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Professor David Driesen: Justices' FHFA Ruling Is Small Step in a Dangerous Direction

Posted on Tuesday 6/29/2021
David Driesen

(Law 360 | June 24, 2021) In Collins v. Yellen, the U.S. Supreme Court invalidated for-cause removal protection for the director of the Federal Housing Finance Agency. In doing so, it sidestepped statutory restrictions on lawsuits brought by Fannie Mae and Freddie Mac shareholders and encouraged private parties to bring litigation aimed at weakening the independence of federal agencies.

President Joe Biden immediately took advantage of the ruling by dismissing the director of the FHFA, a Trump administration holdover.[1]

This litigation, however, appears unlikely to produce any relief to the government-sponsored enterprises' shareholders, who had brought suit. They had challenged the FHFA's third amendment to its preferred stock purchase agreement, which required the GSEs to pay surplus profits to the U.S. Department of the Treasury rather than private shareholders in light of the Treasury Department's previous bailouts of the GSEs.

By the time of oral argument, the director — now removed — had invalidated the third amendment.

A Very Liberal Approach to Justiciability

The Supreme Court has evinced a great deal of interest in deciding removal issues in recent years, allowing ideological plaintiffs and real ones to challenge for-cause removal protection even in cases where the president has not sought to remove the director of an agency, and where no case or controversy exists between the principal parties.

Indeed, both in Collins and its immediate predecessor, Seila Law LLC v. Consumer Financial Protection Bureau,[2] the court appointed an amicus to litigate the merits of the controversy, because the named parties were not adverse to each other with respect to the merits …

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