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1. Supreme Court Finds FHFA Structure Unconstitutional; Biden to Remove Director Calabria Today
The Supreme Court on Wednesday ruled that the structure of the agency that oversees Fannie Mae and Freddie Mac violates separation of powers principles in the Constitution. In a split decision, the court found that the leadership structure of the FHFA was unconstitutional because of a provision that the president could only remove its director for cause, not at will. The widely anticipated decision mirrored the court's ruling on the similarly structured Consumer Financial Protection Bureau last year. The court also unanimously dismissed a claim by Fannie and Freddie shareholders who sued the government to invalidate the 2012 decision to send the companies' profits directly to Treasury, the so-called "third amendment, stating: "We conclude only that under the terms of the Recovery Act, the FHFA did not exceed its authority as a conservator, and therefore the anti-injunction clause bars the shareholders' statutory claim." - Why it matters: The FHFA was created in 2008 in the wake of the financial crisis as part of the Housing and Economic Recovery Act, and the FHFA quickly thereafter placed Fannie and Freddie into conservatorship. The case before the Supreme Court was brought by Fannie Mae and Freddie Mac shareholders who argued that the regulator overstepped its authority when it reached an agreement with the Treasury Department to sweep the mortgage giants' profits to the federal government.
- What's next: The ruling paved the way for the Biden administration to fire FHFA Director Mark Calabria at will, and President Joe Biden took swift action. In a statement yesterday, a White House official told the press that Biden planned to replace Calabria: "FHFA has an important mission of oversight of Fannie Mae and Freddie Mac as well as the Federal Home Loan Bank System," the White House official said. "It is critical that the agency implement the Administration's housing policies. As a result, in light of the Supreme Court's decision today, the President is moving forward today to replace the current Director with an appointee who reflects the Administration's values." President Biden named Sandra Thompson, current FHFA Deputy Director of the Division of Housing Mission and Goals, as Acting Director. MBA's statement on Sandra. Thompson's appointment can be found here.
2. Treasury Secretary Testifies on Capitol Hill; Discusses Retroactive Capital Gains Proposal On Wednesday of last week, Treasury Secretary Janet Yellen suggested in remarks before a Senate panel that if Congress were to pass a capital-gains tax hike starting in April 2021, that would not count as a retroactive increase. "I don't see a prospective change in rules pertaining to the taxation of future realization of capital gains as being a retroactive feature," Secretary Yellen told the Senate Finance Committee, when asked about the Biden administration's tax proposal. A summary of the full hearing can be found here. - Why it matters: President Joe Biden's proposal to raise the capital-gains tax rate to 39.6% from 20% for those earning $1 million or more was first announced April 28, as part of the administration's American Families Plan. Secretary Yellen's comment suggests that the White House continues to push for capital-gains increases to be effective before the date Congress passes any potential law.
- What's next: President Biden's proposal to tax capital-gains income at the same rates as wages and salaries for high earners would be one of the biggest changes to investment taxation in roughly a century. Debate over the start date of any capital-gains tax changes is likely to be a source of tension as the issue is debated in Congress during the coming months.
3. House Moves Key Transportation Bill
Earlier this month, the House Committee on Transportation and Infrastructure advanced its five-year, $547 billion surface transportation bill on a bipartisan basis during a 19-hour markup. This legislation will be part of a larger transportation and infrastructure package that will be merged with the highway authorization, which expires September 30, 2021. MBA's letter on certain housing provisions included in the legislation can be found here. - Why it matters: This markup kicks off action on infrastructure and tax legislation that will pick up in earnest later this summer and into the fall. The House Ways and Means and the Senate Finance Committees will be tasked with coming up with the revenue stream to pay for many of these and future proposals tied to the broader infrastructure debate. Thus far, there is no firm plan, as bipartisan negotiations between House and Senate leaders and the administration continue.
- What's next: House leadership has already announced a full floor vote on this surface transportation bill before the end of the month. MBA will continue to advocate with the administration and on Capitol Hill against any possible threat to real estate finance markets as the congressional debate on tax and infrastructure advances..
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