WASHINGTON. On Wednesday, the Supreme Court gave the president more power to sack the head of the agency that oversees mortgage giants Fannie Mae and Freddie Mac, ruling that the agency’s structure violates the separation of powers enshrined in the constitution.
In his letter to the majority of judges, Judge Samuel Alito said that, as the judges explained in last year’s case, “The constitution prohibits even ‘modest restrictions’ on the president’s powers to remove the head of an agency with one top official.”
The ordinance enables President Joe Biden to remove Mark Calabria, who was appointed head of the Federal Housing Finance Agency in 2019 by then President Donald Trump.
White House spokeswoman Jen Psaki told reporters after the Supreme Court ruling that the president would appoint a new head of the agency, but did not specify a timeline.
The judges sent the case involving the Federal Housing Finance Agency, set up during the 2008 financial crisis, back to a lower court for additional proceedings.
Shareholders in the two companies argued that the agency’s structure was unconstitutional and that judges should overturn a 2012 agreement that paid the companies billions to the government. This money is compensation for the taxpayer aid that Fannie Mae and Freddie Mac received after the 2008 financial crisis. Since then, the 2012 agreement has been superseded by a new one.
The judges refused to do what the shareholders asked and canceled the entire 2012 agreement.
“The structure of the FHFA violates the separation of powers, and we are returning for further proceedings to determine what remedy, if any, shareholders are entitled to obtain in their constitutional claim,” Alito wrote.
The judges noted that the agreement, which the shareholders complained about, was negotiated by the agency’s acting director, whom the president could remove from office for any reason. The judges said the finding “refutes the shareholders’ argument to cancel the agreement” as a whole.
The case is very similar to what the judges decided last year, involving a subsidiary agency of the Federal Housing Finance Agency, the Consumer Financial Protection Bureau, which is the government’s consumer watchdog agency. It was created by Congress in response to the same financial crisis.
In the bureau case, the court lifted congressional restrictions that the president could only fire a bureau director for “inefficiency, neglect, or malfeasance.”
The director of the Federal Housing Finance Agency, like the bureau chief, is appointed by the president and approved by the Senate for a five-year term. In the case of the agency, the director was removed by the president only “for a good reason.”
In a statement released after the ruling, Calabria, the current director of the Federal Housing Finance Agency, called the job a lifelong honor and said it respects the president’s decision and authority. He added that while the agency acted “quickly and efficiently to assist homeowners and tenants affected by the COVID-19 pandemic,” challenges remained and he wished his successor “all the best in addressing the remaining gaps in the housing finance system to remedy the situation. preserve homeownership opportunities for all Americans. “
Contributed by Josh Boak of the Associated Press for this article.