* Nomination advanced out of committee on a party-line vote
* Some Republican support needed for Watt’s final approval
* Panel also approved other presidential nominees
By Margaret Chadbourn
WASHINGTON, July 18 (Reuters) - The Senate Banking Committee on Thursday backed Representative Mel Watt to be the next regulator of government-controlled mortgage financiers Fannie Mae and Freddie Mac, sending the nomination to the full Senate where it faces an uncertain fate.
President Barack Obama nominated Watt, a Democrat from North Carolina, to replace Edward DeMarco as head of the Federal Housing Finance Agency on May 1, but many Republicans were quick to make clear they would not support the nominee.
Members of the committee approved the choice 12-10 strictly along party lines, a sign of the trouble the nomination is likely to face in the full chamber, where some Republican support will likely be needed for Watt to win final approval.
“Congressman Mel Watt is well-qualified to lead the FHFA in its conservatorship of Fannie Mae and Freddie Mac, and he too should be confirmed without delay,” said the panel’s chairman, Democratic Senator Tim Johnson of South Dakota.
The panel also approved Jason Furman to head Obama’s Council of Economic Advisers, and Michael Piwowar and Kara Stein to be members of the Securities and Exchange Committee. Richard Metsger, nominated to join the National Credit Union Administration Board, was approved as well. It also backed current SEC Chair Mary Jo White to serve a full term.
In contrast to Watt, who has served in the House for two decades, those nominees garnered Republican support. To win confirmation by the full Senate, the 67-year-old North Carolina lawmaker will likely have to win a super majority of 60 votes to overcome Republican procedural hurdles.
Democrats control the chamber, with the current breakdown at 52 Democrats, 46 Republicans, and two Independents, who both caucus with the Democrats.
Republicans who oppose Watt’s nomination contend he lacks the technical expertise needed to take on the conservatorship of Fannie Mae and Freddie Mac, which currently back about half of existing U.S. home loans. Watt is a long-time member of the House Financial Services Committee, which has jurisdiction over Fannie Mae and Freddie Mac, and a former head of the Congressional Black Caucus.
“The conservator must be an apolitical financial regulator with technical expertise,” said Senator Mike Crapo of Idaho, the top Republican on the panel. He voiced skepticism that Watt had the skills needed to oversee Fannie Mae and Freddie Mach and head the FHFA, a post that is “like no other position in our government.”
If Watt’s nomination does not clear the Senate, it would mark the Obama administration’s second failed attempt to win confirmation for a permanent FHFA director. DeMarco has been serving in an acting capacity since 2009, and Obama’s first attempt to fill the FHFA post met strong Republican opposition and the president’s nominee Joe Smith, then the North Carolina banking commissioner, eventually withdrew in 2011.
Fannie Mae and Freddie Mac were seized by the government in 2008 as mortgage losses threatened their solvency. They were propped up with $187.5 billion in taxpayer funds, but have since returned to profitability and have paid about $132 billion to the U.S. Treasury in dividends for the government’s stake.
DeMarco has faced push back from the Obama administration, Democrats, and housing and consumer advocates for blocking a proposal to allow Fannie Mae and Freddie Mac to write down principal on troubled loans that they back.
At his confirmation hearing on June 27, Watt signaled he would give strong consideration to such a proposal.
In addition to weighing in on the question of loan forgiveness, the next FHFA director would be expected to guide Fannie Mae and Freddie Mac through an overhaul to reduce their dominant role in the housing finance system.
Watt has welcomed legislation unveiled by two members of the panel that would dismantle Fannie Mae and Freddie Mac over five years. The measure would still maintain a federal role in backstopping the mortgage market.
In addition to approving Watt, and favorably voting for the four other presidential nominees, Ohio Democrat Sherrod Brown said he has some outstanding concerns about the new SEC chair White and her prior ties to Wall Street during her days working as a defense attorney.
“I voted against Ms. White in March. At the time I said I hope she proves me wrong. Unfortunately at this point, I view her record as more negative than positive. She has not yet met the burden of proof to change my mind,” said Brown.
Not considered controversial, Piwowar, a Republican, and Stein, a Democrat, will replace outgoing SEC Commissioners Troy Paredes and Elisse Walter.
Unlike Watt, all other of the nominations that cleared the banking committee are expected to sail through the Senate.