NEW YORK (TheStreet) --  A controversial amendment to the government conservatorship of Fannie Mae (FNMA) and Freddie Mac (FMCC) should be allowed to stand because it is "consistent with the agreement the government negotiated," according to U.S. Rep. John Delaney (D., Md.) a former financial services CEO who is crafting legislation to wind down the government sponsored enterprises (GSEs).

Delaney, former CEO and Chairman of CapitalSource  (CSE) , has emerged as one of the most outspoken defenders of the Treasury Department's 2012 third amendment to the conservatorship agreement governing Fannie and Freddie, which is the subject of extensive litigation. Among those suing the government are the hedge fund Perry Capital and Fairholme Funds, led by Bruce Berkowitz, a Morningstar fund manager of the decade in 2010.

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"The government negotiated and had the company sign an agreement as a condition to the government doing two things. One, guarantee explicitly for a trillion dollars of debt and the second thing they did is injected a hundred eighty seven billion dollars. So as a part of that agreement, the government negotiated a certain set of rights and included in that set of rights was their ability to do things like the third amendment," Delaney said.

Following their March dividend payments, Fannie and Freddie will have paid total dividends of $199 billion on $189.4 billion in senior preferred shares held by the Treasury. Factoring in warrants that were handed to the government to acquire up to 79.9% of the GSEs common shares, Rafferty Capital Markets analyst Richard Bove on last week estimated the government's return on its investment in Fannie and Freddie was $238 billion.

But those figures don't tell the whole story, Delaney contends.

"People keep talking about the hundred eighty seven billion dollars that's kind of been paid back but they're ignoring the fact that the government explicitly guaranteed four trillion dollars of liability which is without question the largest guarantee of debt that was ever done in the history of the world. So I think if you were to value what that guarantee is it's staggering particularly at that moment in time. So whatever the government negotiated seems reasonable to me."

I asked Delaney about a point emphasized regularly by GSE shareholders, notably the consumer advocate and occasional presidential candidate Ralph Nader, who say that the Treasury used and abused them. They say the government structured its takeover in such a way as to give shareholders false hope that their investments still had value, while the real purpose was merely to avoid taking over the GSEs' liabilities and increasing the size of the federal deficit. By taking warrants to buy up to 79.9% of the common shares of Fannie and Freddie, while allowing the outstanding shares to continue to trade freely on public markets, the Treasury could keep the GSEs' obligations off its balance sheet.

Delaney argues the same thing goes on regularly in the private markets.

"I'm sure you can find examples of private companies whose equity securities stay outstanding after they fail and people like mezzanine lenders and distressed investors put in strips of capital and basically take all the rights and the equity becomes 'a hope certificate' as people like to say."

The example he cited was Sirius XM Holdings (SIRI) - Get Report, which Liberty Media saved from a potential bankruptcy in 2009 by lending it $530 million. Liberty now owns a 53% stake and was set to acquire the rest of the company over the vocal objections of several minority shareholders. Among the 47% who said they were being lowballed? You guessed it: Ralph Nader.

But Sirius is just one of many such examples, Delaney contends, and it seems unlikely Nader would argue that point.

"You go down the list," Delaney says. "Everybody had moments of stress and someone stepped in and negotiated a deal that gives them all the economic and control rights."

In other words, as Delaney sees it, the Treasury Department is acting just like any other swashbuckling capitalist.

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