The Republicans in the Senate blocked the nomination of President Barack Obama nomination of Democratic Representative Mel Watt of North Carolina to serve as head of the Federal Housing Finance Agency (FHFA).


FHFA’s responsibilities

The FHFA is the agency responsible in overseeing the operations of mortgage finance giants, Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). The companies were placed under conservatorship after receiving a huge bailout from the government to prevent collapse.

According to Reuters, the procedural vote to bring the nomination of Rep. Watt to debate was 56-42, four shy of the required 60 votes. The White House aggressively rallied support for Watt’s nomination, but it failed to convince Senate Majority Leader Harry Reid, who switched his vote and joined the Republicans in voting no at the last minute.

On the other hand, two Republicans, Sen. Richard Burr of North Carolina and Sen. Rob Portman of Ohio voted yes for Watt’s nomination.

Isaac Boltansky on Watt nomination saga

Isaac Boltansky, policy analyst at Compass Point Research and Trading commented, “The procedural failure of this vote does not completely end the Watt nomination saga. But this failure is undeniably a body blow for the nomination. The focus in financial circles will now move squarely to the nomination of Janet Yellen to head the Federal Reserve and there is no indication that the White House will be willing to push aggressively for Representative Watt again in the future.”

The majority of the Republican lawmakers in the upper chamber are against the appointment of Watt to head the FHFA because they believe that he lacks the expertise to supervise Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). Others argued that Watt will not be able to oppose pressures from the Obama administration to pursue its policy goals for the agency. Watt served in the House of Representatives for 2 decades.

Nominations for FHFA head

The nomination is facing an uphill battle given the fact that the White House failed to secure enough votes to support Watt despite its aggressive efforts, which included engaging the services of top lobbyists in the industry.

The appointment of a new leader for the FHFA could impact the mortgage market in the United States because Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) account for two-thirds of new mortgages in the country. The White House and lawmakers from both political parties want to wind down the mortgage giants. Hedge Funds are lobbying for the privatization of Fannie Mae and Freddie Mac.