What’s the news? The Dow fell a little – off 36 points. Oil traded at $80. And gold dropped $22, to close at $1,129. Nothing unusual.

But poor Mr. Obama… He seemed like a nice enough fellow. More and more people seem to be mad at him.

What went wrong? It looks to us that he has been completely captured by America’s two most special interests – Wall Street and the Pentagon. Maybe he was their man from the get-go; we don’t know.

Yesterday, he announced that he was going to squeeze $120 billion out of the banks over the next 10 years. Don’t worry about the bankers, dear reader; it’s all for show. The feds pretend to punish the bankers and the bankers pretend to suffer. They’ll whimper and whine…all the way to the bank!

How tough is it to make money when you can borrow money for nothing and lend it back to the lender at 400 basis points more interest? Even bankers can make money under those circumstances.

And that’s not all. Don’t forget that the feds are authorized to buy up Wall Street’s mistakes…and to make sure that the bankers don’t have to suffer from their own dumb mistakes.

Yesterday came news that the Fed had a very profitable year. It made more money even than Goldman Sachs – $45 billion. How did it make so much money? The papers report that it cleverly bought up debt that no one wanted…Wall Street’s mistakes. And then, lo and behold…it turned the dross into gold. No kidding. Bad debt became good debt. And then it became great debt…as it became clear that the US government stood behind almost ALL DEBT issued by Wall Street’s major players.

The financial press will spend a few days telling readers how smart the Fed is. Ben Bernanke will stress how the Fed saved the economy. Pundits such as Martin Wolf will claim they saved civilization.

But what is really going on? The Fed has a license to print money. Sometimes…when it can get away with it…it prints a lot of money. And it makes a lot of money. How cool is that?

And so, we turn to the story of Freddie and Fannie. The twins are double trouble, as far as we can tell. They lent (or guaranteed the loans) to people who couldn’t pay the money back. Then, when the inevitable came to pass they told the feds that if they didn’t help them out, America’s entire financial structure would melt down…and almost every family in the country would find itself underwater.

In 2006, Fannie Mae set aside $519 million just in case things went bad. Things did go bad. And guess what. The half a billion Fannie had set aside turned out to be laughably inadequate. Today it has had to come up with ten times that amount…which is still not enough to cover the implied losses at today’s market prices. It needs about twice that amount. So, along come the feds again…in a surprise move on Christmas Eve…with billions more.

We try to imagine members of Congress working hard to understand the complications of mortgage finance…giving the matter the solemn attention and fair-minded deliberation it deserves. After all, hundreds of billions of dollar were at stake. But try as we may, we just can’t imagine it.

The pols didn’t really try to figure it out. They didn’t have to.

“You have no idea,” said a source we won’t divulge, “how much control the bankers – especially Goldman Sachs – have on government. They have their men in the key positions. And every politician and bureaucrat knows that if he goes along with the game he could one day get a job at Goldman and make millions. And I’m not just talking about the US. It’s true of many other countries too. Goldman is international. And they’ve got their men in decisive posts in many countries.”

One source of the bankers’ power is money. The other is ignorance. They have money to throw around. When it comes to money, they seem to know what they are talking about. So, on Christmas Eve, 2009, rather than actually debate and deliberate, Members of Congress deferred to the bankers’ lobbyists.

Who’s going to argue with the bankers? They know how money works, don’t they? What politician has the courage…or the knowledge…to stand against them? If they hadn’t gone along with the bailouts, the whole shebang might have gone down the tubes, right?

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.