Fannie Mae-No Politics (FNMA)

[clarencebeaks21]

Law professors Davidoff and Zaring may have some answers for you, as far as the source of Treasury authority. Their law review article is linked at the end of this post.

First, you might be interested that the two commentators state that the US government found some legal legitimacy by acting as a “vigorous deal maker”, relying not on regulatory authority but on contract law principles of arms-length transactions. [pages 466-467].

Second, more specifically to authority for the SPSA commitments, see pages 484-490. The two scholars state on pg 487:

“HERA…provided the Treasury Secretary with…broad…authority to recapitalize the GSEs. Section 1117 of HERA stated, “the Secretary of the Treasury is authorized to purchase any obligations and other securities issued by the corporation . . . on such terms and conditions as the Secretary may determine and in such amounts as the Secretary may determine.”
…
“In order to increase each GSE’s capital, Treasury also entered into senior preferred share purchase agreements with Fannie Mae and Freddie Mac for each to issue up to $100 billion of senior preferred stock to the Treasury Department.”
[see also Footnotes 97-100, pg 487]

As an aside, the authors several times mistakenly refer to FHFA as “FHA”. Other than that minor error, it’s a thoughtful law review, at times quite critical of the US.

http://www.administrativelawreview.org/wp-content/uploads/2014/04/Regulation-by-Deal-The-Governments-Response-to-the-Financial-Crisis.pdf