(AP) — The Supreme Court
ruled on Wednesday that the structure of the agency in charge of mortgage giants Fannie Mae
and Freddie Mac
violates the Constitution's separation of powers principles.
The Supreme Court remanded the case involving the Federal Housing Finance Agency
, which was established during the 2008 financial crisis and oversees Fannie Mae and Freddie Mac, to a lower court for further proceedings.
Shareholders of the two companies had argued that the FHFA's structure was unconstitutional and that the Supreme Court should set aside a 2012 agreement under which the companies paid the government billions of dollars in compensation for the taxpayer bailouts received by Fannie Mae and Freddie Mac following the 2008 financial crisis.
In their decision, the justices did not go so far.
“The FHFA’s structure violates the separation of powers, and we remand for further proceedings to determine what remedy, if any, the shareholders are entitled to receive on their constitutional claim,” wrote Justice Samuel Alito for the majority of the court.
The case is similar to one decided by the Supreme Court last year concerning the FHFA's companion agency, the Consumer Financial Protection Bureau, which is the government's consumer watchdog agency and was established by Congress
in response to the same financial crisis.
The court overturned congressional restrictions that stated the president
could only fire the bureau's director for "inefficiency, neglect of duty, or malfeasance in office" in the case involving the bureau.
The director of the FHFA, like the bureau's leader, is nominated by the president and confirmed by the Senate
to a five-year term; however, the director of the FHFA is only removable by the president "for cause."
Collins v. Yellen, 19-422 and Yellen v. Collins, 19-563 are the two consolidated cases decided by the court.