Federal court finds FHFA unconstitutional

by Ryan Smith18 Jul 2018

A federal appeals court has ruled that the Federal Housing Finance Agency is unconstitutional.

A three-judge panel for the US Court of Appeals for the Fifth Circuit ruled that the FHFA is unconstitutional because it does not answer to the president, according to a Washington Examiner report. The FHFA, created in 2008, oversees Fannie Mae and Freddie Mac.

“We hold that Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable,” the panel wrote in its ruling.

The case stems from a lawsuit brought by shareholders of Fannie and Freddie, who took issue with the fact that the Treasury decided in 2012 to take all of the GSEs’ profits instead of just a 10% dividend. The court rejected that part of the lawsuit while agreeing that the agency was unconstitutional, the Examiner reported.

The issue in question was the fact that the FHFA – like the Consumer Financial Protection Bureau, which faced similar lawsuits – is run by a single director who cannot be fired by the president except for cause. It also doesn’t receive funding from Congress or feature a bipartisan commission. Those features mean it’s effectively insulated from executive oversight, the court found.

 

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