Congressman Scott Garrett

Representing the 5th District of New Jersey

Mel Watt Not Fit To Run Fed Housing Finance Agency

May 7, 2013
Opinion Pieces

Imagine this: two large financial institutions play a leading role in causing the worst financial crisis since the Great Depression. Then, to keep them afloat, the institutions receive close to $200 billion in bailout money from the U.S. taxpayers.

A few years later, the president announces that one of the institutions' biggest supporters — a man who repeatedly voted against reforms that could have prevented the financial crisis — will be nominated to run them.

Last Wednesday, President Obama made this hypothetical situation a reality by nominating Congressman Mel Watt to serve as the new director of the Federal Housing Finance Agency (FHFA).

I have served with Congressman Watt on the House Financial Services Committee over the last 10 years. He is a good and decent man. Additionally, he is a dedicated public servant.

Unfortunately, his past positions on housing finance issues indicate he is not the right man for this job.

At a recent congressional oversight hearing of FHFA, Congressman Watt stated that he was being considered for the FHFA directorship. Accordingly, out of deference to the process, he did not ask questions of the witness.

For the American taxpayers, however, a few silent minutes at a committee hearing does not cover up two decades worth of votes, campaign contributions and other actions which show he doesn't have the necessary qualifications for the job to which he was nominated.

It is customary for most political appointees to get ambassadorships to Sweden, not positions that require the skills and expertise to run and manage a multi-trillion-dollar portfolio.

Mr. Watt, while a good man, has neither the experience running trillion-dollar portfolios nor the regulatory background needed for this job.

It is not just his lack of expertise that I am concerned about; it is also his judgment. Congressman Watt voted time and time again against measures to make Fannie Mae and Freddie Mac more safe and more sound. He should not be put in charge of regulating and ensuring their safety and soundness.

Now that Congressman Watt has been formally nominated, I believe his record deserves a closer look.

In 2005, before the financial crisis reached its zenith, a Government Sponsored Enterprise (GSE) regulatory bill was considered before the full House of Representatives.

During that debate, a number of amendments were offered that could have strengthened Fannie and Freddie and possibly prevented the financial crisis.

To start, former Rep. Jim Leach offered an amendment that would have required the severely under-capitalized Fannie and Freddie to hold more capital.

Congressman Watt voted no.

Following the Leach amendment, Congressman Ed Royce offered an amendment that would have granted the GSEs' regulator the ability to apply additional regulations on the entities out of concern for potential systemic risk.

Again, Congressman Watt voted no.

Finally, former Congressman Ron Paul offered an amendment that would have severed the line of credit the GSEs enjoyed from the federal government — making it more difficult for the government to bail them out.

Congressman Watt — you guessed it — voted no.

To be fair, in 2007, another GSE regulatory reform bill was brought before the full House and Rep. Watt did support an amendment to that bill.

Unfortunately, the amendment he supported limited the regulator's authority to police the GSEs. Regrettably, less than 16 months later, the U.S. taxpayers paid for a multibillion dollar bailout.

At a time when we so desperately need to reform Fannie and Freddie and to protect taxpayers from future bailouts, something current FHFA Director Ed DeMarco has done so well, why would we want to take a step backward?

I implore the Obama administration to get serious about reforming Fannie and Freddie. House Republicans have led on this issue and President Obama should join us in ending bailouts, reducing taxpayer exposure to the financial sector, and creating a new sustainable housing market that benefits all Americans.