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Corker Slams Rumored Watt Nomination to FHFA

WASHINGTON — Sen. Bob Corker, a top Republican member of the Senate Banking Committee, said Tuesday that he could not support the possible nomination of a fellow lawmaker to head the Federal Housing Finance Agency, saying it needed a politically "neutral" leader.

The Tennessee Republican made the remarks at a Senate Banking Committee hearing exploring whether there were bipartisan proposals for housing finance reform. While members from both parties were enthusiastic about the need for reform, it's not clear they are ready to agree on many specifics.

Nowhere was that more apparent than Corker's comments rejecting Rep. Mel Watt, who is a front-runner to be nominated as director of the FHFA.

Corker used the bulk of his time to raise objections to Watt's qualifications for the job, including his two decades of experience on Capitol Hill. Watt has been a leader on housing issues in the House, and has gone on record supporting Democratic proposals including principal reductions for underwater borrowers and mortgage "cram-downs."

"Walking through a transition to a reformed situation is going to be very difficult. The administration recently has floated a name through the press for a person to lead the GSEs," Corker said. "I'm all for politicians going on to grander things, but I think the GSEs are a very unusual situation and that is, we really need somebody with technical strength and with no political bias whatsoever to help us walk through this. And the last thing we need is a politician who's been involved in these issues for years leading the organization."

Corker also pointed to the implementation of the Dodd-Frank reform law, noting that with any major overhaul, "you can't lay out every detail; you've got to leave it up to the regulators to have some discretion."

"Making sure we continue to have a neutral figure, if you will, one that's trusted, regardless of who that is, and has the ability to walk through the technical issues will be very important."

Corker's comments underscore expectations that Senate Republicans are likely to fight any Obama nominee for FHFA. Republicans routinely praise the current acting director, Ed DeMarco, seeing him as an ally.

At the hearing on Tuesday, Corker commended DeMarco's work, warning that the agency will continue to need someone who can grapple with the detailed and numerous complexities of housing reform. DeMarco has been criticized by Obama administration officials, Democratic lawmakers and advocates for refusing to budge on key issues, including the need for principal reductions.

"As a technocrat, he's been pretty good. I know that some of my friends don't like some of the policy decisions he's made, but even on those it looks like he's coming around a little bit to their way of thinking on some things," Corker said.

Despite their disagreements over FHFA, Democratic and Republican lawmakers signaled increasing interest in reforming the housing finance system, with several banking panel members saying now is the critical time for change. But fundamental partisan disagreements on numerous issues still need to be hashed out.

"Although we do not agree on what should be the final product today, this should not preclude us from beginning negotiations, or even jointly identifying the problems in today's market," said Sen. Mike Crapo of Idaho, the panel's top Republican.

Sen. Mark Warner, D-Va., agreed the panel needs to focus on the issue now.

"I really do think this is the moment. There were clearly concerns about 'do no harm' over the last few years—the housing market was slowly recovering," he said. "I have a fear that as the housing market may be now recovering very quickly that we're going to see enormous profits start flowing back into Fannie and Freddie and there's going to be this — 'let's go back to the status quo' and 'maybe this is not a problem.' I think there are real challenges in this system that we've got right now, and there is actually a lot more bipartisan accord on this than many of the other issues."

One key concern remains where small banks will end up in any new housing finance system.

Several banking panel members, including Chairman Sen. Tim Johnson, D-S.D., pressed witnesses about whether community banks and credit unions would be able to compete under a reformed housing finance system.

Sen. Elizabeth Warren, D-Mass., said she worried about the role of smaller institutions will play, depending on how GSE reform is done.

"We've seen so much bank consolidation over the past several years, and I'm particularly concerned that whatever reforms we end up doing with the GSEs, that it not disadvantage the small banks, the credit unions, in getting access to the funds they need so that they continue to be in the home mortgage lending business," she said.


(2) Comments



Comments (2)
Did Corker mean that DeMarco is "coming around a little bit" on principal forgiveness? If so, maybe it's because of improving home prices. On paper, falling home prices were possibly the chief impediment to principal forgiveness. Modification followed by redefault means a longer timeline before collateral is unloaded than just foreclosure. If home prices fall during than span, the severity of loss is greater. If home prices hold or rise, it's not an issue. - Harry Terris, data editor, American Banker
Posted by hterris1 | Wednesday, March 20 2013 at 11:48AM ET
That's the most polite and evidence-supported "slam" I've seen in a while.
Posted by My 2 Cents | Wednesday, March 20 2013 at 9:15AM ET
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