Biden ousts housing finance chief after U.S. Supreme Court ruling
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[June 24, 2021] By
Lawrence Hurley
WASHINGTON (Reuters) - President Joe Biden
on Wednesday fired the head of the Federal Housing Finance Agency who
had been appointed by his predecessor Donald Trump, acting hours after
the U.S. Supreme Court expanded presidential powers to make it easier to
oust the agency chief.
The court also nixed separate claims brought by shareholders of Fannie
Mae and Freddie Mac - both overseen by the FHFA - challenging a 2012
agreement between the agency and the Treasury Department arising from
the government's rescue of the mortgage finance firms following the 2008
financial crisis.
The justices, in the 7-2 decision, upheld part of a lower court's ruling
that the FHFA's structure was unconstitutional under the separation of
powers doctrine that distributes authority among the government's three
branches because its lone director was insufficiently accountable to the
president.
![](http://archives.lincolndailynews.com/2021/Jun/24/images/ads/current/rohlfs_lda_072017.png)
The justices also voted unanimously to block separate claims brought by
the shareholders challenging the 2012 agreement.
Biden, a Democrat, quickly removed agency chief Mark Calabria, who had
been appointed by the Republican Trump. Calabria was confirmed by the
Senate in 2019 to serve a five-year term.
Calabria said in a statement he respects the Supreme Court ruling and
Biden's authority to remove him.
Late on Wednesday, FHFA announced that Biden had appointed Sandra
Thompson as the agency's acting director. Thompson has served as the
agency's deputy director of the Division of Housing Mission and Goals
since 2013, FHFA said.
A White House official, speaking on condition of anonymity prior to the
Thompson announcement, said Biden would name a replacement "who reflects
the administration's values."
The ruling was a body blow to the shareholders in their long-running
battle contesting the government's total claim on the two companies'
profits despite winning on the constitutional issue. It likely also
means that Fannie and Freddie will not be leaving their government
conservatorship anytime soon.
The justices, in a ruling authored by Justice Samuel Alito, sent the
case back to lower courts to consider whether the shareholders can
obtain compensation based on their constitutional claims. The court
noted that the shareholders could not seek to void the 2012 agreement
altogether.
Alito cast doubt on the notion that any subsequent FHFA decisions
implementing the 2012 agreement could be cast aside, saying "there is no
reason to regard any of the actions taken by the FHFA ... as void."
The U.S. government in 2008 seized Fannie and Freddie, private
enterprises established by Congress, at the height of the financial
crisis as they teetered on the brink of insolvency. The government took
a majority stake in each and they were placed under the supervision of
the FHFA, which was created at the same time.
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![](../images/062421pics/2021-06-23T144846Z_2_LYNXNPEH5M0VN_RTROPTP_4_USA-COURT-HOUSING_small.JPG)
The Supreme Court building is seen in Washington, U.S., June 21,
2021. REUTERS/Sarah Silbiger
![](http://archives.lincolndailynews.com/2021/Jun/21/images/062121PIX/graue_21ENCORE_062121.png)
Wednesday's ruling triggered the largest sell off in Fannie Mae and Freddie Mac
in years, with their common shares each sliding by more than 30%. Their
preferred shares, owned largely by hedge funds that had bet that the litigation
would go their way and potentially force the government to release the companies
from the conservatorship under which they have operated, fell by more than twice
that margin.
Fannie's preferred "S" series and Freddie's preferred "Z" series - among the
last private capital raisings by both before their government takeover - both
sank more than 60%, their largest one-day losses since the day after they were
seized by the government.
(GRAPHIC: Fannie Mae & Freddie Mac shares dive -
https://graphics.reuters.com/USA-COURT/HOUSING/
xklpyxendvg/chart.png)
The FHFA is led by a single director who until Wednesday's ruling could be
removed by the president only "for cause."
The Supreme Court ruling, in line with a similar 2020 decision concerning the
Consumer Financial Protection Bureau (CFPB), gives presidents the authority to
remove the agency's chief at any time. The court in the CFPB case ruled that the
agency's single-director structure was unconstitutional, deciding that a
president should be able to fire its director at any time.
The 2012 agreement, sometimes referred to as the "net worth sweep," eliminated
dividend payouts to various shareholders and required Fannie and Freddie to pay
the U.S. Treasury an amount equal to their quarterly net worth each quarter,
which now totals billions of dollars.
![](http://archives.lincolndailynews.com/2021/Jun/24/images/ads/current/2021_lda_Businessdirectory.png)
Fannie and Freddie shareholders Patrick Collins, Marcus Liotta and William
Hitchcock sued the FHFA and the Treasury Department in Texas in 2016 arguing
that the agreement exceeded FHFA's authority and should be invalidated. Trump's
administration appealed a 2019 ruling by the New Orleans-based 5th U.S. Circuit
Court of Appeals.
(Reporting by Lawrence Hurley; Additional reporting by Pete Schroeder, Dan Burns
and Steve Holland; Editing by Will Dunham and Lincoln Feast.)
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