Political theater today features Treasury Secretary Geithner testifying before Congress about his role in the AIG/GS bailout. Apparently he had no role in the decision to pay off Goldman Sachs in full. Neither, according to their public statements, did either of Mr Bernanke or Mr Paulson. Presumably all will then take a walk on what appears to have been a blatant robbery of the U.S. taxpayer to avoid any losses for Goldman Sachs. This is just more evidence of the depth of the rot in government.

Of course, as John Hussman continues to point out, the whole $12.5 trillion plus of guarantees and subsidies has been aimed at avoiding losses for creditors of the banks – the bondholders, principally.

Make no mistake – we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns’ bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans.

This provides evidence to those financing the banks that their loans continue to be guaranteed  by the taxpayer, so they then continue lending to the banks at low rates, and permit them to use huge leverage, carrying little capital to support the loans. The net result is that the banks make huge profits, both because of the low rates and extreme leverage, above and beyond the cost advantages already yielded by deposit insurance and so forth, none of which would be possible without the taxpayer’s guarantee. The lion’s share of these profits then flows into the pockets of their employees, making sure that there is as little capital as possible left in the company to be lost in the next collapse.

How the bankers continue to pull the wool over people’s eyes is a triumph of propaganda and fear-mongering – basically threatening to bankrupt the country if they don’t get what they want, while funneling a steady stream of money into the pockets of Congress. Shameful.

Tomorrow’s operetta will be the re-confirmation of Bernanke who, after promising at his confirmation hearings to be “independent of all political influences,” has been shamelessly lobbying for votes, per Bloomberg:

Federal Reserve Chairman Ben S. Bernanke had conversations with 18 of the 23 legislators on the Senate Banking Committee prior to their 16-7 vote this month to recommend that the full Senate confirm him to a second term.

The Fed chief had contact with 24 senators between August 4 and Nov. 30, almost all at congressional office buildings, after his Aug. 25 nomination to another four-year term as chairman by President Barack Obama. The meetings and phone calls were listed in a daybook provided by the Fed yesterday in response to Freedom of Information Act requests by Bloomberg News.

What did he promise these people in exchange for their support?