Three Critical Issues Raised by Watt Confirmation Hearing

WASHINGTON — Rep. Mel Watt defended his judgment and experience with housing issues during a hearing Thursday on his nomination to head the Federal Housing Finance Agency, but it's unclear that the performance was enough to sway his Republican critics.

The North Carolina Democrat was joined at the confirmation hearing before the Senate Banking Committee by nominees for Securities and Exchange Commission and other posts, but Republicans directed their toughest questions at Watt.

Observers have been relatively pessimistic about President Obama's chances of getting anyone nominated to head the FHFA in the divided political climate. Republicans have also been relatively pleased with the work of Edward DeMarco, acting director of the agency since 2009. Panel votes on the nominees will be scheduled for as early as July, according to a Senate Banking aide.

Below are three critical issues raised by the confirmation hearing:

Republicans are still wary about Watt

Sen. Bob Corker, R-Tenn., who has expressed concern about Watt's lack of technical experience since President Obama announced the nomination in May, did not appear to have budged on that issue, despite meeting with Watt privately before the hearing.

"To be candid I don't really want a bridge to Congress on this particular job, in that we've had so many difficulties with Congress trying to influence Fannie and Freddie, and I think that Congress aided in big ways the problems that occurred," Corker said. "We want tough, hard-nosed decisions that have nothing to do with politics."

He added that unlike Cabinet positions, where Congress is more likely to afford a president more discretion, positions at the independent agencies like the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency or the FHFA are "specialists."

The banking panel's top Republican, Sen. Mike Crapo, R-Idaho, repeatedly pressed Watt on how far he would go to protect taxpayers' interests as conservator of the government-sponsored enterprises, but ultimately seemed unsatisfied with Watt's response.

"I didn't get the confirmation I wanted about the proper role of the conservatorship that I view," Crapo told reporters after the hearing.

Watt emphasizes good judgment, personal history

Still, despite considerable GOP concern about Watt's technical expertise, the North Carolina Democrat spent a lot of time emphasizing his work as a lawyer and congressman and the skills those jobs, along with his background, have helped him develop.

Watt spoke in his opening statement of one of his first homes as a child, which didn't have running water or electricity when his family first moved in. He used the narrative of overcoming hardship to underscore why he's a good fit for the job.

"I tell people all the time, I don't understand what a billion dollars or a trillion dollars is, but I do know that regardless of how many zeros are back there, you have to apply the very same principles that you would apply as you would when you were making a decision and you had only $10 a week to live on," he said.

Watt added that technical experience can be acquired, either over time or through key hires.

"I can get somebody to do the technician part — I can help them do it. You want somebody who can make good judgments about the technical work that's being done here, and I think that's what I bring to the position," he said.

But while the lawmaker never lost his cool during the hearing, he did ultimately express some frustration with the confirmation process so far.

"A number of people throughout my life have questioned my qualifications to do things. I got questioned when I went to the University of North Carolina. I got questioned by the dean of the law school at the University of North Carolina when I selected Yale University over UNC's law school," Watt said. "It's hurtful to have been doing something for 40-plus years to be on a panel with people most of whom could be my children, and I have been designated out as, 'this guy's not qualified.'"

Watt supports Senate efforts on GSE reform, sidesteps principal reductions

Lawmakers spent precious little time delving into the weeds of housing finance reform or Watt's views on that issue, but the congressman hinted at support for legislation unveiled this week by a group of senators led by Corker and Sen. Mark Warner, D-Va.

"I applaud the bipartisan effort that you all have made," Watt said. "I'm glad to see somebody stepping into this space."

Watt was largely very careful in answering policy questions, including some about his stance on principal reductions. Ed DeMarco, the FHFA's acting director, has faced considerable pushback from the Obama administration and Democratic lawmakers over his decision not to allow principal writedowns on Fannie Mae and Freddie Mac mortgages. House lawmakers, including Watt, for example, sent a letter as recently as December asking DeMarco to change course.

Sen. Pat Toomey, R-Pa., pressed Watt about his decision to sign on to that letter, asking him if his views had changed. But Watt declined to answer, saying he'd need to look into the issue more deeply if appointed as FHFA director.

"I would as I would with any issue that has been decided already by FHFA — I would start by studying carefully how that decision was reached, what it was based on, and then I would build on that new information," said Watt. "I think information on which that decision was made is a year and a half old now, and then I would make a responsible decision based on that."

He added: "You've got to understand that I was a member of Congress representing my constituents and many of whom were underwater, and advocating for relief for them. You should have no doubt that I will be a strong and aggressive advocate for taxpayers in this role, because I view them as my constituents in this role, not the constituents that I represented before."