Court Opinion

ID: 4294652
Source: CourtListenerOpinion
Date Created: 2018-07-17 00:00:26.302718+00
Date Added: 2024-06-11T14:39:35.196692
License: Public Domain

Case: 17-20364       Document: 00514557220         Page: 1    Date Filed: 07/16/2018

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT                                           United States Court of Appeals
                                                                                             Fifth Circuit

                                                                                           FILED
                                                                                       July 16, 2018
                                      No. 17-20364
                                                                                      Lyle W. Cayce
                                                                                           Clerk
PATRICK J. COLLINS; MARCUS J. LIOTTA; WILLIAM M. HITCHCOCK,

               Plaintiffs–Appellants,

v.

STEVEN T. MNUCHIN, SECRETARY, U.S. DEPARTMENT OF
TREASURY; DEPARTMENT OF THE TREASURY; FEDERAL HOUSING
FINANCE AGENCY; MELVIN L. WATT,

               Defendants–Appellees.

                   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

       1 Chief Judge Stewart joins in the entire opinion and judgment except for Section
II.B.2 and the judgment on the constitutional issue; Judge Haynes joins in the entire opinion
and judgment; Judge Willett joins in the entire opinion and judgment except for Section II.A
and the judgment on the statutory issue.
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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.
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       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

       2  12 U.S.C. §§ 1716, 1717
       3  Federal Home Loan Mortgage Corporation Act, Pub. L. No. 91-351, preamble, 84
Stat. 450 (1970).
        4 The financial crisis was caused, in part, by a series of mortgage loans to borrowers

with poor credit, known as “subprime” mortgages. Crash Course: The Origins of the Financial
Crisis, ECONOMIST (Sept. 7, 2013), https://www.economist.com/news/schoolsbrief/21584534-
effects-financial-crisis-are-still-being-felt-five-years-article. Lenders eased their standards
for subprime mortgages, requiring little or no down-payment or income documentation, and
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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

loans often came with discounted interest rates that reset after two years. JOINT CENTER FOR
HOUSING STUDIES OF HARVARD UNIVERSITY, The State of the Nation’s Housing: 2008, at 2
(2008),
https://web.archive.org/web/20100630164105/http://www.jchs.harvard.edu/publications/mar
kets/son2008/son2008.pdf. Even the GSEs relaxed their lending standards to compete with
private banks. See Charles Duhigg, Pressured to Take More Risk, Fannie Reached Tipping
Point,               N.Y.            TIMES             (Oct.              4,           2008),
https://www.nytimes.com/2008/10/05/business/05fannie.html. Subprime mortgages were
then pooled together to back securities that received deceptively high credit ratings.
ECONOMIST, supra. Home prices suffered a steep decline in 2006. Justin Lahart, Egg Cracks
Differ     in    Housing,     Finance   Shells,   WALL      ST.     J.   (Dec.   24,   2007),
https://www.wsj.com/articles/SB119845906460548071?mod=googlenews_wsj. As a result,
subprime borrowers defaulted on their mortgages, and foreclosures drastically increased. See
HARVARD UNIVERSITY, supra at 3.
        5 Office of Inspector General (OIG), FHFA, Analysis of the 2012 Amendments to the

Senior       Preferred    Stock     Purchase    Agreements        5    (Mar.    20,    2013),
https://www.fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf.
        6 12 U.S.C. § 4511(a), (b).

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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

      7 Id. §§ 1455(l)(1)(A), 1719(g)(1)(A).
      8 Id. §§ 1455(l)(1)(B)(iii), 1719(g)(1)(B)(iii).
      9 Id. §§ 1455(l)(1)(C)(vi), 1719(g)(1)(C)(vi).
      10 Id. §§ 1455(l)(4), 1719(g)(4).
      11 Id. §§ 1455(l)(2)(D), 1719(g)(2)(D).
      12 Id. § 4513(a)(1)(A), (B)(i), (B)(ii), (B)(v).
      13 Id. § 4526(a).

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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

       14 See id. § 4631(a)(1). The statute does impose some limits to the Director’s authority,
such as restrictions on the ability to enforce compliance with achieving housing goal
provisions, among other things. See id. § 4631(a)(2).
       15 Id. at § 4631(c)(1).
       16 Id. at § 4631(c)(2).
       17 Id. § 4632(e).
       18 See id. § 4635.
       19 Id. § 4641(a).
       20 See id. § 4641(c).
       21 Id. at § 4631(d).
       22 Id. § 4636(a).
       23 The FHFA may conduct hearings regarding certain enforcement decisions; parties

may appeal the outcome of the hearing to the D.C. Circuit. See id. §§ 4633, 4634(a).
       24 Id. § 4636(b), (c).

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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

      25 Id. § 4636(c), (d).
      26 Id. § 4636(d).
      27 Id. § 4617(a)(2).
      28 Id. § 4617(b)(2)(B)(i).
      29 Id. § 4617(b)(2)(B)(ii)–(v).
      30 Id. § 4617(b)(2)(A)(i).
      31 Id. § 4617(b)(2)(G); see also id. § 4617(b)(2)(H).

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      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

      32 Id. § 4617(b)(2)(D).
      33 Id. § 4617(b)(2)(J).
      34 Id. § 4617(b)(2)(I).
      35 Id. § 4617(d)(1).
      36 See id. § 4585.
      37 Id. § 4512(a), (b)(1).
      38 Id. § 4512(b)(1).
      39 Id. § 4512(b)(2).
      40 Id.

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       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

       41 Id. § 4512(c)(1) (Deputy Director of the Division of Enterprise Regulation), (d)(1)
(Deputy Director of the Division of Federal Home Loan Bank Regulation), (e)(1) (Deputy
Director for Housing Mission and Goals).
       42 Id. § 4512(c)(2), (d)(2), (e)(2).
       43 Id. § 4512(f).
       44 Id.
       45 Id. § 4512(b)(3).
       46 Id. § 4512(b)(4).
       47 Agencies may be classified as either independent or executive. Where the agency

head is removable at will, the agency is “executive.” In re Aiken Cty., 645 F.3d 428, 439 (D.C.
Cir. 2011), subsequent mandamus proceeding, 725 F.3d 255 (D.C. Cir. 2013) (Kavanaugh, J.,
concurring). But where the head or heads of an agency are removable only for cause, the
agency “is an independent agency that operates free of presidential direction and
supervision.” Id.
       48 12 U.S.C. § 4617(f).
       49 Id. § 4516(a).

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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

       50 Id. § 4516(f)(3).
       51 Id. § 4516(f)(2).
       52 Id. § 4513a(a).
       53 Id.
       54 Id.
       55 Id. § 4513a(d)(1).
       56 Id. § 4513a(d)(2).
       57 Id. § 4513a(e).
       58 Id. § 4513a(b).
       59 Id. § 4513a(d)(2).

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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

      60   Id. §§ 1455(l)(2)(D), 1719(g)(2)(D); see also id. §§ 1455(l)(4), 1719(g)(4).
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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

       61Treasury Department Announces Further Steps to Expedite Wind Down of Fannie
Mae     and   Freddie    Mac,    U.S.    DEP’T    OF    TREASURY     (Aug. 17, 2012),
https://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx.
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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
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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

       62  TOTAL Gas & Power N. Am., Inc. v. Fed. Energy Reg. Comm’n, 859 F.3d 325, 332
(5th Cir. 2017).
        63 Copeland v. Wasserstein, Perella & Co., Inc., 278 F.3d 472, 477 (5th Cir. 2002).
        64 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).
        65 Id.
        66 Id.
        67 See Roberts v. Fed. Hous. Fin. Agency, 889 F.3d 397, 399 (7th Cir. 2018); Robinson

v. Fed. Hous. Fin. Agency, 876 F.3d 220 (6th Cir. 2017); Perry Capital, 864 F.3d at 598.
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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,

       68 Because we find that the Shareholders’ statutory claims are barred by § 4617(f), we
need not resolve whether HERA’s succession provision, 12 U.S.C. § 4617(b)(2)(A)(i)
independently prevents the Shareholders from asserting their statutory claims.
       69 12 U.S.C. § 4617(f).
       70 See Roberts, 889 F.3d at 402–06; Robinson, 876 F.3d at 227–32; Perry Capital LLC,
864 F.3d at 606–15.
       71 See Roberts, 889 F.3d at 406–08; Robinson, 876 F.3d at 228–29; Perry Capital LLC,
864 F.3d at 615–16.
       72 See Garner v. U.S. Dep’t of Labor, 221 F.3d 822, 825 (5th Cir. 2000).
       73 Morrison v. Olson, 487 U.S. 654, 682 (1988); see also INS v. Chadha, 462 U.S. 919,

944 (1983). The Shareholders dispute that the presumption of constitutionality applies in
separation-of-powers cases. Justice Scalia noted in his Morrison dissent that “harmonious
functioning of the system demands that we ordinarily give some deference . . . to the actions
of the political branches.” 487 U.S. at 704 (Scalia, J., dissenting). But “where the issue
pertains to separation of powers, and the political branches are . . . in disagreement, neither
can be presumed correct.” Id. at 704–05; see also Freytag v. C.I.R., 501 U.S. 868, 879–80
(1991) (declining to defer to executive branch interpretation of statute alleged to violate the
Appointments Clause because the “structural interests protected by the Appointments
Clause are not those of any one branch of Government but of the entire Republic”). Indeed,
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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

“the separation of powers does not depend on the views of individual Presidents . . . nor on
whether the encroached-upon branch approves the encroachment.” Free Enter. Fund v.
Public Co. Accounting Oversight Bd., 561 U.S. 477, 497 (2010) (internal quotation marks and
citations omitted). Because this case disputes the Constitution’s allocation of governing
power, we do not defer to one branch’s interpretation that would permit it to encroach on
another branch’s constitutional authority.
        74 U.S. CONST. art. III, § 2, cl. 1.
        75 Sprint Commc’ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 273 (2008).
        76 Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002).
        77 Pub. Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th Cir. 2001) (quoting Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)).
        78 Lujan, 504 U.S. at 561.
        79 Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (2008).
        80 Buckley v. Valeo, 424 U.S. 1, 117 (1976) (citations omitted).

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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

       81 Comm. for Monetary Reform v. Bd. of Governors of Fed. Reserve Sys., 766 F.2d 538,
543 (D.C. Cir. 1985) (citing Glidden Co. v. Zdanok, 370 U.S. 530, 533 (1962) (plurality
opinion)).
       82 Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 239 (1995).
       83 The Agencies do not contest the Shareholders’ injury-in-fact. Nevertheless, the court

“must—where necessary—raise” standing issues sua sponte. Ford v. NYLCare Health Plans
of Gulf Coast, Inc., 301 F.3d 329, 331–32 (5th Cir. 2002).
       84 Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331, 336 (1990)

(quoting Warth v. Seldin, 422 U.S. 490, 499 (1975)).
       85 Id.
       86 Id. at 336–37.

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“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

      87 See, e.g., Bowsher v. Synar, 478 U.S. 714 (1986).
      88 Id. at 718.
      89 Id. at 719.
      90 Id. at 720.
      91 Id. at 721.
      92 See id. at 718–19.
      93 Lujan, 504 U.S. at 560 (cleaned up).

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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

       94 Allen v. Wright, 48 U.S. 737, 753 n.19, 757 (1984), abrogated in part on other
grounds by Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).
        95 Lujan, 504 U.S. at 560 (quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S.
26, 41–41 (1976)).
        96 Landry v. FDIC, 204 F.3d 1125, 1130–31 (D.C. Cir. 2000); see also Buckley, 424 U.S.

at 117.
        97 “In the event of the death, resignation, sickness, or absence of the Director, the

President shall designate [one of the Deputy Directors] to serve as acting Director until the
return of the Director, or the appointment of a successor.” 12 U.S.C. § 4512(f).
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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

       98 See Wiener v. United States, 357 U.S. 349, 353 (1958).
       99 See 12 U.S.C. § 4512(b)(2).
       100 Id. § 4617(b)(2)(A)(i).
       101 Meridian Invs., Inc. v. Fed. Home Loan Mortg. Corp., 855 F.3d 573, 579 (4th Cir.

2017); see also O’Melveney & Myers v. FDIC, 512 U.S. 79, 86–87 (1994) (interpreting the
nearly identical provision 12 U.S.C. § 1821(d)(2)(A)(i)); Perry Capital, 864 F.3d at 622; Herron
v. Fannie Mae, 861 F.3d 160, 169 (D.C. Cir. 2017).
       102 See 12 U.S.C. §§ 1452(a), 1723(b).
       103 21 F.3d 62, 64–65 (5th Cir. 1994).
       104 Id. at 67.
       105 Id.

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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

      106 Id. at 68.
      107 Id.
      108 Id. at 67 (emphasis added).
      109 Id.
      110 Id. (emphasis added).
      111 See Plaut, 514 U.S. at 239.

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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

      112 See Free Enter. Fund, 561 U.S. at 477.
      113 Id. at 512 n.12.
      114 Id.
      115 See id.
      116 12 U.S.C. § 4511 et seq.
      117 Allen, 468 U.S. at 753 n.19.
      118 Sprint Commc’ns Co., 554 U.S. at 300 (cleaned up).
      119 Lujan, 504 U.S. at 561 (cleaned up).

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        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.

        120See Bayou Liberty Ass’n v. U.S. Army Corps of Eng’rs, 217 F.3d 393, 397–98 (5th
Cir. 2000).
       121 Free Enter. Fund, 561 U.S. at 513.
       122 See 561 U.S. at 487–88, 513.
       123 Id.

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       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

       124 493 U.S. at 335.
       125  Id. at 336 (“If [taxes against the subsidiary] are higher than the law of the land
allows, that method threatens to cause actual financial injury to [the parent companies] by
illegally reducing the return on their investments in [the subsidiary] and by lowering the
value of their stockholdings.”).
        126 Id.
        127 Id. (stating that there is an exception to the shareholder standing rule for “a

shareholder with a direct, personal interest in a cause of action to bring suit even if the
corporation’s rights are also implicated”).
        128 We recognize that, while not a test for Article III standing, the shareholder

standing rule is an exception to the prudential doctrine that could prevent the Shareholders’
claims for want of standing.
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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

       129  See THE FEDERALIST NO. 47 (James Madison) (“The accumulation of all powers
legislative, executive and judiciary in the same hands, whether of one, a few or many, and
whether hereditary, self appointed, or elective, may justly be pronounced the very definition
of tyranny.”).
        130 THE FEDERALIST NO. 51 (James Madison).
        131 Freytag, 501 U.S. at 870.
        132 See Clinton v. City of New York, 524 U.S. 417, 450 (1998) (Kennedy, J., concurring)

(explaining that our system of separated powers aims “to implement a fundamental insight:
Concentration of power in the hands of a single branch is a threat to liberty”); Mistretta v.
United States, 488 U.S. 361, 380 (1989) (citations omitted) (“This Court consistently has given
voice to, and has reaffirmed, the central judgment of the Framers of the Constitution that,
within our political scheme, the separation of governmental powers into three coordinate
Branches is essential to the preservation of liberty.”); Morrison, 487 U.S. at 697 (Scalia, J.,
dissenting) (“The Framers . . . viewed the principle of separation of powers as the absolutely
central guarantee of a just Government.”); id. (“Without a secure structure of separated
powers, our Bill of Rights would be worthless.”); Bowsher, 478 U.S. at 722 (“[C]hecks and
balances [are] the foundation of a structure of government that would protect liberty.”); id.
at 730 (“The Framers recognized that, in the long term, structural protections against abuse
of power were critical to preserving liberty.”).
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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

       133 Mistretta, 488 U.S. at 381 (emphasis added).
       134 See Free Enter. Fund, 561 U.S. at 515 (Breyer, J., dissenting) (citations omitted).
       135 See PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75, 170 (D.C. Cir. 2018)

(Kavanaugh, J., dissenting).
       136 Free Enter. Fund, 561 U.S. at 499; see PHH Corp., 881 F.3d at 170 (Kavanaugh, J.,

dissenting) (“Ever since the 1935 Humphrey’s Executor decision, independent agencies have
played a significant role in the U.S. Government. The independent agencies possess
extraordinary authority over vast swaths of American economic and social life—from
securities to antitrust to telecommunications to labor to energy. The list goes on.”).
       137 See, e.g., PHH Corp., 881 F.3d at 78 (“Congress has historically given a modicum

of independence to financial regulators like the Federal Reserve, the FTC, and the Office of
the Comptroller of the Currency. That independence shields the nation’s economy from
manipulation or self-dealing by political incumbents and enables such agencies to pursue the
general public interest in the nation’s longer-term economic stability and success, even where
doing so might require action that is politically unpopular in the short term.”).
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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

       138 See Kirti Datla & Richard L. Revesz, Deconstructing Independent Agencies (and
Executive Agencies), 98 CORNELL L. REV. 769, 825 (2013).
       139 See Datla & Revesz, supra note 138, at 825.
       140 Humphrey’s Ex’r v. United States, 295 U.S. 602, 629 (1935).
       141 Free Enter. Fund, 561 U.S. at 483 (citations omitted).
       142 See Datla & Revesz, supra note 138, at 826–27 (recognizing agencies “fall along a

continuum” ranging “from most insulated to least insulated from presidential control”).
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       •     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

       143 See generally id.
       144 Id. at 824.
       145 PHH Corp., 881 F.3d at 78.
       146 Humphrey’s Ex’r, 295 U.S. at 632.
       147 Free Enter. Fund, 561 U.S. at 499; id. (“The Constitution requires that a President

chosen by the entire Nation oversee the execution of the laws.”).
       148 U.S. CONST. art. II § 1, cl. 1; id. § 3.
       149 See Free Enter. Fund, 561 U.S. at 483.
       150 See id.; id. at 492 (“It is his responsibility to take care that the laws be faithfully

executed. The buck stops with the President, in Harry Truman’s famous phrase.”).
       151 Id. at 483 (citations omitted).

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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

       152  Clinton, 524 U.S. at 452 (1998) (Kennedy, J., concurring).
       153   Cf. Free Enter. Fund, 561 U.S. at 498 (“By granting the [Public Company
Accounting Oversight] Board executive power without the Executive’s oversight, this Act
subverts the President’s ability to ensure that the laws are faithfully executed—as well as
the public’s ability to pass judgment on his efforts. The Act’s restrictions are incompatible
with the Constitution’s separation of powers.”).
        154 Martin H. Redish & Elizabeth J. Cisar, “If Angels Were to Govern”: The Need for

Pragmatic Formalism in Separation of Powers Theory, 41 DUKE L.J. 449, 501 (1991) (footnote
omitted); see Free Enter. Fund, 561 U.S. at 500 (“‘Even when a branch does not arrogate
power to itself,’ . . . it must not ‘impair another in the performance of its constitutional
duties.’” (quoting Loving v. United States, 517 U.S. 748, 757 (1996) (footnote omitted))).
        155 Free Enter. Fund, 561 U.S. at 500 (2010) (quoting Metro. Wash. Airports Auth. v.

Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252, 277 (1991)).
        156 Id.
        157 See id. (“Only Presidential oversight can counter its influence.”); id. at 501 (citing

THE FEDERALIST No. 51 (James Madison)).
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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

       158  Congress may establish independent agencies as “necessary and proper” in order
to exercise its enumerated powers. But whatever Congress finds “necessary and proper” must
be consistent with Constitution’s “letter and spirit.” Nat’l Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519, 537 (2012) (quoting McCulloch v. Maryland, 4 Wheat. 316, 421 (1819)); id. at
559 (“As our jurisprudence under the Necessary and Proper Clause has developed, we have
been very deferential. . . . But we have also carried out our responsibility to declare
unconstitutional those laws that undermine the structure of government established by the
Constitution.”); see Free Enter. Fund, 561 U.S. at 516 (Breyer, J., dissenting) (“The Necessary
and Proper Clause does not grant Congress power to free all Executive Branch officials from
dismissal at the will of the President.”).
        159 Free Enter. Fund, 561 U.S. at 496 (finding that when the President could not hold

agency officials accountable for their conduct, “his ability to execute the laws . . . [was]
impaired” in violation of Article II); see Humphrey’s Ex’r, 295 U.S. at 629. (“The fundamental
necessity of maintaining each of the three general departments of government entirely free
from the control or coercive influence, direct or indirect, of either of the others, has often been
stressed and is hardly open to serious question.”).
        160 Free Enter. Fund, 561 U.S. at 508 (holding that Congress cannot “deprive the

President of adequate control over the [Public Company Accounting Oversight] Board, which
is the regulator of first resort and the primary law enforcement authority for a vital sector of
our economy”).
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      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”

      161 Id. at 484–85.
      162 Id. at 485.
      163 Id.
      164 Id. at 496.
      165 Id. (cleaned up).
      166 Id.

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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

       167  Id.
       168  Id.
        169 Id. at 496 (emphasis added).
        170 Id. at 497.
        171 Id. at 499 (“The growth of the Executive Branch, which now wields vast power and

touches almost every aspect of daily life, heightens the concern that it may slip from the
Executive’s control, and thus from that of the people.” (emphasis added)).
        172 Id. at 508 (holding that Congress cannot “deprive the President of adequate control

over the Board, which is the regulator of first resort and the primary law enforcement
authority for a vital sector of our economy”).
        173 See id. at 483–84; id. at 499.
        174 Id. at 501–02; id. (“The President . . . is not limited, as in Harry Truman’s lament,

to ‘persuad[ing]’ his unelected subordinates ‘to do what they ought to do without persuasion.’”
(alterations in original)); id. at 502 (“Congress cannot reduce the Chief Magistrate to a
cajoler-in-chief.”).
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       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

       175  See id. at 509.
       176   Justice Breyer—dissenting and joined by Justices Stevens, Ginsburg and
Sotomayor—followed roughly the same analytical framework. The dissent recognized that
the removal restriction’s constitutionality must be decided “in light of the provision’s practical
functioning in context,” id. at 523 (Breyer, J., dissenting), because “[i]n practical terms no ‘for
cause’ provision can, in isolation, define the full measure of executive power,” id. at 524
(emphasis added). Congress’s agency-design decisions—such as the agency’s “scope of power”
and funding—“affect the President’s power to get something done.” See id. Thus, the dissent
posed the central question as: “To what extent [] is the . . . ‘for cause’ [removal] provision
likely, as a practical matter, to limit the President’s exercise of executive authority?” Id. The
dissent concluded that, even with the removal restriction, the President—through his
“constitutionally sufficient” control over the SEC—could adequately control the PCAOB. Id.
at 528–30. In other words, after evaluating the cumulative effect of the insulating
mechanisms, the dissent concluded the President could still adequately control the PCAOB.
        177 Morrison, 487 U.S. at 660 (footnote omitted).
        178 Id. at 663; id. at 686 (recognizing that the Attorney General may remove the

independent counsel for good cause, after following a statutorily-prescribed process).
        179 The Court reached this conclusion when evaluating the claim that the EGA violated

Article II’s Appointments Clause. We do not find it necessary to recite the Court’s reasoning.
We note, however, that this conclusion influenced the Court’s subsequent analysis of the
separation-of-powers challenge.
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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:

       180Id. at 671, 686.
       181Id. at 671–72.
      182 The Special Division was “a special court . . . created by the Act ‘for the purpose of

appointing independent counsels.’” Id. at 661.
      183 Id. at 672.
      184 Id. at 693.
      185 Id. at 689.
      186 Id. at 691.
      187 Id. at 695–96 (“It is undeniable that the Act reduces the amount of control or

supervision that the Attorney General and, through him, the President exercises over the
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       • 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

investigation and prosecution of a certain class of alleged criminal activity. . . . Nonetheless,
the Act does give the Attorney General several means of supervising or controlling the
prosecutorial powers that may be wielded by an independent counsel.”).
       188 Id. at 696.
       189 Id.
       190 Id.
       191 Id.
       192 Id. at 696 (emphasis added).
       193 See id. at 697.

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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.

       194  Free Enter. Fund, 561 U.S. at 509 (“It is true that the language providing for good-
cause removal is only one of a number of statutory provisions that, working together, produce
a constitutional violation.”) (emphasis added).
        195 See Morrison, 487 U.S. at 696.
        196 Admittedly, measuring the degree of insulation is difficult—especially when each

insulating feature, standing alone, may pass constitutional muster. Nevertheless, we must
remain faithful to the Supreme Court’s guidance and engage in a fact-specific inquiry to
decide whether the various insulating provisions, “working together, produce a constitutional
violation.” See Free Enter. Fund, 561 U.S. at 509.
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             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

       197  Query whether a policy disagreement constitutes cause to remove. See Rachel E.
Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 TEXAS L.
REV. 15, 27 (2010) (footnote omitted) (“Though the issue has not been decided by the Supreme
Court, most commentators agree that it is not good cause for removal if an agency performs
a lawful regulatory agency action that the President disagrees with as a matter of policy.”).
        198 See Neal Devins & David E. Lewis, Not-So Independent Agencies: Party

Polarization and the Limits of Institutional Design, 88 B.U. L. REV. 459, 488 (2008) (finding
that when “[p]residents cannot fire independent-agency heads on policy grounds . . . [they]
have been constrained in their efforts to direct independent-agency policy making.”); Lisa
Schultz Bressman & Robert B. Thompson, The Future of Agency Independence, 63 VAND. L.
REV. 599, 611 (2010) (“[A] President who cannot remove the personnel of the agency for policy
disagreements lacks a key method to impose administration views.”); see also Datla & Revesz,
supra note 138, at 787 (footnote omitted) (“The ability to remove an agency head at will is an
enforcement tool that helps the President ensure that the agency follows his policy
preferences.”); Barkow, supra note 197, at 28 (“Empirical studies on when Congress opts for
good-cause provisions support the view that this design feature seems largely aimed at
stopping presidential pressure [on independent agencies].”); id. at 30 (“A removal restriction
undoubtedly gives an agency head greater confidence to challenge presidential pressure.”).
        199 Indeed, the contours of “for cause” removal are uncertain. “No recent President has

attempted to remove the head of an independent agency for cause . . . .” Datla & Revesz,
supra note 138, at 788; id. at 787–89 (theorizing that the uncertainty regarding what
constitutes “for cause” removal and the potential political costs of litigating the issue
discourage Presidents from firing agency officials for cause).
        Also, statutory provisions governing how to replace the FHFA Director may blunt the
effectiveness of “for cause” removal. If the Director is absent, a Deputy Director (chosen by
the recently removed former Director) is designated by the President to serve as the FHFA’s
acting Director. See 12 U.S.C. § 4512. This former Deputy serves as acting Director until “the
appointment of a successor” following a formal appointment proceeding. Even if a President
removes the Director “for cause,” the President must designate an acting Director from the
ranks of Deputy Directors whom the recently removed Director selected. And the President
cannot install the Director of his choice until the Senate approves his replacement. These
speedbumps to appointing a replacement Director render for-cause removal an impotent
oversight mechanism.
        200 See Free Enter. Fund, 561 U.S. at 483 (citations omitted).

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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

       201 See id. at 509.
       202  See generally PHH Corp., 881 F.3d at 177–79 (Kavanaugh, J., dissenting)
(discussing the nation’s “deeply rooted tradition—namely, that independent agencies are
headed by multiple commissioners—[that] has been widely recognized by leading judges,
congressional committees, and academics who have studied the issue”).
       203 See id. at 169; id. at 173 (“Until this point in U.S. history, independent agencies

exercising substantial executive authority have all been multi-member commissions or
boards.”).
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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

       204  See id. at 166; see Datla & Revesz, supra note 138, at 796–97 (summarizing the
chairperson’s ability to influence agency direction and recognizing “it is clear that the ability
to appoint the head of an independent agency allows the President to retain some control
over that agency’s activities”); Peter L. Strauss, The Place of Agencies in Government:
Separation of Powers and the Fourth Branch, 84 COLUM. L. REV. 573, 590 (1984) (explaining
that the President can influence an independent agency’s priorities and policymaking by
designating a chairperson); id. at 590 n.68 (“The personal, political loyalty of the chairman
assures the President a substantial impact on agency administration, and consequent
influence on policy.”).
        205 Barkow, supra note 197, at 38–39.
        206 See PHH Corp., 881 F.3d at 167 (Kavanaugh, J., dissenting).
        207 Id.
        208 Devins & Lewis, supra note 198, at 491 (footnote omitted); see also id.

(“[S]ystematic studies of both commissioner voting and the nomination process support our
claim that, in this era of party polarization, independent-agency heads are especially likely
to support the priorities of the political party they represent.”).
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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

       209   See Barkow, supra note 197, at 38 (citations omitted) (finding that recent
Presidents have managed to obtain a partisan majority on multi-member independent
agencies in an average of twenty months (a historically slow rate)).
        210 Barkow, supra note 197, at 38; Devins & Lewis, supra note 198, at 498 (concluding

“there is good reason to think that independent agencies will adhere to presidential
preferences once a majority of commissioners are from the President’s party”).
        211 See PHH Corp., 881 F.3d at 148 (Henderson, J., dissenting).
        212 See Barkow, supra note 197, at 41.
        213 See id.
        214 See PHH Corp., 881 F.3d at 146–47 (Henderson, J., dissenting) (citation omitted);

see also Barkow, supra note 197, at 43 (“To be sure, the power of the purse is one of the key
ways in which democratic accountability is served.” (footnote omitted)).
        215 See PHH Corp., 881 F.3d at 147 (Henderson, J., dissenting) (citation omitted).

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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

      216 Id. (citation omitted).
      217  See id. at 147; Barkow, supra note 197, at 44 (“With independent funding, the
agency is insulated from . . . the President.” (footnote omitted)).
      218 Free Enter. Fund, 561 U.S. at 524 (Breyer, J., dissenting).
      219 12 U.S.C. § 4516(f)(2); see HENRY B. HOGUE ET AL., CONG. RESEARCH SERV.,

R43391, INDEPENDENCE OF FEDERAL FINANCIAL REGULATORS: STRUCTURE, FUNDING, AND
OTHER ISSUES 27 (2017).
      220 Cf. PHH Corp., 881 F.3d at 146 (Henderson, J., dissenting) (citations omitted)

(emphasis added).
      221 12 U.S.C. § 4513a(a).
      222 Id. § 4513a(b).

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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

       223  Id. § 4513a(d)(2).
       224  See id. § 5321.
        225 Id. § 5321(b)(1).
        226 Id. § 5321(b)(1)(A).
        227 Id. § 5321(b)(1). The President, with the advice and consent of the Senate, also

appoints a voting “independent member . . . having insurance expertise” to the FSOC who
serves a six-year term. Id. § 5321(b)(1)(J), (c)(1).
        228 PHH Corp., 881 F.3d at 120 (Wilkins, J., concurring); see id. at 120 n.3 (Wilkins,

J., concurring) (explaining that “the chairpersons of five independent agencies serve on the
Council, each of whom the President has the opportunity to appoint either at the outset or
near the beginning of the administration” and “[o]nly four members of the FSOC have terms
longer than four years and are thus potentially not appointed by a one-term President”).
        229 See PHH Corp., 881 F.3d at 98; id. at 120–21 (Wilkins, J., concurring) (finding these

“additional statutory requirements on CFPB action make[] the CFPB Director more
accountable to the President”).
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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

      230  Id. § 5513(a).
      231  PHH Corp., 881 F.3d at 120 (Wilkins, J., concurring) (citing 12 U.S.C. § 5513).
       232 Id.
       233 Some question whether the FSOC is a “meaningful substitute check” on the CFPB’s

actions. See id. at 159–60 (Henderson, J., dissenting) (“The fact that anyone mentions the
Council’s narrow veto as a check is instead a testament to the CFPB’s unaccountable
policymaking power.”). This magnifies the concern here: The FHFA lacks any oversight body.
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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

       234  See Free Enter. Fund, 561 U.S. at 483 (reading Humphrey’s Executor to mean that
“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.” (emphasis added)); see also PHH Corp., 881 F.3d at 186 (Kavanaugh, J.,
dissenting) (interpreting Humphrey’s Executor as limited to approving removal limitations
for independent agencies with multi-member leadership structures).
        235 Humphrey’s Ex’r, 295 U.S. at 630.
        236 Id. at 632.
        237 Id. at 628; see id. at 624 (finding the FTC’s duties were “neither political nor

executive, but predominantly quasi judicial and quasi legislative.”).
        238 Id. at 628.

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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

       239  Id.
       240  Id. (footnote omitted).
        241 The Morrison Court acknowledged, however, that the Humphrey’s Executor Court

may have misperceived the FTC’s authority: “[I]t is hard to dispute that the powers of the
FTC at the time of Humphrey’s Executor would at the present time be considered ‘executive,’
at least to some degree.” Morrison, 487 U.S. at 690 n.28 (citations omitted). The Court has
not, however, formally abrogated the Humphrey’s Executor holding.
        242 See 12 U.S.C. §§ 4585, 4636.
        243 See Humphrey’s Ex’r, 295 U.S. at 628. Decades later, the Morrison Court de-

emphasized the focus on the agency’s function in favor of an approach that focused on
“whether the removal restrictions are of such a nature that they impede the President’s
ability to perform his constitutional duty, and the functions of the officials in question must
be analyzed in that light.” Morrison, 487 U.S. at 691.
        244 See PHH Corp., 881 F.3d at 144–48 (Henderson, J., dissenting).
        245 See Humphrey’s Ex’r, 295 U.S. at 628. Compare 15 U.S.C. § 41 (FTC) with 12 U.S.C.

§ 4512 (FHFA).
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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.

       246 15 U.S.C. § 41.
       247 See supra notes 202–213 and accompanying text.
       248 15 U.S.C. § 42. See generally PHH Corp., 881 F.3d at 146 (Henderson, J.,

dissenting).
       249 PHH Corp., 881 F.3d at 146 (Henderson, J., dissenting).
       250 See supra notes 214–220 and accompanying text.
       251 See supra notes 177–193 and accompanying text; see also Morrison, 487 U.S. at

696; PHH Corp., 881 F.3d at 176 (Kavanaugh, J., dissenting).
       252 Morrison, 487 U.S. at 696.

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       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

       253 PHH Corp., 881 F.3d at 176 (Kavanaugh, J., dissenting).
       254 Cf. id. at 152–53 (Henderson, J., dissenting) (comparing the CFPB Director to the
independent counsel).
       255Id. at 78 (recognizing “[t]he Director may be fired only for ‘inefficiency, neglect of

duty, or malfeasance in office’” (quoting 12 U.S.C. § 5491(c)(3)).
       256 We compliment our colleagues for their numerous incisive, detailed opinions, from

which we have drawn extensively.
       257 Id. at 85.

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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.

       258  Id. at 85. The D.C. Circuit also described the removal restrictions at-issue as
“wholly ordinary” and “mild.” Id. at 78.
       259 Id. at 91 (“Financial regulation, in particular, has long been thought to be well

served by a degree of independence.”).
       260 Id. at 92–93.
       261 Id. at 93.
       262 Id. (“[T]here is no reason to assume an agency headed by an individual will be less

responsive to presidential supervision than one headed by a group.”).
       263 See id. at 102–05.
       264 See id. at 105–06.
       265 Id. at 110. The D.C. Circuit seemed disturbed that PHH’s position “call[ed] into

question the structure of a host of independent agencies that make up the fabric of the
administrative state.” Id. at 93.
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       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

       266Id. at 98.
       267 Id. at 96; see id. at 85 (recognizing that the Supreme Court has invalidated
statutory provisions that “make it abnormally difficult for the President to oversee an
executive officer”); id. at 79 (framing its task as follows: “The ultimate purpose of our
constitutional inquiry is to determine whether the means of independence, as deployed at the
agency in question, impedes the President’s ability under Article II of the Constitution to take
Care that the Laws be faithfully executed” (cleaned up and emphasis added)).
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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

       268 See Free Enter. Fund, 561 U.S. at 499.
       269 See Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J.,
concurring) (“While the Constitution diffuses power the better to secure liberty, it also
contemplates that practice will integrate the dispersed powers into a workable
government.”).
       270 See Clinton, 524 U.S. at 451–52 (Kennedy, J., concurring) (“Abdication of

responsibility is not part of the constitutional design.”); see also Free Enter. Fund, 561 U.S.
at 497 (“The President can always choose to restrain himself in his dealings with
subordinates. He cannot, however, . . . escape responsibility for his choices by pretending that
they are not his own.”).
       271 See Free Enter. Fund, 561 U.S. at 510 (recognizing that while “Congress of course

remains free to” re-structure an agency, the Court cannot shirk its responsibility to remedy
constitutional violations in cases before it); PHH Corp., 881 F.3d at 158 (Henderson, J.,
dissenting) (“At all events, an otherwise invalid agency is no less invalid merely because the
Congress can fix it at some undetermined point in the future.”).
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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

       272 Free Enter. Fund, 561 U.S. at 496.
       273 Id.
       274 We do not question Congress’s authority to establish independent agencies, nor do

we decide the validity of any agency other than the FHFA. Governing through independent
agencies may be normatively desirable. It may not be. That is neither here nor there: Our
sole task is to decide whether the FHFA is constitutionally structured. See Marbury v.
Madison, 5 U.S. (1 Cranch) 137, 177 (1803) (“It is emphatically the province and duty of the
judicial department to say what the law is.”). We found, after an in-depth examination, that
the FHFA is excessively insulated from Executive Branch influence and is, therefore,
structured in violation of the Constitution. We leave for another day the question of whether
other agencies suffer from similar constitutional infirmities.
       And, of course, our opinion does not abrogate the Morrison Court’s holding regarding
the constitutionality of an independent agency tasked with investigating high-ranking
Executive Branch officials.
       275 Free Enter. Fund, 561 U.S. at 508–09 (quotation marks and citation omitted).
       276 See id. at 508; PHH Corp., 881 F.3d at 160–61 (Kavanaugh, J., dissenting); John

Doe Co. v. Consumer Fin. Prot. Bureau, 849 F.3d 1129, 1133 (D.C. Cir. 2017).
       277 Free Enter. Fund, 561 U.S. at 509.

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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,

       278 Id.
       279 Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686 (1987).
       280 John Doe Co., 849 F.3d at 1133 (citing Buckley, 424 U.S. at 142; Citizens for

Abatement of Aircraft Noise, Inc. v. Metropolitan Wash. Airports Auth., 917 F.2d 48, 57 (D.C.
Cir. 1990), aff’d, 501 U.S. 252 (1991)); see also Free Enter. Fund, 51 U.S. at 508–09.
       281 Free Enter. Fund, 561 U.S. at 509.
       282 See Alaska Airlines, 480 U.S. at 686.
       283 Free Enter. Fund, 561 U.S. at 509.

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“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.

      284   Id. at 509–10.
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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
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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
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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.
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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
of the FHFA. For the foregoing reasons, I respectfully dissent.

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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

      1   New York v. FERC, 535 U.S. 1, 18 (2002).
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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.
                                             I
       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

       2 Maj. Op. at 15.
       3 Roberts v. Fed. Hous. Fin. Agency, 889 F.3d 397, 403–04 (7th Cir. 2018); Robinson v.
Fed. Hous. Fin. Agency, 876 F.3d 220, 232 (6th Cir. 2017); Perry Capital L.L.C. v. Mnuchin,
864 F.3d 591, 607–09 (D.C. Cir. 2017).
       4 Roberts, 889 F.3d at 404 (characterizing the Shareholders’ claims as “whether the

Agency made a poor business judgment”); Robinson, 876 F.3d at 231; Perry Capital, 864 F.3d
at 607 (“FHFA’s execution of the Third Amendment falls squarely within its statutory
authority to operate the Companies, to reorganize their affairs, and to take such action as
may be appropriate to carry on their business.” (cleaned up)).
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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 perform this
action as receiver, yet the FHFA seeks to evade the carefully crafted statutory
scheme by proposing an impermissibly broad, and unnecessarily encroaching,
view of its powers as conservator. This overstep cannot sidestep judicial review.
       According to the majority opinion, however, there is essentially no limit
to the FHFA’s conservatorship authority, and courts are powerless to intervene

       5 All courts agree: HERA’s anti-injunction provision does not apply when a plaintiff
“properly alleges that ‘FHFA acted beyond the scope of its conservator power.’” Robinson, 876
F.3d at 228 (quoting Cty. of Sonoma v. Fed. Hous. Fin. Agency, 710 F.3d 987, 992 (9th Cir.
2013)); see also Roberts, 889 F.3d at 402; Perry Capital, 864 F.3d 591, 605; accord id. at 638,
641 (Brown, J., dissenting in part). The Shareholders have made this showing.
       6 12 U.S.C. § 4617(b)(2)(D)(ii).
       7 Id. § 4617(b)(2)(D)(i).

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so long as the FHFA operates under the guise of “conservator.” The majority
opinion’s conception of conservatorship is foreign to this (or any) court.
Adopting this exotic approach betrays the letter and the spirit of limitations
provided by HERA, and ultimately allows the FHFA to raze our established
principles governing administrative entities.
       I cannot endorse such a willy-nilly delegation of authority to an
administrative entity impervious to meaningful judicial review. The FHFA’s
professed power is something special—so spacious it’s specious. In terms of
unfettered clout, the FHFA has no rival across the federal agency landscape.
But unfettered must never be unfretted. Agencies must always operate within
the carefully crafted statutory schemes that govern their existence. And while
the FHFA’s averred authority as conservator is audacious, it is not limitless.
       I cannot join the majority opinion’s conclusion that the Shareholder’s
statutory claims are barred by HERA’s anti-injunction provision.
                                               II
       Agencies require statutory authorization for their actions. The full
extent of FHFA’s authority as conservator is thus found within HERA’s text. 8
As we recently made clear, “the text is the alpha and the omega of the
interpretive process.” 9 So I begin with the language Congress actually used.
       Congress created the FHFA to supervise and regulate the GSEs and
Federal Home Loan banks. 10 HERA granted the FHFA’s director discretionary
authority to place the GSEs in conservatorship. The statute authorizes the

       8 See City of Arlington, Tex. v. FCC, 569 U.S. 290, 317 (2013) (Roberts, C.J., dissenting)
(quoting La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374 (1986)).
       9 United States v. Maturino, 887 F.3d 716, 723 (5th Cir. 2018); see also New York, 535
U.S. at 18 (“[W]e must interpret the statute to determine whether Congress has given [the
agency] the power to act as it has.”).
       10 12 U.S.C. § 4511.

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FHFA to “be appointed conservator or receiver for the purpose of reorganizing,
rehabilitating, or winding up the affairs of a regulated entity.” 11 When serving
as conservator or receiver, the FHFA enjoys an array of general powers
enumerated in § 4617(b)(2). Once appointed as either conservator or receiver,
the FHFA succeeds to the “rights, titles, powers, and privileges of the [GSE],
and of any stockholder, officer, or director . . . with respect to the [GSE] and
the assets of the [GSE].” 12 And the FHFA may assume the assets, business
operations, and functions of the GSE, collect money due to the GSE, and
“preserve and conserve the assets and property” of the GSE. 13 Finally, HERA
permits the FHFA to exercise any function of any stockholder, director or
officer of the GSE. 14
       These general powers, however, must be read in concert with the more
specific powers enumerated for conservators and receivers, respectively. Acts
of Congress should be read cohesively, contextually, and comprehensively, not
“as a series of unrelated and isolated provisions.” 15 Under our precedent, “it is
a ‘cardinal rule that a statute is to be read as a whole,’ in order not to render
portions of [a statute] inconsistent or devoid of meaning.” 16 The majority
opinion’s focus on general powers ignores HERA’s specific provisions governing
how the FHFA is to behave.
       Reading the statute holistically, it is clear that HERA outlines two
distinct roles—conservator and receiver—that come with distinct powers. And

       11 Id. § 4617(a)(2) (emphasis added).
       12 Id. § 4617(b)(2)(A).
       13 Id. § 4617(b)(2)(B).
       14 Id. § 4617(b)(2)(C).
       15 In re Burnett, 635 F.3d 169, 172 (5th Cir. 2011) (quoting Soliman v. Gonzales, 419
F.3d 276, 282 (4th Cir. 2005)).
       16 Id. (quoting Zayler v. Dep’t of Agric. (In re Supreme Beef Processors, Inc.), 468 F.3d
248, 253 (5th Cir. 2006)).
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when the FHFA acts as conservator, HERA imposes mandatory duties on the
FHFA to “preserve and conserve” the GSEs’ assets and property.
                                             A
       Crucial to the issue before us today is that HERA distinguishes between
the role of conservator and the role of receiver. The FHFA Director may
designate the agency as either conservator or receiver, but once the FHFA is
appointed as one or the other, its powers depend on the role. And HERA
prescribes and proscribes those powers.
       HERA explicitly provides that the FHFA may “be appointed as
conservator or receiver for the purpose of reorganizing, rehabilitating, or
winding up the affairs of a regulated entity.” 17 The statute uses the disjunctive
“or,” denoting that the FHFA may not act as both conservator and receiver
simultaneously. 18 Indeed, the text further makes clear that these roles are
mutually     exclusive—appointing         the     FHFA     as   receiver     “immediately
terminate[s] any conservatorship established for the GSE.” 19 The roles are
distinctive, not cumulative.
       So are the powers attaching to each role. Section 4617(b)(2)(D) specifies
the FHFA’s powers as conservator. The FHFA may take any action “necessary
to put the [GSE] in a sound and solvent condition” and “appropriate to carry
on the business of the [GSE] and preserve and conserve the [GSE’s] assets and
property.” 20 By contrast, § 4617(b)(2)(E), (F) enumerates powers reserved to
the FHFA as receiver—which include liquidating the GSE and organizing a

       17 12 U.S.C. § 4617(a)(2).
       18 In ordinary use, the term “or” “is almost always disjunctive, that is, the words it
connects are to be given separate meanings.” Loughrin v. United States, 134 S. Ct. 2384, 2390
(2014) (quoting United States v. Woods, 134 S. Ct. 557, 567 (2013)).
       19 12 U.S.C. § 4617(a)(4)(D).
       20 Id. § 4617(b)(2)(D).

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“successor enterprise” to operate the GSE. 21 Elsewhere, HERA emphasizes the
contrasting nature of these powers. In operating the GSEs, the statute permits
the FHFA to “perform all functions of the [GSE] in the name of the [GSE] which
are consistent with the appointment as conservator or receiver.” 22 This
language echoes later in the statute. Under the incidental powers provision,
the FHFA is empowered only to “exercise all powers and authorities
specifically granted to conservators or receivers, respectively, under this section
. . . .” 23 This use of “respectively” further severs the role of “conservator” from
that of “receiver.” HERA thus outlines a distinct vision for the FHFA’s role as
conservator and its role as receiver.
       This distinction is not a mere procedural formality. When the FHFA acts
as receiver, HERA imposes specific statutory requirements to protect the
various rights and interests of creditors and investors. 24 These procedures exist
to ensure that receivers “fairly adjudicate claims against failed institutions.” 25
Liquidation is exclusively reserved for the FHFA when it acts as receiver. 26 In
fact, liquidation is mandatory, leaving no hope to “rehabilitate” a GSE in
receivership. 27 On the other hand, when the FHFA acts as conservator, it may
take any action “necessary to put the [GSE] in a sound and solvent condition”
and “appropriate to carry on the business of the [GSE] and preserve and
conserve the [GSE’s] assets and property.” 28 These explicit grants of power to

       21 See id. § 4617(b)(2)(E), (F).
       22 Id. § 4617(b)(2)(B)(iii) (emphasis added).
       23 Id. (emphasis added).
       24 See id. § 4617(b)(3)–(9), (c).
       25 Whatley v. Resolution Tr. Corp., 32 F.3d 905, 909–10 (5th Cir. 1994).
       26 See 12 U.S.C. § 4617(b)(2)(E), (F), (b)(3); 12 C.F.R. § 1237.3(b).
       27 See 12 U.S.C. § 4617(b)(2)(E) (“In any case in which the [FHFA] is acting as receiver,

the [FHFA] shall place the [GSE] in liquidation.” (emphasis added)).
       28 Id. § 4617(b)(2)(D).

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the FHFA when it acts as conservator or receiver define the nature of authority
in each role. In this light, the FHFA-as-conservator does not have authority to
“wind[] up” the GSEs. That is inherently, textually, and exclusively the
function of a receiver.
       This plain-language interpretation of the FHFA’s conservatorship
powers follows our interpretation of near-identical language in the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”).
Congress essentially cut-and-pasted the FHFA’s powers and functions as
conservator, including the anti-injunction provision, from FIRREA. 29 And it is
a treasured canon of statutory interpretation that when “Congress adopts a
new law incorporating sections of a prior law, Congress normally can be
presumed to have had knowledge of the interpretation given to the
incorporated law.” 30 Thus, our interpretation of FIRREA must inform our
interpretation of HERA.
       FIRREA empowers the Federal Deposit Insurance Corporation (“FDIC”)
to act as conservator or receiver. 31 FIRREA also breaks down the powers and
functions of the FDIC when it acts as conservator or receiver. Once appointed,
the FDIC “succeed[s] to . . . all rights, titles, powers, and privileges of the
insured depository institution, and of any stockholder, member, accountholder,
depositor, officer, or director . . . with respect to the institution and the assets
of the institution.” 32 FIRREA also permits the FDIC to fully assume the assets,
business operations, and functions of the institution, to collect money due to
the institution, and to “preserve and conserve the assets and property” of the

       29Compare id. § 1821(d)(2)(D) (FIRREA) with id. § 4617(b)(2)(D) (HERA).
       30Lorillard v. Pons, 434 U.S. 575, 580–81 (1978); see also Merrill Lynch, Pierce, Fenner
& Smith Inc. v. Dabit, 547 U.S. 71, 85–86 (2006).
      31 12 U.S.C. § 1821(c)(1).
      32 Compare id. § 1821(d)(2)(A)(i) with id. § 4617(b)(2)(A)(i).

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institution. 33 Finally, the FDIC may also exercise any function by any
stockholder, director or officer of the institution. 34
         This should sound familiar. Much of FIRREA’s text and structure
mirrors that of HERA. As under HERA, the conservator and receiver roles
under FIRREA share common powers and functions, but they are plainly
distinct. Among its general powers in operating the regulated entity, the FDIC
may “perform all functions of the institution in the name of the institution
which are consistent with the appointment as conservator or receiver.” 35 And,
like     HERA,    FIRREA       enumerates          specific,   unique   powers      held    by
conservators 36 and by receivers. 37 FIRREA authorizes conservators to take
“such action as may be . . . necessary to put the insured depository institution
in a sound and solvent condition; and . . . appropriate to carry on the business
of the institution and preserve and conserve [its] assets.” 38 In particular, it
notes the conservator’s “fiduciary duty to minimize the institution’s losses,” 39
whereas receivers “place the insured depository institution in liquidation and
proceed to realize upon the assets of the institution.” 40 Though the conservator
and receiver roles in FIRREA overlap in some respects, the duties reflect
different interests and distinct powers. 41 Under FIRREA, the FDIC holds
distinct roles when it acts as conservator or receiver with clearly delineated
statutory bounds between the two roles.

          Compare id. § 1821(d)(2)(B) with id. § 4617(b)(2)(B).
         33

          Compare id. § 1821(d)(2)(C) with id. § 4617(b)(2)(C).
         34
       35 Id. § 1821(d)(2)(B)(iii) (emphasis added).
       36 Id. § 1821(d)(2)(D).
       37 Id. § 1821(d)(2)(E)–(F).
       38 Id. § 1821(d)(2)(D).
       39 Id. § 1831f(d)(3).
       40 Id. § 1821(d)(2)(E).
       41 See McAllister v. Resolution Tr. Corp., 201 F.3d 570, 579 (5th Cir. 2000); Resolution

Tr. Corp. v. CedarMinn Bldg. Ltd. P’ship, 956 F.2d 1446, 1451–52, 1454 (8th Cir. 1992).
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       We should read HERA consistently with our previous interpretation of
FIRREA. Congress “can be presumed to have had knowledge of the
interpretation given to the incorporated law.” 42 So under HERA’s nearly
identical language, the FHFA as conservator exercises plainly distinct powers
from the FHFA as receiver.
       Nevertheless, the FHFA seeks to make bright lines blurry. First, it
argues that “winding up is different from liquidation,” so a conservator may
take steps akin to winding up so long as they fall short of liquidation.
Alternatively the FHFA argues that “HERA’s plain text authorizes FHFA as
‘conservator or receiver’ to be appointed ‘for the purpose of reorganizing,
rehabilitating, or winding up the affairs’” of the GSEs. As a result, the FHFA
can “wind up” the GSEs as either conservator or receiver. This argument
convinced the D.C. Circuit, which rejected the idea that there is “a rigid
boundary” between the FHFA’s conservator and receiver roles. 43
       To be sure, both as a general matter and as a textual matter,
conservators and receivers share some common functions under HERA. For
example, the FHFA, acting as either conservator or receiver, may “transfer or
sell any asset or liability” of the GSEs, “without any approval, assignment, or
consent.” 44 In fact, many powers granted to the FHFA are available to it in
either role. 45

       42 See Yates v. United States, 135 S. Ct. 1074, 1093 (2015) (Kagan, J., dissenting)
(noting that only the most compelling evidence will persuade the Court that Congress
intended identical terms used in similar contexts to bear different meanings); Morissette v.
United States, 342 U.S. 246, 263 (1952).
       43 Perry Capital, 864 F.3d at 610.
       44 12 U.S.C. § 4617(b)(2)(G).
       45 See, e.g., id. § 4617(b)(2)(G) (power to transfer or sell assets or liability of GSE in

default); id. § 4617(b)(2)(H) (power to pay certain obligations of GSE); id. § 4617(b)(2)(I)
(power to issue subpoenas); id. § 4617(b)(2)(J) (incidental powers necessary for the FHFA to
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      Winding up the GSEs is not one of those powers. Reading HERA this
way would be absurd: It would render the carefully crafted, mandatory,
receiver-specific, wind-up procedures irrelevant. 46 There are no corresponding
procedures for winding up the GSEs during conservatorship. 47 This silence is
unsurprising. As conservator, the FHFA must “preserve and conserve” the
GSEs’ assets. In fact, the powers and functions unique to the FHFA as
receiver—winding up and liquidating a GSE—are antithetical to the duties of
the FHFA as conservator—rehabilitating a GSE and operating it as a going
concern, preserving its assets. 48 If the FHFA wished to wind up the GSEs, it
must first be designated as receiver.
      This conclusion does not deny the FHFA discretion to exercise its lawful
powers as conservator; it simply enforces it. The FHFA may not exercise
powers reserved for receivers when it is designated as a conservator. HERA
specifies discrete conduct that the FHFA may exercise in pursuit of its goals in
either role.
      All this boils down to the fact that the FHFA cannot hide behind the
conservator label to insulate it from meaningful judicial review. The FHFA
placed the GSEs into conservatorship. In making that designation, the FHFA
is limited to its authority as a conservator under HERA.

execute its authority as conservator or receiver); id. § 4617(d)(1) (power to repudiate
contracts or leases).
       46 See id. § 4617(b)(3)–(9), (c) (describing how to resolve claims against the GSEs

during liquidation).
       47 See id. § 4617(b)(2)(D).
       48 Id. § 4617(a)(2), (b)(2)(D)–(E).

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                                              B
       Next, we must outline the contours of the FHFA’s conservatorship
authority. Understanding how HERA defines the FHFA’s conservatorship role
is essential to determining whether the FHFA exceeded its statutory authority.
       HERA enumerates specific powers for the FHFA when it acts as
conservator. The FHFA “may . . . take such action as may be . . . necessary to
put the regulated entity in a sound and solvent condition; and . . . appropriate
to carry on the business of the regulated entity and preserve and conserve the
assets and property of the regulated entity.” 49
       These powers accord with the traditional understanding of the role of
conservators at common law. 50 A conservator is “the modern equivalent of the
common-law guardian” and a “managing conservator” is “[a] person appointed
by a court to manage the estate or affairs of someone who is legally incapable
of doing so.” 51 And conservators had specific fiduciary duties: They were
appointed to protect the legal interests of those unable to protect themselves. 52
According to the Congressional Research Service, “[a] conservator is appointed
to operate the institution, conserve its resources, and restore it to viability.” 53

       49  Id. § 4617(b)(2)(D).
       50  “It is a settled principle of interpretation that, absent other indication, ‘Congress
intends to incorporate the well-settled meaning of the common-law terms it uses.’” United
States v. Castleman, 134 S. Ct. 1405, 1410 (2014) (quoting Sekhar v. United States, 133 S. Ct.
2720, 2724 (2013)). And “absence of contrary direction may be taken as satisfaction with
widely accepted definitions.” Morissette, 342 U.S. at 263. Congress’s use of the word
“conservator” in HERA and FIRREA incorporates the tradition of fiduciary conservatorships
at common law. See, e.g., Perry Capital, 864 F.3d at 641 (Brown, J., dissenting in part)
(construing FHFA conservatorship authority in light of common-law principles); Matter of
Still, 963 F.2d 75, 77 (5th Cir. 1992) (construing FDIC receivership authority in light of
common-law understandings).
        51 Conservator, BLACK’S LAW DICTIONARY (10th ed. 2014) (emphasis in original).
        52 See, e.g., Unif. Prob. Code § 5-418.
        53 DAVID H. CARPENTER & M. MAUREEN MURPHY, CONG. RES. SERV., FINANCIAL

INSTITUTION INSOLVENCY: FEDERAL AUTHORITY OVER FANNIE MAE, FREDDIE MAC, AND
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Traditionally at common law, conservators thus owed certain obligations to
their wards—power must be exercised for their benefit.
       This common-law understanding forms the foundation on which
Congress built FIRREA and later, HERA, authorizing agencies to serve as
conservators for an entity by “preserv[ing] and conserv[ing]” its assets and
operating it in a “sound and solvent” manner. 54 As explained above, we have
interpreted FIRREA to “state[] explicitly that a conservator only has the power
to take actions necessary to restore a financially troubled institution to
solvency.” 55 We are in good company—the Fourth, Eighth, Ninth, Eleventh,
and D.C. Circuits have articulated similar views. 56 And the FDIC’s own policy
statements reflect its view that the conservatorship role imposes a duty to
achieve “sufficient tangible capitalization” that reasonably assures “the future

DEPOSITORY                        INSTITUTIONS                       5                   (2008),
https://digital.library.unt.edu/ark:/67531/metadc795484/m1/1/high_res_d/RL34657_2008Sep
10.pdf.
        54 See 12 U.S.C. § 1821(d)(2)(D); id. § 4617(b)(2)(D).
        55 McAllister, 201 F.3d at 579.
        56 See, e.g., James Madison Ltd. By Hecht v. Ludwig, 82 F.3d 1085, 1090 (D.C. Cir.

1996) (“The principal difference between a conservator and receiver is that a conservator may
operate and dispose of a bank as a going concern, while a receiver has the power to liquidate
and wind up the affairs of an institution.”); Elmco Props., Inc. v. Second Nat’l Fed. Sav. Ass’n,
94 F.3d 914, 922 (4th Cir. 1996) (“[A] conservator’s function is to restore the bank’s solvency
and preserve its assets.”); Del E. Webb McQueen Dev. Corp. v. Resolution Tr. Corp., 69 F.3d
355, 361 (9th Cir. 1995) (“The [Resolution Trust Corporation (“RTC”)], as conservator,
operates an institution with the hope that it might someday be rehabilitated. The RTC, as
receiver, liquidates an institution and distributes its proceeds to creditors according to the
priority rules set out in the regulations.”); Resolution Tr. Corp. v. United Tr. Fund, Inc., 57
F.3d 1025, 1033 (11th Cir. 1995) (“The conservator’s mission is to conserve assets which often
involves continuing an ongoing business. The receiver’s mission is to shut a business down
and sell off its assets.”); CedarMinn, 956 F.2d at 1453 (noting that a conservator’s “mission[]”
is “to take action necessary to restore the failed [financial institution] to a solvent position
and to carry on the business of the institution and preserve and conserve the assets and
property of the institution” (quoting 12 U.S.C. § 1821(d)(2)(D)).
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viability of the institution.” 57 Importantly, a conservator must “minimize the
institution’s losses” and ensure “the future viability of the institution,” whereas
a receiver liquidates and realizes upon the assets of the institution.
       Before this litigation, the FHFA itself agreed with this understanding of
its authority as conservator. The FHFA acknowledged publicly that “[t]he
purpose of conservatorship is to preserve and conserve each company’s assets
and property and to put the companies in a sound and solvent condition.” 58 The
FHFA has repeatedly emphasized that HERA “required” it to restore the GSEs
to soundness and to “preserve and conserve” the GSEs’ assets. 59 And its own
regulations highlight that “the essential function of a conservator is to preserve
and conserve the institution’s assets,” and “[a] conservator’s goal is to continue
the operations of a regulated entity, rehabilitate it[,] and return it to a safe,
sound[,] and solvent condition.” 60 Neither winding up nor liquidating an entity,
whether synonymous or not, are consistent with this mission.
       Now, however, the FHFA no longer thinks a conservator must conserve.
The FHFA argues that HERA’s conservatorship powers “bear no resemblance

       57  Statement of Policy on Assistance to Operating Insured Depository Institutions, 57
Fed. Reg. 60203, 60205 (Dec. 18, 1992).
        58 Fed. Hous. Fin. Agency, Report to Congress: 2009, at i (May 25, 2010),

https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2009_AnnualReportToCongress_5
08.pdf (acknowledging “[t]he purpose of conservatorship is to preserve and conserve each
company’s assets and property and to put the companies in a sound and solvent condition”).
        59 See Fannie Mae and Freddie Mac Loan Purchase Limits: Request for Public Input

on Implementation Issues, 78 Fed. Reg. 77450, 77451 (Dec. 23, 2013) (describing the
authority to “preserve and conserve” the GSEs’ assets as “FHFA’s conservator obligation”
(emphasis added)); 2012-2014 Enterprise Housing Goals, 77 Fed. Reg. 67535, 67549 (Nov. 13,
2012) (“FHFA’s duties as conservator require the conservation and preservation of the
[GSEs’] assets.” (emphasis added)); Conservatorship and Receivership, 76 Fed. Reg. 35724,
35726 (June 20, 2011) (describing FHFA’s authority under § 4617(b)(2)(D) as its “statutory
mission to restore soundness and solvency to insolvent regulated entities and to preserve and
conserve their assets and property” (emphasis added)).
        60 Conservatorship and Receivership, 76 Fed. Reg. 35724, 257327, 35730 (June 20,

2011).
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to the type of conservatorship measures that a private common-law
conservator would be able to undertake,” and Congress empowered the FHFA
to act in its own best interests under the “incidental powers” provision. In
essence, the FHFA contends that the incidental powers provision represents a
clear,        contrary   intention   by    Congress      to   displace   the   common-law
interpretation of “conservator.”
         Other circuits have found this argument persuasive. They believe
Congress explicitly delegated authority that exceeds the customary meaning
of conservator, so the FHFA complied with its general statutory mandate in
adopting the net worth sweep. 61 First, they conclude that the FHFA is not a
traditional conservator because “Congress granted FHFA a broad array of
discretionary authority”—by framing HERA in terms of permissive authority,
Congress intended the FHFA to exercise its discretion and it is not required to
pursue binding duties under § 4617(b)(2)(D) when it acts as conservator. 62
Second, they find that the FHFA is not a traditional conservator because
express powers granted by HERA’s incidental powers permit the FHFA to take
its own interests into account when performing its duties as conservator,
conflicting with the customary meaning of conservatorships. 63

          See, e.g., Robinson, 876 F.3d at 229–30 (finding that the statute is framed in terms
         61

of discretionary authority and that express powers conflict with traditional notions of
conservatorships); Perry Capital, 864 F.3d at 613 (“Congress made clear in the Recovery Act
that the FHFA is not your grandparents’ conservator.”).
       62 Robinson, 876 F.3d at 229–30; see also Roberts, 889 F.3d at 403 (“[S]ection

4617(b)(2)(D) does not require the Agency to do anything. It uses the permissive ‘may,’ rather
than the mandatory ‘shall’ or ‘must,’ to introduce the Agency’s power as conservator to
‘preserve and conserve’ Freddie’s and Fannie’s assets and to restore their solvency.”); Perry
Capital, 864 F.3d at 607 (“The statute is thus framed in terms of expansive grants of
permissive, discretionary authority for FHFA to exercise as the ‘Agency determines is in the
best interests of the regulated entity or the Agency.’” (quoting 12 U.S.C. § 4617(b)(2)(J))).
       63 Robinson, 876 F.3d at 230; Perry Capital, 864 F.3d at 613.

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       There is a textual hook in finding that Congress granted the FHFA
discretionary authority. HERA provides that the FHFA “may . . . take such
action as may be . . . necessary to put the regulated entity in a sound and
solvent condition; and . . . appropriate to carry on the business of the regulated
entity and preserve and conserve the assets and property of the regulated
entity.” 64 Typically, “may” implies discretion. 65 I do not doubt that “may means
may” or that “‘may is, of course, ‘permissive rather than obligatory.’” 66 But
courts seeking a forthright interpretation should not myopically focus on “may”
at the expense of reading HERA as a cohesive, contextual whole. In divining
statutory meaning, courts must never divorce text from context. 67
       Once again, “[a]n agency literally has no power to act . . . unless and until
Congress confers power upon it.” 68 Here, “may” enables the FHFA to act—the
FHFA may take any action as conservator that is either (1) “necessary to put
the [GSE] in a sound and solvent condition” or (2) “appropriate to carry on the
business of the [GSE] and preserve and conserve” GSE assets and property. 69
Logically, the FHFA may not take an action that is inconsistent with this
express list of powers. 70 Any other reading would render the FHFA’s
enumeration        of   specific     conservator       powers       meaningless.      Section

       64  12 U.S.C. § 4617(b)(2)(D) (emphasis added).
       65  See Kingdomware Techs., Inc. v. United States, 136 S. Ct. 1969, 1977 (2016).
        66 Perry Capital, 864 F.3d at 607 (quoting U.S. Sugar Corp. v. EPA, 830 F.3d 579, 608

(D.C. Cir. 2016); Baptist Mem’l Hosp. v. Sebelius, 603 F.3d 57, 63 (D.C. Cir. 2010)).
        67 See, e.g., Torres v. Lynch, 136 S. Ct. 1619, 1626 (2016) (explaining that courts must

“interpret the relevant words [of a statute] not in a vacuum, but with reference to the
statutory context” (quoting Abramski v. United States, 134 S. Ct. 2259, 2267 (2014))).
        68 New York, 535 U.S. at 18.
        69 12 U.S.C. § 4617(b)(2)(D) (emphasis added).
        70 Under the negative implication interpretive canon, expressio unius est exclusio

alterius, the specification of one thing implies the exclusion of the other. Antonin Scalia &
Bryan A. Garner, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 107 (2012); see also
Texas v. United States, 809 F.3d 134, 182 (5th Cir. 2015) (noting the utility of expressio unius
for interpreting statutes in the administrative law field).
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4617(b)(2)(D), though framed permissively, thus circumscribes the FHFA’s
powers as conservator—any action it takes must be consistent with its mission
to “preserve and conserve” the GSEs’ assets.
       Nor does HERA’s incidental powers provision give the FHFA carte
blanche to ignore its statutory mandate as conservator. Under its incidental
powers, 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 them out. 71 And the FHFA
may “take any action authorized by this section, which the [FHFA] determines
is in the best interests of the [GSE] or the [FHFA].” 72 According to the
Shareholders, and at least two other circuits, this provision includes a broad
grant of permissive authority for the FHFA to do whatever it pleases based on
its own self-interest. 73
       I doubt that Congress “in fashioning this intricate . . . machinery, would
[] hang one of the main gears on the tail pipe.” 74 Interpreting the incidental
powers provision to include such sweeping authority would treat the incidental
powers as ends unto themselves, swallowing the remainder of HERA’s
statutory text.
       The incidental powers provision is not a freestanding source of authority
to act. Instead, the provision is confined to “any action authorized by this
section.” 75 In essence, “incidental” powers must be “incidental” to something.

       71  12 U.S.C. § 4617(b)(2)(J)(i).
       72  Id. § 4617(b)(2)(J)(ii).
        73 See Robinson, 876 F.3d at 232 (finding that the Third Amendment could be a valid

use of the FHFA’s incidental power as conservator); Perry Capital, 864 F.3d at 607–08 (noting
that the incidental powers provision permits the FHFA to take any action which it
determines is in its best interests).
        74 Brannan v. Stark, 342 U.S. 451, 463 (1952).
        75 12 U.S.C. § 4617(b)(2)(J)(ii) (emphasis added).

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To support this reading, we need look no further than a dictionary; “incidental”
means “[s]ubordinate to something of greater importance; having a minor
role.” 76 It is inconceivable that FHFA could exercise such free-wheeling
authority under its “incidental” powers—wholly untethered from its specific
powers as conservator or receiver.
       And this broad reading ignores provisions granting the FHFA specific
powers and functions as either conservator or receiver. The incidental powers
provision references these powers and functions when it authorizes the FHFA
to “exercise all powers and authorities specifically granted to conservators or
receivers, respectively.” 77 Logically, any exercise of the FHFA’s incidental
powers must be in service of a power specifically provided by HERA. 78 It is only
with reference to these specific powers that we may discern the scope of the
FHFA’s authority over the GSEs. 79
       Regardless, permitting the FHFA to act in its own best interests does not
come close to providing the type of explicit instruction required to suggest that
Congress displaced the common-law attributes of conservatorships. 80 The

       76   Incidental, BLACK’S LAW DICTIONARY (10th ed. 2014).
       77   12 U.S.C. § 4617(b)(2)(J)(i) (emphasis added).
         78 In some respects, the Court’s analysis of the Necessary and Proper Clause, Article

I’s “incidental powers” provision, is instructive. Cf. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567
U.S. 519, 560 (2012) (noting that “cases upholding laws under [the Necessary and Proper]
Clause involved exercises of authority derivative of, and in service to, a granted power”);
McCulloch v. Maryland, 4 Wheat. 316, 421 (1819) (noting that the general authority to pass
laws “necessary and proper” to executing its powers are determined by the powers granted
under the Constitution).
         79 See RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012)

(noting that it is a well-known canon of statutory construction that a specific provision of a
statute governs the general, avoiding “the superfluity of a specific provision that is swallowed
by the general one, ‘violat[ing] the cardinal rule that, if possible, effect shall be given to every
clause and part of a statute’” (quoting D. Ginsburg & Sons, Inc. v. Popkin, 285 U.S. 204, 208
(1932))).
         80 Cf. Morissette, 342 U.S. at 263.

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FHFA possesses significant regulatory authority with the potential for
reverberations throughout the United States economy. Given the importance
of the FHFA’s role and the potential disruption to financial markets, the
incidental powers provision is insufficient to negate the assumption that the
settled common-law meaning of conservator applies. 81 Instead, the provision
merely permits the FHFA to engage in self-dealing transactions, an act
otherwise inconsistent with the conservator role. 82
       The FHFA’s topsy-turvy take on the notion of conservators upends our
traditional understanding of fiduciary conservatorships, and I cannot endorse
it. “Congress’ repetition of a well-established term carries the implication that
Congress intended the term to be construed in accordance with pre-existing
regulatory interpretations.” 83 Conservator is one such term. We have
consistently honed the meaning of conservator at common law and
subsequently under FIRREA. This court should decline to follow FHFA
through the looking glass to a world where conservators need not conserve.
       Without the statutory command to “preserve and conserve” the GSEs’
assets and property, the FHFA is left without any intelligible principle to guide
its discretion as conservator. The FHFA is essentially permitted to take any
action—unmoored from any statutory guidance—so long as it could plausibly
defend its action as “reorganizing” the GSEs. This broad reading effectively

       81  See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 160 (2000) (“[W]e are
confident that Congress could not have intended to delegate a decision of such economic and
political significance to an agency in so cryptic a fashion.”).
        82 See Perry Capital, 864 F.3d at 643 (Brown, J., dissenting in part).
        83 Bragdon v. Abbott, 524 U.S. 624, 631 (1998) (citations omitted); see also Lorillard,
434 U.S. at 580–81 (noting that where “Congress adopts a new law incorporating sections of
a prior law, Congress normally can be presumed to have had knowledge of the interpretation
given to the incorporated law”).
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eviscerates the carefully crafted statutory authority granted to the FHFA,
permitting it to abandon its conservatorship mission.
      In sum, the FHFA “is not empowered to jettison every duty a conservator
owes its ward, and it is certainly not entitled to disregard the statute’s own
clearly defined limits on conservator power.” 84 The FHFA cannot act contrary
to HERA’s conservator powers; any such action would not be “incidental” to its
statutorily enumerated authority. Thus, the FHFA may act in its own interests
as conservator, but its actions must otherwise be consistent with its statutory
authority to “preserve and conserve” the GSEs’ assets and operate the GSEs in
a “sound and solvent” manner.
                                       III
      Because the FHFA was appointed as conservator—not as receiver—we
must consider whether the net worth sweep was consistent with “the duties,
purpose, and actions of a prudent conservator.” 85 The key question is whether
the net worth sweep was designed to “preserve and conserve” the GSEs’ assets
and rehabilitate the GSEs by putting them in “sound and solvent condition.” 86
      The FHFA’s conservatorship began on a relatively optimistic note.
Fannie and Freddie were publicly placed into conservatorship on September 6,
2008, after failed attempts to recapitalize the GSEs. At the time, the FHFA
Director was concerned about the GSEs’ ability to “operate safely and soundly,”
and he explained the conservatorship as “a statutory process designed to
stabilize a troubled institution with the objective of returning the entities to
normal business operations.” 87 In pursuit of its conservatorship goals, the

      84 Perry Capital, 864 F.3d at 643 (Brown, J., dissenting in part).
      85 Leon Cty. v. Fed. Hous. Fin. Agency, 700 F.3d 1273, 1278 (11th Cir. 2012).
      86 12 U.S.C. § 4617(b)(2)(D).
      87 Statement of FHFA Director James B. Lockhart at News Conference Announcing

Conservatorship of Fannie Mae and Freddie Mac, FHFA (Sept. 7, 2008),
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FHFA enlisted Treasury to provide cash infusions that preserved the value of
Fannie’s and Freddie’s assets, enhanced their ability to function in the housing
market, and mitigated the systemic risk that contributed to an unstable
market. 88 Per the PSPA, Treasury purchased $1 billion of senior preferred
stock in each GSE from the FHFA in exchange for access to capital. Treasury
also had a right to a 10% dividend and periodic commitment fee to compensate
it for any capital provided to the GSEs. Treasury believed it had a
“responsibility to both avert and ultimately address the systemic risk” of GSE
debt and to “eliminate any mandatory triggering of receivership.” 89 This is
consistent with its role as conservator—fixing short-term deficits and
returning entities to functioning market participants is the essence of
conservatorships.
      But everything changed under the Third Amendment. The net worth
sweep fundamentally altered the PSPA between the FHFA and Treasury,
replacing the fixed-rate 10% dividend with the right to sweep the GSEs’ entire
quarterly net worth after accounting for a $3 billion capital reserve buffer that
would gradually fall to zero. Far from ensuring ongoing access to capital, the
net worth sweep denied the GSEs access to approximately $130 billion in profit
that was instead turned over to Treasury. 90 In essence, the sweep siphoned

https://www.fhfa.gov/Media/PublicAffairs/pages/statement-of-fhfa-director-james-b--
lockhart-at-news-conference-annnouncing-conservatorship-of-fannie-mae-and-freddie-
mac.aspx.
        88 See Questions and Answers on Conservatorship, FHFA (Sept. 7, 2008),

https://www.fhfa.gov/Media/PublicAffairs/Pages/Fact-Sheet-Questions-and-Answers-on-
Conservatorship.aspx.
        89 Fact Sheet: Treasury Senior Preferred Stock Purchase Agreement, U.S. Treasury

Dep’t        (Sept.       7,      2008),       https://www.treasury.gov/press-center/press-
releases/Documents/pspa_factsheet_090708%20hp1128.pdf.
        90  See FHFA, Table 2: Dividends on Enterprise Draws from Treasury,
https://www.fhfa.gov/DataTools/Downloads/Documents/Market-Data/Table_2.pdf.
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nearly all of the GSEs’ net worth between 2012 and the present day directly to
a sole shareholder: Treasury. It is undisputed that Treasury has collected over
$200 billion under the net worth sweep—well exceeding the $187.5 billion it
loaned to the GSEs. 91 Treasury has now recovered far more than it invested in
the companies between 2008 and 2012 under the PSPAs. Yet the GSEs remain
on the hook for the $187.5 billion obtained from Treasury before the Third
Amendment. Under the Third Amendment, Treasury has the right to retain
the GSEs’ net worth in perpetuity.
       Indeed, the Agencies abandoned their original optimism for a more
ominous outlook for the GSEs. Both Treasury and the FHFA thought the Third
Amendment aimed to wind up the GSEs—in other words, the GSEs would not
return to operating capacity. Treasury announced that the Third Amendment
would “expedite the wind down of Fannie Mae and Freddie Mac” and ensure
that the GSEs “will be wound down and will not be allowed to retain profits,
rebuild capital, and return to the market in their prior form.” 92 The FHFA
Acting Director also noted that there “seems to be broad consensus that Fannie
Mae and Freddie Mac will not return to their previous corporate forms,” that
the “preferred course of action is to wind down the [GSEs],” and that the Third
Amendment “reinforce[d] the notion that the [GSEs] will not be building
capital as a potential step to regaining their former corporate status.” 93 Once

      91   Id.
      92   Press Release, Dep’t of Treasury, Treasury Department Announces Further Steps to
Expedite Wind Down of Fannie Mae and Freddie Mac (Aug. 17, 2012),
https://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx.
        93 Edward J. DeMarco, Acting Director, FHFA, Statement Before the U.S. Sen. Comm.

on       Banking,       Hous.,       &      Urban      Affairs    (Apr.     18,      2013),
https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-of-Edward-J-DeMarco-Acting-
Director-FHFA-Before-the-US-Senate-Committee-on-Banking-Housing-and-Urban-
Affa359.aspx.
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again, in a report to Congress, the FHFA explained that it was “prioritizing
[its] actions to move the housing industry to a new state, one without Fannie
Mae and Freddie Mac.” 94 Treasury and the FHFA did not attempt to hide their
intentions, or, if they did, they weren’t very good at it. Instead, they proclaimed
loudly and proudly that they wanted to transfer wealth from the Shareholders
to Treasury in an effort to wind up Fannie’s and Freddie’s affairs.
       But to wind up the GSEs’ affairs, the FHFA needed to follow HERA’s
carefully crafted procedures. The FHFA could be designated as receiver for the
GSEs and put them on the path to liquidation. But that is not the path that
the FHFA chose—the FHFA was designated as conservator. By evading the
receivership label, the FHFA could unilaterally bleed the GSEs’ assets for its
own use. The Shareholders were essentially denied their property rights in
GSE assets. Even worse, the FHFA evaded any judicial oversight to ensure
compliance with HERA’s receivership procedures.
       The Sixth, Seventh, and D.C. Circuits determined that the Third
Amendment falls squarely within the FHFA’s authority operate the GSEs,
carry on business, transfer or sell assets, and do so in the GSEs’ or its own best
interests. 95 These courts characterize the Shareholders’ complaint as attacking
the “necessity or financial wisdom” of the net worth sweep, reasoning that
“Congress could not have been clearer about leaving those hard operational
calls to FHFA’s managerial judgment.” 96

       94    FHFA,     Report     to   Congress     2012,    at   13     (June    13,    2013),
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2012_AnnualReportToCongress_5
08.pdf.
        95 Robinson, 876 F.3d at 231 (citing 12 U.S.C. § 4617(b)(2)); Roberts, 889 F.3d at 404;

Perry Capital, 864 F.3d at 607.
        96 Robinson, 876 F.3d at 231 (quoting Perry Capital, 864 F.3d at 607); Roberts, 889
F.3d at 404 (quoting Perry Capital, 864 F.3d at 607).
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      Admittedly, judges are not experts at Byzantine financial dealings or
long-term market strategy. But interpreting statutes is squarely in the judicial
wheelhouse. The FHFA may not hide behind the label of conservator to
insulate itself from meaningful judicial review. Instead, we must apply well-
settled principles underlying conservatorships to determine if the FHFA’s
actions were within its statutory authority. Simply put, HERA requires the
FHFA as conservator to act in a certain way, and the net worth sweep is
inconsistent with those requirements. Draining the GSEs’ entire net worth in
perpetuity makes rehabilitation—a core function of conservatorships—
impossible. The net worth sweep was thus inconsistent with what a
conservator may do, under HERA or otherwise.
      That the GSEs have returned to profitability is of no matter. This case
concerns whether a discrete action by the FHFA falls within its statutory
conservatorship authority. The net worth sweep strips the GSEs of their
capital reserves, and it is thus antithetical to the FHFA’s statutory command
that it “preserve and conserve the assets and property” of the GSEs. 97 Yet the
net worth sweep persists—and it persists indefinitely.
      This violates the FHFA’s principal duty as conservator to “put the
[GSEs] in a sound and solvent condition.” 98 One of the FHFA’s regulatory
duties over the GSEs is “to ensure that [the GSEs] operate[] in a safe and sound
manner, including maintenance of adequate capital.” 99 And FHFA regulations
suggest that allowing this transfer of capital to Treasury, thereby depleting
the conservatorship assets, is incompatible with its “statutory charge to work
to restore a regulated entity in conservatorship to a sound and solvent

      97 12 U.S.C. § 4617(b)(2)(D)(ii).
      98 Id. § 4617(b)(2)(D)(i).
      99 Id. § 4513(a)(1)(B).

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condition.” 100 Without capital reserves, the net worth sweep left the GSEs
extremely vulnerable to market fluctuations and risked further reliance on
Treasury’s funding commitment. This risk increased each year as the reserve
cap decreased, supporting the position that the net worth sweep is inconsistent
with the statutory command to take actions “necessary to put the regulated
entity in a sound and solvent condition. 101 The FHFA Director said it best:
Allowing the GSEs to operate without a reserve buffer is “irresponsible.” 102
       To be sure, the GSEs are now permitted to retain a $3 billion capital
reserve amount under the net worth sweep. 103 But removing the GSEs’ entire
net worth beyond that reserve cap still risks increasing Treasury’s liquidation
preference. In fact, the GSEs have incurred additional debt in order to pay
Treasury under the net worth sweep. Ordering the GSEs to further weaken
their financial position in this manner is inconsistent with the FHFA’s
statutory authority.
       Congress carefully delineated the FHFA’s powers as conservator. And
courts have a responsibility to ensure that the FHFA does not exceed those
powers. By holding otherwise, the majority opinion forecloses any recourse the
Shareholders have to ensure that their property rights are protected by
HERA’s mandatory procedures.
                                      *      *      *

       100  Conservatorship and Receivership, 76 Fed. Reg. 35724, 35727 (June 20, 2011).
       101  12 U.S.C. § 4617(b)(2)(D)(i).
        102 Melvin L. Watt, Director, FHFA, Statement Before the U.S. House of

Representatives          Comm.        on    Fin.       Servs.      (Oct.      3,     2017),
https://www.fhfa.gov/Media/PublicAffairs/pages/statement-of-melvin-l--watt,-director,-fhfa,-
before-the-u-s--house-of-representatives-committee-on-financial-services.aspx.
        103 Melvin L. Watt, Director, FHFA, Statement on Capital Reserve for Fannie Mae

and               Freddie              Mac           (Dec.            21,             2017),
https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-from-FHFA-Director-Melvin-L-
Watt-on-Capital-Reserve-for-Fannie-Mae-and-Freddie-Mac.aspx.
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      In a legal system governed by the Rule of Law, investors rely on
predictable, well-settled principles of conservatorships and receiverships and
the consistent interpretation of these terms by courts. HERA established the
FHFA in order to stabilize and restore confidence in the United States housing
market. In drafting the statute, Congress built HERA on the foundation of
FIRREA, importing the accompanying predictable, deep-dyed common-law
principles of conservatorships. Importantly, when the FHFA acts as
conservator, Congress requires it to “preserve and conserve” the property and
assets of the GSEs.
      The FHFA abandoned this duty as conservator when it enacted the net
worth sweep, thus barring the GSEs from earning and maintaining a profit. In
essence, the FHFA began to wind up the GSEs and place them into
liquidation—a power reserved for its role as receiver. 104 But the FHFA had not
been designated as receiver, and it disregarded the receiver-specific statutory
protections afforded to the GSEs and their investors.
      Nothing in the statute prevents the FHFA from being designated and
acting as a receiver. Perhaps all this litigation could have been avoided had
the FHFA done so. But the FHFA has made its statutory bed, and now it must
lie in it. If the FHFA wishes to wind up the GSEs, it must comply with the
statutory procedures designating itself as receiver and terminating the
conservatorship first. Having failed to do just that, the FHFA exceeded its
statutory authority.
      HERA neither bars review of the Shareholders’ APA claim nor
authorizes the FHFA as conservator to bleed the GSEs profits in perpetuity.
Because the majority opinion holds otherwise, I respectfully dissent.

      104   See 12 U.S.C. § 4617(a)(4)(D), (b)(2)(E), (b)(3), (c).
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