By William Reed
Many Blacks are saying “shame on” the U.S. Senate Republicans for the recent blow they dealt to President Barack Obama’s efforts to install his own nominee as regulator of Fannie Mae and Freddie Mac. The GOP blocked the effort to confirm North Carolina Congressional District 12 Rep. Mel Watt to the post.
With Obama’s approval ratings dipping, Black voters are still “standing by both men,” saying “The Republicans will not let him have the people he needs to run the government.” Blacks are livid about the Republicans’ resistance to Watt. This vote doesn’t completely end the Watt nomination. The White House says it is “absolutely not” giving up on the nomination. Democrats could bring it before the Senate again. Obama administration officials still hope to convince more Senate Republicans to support Watt.
Watt’s participation in the “ol’ boy network” is part of the problem with the nomination. However, a former African-American CEO of Fannie Mae also figures prominently into the equation. On December 21, 2004, Franklin Raines accepted what he called “early retirement” from that position while the U.S. Securities and Exchange Commission investigators alleged accounting irregularities. Raines was accused by the Office of Federal Housing Enterprise Oversight, the regulating body of Fannie Mae, of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses. Fannie and Freddie have been “honey pots” for Raines and his predecessors to the tune of scores of billions of dollars.
The Federal Housing Finance Agency (FHFA) now oversees mortgage finance giants Fannie Mae and Freddie Mac with combined debts and obligations totaling $6.7 trillion. It was put into government conservatorship at the start of the 2008 financial crisis and its direction and future is a subject of intense Congressional debate. During the early days of the financial crisis, the federal government took control of Fannie and Freddie. Fixing these mortgage giants remains the largest single piece of unfinished business. A change of leadership at the FHFA could have a broad impact on the mortgage market since Fannie and Freddie currently back about two-thirds of new mortgages. Republicans opt for a housing finance system supported largely by private capital.
The White House, real estate industry trade associations and the Congressional Black Caucus (CBC) are in Watts’ corner. “Mel Watt is absolutely, totally qualified,” said Vice President Joe Biden. These groups are “alleging” blatant racism in the Republicans’ actions. The CBC said it would be the first rejection of a long-standing sitting member in good standing since 1843.
CBC Chair Rep. Marcia Fudge (D-Ohio) said, “This has only occurred once in the history of this Congress.” No sitting member of Congress has been denied a Cabinet position since 1843. Civil rights and human rights groups – including the National Urban League – support Watt to replace FHFA’s current acting director Ed DeMarco. Many of the groups signed a joint letter citing Watt’s experience in housing finance, including 20 years as a member of the House Financial Services Committee.
Republicans don’t see Watt’s experience as a plus and are displeased that the White House nominated a politician to head the FHFA. The agency’s director has tremendous power over the multi-trillion-dollar companies, and Republicans don’t like the idea of a “political person” running the two companies based on their long history of being manipulated for political purposes.
Many Republicans prefer DeMarco’s plans for the agency and criticize Watt’s past support for Fannie and Freddie. Republican resistance has centered on a view that the leadership of FHFA is better suited to a person with technical rather than political expertise. Most Republicans hope the president withdraws Watt’s nomination and names a technocrat instead. Conservative groups oppose Watt’s nomination because of his call for more federal involvement in the home mortgage industry.
This is the second FHFA nominee that President Obama has put forward. The previous nominee was former North Carolina Banking Commissioner Joseph Smith, who withdrew his nomination in 2011.
William Reed is head of the Business Exchange Network and available for speaking/seminar projects through the Bailey Group.org.