Fannie Mae-No Politics (FNMA)

[navycmdr]

That means Calabria will have to accelerate Fannie Mae’s and

Freddie Mac’s exit from conservatorship,

and any other housing reforms,

if he wants to insulate them from reversal by an incoming Biden

administration in January.

SCOTUS CFPB Decision Means FHFA Director Can Be Removed As Well

June 29, 2020 - Dennis Hollier - [e-mail]

In a decision that may have dramatic implications for the Federal Housing Finance Agency, the U.S. Supreme Court on Monday ruled in Seila Law v. Consumer Financial Protection Bureau that the single-director structure of the CFPB is unconstitutional.

The 5-4 decision, written by Chief Justice John Roberts, finds that the so-called “for cause” provision, which limits the ability of the President to fire the bureau’s director, to be a violation of the principle of separation of powers. However, the court preserved the rest of the language in the Dodd-Frank Act that created the CFPB, ruling that the “for-cause” provision is “severable.”

The impact on the FHFA, which has a directorship structure very similar to the CFPB’s, is clear: According to Monday’s decision, the president can fire FHFA Director Mark Calabria at will – whether it’s the current president, or a potential President Joe Biden following the November election. That means Calabria will have to accelerate Fannie Mae’s and Freddie Mac’s exit from conservatorship, and any other housing reforms, if he wants to insulate them from reversal by an incoming Biden administration in January.

Lest there be any ambiguity about the implications of the Roberts ruling for the FHFA, the Chief Justice takes direct aim at Humphrey’s Executor, the case that initially permitted the creation of independent agencies like the CFPB, the FHFA, and the Federal Trade Commission.

Roberts claims that the justices in that case limited the “for-cause” provision to agencies with multi-member boards whose members may have been appointed by presidents of both parties. Perhaps more importantly, Monday’s decision appears to further limit the constitutionality of removal protections to agencies “that perform legislative and judicial functions.”

In other words, agencies like the CFPB and the FHFA, which exercise powers that Roberts and the conservative justices consider executive in nature, are not covered by the principles in Humphrey's.

In a dissent joined by the other liberal members of the court, Justice Elena Kagan argued that the Supreme Court has frequently allowed legislation that limits the president’s power to remove agency heads, provided both Congress and the Executive Branch agree to it.