You have to give Treasury Secretary Tim Geithner some credit for spin: today the Treasury announced “Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac.” The only problem is that the steps announced largely put the taxpayer at greater risk in order to protect holders of Fannie and Freddie debt.

Essentially, the Treasury has amended its agreements with Fannie and Freddie so that the companies no longer have to pay a fixed dividend to the U.S. taxpayer, but instead “every dollar of profit” from the companies to the taxpayer. The problem is that the Government Sponsored Enterprises (GSE) have never had a year where their profits would have covered the dividend payments, so while we can debate if the taxpayer will recover anything from the GSEs, shifting to just collecting profits definitely means the taxpayer’s potential recoupment is lower.

The GSE’s regulator, the Federal Housing Finance Agency (FHFA) was at least a little more honest in its announcement of the changes, stating that, “as Fannie Mae and Freddie Mac shrink, the continued payment of a fixed dividend could have called into question the adequacy of the financial commitment contained in the PSPAs.” Read “financial commitment” to mean protecting debtholders from loss.

How does the change protect debtholders over taxpayers? It reduces the ability of FHFA to place Fannie or Freddie into a receivership, under which FHFA could impose losses on creditors. Under Section 1145 of the Housing and Economic Recovery Act, FHFA has the discretion of appointing a receiver if one the GSEs displays an “inability to meet obligations,” which would include dividend payments. By essentially taking away that lever from FHFA, Treasury has greatly reduced any chance of a receivership. Sadly, I believe a receivership was the only thing that would force Congress to also deal with Fannie and Freddie. Treasury’s actions have been a massive win for the broken status quo.

Don’t let the rest of the Treasury announcement fool you. Yes, Treasury has both agreed to reduce the GSEs’ portfolios and to require the GSEs to submit an “annual taxpayer protection plan,” but both of these efforts are little more than fig-leafs to cover Treasury’s protection of GSE creditors at the expense of taxpayers. After all, the first commandment in the Geithner bible, as witnessed during the 2008 bailouts, is that debtholders shall take no losses, regardless of the expense to the taxpayer.