The Supreme Court ruled on Wednesday in Collins v. Yellen, that the decision to restrict the President to remove the Federal Housing Finance Agency (FHFA) director violated the separation of powers.
The 7-2 ruling formed in two parts addressed the issues of whether Congress could limit the President’s ability to remove the FHFA director from office by legislating that removal could only take place ‘for cause’ and if the federal takeover of Fannie Mae and Freddie Mac exceeded the authority granted to the FHFA.
The FHFA was established in 2008 by the Housing and Economic Recovery Act, amidst the Great Recession to regulate the mortgage industry. The removal restrictions in questions were imposed by the same act. However Wednesday’s decision found these restrictions to be unconstitutional. As there is one FHFA director in management of a federally-sponsored enterprise, the court affirmed the plaintiff’s argument that this structure deprived the President’s powers over the executive branch.
On the second issue, the Fifth Circuit’s decision was upheld, maintaining the FHFA’s conservatorship of Fannie Mae and Freddie Mac. The shareholders of these enterprises asserted that the FHFA control exceeded their authority by directing funds to the Treasury; however, the court dismissed this claim on the grounds of statutory authority.
The shift in decision over the presidential power to remove the FHFA regulator led to President Biden replacing outgoing Director Mark Calabria with Sandra Thompson on Wednesday, citing concern by stakeholders over continued Federal control over Fannie Mae and Freddie Mac.