President Obama has nominated North Carolina Rep. James Watt to head the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac. Few question Rep. Watt’s qualifications. Watt, a Yale-educated lawyer, was elected to the U.S. House of Representatives in 1992 and during his tenure he has held key positions on the House Financial Services and House Judiciary committees. Watt also played an instrumental role in the passage of the Dodd-Frank Act. In addition, Watt has co-sponsored various versions of the Mortgage Reform and Anti-Predatory Lending Act and championed access to mortgage loans for minority and low-income consumers. President Obama explained his choice by saying “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.”
This nomination, however, could be dead in the water. Sen. Bob Corker (R. TN) said that he “could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the henhouse.” Acknowledging that Rep. Watt faces an uphill confirmation battle, President Obama jokingly thanked the Senate “for what I'm sure will be a speedy confirmation process.”
Watt has been nominated to replace Edward DeMarco. DeMarco, a Bush appointee, came under fire from Democrats last year when he refused to write down the principal of underwater mortgages held by Fannie and Freddie. A move that the CBO recently announced could have saved taxpayers billions of dollars and provide a boost to the economy. This is President Obama’s second attempt to replace DeMarco. In November 2010, Obama nominated North Carolina’s top banking regulator, Joseph Smith, to lead the FHFA. Smith was approved by the Senate Banking Committee by a vote of 16-6, but Smith withdrew his name from consideration after Senate Republicans blocked his nomination from coming to a vote in the Senate. Based on early reports, it appears that the Watt nomination may be heading to the same fate.
Why then nominate Watt? First, the nomination should quell criticism from Democrats who have long demanded that Obama replace DeMarco. Second, it will bring to the forefront the debate over principal reductions for homeowners, which Watt and the Obama administration have supported, and which cast Republicans as obstructionists blocking both relief to homeowners and housing policy reform. Watt’s nomination also addresses criticisms levied at Obama for not nominating enough minorities to administration jobs. Watt, an African-American, is the former chairman of the Congressional Black Caucus.