Collins v. Yellen

Decision Date23 June 2021
Docket NumberNo. 19-422, No. 19-563,19-422
Citation141 S.Ct. 1761,210 L.Ed.2d 432
Parties Patrick J. COLLINS, et al., Petitioners v. Janet L. YELLEN, Secretary of the Treasury, et al.; Janet L. Yellen, Secretary of the Treasury, et al., Petitioners v. Patrick J. Collins, et al.
CourtU.S. Supreme Court

Counselor to the Solicitor General Hashim M. Mooppan, Washington, D.C., for the federal parties.

Aaron L. Nielson, appointed by this Court as amicus curiae, and by David H. Thompson, Washington, D.C., for the petitioners in No. 19–422 and the respondents in No. 19–563.

Jeffrey B. Wall, Acting Solicitor General, Counsel of Record, Jeffrey Bossert Clark, Acting Assistant Attorney, General, Hashim M. Mooppan, Counselor to the Solicitor, General, Vivek Suri, Assistant to the Solicitor, General, Mark B. Stern, Abby C. Wright, Gerard Sinzdak, Attorneys, Department of Justice, Washington, D.C., for federal parties.

Charles Flores, Beck Redden LLP, Houston, Texas, Charles J. Cooper, Counsel of Record, David H. Thompson, Peter A. Patterson, Brian W. Barnes, Cooper & Kirk, PLLC, Washington, D.C. for Patrick J. Collins, et al.

Justice ALITO delivered the opinion of the Court.

Fannie Mae and Freddie Mac are two of the Nation's leading sources of mortgage financing. When the housing crisis hit in 2008, the companies suffered significant losses, and many feared that their troubling financial condition would imperil the national economy. To address that concern, Congress enacted the Housing and Economic Recovery Act of 2008 (Recovery Act), 122 Stat. 2654, 12 U.S.C. § 4501 et seq. Among other things, that law created the Federal Housing Finance Agency (FHFA), "an independent agency" tasked with regulating the companies and, if necessary, stepping in as their conservator or receiver. §§ 4511, 4617. At its head, Congress installed a single Director, whom the President could remove only "for cause." §§ 4512(a), (b)(2).

Shortly after the FHFA came into existence, it placed Fannie Mae and Freddie Mac into conservatorship and negotiated agreements for the companies with the Department of Treasury. Under those agreements, Treasury committed to providing each company with up to $100 billion in capital, and in exchange received, among other things, senior preferred shares and quarterly fixed-rate dividends. Four years later, the FHFA and Treasury amended the agreements and replaced the fixed-rate dividend formula with a variable one that required the companies to make quarterly payments consisting of their entire net worth minus a small specified capital reserve. This deal, which the parties refer to as the "third amendment" or "net worth sweep," caused the companies to transfer enormous amounts of wealth to Treasury. It also resulted in a slew of lawsuits, including the one before us today.

A group of Fannie Mae's and Freddie Mac's shareholders challenged the third amendment on statutory and constitutional grounds. With respect to their statutory claim, the shareholders contended that the Agency exceeded its authority as a conservator under the Recovery Act when it agreed to a variable dividend formula that would transfer nearly all of the companies’ net worth to the Federal Government. And with respect to their constitutional claim, the shareholders argued that the FHFA's structure violates the separation of powers because the Agency is led by a single Director who may be removed by the President only "for cause." § 4512(b)(2). They sought declaratory and injunctive relief, including an order requiring Treasury either to return the variable dividend payments or to re-characterize those payments as a pay down on Treasury's investment.

We hold that the shareholders’ statutory claim is barred by the Recovery Act, which prohibits courts from taking "any action to restrain or affect the exercise of [the] powers or functions of the Agency as a conservator." § 4617(f ). But we conclude that 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.


Congress created the Federal National Mortgage Association (Fannie Mae) in 1938 and the Federal Home Loan Mortgage Corporation (Freddie Mac) in 1970 to support the Nation's home mortgage system. See National Housing Act Amendments of 1938, 52 Stat. 23; Federal Home Loan Mortgage Corporation Act, 84 Stat. 451. The companies operate under congressional charters as for-profit corporations owned by private shareholders. See Housing and Urban Development Act of 1968, § 801, 82 Stat. 536, 12 U.S.C. § 1716b ; Financial Institutions Reform, Recovery, and Enforcement Act of 1989, § 731, 103 Stat. 429–436, note following 12 U.S.C. § 1452. Their primary business is purchasing mortgages, pooling them into mortgage-backed securities, and selling them to investors. By doing so, the companies "relieve mortgage lenders of the risk of default and free up their capital to make more loans," Jacobs v. Federal Housing Finance Agcy. (FHFA), 908 F.3d 884, 887 (CA3 2018), and this, in turn, increases the liquidity and stability of America's home lending market and promotes access to mortgage credit.

By 2007, the companies’ mortgage portfolios had a combined value of approximately $5 trillion and accounted for almost half of the Nation's mortgage market. So, when the housing bubble burst in 2008, the companies took a sizeable hit. In fact, they lost more that year than they had earned in the previous 37 years combined. See FHFA Office of Inspector General, Analysis of the 2012 Amendments to the Senior Preferred Stock Purchase Agreements 5 (Mar. 20, 2013),–2013–002_2.pdf. Though they remained solvent, many feared the companies would eventually default and throw the housing market into a tailspin.

To address that concern, Congress enacted the Recovery Act. Two aspects of that statute are relevant here.

First, the Recovery Act authorized Treasury to purchase Fannie Mae's and Freddie Mac's stock if it determined that infusing the companies with capital would protect taxpayers and be beneficial to the financial and mortgage markets. 12 U.S.C. §§ 1455(l )(1), 1719(g)(1). The statute further provided that Treasury's purchasing authority would automatically expire at the end of the 2009 calendar year. §§ 1455(l )(4), 1719(g)(4).

Second, the Recovery Act created the FHFA to regulate the companies and, in certain specified circumstances, step in as their conservator or receiver. §§ 4502(20), 4511(b), 4617.1 A few features of the Agency deserve mention.

The FHFA is led by a single Director who is appointed by the President with the advice and consent of the Senate. §§ 4512(a), (b)(1). The Director serves a 5-year term but may be removed by the President "for cause." § 4512(b)(2). The Director is permitted to choose three deputies to assist in running the Agency's various divisions, and the Director sits as Chairman of the Federal Housing Finance Oversight Board, which advises the Agency about matters of strategy and policy. §§ 4512(c)(e), 4513a(a), (c)(4). Since its inception, the FHFA has had three Senate-confirmed Directors, and in times of their absence, various Acting Directors have been selected to lead the Agency on an interim basis. See Rop v. FHFA , 485 F.Supp.3d 900, 915 (WD Mich. 2020).

The Agency is tasked with supervising nearly every aspect of the companies’ management and operations. For example, the Agency must approve any new products that the companies would like to offer. § 4541(a). It may reject acquisitions and certain transfers of interests the companies seek to execute. § 4513(a)(2)(A). It establishes criteria governing the companies’ portfolio holdings. § 4624(a). It may order the companies to dispose of or acquire any asset. § 4624(c). It may impose caps on how much the companies compensate their executives and prohibit or limit golden parachute and indemnification payments. § 4518. It may require the companies to submit regular reports on their condition or "any other relevant topics." § 4514(a)(2). And it must conduct one on-site examination of the companies each year and may, on any terms the Director deems appropriate, hire outside firms to perform additional reviews. §§ 4517(a)(b), 4519.

The statute empowers the Agency with broad investigative and enforcement authority to ensure compliance with these standards. Among other things, the Agency may hold hearings, §§ 4582, 4633; issue subpoenas, §§ 4588(a)(3), 4641(a)(3); remove or suspend corporate officers, § 4636a; issue cease-and-desist orders, §§ 4581, 4632; bring civil actions in federal court, §§ 4584, 4635; and impose penalties ranging from $2,000 to $2 million per day, §§ 4514(c)(2), 4585, 4636(b).

In addition to vesting the FHFA with these supervisory and enforcement powers, the Recovery Act authorizes the Agency to act as the companies’ conservator or receiver for the purposes of reorganizing the companies, rehabilitating them, or winding down their affairs. §§ 4617(a)(1)(2). The Director may appoint the Agency in either capacity if the companies meet certain specified benchmarks of financial risk or satisfy other criteria, § 4617(a)(3), and once the Director makes that appointment, the Agency succeeds to all of the rights, titles, powers, and privileges of the companies, § 4617(b)(2)(A)(i).2 From there, the Agency has the authority to take control of the companies’ assets and operations, conduct business on their behalf, and transfer or sell any of their assets or liabilities. §§ 4617(b)(2)(B)(C), (G). In performing these functions, the Agency may exercise whatever incidental powers it deems necessary, and it may take any authorized action that is in the best interests of the companies or the Agency itself. § 4617(b)(2)(J).

Finally, the FHFA is not funded through the ordinary appropriations process. Rather, the Agency's budget comes from the assessments it...

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