Collins v. Yellen
The Supreme Court ruled that a law protecting the head of the federal agency overseeing Fannie Mae and Freddie Mac from being fired without cause was unconstitutional — but refused to void the 2012 financial agreement that funneled the companies' earnings to the Treasury, leaving shareholders' chances of recovering money uncertain.
The decision extends the Court's 2020 ruling in Seila Law to any single-director independent agency, regardless of how much power it wields, raising questions about whether similar protections at other federal agencies can survive.
How it got here: The district court dismissed shareholders' claims; the Fifth Circuit reversed in part, finding the FHFA's structure unconstitutional; both sides petitioned the Supreme Court, which granted review of the consolidated cases.
The Case in Depth
What happened
When the housing market collapsed in 2008, Congress created the Federal Housing Finance Agency to oversee Fannie Mae and Freddie Mac, the two government-backed companies that dominate the U.S. mortgage market. In 2012, the FHFA agreed to a deal requiring the companies to hand over virtually all of their quarterly earnings to the Treasury Department — a transfer totaling roughly $200 billion. Shareholders who lost value sued, challenging both the legality of the deal and the constitutional structure of the FHFA, whose director could be fired only "for cause."
The question before the Court
Did Congress unconstitutionally shield the head of the agency overseeing Fannie Mae and Freddie Mac from being fired at will by the president, and can shareholders recover the billions swept from the companies to the government under a 2012 financial deal?
The Court's answer
Partly — on the statutory claim, the Court ruled against the shareholders. A provision of the Housing and Economic Recovery Act bars courts from interfering with the FHFA's conservatorship decisions, and the agency acted within its broad authority when it agreed to the variable dividend formula — which was designed to stabilize the mortgage market even at the expense of the companies and their shareholders.
On the constitutional claim, the Court ruled yes: the law protecting the FHFA's director from being fired without cause violated the separation of powers. Applying its 2020 ruling in Seila Law, the Court held that any independent agency led by a single director whose removal Congress has restricted is unconstitutional. But the Court refused to void the 2012 financial deal or order the government to return the money, instead sending the case back to lower courts to determine whether the unconstitutional removal restriction actually caused the shareholders harm — a difficult standard to meet.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Shareholders who lost billions when the government swept Fannie Mae and Freddie Mac's profits face a difficult road to any financial recovery — lower courts must now determine whether the unconstitutional removal protection actually influenced the disputed decision. More broadly, the ruling signals that Congress has little room to shield single-director agency heads from presidential firing, potentially affecting other regulators with similar structures.
What changes now
The case returns to lower federal courts to determine whether the unconstitutional removal restriction actually influenced the 2012 financial deal — for instance, by affecting whether the President might have replaced an FHFA director who would have acted differently. The statutory claim is permanently dismissed. The broader constitutional ruling takes immediate effect, meaning the FHFA director is now removable by the President at will under the statute as fixed by the Court's severance of the for-cause restriction.
What this does not decide
The Court explicitly declined to rule on the constitutionality of removal restrictions at other agencies, including the Social Security Administration and the Office of Special Counsel. It also did not decide whether the shareholders are entitled to any money damages — that question, and the government's laches defense, were sent back to lower courts.
Concurrences and dissents
Concurrence — Justice Thomas
Justice Thomas joined the majority in full but wrote separately to flag what he sees as an unresolved foundational problem in removal-restriction cases. He argued that finding a removal restriction unconstitutional does not automatically make the agency's actions unlawful. Because the directors were properly appointed executive officers whom the President could always have removed under the Constitution (which automatically displaces any conflicting statute), no director ever lacked authority to act. He doubted the shareholders could show that any relevant FHFA action was actually unlawful.
Concurrence in part — Justice Kagan
Justice Kagan agreed on the statutory ruling and joined the majority's remedial analysis, but concurred only in the judgment on the constitutional question. She explained that stare decisis forced her to agree the removal restriction was unconstitutional under Seila Law, even though she had vigorously dissented from that decision. She objected on two grounds: the majority's political theory about electoral accountability was flawed, and the majority unnecessarily extended Seila Law beyond its stated 'significant executive power' limitation — a broadening she said violated the majority's own obligation to respect precedent.
Concurrence — Justice Gorsuch
Justice Gorsuch agreed the removal restriction was unconstitutional but dissented from the Court's remedial approach. In his view, when an officer acts without constitutional authority — whether through an improper appointment or unconstitutional insulation from removal — the traditional remedy is to set the action aside as void, not to engage in speculation about whether the President would have fired the officer. He argued the Court's novel approach requiring a showing that the President actually would have intervened was unprecedented, unworkable, and inconsistent with prior cases.
Dissent in part — Justice Sotomayor
Justice Sotomayor dissented from the constitutional holding, arguing the FHFA does not exercise 'significant executive power' as Seila Law required before invalidating a single-director agency's removal protection. In her view, the FHFA's narrow regulatory mandate, its focus on government-sponsored enterprises rather than private parties, and historical traditions of financial regulator independence all support Congress's power to insulate the FHFA director. She accused the majority of silently disavowing the very distinctions it had drawn just one term earlier in Seila Law.
How the Court got there
The legal reasoning, step by step
- The Housing and Economic Recovery Act's 'anti-injunction clause' bars courts from taking any action to restrain the FHFA's conservatorship powers. Because the FHFA acted within its broad conservatorship authority — which uniquely allows it to act in the interests of the agency and the public, not just the companies being conserved — when it adopted the variable dividend formula, no court could step in to challenge or undo that decision.
- Before reaching the constitutional question, the Court cleared several procedural hurdles: shareholders had concrete financial injury from the wealth transfer, giving them standing to sue; the later fourth amendment did not moot the case because shareholders still sought retrospective relief; a succession clause in the law did not strip shareholders of their constitutional right to challenge the removal restriction; and because confirmed FHFA directors kept implementing the deal after the acting director signed it, the harm continued under officials who were unconstitutionally shielded from removal.
- The Court's 2020 decision in Seila Law LLC v. CFPB — which struck down the Consumer Financial Protection Bureau director's for-cause removal protection — applied directly. Both the CFPB and the FHFA are led by a single director, and both statutes restrict presidential removal power to 'for cause' situations. The Court rejected arguments that the FHFA's narrower authority or its focus on government-sponsored enterprises rather than private parties distinguished it from the CFPB.
- The Constitution's structure requires the President to be able to remove executive officers at will in order to maintain democratic accountability over those who exercise executive power. The removal power allows the President to supervise subordinates, enforce policies the electorate chose, and ensure effective government — purposes that apply regardless of an agency's size or scope. Even 'modest restrictions' on that power are unconstitutional when a single director heads the agency.
- On remedy, the Court declined to void the 2012 agreement. The officers who adopted and implemented it were properly appointed and had legal authority to act — the only constitutional defect was the unlawful limit on their removal, not any flaw in how they were chosen or what powers they held. Unlike cases where an official exercised power they did not lawfully possess, these directors were entitled to do what they did. The unconstitutional restriction could still have caused compensable harm — for example, if the President might have fired a director who would then have renegotiated the financial deal — so the question of actual harm was sent back to lower courts.
Doctrinal impact
Cases affected by this decision
Reaffirms Seila Law LLC v. Consumer Financial Protection Bureau (591 U.S. ___)
The Court applied Seila Law's rule against single-director for-cause removal protections to the FHFA, extending its reach.
Reaffirms Shurtleff v. United States (189 U.S. 311)
Reaffirmed the presumption that an officer serves at the President's pleasure when a statute is silent on removal.