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Federal Court Puts Progressive Bureaucrats on Notice: The Constitution Is Back In Business

On Monday, the 5th Circuit Court of Appeals breathed new life into the Constitution in an era of stifling bureaucratic "progressivism." For nearly 100 years, progressive leaders have been creating administrative agencies that effectively insulate the process of lawmaking from the clear limits in the Constitution. This ruling will help pare back the bureaucratic hydra.

"Agencies that have been making law now for decades are going to get more scrutiny, I'm sure of it," Thomas Jipping, senior legal fellow at the Heritage Foundation, told PJ Media on Tuesday. "This case is a strong precedent for a core principle of the Constitution."

In Collins v. Mnuchin, the 5th Circuit ruled that the Federal Housing Finance Agency (FHFA) was unconstitutional because it had too much "insulation" from the presidency. As an administrative agency, FHFA came under the purview of the president's powers under the Constitution. The 5th Circuit ruled that Congress had insulated the agency from presidential control, effectively stealing his authority under Article II of the Constitution.

"The outer limit of Congress's ability to insulate independent agencies from executive oversight is the President's Article II obligation to ensure that the nation's laws are faithfully executed," Chief Judge Carl Stewart and Judges Catharina Haynes and Don Willett wrote in a unanimous ruling (with partial dissents from Stewart and Willett).

Any "excessive insulation upsets the separation of powers both by allowing Congress to weaken the President’s performance of his constitutionally mandated duties and by allowing Congress to accumulate power for itself. Therefore, Congress cannot enshroud an agency in layers of independence-promoting insulation to the point at which the President cannot adequately control the agency’s behavior."

The court ruled that FHFA is unconstitutional because of the "combined effect" of five reasons: the agency's director can only be removed "for cause," the agency has only one director with complete power, there is no requirement for bipartisan leadership, FHFA's funding comes outside the normal appropriations process, and the Federal Housing Finance Oversight Board has a purely advisory oversight role.

To remedy this, the court struck down part of the law creating FHFA, the 2008 Housing and Economic Recovery Act (HERA), and made the FHFA director dismissible for any reason.

The case involved shareholders for the two government-chartered private loan companies: the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). In the terms of a 2012 agreement between FHFA and the Treasury Department, Treasury provided billions of taxpayer dollars in capital, but Fannie and Freddie were required to pay the Treasury quarterly dividends equal to their entire net worth. Investors were ticked.

The 5th Circuit did not make a specific ruling on the agreement in question, but it did remand the case back to a lower court to handle details.