In this case, shareholders of Fannie Mae and Freddie Mac, the federally chartered corporations that dominate the secondary mortgage market, challenged actions of the Federal Housing Finance Agency (FHFA) that, they claimed, had destroyed the value of their ownership interests. Specifically, they challenged the FHFA’s decision as conservator of Fannie Mae and Freddie Mac to authorize payments to the Treasury to compensate the United States for the massive investments it made in the two corporations to keep them afloat during the financial crisis. One of the plaintiffs’ key arguments was the assertion that the structure of the FHFA violates the constitutional principle of separation of powers because the FHFA is headed by a single director who may be removed from office by the President only for cause.
A panel of the U.S. Court of Appeals held in the summer of 2018 that the FHFA’s structure infringes the powers of the President, though the court refused to order the relief sought by the plaintiffs. The plaintiffs petitioned for rehearing en banc challenging the panel’s refusal to set aside the actions they challenge, and the FHFA also petitioned for rehearing en banc, contending that the panel had erred in holding its structure unconstitutional. The court granted both petitions and ordered supplemental briefing. In its supplemental brief, the FHFA—now headed by an acting director appointed by President Trump—reversed course and conceded that the agency’s structure violates separation-of-powers principles. Public Citizen obtained leave of the Court to file a brief as amicus curiae presenting the argument that the agency’s structure is constitutional. In a splintered en banc decision issued on September 6, 2019, however, the Fifth Circuit held the for-cause removal provision unconstitutional and that the remedy was to sever the provision from the statute.