fired Trump Federal Housing Finance Agency (FHFA) director
immediately after the Supreme Court ruled Wednesday that he could. While Mr. Calabria’s dismissal is bad news for taxpayers, the conservative majority’s decision in Collins v.
strikes a blow for the Constitution’s separation of powers.
Congress created the FHFA amid the housing market meltdown to regulate the underwater government-sponsored enterprises Fannie Mae and Freddie Mac. We argued that the giants should be unwound, but the Bush Treasury and FHFA placed them under conservatorship. In return for its backstop, Treasury received senior preferred stock and quarterly dividends.
The Obama Treasury and FHFA then decided to sweep their earnings. Fannie and Freddie shareholders sued, arguing that the sweep exceeded the FHFA’s authority and that the 2008 housing law’s restrictions on the President’s power to remove the director violated the separation of powers.
The Court unanimously rejected the first argument, and the six conservative Justices also struck down the removal restrictions. Justice
majority opinion cites the Court’s Seila Law decision last term, which held that similar limitations on the President’s ability to remove the Consumer Financial Protection Bureau (CFPB) director violated the separation of powers.
On first look, the Court doesn’t appear to break new constitutional ground. But as Justice
writes in a dissent joined by Justice
the majority significantly broadened Seila Law, which was cabined to single directors of independent agencies who wield “significant executive power” over private citizens.
Now the conservative majority has decided that the “nature and breadth of an agency’s authority is not dispositive in determining whether Congress may limit the President’s power to remove its head” and that the “removal power serves vital purposes even when the officer subject to removal is not the head of one of the largest and most powerful agencies,” as Justice Alito writes.
The liberal Justices accuse the conservatives of careening down a slippery slope to overturning the Court’s Morrison v. Olson (1988) and Humphrey’s Executor (1935) precedents. “The FHFA Director mimics the independent counsel whose tenure protections were upheld in Morrison,” Justice Sotomayor writes.
She also argues that FHFA’s authorities are similar to those of the Federal Trade Commission in 1935 when the Court in Humphrey’s Executor upheld limitations on the President’s authority to remove commissioners. Justice
separately criticizes the majority’s “departing” from Seila Law as “gratuitous—unnecessary to resolve the dispute here.”
Except progressives continue to float new independent agencies insulated from executive control. CFPB nominee
has proposed a Public Integrity Protection Agency whose director would be subject to removal proceedings similar to that of a federal judge. At least Mr. Biden sees the political utility in exercising control over executive officers.
The President fired CFPB director
on day one and now plans to replace Mr. Calabria “with an appointee who reflects the administration’s values.” Meaning a progressive who will ease underwriting standards again to boost home-ownership among those priced out of the sizzling market that the Federal Reserve has stoked.
Mr. Calabria in his final days raised capital requirements and limited the risky mortgages that Fan and Fred could acquire to protect taxpayers. Mr. Biden’s housing czar is likely to undo these reforms, so taxpayers beware.
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Appeared in the June 26, 2021, print edition.