Republicans block Obama's pick to head Fannie and Freddie Mac

A vote for the president's pick, Mel Watt, to oversee the Federal Housing Finance Agency fell short by four yeas

Democratic Representative Mel Watt's nomination to head the Federal Housing Finance Agency fell short by four votes on Thursday.
Yuri Gripas/Reuters

Senate Republicans on Thursday blocked President Barack Obama's nominee, Mel Watt, from heading the Federal Housing Finance Agency (FHFA), possibly derailing his chances of securing the position. The agency oversees Fannie Mae and Freddie Mac, the taxpayer-owned giants that own or back about half of all U.S. mortgages.

Democrats have praised Watt's pro-consumer record, which includes opposing risky Wall Street behavior that helped produce the 2008 financial industry collapse. Watt, a 21-year veteran of the House and its Financial Services committee, won support from the National Association of Realtors and the National Association of Home Builders.

The defeat on a procedural vote for Watt, a Democratic representative 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 60 needed to head off a filibuster threat and bring the nomination to a final vote.

As expected, the vote broke along party lines. Senate Majority Leader Harry Reid, D-Nev., switched his vote from yea to nay at the last minute to reserve the right to bring back Watt's nomination to head the FHFA.

Aside from Reid, Watt won support from all the Senate's Democrats and the two independents. Only two Republicans — Sen. Richard Burr, who is from Watt's home state, and Sen. Rob Portman of Ohio — voted yea.

"Something has to change, and I hope we can make the changes necessary through cooperation," Reid said after the votes.

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.

Watt also said he did not plan to withdraw from the nomination.

Some 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.

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

The defeat immediately subjected Democratic leaders to pressure from liberal groups and newer Democratic senators to change Senate rules that let the minority party, currently Republicans, force the majority to muster 60 votes on controversial nominations, instead of a simple majority.

A coalition of Democratic-leaning groups including the Alliance for Justice, the Communications Workers of America, Common Cause and the Sierra Club issued a statement saying, "Democrats must be prepared to change the Senate rules."

Freshman Sen. Chris Murphy, D-Conn., said, "The conversation on rules changes can't come fast enough for me." He called the GOP procedural hurdles "a government shutdown by another tactic."

No. 2 Senate GOP leader John Cornyn of Texas said he doubted Democrats would act on their threats.

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.

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.

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