and the public alike. Literally within hours last Monday, McCain reversed course on the underlying strength of the American economy and declared the fundamentals of the economy to be "at great risk."

Then John McCain did what he does best - he got mad.

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