WASHINGTON (Reuters) - President Barack Obama will nominate a state bank regulator to be director of the U.S. agency that oversees mortgage giants Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, the White House said on Friday.
At a time of crisis and growing calls for change to America’s broken housing finance system, Obama intends to tap North Carolina Commissioner of Banks Joseph Smith to head the Federal Housing Finance Agency, the administration said.
“Mr. Smith brings to this position both tremendous expertise and a deep commitment to strengthening our housing finance system for the American people,” Obama said.
“I’m grateful that he has accepted this nomination, and I look forward to working with him in the months and years to come,” the president said in a statement.
Smith is a corporate and bank lawyer who has worked in Washington and New York. He has been North Carolina banks commissioner since June 2002.
If confirmed by the Senate, he would replace Edward DeMarco, acting FHFA director. The post also includes regulating 12 Federal Home Loan banks.
At the height of the global financial crisis in 2008, both Fannie Mae and Freddie Mac were bailed out by taxpayers, seized by the government and put in federal conservatorship.
They are now money-losing organizations that have soaked up $148 billion in bailout money and are under direct federal supervision. They stand behind 80 percent of new U.S. home mortgages. A major push to fundamentally reform them is expected to get under way in Congress within weeks.
Senate Banking Committee Chairman Christopher Dodd, whose panel must review the nomination prior to a Senate confirmation vote, said the nomination would be considered promptly. Dodd is retiring from the Senate in a few weeks.
Senator Tim Johnson, who will replace Dodd as chairman, said, “We need to get a permanent director in place at the Federal Housing Finance Agency to provide stability and consistency for the market, especially as Congress looks to address housing finance reform.”
The Obama administration is expected to unveil a plan for overhauling Fannie Mae and Freddie Mac in January.
The $10 trillion U.S. housing market has been in a deep slump since a historic home price bubble burst in 2007-08, hammering millions of homeowners and triggering a credit crisis that shook the world financial order.
As the balance sheets of banks and other institutions crumbled under over-valued debt instruments backed by home mortgages, the role of Fannie Mae and Freddie Mac at the center of housing finance became ever more central.
While the two helped bring about the crisis by chasing subprime mortgage lending profits, Fannie Mae and Freddie Mac also helped prevent it from getting worse by throwing their vast resources behind the market.
Known as government-sponsored enterprises, or GSEs, the two companies’ future was not addressed in sweeping Wall Street reforms approved in July. Both Democrats and Republicans expect GSE reform will be a major flashpoint in 2011-12, with the parties deeply divided.
Republican Representative Spencer Bachus, frontrunner to head the House Financial Services Committee, told Reuters last week the GSEs should be in liquidation, not conservatorship.
Additional reporting by Steve Holland and Ross Colvin; Editing by Neil Stempleman