Supreme Court Hears an Argument on FHFA’s Structure

On December 9, the Supreme Court heard a case, Collins v. Mnuchin, that challenges the constitutionality of the Federal Housing Finance Agency’s (FHFA’s) structure and calls for voiding an agreement between the agency and the U.S. Department of the Treasury (Treasury) over generated revenue by Fannie Mae and Freddie Mac (the Government-Sponsored Enterprises, or GSEs). The GSEs  have been under the FHFA conservatorship since 2008.

The plaintiffs argued that the FHFA’s structure is unconstitutional, stating that the President cannot remove the FHFA director ahead of their term’s expiration unless it is “for cause.” The plaintiffs also called for voiding an agreement between the FHFA and Treasury stipulating that Treasury would provide up to $100 billion in funding for the GSEs in exchange for compensation that included stock, or dividends tied to the GSEs’ net worth via a 2012 amendment and priority over the other shareholders in reclaiming their investments. An analysis from the American Banker notes that while it is unclear when the Supreme Court will issue a ruling for Collins v. Mnuchin, the general expectation is the Court would hand down its decision before summer 2021.

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