Administration Seeks Supreme Court Review of FHFA Exceeding Its Powers

The Administration petitioned the Supreme Court for review of an appellate decision finding that the Federal Housing Finance Agency (FHFA) exceeded its statutory powers when, in its capacity as Fannie Mae’s and Freddie Mac’s (the GSEs’) conservator, it agreed to pay all of the GSEs’ net worth to the Treasury Department in exchange for a bailout during the financial crisis.  However, the Administration agrees with and is not challenging a related decision which found that the FHFA was unconstitutionally structured.

In September 2019, the Fifth Circuit en banc ruled that the FHFA’s structure—with a single director who is only removable for cause—was unconstitutional, and struck down the for-cause removal provision.  The court also addressed an agreement entered into between the Treasury Department and the FHFA, acting in its capacity as the GSEs’ conservators.  The agreement provided that, in exchange for a bailout of the GSEs during the financial crisis, the GSEs would pay their entire net worth beyond a certain capital reserve amount to the Treasury into perpetuity.  The Fifth Circuit found that the FHFA’s decision to enter into the net worth sweep agreement exceeded its statutory powers.  WBK previously wrote about that decision here.

The Administration is now asking the Supreme Court to review the decision as to whether entering into the net worth sweep agreement exceeded the FHFA’s statutory powers.  However, both the Administration and the FHFA itself have taken the position that the FHFA’s structure was unconstitutional, and are therefore not seeking review of the part of the decision striking down the for-cause removal requirement.

The Supreme Court has not yet decided whether it will hear the case.