I am no expert on Wall Street shenanigans or the economy more generally, but thanks to The Automatic Earth, it’s always possible to see what’s being reported in business news, with a bit of insight into the bigger picture. (I suppose I should also shout out Barry Ritholtz’s The Big Picture since that’s where they picked up on the story I’m sharing here… but I’d have to say that The Automatic Earth presents a much bigger picture).

While corporate media makes big noise about inaugural pageantry in Boston and in Washington DC, and even less meaningful distractions, some incredible Wall Street maneuvering is happening without much fanfare.

In what Ritholtz calls a “back door bailout of the banks”, Freddie Mac and Fannie Mae have been negotiating with Bank of America, JP Morgan and others who sold them no-verification “liars loans”, namely via “buy back demands.”

Bank of America just settled these demands with Freddie Mac and Fannie Mae for a total of $4.1 billion. But the Freddie deal is particularly insidious.

According to Bloomberg News, Bank of America paid $1.28 billion to Freddie Mac to buy back $1 billion of outstanding loans. But the deal also covers future potential repurchase of up to $127 billion of outstanding loans sold by Countrywide (now serviced by Bank of America). In other words, if these liars loans prove to be worthless, Freddie Mac will take the hit, and not Bank of America. And while Freddie Mac is a privately-owned company, it’s basically got the backing of the US taxpayer.

The deal is being considered a template for how Freddie, Fannie, and Ginnie (often referred to as the GSEs, or “government-sponsored enterprises”) can negotiate similar deals with JP Morgan, Citigroup, Wells Fargo, and Ally/GMAC. To screw over the American taxpayer and give Wall Street this backdoor bonus. The stock market soared on the news of this b.s. And it’s probably a sign of what’s ahead, with Obama’s hiring of Midwest Chairman of JP Morgan as his Chief of Staff.

At least that’s the picture as I can see it. I welcome any better-informed insights.