U.S. Supreme Court will hear case challenging Federal Housing Finance Agency structure
The U.S. Supreme Court just wrapped up its 2019-2020 term, but we’re already looking ahead to the upcoming term. On July 9, SCOTUS agreed to hear Collins v. Mnuchin, which asks whether the structure of the Federal Housing Finance Agency (FHFA) is unconstitutional.
The FHFA is an independent agency that regulates Fannie Mae and Freddie Mac, the government-sponsored entities that deal in mortgages, and the Federal Home Loan Bank System. The president appoints the agency's director to a five-year term, subject to Senate confirmation. The president may only remove the director for cause.
The case began when shareholders of Fannie Mae and Freddie Mac sued the FHFA. The plaintiffs allege that because the single director can only be removed for cause, and does not depend on congressional appropriations, it’s structurally unconstitutional.
The U.S. Court of Appeals for the 5th Circuit ruled en banc that the structure of the FHFA was unconstitutional because it “limits the President’s removal power and does not fit within the recognized exception for independent agencies.” The U.S Supreme Court established that exception for agencies with multi-member boards in the 1935 case Humphrey's Executor v. United States. The Fifth Circuit held that court precedent does not support removal protections for single-director agencies like the FHFA.
The Fannie and Freddie shareholders appealed to the U.S. Supreme Court, arguing, "While the Fifth Circuit correctly held that FHFA’s insulation from at-will presidential removal power unconstitutionally dilutes the President’s Article II authority, the court failed to carry out the Article III responsibilities that follow from that finding."
Just 10 days before agreeing to decide Collins v. Mnuchin, the U.S. Supreme Court held in Seila Law that the structure of the Consumer Financial Protection Bureau (CFPB) was unconstitutional. The president was barred from firing the CFPB's director at-will. The Supreme Court ruled 5-4 that such a restriction violated the separation of powers doctrine because it limited presidential use of executive power.
And don’t forget, our SCOTUS wrap-up briefing is this Thursday, July 23, at 11:00 am CDT. We’ll be reviewing the most important aspects of the term, including the pandemic's impact, the decision trends we're seeing, and the latest data on reversal rates. Click here to sign up.
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