In a blow to conservatives seeking to privatize federal mortgage programs Freddie Mac and Fannie Mae, the Supreme Court unanimously ruled that their umbrella organization, the Federal Housing Finance Agency, was structured unconstitutionally, negating the ability of the President to place someone in charge of the agency that would support administrative policy, the Wall Street Journal reports.

The court judgement also reinforced the agency’s ability to determine how its dividends are distributed, a point of contention with private shareholders of Freddie Mac and Fannie Mae, who feel the government should not be taking dividend even though it’s the primary shareholder.

The Biden Administration immediately dismissed Mark Calabria as the Director of the Federal Housing Finance Agency, a position he held since April 2019.  He had been the chief economist for Vice President Mike Pence; prior to that, Calabria has been Director of Financial Regulation Studies at the libertarian Cato Institute.  FHFA directors serve a five year term.

Calabria pushed for the privatization of Freddie Mac and Fannie Mae, which back about $5.5 trillion in mortgages in the United States, roughly half of the entire market.  Calabria encouraged a lawsuit by private investors to turn the two organizations to be privatized, although the federal government would still underwrite their holdings.

While under private management prior to the creation of FHFA, Freddie and Fannie found itself in financial difficulties in 2008 as it competed against private firms to securitize bundles of mortgages.  In the midst of the Great Recession, FHFA was formed to put Freddie and Fannie under government management.

The Obama Administration invested more than $190 billion into Fannie and Freddie.  This prompted many institutional investors and hedge funds to sweep up public stock in the companies, who saw them as long-term investments which would payoff through dividends and when the companies would switch back to private management.

The FHFA, however, mandated that the majority of dividends go to preferred stock owners–basically, the federal government that bailed out the companies and owned virtually all of the preferred stock.

The plaintiffs in the case, buoyed by the election of Donald Trump and his campaign promises, bought into his promise that he would privatize Freddie and Fannie, and they sued claiming that dividends should not be limited to preferred stock owners.  Essentially, they tried using the courts to change the corporate structure of these institutions.

In an opinion, written by Justice Samuel Alito, ruled definitively against the plaintiffs, saying the at the agencies had wide ranging authority to determine how its dividends were distributed, much in the same way a private corporation does.

The opinion also stated that the agency, which was chartered under George W. Bush, was unconstitutionally organized because it removed the ability of the President to put someone who will support the President’s fiscal policies in charge.

With that decision, Biden opted to immediately fire the Trump appointee, Calabria, because of his advocacy for actions contrary to Biden’s policy.  No replacement has yet been named.

“I respect the Supreme Court’s decision and the authority of the president to remove the Federal Housing Finance Agency director,” Calabria said in a statement. “I wish my successor all the best in fixing the remaining flaws of the housing finance system.”