Justice Says Treasury Can Cap GSE Debt

The Treasury Department has obtained a legal opinion from the Justice Department that clarifies its authority to limit the debt issuance of Fannie Mae and Freddie Mac.

Treasury officials have not made the legal memo public and so far they have refused to speak publicly about the Justice Department memo.

According to a Wall Street Journal report, the legal memo indicates that the Treasury secretary can limit the government sponsored enterprises debt issuances for safety and soundness reasons, as well as to protect financial markets and the economy.

Earlier this year, the Treasury Department asked for the opinion as part of a review of their existing authority to control the growth and activities of the two GSEs. However, Treasury officials have expressed some wariness about actually limiting GSEs debt issuances and exercising such control over the companies' finances.

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