Court rules government caretaker of Fannie, Freddie unconstitutional

The government caretaker of Fannie Mae and Freddie Mac is unconstitutional, a federal court has ruled.

The Federal Housing Finance Agency, created in in the wake of the 2008 financial crisis as the housing market collapsed, violates the Constitution because it does not answer to the president, a three-judge panel for the U.S. Court of Appeals for the Fifth Circuit ruled Tuesday, the Washington Examiner reported.

The specific issue the court addressed is that FHFA is run by a single director who cannot be removed by the president except for cause. Unlike other federal agencies, the FHFA does not have a bipartisan commission and does not receive funding from Congress. Those features protect it from executive oversight, according to the court.

The situation bears watching for credit unions because it is very similar to that of the Bureau of Consumer Financial Protection (BCFP). Federal courts have found that the BCFP is unconstitutional because it is led by a single director