The Supreme Court on Wednesday gave President Joe Biden greater control over the future of Fannie Mae and Freddie Mac, the two companies that dominate the U.S. mortgage market, ruling that he has the authority to fire their regulator.

The decision offers Biden the chance to replace the libertarian economist who was appointed by President Donald Trump to head the agency and has sought to reduce the government’s role in the housing market since he took office in 2019.

The court in a split decision found that the leadership structure of the Federal Housing Finance Agency was unconstitutional because of a provision that the president could only remove its director for cause, not at will. The widely anticipated decision mirrored the court’s ruling on the similarly structured Consumer Financial Protection Bureau last year.

The court also unanimously dismissed a claim by Fannie and Freddie shareholders who sued the government to invalidate the 2012 decision to send the companies’ profits directly to Treasury. President George W. Bush’s administration took control of Fannie and Freddie in September 2008 to prevent their collapse during the housing crisis, and they remain under government conservatorship after years of debate over how to overhaul their operations.

“We conclude only that under the terms of the Recovery Act, the FHFA did not exceed its authority as a conservator, and therefore the anti-injunction clause bars the shareholders’ statutory claim,” Justice Samuel Alito wrote in the opinion of the court.

The high court sent the case back to the Court of Appeals for the Fifth Circuit for further proceedings to “determine what remedy, if any, the shareholders are entitled to receive on their constitutional claim.”

Fannie and Freddie, which buy mortgages from lenders and bundle them into securities for sale to investors, stand behind about half of the $11 trillion U.S. residential mortgage market.

The companies have sent about $300 billion in profits to the government since their federal takeover.

The Trump administration, keen to release Fannie and Freddie from government control, allowed them to start building capital again under FHFA Director Mark Calabria. It was not immediately clear how quickly, or if, Biden would move to replace Calabria, who also served as chief economist to former Vice President Mike Pence.

Many Democrats are wary of releasing Fannie and Freddie, fearing that the newly privatized companies would focus less on affordable housing. The companies have also played a crucial role in the government’s response to the economic crisis caused by the pandemic by giving distressed borrowers the option to pause mortgage payments for up to 18 months.

Original Source: politico.com

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Original Article: politico.eu