WASHINGTON — The Senate appears set to approve the nomination of Joseph Smith as director of the Federal Housing Finance Agency before Congress adjourns for the year at the end of next week.
Smith was the subject of a brief Senate Banking Committee confirmation hearing Thursday, where he pledged to lawmakers that he would be independent, rejected keeping Fannie Mae and Freddie Mac in conservatorship in perpetuity and emphasized he would also focus on the Federal Home Loan banks.
Both incoming and outgoing chairmen of the Banking Committee lauded Smith as the right pick for the FHFA, and said they hoped his nomination would be approved by the panel and the full Senate next week.
"Mr. Smith is no stranger to this committee or to the challenges of implementing financial reforms," said Sen. Tim Johnson of South Dakota, noting Smith's current role as North Carolina banking commissioner.
"As commissioner of banks, he was responsible for implementing and enforcing North Carolina's anti-predatory-lending laws, overseeing the state's foreclosure prevention program and serving on the governor's task force to increase small-business lending — to name a few of this accomplishments — all while regulating small and large financial institutions in the state."
While Johnson is expected to take the gavel next year, the current chairman, Chris Dodd, issued a brief statement saying he would work with Sen. Richard Shelby, R-Ala., and Majority Leader Harry Reid to get Smith confirmed before Congress adjourns.
"He is eminently qualified, and has both the experience and expertise necessary to succeed as director," Dodd said.
For his part, Shelby pressed Smith on his ability to maintain his independence and not fall to pressure by outside agencies, specifically the Treasury Department and the Department of Housing and Urban Development, on a course of action when it comes to Fannie and Freddie.
"Given the responsibilities of the Federal Housing Finance Agency, as a conservator of Fannie and Freddie would you resist administration pressure on Fannie and Freddie?" Shelby asked. "Will you be independent if confirmed?"
Smith attempted to reassure Shelby.
"I will," Smith said. "Senator, the Federal Housing Finance Agency is an independent agency."
As a result of limited time, Shelby asked Smith several questions that were left unanswered by the nominee at the hearing, including his thoughts on what the appropriate role outside agencies, like Treasury and HUD, should have as well as what the appropriate level of housing goals should be for the government-sponsored enterprises.
During his testimony, Smith provided limited guidance on what the appropriate approach the Obama administration should take in addressing troubled mortgage GSEs Fannie Mae and Freddie Mac. The administration is due to release its plan next month.
"Conservatorship cannot be a long-term solution," said Smith of the GSEs, which were taken over by the government in September 2008.
But he also pledged to focus on the Federal Home Loan banks, saying they were a key part of the system and played a supportive role before and during the financial crisis.
"Community banks are dear to my heart, and you may be assured that the Home Loan banks will receive my full attention, with an eye to strengthening them and the banks they serve," Smith said.
As their advance business has continued to see declines, some have questioned what the administration will propose for them giving its pending housing finance reform plan.
Smith acknowledged the recent challenges facing the banks addressed in the FHFA's recent report to Congress, but said they were a necessary part of the system.
"I expect many of you have heard from your bankers what I have heard from mine: the Federal Home Loan banks are a crucial and needed source of funding and support to community banking which, in turn, plays a vital role in addressing the credit needs of consumers, small businesses and communities around the country," Smith said.