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Obama Taps Congressman To Oversee Fannie Mae, Freddie Mac
Originally published on Wed May 1, 2013 7:48 pm
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President Obama today announced two new heads of agencies that play key roles in the economy. He tapped former wireless and cable industry executive, Tom Wheeler, to head the Federal Communications Commission. And he's naming North Carolina Democrat and veteran Congressman Melvin Watt to head the Federal Housing Finance Agency.
As NPR's Yuki Noguchi reports, Watt replaces the agency's controversial acting head of that agency, who has not always seen eye-to-eye with the president.
YUKI NOGUCHI, BYLINE: Under normal circumstances, the head of the Federal Housing Finance Agency is an obscure political appointment. But these haven't been normal times. When Fannie Mae and Freddie Mac nearly failed, the FHFA swooped in as their conservator. Now, Fannie and Freddie are a dominant part of the housing economy - owning or guaranteeing more than half of U.S. mortgages. In announcing his pick, President Obama outlined some of the challenges.
PRESIDENT BARACK OBAMA: We've got more folks to help. We've got responsible homeowners who've never missed a payment but aren't allowed to refinance. We've got working families are doing everything right but still owe more on their homes than they're worth. We've got young people who are trying to start a family and get into the market, and have seen difficulties in terms of financing. So, there are a lot of areas where we can make significant improvement.
NOGUCHI: Watt is African-American and has represented the Charlotte, North Carolina area for two decades. He served on the House Financial Services Committee where he worked on the Dodd-Frank financial legislation. If confirmed, he would replace current acting FHFA Director Edward DeMarco, a Republican holdover from the Bush administration who has held that post since 2009.
DeMarco oversaw Fannie and Freddie through tumultuous years as the two tried to unwind massive damage from subprime home loans they guaranteed or purchased. But DeMarco also became a partisan lightening rod after refusing to follow the Obama administration's instructions to embrace principal reduction - that is, loan forgiveness - on troubled mortgages owned by Fannie and Freddie. For this, DeMarco faced heat from administration officials and fierce criticism from liberal housing groups who called for his resignation.
John Taylor is president of the National Community Reinvestment Coalition and a critic of DeMarco and his approach.
JOHN TAYLOR: Unfortunately, Mr. DeMarco didn't quite see that by helping homeowners who are underwater - whether it's through principal reduction or through other methods - you're accelerating the housing recovery, not just in some areas of the country but nationally.
NOGUCHI: DeMarco defended his decision saying his primary job was to staunch the financial bleeding of Fannie and Freddie. American Enterprise Institute fellow and former Fannie Mae executive vice president Edward Pinto agrees.
EDWARD PINTO: There's bigger downside to doing principal reduction than there was upside.
NOGUCHI: After losing billions of dollars, Fannie and Freddie are now back in the black, posting record profits.
Watt has critics on both sides. Some say he is too cozy with the banking industry. On the other side, AEI's Pinto worries that Watt will push Fannie and Freddie too hard to relax lending standards.
PINTO: I think he's been an advocate of a lot of these affordable housing programs, which is why I think it's particularly important for the Senate to look at that very closely because we've been down that road before and it ended in disaster.
NOGUCHI: Watt must first be confirmed by the Senate.
Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.