Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

Well, here's a new twist in this ongoing soap opera of a clusterfu*k for shareholders: Will the Supremes eventually whip out the bulldozer on CFPB (and subsequently FHFA) in the latest 3 Judge Appealate Panel ruling in the 5th Circuit? P.S. Elizabeth Warren and Elena Kagan will be upset I'm sure !

AA in yesterdays WSJ:. "Ruling Casts Shadow on Work of CFPB

WASHINGTON -- An appellate court ruling that the Consumer Financial Protection Bureau is unconstitutionally funded could undermine the agency's work over its nearly 12 years of existence, legal experts said, including rules that ensure smooth functioning of the $13 trillion mortgage market.

The decision, by a three-judge panel of the Fifth U.S. Circuit Court of Appeals in New Orleans, is the latest blow to the consumer financial regulator that has long been politically polarizing.

If upheld, the decision would impede the bureau's ability to operate effectively, said Joann Needleman, a partner at the law firm Clark Hill PLC in Philadelphia. "It's going to cause havoc, it's going to cause a lack of clarity and massive confusion," she said.

The ruling could upend an array of current regulations and also invite fresh challenges to new rules from the agency, including planned restrictions around checking-account overdraft fees and lending to small businesses.

Wednesday's decision said the CFPB's funding structure violated the Constitution's doctrine of separation of powers, which sets the authority of the three branches of government. Congress has the sole power of the federal purse, and the bureau's funding structure undercuts that authority, the court said.

Under the agency's funding method, the CFPB director sets a budget he or she determines is necessary to fund the agency's mission and the funding comes from the Federal Reserve, subject to certain caps. The cap for the fiscal year that began Oct. 1 is $750.9 million, according to a bureau budget document.

While the court said the bureau didn't exceed its authority in writing 2017 restrictions on payday lenders, it nonetheless tossed out the rule as a product of the agency's "unconstitutional funding scheme."

That line of thinking could undermine the bureau's past rulemaking efforts and any steps to enforce those rules, particularly in the Fifth Circuit, which includes Mississippi, Louisiana and Texas, though financial firms would likely have to raise individual challenges to those measures.

"A payday lender in Louisiana or Texas could go to a court and say, 'I want you to enjoin the CFPB from examining me,' and I don't know how a lower court could avoid agreeing with that given this opinion," said Adam Levitin, a law professor at Georgetown University.

The U.S. Chamber of Commerce and other industry groups sued the bureau in the Fifth Circuit last month over the agency's recent steps to combat potential discrimination in banking services. The groups argued in part that the initiative was funded unlawfully.

CFPB spokesman Sam Gilford disputed the reasoning behind Wednesday's ruling, saying other federal financial regulators are funded outside annual spending bills, as are programs such as Medicare and Social Security. "The CFPB will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers," Mr. Gilford said.

The bureau could ask all the active judges on the appeals court to reconsider the decision or it could seek review by the Supreme Court.

Republican lawmakers cheered Wednesday's ruling, saying they agreed that Congress erred when it carved out the consumer bureau from the annual appropriations process in the 2010 Dodd-Frank financial law, which created the agency.

"The CFPB has been an unconstitutional and unaccountable agency since its inception," Sen. Pat Toomey (R., Pa.), said. "As the Constitution requires, the people's representatives shall determine how their tax dollars are spent. I'm glad to see the court agrees."

The bureau has largely survived legal challenges to its creation, and it didn't halt its work while separate litigation challenging its constitutionality wound its way to the Supreme Court, culminating in a ruling two years ago. While that 2020 ruling found that the bureau's structure was unconstitutional because its director held too much unchecked power, the court held the solution was to allow the president to remove the director for any reason. The court rejected broader legal arguments that it should strike down the bureau altogether.

Some legal experts and former bureau officials said the current case could pose a bigger threat to the agency than the 2020 litigation because there is no simple remedy for altering the bureau's funding source, especially with the likelihood of split power in Washington after the midterm elections.

"There is no fallback position here," said John Coleman, a partner at the law firm of Buckley LLP and a former CFPB deputy general counsel. "If the Supreme Court strikes down the CFPB's funding mechanism, it will likely be up to Congress to decide how to fix it."

If Wednesday's appellate court ruling were applied to the bureau's mortgage rules, it could bring the housing-finance industry grinding to a halt, some industry officials said. Those rules, among other things, ease the ability of lenders to comply with legal requirements that a borrower can repay their mortgage. Without those rules, lenders would face heightened legal exposure that could make them averse to issuing new loans, some officials said."