Corporate Accountability

Collins v. Mnuchin; Mnuchin v. Collins

In Collins v. Mnuchin, the Supreme Court is considering a constitutional challenge to the leadership structure of the Federal Housing Finance Agency, an agency created in 2008 to help preserve the security of the American housing finance system.

Case Summary

The effects of the 2008 housing crisis decimated the American economy. And at the height of the crisis, nearly half of the nation’s mortgage debt was owned or guaranteed by Fannie Mae and Freddie Mac. But to compete with Wall Street and increase profits, Fannie and Freddie had over-invested in risky mortgages and securities, ultimately requiring billions in federal bailouts. These practices were made possible by the lax oversight of a weak and politically dependent government regulator. To correct that problem, Congress established a new agency to oversee Fannie and Freddie, the Federal Housing Finance Agency (FHFA). Congress further provided that the FHFA’s director could be fired by the president for good cause but not for policy disagreements alone—ensuring accountability while shielding the agency from undue political pressure aimed at weakening oversight.

In Collins v. Mnuchin, the FHFA’s leadership structure was challenged in the U.S. Court of Appeals for the Fifth Circuit as an unconstitutional infringement on presidential power.  In a 9-7 decision, the en banc Fifth Circuit held that the leadership structure of the FHFA violates the separation of powers because, according to the majority, the President has less ability to influence the policies of an independent agency led by a single Director than he does the policies of independent agencies led by boards or commissions.  Judge Higginson’s dissent described “these assertions [as] little more than debatable empirical claims—hardly the firm footing judges need to take the bold step of declaring Congress’s agency design choices unconstitutional.”

Following its decision in Seila Law LLC v. Consumer Financial Protection Bureau (CFPB), in which the Court held that the leadership structure of the CFPB violates the separation of powers, the Supreme Court granted certiorari in Collins v. Mnuchin.  CAC filed an amicus brief in support of the Supreme Court-appointed amicus assigned to defend the FHFA’s constitutionality.

In our brief, we first explain that the Constitution gives Congress broad power to shape the structure of federal agencies and to give their leaders a degree of independence from presidential policy control.  As we show, the Framers deliberately provided such flexibility to Congress so that future lawmakers could respond effectively to new and unforeseen national crises.  Our brief then describes how Congress exercised this discretion amidst the housing crisis of 2008, concluding that a new regulator with some degree of independence was needed to help preserve the security of the housing finance system.

Finally, our brief explains that the Supreme Court has long recognized that the heads of regulatory agencies may be shielded from firing without cause.  Although the Supreme Court held in Seila Law that a for-cause restriction on the President’s power to remove the CFPB Director violates the separation of powers, that case does not dictate the outcome here.  The FHFA is materially different from the CFPB for two reasons.  First, the FHFA does not wield regulatory or enforcement authority comparable to the CFPB, and is instead focused on the regulation of 13 Government-sponsored enterprises alone.  Second, unlike the CFPB, the FHFA has no authority to regulate purely private actors; rather, it regulates entities like Fannie and Freddie that were created by Congress, implicitly subsidized by Congress, and regulated by Congress.  For these reasons, Congress can choose to impose a for-cause restriction on the President’s power to remove the FHFA’s Director, and the Court should reverse the Fifth Circuit’s decision.

Case Timeline

  • January 18, 2019

    CAC files amici curiae brief on behalf of Members of Congress

    5th. Cir. Amici Brief
  • January 23, 2019

    The court hears arguments en banc

  • September 6, 2019

    The en banc Fifth Circuit issues its decision

  • October 30, 2020

    CAC files amicus curiae brief

    Sup. Ct. Amicus Br.
  • December 9, 2020

    The Supreme Court will hear oral argument

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