For months, Majority Leader Harry Reid of Nevada threatened to change the rules of the Senate to prevent Republicans from filibustering Presidential nominees. This so-called “nuclear option” was avoided, as Republicans hastily rushed into a deal and set aside their constitutional right to “advice and consent” by immediately approving five contentious appointments.
However, controversial nominee Rep. Mel Watt of North Carolina was not part of the discussions and is President Obama’s pick to replace interim director Ed DeMarco at the Federal Housing Finance Agency (FHFA). His duties would be regulating the trillion-dollar assets of Fannie Mae and Freddie Mac, the government-sponsored mortgage giants which were at the center of the 2008 financial crisis.
The left has been anxious to replace DeMarco, as his civil servant status protected him as he refused to enact principal reduction to many underwater homeowners. This led to the “Dump DeMarco” campaign, supported by groups such as La Raza and other liberal activist groups which were once under the ACORN umbrella. This campaign fully supports Watt.
This month, during a speech in Phoenix, Arizona, President Obama joined with the growing consensus in Washington that Fannie Mae and Freddie Mac should go. Five years after those two government-sponsored enterprises received a $187.5 billion taxpayer funded bailout, this almost sounds like a welcome position.
However, in the same speech, Obama went on to call for government reinsurance of mortgage securities; new funding for refinancing; the “greening” of blighted properties (which would include a “sizeable” amount for bankrupt Detroit); and expanding government in the same ways which caused the original mortgage meltdown. It is clear the Obama Administration has no interest in a functional private housing market, and Rep. Watt is ready to implement misguided policies on the President’s behalf.
By his own admission, Rep. Watt is not an expert on financial issues. In December 2011, Watt said, “For all of the last term of Congress, I sat in the Financial Services Committee, and a lot of these arguments that I am hearing today are the same arguments that I heard about derivatives. Well, I didn’t know a damn thing about derivatives. I am still not sure I do.”
Before the housing bubble burst, Rep. Watt voted against new regulations for Fannie and Freddie to limit their potential risk due to their extreme undercapitalization. As the crisis started in 2007, he supported an amendment that denied the risks caused by those GSEs and allowed their wild growth rates to continue.
Watt is on record supporting refinance programs, debt forgiveness, and higher loan limits for Fannie and Freddie, as well as allowing them to continue borrowing from the Treasury. Watt believes that since minorities were disproportionately encouraged to take subprime loans for homes they could not afford, government, at the expense of borrowers and taxpayers, must do anything to keep them out of foreclosure. And if confirmed, Watt would control billions and billions in bailout funds for Freddie and Fannie.
We have seen this movie before. Such heavy-handed, unconstitutional policies have already damaged the economy so severely it will take generations to recover. Rep. Watt should not be confirmed by the U.S. Senate.