Courthouse Steps Decision Webinar: Collins v. Yellen

Federalism & Separation of Powers and Litigation Practice Groups Teleforum

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On June 23, 2021, the U.S. Supreme Court in Collins v. Yellen held 7-2 that 1) because the Federal Housing Finance Agency did not exceed its authority under the Housing and Economic Recovery Act of 2008, the anti-injunction provisions of the Recovery Act bar the statutory claim brought by shareholders of Fanne Mae and Freddie Mac; and 2) the Recovery Act’s structure violates the separation of powers.

Justice Alito wrote the majority opinion. Justice Gorsuch joined the opinion as to all but Part III–C, Justices Kagan and Breyer joined as to all but Part III–B, and Justice Sotomayor joined as to Parts I, II, and III–C. Justice Thomas filed a concurring opinion. Justice Gorsuch filed an opinion concurring in part. Justice Kagan filed an opinion concurring in part and concurring in the judgment, in which Justices Breyer and Sotomayor joined as to Part II. Justice Sotomayor filed an opinion concurring in part and dissenting in part, in which Justice Breyer joined.


  • Jason Levine, Partner, Alston & Bird
  • Jeffrey McCoy, Attorney, Pacific Legal Foundation

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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.


Event Transcript



Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group Teleforum calls, become a Federalist Society member today at



Guy DeSanctis:  Welcome to The Federalist Society’s webinar call. Today, July 2, we discuss a Courthouse Steps Decision, Collins v. Yellen. My name is Guy DeSanctis, and I’m assistant director of practice groups at The Federalist Society.


As always, please note that all discretions of opinion are those of the experts on today’s call.


Today, we are fortunate to have with us Jason Levine, Partner, Alston & Bird, and also Jeffrey McCoy, Attorney, Pacific Legal Foundation. Throughout the panel, if you have any questions, please submit them through the question-and-answer feature so that our speakers will have access to them for when we get to that portion of the webinar.


With that, thank you for being with us today. Jason and Jeffrey, the floor is yours.


Jason Levine:  Thank you very much. I think I drew the short straw and I’m leading off. Thank you everyone for joining us this afternoon, the Friday before July 4th weekend. We’re diehards, and we appreciate it. I’m Jason Levine. As Guy said, I’m a trial lawyer and a litigation partner at the law firm Alston & Bird, based in Washington DC. Jeffrey and I have something specific in common. We both filed amicus briefs in support of shareholders in the Collins v. Yellen case, which the Supreme Court decided last week. I actually filed two briefs for two different amici at different stages of the case.


So, for today, I’ll provide some general background about the case and discuss the merits issues, and Jeffrey will then talk about the Court’s decision regarding remedy, which is actually quite significant. I should note that my views are my own and I’m not speaking on behalf of my law firm or any of its clients. So, let me give you some background about Collins v. Yellen to begin with.


The case is one of many that was filed across the country by shareholders of Fannie Mae and Freddie Mac in the wake of actions the federal government took following the financial crisis of 2008. Congress, as you may know, created the Federal National Mortgage Association, which we call Fannie Mae, in 1938, and it created the Federal Home Loan Mortgage Corporation, Freddie Mac, in 1970. Both of those entities buy mortgages, pool them into mortgage-backed securities, and then sell them to investors. Their combined portfolios are roughly $5 trillion.

Both are what’s called government-sponsored entities. They operate under congressional charters. Yet, they’re also private, for-profit companies that are incorporated in Delaware and Virginia, respectively, and are owned by private shareholders. So, when the economic crisis of 2008 hit, Congress enacted a Housing and Economic Recovery Act, HERA. And HERA did many things, but two aspects of it are most important for purposes of the case.


First, it authorized the Treasury Department to buy Fannie Mae and Freddie Mac stock if it concluded that doing so would benefit the markets. Second, HERA created a new federal agency, the Federal Housing Finance Agency, as a new regulator for Fannie Mae and Freddie Mac. HERA provided that the FHFA would have the power under certain circumstances to act as either a conservator or a receiver for the companies.


In terms of its leadership, because the case does involve separation-of-powers issues, are the FHFA is lead, pursuant to HERA, by a single Senate-confirmed director who’s appointed by the president. Now, the director has a five-year term, and HERA provided that the director can only be removed by the president for cause. That becomes important to the Collins v. Yellen decision.


As I mentioned, HERA empowered the FHFA to act as either the conservator or the receiver of Fannie Mae or Freddie Mac in order to either reorganize or rehabilitate them as a conservator or to wind up their affairs as a receiver. In either capacity, HERA provides that, then, the FHFA succeeds to the rights of either of the companies. And it can take any authorized action—that very important qualifier—any authorized action that it deems to be in the best interest of the companies or, in a separate portion of HERA, in the best interest of the FHFA itself.


In September 2008, the FHFA director appointed the FHFA as conservator of Fannie Mae and Freddie Mac. Treasury then bought stock in the companies and committed to providing up to a $100 billion in capital as a backstock for them, in exchange for which the Treasury received a million shares of special senior-preferred stock in both companies, which gave Treasury several entitlements.


It gave them a liquidation preference. It gave them warrants to buy up to 79.9 percent of the shares of common stock at a nominal price. It gave them a quarterly commitment fee and quarterly dividends equal to 10 percent of the liquidation preference. Treasury later increased its capital commitment. And interestingly, it chose 79.9 percent as the level for the warrants because it determined that at 80 percent, the federal government might have to reflect Fannie Mae and Freddie Mac's portfolio and its, possibly, upward-of-$5-trillion contingent liability in the event of massive defaults on the federal balance sheet, which of course was not politically viable.


So, what happened between 2008 and 2012, which really give rise to the litigation – it’s pretty controversial. The government portrays the conservatorship of the companies as being necessary for their survival and their drawdowns, ultimately, of $187 billion from Treasury’s capital commitment as proof that they were fragile. That, though, was not really accurate. The situation was largely because the FHFA forced the companies to incur over $300 billion in non-cash accounting charges after they went into conservatorship. In 2008, they also had $700 billion in unencumbered assets they could’ve collateralized if they had to, and there was also secure lending facility set up by the Treasury.


But Treasury and the Federal Reserve declined to make that facility available to the companies as a policy matter, partly as an effort to force them into conservatorship. This isn’t just a conspiracy theory. Former Fed chairman, Ben Bernanke, talks about these policy machinations in his book, The Courage to Act, and so does former Treasury Secretary Hank Paulson in his book, On the Brink. And I talk about this a bit in the Amicus 35 file for Timothy Howard, who’s a former chief financial officer of Fannie Mae.


But let me just say that the factual record shows there was a calculated effort over many years to, basically, nationalize Fannie Mae and Freddie Mac. By 2012, the companies had begun to return to profitability. They were generation billions of dollars in net revenue, from which they repaid Treasury. And as they emerged into consistent profitability, it was at this point the Treasury and FHFA amended their agreements to replace the 10 percent dividend formula with a new one that basically required the companies to pay the Treasury their entire net worth in excess of a small capital reserve.


This is a net worth sweepthat’s the catchphrase for the litigationwhich, in practice, meant that Fannie Mae and Freddie Mac would never be able to emerge from conservatorship because their capital would always be limited to the small reserve. And the shareholders would also never receive any upside of their investments, which, needless to say, cratered as a result of net worth sweep.


From 2012 to 2016, for example, which is when Collins v. Yellen was first filed as Collins v. Munching, the companies paid Treasury over $126 billion beyond what they would have paid under the 10 percent dividend formula, totaling $192 billion. Now, after Collins v. Yellen was argued, interestingly, in January 2021, the net worth sweep was suspended and replaced by a different formula until the companies build up a larger capital reserve. So, they are possibly on a trajectory to build a large realistic capital reserve.


So, as I mentioned, after the net worth sweep was put in place, share prices cratered, and it was at this point that litigation ensued. Many investors, individuals, and institutions, including hedge funds, filed lawsuits against federal government, claims for uncompensated takings, illegal exactions also were filed in the US Court of Federal Claims, APA and contractual claims were filed in the DC circuit and elsewhere, and three shareholders, including Mr. Collins, filed suit in the District Court of Texas in 2016 in what was initially Collins v. Munching and then became Collins v. Yellen.


So, two of the claims filed by Collins and other shareholders became an issue in the Supreme Courttwo key claims. First, was a shareholder’s claim that the FHFA had exceeded its statutory authority under HERA as the company’s conservator through the net worth sweep, that the net worth sweep essentially went too far. Second, they claimed that because the FHFA is led by a single director removable only for cause, that the agency structure is unconstitutional under the separation of powers.


So, the shareholders ask for declaratory and injunctive relief and, most importantly, for an order setting aside the net worth sweep and compelling the Treasury to repay Fannie Mae and Freddie Mac all the dividend payments that they had made under the net worth sweephundreds of billions of dollars. Now, the District Court dismissed the statutory claim and granted so many judgment in favor of the FHFA on the constitutional claim.


The Fifth Circuit, ultimately en banc, reversed the dismissal of the statutory claim and held that the FHFA does, through its structure, violate the separation of powers. But then, the Court held that the remedy for this was merely to sever the for-cause removal provision. It didn't set aside or reverse the net worth sweep. It did not provide any retrospective relief. So, both sides sought Supreme Court review.


The Court, last week, issued a fractured set of opinions, the ultimate upshot of which was to deny the shareholders’ claim against HERA’s validity, to uphold their constitutional claim regarding the structure of the FHFA, but then to remand regarding the remedy, declining to order any relief. The lead opinion was written by Justice Alito, and was joined in full by Chief Justice Roberts and Justices Thomas, Kavanaugh, and Barrett. Notably, Justice Gorsuch, joined except as to the portions of the opinion that addressed the remedy, he had his own separate views about remedy, which Jeffrey will talk about in a couple of minutes.


In respect to the merits, let me talk about what the Court did on the two key claims. First, the Court held that the statutory claim challenging HERA should be dismissed. HERA has a provision that limits, very severely, judicial review of acts taken by the FHFA as a conservator or a receiver. It makes such actions essentially unreviewable by courts unless requested by the FHFA director or elsewhere authorized by the statute. So, this left open the possibility that relief could be available only if the FHFA exceeded its authority as a conservator or a receiver. But the Court concluded that the FHFA did not exceed its authority.


As a conservator, the Court reasoned FHFA’s mission was to rehabilitate Fannie and Freddie, to put them in a sound and solid condition. One might wonder how the FHFA could have done this given its agreement to the net worth sweep that basically prevented the companies from ever building up the reserves necessary for soundness and solvency. The Court’s answer to this was to distinguish the FHFA conservatorship from a typical one and focus instead on HERA’s authorization for FHFA to act in the best interests of itself in addition to the best interests of the regulated company.


So, the Court found that the net worth sweep, even though it was detrimental in some ways to the company’s finances and clearly to its shareholders, was ultimately designed to serve the interests of the FHFA and also, the Court reasoned, for public by bringing vast sums of money into the Treasury and reducing what the Court saw as a risk of another possible deficit situation.


The Court, though, did not address what I believe to be the artificiality of that deficit back in 2008. The Court also rejected the shareholders’ contention that the net worth sweep wasn’t in the best interests of the FHFA or the public, obviously. Most importantly, the shareholders also claimed that the net worth sweep wasn’t really a step on the path to conservatorship so much as a step on the path to liquidation and was essentially a receivership.


But the Court rejected that argument, finding that nothing was preventing Fannie or Freddie from continuing to operate in the markets, which they did do. And the Court actually found that the companies’ net worth grew to over $200 billion from 2012 to 2016. Now, of course, this was despite the net worth sweep, which basically decimated the value of the shareholders’ stock and reduced the net worth of the companies despite their improving financial condition.


My personal view, for what it’s worth, is that the Court made several missteps in its analysis. For one thing, it really disregarded the shareholders’ allegations in their initial complaint, which are to be taken as true on a motion to dismiss concerning the actual financial status of Fannie Mae and Freddie Mac, and also really disregarded the reasoning and the actions behind the scenes of Treasury and FHFA in connection with the conservatorship, which one could see as showing that it was not necessarily in the best interests of either the companies or the public.


It also seems to me that the Court gave short shrift to the shareholders’ argument that the net worth sweep was outside of the proper bounds of FHFA authority as a conservator, which one might say was tacitly acknowledged by the reversal of the net worth sweep in January 2021 after the case was argued.


Now, there are some implications that are significant to the federal government’s ability, which the Court ratified, to essentially force these heavily regulated, but still private companies, into effective total subservience to the government by forcing them to take federal support funds and then using that as a lever to extract their assets later and potentially, as at least initially, potentially in perpetuity, which a net worth sweep did. It didn't have an expiration date upfront.


Basically, Fannie Mae and Freddie Mac were too big to fail, but the government effectively decreed that they were also too big to thrive. And that’s the situation that they find themselves in today.


Now, in terms of the constitutional claim, the Court quickly rejected a few arguments made by the government that the shareholders lacked standing to sue. The Court found that they had standing, that the January ’21 change to the net worth sweep mooted the constitutional claim. The Court said it did not, it only affected the relief -- that a particular clause in the HERA statute called a succession clause, where HERA exceeds to the rights of the companies, bar their constitutional claim. The Court found it did not. And, lastly, the constitutional claim was barred by the fact that the net worth sweep was adopted when FHFA had an acting director. The Court said no. That wasn’t correct either.


Then, most importantly, the Court held that the for-cause restriction on the president’s authority to remove the director violated the separation of powers. But the Court based its actual decision on a pretty simple application of its reasoning from last term’s decision in the Seila Law case, where it held that the structure of the CFPB was unconstitutional for, essentially, the same reason. There, there’s a single director, but that person could be removed only for inefficiency, neglect, or malfeasance.


In both cases, the Court concluded that the restriction of the president’s removal authority was too great and concentrated too much power in a single actor insulated from presidential control. Now, interestingly, in Collins v. Yellen, in the wake of the Seila Law case, the federal government declined to defend the constitutionality of the FHFA structure, so the Court appointed an amicus curiae, Professor Aaron Nielson, to make that argument, which the Court then rejected.


The amicus really made four arguments. First, he argued that Congress should have greater power to restrict the president’s removal authority as to the FHFA than as to the CFPB because the FHFA’s power is more limited. Now, the Court didn’t resolve this, but it concluded that it would not be dispositive of the constitutional issue, even if it were true. Rather, the Court reaffirmed that the removal power is fundamental to the president’s control over subordinates as the head of the executive branch and to keeping the executive accountable to voters, really, regardless of the parameters of the power of the agency.


Second, Professor Nielson claimed that Congress can restrict the removal of the FHFA director because when the agency becomes a conservator or a receiver, it effectively becomes a private party and is no longer acting as an executive agency. The Court disagreed there as well, concluding that the FHFA is always acting as an executive agency and that its authority, even as a conservator, still stems from HERA, which is a federal law.


Third, Professor Nielson sought to distinguish the FHFA by pointing to the public nature of the entities it regulates, which have congressional charters and serve public objectives. So, he argued, in effect, the FHFA is regulating quasi-governmental entities, which diminishes separation of powers concerns. The Court disagreed once again because, in its view, the removal powers serves important constitutional purposes regardless of the nature of the regulated entities.


And last, Professor Nielson argued that the for-cause removal restriction is only modest tenure protection and, therefore, is unconstitutionally problematic. But the Court rejected that, as well, based on Seila Law, where it concluded that the Constitution prevents even “modest restrictions on the president’s authority to remove the head of an agency with a single director.”


So, the Court’s analysis on the separation of powers issue was fairly conclusory in the opinion, which was pretty lengthy. But the decision was predicated almost entirely on Seila Law. The Court has now, in rapid succession between that case and Collins, set a meaningful precedent on agency separation-of-powers issues relating to agency heads and removal authority.


For example, the Court declined to have its analysis turned under particular attributes of the agency and instead drew a bright line regarding removal authority. However, as pleased as the shareholders may have been that they prevailed on their constitutional claim in substance, one can only imagine their disappointment at not receiving any concrete remedy from the Court. And with that, I’d like to turn things over to Jeff to discuss the remedial issues. Thank you.


Jeffrey McCoy:  Thank you, Jason. And as Jason said, likewise, all what I’m going to say is my opinion and not necessarily the opinion of Pacific Legal Foundation or any of our clients. But, yes, as Jason said, the remedy -- the plaintiffs, although they succeeded, may not be satisfied with the remedy.


We’ll start back with what they asked for at the beginning of this case. They asked for the net worth sweep to be set aside, for the agency to be enjoined, and for a return of all of the profits that went to Treasury during the time of the net worth sweep. As Jason said, after this was argued, the agreement was changed, and the net worth sweep was ended, which meant that there wasn’t -- no perspective relief was available. But the Court still looked at whether there was retrospective relief and specifically whether Court could order all of the return of all the funds that were taken.


One key part of this was, as Jason mentioned, when the net worth sweep was adopted there was an acting director. And the Court noted that the removal restrictions did not apply to the acting director. And so, therefore, the decision to adopt the net worth sweep wasn’t unconstitutional because the president at that time could remove for any reason the acting director.


However, they distinguished that from the implementation. So, while the agreement -- or the modification of the agreement -- and the net worth sweep was adopted by the acting director, later on, there was a director that was appointed and that director implemented it, in effect, actually making the orders to transfer the funds.


With that, the Court said, “Well, because of the director at that time, when he was implementing, that was not removable. That was the violation, the constitutional violation.” However, the Court then went and said, “Well, what you have to do -- the lower court, on remand, is going have to decide -- is whether there actually was any harm because” -- and this is where the Court, in my opinion, kind of went to a counterfactual -- they said, “Well, yes, while the director was insulated from the removal power, did that really affect the decision to implement the net worth sweep? Because, if the director would have done it even if he was removable and the president agreed, then there was really no harm and there was no need to return any of the funds.”


And so, the Court remanded for the lower court Fifth Circuit -- or even the District Court -- to decide whether or not the plaintiffs in the case can demonstrate that there was some harm as a result of the removal provision or whether all the decisions would have been the same. Justice Gorsuch, as Jason mentioned, dissented from this part of the opinion.


Essentially, it said -- well, one thing is that the Court and their justification of this is that they said that the Court -- that the director -- did not act unlawfully. Unlike an appointments clause challenge, for example, where if there is someone who is not lawfully appointed, who is exercising executive authorityunlawfully exercising that executive authoritythen that person does not have the power to make those decisions.


But here they said, “Well, the director was appointed and confirmed by the Senate, so was acting lawfully. The only problem was the removal powers.” So, the action of implementing was not unconstitutional, necessarily, because they had the power. It was just they were insulated. That’s where they justified that you have to see if there was any harm, if the actions were affected by the inability to be removed.


Justice Gorsuch disagreed with this interpretation of what went on -- basically said when an officer acts, there’s not -- while you can sort of see a distinction between action not authorized under the appointments clause, but action when you’re not removable. But he said either way, you’re taking action that is unconstitutional.


And, so, it doesn’t matter about whether -- yes, there was executive power being – action being took or exercised by the director. The fact of the matter was, at the time, the director was not removable, which was a violation of separation of powers, and so any of those actions were necessarily unconstitutional. Then, he said straightforward, “The Administrative Procedure Act says that when there’s a decision made that is contrary to constitutional right, it’s set aside.” He said, “May be subject to some equitable principles, but other than that is that all those decisions, including all of the funds that were transferred, should have been set aside and returned as a result.”


Justice Thomas, while he did concur in full, he clarified his view on all of this and essentially said that he would almost never find any harm for removal position, from a removable clause violation because he said, essentially, that -- “Well, the president can always fire the head of the agency here. Just because the statute says that the president couldn't fire the director doesn’t mean that is unconstitutional. So, if the president wanted to fire the director at any time, then absolutely, the president could have done that.”


And so, there’s no harm because everybody knew -- essentially, he’s arguing that everybody knew that it was unconstitutional, so no actions were altered as a result of this because -- and he did point that courts have never held that there was a violation or enjoined a removal of any officer. He did say that, maybe, there’s a possibility that if there was some misunderstanding about the power of the president to remove, that maybe the decisions would be arbitrary and capricious under the Administrative Procedure Act. But he said that wasn’t the argument here. So, really, while he joined the opinion in full, in his view, he finds it almost impossible for the shareholders here to find any harm because he thinks that none of the actions taken by the director in implementing the net worth sweep changed anything, even though the statute had one line about only being removable for-cause.


I think one of the things -- or one of the arguments -- that the shareholders made on the remedy was about standing and that, in order to bring a suit, you have to have some injury that can be remedied. And as Jason said, the Court did find standing here. It is a little interesting how they found standing. They said that there was an injury, but they said there was an injury because of an alleged violation and doesn’t have to actually be tied, necessarily, to the statutory -- or even the actions -- of the director.


Which, to me, seems a little counterintuitive because, I mean, obviously, the shareholders --they didn't go through this whole processgoing all the way to the Supreme Courtjust to be told, “Hey, you’re right. He is removable.” They had what they believe were actual injuries in terms of their stock prices. Jason gave some good background on the stock prices. And the companies, obviously, are in a much different situation as a result of this net worth sweep. But ultimately, they didn't get anything.


So, I think there is a little bit of a disconnect between the standing -- the finding that the shareholders have standing and the remedy. It is possible that the lower court will find that there’s some harm, but I don’t know exactly. I think Justice Thomas makes some good points about how you actually prove any of this. It’s not like there were public statements made. At least, I don’t think that there was any public statements made.


The president at the time said, “Well, I would fire the director of HERA, but I can’t. So, I guess we’ll just have to put up with it.” That was one of the hypotheticals that the Court said would cause harm. But I don’t think there’s anything to that effect. And so, it would be almost, I think, impossible for themthe shareholdersto prove any harm on remand, which ultimately, it means that they did not get any -- they aren’t going to get any relief from what they want.


Possibly now, maybe the litigation did lead to changing of the agreementthe Fourth Amendment to this agreement. But that wasn’t necessarily as a result of the decision today -- or last week. I think that’s briefly what I had to say. Jason, did you want to add anything, either on the remedy or on the merits, before we take questions?


Jason Levine:  No. I would add one thing and that is that one cannot think this is coincidental. Right after the Supreme Court issued its decision, President Biden fired the director of the FHFA and replaced him with a new interim director. You can see the practical effect that the Court’s decision had, although that doesn’t necessarily help the shareholders very much. I suppose with that, if there are any questions, we’re happy to take them. I guess they can be put in the chat.


Guy DeSanctis:  Yes. If there are any questions, please add them to the chat or the Q&A section on Zoom. Is there anything else either of you would like to discuss while we wait for questions?


Jeffrey McCoy:  Yeah. I will say, when talking about the remedies, the Court looked at Seila Law, which had a different procedure because it was -- the agency in that case brought the case. But there is some distinction between appointments clause violations and removability violations. There is a question that, under the lower court -- in many cases about lower courtsabout ratificationbecause, ultimately, a lot of these cases come up where they rule the regulations adopted by someone who is not an officer under the constitutional meaning and does not actually have the legal authority to adopt a rule.


But oftentimes, the secretary of that agency will ratify it. And there is an ongoing conversation among lower courts of whether that is sufficient, whether just, basically, the secretary of the agencythe head of the agencybasically says, “Okay, yeah. Even though this person was an employee, I adopted in full on.” Whether that’s sufficient remedy -- I do think that this is going to be an ongoing issue, which was not necessarily -- was not involved in this case but I do think is a potential issue in future cases.


Jason Levine:  Jeff, I see we do have a question, which I think is initially, at least, directed to you. Does this preclude shareholders from ever getting relief?


Jeffrey McCoy:  Yeah. I think so. I think it will be very hard -- the Court left it open, but they said they basically had to show that the director would have acted differently had he known he was removable. And I don’t know what evidence you’re going to bring to that absent an actual statement. So, I think that they ultimately won’t get relief. And as I said, Justice Thomas doesn’t think that they could ever because he -- and I think maybe he’s signaling in future cases -- that the president should feel bound by these removability restrictions and should assert his or her -- a future president should assert his or her authority to fire an agency head that they disagree with.


Jason Levine:  And I have a comment on this also. It may very well be, as Jeff is saying, that the shareholders won’t get relief in this particular case. However, there is other litigation still going on. I haven’t checked on it within the last few weeks, but there is still takings and a legal-exaction litigation pending in the Court of Federal Claims, which could result in relief for shareholders. There have been a lot of discovery battles there that have been very interesting. That case is not over.


There was also -- although the decision the DC Circuit on contract claims was in the shareholders’ favor and was quite limited -- actually, at this point, I guess, two years ago -- there was a remand there for some consideration of remedy by the District Court in DC. So, there’s an outside chance that there might be some remedy there that’s tangible in nature separate and apart from what happened in Collins v. Yellen. But I think that either of those situations are a ways away from a final decision.


Jeffrey McCoy:  The next question. Does the director being fired immediately upon this ruling add credence to the idea that the director might have acted differently without the protection of for-cause firing?


Jeffrey McCoy:  Maybe. I do think it does seem that President Biden was waiting for the word that he could fire. In order to fire -- I think there’s probably many different political reasons for doing that, especially because these are five-year terms. So, ultimately, wanting to get his person in is probably a sufficient reason for that. I do think that it kind of undermines Justice Thomas’s view that presidents -- everybody knows that this could happen, so no one acts like it. I do think that it kind of shows that the president was waiting for a word.


But I’m not aware of any statements that the president made in the firing that would relate, basically – said, “I’m firing because of the actions.” There’s many different reasons that people fire agency heads. And so, I think it’s going to be -- presumably, it will the client’s burden to prove this on remand and that will make it even harder to meet that burden.


Jason Levine:   And the director of the FHFA, Mark Calabria, was something of a political lightning rod as well. He had been a congressional staffer who had written extensively about Fannie Mae and Freddie Mac. He had some pretty specific views about them, which he didn't ultimately get to implement through the FHFA directorship. So, that may have been a factor in President’s Biden decision also.


Jeffrey McCoy:  Next question. Does this mean that Fannie and Freddie won’t be privatized? Jason, you know a lot more about the background.


Jason Levine:   Well, I would say the idea of privatizing Fannie and Freddie has been floating around for a long time. It’s never really gone anywhere. There was -- gosh, before the pandemic, I guess, in 2019, a white paper that was prepared about the proposition and some groundwork being laid by Director Calabria in that direction. But it never became concrete and never advanced. I would say that it would be a long time, if ever, before Fannie and Freddie are really privatized.


Right now, they’re still in the process of trying to build up capital, having been relieved of the net worth sweep just a few months ago. So, even if that were a possibility from a regulatory perspective, chances are that, as a practical matter, it would still be several years before they could even get themselves into a financial position where it would be feasible. My bet would be, if they are ever privatized, it won’t be for years. That’d be my hunch.


Jeffrey McCoy:  Next question. To either speaker, can you discuss whether the director had significant executive authority sufficient to meet Seila standard, or is Justice Kagan in the wrong. Jason, you discussed the merits   so I’ll let you take that first.


Jason Levine:   Yeah. Well, honestly, I didn't think too much about Justice Kagan’s dissenting opinion. But I would say that, certainly, there’s a reasonable argument to be made that the FHFA director did have significant executive authority. I mean, yes. The FHFA only oversees two entities, Fannie Mae and Freddie Mac, but they’re huge entities. They’re huge entities that have $5 trillion or more worth of mortgage debt that they’re involved with and they touch the lives one way or another of tens of millions of Americans.


So, you can see where it’s not unreasonable to conclude that there is significant executive authority there given the fact that there’s so much public involvement by the regulated entities. And the FHFA does have the ability to conduct investigations, convene hearings, essentially control and oversee the operations of those entities. It’s not, I think, a black and white issue. Yes, he does; yes, he doesn’t. I think it’s reasonable to suggest that there is a fair amount of executive authority residing with the director.


Jeffrey McCoy:  Yeah. I think that this was one of the arguments to try and distinguish from Seila Law because it was so recent. And I think the Court just made very clear that, while it didn't overturn Humphrey’s Executor, which is the last remaining part where this may become an issue, I think the Court has made pretty clear that you can’t have an independent agency headed by a single director, and that the amount of power that that agency hold is going to be pretty irrelevant to the analysisthe constitutional Separation of Powers analysis.


Jason Levine:  And another question. Does the fact that the Federal Reserve has no direct executive oversight translate into Fannie’s protection from executive rule or presidential authority? I guess, maybe, that’s primarily me.


I think the answer’s no. I’m not sure why the Federal Reserve having oversight would impact that issue. Federal government, through HERA, created the FHFA to be a direct regulator of Fannie Mae and Freddie Mac. There previously was a different entity that played that role. And it is a federal agency. So, I don’t believe that the absence of oversight by the Federal Reserve would impact the independence of Fannie or Freddie.


Jeffrey McCoy:  I don’t see any other questions. I think, one -- just in terms of potential issues that this case did not resolve or that left open going forward -- I think there was a lot of -- both sides talked a lot about the APA’s hold unlawful and set aside standard for unlawful agency action. Ultimately, the Court didn't really look into that. Only Justice Gorsuch even mentioned that section in his opinion.


But there was a lot of talk in the briefs about how automatic that hold unlawful and set aside provision is. There was a lot of talk about equities and equitable balancing. And this is something that happens in many APA cases. Ones that I’ve litigated is, ultimately, what is -- even when a court findsholdsthat an agency action is unlawful or arbitrary and capricious, ultimately, what is the remedy for it? Many times, courts will just remand to the agency to fix -- if there was some procedural violation -- without actually setting aside the rule. I do think that this is something that the Court will eventually have to answer when it comes, maybe, in a more straightforward way.


Jason Levine:  I would agree with that. Well, it’ll be interesting, too, to see what ultimately happens with some of these other cases. But again, they’re plodding along in different courts. We’ll be back again talking another ruling of the Supreme Court in one of those.


Guy DeSanctis:  Well, thank you both. On behalf of The Federalist Society, I want to thank our experts, Jason Levine and Jeffrey McCoy for the benefit of their valuable time and expertise today. And I want to thank our audience for joining and participating.


We also welcome listener feedback by email at As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.




Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at