By: Jon Prior and Jonathan Allen
May 1, 2013
President Barack Obama on Wednesday will nominate Rep. Mel Watt for a key housing position, but his chances of confirmation face long odds as Republicans and the administration continue to sharply disagree over what to do with bailed out mortgage giants Fannie Mae and Freddie Mac.
Watt (D-N.C.) is being nominated to be director of the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, and would replace Edward DeMarco who is the acting director, according to a White House official.
"Over his more than twenty years on the House Financial Services and Judiciary Committees, Mr. Watt has developed a proven track record of fighting to rein in deceptive mortgage lenders, protect consumers from abusive financial practices, and expand affordable housing as well as working across the aisle to find common ground on critical issues," a set of White House talking points obtained by POLITICO say.
When news leaked last month that Watt was being considered for the job, Sen. Bob Corker (R-Tenn.) quickly raised questions about the idea.
"We really need somebody with technical strength and with no political bias whatsoever to help us walk through this and the last thing that we need is a politician -- who's actually been involved in these issues for years -- leading the organization," he said at a March 19 Senate Banking Committee hearing, without specifically naming Watt.
Republicans in 2010 blocked an earlier choice to lead the agency, North Caroline banking regulator Joseph Smith, with Sen. Richard Shelby (R-Ala.) raising concerns he would not act independently of the administration. In early 2011, Smith said he no longer wanted to be considered for the job. The agency has been without a confirmed director for nearly four years.
Democrats and housing groups have been pressuring Obama to replace DeMarco since he rejected a proposal last year to write down principal loans than their homes were worth.
Advocates of the idea argue it would help prevent foreclosures, but DeMarco said it creates more problems than it is worth and would ultimately cost the taxpayer too much money.
"Nomination of a permanent director will allow this agency to finally assist troubled homeowners, improve our nation's housing market and boost economic recovery," Sen. Carl Levin (D-Mich.) wrote in the April 15 letter to Obama. "It's long overdue."
On Wednesday, Democrats who want DeMarco out praised the choice of Watt.
"Congressman Watt has deep expertise in housing policy and a record of distinguished service on the House Financial Services Committee," Rep. Elijah Cummings (D-Md.) said in a statement. "He will be an excellent Director for FHFA."
Economist Mark Zandi was also in contention for the job.
"I wish him the best," Zandi told CNBC on Wednesday. "He's going down a tough path and he can use all the luck he can get."
Fannie and Freddie were taken over by the government in 2008 and have received $187 billion in taxpayer funds. Since that time, however, there has been little agreement on what to do with the companies.
Both companies are now back to turning out profits, which may be taking away what little sense of urgency there was in Congress to figure out a new housing finance system.
Those profits are being sent to the government.
Obama's fiscal 2014 budget estimates that between January 2013 and the end of 2023, Fannie and Freddie could send $183.3 billion to the Treasury, assuming they remain under government control. That would go with the $55.2 billion the two firms have already paid, leaving roughly $51 billion for Uncle Sam.
Watt is the second major Charlotte politician plucked by the administration in recent days, following on the nomination of Mayor Anthony Foxx to the post of Transportation secretary.