Supreme Court: FHFA Director May be Removed by President at Will

The Supreme Court ruled today that the structure of the Federal Housing Finance Agency is unconstitutional, given that it has a sole director who may only be removed by the president for cause, not at will. The court’s opinion in the case of Collins v. Yellen mirrored its decision in Seila Law v. CFPB, which challenged the Consumer Financial Protection Bureau’s structure on similar grounds. The court in that case held that the bureau may continue to operate but that its single powerful director must be able to be removed at will by the president.

Immediately after the decision, President Biden removed FHFA Director Mark Calabria, who had been appointed by former President Trump to a five-year term starting in 2019. Biden designated Sandra Thompson as FHFA acting director. Thompson, a 23-year veteran of the FDIC, has served since 2013 as deputy director of FHFA’s Division of Housing Mission and Goals.

The Collins case arose when Fannie Mae and Freddie Mac shareholders challenged FHFA’s amendments to the senior preferred stock purchase agreements, which among other things included the replacement of the fixed dividend with a variable quarterly dividend. The shareholders argued that FHFA exceeded its authority both on statutory grounds as a conservator under the Recovery Act by agreeing to the new variable dividend formula, and on constitutional grounds, claiming that the agency’s structure violates the separation of powers.

While the court sided with the shareholders on the constitutional question, it held that the shareholders’ statutory claim is barred by the Housing and Economic Recovery Act, which prohibits course from taking “any action to restrain or affect the exercise of [the]powers or functions of the Agency as a conservator.”

This story has been updated to reflect the appointment of an acting FHFA director.