Dear Senator:
On behalf of the 362,000-member National Taxpayers Union (NTU), I write in opposition to President Obama’s nomination of Rep. Mel Watt (D-NC) to head the Federal Housing Finance Agency (FHFA). As the regulatory body overseeing government sponsored enterprises (GSE) Fannie Mae and Freddie Mac, it is essential that the candidate for this position have the highest commitment to reform, given the enormous role the two companies had during the recent economic downturn. When considered in light of the job description for Director written by Congress in 2008 and the need to minimize future federal liabilities for the housing finance, capital, and mortgage securities markets required of the role, we believe lawmakers should consider other options for this post.
As a legislator, Rep. Watt has a long track record of advocating to expand the availability of the risky loans that first inflated the housing bubble and later left many homeowners with mortgages they couldn’t afford. The Congressman also has close ties to companies in the banking sector whose complex securities schemes and questionable lending practices contributed to the 2008 crisis and later precipitated taxpayer-funded bailouts that Rep. Watt supported. Given the roles that Fannie, Freddie, banks, Congress, and regulators all played in the mess we are still dealing with today, the right candidate for director of the FHFA should not only have the specialized knowledge needed to parse these relationships, but also the independence necessary to ensure impartiality. In addition, Watt’s own assertion that he is “not very knowledgeable on technology” is cause for concern in a world of complicated electronic financial transactions.
In early August, President Obama spoke of the need to wind down Fannie and Freddie and to get taxpayers off the hook for bad business decisions. In this regard, he couldn’t be more right. Unfortunately, his pick for FHFA director sends a different message. Taxpayers are concerned that a Director Watt would maintain or even expand on the same harmful policies that sowed the seeds of the mortgage crisis and subsequent Wall Street bailouts. The principal reductions and write downs that he has supported in the past increase the likelihood that history would repeat itself, with taxpayers once again left holding the bag.
Ultimately, NTU would expand on the President’s plan to wind down Fannie and Freddie. Enacting comprehensive reform legislation such as the PATH Act (introduced in the House as H.R. 2767) would be a helpful step in this regard. However, while Fannie and Freddie continue to have a large role in our economy, it is paramount that this appointment be based on experience and know-how, not political expediency. Despite his many years in office, Congressman Watt’s résumé does not fulfill taxpayers’ expectations for Director of FHFA and NTU urges all Senators to vote “No” on his nomination.
Sincerely,
Nan SwiftFederal Affairs Manager