President Barack Obama nominated Representative Mel Watt to be director of the Federal Housing Finance Agency after months of political pressure from consumer advocates to find a new overseer for Fannie Mae and Freddie Mac.
Watt, a North Carolina Democrat whose appointment must be confirmed by the Senate, would replace Edward J. DeMarco, whose tenure as FHFA acting director has been embraced by Republicans and faulted by housing activists who accuse him of blocking debt reduction for some troubled borrowers.
“Mel understands as well as anybody what caused the housing crisis,” Obama said at a news conference in Washington today. “He knows what it’s going to take to help responsible homeowners fully recover.”
FHFA is the regulator for Fannie Mae and Freddie Mac, the two mortgage-finance companies that have operated under federal conservatorship since they were seized amid soaring losses during the 2008 credit crisis. Watt’s nomination comes at a pivotal moment for the government-sponsored enterprises, which back half of outstanding home loans and have returned to soaring profits after drawing more than $187.5 billion in taxpayer aid.
Confirmation of Watt is far from certain. His voting record as a member of the House Financial Services Committee, which handles housing issues, and his support for reducing debt for troubled borrowers could hurt his chances of Republican support needed to get the nomination to the Senate floor.
Along with other lawmakers, Watt signed a December 2012 letter to Obama and congressional leaders urging them to include principal reduction for borrowers with Fannie Mae and Freddie Mac loans in legislation averting the so-called fiscal cliff.
Senators Bob Corker of Tennessee and David Vitter of Louisiana, both Republicans who serve on the Banking Committee, released statements criticizing Obama’s choice.
“I could not be more disappointed in this nomination,” said Corker. “This gives new meaning to the adage that the fox is guarding the hen house.”
The nomination was praised by congressional Democrats including Senator Elizabeth Warren, a Banking Committee member from Massachusetts who called Watt an “excellent choice.”
To win the 60 votes he’ll need for confirmation, Watt will have to get the support of at least five Republicans if he’s backed by all 55 members who caucus with the Democrats.
Watt, a lawyer first elected to the House in 1992, represents a Charlotte district that includes the headquarters of Bank of America Corp. In 2005, he was elected chairman of the Congressional Black Caucus, a post he held until 2006. He co-sponsored the 2009 Credit Card Accountability, Responsibility and Disclosure Act, which required more disclosures for consumer credit products.
Brian Gardner, senior vice president for Washington research at Keefe, Bruyette & Woods Inc., put the odds of Watt getting confirmed at “less than 50-50.”
“I don’t think it’s as much a policy debate as about the nominee himself and whether he has the skills to run and manage an agency that runs two very large and complex and critically important companies,” Gardner said in a telephone interview.
“Maybe in his confirmation hearing he can answer his critics and placate them a little bit, but I think he has a bit of a high bar to show he has the technical skills.”
Watt was investigated by the Office of Congressional Ethics for withdrawing a proposal for more stringent regulations of auto dealers after a series of fundraisers in 2009. After he was cleared in 2010, Watt said he did nothing improper.
“While the decision of the Office of Congressional Ethics cannot restore my reputation, I am thankful that the review has been completed and that it concluded that I did nothing improper or unethical,” Watt said in a September 2010 statement.
Lawmakers created FHFA in 2008, shortly before regulators seized Fannie Mae and Freddie Mac. During DeMarco’s time as their regulator, the two companies have swung from surviving on taxpayer life support to posting record profits.
Homeowner advocates launched a campaign last year to oust DeMarco because he refused to cut principal on the grounds that it would hurt the companies’ bottom line. A group called National People’s Action sent 500 protesters to DeMarco’s house in suburban Washington on April 21.
“This is a good day for millions of homeowners,” Tracy Van Slyke, director of the #DumpDeMarco campaign, said in a statement.