Republicans weigh the merits of moving swiftly. G.O.P. senators facing tough campaigns called for a confirmation of Mr. Trump’s pick, giving Mitch McConnell, the majority leader, leverage to replace Justice Ginsburg quickly. But record-breaking donations to Democratic candidates in recent days show that the confirmation battle has also energized the left. Times Opinion editors presented the case for filling the seat, made by Democrats in 2016, and for putting it off until after the election, advanced by Republicans in 2016.
Health care stocks took a hit. Uncertainty about the future of the Affordable Care Act dragged down shares in companies like Centene, HCA Services and Universal Health Services yesterday. Justice Ginsburg was a stalwart defender of Obamacare, so her death has led analysts to revise their forecasts for companies that benefit from the law’s “individual mandate,” which could be struck down in a case that the court will hear in November.
Case in focus: Collins v. Mnuchin
The new Supreme Court Justice will probably not be seated in time to have a say in several upcoming cases, leaving the eight current justices to decide these consequential matters. One case of interest to DealBook readers is Collins v. Mnuchin, which pits shareholders in Fannie Mae and Freddie Mac against the Treasury Department.
The fight is all about a “net worth sweep.” In exchange for bailing out Fannie and Freddie in 2008, the Treasury demands that the companies transfer everything but capital reserves to the government, which shareholders say deprives them of benefiting from future profits. As of May 2019, Fannie and Freddie, which are controlled by the Federal Housing Finance Agency (F.H.F.A.), have paid the Treasury $292 billion in dividends, of which $191 billion was via the profit sweep.
Common shareholders want to scrap the arrangement. In the Supreme Court, the shareholders are arguing that the F.H.F.A., which was created to act as a “conservator” for Fannie and Freddie in 2008, is structured unconstitutionally, thus rendering the agreement to transfer profits to the Treasury invalid. Their argument rests on the fact that the F.H.F.A.’s sole director serves for a five-year term and can only be fired “for cause,” limiting the president’s authority to appoint the head of an important government agency.
A similar claim was successful in a case about the Consumer Financial Protection Bureau. The bench split along ideological lines, with the five conservatives concluding that the “for cause” clause rendered the C.F.P.B. structure unconstitutional. However, the court didn’t invalidate the bureau’s prior actions as a result; the director question was simply “severed.”
• Fannie and Freddie shareholders may face a similar result, in which case the profit sweep agreement would survive. That is, unless the court is taking up the case to resolve the profit sweep issue specifically, which would have major implications for investors in Fannie and Freddie, the future of government conservatorships, and the mortgage and housing markets in general.