President Biden fired Mark Calabria, director of the Trump Federal Housing Finance Agency (FHFA), immediately after the Supreme Court ruled on Wednesday that he could. While Mr. Calabria’s sacking is bad news for taxpayers, the decision by the Conservative majority in Collins v. Yellen
is a blow to the separation of powers provided for in the Constitution.
Congress created the FHFA amid the collapsing housing market to regulate government-sponsored underwater businesses Fannie Mae and Freddie Mac. We argued that the giants should be defeated, but the Bush Treasury and the FHFA put them under trusteeship. In exchange for its safety net, the Treasury received first preferred stock and quarterly dividends.
The Obama Treasury and the FHFA then decided to wipe out their profits. Shareholders in Fannie and Freddie have filed a lawsuit, arguing that the sweep exceeded the powers of the FHFA and that the 2008 Housing Act restrictions on the president’s power to remove the director violated the separation of powers.
The court unanimously rejected the first argument, and the six Conservative justices also overturned the removal restrictions. Judge Samuel Alito’s Majority Opinion Cites Court Decision Seila Law decision from the last term, which ruled that similar limitations on the president’s ability to remove the director of the Consumer Financial Protection Bureau (CFPB) violated the separation of powers.
At first glance, the Court does not seem to be innovating in constitutional matters. But as Judge Sonia Sotomayor writes in a dissent joined by Judge Stephen Breyer, the majority has grown considerably Seila Law, which was entrusted to sole directors of independent agencies which exercised “significant executive power” over private citizens.
Now the Conservative majority has decided that “the nature and extent of an agency’s authority is not determinative of whether Congress can limit the president’s power to remove his head” and that “the power of impeachment serves vital purposes even when the agent subject to impeachment is not the head of one of the largest and most powerful agencies, ”writes Judge Alito.
Liberal judges accuse Tories of rolling down a slippery slope to overthrow the Court Morrison v. Olson (1988) and Humphrey’s Executor (1935) previous. “The director of the FHFA imitates the independent lawyer whose land protection has been maintained in Morrison “, writes Judge Sotomayor.
It also argues that the powers of the FHFA are similar to those of the Federal Trade Commission in 1935 when the Court of Humphrey’s Executor confirmed the limitations on the president’s power to remove commissioners. Judge Elena Kagan separately criticizes the “departure” of the majority Seila Law as “free – useless to resolve the dispute here”.
Except that the progressives continue to float new independent agencies isolated from the control of the executive. CFPB candidate Rohit Chopra proposed an agency for the protection of public integrity whose director would be subject to a dismissal procedure similar to that of a federal judge. At least Mr. Biden sees the political utility of exerting control over the rulers.
The president sacked CFPB director Kathleen Kraninger on day one and now plans to replace Mr. Calabria “with an appointed person who reflects the values of the administration.” That is, a progressive who is relaxing underwriting standards again to boost home ownership among those priced out of the sizzling market the Federal Reserve has fueled.
Mr. Calabria, in his dying days, increased capital requirements and limited the risky mortgages Fan and Fred could acquire to protect taxpayers. Mr Biden’s housing czar is likely to reverse these reforms, so taxpayers are wary.
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Published in the print edition of June 26, 2021.