Why the New York Times likes Mel Watt

The New York Times backed U.S. Rep. Mel Watt's nomination to oversee Fannie Mae and Freddie Mac in an editorial today. The Times argues that Watt, a Democrat from Charlotte, has a keen understanding of both what the banks need and what underwater borrowers need as the housing market tries to right itself. Watt, the paper says, would "take a smarter, more forceful approach" to mortgage relief than the current director, Edward DeMarco, has.
Watt, the paper concludes, "has what it takes to explain and carry out policies to help revive credit and provide long overdue assistance to homeonwers."  

The Times' editorial is below. The Charlotte Observer backed Watt's nomination last week.

Mr. Watt, Fannie Mae and Freddie Mac

By THE EDITORIAL BOARD

There are many reasons to be bullish on housing. Valuations, affordability and supply and demand are moving in the right direction. But there are also causes for concern. Home sales and home prices can rise only so far given today’s high level of unemployment and low level of wage gains. And millions of homeowners are still in financial distress. At the end of 2012, some 11.3 million homeowners — nearly one-fourth of all those with a mortgage — still owed more on their mortgages than their homes were worth, according to Moody’s Analytics. Of those, three million are currently in or near foreclosure.

Against that backdrop, President Obama has nominated Representative Melvin Watt, a Democrat of North Carolina, to be the next director of the Federal Housing Finance Agency, the overseer of the government-backed mortgage companies Fannie Mae and Freddie Mac.

As a senior member of the House Financial Services Committee, Mr. Watt has long been a champion of homeownership and credit availability. Before credit standards were abandoned in the lending of the bubble years, careful efforts by Mr. Watt and other policy makers had prudently expanded homeownership to middle- and low-income families, without the negative consequences of the subprime era. Reviving those successful efforts, while averting the dangers, should be a priority for the next director of the agency.

As a representative from North Carolina, whose district includes parts of Charlotte, the home of Bank of America, Mr. Watt is also aware of the needs and demands of banks. He has been criticized for taking campaign donations from the financial industry, though, sadly, it is hard to find a politician who doesn’t accept special-interest money. But Mr. Watt has shown a willingness to act in the public interest — and to compromise skillfully across the aisle. During debates over the Dodd-Frank financial reform bill in 2010, he was instrumental in passing core mortgage reforms, including rules to improve and enforce underwriting standards to protect borrowers and the public from reckless lending.

The question, of course, is whether Mr. Watt can be confirmed in a Senate where Republicans block nominees for the sake of doing so. For some time, many Republicans have insisted that the most important housing issue is the privatization of Fannie and Freddie, which have been under government control since their bailout in 2008.

The debate over the future of Fannie and Freddie is legitimate, but premature. Currently, Fannie and Freddie and other federal agencies guarantee about 90 percent of new mortgages. Banks and other private sector lenders are simply in no position to fill that role anytime soon.

A confirmation hearing should focus on the real, near-term priorities for Fannie and Freddie, especially the need to ensure the flow of ample mortgage credit and to provide relief to hard-pressed borrowers.

The current acting director, Edward DeMarco, has been slow to clarify mortgage issues that impair the banks’ willingness to extend credit. He has also stood in the way of principal reductions for underwater borrowers, saying that writing off principal would be against the taxpayer interest. Mr. Watt’s record indicates that he would take a smarter, more forceful approach to mortgage relief. Research by the Congressional Budget Office confirms that principal write-downs would save the government money and reduce foreclosure and delinquency rates.

Mr. Watt has what it takes to explain and carry out policies to help revive credit and provide long overdue assistance to homeowners — if only the Senate will give him the chance.