On Christmas Eve, Treasury Secretary Tim Geithner decided that the nation’s taxpayers had been naughty, and accordingly left a big lump of coal in their stockings. More specifically, after Congress had finally left town and health care filled the headlines, Treasury announced in a short press release, that the federal government would cover all of Fannie Mae and Freddie Mac losses between now and 2012.

Previous to this announcement, Treasury had agreed to cover up to $400 billion in Fannie and Freddie losses. Remember this isn’t an investment that will come back to the taxpayer, it is a loss. And a loss that will exceed anything seen under the TARP. As if $400 billion were not a sufficient hit to the taxpayer, Treasury has not decided that additional losses will also be covered. All this without so much as even a press conference; much less a vote of Congress. So much for accountability and transparency.

Of course, Treasury tells us this action is necessary to protect our mortgage markets. Maybe at some point, we will actually decide that we’ve spent enough to protect our mortgage markets. I have a home and a mortgage; yet didn’t feel any more protected by agreeing to cover losses that could run into the trillions.

What Geithner really should have admitted is that we aren’t taking these actions to protect the mortgage market, we are taking these actions to protect Fannie and Freddie’s largest debtholders, among them the Chinese Central Bank. But then if we don’t make good on the Chinese investment in Fannie and Freddie, how can we expect them to continue lending us ever more money to live beyond our means?