Representative Mel Watt (D-NC) addresses the Democratic National Convention in 2012. (AP Photo/J. Scott Applewhite.)
This afternoon President Obama will introduce his choice to head the Federal Housing Finance Agency—Representative Mel Watt from North Carolina, a twenty-year veteran of Congress and member of the powerful House Financial Services Committee.
FHFA Director may not seem like a sexy appointment, but the agency has a monumental impact. It controls Fannie Mae and Freddie Mac, the government-sponsored enterprises that own 60 percent of US mortgages. With thousands of foreclosures taking place every week, FHFA is in a position to send a lifeline to many of these distressed homeowners.
For months, the White House, state attorneys general and liberal activists groups have been demanding that the FHFA write down the principal of underwater mortgages held by Fannie and Freddie—in other words, reduce the amount people owe on mortgages that are worth more than their homes. Analysts estimate as many as 500,000 homeowners could benefit from FHFA principal reduction, which could provide an additional boost to the flagging economy.
Acting FHFA Director Edward DeMarco briefly flirted with the idea, but then refused to do it. So activists launched a “Dump DeMarco” campaign, urging Obama to replace the acting director with someone who supports principal reduction.
On that score, Watt is a good choice. He has repeatedly supported the idea of principal reduction and would presumably undertake it at FHFA.
Key reformers in Congress are thus applauding his selection this morning. Senator Elizabeth Warren called Watt an “excellent choice” with a “long record as a champion for working families.” Representative Keith Ellison, chair of the Congressional Progressive Caucus, tweeted he was “thrilled that homeowners will finally have an advocate leading FHFA.” The CPC has relentlessly called for DeMarco to be fired and replaced with someone who favors principal reduction.
Watt’s record has some serious blotches, however. His North Carolina district includes the headquarters of Bank of America, and commercial banks are the number-one contributor to Watt’s political coffers over his career. Bank of America is second among individual career contributors.