The man behind Fannie and Freddie
U.S. Vice President Joe Biden ceremonially swears in Mel Watt as the new director of the Federal Housing Finance Agency as his wife Eulada Watt, looks on
In the world of real estate, few people are more powerful than Mel Watt, the head of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. Together, the two mortgage giants guarantee about 60 percent of all new home loans.
Watt hasn’t made a lot of public appearances since he was appointed head of the FHFA in January. In fact, his first major speech wasn't until May 13, at the Brookings Institution.
“We’re balancing, in a number of instances, contradictory mandates,” he told the audience.
For example, the mandate to protect the taxpayers while trying to get banks to lend more but not make risky loans, which Fannie and Freddie would still have to guarantee. After the speech, Watt hung around outside Brookings and chatted for a while -- Maybe not what you’d expect, but perhaps a throwback to Watt’s previous job. He served in Congress for more than two decades, representing the banking hub of Charlotte, North Carolina.
The Senate Banking Committee has passed legislation that would gradually wind down Fannie and Freddie, something Watt’s predecessor also tried to do, but without input from Capitol Hill.
But Congress isn’t likely to act this year, leaving Watt in charge of Fannie and Freddie’s fate.
“I think he’ll work cooperatively with Congress,” says David Stevens, president of the Mortgage Bankers Association, who adds that he thinks Watt will let Congress decide what to do with the mortgage giants.
“He gets it. Mel understands his role," Stevens says. "He understands the role of Congress.”
Watt’s role also involves dealing with a lot of money. Since Fannie and Freddie were taken over by the government in 2008, their profits have gone to the U.S. Treasury.
“Even in this town, $25 billion a year is a lot of money,” says Mike Calhoun, president of the Center for Responsible Lending, a homeowner advocacy group.
Sitting in Calhoun's Washington office, I ask him whether all that money led to pressure on Watt, maybe from people in the White House who don’t want to change Fannie and Freddie because they’re afraid of cutting off the spigot of cash. But Calhoun doesn't think that'll happen.
“They know he is going to be independent. He’s in his mid 60s," Calhoun says. "He’s quite comfortable standing his ground.”