Presidential Spending Authority Under EESA
The Emergency Economic Stabilization Act (EESA) of 2008, commonly referred to as the Troubled Asset Relief Program (TARP), is the $700-billion program meant to lend assistance to financial institutions and mortgagors. The program is hailed by some as providing financial stability; others revile it as a bailout for banks and over-leveraged borrowers.
Congress, in crafting the legislation, provided extraordinary spending privileges to the
executive branch of the U.S. federal government. The executive branch of government
gained the ability to develop policy, determine eligibility, purchase troubled assets, and
reduce foreclosures to homeowners. These programs are directed by the executive
branch through the Department of Treasury, with some assistance of Housing and Urban
Development (HUD). The Federal Housing Financing Agency (FHFA) is also involved
as conservators of Fannie Mae and Freddie Mac.
Not only did the executive branch gain the ability to develop and execute policy of how
to spend the $700 billion in available funds, but the Congress allowed for a self-extension of
the program. Treasury Secretary Geithner asked for just such an extension until the
statutory limit of the program, October 3, 2010. In all, the EESA program will run for
two full years. This starkly contrasts most congressional financial approvals, which fund
government operations for single fiscal years through a normal budgeting process.
The "considerations" in Section 103 defined some loose goals, such as "protecting the interest of the taxpayers" and "preventing disruption to the financial markets." The only strict limitation is contained in Paragraph 5 of Section 103 (12 USC 5213) that states admirable goals of non-preferential treatment.
12 USC 5213 Section 103. Considerations. [Page 6 of the EESA bill.]
In exercising the authorities granted in this Act, the Secretary shall take into
consideration-(5) ensuring that all financial institutions are eligible to participate in the
program, without discrimination based on size, geography, form of
organization, or the size, type, and number of assets eligible for purchase
under this Act.
These "considerations" of how EESA monies can be spent will be tested with President Obama's recent announcement of stabilizing the housing markets of five states. It seems that certain geographical areas may have preferential treatment under such a program. Additionally, the only form of financial institution eligible for this assistance are state Housing Finance Agencies (HFAs).
President Obama today is announcing Help for the Hardest Hit Housing Markets. The program will apply to states that have suffered an average home price drop of over 20% from the peak. State and local Housing Finance Agencies (HFAs) in each state are already familiar with the urgent challenges facing their communities and have demonstrated the ability to address these challenges. For that reason, we will work with these HFAs to expand the capacity to help address these challenges, with $1.5 billion from the funds set aside for housing under the Emergency Economic Stabilization Act of 2008 (EESA).
Programs must meet funding requirements under EESA. These include that the recipient of funds must be an eligible financial institution and that the funds must be used to pay for mortgage modifications or for other permitted uses under EESA.
CalHFA was chartered as the State's affordable housing bank to make low interest rate loans through the sale of tax-exempt bonds. A completely self-supporting State agency, bonds are repaid by revenues generated through mortgage loans, not taxpayer dollars.
12 USC 5213 Section 103. Considerations. (Page 6 of the EESA bill.)
In exercising the authorities granted in this Act, the Secretary shall take into
consideration-(5) ensuring that all financial institutions are eligible to participate in the
program, without discrimination based on size, geography, form of
organization, or the size, type, and number of assets eligible for purchase
under this Act.