FHFA denies rumors Watt will duck House hearing

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WASHINGTON — A spokeswoman for Federal Housing Finance Agency Director Mel Watt, who is being investigated for sexual harassment allegations, denied rumors that he will avoid testifying at an upcoming House hearing.

The House Financial Services Committee last month announced a hearing on "various allegations of waste, fraud and abuse" at the agency, Fannie Mae and Freddie Mac. The panel said the hearing will be held no later than Sept. 27, and that Watt will be among the witnesses invited to testify.

But speculation has grown that Watt will try to sidestep the appearance as he faces allegations of inappropriate sexual advances toward an employee who claims he also withheld a pay raise from her after she denied his advances.

"There’s a general acceptance that he’s not going to testify and there’s been rumors that he might step down or that this might just be something he would avoid if he was still working as director,” said an industry source, who spoke on the condition of anonymity.

But when asked about the rumors, Megan Moore, a spokeswoman for Watt, said he still plans to testify.

"This is not true," Moore said of the rumors. "Yes, he plans to testify. What you're hearing is false."

The committee's press release said Watt will be invited to testify along with Timothy Mayopoulos, the CEO of Fannie, who plans to leave at the end of this year.

Watt's term at the FHFA expires in January, but some have speculated that the scandal could force him out sooner. The Trump administration could then name an acting director — either from among Watt's deputies or another Senate-confirmed official who could run the agency on an acting basis under the Federal Vacancies Reform Act.

As first reported by Politico in July, Watt is under investigation as a result of an equal employment opportunity complaint filed by the FHFA employee, Simone Grimes. She taped recordings of alleged encounters with Watt.

On Aug. 2, Politico reported that the FHFA’s inspector general, Laura Wertheimer, was under investigation for allegedly taking steps to limit her office’s oversight of the agency in response to pressure from Watt.

While the House committee has not released an official announcement of the hearing date, the industry source said the panel is likely focused on Sept. 27.

The source said committee staff members have had a difficult time nailing down a time Watt would be willing to testify.

But according to congressional sources, the committee has extended Watt an invitation to testify.

Watt has also declined to respond to or be interviewed for an independent investigation of the sexual harassment allegations, Bloomberg reported Friday. In an email to an investigator working on behalf of the U.S. Postal Service, according to the article, Watt said his lawyer had advised him not to participate in the investigation because the agency’s process for dealing with sexual harassment claims was designed so that management would be responsible for determining whether to take action against an accuser. However, because Watt doesn’t have a supervisor, the process doesn’t apply to him, he had said in an email to the investigator.

In the investigator’s report — of which both Bloomberg and the Washington Post obtained a copy — the Postal Service details new allegations against Watt. They reportedly include a claim that he had asked to see photos of Grimes in a “bikini-type swimsuit.”

In a conversation with reporters last week, House Financial Services Committee Chairman Jeb Hensarling said the allegations against Watt should be examined. Watt is a former House Democrat from North Carolina, who served on the committee.

“This is something that hits close to home, because this is a former colleague of ours who we have served with and oversight of these agencies is the purview of Congress,” Hensarling said. “The individual allegations dealing with Mr. Watt, again that’s not our primary responsibility, but we want to ensure that they are thoroughly and fairly investigated.”

Watt had previously reassured people close to him that he intended to fight his accuser’s claims and was confident that he would remain at his post until the end of his term in January, Bloomberg News reported in August.

There is some confusion over what exactly the hearing will examine, and whether it will focus on the allegations against Watt, if there is appropriate oversight at the FHFA or if it will look into whether the government-sponsored enterprises have exceeded the scope of their charters. Hensarling announced the hearing along with Rep. Ann Wagner, R-Mo., who chairs the oversight and investigations subcommittee.

Wagner “might want to discuss the concerns about the GSEs actually lobbying for particular policy outcomes,” the source said.

However, Ike Brannon, the president of Capital Policy Analytics, said his presumption is that “any policy debate will get sidelined by discussions of" the sexual harassment allegations.

“I’d like to see his successor get nominated soon so he or she [will] be confirmed by January and hit the ground running, because the status quo is far from ideal,” he said.

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