June 23, 2021

Supreme Court Says President Can Fire FHFA Director

The U.S. Supreme Court held that (i) the President of the United States can remove the Federal Housing Finance Agency ("FHFA") director for any reason, and (ii) the FHFA can continue to collect profits from Fannie Mae and Freddie Mac, for which it has served as a conservator since the aftermath of the 2008 financial crisis.

Collins v. Yellen raised questions as to (i) whether the structure of the FHFA was an infringement on the separation of powers with respect to the President's authority over executive agencies, and (ii) the validity of the 2012 agreement between the Treasury and the FHFA to exchange the profits of Freddie Mac and Fannie Mae for capital infusions from the Treasury.

As to the removal authority of the President, Justice Samuel Alito concluded that such authority cannot be limited to "just officers who disobey his commands." Justice Alito also stated that the removal power of the President "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."

With respect to the validity of the FHFA's 2012 agreement with the Treasury, Justice Alito held that the FHFA did not exceed its authority as conservator under the Housing and Economic Recovery Act of 2008 because Section 4617 of the Act enables the FHFA to act in the manner that it decides is "in the best interests of the regulated entity or the Agency."

According to reports following the ruling, President Biden intends to replace current FHFA Director Mark Calabria with "an appointee who reflects the administration's values."

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