In a July 9, 2019, letter, the Federal Housing Finance Agency (FHFA) asked the Fifth Circuit Court of Appeals to uphold for-cause removal protections, which limit the circumstances in which presidents can remove the heads of agencies. The FHFA told the court that the agency’s new director had reconsidered the constitutionality of the agency’s structure.
The FHFA sent the letter as part of the ongoing proceedings in Collins v. Mnuchin, where a panel of the Fifth Circuit found that the structure of the FHFA is unconstitutional because it is led by a single director who is only removable by the president for cause. The court reheard the case en banc in January 2019 and had not announced a decision as of July 11, 2019.
The FHFA was created by the Housing and Economic Recovery Act of 2008 (HERA) to oversee the government-sponsored mortgage security corporations Fannie Mae and Freddie Mac. In Collins v. Mnuchin, Fannie Mae and Freddie Mac shareholders presented the following complaints:
- A 2012 dividend agreement between the FHFA and the U.S. Department of the Treasury, which rendered their shares valueless, exceeded the statutory authority of the FHFA and the Treasury Department.
- The FHFA is unconstitutionally structured because it is headed by a single director who is only removable for cause and it does not depend on congressional appropriations.
A district court dismissed the shareholders’ complaints. In a split decision, however, the Fifth Circuit panel reversed the decision on the grounds that the structure of the FHFA violates the separation of powers because the agency’s director is too insulated from presidential control. The court struck the language from HERA that only allowed the president to dismiss the FHFA director for good cause. Though the panel found the FHFA structure unconstitutional, they upheld the power of FHFA and Treasury Department to enter into the dividend agreement.
Additional reading:
FHFA letter to the 5th Circuit: