Mel Watt, Unfit to Serve
Last week, news broke that President Obama will pick Rep. Mel Watt (NC-12) to head the Federal Housing Finance Agency (FHFA), the government agency charged with overseeing Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.
There are many objections to Watt’s nomination worth considering, and this is merely a brief overview of why Campaign for Liberty (C4L) believes Mel Watt is unfit to serve as head of the FHFA. As his nomination proceeds to the Senate for hearings and a vote on confirmation, C4L will be following the proceedings closely to keep our members informed and to express our strong disapproval with this nominee.
For starters, John Berlau, Senior Fellow at the Competitive Enterprise Institute (CEI), argues that “Two prerequisites for any nominee for government posts is dedication to transparency in government and a respect for the privacy of citizens.”
In this regard, Rep. Watt fails both.
During the 111th Congress, while Watt supported all the costly regulations and mandates on the private sector in the Dodd-Frank “Wall Street Reform and Consumer Protection Act,” he was the most vocal opponent of then-Representative and current C4L Chairman Ron Paul’s Audit the Fed bill and later helped gut the proposal in the conference committee.
Berlau writes, “[H]e thought having the Federal Reserve go through a simple audit of its books by the Government Accountability Office, which nearly every other agency goes through, would place too much of a ‘burden’ on this government entity.”
On the privacy side, Berlau points out that Watt was a cosponsor and vocal supporter of the Stop Online Piracy Act (SOPA).
“When privacy concerns were raised…Watt pooh-poohed what he called the ‘hyperbolic charges.’”
If a nominee fails these two basic prerequisites, that alone should be enough to disqualify them from service to the federal government. But as we’ll see with Mel Watt, this is only the tip of the iceberg.
In an article in The Daily Caller, Charles Johnson recently laid much of the blame for the subprime mortgage lending crisis at the feet of Mel Watt.
Johnson writes, “In 2002, Watt teamed up with Freddie Mac and Fannie Mae, Bank of America, BB&T, and UJAMMA Inc., to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients.” For a down payment as little as $1,000 of their own money, the City of Charlotte, North Carolina, would “subsidize” the rest of the 3% down payment on a house.
If confirmed, Johnson notes, Watt would be overseeing the very agencies he made engage in such risky lending practices that inflated the housing bubble.
In 2007, a full year after the real estate market peaked and began to plummet under the weight of millions of mortgage defaults, Watt and Frank co-sponsored a bill forcing Fannie and Freddie to meet even higher quotas for affordable lending and investing in an “Affordable Housing Fund” for inner city communities.
Watt’s deregulation of Fannie and Freddie came after the government-sponsored enterprises spent billions in his congressional district. “Freddie Mac has purchased $9.5 billion in mortgages made to an estimated 82,000 Charlotte-area residents,” Watt’s staff announced in 2002.
Many of those risky loans ultimately led to the housing bubble and financial crisis. Charlotte was among the hardest-hit areas of the country. The 6.09 percent foreclosure rate for the North Carolina city was more than double the national average of 2.85 percent, according to the Charlotte Observer.
As if ignorant of Watt’s actions and blind to their consequences, President Obama said last Wednesday when announcing Watt’s nomination, “Mel has led efforts to rein in unscrupulous mortgage lenders. He’s helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place. And he’s fought to give more Americans in low-income neighborhoods access to affordable housing.”
This is the political equivalent of naming a convicted arsonist Fire Marshal.
There are even more criticisms worth keeping in mind of Mel Watt’s “qualifications” for this position.
Mark Calabria of the Cato Institute, a former Senate Banking Committee staffer, has argued that Watts does not have the “demonstrated understanding” of financial management or oversight, capital markets, and housing finance the position requires.
National Review goes further in their condemnation, writing:
On the record of his public pronouncements alone, Mr. Watt is unfit to hold any federal office; given that the FHFA has oversight of Fannie Mae and Freddie Mac, the corrupt government corporations at the center of the 2008 financial crisis, this nomination is particularly worrisome.
Mr. Watt’s top financial benefactor is Bank of America, a firm recently sued by FHFA. (If it has occurred to anybody at the White House that this presents a conflict of interest, they have said nothing about it.) In 2009, about half of Mr. Watt’s campaign funds came from banking and real estate. The usual suspects are well represented: Goldman Sachs, the Credit Union National Association, Wells Fargo, the National Association of Realtors — all make appearances on his top-donors list.
When you look at the complete picture of who Rep. Mel Watt is, an ideological partisan who’s in the pocket of Bank of America and other major investment banks, the nomination becomes particularly troubling.
For these reasons and many more that have yet to be fully explored, Campaign for Liberty strongly opposes the nomination of Mel Watt to serve as the head of the FHFA and encourages senators to place a hold on his nomination, as he is clearly unfit to serve.