Collins v. Yellen
The Supreme Court struck down the law protecting the head of the agency that oversees Fannie Mae and Freddie Mac from being fired by the President, ruling that such single-director independent agencies must be subject to presidential control.
The decision also blocked shareholders of the two companies from automatically unwinding a 2012 deal that transferred hundreds of billions of dollars to the federal government, sending them back to lower courts with a steep burden to prove actual harm.
How it got here: Shareholders sued in Texas federal district court; the district court dismissed; the Fifth Circuit en banc reversed in part, holding the removal restriction unconstitutional but declining to undo the deal; both sides petitioned the Supreme Court, which agreed to hear the case.
The Case in Depth
What happened
Fannie Mae and Freddie Mac are government-created companies that back roughly half of all U.S. home mortgages. During the 2008 financial crisis, the Federal Housing Finance Agency took over both companies and in 2012 struck a deal with the Treasury Department requiring the companies to hand over nearly all their profits each quarter — a formula that transferred well over $200 billion to the government. Shareholders argued the deal was unlawful and that the agency's structure was unconstitutional because its director could only be fired "for cause."
The question before the Court
Could Congress limit the President's ability to fire the director of the agency overseeing Fannie Mae and Freddie Mac, and if not, are shareholders of those companies entitled to have a 2012 deal that swept hundreds of billions of their profits to Treasury reversed?
The Court's answer
No, shareholders cannot challenge the "net worth sweep" deal in court. The Recovery Act's anti-injunction clause bars any court from restraining the FHFA when acting as a conservator, and the third amendment fell within the agency's broad conservatorship authority — which explicitly allows the FHFA to act in its own best interests, not just those of the companies or their shareholders.
Yes, the law protecting the FHFA director from being fired except "for cause" is unconstitutional. Following its 2020 ruling on a similar agency, the Court held that any single-director independent agency head must be removable by the President at will. However, shareholders cannot automatically get the deal reversed: because all FHFA directors were properly appointed, their actions are not void from the start. Shareholders must prove in lower courts that the unconstitutional removal restriction actually caused them harm.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
The President can now remove the head of the Federal Housing Finance Agency at will, giving the White House more direct control over the agency that shapes the mortgage market for millions of American homeowners. Shareholders of Fannie Mae and Freddie Mac who lost billions in the 2012 "net worth sweep" deal must still litigate in lower courts and may recover nothing.
What changes now
The case returns to lower courts, which must decide whether shareholders can show that the unconstitutional removal restriction actually harmed them — for example, by demonstrating the President would have replaced a director who was implementing the deal. The "net worth sweep" deal itself, replaced by a fourth amendment in January 2021, is not automatically undone. Shareholders face a challenging factual inquiry with no guarantee of any recovery.
What this does not decide
The Court declined to decide whether the removal restriction applied to Acting Directors (holding it does not). It also expressly reserved judgment on whether similar removal restrictions at other agencies — such as the Social Security Administration, the Office of Special Counsel, or multi-member commissions — are constitutional. Whether shareholders are entitled to any damages remains entirely open.
Concurrences and dissents
Concurrence — Justice Thomas
Justice Thomas joined the majority in full but wrote separately to flag what he sees as an underexamined problem: even if a removal restriction is unconstitutional, the Government does not necessarily act unlawfully. Because the FHFA directors were properly appointed executive officers, their actions were not void. He expressed serious doubt that shareholders could ultimately show any director acted unlawfully, and noted the Fifth Circuit could address that question on remand.
Concurrence in part — Justice Kagan
Justice Kagan agreed with the statutory analysis and agreed — on stare decisis grounds only — that the removal restriction is unconstitutional under Seila Law, a decision she had vigorously dissented from. She objected, however, that the majority expanded Seila Law's rule by dropping its 'significant executive power' limitation without justification. She also joined the remedy analysis, noting that the Fifth Circuit's prior reasoning may have already answered the harm question, potentially ending the remand quickly. Breyer and Sotomayor joined only her remedial analysis (Part II).
Concurrence in part — Justice Gorsuch
Justice Gorsuch agreed fully with the constitutional merits but dissented from the remedy analysis. He argued that unconstitutional removal restrictions, like improper appointments, should render the affected official's actions void — requiring no speculation about what the President might have done. He criticized the majority's novel approach as impossible to apply practically, accused it of implicitly and illegitimately severing a statutory provision to reach the desired result, and would have simply instructed lower courts to set aside the Director's unconstitutional actions.
Dissent in part — Justice Sotomayor
Justice Sotomayor agreed with the statutory and remedial analyses but dissented from the constitutional holding. She argued the majority disavowed the very distinctions it had drawn just last Term in Seila Law, which repeatedly limited its holding to single-director agencies with 'significant executive power.' The FHFA does not wield significant executive power — its authority is narrower than even the 1935 FTC — and its power is directed at government-sponsored enterprises rather than private citizens. She would have upheld the FHFA director's independence under existing precedent.
How the Court got there
The legal reasoning, step by step
- The Recovery Act contains an 'anti-injunction clause' barring any court from restraining the FHFA while it acts as a conservator. The shareholders' statutory challenge depended on showing the third amendment exceeded the FHFA's conservatorship authority — but the Act's conservatorship power is broader than typical: the FHFA may act in its own best interests and the public's, not just the companies'. The anti-injunction clause therefore blocked the claim.
- The third amendment — which replaced a fixed quarterly dividend with a formula sweeping all of the companies' net worth to Treasury — was a reasonable exercise of that broad authority. The FHFA could conclude that eliminating the risk of the companies draining Treasury's capital commitment was in the best interest of market stability, even if it was not the best business decision for shareholders.
- On the constitutional question, the Court applied its 2020 ruling in Seila Law LLC v. Consumer Financial Protection Bureau, which struck down a nearly identical removal restriction for the CFPB on the ground that a single-director independent agency head insulated from presidential control 'lacks a foundation in historical practice and clashes with constitutional structure.' Because the FHFA is also led by a single director whose removal is restricted, the same rule applies.
- The Court rejected arguments that the constitutional analysis should turn on how much power an agency wields. The President's removal authority ensures that executive branch officials remain accountable to the public through the President — a purpose that applies regardless of the agency's size or the breadth of its regulatory footprint. Courts are also poorly suited to rank agencies by relative power on a case-by-case basis.
- On remedy, the Court drew a distinction between officials who were improperly appointed (whose actions are typically void from the start) and officials who were properly appointed but merely shielded from removal. Because every FHFA director was lawfully appointed and held legitimate executive authority, there is no basis to declare their implementation of the third amendment automatically void.
- Even so, the unconstitutional removal restriction could still cause compensable harm — for instance, if the President had tried to remove a director and was blocked, or if a director's behavior was shaped by the belief that he was insulated from firing. Whether such harm occurred in this case must be resolved by lower courts in the first instance.
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 — single-director independent agency heads must be removable at will — to the FHFA.