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Collins v. Mnuchin

United States Court of Appeals, Fifth Circuit

July 16, 2018


          Appeal from the United States District Court for the Southern District of Texas

          Before STEWART, Chief Judge, and HAYNES and WILLETT, Circuit Judges.

          PER CURIAM. [1]

         A decade ago, the United States was engulfed in perhaps the worst financial crisis since the Great Depression. Toxic mortgage debt had poisoned the global financial system. Hoping to reverse a national housing-market meltdown, Congress passed the Housing and Economic Recovery Act of 2008 ("HERA"), Pub. L. No. 110-289, 122 Stat. 2654 (codified in various sections of 12 U.S.C.). Among other things, HERA created a new independent federal entity-the Federal Housing Finance Agency ("FHFA")-to oversee two of the nation's largest financial companies, government-chartered mainstays of the U.S. mortgage market: the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac").

         Since their inception, these twin mortgage-finance giants have always been government-sponsored entities ("GSEs"). But Fannie and Freddie are also private corporations with private stockholders, and many investors are disenchanted with the Federal Government's management. This case is the latest in a series of shareholder challenges to an agreement between the FHFA, as conservator to Fannie and Freddie, and the Treasury Department. Under the 2012 agreement, Treasury provided billions of taxpayer dollars in capital. In exchange, Fannie and Freddie were required to pay Treasury quarterly dividends equal to their entire net worth. This exchange is known as the "net worth sweep," and aggrieved investors are unhappy with the bailout terms.

         Plaintiffs-Appellants Patrick J. Collins, Marcus J. Liotta, and William M. Hitchcock (collectively "Shareholders") are Fannie Mae and Freddie Mac shareholders. They sued the FHFA and its Director, as well as Treasury and its Secretary, arguing that the agreement rendered their shares valueless. They contend that Treasury and the FHFA (collectively the "Agencies") exceeded their statutory authority under HERA and that the agreement was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) ("APA"). They also claim that the FHFA is unconstitutionally structured in violation of Article II, §§ 1 and 3 of the Constitution because, among other things, the agency is headed by a single Director removable only for cause, does not depend on congressional appropriations, and evades meaningful judicial review. The district court dismissed the Shareholders' statutory claims and granted summary judgment in favor of the Agencies on the constitutional claim.

         Because we find that the FHFA acted within its statutory authority by adopting the net worth sweep, we hold that the Shareholders' APA claims are barred by § 4617(f). But we also find that the FHFA is unconstitutionally structured and violates the separation of powers. Accordingly, we AFFIRM in part and REVERSE in part.

         I. Background

         A. Fannie and Freddie

         The foundation of the United States housing market is built on two entities: Fannie Mae and Freddie Mac. Congress created Fannie Mae in 1938 to "provide stability in the secondary market for residential mortgages," to "increas[e] the liquidity of mortgage investments," and to "promote access to mortgage credit throughout the Nation."[2] Congress created Freddie Mac in 1970 to "increase the availability of mortgage credit for the financing of urgently needed housing."[3] Both Fannie and Freddie are now publicly traded, for-profit corporations. Together, they purchase and guarantee mortgages originating in private banks and bundle them into mortgage-backed securities. In doing so, these GSEs leverage shareholder investments to provide liquidity to the residential mortgage market, ensuring that homeownership is a realistic goal for American families.

         B. The Recession

         In 2007, the housing market collapsed, [4] and the United States economy fell into a severe recession. At the time, Fannie and Freddie controlled combined mortgage portfolios valued at approximately $5 trillion-nearly half of the United States mortgage market. As essential players in the housing market, Fannie and Freddie suffered multi-billion dollar losses. Indeed, the GSEs lost more in 2008 ($108 billion) than they had earned in the previous thirty-seven years combined ($95 billion).[5] Yet the GSEs remained solvent. Because they had taken a relatively conservative approach to the riskier mortgages that were issued in the years preceding the recession, they remained in comparatively sound financial condition. As a result, Fannie and Freddie continued to support the United States home mortgage system as distressed banks failed.

         C. The FHFA and HERA

         During the summer of 2008, President Bush signed HERA into law in an effort to protect the fragile national economy from further losses. HERA established the FHFA as an "independent" agency and classified Fannie and Freddie as "regulated entit[ies]" subject to the direct "supervision" of the FHFA.[6] Separately, HERA granted Treasury temporary authority "to purchase any obligations and other securities" issued by the GSEs, [7] so long as Treasury determined that the terms of purchase would "protect the taxpayer, "[8]and imposed "limitations on the payment of dividends."[9] HERA terminated Treasury's authority to purchase securities on December 31, 2009.[10] After that, Treasury was only authorized to "hold, exercise any rights received in connection with, or sell, any obligations or securities [it] purchased."[11]

         How Congress chose to structure the FHFA through HERA is central to this appeal.

         1. Authority

         The FHFA possesses broad discretion to exercise regulatory and enforcement authority over the GSEs' operations.

         We first outline the FHFA's regulatory authority. HERA charges the FHFA Director with the broad duty to "oversee the prudential operations" of the GSEs and to ensure that: the GSEs "operate[] in a safe and sound manner, including maintenance of adequate capital and internal controls;" "the operations and activities of each regulated entity foster liquid, efficient, competitive, and resilient national housing finance markets;" and the GSEs' activities "are consistent with the public interest."[12] The Director may issue "any regulations, guidelines, or orders necessary to carry out" this duty.[13]

         Next, we turn to FHFA's enforcement authority. For one, the Director may issue and serve a "notice of charges" to the GSE or an entity-affiliated party if the party is, or is reasonably suspected of, engaging in "unsafe or unsound practice[s] in conducting the business" of the GSE or otherwise violating laws, rules, or regulations imposed by the Director.[14] The notice of charge schedules a formal hearing, during which the FHFA determines whether to issue a cease and desist order.[15] After the hearing, the Director may issue the order and may require the entity to take "affirmative action to correct or remedy" the violation.[16] The Director can also: (1) obtain an injunction[17] in federal court to enforce his cease and desist orders; (2) seek judicial enforcement of outstanding notices or orders that the FHFA issued;[18] and (3) issue subpoenas, [19] which may be enforced in federal court.[20] Finally, the Director may "require the regulated entity to take such other action as the Director determines appropriate."[21]

         Under certain circumstances, the Director may impose civil monetary penalties "on any regulated entity or any entity-affiliated party."[22] The Director must abide by certain conditions before imposing a penalty, such as providing notice to the entity and providing the opportunity for a hearing[23]before the FHFA. There are tiers of potential penalties depending on the severity of the offense, and the Director has wide discretion to determine the appropriate penalty.[24] The penalty "shall not be subject to review, except" by the D.C. Circuit.[25] If the penalized entity does not comply, the Director may sue to obtain a monetary judgment and "the validity and appropriateness of the order of the Director imposing the penalty shall not be subject to review."[26]

         HERA also authorizes the FHFA Director to appoint the FHFA as either conservator or receiver for the GSEs, "for the purpose of reorganizing, rehabilitating, or winding up the[ir] affairs."[27]

         Once appointed conservator or receiver, the FHFA enjoys sweeping authority over GSE operations. For example, the FHFA "may . . . take over the assets of and operate the regulated entity with all the powers of the shareholders, the directors, and the officers of the regulated entity and conduct all business of the regulated entity."[28] The FHFA may also "collect all obligations and money due," "perform all functions of the regulated entity in the name of the regulated entity which are consistent with the appointment as conservator or receiver," "preserve and conserve the assets and property of the regulated entity," and "provide by contract for assistance in fulfilling any function, activity, action, or duty of the Agency as conservator or receiver."[29]And upon appointment, the FHFA "immediately succeed[s] to all rights, titles, powers, and privileges of such regulated entity with respect to the regulated entity and the assets of the regulated entity."[30] The FHFA also has discretion to "transfer or sell any asset or liability of the regulated entity in default, and may do so without any approval, assignment, or consent."[31]

         More specifically, as conservator, HERA authorizes the FHFA to "take such action as may be . . . (i) necessary to put the regulated entity in a sound and solvent condition; and (ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity."[32]

         The FHFA also has broad incidental powers when it acts as conservator or receiver. The FHFA may "exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this section, and such incidental powers as shall be necessary to carry out such powers," and it may "take any action authorized by this section, which the Agency determines is in the best interests of the regulated entity or the Agency."[33] The FHFA also has independent litigation authority; it may issue subpoenas, [34] "disaffirm or repudiate [certain] contract[s] or lease[s], "[35] and impose civil fines.[36]

         2. Structure

         The FHFA is led by a single Director, "appointed by the President, by and with the advice and consent of the Senate."[37] The Director must be a United States citizen who has "a demonstrated understanding of financial management or oversight, and ha[s] a demonstrated understanding of capital markets, including the mortgage securities markets and housing finance."[38]The Director is appointed for a five-year term[39] and may only be removed "for cause by the President."[40]

         The Director is also responsible for picking three Deputy Directors.[41]And the Director has substantial influence over how the Deputy Directors may exercise their authority.[42]

         The statute establishes the process for replacing a Director whose service terminates early due to "death, resignation, sickness, or absence."[43] In such case, "the President shall designate" a Deputy Director "to serve as acting Director until the return of the Director, or the appointment of a successor."[44]The newly appointed Director only serves the remainder of the former Director's term.[45] "An individual may serve as the Director after the expiration of the term for which appointed until a successor has been appointed."[46]

         3. Oversight

         Congress structured the FHFA as an independent agency.[47] The FHFA's operations as conservator are insulated from judicial review: "[N]o court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver."[48] Plus, the FHFA is funded through annual assessments collected from the "regulated entities" for reasonable costs and expenses of the running the FHFA.[49] The assessments are "not . . . subject to apportionment, "[50] and are "not . . . construed to be Government or public funds or appropriated money."[51]

         The FHFA is overseen by the Federal Housing Finance Oversight Board ("Board"), which "advise[s] the Director with respect to the overall strategies and policies in carrying out" his duties.[52] The four-member Board includes two cabinet-level Executive Branch officials-the Secretary of the Treasury and the Secretary of Housing and Urban Development-the FHFA Director, and the Securities and Exchange Commission ("SEC") Chairperson.[53] The FHFA Director is the Board's Chairperson.[54] The Board meets at least quarterly, but it can meet more frequently by notice of the Director.[55] Beyond that, Board members may require a special meeting through written notice to the Director.[56] The Board is responsible for testifying annually before Congress about, among other things, the "safety and soundness" of the GSEs, "their overall operational status," and the "performance of the [FHFA]."[57] The Board may not "exercise any executive authority, and the Director may not delegate to the Board any of the functions, powers, or duties of the Director."[58] That is, the Board cannot require the FHFA or Director to do much of anything; the Board can only order "a special meeting of the Board."[59]

         D. The Underlying Dispute

         On September 6, 2008, the FHFA's Acting Director placed the GSEs into conservatorship. The next day, Treasury entered into Preferred Stock Purchase Agreements ("PSPAs") with the GSEs. Under the PSPAs, Treasury purchased large amounts of stock, infusing the GSEs with additional capital to ensure liquidity and stability. Treasury also provided the GSEs with access to a capital commitment, initially capped at $100 billion per GSE, to keep them from defaulting. In return, Treasury received one million senior preferred shares in each GSE. Those shares entitled Treasury to (1) a $1 billion senior liquidation preference; (2) a dollar-for-dollar increase in that preference each time Fannie or Freddie drew on Treasury's funding commitment; (3) quarterly dividends the GSEs could pay either at a rate of 10% of Treasury's liquidation preference or as a commitment to increase the liquidation preference by 12%; (4) warrants allowing Treasury to purchase up to 79.9% of common stock; and (5) the possibility of periodic commitment fees over and above any dividends. The PSPAs prohibited the GSEs from "declar[ing] or pay[ing] any dividend (preferred or otherwise) or mak[ing] any other distribution (by reduction of capital or otherwise)" without Treasury's consent.

         Treasury and the FHFA subsequently amended the PSPAs. In May 2009, Treasury agreed to double its funding commitment to $200 billion for each GSE under the First Amendment. On December 24, 2009, Treasury agreed to further raise its commitment cap under the Second Amendment. This time, the cap was raised to an adjustable figure determined in part by the GSEs' quarterly cumulative losses between 2010 and 2012. On December 31, 2009, Treasury's authority to purchase GSE securities expired, leaving Treasury authorized only to "hold, exercise any rights received in connection with, or sell, any obligations or securities purchased."[60]

         As of August 8, 2012, the GSEs had drawn approximately $189 billion from Treasury's funding commitment. Yet the GSEs still struggled to generate capital to pay the 10% dividend owed to Treasury. As a result, the FHFA and Treasury adopted the Third Amendment to the PSPAs on August 17, 2012.

         The Third Amendment replaced the quarterly 10% dividend formula, with a requirement that the FHFA pay Treasury quarterly variable dividends equal to the GSEs' excess net worth after accounting for prescribed capital reserves. The capital reserve buffer started at $3 billion and decreased annually until it reached zero in 2018. Under the net worth sweep, the GSEs would no longer incur debt to make dividend payments, but they would also no longer accrue capital. Treasury also suspended the periodic commitment fee. Treasury believed this would "support a thoughtfully managed wind down" of the GSEs and observed that the GSEs "will not be allowed to retain profits, rebuild capital, [or] return to the market in their prior form."[61]

         The net worth sweep transferred significant capital from Fannie and Freddie to Treasury. In 2013, the GSEs paid Treasury $130 billion in dividends. The following year, they paid $40 billion. And in 2015, they paid $15.8 billion. In the first quarter of 2016, Fannie Mae paid Treasury $2.9 billion, and Freddie Mac paid no dividend at all. Between the final quarter in 2012 and the first quarter of 2017, the GSEs generated over $214 billion. Thus, under the net worth sweep Treasury essentially recovered what the GSEs had drawn on Treasury's funding commitment.

         E. Procedural History

         In October 2016, shareholders of Fannie Mae and Freddie Mac sued the FHFA and its Director, as well as Treasury and its Secretary, challenging the net worth sweep on both statutory and constitutional grounds. First, the Shareholders brought a claim under the APA claiming that the FHFA, in agreeing to the Third Amendment net worth sweep provision, exceeded its statutory authority as conservator under HERA, 12 U.S.C. § 4617(b)(2)(D). Second, the Shareholders brought claims against Treasury under the APA, 5 U.S.C. §§ 702, 706(2)(C), (D), arguing that Treasury exceeded its statutory authority under HERA, 12 U.S.C. §§ 1455(l)(4), 1719(g)(1)(B), (g)(4), by (1) purchasing securities after the sunset provision period, (2) failing to make the required determinations of necessity before purchasing securities, and (3) agreeing to the net worth sweep. Third, the Shareholders brought claims under the APA, 5 U.S.C. §§ 702, 706(2)(A), alleging that Treasury acted in an arbitrary and capricious manner by agreeing to the net worth sweep. Finally, the Shareholders brought a constitutional claim under Article II, §§ 1 and 3, alleging that the FHFA is unconstitutionally structured because, among other things, it is headed by a single Director removable only for cause. The Shareholders sought both declaratory and injunctive relief invalidating the Third Amendment and returning all dividend payments made to Treasury under the net worth sweep.

         The Agencies moved to dismiss the three statutory claims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) based on HERA's limitation on judicial review, 12 U.S.C. § 4617(f). Plaintiffs and Defendants filed cross-motions for summary judgment on the constitutional claim. The district court concluded, based on the D.C. Circuit's reasoning in Perry Capital L.L.C. v. Mnuchin, 848 F.3d 1072 (D.C. Cir. 2017), amended by 864 F.3d 591 (D.C. Cir. 2017), cert. denied, 138 S.Ct. 978 (2018), and cert. denied sub nom. Cacciapalle v. Fed. Hous. Fin. Agency, 138 S.Ct. 978 (2018), that the Shareholders "fail[ed] to demonstrate that the FHFA's conduct was outside the scope of its broad statutory authority as conservator." And that "the effect of any injunction or declaratory judgment aimed at Treasury's adoption of the Third Amendment would have just as direct and immediate an effect as if the injunction operated directly on FHFA." Thus, the district court granted the Agencies' motions to dismiss the statutory claims as "precluded by § 4617(f)." Finally, the court found that "FHFA's removal provision, when viewed in light of the agency's overall structure and purpose, does not impede the President's ability to perform his constitutional duty to take care that the laws are faithfully executed." The court therefore granted the FHFA's motion for summary judgment on the constitutional claim. The Shareholders timely appealed.

         II. Discussion

         This court "review[s] de novo a district court's rulings on a motion to dismiss and a motion for summary judgment, applying the same standard as the district court."[62] To survive a motion to dismiss, the Shareholders' complaint must state a valid claim for relief, viewed in the light most favorable to the plaintiff.[63] "[A] complaint must contain sufficient factual matter . . . to 'state a claim to relief that is plausible on its face.'"[64] "[M]ere conclusory statements" are insufficient to state a claim.[65] A claim is facially plausible only when a plaintiff pleads facts "allow[ing] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[66]

         A. Statutory Claims

         The Shareholders' statutory claims mirror the claims made against the FHFA that the D.C., Sixth, and Seventh Circuits have all rejected.[67] We reject the Shareholders' statutory claims based on the same well-reasoned basis common to those courts' opinions.[68] HERA bars courts from taking "any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver."[69] Because the FHFA acted within its statutory authority, any potential exception to that bar does not apply.[70] The bar similarly applies to claims against the Department of Treasury that would "affect the exercise of powers or functions of the Agency as a conservator or receiver."[71] Consequently, we lack authority to grant relief on any of the Shareholders' statutory claims.

         B. The Constitutional Claim

         The Shareholders claim the FHFA's structure violates the separation of powers because it is headed by a single Director removable only for cause. Despite statutory limitations on judicial review, we may exercise jurisdiction to consider a substantial constitutional claim.[72] Ordinarily, courts have a "duty . . . to construe the statute in order to save it from constitutional infirmities" and should be cautious of "overstat[ing] the matter" when describing the power and independence of the Director.[73] Before we examine the FHFA's structure, we must determine whether the Shareholders have standing to bring their claim.

         1. Standing

         Federal courts are confined to adjudicating actual "cases" and "controversies."[74] That "requirement is satisfied only where a plaintiff has standing."[75] "Standing is a question of law that we review de novo."[76] At its "irreducible constitutional minimum," standing requires plaintiffs "to demonstrate: they have suffered an 'injury in fact'; the injury is 'fairly traceable' to the defendant's actions; and the injury will 'likely . . . be redressed by a favorable decision.'"[77] The party invoking federal jurisdiction bears the burden of establishing these elements.[78] And a plaintiff must demonstrate standing for each claim asserted.[79]

         Standing for separation-of-powers claims is subject to a more relaxed inquiry: "Party litigants with sufficient concrete interests at stake may have standing to raise constitutional questions of separation of powers with respect to an agency designated to adjudicate their rights."[80] Under this standard, "a party is not required to show that he has received less favorable treatment than he would have if the agency were lawfully constituted."[81] In essence, the prophylactic, structural nature of the separation of powers justifies permitting claims beyond those where a "specific harm . . . can be identified."[82]

         The FHFA argues that the Shareholders lack standing to assert their separation-of-powers claim because the Shareholders' claimed injury[83] is not traceable to the removal provision, nor would it be redressed if the restriction were held unconstitutional.

         a. Injury-in-fact

         Generally, a plaintiff "must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties."[84]The shareholder standing rule "prohibits shareholders from initiating actions to enforce the rights of [a] corporation unless the corporation's management has refused to pursue the same action for reasons other than good-faith business judgment."[85] "[S]hareholder[s] with a direct, personal interest in a cause of action," however, may "bring suit even if the corporation's rights are also implicated."[86]

         The Shareholders assert that the unconstitutionally structured FHFA caused them direct economic injury-"[m]inority shareholders were directly and uniquely harmed by the expropriation of their rights" because this case "concern[s] the transfer of all minority shareholder economic rights to a single, majority shareholder."

         We agree. Divesting the Shareholders' property rights caused a direct injury.[87] In Bowsher v. Synar, for example, a statute required the President to issue an "order mandating the spending reductions specified by the Comptroller General."[88] The statute automatically suspended scheduled cost-of-living increases to National Treasury Employees Union members.[89] The Union filed suit alleging that the statute violated the separation of powers.[90]The Court found the Union had standing because it would "sustain injury by not receiving a scheduled increase in benefits."[91] The statutory deprivation of benefits was sufficient to injure Union members directly.[92]

         Here, the transfer of the Shareholders' economic rights to Treasury by an allegedly unlawfully constituted agency resembles the statutory deprivation of benefits to the Union members in Bowsher. The Shareholders are directly and uniquely affected by the net worth sweep.

         b. Causation

         Next, standing requires "a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the challenged action of the defendant."[93] Whether an injury is traceable to a defendant's conduct depends on "the causal connection between the assertedly unlawful conduct and the alleged injury."[94] The injury cannot be "the result of the independent action of some third party not before the court."[95]

         Because the FHFA was unconstitutionally insulated from executive control, the Shareholders argue that its actions are presumptively unconstitutional and thus void. In Landry v. FDIC, the D.C. Circuit noted that separation-of-powers matters justify a relaxed causation inquiry because "it will often be difficult or impossible for someone subject to a wrongly designed scheme to show that the design-the structure-played a causal role in his loss."[96] We endorse that inquiry here.

         The FHFA argues that the Shareholders' harm is not traceable to the removal restriction for two reasons. First, the Third Amendment was the decision of an acting director whose designation was not subject to the for-cause removal restriction. Second, the FHFA does not exercise "executive" power; instead, the FHFA "steps into the shoes" of the GSEs-private financial institutions-when it acts as conservator. Neither argument is persuasive.

         Section 4512(f) specifies when an acting Director may serve the FHFA in the Director's place.[97] The FHFA argues that because § 4512(f) does not specify a fixed term nor restrict the President's removal authority, the acting Director is not subject to the for-cause removal restriction. But if the acting Director could be removed at will, the FHFA would be an executive agency-not an independent agency. There is no indication that Congress sought to revoke the FHFA's status as an independent agency when it is led by an acting, rather than appointed, Director.[98] So an acting Director, like an appointed one, is covered by the removal restriction.[99]

         Second, the FHFA argues that it does not exercise executive functions that Article II vests in the Executive Branch. Under HERA, the FHFA as conservator succeeds to "all rights, titles, powers, and privileges" of the GSEs.[100] Courts interpret this provision as evincing Congress's intent for the FHFA to step into the shoes of the GSEs; although the FHFA is a federal agency, as conservator it "shed[s] its government character and also becom[es] a private party."[101] And the GSEs are undoubtedly private entities.[102]

         When an agency acts as conservator, we have held that it does not exercise governmental functions. In United States v. Beszborn, the Government filed indictments against various defendants for their role in scheming to defraud financial institutions.[103] Earlier, however, the Resolution Trust Corporation ("RTC") participated in a civil action seeking punitive damages against the defendants as conservator to a financial institution based on the same conduct leading to criminal charges.[104] Our circuit assessed whether the government's prosecution following the RTC's role in the civil trial violated the Double Jeopardy Clause.[105] The court noted the "uniqueness" of the RTC's role as receiver: It was represented by private attorneys, and proceeds from successful actions benefited the creditors and stockholders of the institution it represented rather than the Treasury.[106] Thus, the court found that by acting as receiver, "the RTC stands as a private, non-governmental entity, and is not the Government for purpose of the Double Jeopardy Clause."[107]

         In Beszborn, however, it was "the conduct or actions of the Government which the Double Jeopardy Clause seeks to limit."[108] The court reasoned that "[t]he rationale behind the protection of the Double Jeopardy Clause rests upon the doctrine that the Government or the sovereign with all of its power should not be allowed to make repeated attempts to convict an individual for an alleged offense."[109] As a result, whether or not the agency was acting as a receiver or regulator decided the issue of whether it violated constitutional protections. We emphasized that "for the Double Jeopardy Clause to have any application, there must be actions by a sovereign, which place the individual twice in jeopardy."[110] The separation of powers, however, rests on an entirely different foundation than the Double Jeopardy Clause.

         Once again, the Supreme Court has emphasized the nature of the separation-of-powers principle as a "prophylactic device" and structural safeguard rather than a remedy available only when a specific harm is identified.[111] Whether the FHFA's specific conduct or actions were governmental in nature is not relevant-the structure of the agency is. In Free Enterprise Fund, for example, the Court considered the causation prong of standing in the context of a separation-of-powers claim.[112] Like the Agencies in the instant case, the Public Company Accounting Oversight Board ("PCAOB") argued that petitioners lacked standing because their injuries were not fairly traceable to an invalid appointment.[113] The Court rejected this argument, finding that "standing does not require precise proof of what the PCAOB's policies might have been" had the agency's structure met constitutional requirements.[114]

         Thus, to establish standing, the Shareholders are not required to show what the FHFA may have done had it been constitutionally structured.[115]Beyond its powers as conservator, the FHFA enjoys broad regulatory power over the GSEs.[116] And that regulatory power will continue to cast a shadow over the Shareholders' interests even after this case is resolved. As regulator, the FHFA has the ongoing potential to make decisions that affect the Shareholders' economic rights. We are satisfied that the Shareholders' injury is fairly traceable to the FHFA's unconstitutional structure.

         c. Redressability

         Redressability examines "the causal connection between the alleged injury and the judicial relief requested."[117] "The point has always been the same: whether a plaintiff personally would benefit in a tangible way from the court's intervention."[118] "[I]t must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision."[119]

         Treasury argues that there is no basis to set aside the Third Amendment, and thus ruling on FHFA's constitutionality would result in an impermissible advisory opinion.[120] In essence, Treasury argues severing the removal restriction would be the appropriate remedy for the Shareholders' claim, which would not resolve the Shareholders' injury.

         We disagree. The Shareholders allege an ongoing injury-being subjected to enforcement or regulation by an unconstitutionally constituted body. This is consistent with standing in separation-of-powers cases. In Free Enterprise, for example, the Court concluded that the petitioners were "entitled to declaratory relief sufficient to ensure that the reporting requirements and auditing standards to which they are subject will be enforced only by a constitutional agency accountable to the Executive."[121] Striking the removal provision was meaningful because a plaintiff was registered with the PCAOB and subject to its continuing jurisdiction, regulation, and investigation.[122]Declaratory relief addressing the constitutional issue stopped the ongoing injury from persisting. Petitioners thus had a tangible interest in ensuring that the PCAOB met constitutional requirements[123]-just like the Shareholders here.

         The relationship between the FHFA and the Shareholders is sufficiently close to subject the Shareholders to FHFA oversight. In exercising its power as conservator, the FHFA has stepped into the shoes of the directors and managers charged with making decisions that directly affect the Shareholders' interests. As a result, the Shareholders' injury stems from the continued harm caused by the FHFA's ongoing conservatorship without executive oversight.

         The relatively sparse case law seems to support this conclusion: The Supreme Court's most authoritative statement on Article III standing of shareholders and the prudential doctrine of shareholder standing came in Franchise Tax Board of California v. Alcan Aluminium Ltd.[124] There, a wholly-owned subsidiary was taxed by the state of California. The subsidiary's parent companies, rather than the subsidiary itself, sued for relief. The Supreme Court concluded that the parent companies clearly had standing.[125] But the "more difficult issue [was] whether respondents [could] meet the prudential requirements of . . . the so-called shareholder standing rule."[126] Although the Court left that issue unresolved, it left bread crumbs that resulted in courts using the direct-derivative action dichotomy for the shareholder standing rule.[127] Consistent with this approach, the Shareholders here assert direct, personal interest in their cause of action[128]-their security interests are subject to the FHFA's continuing jurisdiction, regulation, and control.

         Because the Article III standard is subject to a more relaxed inquiry than the shareholder standing rule, we conclude that the Shareholders have Article III standing to seek declaratory relief. The FHFA as conservator and regulator has extensive authority and responsibility that impacts the Shareholders' rights. Vacatur of the net worth sweep alone would not fully resolve the Shareholders' constitutional injury-it fails to remedy the ongoing separation-of-powers violation. We are satisfied that the Shareholders have standing to bring their constitutional claim.

         2. The FHFA is Unconstitutionally Structured

         Our Constitution divides the powers and responsibilities of governing across three co-equal branches. Each branch may exercise only the powers explicitly enumerated in the Constitution-executives execute, legislators legislate, and judges judge. This structural division of power aims to ensure no single branch becomes too powerful.[129] The Framers were not tinkerers; they upended things. The Revolution produced a revolutionary design. "Ambition must be made to counteract ambition."[130] The Constitution's unique architecture is "the central guarantee of a just government"[131] and essential to protecting individual liberty.[132]

         Yet when one branch tries to impair the power of another, this upsets the co-equality of the branches and degrades the Constitution's deliberate separation of powers. Accordingly, the Supreme Court "ha[s] not hesitated to strike down provisions of law that either accrete to a single Branch powers more appropriately diffused among separate Branches or that undermine the authority and independence of one or another coordinate Branch."[133]

         Here, the Shareholders assert the FHFA, as currently structured, undermines the separation of powers; they claim that the Executive Branch cannot adequately control the agency. Before evaluating the merits of the Shareholders' challenge, we must discuss the powers and obligations of the two branches implicated in this case.

         Incidental to the exercise of its enumerated powers, Congress may establish independent agencies as "necessary and proper."[134] Over the past century, Congress has established dozens of independent agencies responsible for performing executive, regulatory, and quasi-judicial functions.[135] These independent agencies "wield[] vast power and touch[] almost every aspect of daily life."[136]

         Congress often structures agencies to be independent from the Executive Branch in hopes that a measure of political insulation will enable the agencies to pursue policy objectives that (hopefully) yield long-term benefits.[137] To do so, Congress selects from a "menu of options"[138] in order "to structure the agency to be more or less insulated from presidential control."[139]

         The quintessential independence-promoting mechanism is restricting the Executive Branch's ability to remove agency leaders at will. The Supreme Court in 1935 explained the rationale this way: "[O]ne who holds his office only during the pleasure of another cannot be depended upon to maintain an attitude of independence against the latter's will."[140] As a result, Congress will often permit the President to remove agency leadership only "for cause." And the Supreme Court has approved this design: "Congress can, under certain circumstances, create independent agencies run by principal officers appointed by the President, whom the President may not remove at will but only for good cause."[141]

         Beyond the removal restriction, Congress may impose other independence-promoting features.[142] For example, Congress may:

• Empower a single director or a body of co-equal leaders to manage the agency;
• Establish fixed terms of service for agency leadership;
• Mandate the agency be composed of a bipartisan leadership team;
• Exempt the agency from the standard appropriations process;
• Require the Senate to formally approve agency leadership nominations;
• Establish a formal oversight board that monitors and manages the independent agency's activities; and
• Grant the agency unilateral litigation authority, untethered from the Department of Justice.[143]

         Sometimes, Congress imposes multiple independence-promoting mechanisms. Ultimately, "an agency's practical degree of independence from presidential influence depends" on the combined effect of these (sometimes mutually reinforcing) structural features.[144]

         While "[t]he Supreme Court has long recognized that, as deployed to shield certain agencies, a degree of independence is fully consonant with the Constitution, "[145] a vast "field of doubt" remains regarding how much Congress can insulate an independent agency from Executive Branch influence.[146] In other words: "where, in all this, is the role for oversight by an elected President?"[147]

         The President's oversight role originates in Article II. The Constitution vests the "executive Power" in the President and obligates him to "take Care that the Laws be faithfully executed."[148] Independent agencies are staffed by subordinate executive officers, [149] so the President bears the ultimate responsibility for overseeing those officials.[150] Accordingly, "[s]ince 1789, the Constitution has been understood to empower the President to keep these officers accountable-by removing them from office, if necessary."[151] The President cannot shirk this oversight obligation: "Abdication of responsibility is not part of the constitutional design."[152]

         If an independent agency is too insulated from Executive Branch oversight, the separation of powers suffers. First, excessive insulation impairs the President's ability to fulfill his Article II oversight obligations.[153] By limiting his ability to oversee subordinates, Congress weakens the President's ability to fulfill his "constitutionally assigned duties, and thus undermines . . . the balance of constitutionally prescribed power among the branches."[154]

         Second, excessive insulation allows Congress to accumulate power for itself. As the Supreme Court recognized, excessively insulating an independent agency from Executive Branch influence "provides a blueprint for extensive expansion of the legislative power."[155] Congress can expand its powers through its "plenary control over the salary, duties, and even existence of executive offices."[156] And without meaningful tools to oversee the agency, the President cannot counteract Congress's ambition.[157]

         For these reasons, agencies may be independent, but they may not be isolated. Surveying the Supreme Court's removal-power cases, a unifying principle emerges: 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. In other words, Article II's Take Care Clause must impose a hard limit on what is "necessary and proper" under Article I.[158] Otherwise, Congress could insulate an agency to the point where the President could not adequately oversee the agency's activities, impairing the President's ability to fulfill his Article II obligations.[159] This 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.[160]

         To determine when insulating an independent agency from Executive Branch control goes too far, we must review the Supreme Court's leading removal-power cases.

         a. Free Enterprise Fund

         The Supreme Court in Free Enterprise Fund evaluated whether Public Company Accounting Oversight Board ("PCAOB") members were excessively insulated from Executive Branch control.

         The PCAOB was a "nonprofit corporation" with "expansive powers to govern" foreign and domestic accounting firms that audit public companies to ensure compliance with our nation's securities laws.[161] Congress charged the SEC with the responsibility of overseeing the PCAOB.[162] Yet, Congress also "substantially insulated" PCAOB members "from the Commission's control."[163]PCAOB members could not be removed "except for good cause," and the Securities and Exchange Commissioners decided "whether good cause exist[ed]."[164] The President had virtually no oversight over the good-cause determination made by the SEC Commissioners; the President "was powerless to intervene-unless that determination [was] so unreasonable as to constitute inefficiency, neglect of duty, or malfeasance in office."[165] Thus, to the Court, none of those Commissioners were "subject to the President's direct control."[166]

         The Court concluded that excessively insulating the PCAOB members through two layers of for-cause removal protection unconstitutionally impaired the President's ability to fulfill his Article II responsibility. Congress "withdr[ew] from the President any decision on whether . . . good cause exists" and "vested" that decision in SEC Commissioners.[167] This meant that the PCAOB was "not accountable to the President," and the President was "not responsible for the Board."[168] This arrangement was unconstitutional because:

[n]either the President, nor anyone directly responsible to him, nor even an officer whose conduct he may review only for good cause, ha[d] full control over the Board. The President [was] stripped of the power our precedents have preserved, and his ability to execute the laws-by holding his subordinates accountable for their conduct-[was] impaired.[169]

         We draw three important lessons from Free Enterprise.

         First, Congress may not "shelter the bureaucracy" to the point where executive officers are "immune from Presidential oversight."[170] We must not forget the Court's fear that, absent effective oversight tools, the Chief Executive could lose control over the Executive Branch.[171]

         Second, to maintain "adequate control"[172] over his subordinates, the President must retain sticks that he can use to demand accountability- including the power to remove.[173] As the Free Enterprise Court made clear, Congress cannot transform the President into a "cajoler-in-chief" who can only offer carrots.[174]

         Third, we must look at the aggregate effect of the insulating mechanisms to determine whether an agency is excessively insulated. The Court in Free Enterprise explicitly recognized that "the language providing for good-cause removal" "working together" with "a number of statutory provisions" "produce[d] a constitutional violation."[175] Indeed, all nine Justices adopted this analytical approach.[176]

         b. Morrison

         Morrison involved the constitutionality of the Ethics in Government Act ("EGA"), which permitted "the appointment of an 'independent counsel' to investigate and, if appropriate, prosecute certain high-ranking Government officials for violations of federal criminal laws."[177] The EGA conferred upon the independent counsel protection from at-will removal by the Executive Branch.[178]

         The independent counsel was an "inferior officer"[179] within the Executive Branch, who was "subject to good-cause removal by a higher Executive Branch official" (i.e., the Attorney General).[180] The counsel had no "authority to formulate policy for the Government or the Executive Branch, nor . . . [authority to exercise] any administrative duties outside of those necessary to operate her office."[181] The counsel could "only act within the scope of the jurisdiction that ha[d] been granted by the Special Division[182] pursuant to a request by the Attorney General."[183] The Attorney General-a principal executive officer who is removable at will by the President-exercised substantial oversight over the authority and actions of the independent counsel.

         Although the EGA provided the independent counsel protection from at-will removal, the Court found this removal restriction did not "sufficiently deprive[] the President of control over the independent counsel to interfere impermissibly with his constitutional obligation to ensure the faithful execution of the laws."[184] The Court recognized that the separation of powers aims to ensure "Congress does not interfere with the President's exercise of the 'executive power' and his constitutionally appointed duty to 'take care that the laws be faithfully executed' under Article II."[185] But it concluded that the removal restriction did not "impede the President's ability to perform his constitutional duty."[186] This is because the EGA provided the Executive Branch various other tools to supervise and control the independent counsel.[187]For example:

• The independent counsel may be appointed only following a "specific request by the Attorney General, and the Attorney General's decision not to request appointment if he finds 'no reasonable grounds to believe that further investigation is warranted' is committed to his unreviewable discretion."[188]This gave "the Executive a degree of control over the power to initiate an investigation by the independent counsel."[189]
• The independent counsel's jurisdiction was "defined with reference to the facts submitted by the Attorney General."[190]
• "[O]nce a counsel [was] appointed, the Act require[d] that the counsel abide by Justice Department policy unless it [was] not 'possible' to do so."[191]

         Considering the combined effect of the EGA's provisions, the Court concluded that "[n]otwithstanding the fact that the counsel [was] to some degree 'independent' and free from executive supervision . . . [those] features of the Act g[a]ve the Executive Branch sufficient control over the independent counsel to ensure that the President [was] able to perform his constitutionally assigned duties."[192] Congress, in effect, compensated for the removal restriction by providing the Executive Branch other effective tools to monitor and control the independent counsel. Thus, the Morrison Court held, the independent counsel was not excessively insulated from presidential control, so there was no separation-of-powers violation.[193]

         * * *

         The overarching imperative to prevent an agency from being unconstitutionally insulated from Executive Branch oversight explains why an at-will removal limit survived in Morrison but died in Free Enterprise. Restricting at-will removal of PCAOB Members in Free Enterprise-in combination with the other mechanisms that insulated the PCAOB from executive oversight-went too far.[194] But in Morrison, the Executive retained tools to meaningfully oversee the independent counsel, despite the removal restriction. After considering the combined effect of the provisions governing the independent counsel, the Morrison Court concluded that Congress had not excessively insulated the independent counsel from the Executive Branch.[195]

         Congress cannot isolate an independent agency from meaningful executive oversight. Otherwise, the President could not fulfill his Article II responsibility to ensure the faithful execution of the nation's laws, thus undermining the separation of powers.

         c. The FHFA

         We hold that Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable.[196] We reach this conclusion after assessing the combined effect of the: (1) for-cause removal restriction; (2) single-Director leadership structure; (3) lack of a bipartisan leadership composition requirement; (4) funding stream outside the normal appropriations process; and (5) Federal Housing Finance Oversight Board's purely advisory oversight role.

         i. The for-cause removal restriction

         The President may remove the FHFA Director only "for cause." Limiting the President to only "for cause" removal dulls an important tool[197] for supervising the FHFA because the agency is protected from Executive influence and oversight.[198] Although the power to remove "for cause" may be a dull oversight tool, [199] limiting the President to "for cause" removal is not sufficient to trigger a separation-of-powers violation.[200] Cognizant of this restriction, we consider whether this and other independence-promoting mechanisms-"working together"[201]-excessively insulate the FHFA, violating the separation of powers.

         ii. Single-Director agency leadership

         The FHFA's single-Director structure further insulates the Agency from presidential influence and oversight.

         Traditionally, independent agencies are governed by multi-member bodies.[202] Early examples of agencies whose directors were protected from at-will removal-such as the Interstate Commerce Commission and the Federal Trade Commission-were "multi-member bodies: They were designed as non-partisan expert agencies that could neutrally and impartially issue rules, initiate law enforcement actions, and conduct or review administrative adjudications."[203]

         The distinction affects the President's ability to monitor independent agencies. In multi-member agencies whose leaders are protected from at-will removal, the President can still influence the agency through the power "to designate the chairs of the agencies and to remove chairs at will from the chair position."[204] By designating a chair, a new President can "quickly" exert supervisory oversight.[205]

         The FHFA has no chair. "[A] President may be stuck for years with a [FHFA] Director who was appointed by the prior President and who vehemently opposes the current President's agenda."[206] This "dramatic and meaningful difference vividly illustrates that the . . . single-Director structure diminishes Presidential power more than traditional multi-member independent agencies do."[207] Thus, the FHFA's single-Director leadership structure insulates the agency from presidential oversight.

         iii. Lack of bipartisan balance

         Another factor is whether the independent agency has a statutorily mandated requirement of bipartisan leadership.

         A bipartisan leadership structure gives the President allies: "[C]ommon sense and existing scholarship point to the increasing identity of interests between the President and independent-agency commissioners from the president's party."[208] Even when the President inherits an agency led by the opposing party, he often can secure a majority of the leadership on the governing board within the first two years of his term.[209] And "[o]nce the President has a majority of members of his or her party, the commissions fall in line with the President's priorities and positions."[210] Thus, bipartisan balance requirements bolster presidential involvement.

         The FHFA, however, lacks this requirement. "Its single Director is from a single party-presumably the party of the President who appoints him."[211]Given the Director's fixed five-year term, the opposing party may dominate the Agency for the duration of the President's term.

         Plus, bipartisan leadership requirements enhance Executive Branch oversight. Party members on an agency's governing board are "likely to . . . dissent if the agency goes too far in one direction, "[212] which serves as a "fire alarm" that alerts the President about controversial agency actions.[213] But, at the FHFA, no one is there to sound the alarm.

         iv. Abnormal agency funding

         An agency's funding stream bears on presidential influence.[214] If the agency is subject to the normal appropriations process, the President can veto a spending bill containing appropriations for the agency.[215] Also, the President submits an annual budget to Congress, which he uses "to influence the policies of independent agencies."[216]

         By placing an agency outside the normal appropriations process, the President loses "leverage" over the agency's activities.[217] As Justice Breyer's Free Enterprise dissent recognized, "who controls the agency's budget requests and funding" affects the "full measure of executive power" to oversee an agency; an agency's funding stream "affect[s] the President's ability to get something done."[218]

         The FHFA stands outside the budget[219]- in stark contrast to "nearly all other administrative agencies"[220]-and is therefore immune from presidential control.

         v. No formal control over agency activities

         No statutory provision provides for formal Executive Branch control over the FHFA's activities. The closest thing is the statutorily created Federal Housing Finance Oversight Board (the "Board").[221] Two of the Board's four members are Cabinet officials who are beholden to the President: the Secretary of the Treasury and the Secretary of Housing and Urban Development. But the Board may not "exercise any executive authority, and the Director may not delegate to the Board any of the functions, powers, or duties of the Director."[222]The Board exercises purely advisory functions; it cannot require the FHFA or Director to do anything-beyond ordering "a special meeting of the Board."[223]Thus, Cabinet officials-through the Board-can do nothing more than cajole the FHFA into acting.

         This lack of formal involvement contrasts with situations where courts have upheld the insulation of independent agencies: PHH (the Consumer Financial Protection Bureau) and Morrison (independent counsel).

         With respect to the Consumer Financial Protection Bureau ("CFPB"), the President, through the Financial Stability Oversight Council ("FSOC"), can influence the CFPB's activities.[224] The Council is comprised of ten voting members.[225] The Treasury Secretary is the Council's Chairperson.[226] The other voting members are heads of various independent agencies, including the SEC, Commodity Futures Trading Commission, CFPB, and FHFA.[227] "Significantly, a supermajority of persons on the Council are designated by the President."[228]

         The FSOC holds veto-power over the CFPB's policies.[229] Specifically, the FSOC may "set aside a final regulation prescribed by the [CFPB], or any provision thereof, if the Council decides . . . the regulation or provision would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk."[230] "Any member of the Council can file a petition to stay or revoke a rule, which can be granted with a two-thirds majority vote."[231] This veto is a "powerful" oversight mechanism.[232] Thus, despite the CFPB's independent status, the Executive Branch retains an emergency brake to hold the CFPB accountable.[233]

         With respect to the independent counsel in Morrison, the EGA established formal mechanisms for the Attorney General to oversee the independent counsel. And these mechanisms, in part, persuaded the Court to uphold the removal restriction.

         In sum, there are no formal mechanisms by which the Executive Branch can control how the FHFA exercises authority. The only formal oversight body is the Federal Housing Finance Oversight Board-a purely advisory body that cannot impose its will on the FHFA. Although the Treasury Secretary is a member of the Board, she cannot pump the brakes on the FHFA's actions.

         d. There are no similarly insulated agencies.

         The FHFA defends its constitutionality by asserting that it follows in a long line of independent agencies that courts have found to be constitutional- namely, the Federal Trade Commission, the Office of the Independent Counsel, and the Consumer Financial Protection Bureau. We see things differently. The FHFA is sui generis, and its unique constellation of insulating features offends the Constitution's separation of powers.

         i. The FTC in Humphrey's Executor

         The FTC is an independent agency whose leaders are protected from at-will removal. The Supreme Court approved this arrangement 80-plus years ago in Humphrey's Executor-which the FHFA takes as validation.

         But the Court has since clarified that Humphrey's Executor did not grant Congress blanket authority to create independent agencies whose leaders are protected from at-will removal.[234] The Humphrey's Executor Court established two demarcations regarding the President's oversight power: The President has "unrestrictable power to remove purely executive officers," and Congress may limit the President's power to remove commissioners of an independent agency that is "wholly disconnected from the executive department."[235]Between those poles lies a "field of doubt."[236]

         The Humphrey's Executor Court's description of the FTC instructs how we tend the field. First, the Court described the FTC as "an administrative body created by Congress to carry into effect legislative policies" that "act[ed] in part quasi legislatively and in part quasi judicially."[237] The Court emphasized that the FTC "cannot in any proper sense be characterized as an arm or an eye of the executive."[238] And "any executive function" it does exercise-"as distinguished from executive power in the constitutional sense"[239]-is "in the discharge and effectuation of its quasi legislative or quasi judicial powers, or as an agency of the legislative or judicial departments of the government."[240] Thus, central to the Court's decision was its perception that the FTC did not exercise executive power.

         This discussion highlights how the FTC differs from the FHFA. The FHFA-unlike the FTC[241]-exercises executive functions. For example, the FHFA can enforce rules that it creates through cease-and-desist orders and monetary civil penalties.[242] Thus, the FHFA can easily "be characterized as an arm or eye of the executive."[243]

         Also, the FHFA lacks formal nonpartisanship requirements. The President appoints the Director, and the Director then appoints three deputies. Most likely, the agency's approach to exercising its broad discretion will slant toward the views of the President's party.[244] The FTC, on the other hand, is bipartisan.[245] The FTC is also structured to allow the President to choose a chairperson, [246] which allows the Executive Branch to wield considerable influence over the agency's priorities and actions.[247]

         One final distinction: The FTC is subject to the traditional appropriations process.[248] "Accordingly, the FTC must go to the Congress every year with a detailed budget request explaining its expenditure of public money, "[249] which allows the President to monitor and shape the agency's activities.[250]

         Humphrey's Executor, therefore, is inapposite. By structuring the FTC to preserve Executive Branch influence, Congress mitigated the impact of limiting the President's removal power. Congress did not stifle the President's ability to directly impact the agency. As a result, the President could fulfill his Article II responsibility, and the FTC survived constitutional challenge. The FHFA is a different beast.

         ii. The independent counsel in Morrison

         The Executive Branch could exercise far greater control over the independent counsel as compared with the FHFA.[251] Indeed, the EGA gave the Executive Branch control over when and how the independent counsel performed its prosecutorial functions; this control was "sufficient" to allow the President to fulfill his Article II responsibilities.[252] No principal Executive Branch official can exert comparable influence over the FHFA.

         The FHFA Director also does not resemble the independent counsel. The independent counsel "exercised only executive power, not rulemaking or adjudicative power" and "had only a limited jurisdiction for particular defined criminal investigations."[253] Because the FHFA Director can write and enforce laws-as opposed to just enforcing existing laws-the FHFA Director "poses a more permanent threat to the President's faithful execution of the laws."[254]

         iii. The CFPB in PHH Corporation

         The D.C. Circuit recently evaluated the constitutionality of the structure of the Consumer Financial Protection Bureau, an independent agency that exercises executive, legislative, and adjudicatory functions. Congress structurally insulated the CFPB from Executive Branch oversight; this insulation included a restriction on the President's ability to remove the CFPB's director at will.[255] Ultimately, the en banc court found the agency's structure constitutional.[256]

         The D.C. Circuit found that "[t]he [Supreme] Court has consistently upheld ordinary for-cause removal restrictions like the one at issue here, while invalidating only provisions that either give Congress some role in the removal decision or otherwise make it abnormally difficult for the President to oversee an executive officer."[257] Following that framing, the court approved "Congress's application of a modest removal restriction to the CFPB, a financial regulator akin to the independent FTC in Humphrey's Executor and the independent SEC in Free Enterprise Fund, with a sole head like the office of independent counsel in Morrison."[258]

         The D.C. Circuit explained its conclusion as follows. First, the CFPB's structure was consistent with historical practice with regard to independent, financial regulatory agencies.[259] Second, "Congress validly decided that the CFPB needed a measure of independence and chose a constitutionally acceptable means to protect it, "[260] including budgetary independence.[261] Third, an agency led by a single director is likely as responsive to the Executive Branch as an agency with a multi-member leadership structure.[262] Finally, the D.C. Circuit disagreed with Judge Kavanaugh's dissenting position; according to the majority, the CFPB's novel structure was, standing alone, not constitutionally problematic, [263] nor did the CFPB lose under a freestanding "liberty" inquiry.[264] Ultimately, "[n]o relevant consideration g[ave] [the court] reason to doubt the constitutionality of the independent CFPB's single-member structure. Congress made constitutionally permissible institutional design choices for the CFPB with which courts should hesitate to interfere."[265]

         We are mindful of our sister court's analysis regarding the FHFA's constitutionality. But salient distinctions between the agencies compel a contrary conclusion.

         First, the agencies are structured differently. The Executive Branch can directly control the CFPB's actions through the FSOC-a feature the PHH majority found highly relevant.[266] The FHFA, on the other hand, has no formal oversight beyond the purely advisory Federal Housing Finance Oversight Board.

         Second, the Shareholders here challenge not only the removal-power limitation or the FHFA's single-head structure. Instead, they challenge the FHFA's unconstitutional insulation from Executive Branch oversight-the cumulative effect of Congress's agency-design decisions. Indeed, as the D.C. Circuit recognized, "for two unproblematic structural features to become problematic in combination, they would have to affect the same constitutional concern and amplify each other in a constitutionally relevant way."[267] That is precisely the case here: The structural insulation of the FHFA Director-who may be appointed by a former President, who cannot be replaced at-will, and who is insulated from Executive Branch oversight-interferes with the President's ability to fulfill his duties under the Constitution.

         * * *

         Article I cannot cannibalize Article II. Congress has broad discretion to establish independent agencies, but Congress cannot go so far as to impair the President's ability to fulfill his Article II obligations. The independent agencies Congress may establish may not be excessively insulated from Executive Branch oversight-even if insulation is normatively desirable.[268] Article II is an outer limit on what is "necessary and proper."

         In order to achieve a "workable government, "[269] the FHFA asks to us trust that Congress can adequately monitor the FHFA, altering the agency's budget or authority if necessary. But this highlights the separation-of-powers concern: The FHFA performs executive functions, but the agency's operations are subject primarily (if not exclusively) to Congress's will, divorced from Executive control. The Executive Branch should not-and, constitutionally, cannot-delegate to Congress the responsibility to ensure the faithful execution of the nation's laws.[270] And, even if Congress could fix the FHFA's unconstitutionality in the future, we must fulfill our own constitutional obligation here and now.[271]

         We conclude that the FHFA's structure violates Article II. Congress encased the FHFA in so many layers of insulation-by limiting the President's power to remove and replace the FHFA's leadership, exempting the Agency's funding from the normal appropriations process, and establishing no formal mechanism for the Executive Branch to control the Agency's activities-that the end "result is a[n] [Agency] that is not accountable to the President."[272] The President has been "stripped of the power [the Supreme Court's] precedents have preserved, and his ability to execute the laws-by holding his subordinates accountable for their conduct-[has been] impaired."[273] In sum, while Congress may create an independent agency as a necessary and proper means to implement its enumerated powers, Congress may not insulate that agency from meaningful Executive Branch oversight.[274]

         3. Relief Available for Separation-of-Powers Violations

         Having concluded that the FHFA structure violates Article II, we must now determine what to do about it. When fashioning relief for constitutional violations, courts "try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact."[275] When a removal limitation crosses constitutional lines, courts routinely declare the limitation inoperative, prospectively correcting the error.[276] Severability is appropriate so long as the remaining statute remains "fully operative as a law with the tenure restrictions excised"[277] and nothing in the text or historical context of the statute makes it "evident" that Congress would have preferred no law at all to excising the restriction.[278] Indeed, there is a presumption that "the objectionable provision can be excised."[279] In doing so, courts routinely "accord[] validity to past acts of unconstitutionally structured governmental agencies."[280]

         We conclude that severing the removal restriction from HERA is the proper remedy in the instant case. As a result, we leave the remainder of HERA undisturbed. The removal restriction itself has little effect on the remainder of HERA. In fact, HERA remains operative as a law without the restriction; its remaining provisions are capable of functioning independently from the removal restriction.[281] Given the exigent context in which the law was passed, it is unlikely that the entirety of HERA depended on a removal restriction. And though HERA contains no severability clause, [282] "there is nothing in the statute's text or historical context that makes it 'evident' that Congress, faced with the limitations imposed by the Constitution, would have preferred no [FHFA] at all" to one with a Director "removable at will" by the President.[283]

         The appropriate remedy for the constitutional infirmity is to strike the language providing for good-cause removal from 12 U.S.C. § 4512(b)(2), restoring Executive Branch oversight to the FHFA. It is true here, as it was in Free Enterprise Fund, that the removal restriction is just one of several provisions that cumulatively offend the separation of powers. To be sure, we could "blue-pencil" other edits to HERA, but, as the Supreme Court advises, "such editorial freedom . . . belongs to the Legislature, not the Judiciary."[284]We leave intact the remainder of HERA and the FHFA's past actions- including the Third Amendment. In striking the offending provision from HERA, the FHFA survives as a properly supervised executive agency.

         III. Conclusion

         We AFFIRM the district court's order granting the Agencies' motions to dismiss the Shareholders' APA claims because such claims are barred by 12 U.S.C. § 4617(f).

         We REVERSE the district court's order granting the Agencies' motion for summary judgment regarding the Shareholders' claim that the FHFA is unconstitutionally structured in violation of Article II and the Constitution's separation of powers, and we REMAND to the district court with instructions to enter judgment declaring the "for cause" limitation on removal of the FHFA's Director found in 12 U.S.C. § 4512(b)(2) violates the Constitution's separation-of-powers principles.

          CARL E. STEWART, Chief Judge, dissenting in part:

         The constitutional issue presented by the Shareholders-whether the FHFA's structure impermissibly inhibits the President's ability to oversee and remove the Director consistent with his Article II obligation to "take care that the laws are faithfully executed"-does not lend itself to a clear-cut answer. As the panel majority's opinion states, Congress may mix and match a number of "features of independence" when crafting an independent agency's internal structure, subject of course to constitutional limitations set both within the Constitution's text and by Supreme Court precedent. These features include: placing formal constraints on the President's removal power through the use of "for-cause" removal restrictions, establishing a multimember leadership structure, subjecting agency heads to fixed terms of service, mandating that an agency be composed of a bipartisan leadership team, exempting the agency from the standard appropriations process, and granting the agency unilateral litigation authority. See P.C. Opn. at pg. 28; see also Free Enter. Fund v. Pub. Co. Accounting Oversight Bd, 561 U.S. 477, 588 app. D (2010) (Breyer, J., dissenting). And Congress has used these features in several different combinations. Importantly, neither the presence nor absence of any given feature is dispositive of the agency's viability under Articles I and II and separation-of-powers principles.

         The Supreme Court's Article II removal precedent, although sparse, has only rejected Congress's attempts to fashion independent agencies on two occasions. The first was in Myers v. United States, 272 U.S. 52, 60 (1926), in which Congress attempted to simultaneously limit the President's removal power and increase its own authority over the agency by conditioning the President's removal power on the Senate's advice and consent. This form of appropriation and aggrandizement was deemed violative of the Constitution's separation of powers. The second was in Free Enterprise Fund, which presented an "extreme variation on the traditional good-cause removal standard" by doubly insulating members of Public Company Accounting Oversight Board with two layers of for-cause removal protection. PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75, 89 (D.C. Cir. 2018) (en banc). These cases and others within the Supreme Court's body of Presidential removal-power precedent establish, as the panel majority explains, that Congress's use and construction of independent agencies is subject to constitutional limitations, the outer boundary of which is the President's domestic executive authority under Article II.

         Notwithstanding my agreement with this fundamental principle of law, I conclude that the FHFA's structure does not reach that boundary and therefore does not impinge on the President's oversight and removal authority. My reasoning substantially mirrors that of the D.C. Circuit's en banc majority opinion in PHH Corporation, which concluded that the CFPB's similar structure does not exceed constitutional constraints on the agency's makeup. Thus, and for reasons expressed by the en banc majority in PHH Corporation, I respectfully dissent from the panel majority opinion's conclusion that the FHFA's structure unconstitutionally restricts the President's removal power under Article II.

         I elaborate to briefly address and distinguish a feature of the CFPB's structure that is absent from the FHFA. As the majority opinion notes, when Congress created the CFPB, it also created the Financial Stability Oversight Council ("FSOC"), 12 U.S.C. § 5321, which is composed of several members of the Executive Branch and independent agency heads chosen by the President who have substantial stay and veto authority over any rule promulgated by the Director that the FSOC believes might "put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk." 12 U.S.C. § 5513. No such "mandatory oversight" committee, with stay and veto power, exists under HERA's provisions creating the FHFA. Rather, HERA created the Federal Housing Finance Oversight Board ("FHFOB"), 12 U.S.C. § 4513a(a). Two Executive Branch officials-the Treasury Secretary and the Secretary of Housing and Urban Development- are members of the FHFOB, see id. § 4513(c). However, unlike the FSOC, the Board may not "exercise any executive authority" and may not be delegated "any functions, powers, or duties of the Director." Id. § 4513a(b). The FHFOB's involvement in the FHFA Director's execution of his statutory mandate is limited to "advis[ing] the Director with respect to overall strategies and policies in carrying out" his duties. Id. § 4513a(a). The panel majority opinion highlights the advisory status of the FHFOB as further removing the FHFA from Presidential oversight.

         The mandatory-versus-advisory oversight distinction, although important, does not meaningfully alter the constitutional analysis in this case. Notably, the FHFA is not the only single-leader independent agency subject to the "mere advice" of an advisory board. The Social Security Act created the Social Security Advisory Board ("SSAB") which is statutorily required to "advise" the Social Security Commissioner "on policies related to" the availability of benefits to Social Security beneficiaries. 42 U.S.C. § 903(b). The SSAB's functions are largely limited to "making recommendations" with respect to several aspects of the Administration's duties, see id. § 903(b), and the SSAB is not statutorily authorized to exercise veto power over the Commissioner's decisions.

         Further, even without mandatory oversight authority, the FHFOB wields some sway over the FHFA Director's exercise of his statutory power. The Director is required to meet with the FHFOB at least once every three months and must at the very least subject himself to their advice. See 12 U.S.C. § 4513a(a), (d)(1). And once every year, the FHFOB must testify before Congress regarding, inter alia, the "operations, resources, and performance of the [FHFA]" and "such other matters relating to the [FHFA] and its fulfillment of its mission," id. § 4513a(e)(5), (6). At these Congressional hearings, the FHFOB may either testify in support of the Director's leadership or testify that the Director has derogated from his duties under HERA, thereby providing grounds for the President to exercise his "prerogative to consider whether any excesses amount to cause for removal." PHH Corp., 881 F.3d at 106. Although giving the FHFOB a more active role in the promulgation of policy decisions would more explicitly submit the Director to Executive Branch control, when it comes to independent agencies, control in the sense encouraged by the panel majority opinion is not required by the Constitution. An advisory board both preserves permissible agency independence and exposes the FHFA Director to policy perspectives held by Executive Branch officials immediately answerable to the President and, thereby, the President, thus achieving the oversight and accountability necessary to satisfy Article II.

         Neither the for-cause removal restriction nor the single-leader feature of the FHFA's structure place the agency outside the Presidents purview in violation of the Constitution or the Supreme Court's removal jurisprudence. Nor does the absence of a mandatory oversight board in this case unduly inhibit the President's ability to remove the Director or oversee the goings-on

          WILLETT, Circuit Judge, dissenting in part:

         Desperate times breed desperate measures. Exhibit A is the Housing and Economic Recovery Act of 2008 ("HERA"), enacted after the United States housing bubble burst and triggered a massive mortgage-security and general-credit crisis. Nobody disputes that Congress created the Federal Housing Finance Authority ("FHFA") amid a dire financial calamity. The situation, both domestic and international, was grim and worsening quickly:

• housing market-melting down
• national economy-circling the drain
• global financial system-teetering on collapse

         The FHFA was cast as a silver bullet, a super-agency endowed with far-reaching regulatory authority to stanch the bleeding and to restore liquidity to the U.S. housing and financial markets.

         But contrary to how other federal courts have so far ruled on this issue (including this court's opinion today), Congress did not vest the FHFA with unbounded, unreviewable power. The FHFA-like any agency-is restrained by the four corners of its enabling statute: "An agency literally has no power to act . . . unless and until Congress confers power upon it."[1] Every agency requires a defined statutory basis for its actions. Absent a valid delegation of authority, an agency's actions are dubious at best, and contrary to bedrock constitutional principles at worst. Exigency does not justify conferring nigh-unchecked power on an agency insulated from judicial review. Expedience does not license omnipotence.

         This case concerns whether the net worth sweep falls within the scope of the FHFA's statutory authority as conservator. To answer the question before us, we need only look to HERA's plain text. And it is our duty to ensure that the FHFA operates squarely within the bounds of its statutory authority.

         Regrettably, the majority opinion does otherwise. The upshot is a lucrative limbo: Mortgage-finance giants Fannie Mae and Freddie Mac are forever trapped in a zombie-like trance as wards of the state, bled of their profits quarter after quarter in perpetuity. In rejecting the Shareholders' statutory claims, the majority opinion embraces the views of our sister circuits, adopting "the same well-reasoned basis common to those courts' opinions."[2]But what the majority opinion finds convincing, I find confounding.

         With respect I dissent.


         In essence, the judicial consensus is that HERA's anti-injunction provision bars the Shareholders claims because (1) the text of HERA does not require the FHFA as conservator to "preserve and conserve" the assets of these colossal government-sponsored enterprises ("GSEs");[3] and (2) regardless, the net worth sweep is consistent with the FHFA's statutory authority.[4]

         Respectfully, this reading, while popular, flouts HERA's plain text, which should be the North Star of our analysis. HERA tells us two important things. First, the anti-injunction provision bars only claims that would "restrain or affect" the FHFA's statutory powers as conservator (not the case here).[5] Second, the FHFA does not have unfettered discretion to dispose of the GSEs' assets and property at will so long as it dons the conservator cowl.

         By enacting the net worth sweep in the Third Amendment, the FHFA exceeded the scope of its statutory authority as conservator. HERA makes clear that the FHFA may operate either as conservator or receiver at any given time. The statute then provides a list of role-specific duties. As conservator, the FHFA must "preserve and conserve the assets and property" of the GSEs.[6] This statutory command is mandatory, not discretionary. Stripping the GSEs of their cash reserves by depriving them of their net worth-in perpetuity-is antithetical to this "preserve and conserve" requirement. This permanent pillaging of capital violates the FHFA's obligation as conservator to "put the [GSEs] in a sound and solvent condition."[7] The sweep siphons the GSEs' net worth quarter after quarter-all but guaranteeing that they will draw on Treasury's funding commitment, increasing its liquidation preference. This action is fundamentally incompatible with the FHFA's statutory mandate as conservator. Indeed, Congress specifically permits the FHFA to ...

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