New Fannie Mae Shareholder Case Against FHFA Has Merit

By Saikrishna Prakash (October 24, 2017, 1:33 PM EDT) -- Over the summer, shareholders of Fannie Mae and Freddie Mac brought a new suit, Bhatti et al. v. Federal Housing Finance Agency et al., alleging that the structure and actions of the FHFA violate the Constitution's separation of powers. The U.S. District Court for the District of Minnesota is considering the government's recent motion to dismiss the case. By my lights, this suit has merit.

Background

In 2008, Fannie and Freddie were placed under a FHFA conservatorship pursuant to the terms of the Housing and Economic Recovery Act. In 2012, FHFA authorized the diversion of all future government-sponsored enterprise (GSE) earnings to...

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