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Senate Republicans block Obama nominee for housing post

Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of
Representative Mel Watt testifies before the Senate Banking, Housing and Urban Affairs Committee confirmation hearing to be the regulator of

By Margaret Chadbourn

WASHINGTON (Reuters) - Senate Republicans on Thursday blocked President Barack Obama's nominee to oversee mortgage finance giants Fannie Mae and Freddie Mac, likely derailing his chances of securing the position.

The defeat on a procedural vote for the nominee, Democratic Representative Mel Watt of North Carolina, came despite an aggressive White House push to round up support. The vote against bringing debate on Watt to a close was 56-42, four short of the needed 60.

The vote broke along party lines, as expected. Senate Majority Leader Harry Reid switched his vote from yea to nay at the last minute to reserve the right to bring back Watt's nomination to head the Federal Housing Finance Agency.

Watt won support from all the Senate's Democrats - aside from Reid - and the two independents who vote with them. Only two Republicans - Senator Richard Burr, who is from Watt's home state, and Senator Rob Portman of Ohio - voted yea.

Democrats needed to win the vote to head off a filibuster threat and bring the nomination to a final vote.

"The procedural failure of this vote does not completely end the Watt nomination saga," said Isaac Boltansky, a policy analyst with Compass Point Research and Trading.

"But this failure is undeniably a body blow for the nomination," he said. "There is no indication that the White House will be willing to push aggressively for Representative Watt again in the future."

The White House said, however, that it was not giving up on the nomination. "It is enormously disappointing that Republicans would filibuster this nomination of a highly qualified nominee," White House spokesman Jay Carney said.

Many Republicans had argued that Watt, who has served in the House of Representatives for two decades, lacked the expertise to oversee the two mortgage firms and some worried he would be unable to resist pressure from the Obama administration to pursue their policy goals.

The White House's failure to find adequate support, despite a push that included enlisting the help of power industry lobbies, throws the FHFA's future into doubt.

But it is unlikely to signal any particular trouble for other nominees, such as Federal Reserve Vice Chair Janet Yellen, whom Obama has tapped to lead the central bank.

FANNIE, FREDDIE FUTURE AT STAKE

Any leadership changes at the FHFA could affect the trillion dollar U.S. mortgage market. Government-controlled Fannie Mae and Freddie Mac back about two-thirds of new mortgages and the Obama administration and Republican and Democratic lawmakers have all called for winding them down.

Their regulator is likely to play a big role in efforts to revamp the U.S. housing finance system.

Many Republicans would like to keep Acting Director Edward DeMarco at the helm. They have praised his efforts to protect the taxpayer dollars that have been spent to prop up Fannie Mae and Freddie Mac.

The mortgage firms have drawn nearly $190 billion in taxpayer aid since they were taken over by the government in 2008, although they have paid about $146 billion to the Treasury in dividend payments in return for the support.

This was not the administration's first effort to put someone new in the job. Obama nominated Joseph Smith, a former North Carolina banking commissioner, for the post in 2010, but he withdrew in the face of Republican opposition.

DeMarco has blocked an administration proposal to allow Fannie Mae and Freddie Mac to reduce principal on mortgages for so-called underwater homeowners — those who owe more on their loans than their house is worth. DeMarco has argued the plan could wind up costing the taxpayers more money.

Democratic state attorneys general, and homeowner and consumer advocacy groups have campaigned for months for the White House to push Watt's confirmation, arguing that DeMarco has not embraced programs that could help borrowers having trouble making mortgage payments.

During his time in the House, Watt fought against predatory lending and pushed for increased loan access for minority and low-income borrowers.

He has continued to work in Congress since being nominated for the FHFA post on May 1. Watt faces a February 28 deadline to file papers if he intends to pursue re-election next year.

(Reporting by Margaret Chadbourn; Editing by Tim Ahmann and Doina Chiacu)

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