Amicus Curiae Brief — Patrick J. Collins, et al., Petitioners v. Janet L. Yellen, Secretary of the Treasury, et al.

Supreme Court briefOct 30, 2020

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Nos. 19-422 & 19-563

IN THE

Supreme Court of the United States

____________

PATRICK J. COLLINS, ET AL.,

Petitioners,

STEVEN T. MNUCHIN, SECRETARY OF THE TREASURY, ET AL.,

Respondents.

____________

STEVEN T. MNUCHIN, SECRETARY OF THE TREASURY, ET AL.,

Petitioners,

PATRICK J. COLLINS, ET AL.,

Respondents.

____________

On Writs of Certiorari to the United States Court of

Appeals for the Fifth Circuit

____________

BRIEF OF CONSTITUTIONAL ACCOUNTABILITY

CENTER AS AMICUS CURIAE IN SUPPORT OF COURTAPPOINTED AMICUS CURIAE

____________

ELIZABETH B. WYDRA

BRIANNE J. GOROD*

BRIAN R. FRAZELLE

ASHWIN P. PHATAK

CONSTITUTIONAL

ACCOUNTABILITY CENTER

1200 18th Street NW, Suite 501

Washington, D.C. 20036

(202) 296-6889

brianne@theusconstitution.org

October 30, 2020

Counsel for Amicus Curiae

* Counsel of Record

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................................

INTEREST OF AMICUS CURIAE ......................

INTRODUCTION AND SUMMARY OF ARGUMENT.................................................................

ARGUMENT .........................................................

I. Congress Has Broad Authority To Shape

the Structure of the Federal Government

and To Confer on Certain Officers a

Degree of Independence from the President

II. Responding to the Devastating Housing Crisis of 2008, Congress Determined it was

Necessary to Establish the FHFA as a Regulator with Some Degree of Independence..

III. Congress Acted Within Its Constitutional

Authority in Conferring on the FHFA Director Some Degree of Independence from the

President.......................................................

CONCLUSION ....................................................

(i)

TABLE OF AUTHORITIES

Cases

Page(s)

Bond v. United States,

564 U.S. 211 (2011) ...............................

5, 21

Bowsher v. Synar,

478 U.S. 714 (1986) ...............................

Free Enter. Fund v. Pub. Co. Accounting

Oversight Bd.,

561 U.S. 477 (2010) ............................... 3, 7, 17

Harmelin v. Michigan,

501 U.S. 957 (1991) ...............................

Herron v. Fannie Mae,

861 F.3d 160 (D.C. Cir. 2017) ...............

Humphrey’s Ex’r v. United States,

295 U.S. 602 (1935) ...............................

4, 17

McCulloch v. Maryland,

17 U.S. 316 (1819) .................................

3, 13

Morrison v. Olson,

487 U.S. 654 (1988) ...............................

4, 17

Myers v. United States,

272 U.S. 52 (1926) .................................

Seila Law LLC v. Consumer Financial Protection Bureau,

140 S. Ct. 2183 (2020) ........................... passim

United States v. Perkins,

116 U.S. 483 (1886) ...............................

iii

TABLE OF AUTHORITIES – cont’d

Page(s)

Wellness Intern. Network, Ltd. v. Sharif,

135 S. Ct. 1932 (2015) ...........................

Constitutional Provisions and Legislative Materials

Act of Apr. 30, 1798, ch. 35, 1 Stat. 553 ..

Act of Aug. 7, 1789, ch. 7, 1 Stat. 49 ........

Act of Aug. 12, 1790, ch. 47, 1 Stat. 186 ..

Act of Feb. 20, 1792, ch. 7, 1 Stat. 232 ....

Act of July 27, 1789, ch. 4, 1 Stat 28 .......

Act of Sept. 2, 1789, ch. 12, 1 Stat. 65 .....

Act of Sept. 22, 1789, ch. 16, 1 Stat. 70 ...

1 Annals of Cong. (1798)

(Joseph Gales ed., 1834) .................. 8, 9, 10, 11

H.R. Rep. No. 110-142 (2007) .................. 16, 17

S. Rep. No. 111-176 (2010) .......................

12 U.S.C. § 1716 .......................................

12 U.S.C. § 1717 ....................................... 20, 22

12 U.S.C. § 1719 ....................................... 20, 22

12 U.S.C. § 4512 .......................................

3, 17

12 U.S.C. § 4513 .......................................

12 U.S.C. § 4513b .....................................

12 U.S.C. § 4514a .....................................

TABLE OF AUTHORITIES – cont’d

Page(s)

12 U.S.C. § 4517 .......................................

12 U.S.C. § 4518 .......................................

12 U.S.C. § 4521 .......................................

12 U.S.C. § 4581 .......................................

12 U.S.C. § 4585 .......................................

12 U.S.C. § 4588 .......................................

12 U.S.C. § 4617 .......................................

12 U.S.C. § 4631 .......................................

12 U.S.C. § 4636 .......................................

12 U.S.C. § 4641 .......................................

12 U.S.C. § 5481 .......................................

12 U.S.C. § 5531 .......................................

12 U.S.C. § 5536 ............................... 4, 18, 19, 23

12 U.S.C. § 5581 .......................................

U.S. Const. art. I, § 8, cl. 18 .....................

3, 6

U.S. Const. art. II, § 1, cl. 1 ......................

U.S. Const. art. II, § 2, cl. 1 ......................

5, 6

U.S. Const. art. II, § 2, cl. 2 ......................

U.S. Const. art. II, § 3 ..............................

U.S. Const. art. II, § 4 ..............................

TABLE OF AUTHORITIES – cont’d

Page(s)

Books, Articles, and Other Authorities

Accounts and Accounting Offices,

2 U.S. Op. Att’y Gen. 507 (1832) ..........

Daniel D. Birk, Interrogating the Historical

Basis for a Unitary Executive, 73 Stanford L. Rev. (forthcoming 2021) ............

Christine Kexel Chabot, Is the Federal Reserve Constitutional? An Originalist Argument for Independent Agencies,

96 Notre Dame L. Rev. 101 (2020) .......

Jeanne Cummings, Regulation

Comes To Those Who Wait,

Politico (July 9, 2007) ............................

David P. Currie, The Constitution in Congress: The First Congress and the Structure of Government, 1789–1791,

2 U. Chi. L. Sch. Roundtable 161(1995)

Fin. Crisis Inquiry Comm’n, The Financial

Crisis Inquiry Report (2011) ................. passim

Martin S. Flaherty, The Most Dangerous

Branch, 105 Yale L.J. 1725 (1996) .......

Alexander Hamilton, Report on a Plan for

the Further Support of Public Credit

(Jan. 16, 1795) .......................................

James Hart, The American Presidency in

Action: 1789 (1948) ................................

TABLE OF AUTHORITIES – cont’d

Page(s)

Letter from Thomas Hartley to William Irvine (Aug. 17, 1789) ..............................

John F. Manning, Separation of Powers as

Ordinary Interpretation, 124 Harv. L.

Rev. 1939 (2011) ....................................

Jerry L. Mashaw, Recovering American Administrative Law: Federalist Foundations, 1787–1801, 115 Yale L.J. 1256

(2006) ..................................................... 7, 8, 11

Bethany Mclean, Fannie Mae’s Last Stand,

Vanity Fair (Feb. 2009) .........................

Wayne Passmore, The GSE Implicit Subsidy and the Value of Government Ambiguity, 33 Real Est. Econ. 465 (2005) .....

Jeremy Pelofsky, Bush Signs Housing Bill

as Fannie Mae Grows, Reuters

(July 30, 2008) .......................................

Power of the President Respecting Pension

Cases,

4 U.S. Op. Att’y Gen. 515 (1846) ..........

Saikrishna Prakash, New Light on the Decision of 1789, 91 Cornell L. Rev.

1021 (2006) ............................................

2 Records of the Federal Convention of 1787

(Max Farrand ed., 1911) .......................

The Jewels of the Princess of Orange,

2 U.S. Op. Att’y Gen. 482 (1831) ..........

vii

TABLE OF AUTHORITIES – cont’d

Page(s)

The President and Accounting Offices,

1 U.S. Op. Att’y Gen. 624 (1823) .......... 11, 12

INTEREST OF AMICUS CURIAE1

Constitutional Accountability Center (CAC) is a

think tank, public interest law firm, and action center

dedicated to fulfilling the progressive promise of our

Constitution’s text and history. CAC works in our

courts, through our government, and with legal scholars to improve understanding of the Constitution and

preserve the rights and freedoms it guarantees. CAC

has a strong interest in preserving the balanced system

of government laid out in our nation’s charter and accordingly has an interest in this case and particularly

the question of whether the Federal Housing Finance

Agency’s (FHFA’s) structure comports with the constitutional separation of powers.

INTRODUCTION AND

SUMMARY OF ARGUMENT

In 2008, the nation confronted the worst financial

disaster since the Great Depression, a crisis that

“shattered” lives, “shuttered” businesses, “evaporated”

savings, and caused millions of families to lose their

homes. S. Rep. No. 111-176, at 39 (2010); see id.

(“[T]he financial crisis has torn at the very fiber of our

middle class.”). At the heart of this crisis was the

mortgage industry. As the Financial Crisis Inquiry

Commission explained, “[l]ending standards collapsed,

and there was a significant failure of accountability

1 The parties have consented to the filing of this brief and

their letters of consent have been filed with the Clerk. Under

Rule 37.6 of the Rules of this Court, amicus states that no counsel

for a party authored this brief in whole or in part, and no counsel

or party made a monetary contribution intended to fund the preparation or submission of this brief. No person other than amicus

or its counsel made a monetary contribution to its preparation or

submission.

and responsibility throughout each level of the lending

system.” Fin. Crisis Inquiry Comm’n, The Financial

Crisis Inquiry Report 125 (2011). As loan originations

and the volume of private-label mortgage-backed securitizations increased, the Federal National Mortgage

Association (Fannie Mae) and the Federal Home Loan

Mortgage Corporation (Freddie Mac) increased their

purchases of private-label mortgage-backed securities,

including those backed by subprime and Alt-A loans.

And at the peak of the crisis, nearly half of the nation’s

mortgage debt was owned or guaranteed by Fannie

Mae and Freddie Mac in the form of whole loans, private-label securities holdings, and guaranteed securities. When home prices declined and delinquencies

rose, Fannie and Freddie experienced billions in losses

on loans and securities. Id. at 309-10.

Unsound practices at Fannie Mae and Freddie

Mac in the years leading up to the crisis were made

possible by ineffective oversight of the Office of Federal

Housing Enterprise Oversight (OFHEO). Fannie and

Freddie spent millions of dollars creating a sophisticated lobbying machine with “immense political

power,” which they used to ensure that this regulatory

agency remained “largely toothless.” Id. at 40, 311.

When Fannie and Freddie made business decisions to

enhance their growth, market share, and executive

compensation, OFHEO simply “took its eye off the

ball,” failing to rein them in despite their “increasing

investments in risky mortgages and securities.” Id. at

322, 122.

To correct these problems, prevent their reoccurrence, and stem the escalating housing crisis, Congress passed, and President George W. Bush signed,

the Housing and Economic Recovery Act (Recovery

Act) in July 2008. Key to the legislation was the establishment of a new agency to oversee Fannie and

Freddie, the FHFA. Given the failures of the previous

regulatory regime and the disastrous consequences

that resulted from those failures, Congress chose to

grant the FHFA a degree of independence, providing

that it would be led by a director whom the President

could remove “for cause,” 12 U.S.C. § 4512(b)(2). In

that way, Congress sought to ensure that the new

agency could fulfill its statutory mandate and safeguard the stability of government-sponsored enterprises (GSEs) like Fannie and Freddie.

Petitioners and the Department of Justice argue

that the FHFA’s independence violates the Constitution’s separation of powers. This argument is wholly

without merit. The Framers empowered Congress to

“make all Laws which shall be necessary and proper

for carrying into Execution . . . all . . . Powers” of the

federal government, U.S. Const. art. I, § 8, cl. 18, thus

ensuring that future legislators would have the flexibility needed to structure the government so it could

respond effectively to new challenges. As Chief Justice

John Marshall later observed, the Framers made no

“unwise attempt” to dictate “the means by which government should, in all future time, execute its powers.”

McCulloch v. Maryland, 17 U.S. 316, 415 (1819). Their

choice reflected an understanding that the Constitution was “intended to endure for ages to come, and consequently, to be adapted to the various crises of human

affairs.” Id. From the earliest days of the Republic,

Congress has used this discretion to vary the organization of federal agencies, and to provide officers who

implement regulatory statutes a measure of independence from presidential policy control.

Consistent with this constitutional design, this

Court has long recognized that Congress may shield

the heads of regulatory agencies from removal without

cause.

See, e.g., Free Enter. Fund v. Pub. Co.

Accounting Oversight Bd., 561 U.S. 477, 501 (2010);

Morrison v. Olson, 487 U.S. 654, 692 (1988); Humphrey’s Ex’r v. United States, 295 U.S. 602, 631-32 (1935).

Last Term, in Seila Law LLC v. Consumer Financial

Protection Bureau, 140 S. Ct. 2183 (2020), this Court

nonetheless held that a for-cause removal restriction

on the head of the Consumer Financial Protection Bureau (CFPB) violated the separation of powers because

the Bureau was “led by a single Director and vested

with significant executive power.” Id. at 2201.

That decision does not dictate the outcome of this

case, and this Court should not extend its decision in

Seila Law to this materially different agency. First,

the FHFA Director does not wield “regulatory or enforcement authority remotely comparable to that exercised by the CFPB.” Id. at 2202. While Congress

granted the CFPB roving authority to regulate and adjudicate “any unfair, deceptive, or abusive act or practice” in the consumer-finance market, 12 U.S.C.

§ 5536(a)(1)(B), as well as the authority to enforce 18

other federal laws, the FHFA’s purview is far more

limited. Under the Recovery Act, the FHFA regulates

only 13 GSEs, including Fannie and Freddie, and its

regulation of these entities is carefully delineated by a

number of provisions of federal law that limit the

FHFA’s actions. Moreover, federal law ties the

FHFA’s actions to the statutory charters of the GSEs,

and the GSEs themselves can only act as prescribed by

these tightly woven charters. And while the FHFA can

also serve as conservator or receiver of the GSEs, the

FHFA acts as a private entity in that role, so its actions in that capacity do not implicate the separation

of powers. In any event, that role too is constrained to

the 13 GSEs and is limited in various ways by federal

law. In short, the FHFA does not enjoy anything like

the broad power to regulate the entire marketplace of

consumer financial products that the CFPB does.

Second, as this Court recognized, the FHFA “regulates primarily Government-sponsored enterprises,

not purely private actors.” Seila Law, 140 S. Ct. at

2202. Indeed, the GSEs were created by federal statute, are subsidized by the government, and fulfill a

public purpose. Moreover, private actors that invest

in the GSEs do so voluntarily and with full knowledge

that the GSEs are uniquely subsidized and regulated

by the government. Because “[t]he structural principles secured by the separation of powers protect the

individual,” Bond v. United States, 564 U.S. 211, 222

(2011), those constitutional constraints are necessarily

less relevant in the context of a federal agency like the

FHFA that does not exercise coercive sovereign power

over any purely private commercial conduct.

In short, this Court’s reasoning in Seila Law does

not apply to the FHFA, and the FHFA’s leadership

structure does not violate the separation of powers.

Congress’s considered judgment about how best to

structure the FHFA should be allowed to stand.

ARGUMENT

I. CONGRESS HAS BROAD AUTHORITY TO

SHAPE THE STRUCTURE OF THE FEDERAL GOVERNMENT AND TO CONFER ON

CERTAIN OFFICERS A DEGREE OF INDEPENDENCE FROM THE PRESIDENT.

A. The Constitution gives Congress great flexibility in determining how best to shape the federal government. While the Framers anticipated the creation

of “Departments,” U.S. Const. art. II, § 2, cl. 1, they left

unspecified what those departments would be, how

they would be organized, and what connection they

would have to the President. Likewise, while the

Framers envisioned that “Officers of the United

States” would be “established by Law,” id. art. II, § 2,

cl. 2, they provided few details concerning those officers’ relationship with the President. Cf. id. art. II, § 2,

cl. 1 (the President “may require the Opinion, in writing, of the principal Officer in each of the executive Departments”).

Significantly, nowhere in the Constitution is the

President given the power to remove these officers

from their positions. Seila Law, 140 S. Ct. at 2205.

Indeed, the Constitution addresses their removal only

by giving Congress the power to impeach them. U.S.

Const. art. II, § 4.

It was no accident that the Constitution left open

most questions concerning the federal government’s

departments and officers. The Framers deliberately

rejected a plan that would have delineated in the Constitution the duties of six department secretaries while

specifying that each would serve the President “during

pleasure.” See 2 Records of the Federal Convention of

1787, at 335-36 (Max Farrand ed., 1911) (proposal

specifying duties of six department secretaries, all

serving the President “during pleasure”). Instead, the

Framers chose to assign Congress broad discretion

over the manner in which federal laws are executed,

granting it the authority to “make all Laws which shall

be necessary and proper for carrying into Execution

. . . all . . . Powers vested by this Constitution in the

Government of the United States.” U.S. Const. art. I,

§ 8, cl. 18 (emphasis added); see 2 Records 345 (this

authority includes the power to “establish all offices”).

This “is the one and only provision of the Constitution

that directly addresses the establishment of the federal government,” and it “gives the relevant power expressly to Congress.” John F. Manning, Separation of

Powers as Ordinary Interpretation, 124 Harv. L. Rev.

1939, 1986 (2011); see Jerry L. Mashaw, Recovering

American Administrative Law: Federalist Foundations, 1787–1801, 115 Yale L.J. 1256, 1271 n.34 (2006)

(“the intention was for Congress to shape the executive

departments in the exercise of its powers under the

Necessary and Proper Clause”). Under the Constitution, therefore, “Congress has plenary control over the

salary, duties, and even existence of executive offices,”

Free Enter. Fund, 561 U.S. at 500, wielding broad authority over the structure of federal agencies.

The Constitution does, of course, place the “executive Power” in the President, whom it directs to “take

Care that the Laws be faithfully executed.” U.S.

Const. art. II, § 1, cl. 1; id. art. II, § 3. But at the

Founding, there was no consensus that “executive”

power entailed an authority to remove officers, Martin

S. Flaherty, The Most Dangerous Branch, 105 Yale

L.J. 1725, 1790 (1996), much less an illimitable power

to remove them at will. Indeed, “there is no evidence

to support the assertion that the removal of executive

officers was . . . an inherent attribute of the ‘executive

power’ as it was understood or practiced in England.”

Daniel D. Birk, Interrogating the Historical Basis for a

Unitary Executive, 73 Stanford L. Rev. (forthcoming

2021) (manuscript at 5) (available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3428737).

To the contrary, throughout English history Parliament freely “altered modes of . . . removing existing

officers,” “transferred . . . removal power from the king

to other officials,” and “provided statutory tenure

when it wished to make the officer independent of the

king or when it had some other political or fiscal reason to do so.” Id. at 6.

Nor could it be deduced from state constitutions in

the Founding era that the power of removal—much

less an illimitable power of removal—was an inherent

executive quality. For “in state and colonial governments at the time of the Constitutional Convention,”

the removal power was typically “lodged in the Legislatures or in the courts.” Myers v. United States, 272

U.S. 52, 118 (1926); see 1 Annals of Cong. 534 (1798)

(Joseph Gales ed., 1834) (White) (“This is a doctrine

not to be learned in American Governments . . . . Each

State has an Executive Magistrate; but look at his

powers, and I believe it will not be found that he has

in any one, of necessity, the right of appointing or removing officers.”).

B. Legislative decisions in the early Republic confirm that Congress enjoys broad freedom to shape the

government’s administrative structure—and to grant

certain officers a measure of independence from the

President. See Harmelin v. Michigan, 501 U.S. 957,

980 (1991) (“actions of the First Congress” are “persuasive evidence of what the Constitution means”).

Founding-era legislation “created commissions

and boards outside of any of the major departments”

to carry out various functions. Mashaw, supra, at

1291. For example, to help effectuate a monetary policy, the First Congress established a committee empowered to purchase public debt. The President could

not instigate these purchases, and two of the committee’s five leaders were ex officio members whom the

President could not remove from office—the Vice President (then a political rival, not a running mate) and

the Chief Justice. Act of Aug. 12, 1790, ch. 47, § 2, 1

Stat. 186, 186; see Christine Kexel Chabot, Is the Federal Reserve Constitutional? An Originalist Argument

for Independent Agencies, 96 Notre Dame L. Rev. 101,

137, 142 (2020). This committee was the brainchild of

Alexander Hamilton, who consistently advocated its

independence to prevent politicians from raiding its

funds “when immediate exigencies press . . . rather

than resort to new taxes.” Alexander Hamilton, Report on a Plan for the Further Support of Public Credit

(Jan. 16, 1795), https://founders.archives.gov/documents/Hamilton/01-18-02-0052-0002.

Similarly, when creating the Treasury Department, Congress recognized that its Secretary—unlike

the previously established Secretaries of Foreign Affairs and War—should not be a mere instrument of the

President’s will. See 1 Annals of Cong. 532 (Vining)

(“The Departments of Foreign Affairs and War are peculiarly within the powers of the President . . . .”).

Whereas Congress simply ordered those other two

Secretaries to “perform and execute such duties as

shall from time to time be enjoined on or intrusted to

him by the President,” Act of July 27, 1789, ch. 4, § 1,

1 Stat. 28, 29; see Act of Aug. 7, 1789, ch. 7, § 1, 1 Stat.

49, 50, it gave the Treasury Secretary detailed responsibilities that effectuated congressional policies and

“made him in part an agent of Congress,” David P.

Currie, The Constitution in Congress: The First Congress and the Structure of Government, 1789-1791, 2

U. Chi. L. Sch. Roundtabe 161, 202 (1995). When the

House sought to make the Secretary removable by the

President, the Senate balked, leading to an impasse

between the bodies. See James Hart, The American

Presidency in Action: 1789 217 (1948) (“[S]enators who

had favored presidential removal of the other Secretaries were at first against his removal of the Secretary of the Treasury.”). Only the Vice President’s tiebreaking vote led the Senate to approve the legislation,

while still refusing to explicitly “acknowledge the

Power of removal in the President.” Saikrishna Prakash, New Light on the Decision of 1789, 91 Cornell L.

Rev. 1021, 1064 (2006) (quoting Letter from Thomas

Hartley to William Irvine (Aug. 17, 1789)).

By no means, therefore, was it generally accepted

that every principal office, regardless of its function,

was inherently subject to presidential removal—much

less an illimitable power to remove at will. This was

evident also in the discussions surrounding another officer within the proposed Treasury Department, a

Comptroller who would be empowered “to superintend

the adjustment and preservation of the public accounts” and to “direct prosecutions . . . for debts . . . due

to the United States.” Act of Sept. 2, 1789, ch. 12, § 3,

1 Stat. 65, 66. Because the Comptroller’s duties would

partake “of a judiciary quality as well as executive,”

Madison argued that there were “strong reasons why

an officer of this kind should not hold his office at the

pleasure of the executive.” 1 Annals of Cong. 636. He

explained:

Whatever . . . may be my opinion with respect

to the tenure by which an executive officer may

hold his office according to the meaning of the

constitution, I am very well satisfied, that a

modification by the Legislature may take place

in such as partake of the judicial qualities, and

that the legislative power is sufficient to establish this office on such a footing as to answer

the purposes for which it is prescribed.

Id.

Madison further noted that, given the Comptroller’s statutory responsibilities, the office was not intended “merely to assist [the President] in the performance of duties.” Id. at 638 (“I do not say the office is

either executive or judicial; I think it rather distinct

from both, though it partakes of each . . . .”). Others

advocated that the Comptroller be “appointed for a

limited time” and that “during that time he ought to

be independent of the Executive, in order that he

might not be influenced by that branch of the

Government in his decisions.” Id. at 637 (Smith). The

key point was that “the nature of this office” meant

that “a modification might take place.” Id. at 638

(Madison).

Likewise, when Congress created a new Post Office, it detailed an elaborate set of responsibilities for

the Postmaster General and his subordinates, deleting

prior references to presidential control. Compare Act

of Feb. 20, 1792, ch. 7, 1 Stat. 232, 232-39, with Act of

Sept. 22, 1789, ch. 16, § 1, 1 Stat. 70, 70. In contrast,

when creating the Navy Department, Congress simply

directed its Secretary “to execute such orders as he

shall receive from the President.” Act of Apr. 30, 1798,

ch. 35, § 1, 1 Stat. 553, 553. Once again, Congress distinguished those departments “exclusively under presidential direction” from those “also directed according

to law,” Mashaw, supra, at 1289, and gave the latter

greater independence.

C. Contemporary Attorney General opinions also

recognized Congress’s power to assign independent decision-making authority to officials besides the President. These opinions are at odds with the notion that

the President must exert the type of total policy control

over all federal agencies that would demand an illimitable power to remove at will.

As one opinion explained, “[t]he constitution assigns to Congress the power of designating the duties

of particular officers: the President is only required to

take care that they execute them faithfully.” The President and Accounting Offices, 1 U.S. Op. Att’y Gen.

624, 625-26 (1823). Thus, where a duty is assigned by

statute, the President “is not to perform the duty, but

to see that the officer assigned by law performs his

duty faithfully—that is, honestly: not with perfect correctness of judgment, but honestly.” Id. at 626. If the

officer entrusted with that duty selects one option

“while the President prefers another, the President

cannot interfere . . . because the selection is referred

by law to the judgment of the [officer] alone, without

any reference to any controlling power in the President.” Id.; accord Accounts and Accounting Offices, 2

U.S. Op. Att’y Gen. 507, 509-10 (1832) (concluding that

“the decision of the Comptroller in this case is conclusive upon the executive branch”).

To be sure, Attorney General opinions also affirmed the President’s power to remove lower-level officers. But they rooted this power in the need to ensure

the faithful execution of the laws. See, e.g., Power of

the President Respecting Pension Cases, 4 U.S. Op.

Att’y Gen. 515, 515 (1846) (“the President is to take

care that [officers] execute their duties faithfully and

honestly,” and thus he has “the power of removal” over

“unfaithful subordinates”); The Jewels of the Princess

of Orange, 2 U.S. Op. Att’y Gen. 482, 489 (1831) (if “a

district attorney was prosecuting a suit . . . for the purpose of oppressing an individual . . . such a prosecution

would not be a faithful execution of the law”); 1 U.S.

Op. Att’y Gen. at 626 (if “the postmaster should make

a corrupt appointment . . . the laws in such a case have

not been faithfully executed”). Consistent with a regime of good-cause tenure, these opinions emphasize

that the President need not ensure that an officer

tasked with statutory duties acts “with perfect correctness of judgment” in the President’s view, but rather

that the officer “performs his duty faithfully.” Id.

***

In sum, the Constitution’s text, structure, drafting

history, and early construction all tell the same story:

Congress has considerable latitude when shaping the

government’s administrative structure. Rather than

ossify that structure and foreclose innovation, the

Framers empowered future leaders to respond

effectively “to the various crises of human affairs.”

McCulloch, 17 U.S. at 415.

II. RESPONDING TO THE DEVASTATING

HOUSING CRISIS OF 2008, CONGRESS DETERMINED IT WAS NECESSARY TO ESTABLISH THE FHFA AS A REGULATOR

WITH

SOME

DEGREE

INDEPDENDENCE.

In 2008, the nation was plunged into the worst financial disaster since the Great Depression. The crisis

stemmed from a financial system pervaded by unsustainable risk and incapable of weathering a drop in

housing prices. And at the peak of the housing crisis,

nearly half of the nation’s mortgage debt, including in

the form of private securities, was owned or guaranteed by Fannie Mae and Freddie Mac, “the two massive government-sponsored enterprises (GSEs) created by Congress to support the mortgage market.”

Fin. Crisis Inquiry Comm’n, The Financial Crisis Inquiry Report 38 (2011) (hereinafter “Report”). Unsound practices—including poor corporate governance

and risk management at the GSEs as they prioritized

earnings growth—were made possible by ineffective

oversight of a weak and politically dependent regulatory agency. Id. at 323. By establishing the FHFA to

oversee Fannie and Freddie, Congress and President

Bush sought to correct these problems, prevent another GSE meltdown, and ensure that the GSEs were

acting to further their missions.

Fannie Mae and Freddie Mac were chartered per

federal legislation to promote American home ownership by freeing up mortgage capital. By purchasing

mortgages from banks, thrifts, and mortgage originators, the GSEs enable those entities to make new

loans. Id. at 39. Despite the public mandate in their

charters, however, Fannie and Freddie are

shareholder-held corporations, giving them “dual missions” that include “maximiz[ing] returns for shareholders.” Id.

Pursuing shareholder profit, Fannie and Freddie

poured immense resources into shaping their regulatory environment during the late twentieth century,

building “‘the greatest, most sophisticated lobbying operation in the modern history of finance.’” Bethany

Mclean, Fannie Mae’s Last Stand, Vanity Fair (Feb.

2009), https://www.vanityfair.com/news/2009/02/fannie-and-freddie200902-2 (quoting former House Banking and Financial Services Chairman Jim Leach).

Through their “well-oiled, well-financed and well-connected lobbying armada,” they “spent years nurturing

relationships with lawmakers,” Jeanne Cummings,

Regulation Comes To Those Who Wait, Politico

(July 9, 2007), https://www.politico.com/story/2007/07/

regulation-comes-to-those-who-wait-004835, spending

more than $164 million on lobbying between 1999 and

2008, Report 41. In short, “Fannie and Freddie accumulated political clout,” id., which they used “to stymie effective regulation,” Mclean, supra.

For instance, while Congress “imposed tougher,

bank-style capital requirements and regulations on

thrifts” after the savings and loan crisis, it allowed

Fannie and Freddie to continue holding lower amounts

of capital. Report 40. And although Congress established OFHEO as a regulator for Fannie and Freddie,

Congress placed it within the Department of Housing

and Urban Development and deprived it of “legal powers comparable to those of bank and thrift supervisors.” Id.

As a result, “OFHEO was structurally weak and

almost designed to fail.” Id. (quoting former director).

And fail it did—in part because the “Fannie and Freddie political machine resisted any meaningful

regulation using highly improper tactics.” Id. at 42.

As Fannie Mae’s chief operating officer recalled: “The

old political reality . . . was that we always won, we

took no prisoners . . . we used to . . . be able to write, or

have written rules that worked for us.” Id. at 180. In

short, OFHEO was not only a “largely toothless

agency,” id. at 311, but was further cowed by being

“constantly subjected to malicious political attacks and

efforts of intimidation,” id. at 42 (quoting another former director).

By the twenty-first century, scandals engulfed

Fannie and Freddie as it was discovered that their employees had long “manipulated accounting and earnings to trigger bonuses for senior executives.” Id. at

180. Furthermore, to compete with Wall Street, Fannie and Freddie also ventured into acquiring subprime

and Alt-A private-label mortgage-backed securities

and “loosened their underwriting standards, purchasing and guaranteeing riskier loans.” Id. at 122. But

OFHEO could not prevent the danger of these “increasing investments in risky mortgages and securities.” Id. “The results would be disastrous for the companies, their shareholders, and American taxpayers.”

Id. at 125. As mortgage delinquencies skyrocketed,

“both GSEs began to take significant losses,” particularly from their purchases of private-label Alt-A securities, and these losses “were ultimately borne by taxpayers.” Id. at 123, 323. In the end, it was “the risky

practices” of Fannie and Freddie, “undertaken to meet

Wall Street’s expectations for growth,” that led to the

need for Treasury to provide funding for them. Id. at

323.

Although OFHEO knew that “mortgage insurers

were already seeing abuses” with these higher-risk

loans, the agency regarded the developments as “not a

‘significant supervisory concern.’” Id. at 123 (quoting

agency report). Thus, even as the GSEs expanded efforts to “increase our penetration into subprime,” id.

at 180 (quoting Fannie Mae’s then-CFO), “OFHEO

never told the GSEs to stop. Rather, year after year,

the regulator said that both companies had adequate

capital, strong asset quality, [and] prudent credit risk

management.” Id. Simply put, “OFHEO took its eye

off the ball.” Id. at 322. Without a diligent regulator,

Fannie and Freddie were allowed to increase their “investments in risky loans and securities” unchecked.

Id. at 122.

To stem the escalating crisis across the private-label and GSE-securitized mortgage markets, and to

help prevent another similar crisis, Congress and

President Bush in 2008 enacted “a sweeping rescue

package aimed at resurrecting the housing market

from its worst slump since the Great Depression and

stabilizing the two largest mortgage finance companies.” Jeremy Pelofsky, Bush Signs Housing Bill as

Fannie Mae Grows, Reuters (July 30, 2008),

https://www.reuters.com/article/us-fannie-freddiebush/bush-signs-housing-bill-as-fannie-mae-growsidUSN3042756820080730.

Among its key reforms was the establishment of

the FHFA to “ensure that the government sponsored

enterprises supporting the mortgage markets operate[d] in a safe and sound manner.” H.R. Rep. No. 110142, at 87 (2007). Recognizing that OFHEO’s lack of

independence had prevented it from robustly enforcing

the law—a mistake that led to billions in federal

bailouts and was one of the market-wide failures that

contributed to the near-collapse of the American economy—Congress provided that the new agency would

enjoy some degree of independence from the President.

It would be “headed by a Director appointed by the

President and confirmed by the Senate for a five-year

term,” id. at 88, whom the President could only remove

“for cause,” 12 U.S.C. § 4512(b)(2). As the next Section

explains, Congress’s choice to impose this for-cause restriction does not offend separation-of-powers principles.

III. CONGRESS ACTED WITHIN ITS CONSTITUTIONAL AUTHORITY IN CONFERRING

ON THE FHFA DIRECTOR SOME DEGREE

OF INDEPENDENCE FROM THE PRESIDENT.

For over a century, and consistent with constitutional text and history, this Court has repeatedly reiterated that Congress may limit the President’s authority to remove certain officers without cause. See, e.g.,

Seila Law, 140 S. Ct. at 2192 (“we need not and do not

revisit our prior decisions allowing certain limitations

on the President’s removal power”); Free Enter. Fund,

561 U.S. at 501 (noting that the Court does not “take

issue with for-cause limitations in general”); Morrison,

487 U.S. at 692 (upholding for-cause removal restrictions for an independent counsel); Humphrey’s

Ex’r, 295 U.S. at 627-28 (upholding for-cause removal

restrictions for the members of the Federal Trade

Commission); United States v. Perkins, 116 U.S. 483,

484 (1886) (upholding for-cause removal restrictions

on naval cadet engineers).

To be sure, last Term, this Court held in Seila Law

that a for-cause restriction on the President’s power to

remove the CFPB’s single Director violates the separation of powers. 140 S. Ct. at 2201. That decision is

in tension with both Founding-era history and this

Court’s prior precedents, as discussed above. But

whatever the merits of that decision, this Court should

not extend it to the FHFA, which is materially different than the CFPB for at least two reasons. See generally Humphrey’s Ex’r, 295 U.S. at 631

(constitutionality of removal restrictions “will depend

upon the character of the office”).

First, the FHFA Director does not wield “regulatory or enforcement authority remotely comparable to

that exercised by the CFPB,” Seila Law, 140 S. Ct. at

2202. In Seila Law, this Court explained that the

CFPB Director “wields vast rulemaking, enforcement,

and adjudicatory authority over a significant portion

of the U.S. economy.” Id. at 2191. Specifically, “Congress transferred the administration of 18 existing federal statutes to the CFPB, including the Fair Credit

Reporting Act, the Fair Debt Collection Practices Act,

and the Truth in Lending Act.” Id. at 2193. The statutes “cover everything from credit cards and car payments to mortgages and student loans.” Id. at 2200.

Moreover, Congress created a new prohibition on “any

unfair, deceptive, or abusive act or practice” in the consumer-finance market. 12 U.S.C. § 5536(a)(1)(B). The

CFPB is empowered to promulgate binding regulations enforcing that standard and the other pre-existing statutes within its purview. Id. §§ 5531(a)-(b),

5581(a)(1)(A), (b).

On top of that, the Court explained that the CFPB

had the authority to enforce these laws by “conduct[ing] investigations, issu[ing] subpoenas and civil

investigative demands, initiat[ing] administrative adjudications, and prosecut[ing] civil actions in federal

court.” Seila Law, 140 S. Ct. at 2193. The CFPB can

also “seek restitution, disgorgement, and injunctive relief, as well as civil penalties of up to $1,000,000 (inflation adjusted) for each day that a violation occurs.” Id.

In short, the CFPB “acts as a mini legislature, prosecutor, and court, responsible for creating substantive

rules for a wide swath of industries, prosecuting violations, and levying knee-buckling penalties against private citizens.” Id. at 2202 n.8; id. at 2204 (Director

“may dictate and enforce policy for a vital segment of

the economy affecting millions of Americans”).

The powers of the FHFA bear no resemblance to

the “significant governmental power” vested in the

CFPB, id. at 2203. Rather, the FHFA and its regulated entities are sharply constrained in their authorities, activities, and powers by explicit statutory direction from Congress, creating a framework of action far

less broad than that of the CFPB.

The FHFA regulates only 13 GSEs, and it has the

duty to “oversee the prudential operations of” those entities alone. 12 U.S.C. § 4513(a)(1)(A). Moreover, unlike the statutes governing the CFPB, federal law dictates precisely what the FHFA Director may do in that

regulatory role. For instance, federal law provides

that the Director “shall establish standards . . . for

each regulated entity,” and then delineates ten areas

that the standards shall cover. Id. § 4513b(a). Likewise, the law provides that the Director “shall conduct

an ongoing study of fees charged by enterprises for

guaranteeing a mortgage,” and then spells out seven

factors that the study must include. Id. § 4514a(a) &

(d). Federal law also requires the Director to conduct

an annual on-site examination of each GSE, id. § 4517,

to prohibit compensation to executives at the GSEs

that “is not reasonable and comparable with compensation for employment in other similar businesses,” id.

§ 4518(a), and to submit annual reports to Congress,

id. § 4521. In short, unlike the roving authority to police “any unfair, deceptive, or abusive act or practice”

in the consumer financial products marketplace that

Congress vested in the CFPB Director, id.

§ 5536(a)(1)(B), the FHFA Director’s powers are narrowly focused on 13 entities and are carefully defined

by statute.

On top of that, Congress also limited the powers of

the GSEs themselves, which—again—are the only entities the FHFA has the power to regulate. For instance, Congress has described over many pages of the

U.S. Code the precise structure, purposes, and operations of Fannie and Freddie, the two biggest GSEs

overseen by the FHFA, as well as limitations on what

they can do. See, e.g., id. §§ 1717, 1719. Thus, the

FHFA is doubly limited in the scope of its powers, both

through its own statute and the statutes governing the

GSEs.

Furthermore, even the powers of the FHFA that

are arguably comparable to the CFPB’s powers are circumscribed in ways that the CFPB’s are not. For instance, while the CFPB can bring enforcement actions

against any person in the consumer financial product

marketplace, the FHFA can issue and serve a “notice

of charges” against only the regulated entities or their

affiliates, and only for specific circumstances enumerated by statute. Id. §§ 4581(a), 4631(a). And it is only

as part of such a narrowly-delineated enforcement proceeding that the FHFA may issue regulatory subpoenas. Id. §§ 4588, 4641. Finally, the FHFA can only

fine the regulated entities or their affiliates, and only

for specific conduct enumerated by statute.

Id.

§§ 4585(a), 4636.

To be sure, the FHFA may also act as a conservator or receiver of Fannie and Freddie, and—as Petitioners point out—its decisions in this capacity could

affect “a major segment of the U.S. economy,” Pet’rs

Br. 61 (quoting Seila Law, 140 S. Ct. at 2200). But

where the FHFA acts as conservator or receiver of, for

example, Fannie Mae, it steps “into Fannie Mae’s private shoes” and “shed[s] its government character” altogether. Herron v. Fannie Mae, 861 F.3d 160, 169

(D.C. Cir. 2017) (quotations and alterations omitted).

Thus, when the FHFA acts as conservator or receiver,

it is no different from an Article II perspective than the

CEOs of Fannie Mae and Freddie Mac. The FHFA’s

activities as conservator or receiver therefore should

not trigger separation-of-powers concerns.

In any event, even if the FHFA’s role as conservator or receiver did implicate separation-of-powers limitations, its conservatorship or receivership powers—

like its regulatory powers—are focused solely upon the

13 GSEs within its purview, and federal law spells out

at length how the FHFA shall exercise those powers.

See 12 U.S.C. § 4617. In short, at every turn, the powers of the FHFA are narrowly tailored to overseeing

the GSEs, and these powers are clearly defined and

limited by federal law. The FHFA is thus materially

different from the CFPB.

Second, unlike the CFPB, the FHFA “regulates

primarily Government-sponsored enterprises, not

purely private actors.” Seila Law, 140 S. Ct. at 2202.

That distinction is important. After all, “[t]he structural principles secured by the separation of powers

protect the individual.” Bond, 564 U.S. at 222; see

Seila Law, 140 S. Ct. at 2202 (“structural protections”

are “critical to preserving liberty” (quoting Bowsher v.

Synar, 478 U.S. 714, 730 (1986))); Wellness Intern. Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1955 (2015) (Roberts, J., dissenting) (“the values of liberty and accountability protected by the separation of powers belong

not to any branch of the Government but to the Nation

as a whole”).

In fact, in Seila Law, this Court contrasted the

CFPB with the independent counsel at issue in Morrison, noting that although the independent counsel had

the power to initiate criminal investigations and prosecutions, its power was “trained inward to high-ranking Governmental actors identified by others.” 140 S.

Ct. at 2200 (emphasis added). Seila Law also distinguished the Office of the Special Counsel, which “exercises only limited jurisdiction to enforce certain rules

governing Federal Government employers and employees,” and “does not bind private parties at all.” Id. at

2201-02 (emphasis added). By contrast, in the Court’s

view, the CFPB Director “has the authority to bring

the coercive power of the state to bear on millions of

private citizens and businesses, imposing even billiondollar penalties through administrative adjudications

and civil actions.” Id. at 2200-01.

Although the FHFA is a financial regulatory

agency, its jurisdiction is much more like that of the

independent counsel and the Office of Special Counsel

than that of the CFPB. The FHFA regulates government-sponsored entities. Indeed, Fannie and Freddie

enjoy billions of dollars of effective federal subsidies

based on the federal government’s implicit backing, see

generally Wayne Passmore, The GSE Implicit Subsidy

and the Value of Government Ambiguity, 33 Real Est.

Econ. 465, 465-66 (2005), and are exempt from various

regulations and tax obligations, see, e.g., 12 U.S.C.

§ 1719(d) & (e) (GSE securities are “exempt securities

within the meaning of laws administered by the

[SEC]”). Moreover, they were created by Congress to

serve a public purpose: to “provide stability in the secondary market for residential mortgages,” to “increas[e] the liquidity of mortgage investments,” and to

“promote access to mortgage credit throughout the Nation.” 12 U.S.C. § 1716; see id. § 1717. In short, the

only entities over which the FHFA has regulatory authority are themselves created by the government,

subsidized by the government, and regulated by the

government. The constitutional separation-of-powers

are necessarily less relevant where the FHFA does not

regulate “purely private actors,” Seila Law, 140 S. Ct.

at 2202.

To be sure, private individuals, including the private Petitioners here, invest in the GSEs and can

therefore be affected by the FHFA’s decisions as conservator, receiver, or regulator of the GSEs. But any

investment in the GSEs is purely voluntary. And investors in the GSEs are well aware when they invest

that the GSEs are government-sponsored and therefore subject to greater governmental regulation and

control. In fact, investors likely relied on the implicit

backing of the United States government—including

the possibility that the GSEs would be rescued by the

government if they failed—when they invested in

them. That makes the FHFA far different from the

CFPB, which can regulate “any covered person”—that

is, “any person that engages in offering or providing a

consumer financial product or service,” 12 U.S.C.

§ 5481(6)(A)—who engages in “any unfair, deceptive,

or abusive act or practice” as the CFPB determines by

regulation and adjudication. Id. § 5536(a)(1) (emphases added). In short, “[t]he FHFA’s relationship with

the public . . . ultimately rests on voluntary choices rather than sovereign commands.” Br. for Court-Appointed Amicus Curiae 30.

***

Seila Law does not dictate the outcome here. Unlike the CFPB, the FHFA does not have broad-based

power to regulate commercial activities. In fact, it

does not have the power to regulate private individuals or entities at all. Rather, its jurisdiction is narrowly focused on regulating, or acting as conservator

or receiver for, 13 government-sponsored entities that

serve public missions and are themselves carefully

regulated by statute. The FHFA therefore does not

“wield[] significant executive power,” Seila Law, 140 S.

Ct. at 2192, and under this Court’s decision in Seila

Law, Congress can choose to impose a for-cause restriction on the President’s power to remove the

FHFA’s Director.

CONCLUSION

For the foregoing reasons, this Court should reverse.

Respectfully submitted,

ELIZABETH B. WYDRA

BRIANNE J. GOROD*

BRIAN R. FRAZELLE

ASHWIN P. PHATAK

CONSTITUTIONAL

ACCOUNTABILITY CENTER

1200 18th Street NW, Suite 501

Washington, D.C. 20036

(202) 296-6889

brianne@theusconstitution.org

Counsel for Amicus Curiae

October 30, 2020

* Counsel of Record

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.