Corporate Accountability

Collins v. Mnuchin

In Collins v. Mnuchin, the United States Court of Appeals for the Fifth Circuit 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 is being challenged as an unconstitutional infringement on presidential power. CAC filed a friend-of-the-court brief on behalf of members of Congress defending the agency’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 strong and independent new regulator was needed to help preserve the security of the housing finance system. Finally, our brief demonstrates that Congress had every right to make this choice: the Supreme Court has long recognized that the heads of regulatory agencies may be shielded from firing without cause, and the FHFA is materially indistinguishable from the agencies addressed in the Court’s prior decisions. Thus, the agency’s leadership structure is constitutional.

Case Timeline