Supreme Court strikes down FHFA director’s firing protection

The Supreme Court ruled Wednesday that the director of the Federal Housing Finance Agency (FHFA) can be fired by the president for any reason.

The court held in Collins v. Yellen that a provision protecting the FHFA director from being fired for reasons other than misconduct or neglect violated the separation of powers between the legislative and executive branches. The court, however, did not void an agreement between the Treasury Department and FHFA over handling of revenue from the government-sponsored enterprises the agency oversees.

“The Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer,” wrote Associate Justice Samuel Alito in the court’s opinion. “The President must be able to remove not just officers who disobey his commands.”

Alito was joined by Chief Justice John Roberts, and Associate Justices Clarence Thomas, Brett Kavanaugh, and Amy Coney Barrett—all appointees of Republican presidents. Associate Justice Neil Gorsuch concurred with the decision to scrap the FHFA director’s removal protection, but not the decision to leave alone the Treasury-FHFA agreement.

The case focused on whether the structure FHFA, the conservator of Fannie Mae and Freddie Mac, infringed on the president’s executive authority and invalidated a 2012 agreement to exchange billions in Fannie and Freddie stock for capital infusions from the Treasury.

The FHFA was created in 2008 to be the conservator and supervisor of Fannie Mae and Freddie Mac, two government-sponsored mortgage securitization firms that collapsed during the 2007-08 housing crisis and recession. The 2008 Housing and Economic Recovery Act created the FHFA with a sole director who has final say over the agency’s operations and could only be fired by the president for cause.

A group of investors opposed to the 2012 agreement sued the Treasury Department in 2017, claiming that the agreement was invalid because the structure of the FHFA was unconstitutional.

Alito agreed with those complaints in part on behalf of the court, citing its 2019 decision in Seila Law vs. the Consumer Financial Protection Bureau (CFPB). The court held in Seila Law that the CFPB’s structure was also unconstitutional because the agency’s sole director was not fireable by the president at will.

“We have noted differences between these two agencies. But the nature and breadth of an agency’s authority is not dispositive in determining whether Congress may limit the President’s power,” Alito wrote.

“The removal power helps the President maintain a degree of control over the subordinates he needs to carry out his duties as the head of the Executive Branch, and it works to ensure that these subordinates serve the people effectively and in accordance with the policies that the people presumably elected the President to promote.”

But while Alito agreed that the FHFA’s structure was unconstitutional, he said the agency did not overstep its authority with the 2012 agreement. 

The court’s liberal bloc also concurred with the ruling in general, but disagreed with aspects of how Alito reached his conclusion.

“The issue now is not whether Seila Law was correct. The question is whether that case is distinguishable from this one. And it is not,” wrote Associate Justice Elena Kagan in an opinion joined in part by Associate Justices Stephen Breyer and Sonia Sotomayor.

Updated at 11:36 a.m.

Tags Amy Coney Barrett Brett Kavanaugh Clarence Thomas Elena Kagan Federal Housing Finance Agency FHFA Neil Gorsuch Samuel Alito Sonia Sotomayor Stephen Breyer Supreme Court
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