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.

FHFA has quite a bit of business that overlaps with big banks—in fact, late last year the agency sued several large financial institutions, including Bank of America, for concealing the low value of mortgage-backed securities and contaminating the books of Fannie Mae and Freddie Mac.

Watt’s transition from a member of Congress that benefits from Bank of America’s largesse to one of the bank’s chief executive branch antagonists naturally troubles some advocates. (Watt’s office would not comment to The Nation about his appointment.)

Most progressive activists, however, are still backing his nomination. “I don’t think we’ll be counted as his loudest cheerleader, but you can’t fall off the floor with where are now. DeMarco is a problem. I think Mel Watt is a solution,” said Bart Naylor, financial policy advocate for Public Citizen.

“Obviously Public Citizen wishes there wasn’t any money involved at all from vested interests. That’s not where we are now, that’s not what we have with Mel Watt,” Naylor said. “Fortunately as FHFA director, he’s not going to take campaign contributions. While he no doubt will be meeting with JP Morgan and Bank of America, those meetings will neither be preceded nor succeeded by campaign contributions.”

Progressive angst about Watt’s ties with the commercial banking industry, and Bank of America in particular, probably won’t appear on congressional roll calls—with Elizabeth Warren backing his nomination, it’s unlikely there’s a senator willing to tack left of her on the nomination. Warren has been a visible proponent of FHFA write-downs for a long time.

Republican opposition is another story, however. The GOP has already blocked one of Obama’s nominees for FHFA Director: Joseph Smith, the North Carolina banking commissioner. Smith had relatively unknown views compared to Watt, who has a long history of backing principal reduction. Senator Bob Corker, a member of the Senate Banking Committee, wasted no time this morning blasting Watt’s nomination.

This is a real problem for homeowners that might be helped by FHFA principal reduction. Even in the best-case scenario, Watt probably wouldn’t be confirmed for several months, if he is confirmed at all.

Consequently, New York Attorney General Eric Schneiderman is pushing for Obama to take immediate action. Schneiderman’s theory, per a memo his office prepared last month, is that Obama has the legal power to dump DeMarco right away, since he is only an acting director.

Obama couldn’t pick Watt to serve as acting director in this scenario. Federal law says it would have to be one of DeMarco’s three deputies, one of whom might be more inclined to enact principal reduction.

There’s no guarantee the courts would uphold this move, as there are ongoing legal questions about similar White House maneuvers to staff the Consumer Financial Protection Bureau and the National Labor Relations Board. Schneiderman’s memo cites some legal precedence for the switch, like a 1996 DC Circuit case involving a holdover on the Board of the National Credit Union Association.

But the idea for now is to get a new director in place and get the principal reductions moving as soon as possible.

“This nomination is a good first step, but struggling homeowners cannot afford to wait for the Senate to complete the confirmation process,” Schneiderman said in a statement this morning. “The President should use his legal authority to replace Edward DeMarco with a new acting director who will start the effort to put FHFA on the side of working families immediately.”

Federal regulators failed on several fronts with the fertilizer plant that exploded in Texas, and now the Senate has taken a good first step by beginning a formal investigation, George Zornick writes.