President Barack Obama nominated Rep. Mel Watt, D-N.C., as the new director of the Federal Housing Finance Agency Wednesday, but the president's pick could face strong headwinds in his confirmation hearings as policymakers continue to bicker over the future of government mortgage giants Fannie Mae and Freddie Mac.
The Obama administration has struggled to find a replacement for Ed DeMarco who has served as the agency's acting director since 2009. Obama previously nominated North Carolina Commissioner of Banks Joseph Smith for the post in 2011, but Smith later withdrew his bid after running into strong resistance from Republicans.
Watt has been in Congress for 20 years and is a longtime member of the House Financial Services Committee, which oversees housing issues. According to multiple sources, Watt was tapped to the FHFA's next director because of his experience on the committee as well as his role in brokering the passage of the Dodd-Frank Wall Street Reform Act.
"Mel has led efforts to rein in unscrupulous mortgage lenders and he's fought to give more Americans in lower income neighborhoods access to affordable housing," Obama said in press conference announcing Watt's nomination Wednesday. "He knows better than anyone else what started the housing crisis and he knows what it's going to take for responsible homeowners to fully recover."
Obama alluded to Watt's humble roots saying the congressman "grew up in a house where you could see the stars through the roof and the ground through the floor."
But Watt's road to confirmation won't be a smooth one. Sen. Bob Corker, R-Tenn., released a statement Wednesday objecting to the nomination arguing that a new director should not be considered until there's a clearer picture of the future of Fannie and Freddie, entities which have been under federal conservatorship since 2008 and now play an outsized role in the housing market, according to some critics.
"I could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the hen house," he said. "The debate around his nomination will illuminate for all Americans why Fannie and Freddie failed so miserably."
Anthony Sanders, professor of real estate finance at George Mason University, similarly characterized the appointment calling it akin to having the cookie monster in charge of keeping Congress out of the proverbial cookie jar.
"Watt is part of the Congressional Black Caucus, which has been very active in promoting principal reduction and the easing or mortgage standards, basically recreating the same disaster we had last decade," Sanders says. "This is a political appointment for a person who wants to put the foot on the gas again."
Sanders also points out that some of Watt's biggest donors are also some of the nation's biggest banking interests, a factor that could trip him up at his confirmation hearings. According to OpenSecrets.org, among Watt's top five contributors between 1992 and 2012, three (Bank of America, the American Bankers' Association, and Wachovia) were in the banking industry.
"He's very clearly in the pocket for the banks," Sanders adds. "I really want to see how that plays out."
But others see Watt as godsend given the fiery debate that continues to swirl around the fate of Fannie and Freddie. While the two companies recently posted record profits under DeMarco's watch, Watt's supporters say he's the right guy to lead the agencies into the next phase of their existence.
With 20 years of congressional experience under his belt, Watt has experience brokering deals across the aisle and comes at the position from a different angle than DeMarco, who's an economist, according to John Taylor, president and CEO of the National Community Reinvestment Coalition.
"He's arriving with an understanding of the Obama team and how to work collaboratively with other departments in the administration," Taylor says. "He wants Fannie and Freddie to be successful and profitable, and part of making the dream of homeownership once again a dream, not a nightmare."