Collins v. Yellen - Case Summary

Legal Case Summary

Facts

In this case, the shareholders of Fannie Mae and Freddie Mac, led by Collins, disputed the constitutionality of the Federal Housing Finance Agency (FHFA). It was initiated due to the 2012 agreement between FHFA and the U.S. Treasury that the latter received almost all of Fannie Mae's and Freddie Mac's profits (Alden, 2022).

The Plaintiffs highlighted the structure of the FHFA. They argued that it's headed by a single director who can only be removed by the President 'for cause' and not 'at will'. This, they posited, infringes upon the separation of powers and is therefore unconstitutional (Simmons, 2021).

Issues

The significant issue raised in this case was the constitutionality of the structure of FHFA. The question that arises was whether the structure of FHFA, which is headed by a single director who could only be removed 'for cause', infralled the separation of powers and hence is unconstitutional (Simmons, 2021).

Another issue was whether relief was available for the shareholders if it is held that the structure is indeed unconstitutional. The dispute here was related to the 2012 agreement that mandated almost all profits of the companies to go to the U.S. Treasury (Alden, 2022).

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Analysis

This case is significant because it builds upon a recent decision, Seila Law v. Consumer Financial Protection Bureau, where the Court ruled that the structure of the Consumer Financial Protection Bureau (CFPB) was unconstitutional on similar grounds (Simmons, 2021).

The decision in this case need not always lead to drastic changes. Specifically, in this case, after the 'for cause' provision was struck down, it converted the status of the FHFA Director into a removable 'at will' employee. However, this did not lead to an unwinding of actions taken by the FHFA previously (Alden, 2022).

Decision

In this case, the U.S. Supreme Court ruled in a 7-2 decision that the 'for cause' removal protection of the FHFA Director was indeed unconstitutional. Justice Samuel Alito wrote the opinion of the Court and stated that such a structure violated the separation of powers (Simmons, 2021).

However, the Court did not provide the plaintiffs any relief concerning their claims about the 2012 agreement. It held that the unconstitutional removal clause did not play a role in the agreement. Hence, the unperturbed operation of the agreement was confirmed (Alden, 2022).

References

• Alden, William T. (2022). What the Supreme Court's Ruling Means for Fannie Mae, Freddie Mac and their Investors. New York Times.
• Simmons, Kelley (2021). Collins v. Yellen. Cornell Law School Legal Information Institute.

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Journalist Brief

The Supreme Court of the United States has decided that the Federal Housing Finance Agency (FHFA)'s structure is unconstitutional. It was headed by a single director who had legal protection against being removed without significant cause. The court, however, held this to be an infringement on the separation of powers principle, which is a cornerstone of the U.S. Constitution. The case had another part where shareholders of Fannie Mae and Freddie Mac challenged an agreement that directed most of the companies' profits to the U.S. government. On this point, the court denied the shareholders any relief, saying that the unconstitutional protection clause did not influence the agreement.

FAQs

What was the outcome of the Collins v. Yellen case?

Answer: The U.S. Supreme Court ruled that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional, but did not provide any relief to the plaintiffs regarding their claims about an agreement directing company profits to the U.S. Treasury.

Why was the structure of FHFA found unconstitutional?

Answer: The structure was found unconstitutional because it violated the separation of powers - the FHFA was headed by a single director protected against removal without significant cause.

What does the court's ruling mean for Fannie Mae and Freddie Mac?

Answer: The court's ruling did not disrupt the operation of Fannie Mae and Freddie Mac, as it did not grant any relief to the plaintiffs regarding the agreement directing most of the companies' profits to the U.S. government.