Courthouse Steps Oral Argument Teleforum: Mnuchin v. Collins

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The case of Mnuchin v. Collins will have oral arguments before the Supreme Court on December 9, 2020. The case involves the Federal Housing Finance Agency's 2008 decision to appoint itself conservator of Fannie Mae and Freddie Mac, and the issues presented are whether the statute's anti-injunction clause precludes a court from setting aside the Third Amendment and whether the succession clause precludes shareholders from challenging the Third Amendment. Elizabeth Slattery joins us to discuss the case and its implications.


Elizabeth Slattery, Senior Legal Fellow, Pacific Legal Foundation


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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



Micah Wallen:  Welcome to today's Federalist Society's Teleforum Conference Call. This afternoon's topic is a Courthouse Steps Oral Argument teleforum on Collins v. Mnuchin. My name is Micah Wallen, and I am the Assistant Director of Practice Groups at The Federalist Society.


      As always, please note that all expressions of opinion are those of the expert on today's call.


      Today, we are fortunate to have with us Elizabeth Slattery, who is a Senior Legal Fellow at the Pacific Legal Foundation. After Elizabeth gives her opening remarks, we will then move to an audience Q&A.


      Thank you all for joining us today, and, Elizabeth, the floor is yours.


Elizabeth Slattery:  Thank you so much, and thank you to The Federalist Society for inviting me to do this today. And thanks to all of you for dialing in.


      This morning, the Supreme Court heard an extra-long oral argument in Collins v. Mnuchin. Just to provide a little bit of background before we jump into the questions that the justices had, this case involves the Federal Housing Finance Agency, which was created in 2008 as part of the Housing and Economic Recovery Act, which was the congressional response to the mortgage lending crisis. This new independent agency — so-called independent agency — was given sweeping authority over our nation's housing system. And, to reinforce its independence, Congress set it up to be run by a single director who would enjoy a five-year term, and that person could only be removed from office for cause by the president. The Agency would also be exempt from the congressional appropriations process, instead being funded by assessments that it collected from regulated entities. Some of its powers included bringing charges against regulated entities for unsound practices and other violations of the law, imposing penalties, and appointing itself conservator or receiver of government-sponsored entities such as Fannie Mae and Freddie Mac.


      And that brings us to the issue in Collins v. Mnuchin. The case stems from the FHFA putting Fannie and Freddie into conservatorship shortly after the creation of the Agency back in 2008. The Agency entered into an agreement on behalf of Fannie Mae and Freddie Mac with the U.S. Treasury to provide up to $100 billion per entity in exchange for preferred stock, dividends, and quarterly fees. A later version of this financing agreement known as the Third Amendment came up with a new formula for calculating dividends and fees that they would pay the U.S. Treasury, and this ended up resulting in the entire net worth of Fannie and Freddie, an estimated $195 billion, being paid to the Treasury. Private shareholders challenged this, calling it a net-worth sweep and saying that the Agency had exceeded its conservator authority; it had also violated the Administrative Procedure Act, and they directly challenged the director's tenure protection for violating Article II of the U.S. Constitution.


      So the lower court, the district court, first ruled that -- it granted the government's motion for summary judgment on the constitutional issue. It went up to the Fifth Circuit Court of Appeals, which held that the structure was unconstitutional because it was run by a single director. Then the case went up to the Supreme Court, where it was held for more than a year while the Court heard Seila Law last term. And, finally, the Court heard oral argument this morning.


      There were three attorneys appearing before the justices: one on behalf of the Solicitor General's office, one on behalf of the shareholders, and an amicus appointed by the Court — Professor Aaron Nielson, a law professor — to defend the structure of the FHFA because the federal government agrees with the shareholders that the director's tenure protection did violate the Constitution.


      There were several themes that emerged from the justices' questions. I continue to enjoy the new COVID oral argument format where the justices have to take turns and they each get a few minutes to ask each attorney questions. It's very different from the normal rough-and-tumble of a typical Supreme Court oral argument. I have to wonder if this will continue when arguments begin -- go back to being heard live in the courtroom — hopefully, at some point in the future.


      But some of the big themes that emerged from the argument were, first, does it matter that, at the time that Fannie and Freddie entered into this Third Amendment agreement -- does it matter that the FHFA was an acting director rather than a Senate-confirmed director? So Chief Justice Roberts and Justice Gorsuch asked about, would an acting director be removable, and does it matter? The federal government said, "Yes, he was removable. The statute didn't say he would be insulated, unlike an actual confirmed director. And so it's common sense not to create a constitutional problem by assuming that there would be a for-cause provision protecting an acting director."


      David Thompson, who argued on behalf of the shareholders, saw it differently. He pointed out that the president is limited in who he can select as the acting director. The director of the FHFA selects three deputies, and then, once a director leaves, one of those three deputies is the president's choice for who can be an acting director. The shareholders think that that is a problem. And the amicus, Aaron Nielson, agreed with the United States that the statute didn't say anything about limiting the president's ability to remove the acting director, and so that's why we shouldn't add something into the statute that's not there.


      Justice Barrett wanted to know how much participation by the later-unconstitutional director, who is not answerable directly to the president -- how much participation by this person is necessary to require the Court to reverse actions taken by the acting director. And the lawyer for the shareholders pointed out that, even though the acting director -- there may not have been a constitutional problem with him being in place when the Third Amendment was enacted, the subsequent unconstitutional director continued to implement the Third Amendment throughout the next several years, and so that was the involvement that was unconstitutional.


      Justice Gorsuch and Justice Thomas both wanted to know if a future director, who would be answerable to the president if the Court decides that the Agency may not have a director who is insulated from presidential removal, if that director could simply ratify the Third Amendment. And David Thompson, for the shareholders, said that no, that would not do because the Administrative Procedure Act says that unlawful agency actions shall be set aside, and they're challenging this as unlawful agency action.


      Justices Alito and Sotomayor asked about the fact that this was a joint endeavor of the FHFA and the Treasury, if that meant that the president had adequate presidential supervision because, of course, the Treasury secretary had to sign off on this agreement as well, and the Treasury secretary is directly responsible to the president. The Solicitor General -- the representative from the Solicitor General's office said that he believed the president did have sufficient control because of the control over the Treasury secretary. David Thompson, for the shareholders, said, "Look, we know that the president was willing to sign onto this deal, but we don't know if it's what he wanted. He was not able to control the director at the time, and so we shouldn't -- the plaintiff shouldn't have to speculate about what the deal might have looked like if the president had complete control over the director and the Treasury secretary."


      Another major theme was, does the FHFA exercise executive power? This came up -- a number of justices asked questions about this:  Justices Breyer, Sotomayor, Kagan, Kavanaugh. Justice Kagan pointed out that the Agency makes rules, has subpoena power, brings enforcement actions, oversees the mortgage market — this all sounds like executive power to her. The amicus, Aaron Nielson, said, "Look, Congress basically gave the Agency a recipe book and said, 'You have very limited discretion. Here's what you do in this instance; here's what you do in this other instance.' So this was not like the CFPB from the Seila Law case last term, which the director there exercised much more discretion."


      The amicus said also that the FHFA is not regulating private parties, just government-sponsored entities. And so, he said, "Basically, this is sort of a non-sovereign power. The government can order books, but that doesn't make ordering books an executive power just because the government is doing it." And Justice Sotomayor wanted to know, if it is an executive agency, which clearly the FHFA is an executive agency, do we have to look at -- do they have to look at the specific actions taken in the context of the conservatorship to decide if it's executive power?


      And that was basically what the amicus said the Court needs to do — that, acting as the conservator for Fannie and Freddie, the FHFA was not exercising executive power. Justice Kagan asked about, "Well, you know, in the past, we've talked about significant executive power. In Morrison and in Seila they talk about significant executive power." And, to that, David Thompson, for the shareholders, said, "Look, Seila Law didn't create a sliding scale for significance. This is clearly executive power." And one other thing Justice Sotomayor brought up was, she thought that this seemed more like -- the conservatorship power seemed more like a judicial power rather than executive power. "But," the Solicitor General -- the attorney from the Solicitor General's office said, "look, this impacts mortgages across the country, and it is significant executive power."


      Another issue was sort of this slippery slope that the amicus, Aaron Nielson, brings up in his brief. Justices Kagan and Kavanaugh wanted to know about, what happens to other single-head agencies or even the chairs of multimember agencies? They're thinking of the Social Security Administration, which has a single head, or the Federal Reserve, which has a chair with specific powers separate from the other board members. And the amicus said this could lead down the path to problems for the federal civil service. And David Thompson, for the shareholders, said, "Look, you just follow Seila. We're not asking for anything beyond what the Court recognized in Seila." And Justice Kagan brought up the Social Security Administration a couple of times. She said, "Since 1994, it makes -- the head makes, I think, something around 650,000 decisions each year. And do we think those would have really turned out differently if the head of the Social Security Administration was removable at will?"


      In response to that, David Thompson, for the shareholders, said, "Look, the plaintiffs don't have to try to recreate a but-for world." He pointed out that, in other recent appointments-clause cases, such as Lucia v. SEC, simply a new ALJ was assigned on remand. And the same with Seila Law. We don't know if the subpoena would have turned out differently that started out that case, but that's not the point.


      At one point, the issue of whether Humphrey's Executor, the 1935 ruling by the Court that sort of props up the entire administrative state by allowing independent agencies -- if the Court should overrule that, what would happen? Would all acts by the FTC — which was the agency at issue in Humphrey's Executor — would all of the acts since 1935 be void? And David Thompson, for the shareholders, said, "Look, you have to look at everything that's done by the principal officers, and, yes, it would likely be void."


      Another issue that came up was in comparison to Seila Law and the CFPB from last term. In that case -- and the FHFA and the CFPB were created at the same time, but Congress used a different removal restriction in their enabling statutes. For the CFPB, it included that the director could only be removed for malfeasance, inefficiency, and neglect of duty, whereas the head of the FHFA could be removed for cause. So Justice Kagan asked about this -- asked a couple of the attorneys what they should make of this different language. The amicus, Aaron Nielson, said, "You know, Congress clearly used different language." And for-cause, in his view, can be read more broadly to allow removal for policy disagreements. David Thompson said that the Court had previously explained in a case that for-cause means rectitude, which, in his opinion, means it's stronger than malfeasance, inefficiency, and neglect of duty.


      There are several other exchanges I could get into, but I do want to get to your questions. I just want to close my opening remarks with a couple of takeaways just kind of running through where I see the various justices at based on 90 minutes of oral argument.


      Justice Breyer pointed out a couple times, "Well, I dissented in the PCAOB case and other cases like this, so why is this case different?" He didn't seem satisfied by answers that this case was different. So he, I think, would be a likely dissenting vote in this case.


      Justices Gorsuch, Kavanaugh and Barrett all seemed focused on the remedies. They were ready to jump right to the remedies, so perhaps they're on board with a finding that the head of the Agency does need to be removed directly by the president or answerable directly to the president.


      Justice Sotomayor seemed troubled by the fact that there is a provision in the enabling statute that the government had argued could preclude judicial review of the FHFA's decisions as conservator. But she suggested that, in this instance, the president had had sufficient control through the Treasury secretary, and so she was not as concerned about the executive removal issue.


      Justice Alito was focused on teasing out the distinctions between the acting and confirmed directors and what sort of constitutional implications that has.


      Justice Kagan recognized that -- seemed to recognize that the FHFA is clearly exercising executive power, but she was very concerned about the downstream effects of a ruling and what that could mean for other single-director agencies that don't exercise as clear executive power or ones that have a chair of a multimember agency.


      Justice Thomas, in his questions, he seemed to be trying to drill down to what the action specifically being challenged was. Was it the adoption of the Third Amendment, or was it the subsequent implementation? Was it all of the above?


      And Chief Justice Roberts, he seemed to be playing both sides a little bit. At one time, he brought up the fact that the shareholders had lost basically all value of their stock. But then, later, he admitted that he had engaged in a little extrajudicial research this very morning and he had looked up the value of their stocks and that they were not completely wiped out.


      So, with that, I'm happy to turn it back to Micah and answer questions.


Micah Wallen:  Absolutely. Thanks so much, Elizabeth, for those opening remarks. Let's go ahead and open up the floor for audience questions. I'm not seeing any questions pop up right away. We'll give our audience another minute to come up with one or to join the queue; sometimes it's slow.


      But, Elizabeth, did you have a prediction, maybe, based off the oral arguments for what to expect from this case?


Elizabeth Slattery:  Well, I think, heading into it, a lot of people see this as the constitutional issue of the removal issue should be a slam dunk after Seila Law. The FHFA was created at the same time as the CFPB. They both have tenure protection, and they're both single-director agencies, which are pretty rare. Most independent agencies that Congress sets up have multiple members. And if you go back to Humphrey's Executor, that's something that the Court has pointed back to over the years in the PCAOB case and in Seila Law, pointing out that, when you have multiple members of an agency that 's independent, that might be okay, but a single director that's unaccountable to the president is potentially problematic.


      So I think, on that issue, I think most people expect that the FHFA, going forward -- that the director is going to have to be answerable directly to the president. So I think the real big issue here is, can the Court just basically erase that provision from the statute, or can they -- will they give actual meaningful relief to the shareholders here? Of course, the shareholders probably, at the end of the day, don't care that much about the removal provision. They care about the bottom line and the fact that they say that they lost a lot of money because of this agreement. And so I think they care about the bottom line for these entities that they have invested in.


Micah Wallen:  Absolutely. All right. Well, we still didn't have a question come in from the audience, so I'm guessing the remarks were just so comprehensive that our audience is left completely informed. So thank you so much, Elizabeth.


Elizabeth Slattery:  Thank you.


Micah Wallen:  And, on behalf of The Federalist Society, I'd like to thank our experts and our audience for joining us today. We welcome listener feedback by email at


      Thanks to all for joining us, and 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


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