President Barack Obama said Wednesday that he would nominate Rep. Melvin Watt to lead the Federal Housing Finance Agency, the regulator that oversees Fannie Mae and Freddie Mac, but the initial response from some lawmakers and industry representatives suggests a sharp political fight over his confirmation.
Watt, a North Carolina Democrat and former chairman of the Congressional Black Caucus, would replace Edward J. DeMarco, who has been at odds with the Obama administration on major housing finance issues since becoming acting director in 2009.
Sen. Bob Corker, a Tennessee Republican who sits on the Banking Committee, blasted the administration’s pick, signaling that Watt’s confirmation in the Senate will face strong opposition.
“I could not be more disappointed in this nomination,” Corker said in a written statement. “This gives new meaning to the adage that the fox is guarding the hen house. The debate around his nomination will illuminate for all Americans why Fannie and Freddie failed so miserably.”
Sen. Michael D. Crapo of Idaho, another Republican on the Banking Committee, said he was “concerned” about a nominee to a position that “must be politically independent and have the necessary policy and technical expertise to be the conservator of two highly complex, multitrillion-dollar housing companies.”
But Watt also won praise from GOP Sen. Richard M. Burr of North Carolina, who suggested that he expects Watt to win confirmation.
“Having served with Mel, I know of his commitment to sustainable federal housing programs and am confident he will work hard to protect taxpayers from future exposure to Fannie Mae and Freddie Mac,” Burr said in a statement. “I look forward to working with Rep. Watt in his new role to find new ways to facilitate more private sector involvement in the housing and mortgage markets.”
Corker and other Republicans have argued that Watt was overly cozy with Fannie and Freddie during their heyday and was not properly focused on protecting taxpayers’ interests.
They also have criticized the Obama administration for not setting a path for removing Fannie and Freddie from the conservatorship since the government took over the mortgage finance giants amid the 2008 financial crisis and received more than $180 billion in public funds. “Before any nominee should be considered for this post, regardless of their qualifications, the administration should explicitly lay out how they will unwind these entities,” Corker said in his statement.
If confirmed, Watt would succeed DeMarco, a career civil servant whom Republicans have praised for helping guide the country out of the housing crisis. But some Democrats in Congress, consumer advocates and other administration officials have criticized DeMarco for not putting in place a debt reduction plan backed by Treasury and the White House.
Introducing Watt at the White House, Obama said he would help an ongoing housing recovery and protect consumers.
“Mel has led efforts to rein in unscrupulous mortgage lenders,” Obama said. “He’s helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place. And he’s fought to give more Americans in low-income neighborhoods access to affordable housing.
“So Mel understands as well as anybody what caused the housing crisis. He knows what it’s going to take to help responsible homeowners fully recover.”
Liberal Sen. Elizabeth Warren, D-Mass., called Watt “an excellent choice” to lead the FHFA.
“Congressman Watt is a thoughtful policymaker with a deep background in finance and a long record as a champion for working families,” the Banking Committee member said. “The Senate should confirm Congressman Watt soon so he can get to work stabilizing shaky housing markets and helping struggling homeowners.”
Warren added that the administration “needs to remove Ed DeMarco as director of the FHFA. Under DeMarco’s leadership, the FHFA has refused repeatedly, often with cold indifference, to work with families struggling to save their homes.”
Rick Judson, chairman of the National Association of Home Builders, applauded the nomination of Watt.
“Rep. Watt brings years of experience to this position at a pivotal moment as our nation’s housing market recovers,” Judson said in a written statement. “NAHB looks forward to working closely with Rep. Watt to help address the many complex challenges facing the U.S. housing finance system upon his confirmation by the U.S. Senate.”
For Republicans, however, the move to replace DeMarco with Watt represents a major battle over housing policy and the sharply different views that the parties hold over government backing for the fragile mortgage finance market.
A senior financial industry lobbyist said he expects “an uphill battle” for Watt to get confirmed.
Obama has previously struggled to fill the position. After he nominated Joseph A. Smith Jr., a respected North Carolina banking regulator, in November 2010, Senate Republicans promised to filibuster Smith’s nomination because they said he wouldn’t be an independent regulator. Smith declined to be renominated in January 2011.
Obama promised housing advocates that he would move to replace DeMarco quickly if he won re-election.
Alan Jenkins, executive director of The Opportunity Agenda, a housing policy advocacy group, said in a statement praising Watt’s nomination that DeMarco “has doggedly blocked principal correction — adjusting mortgage principal to reflect the fair market value of homes that are now worth less than homeowners owe on their mortgages — for the 30 million loans owned or backed by Fannie and Freddie.”
Despite the political furor around the agency, DeMarco issued a statement pledging to help the man who would succeed him. “We look forward to working with Congressman Mel Watt as he prepares for his confirmation hearing and for undertaking the important work at FHFA,” DeMarco said.