Obama's pick to lead Fannie, Freddie promises leadership

McClatchy NewspapersDecember 9, 2010 

WASHINGTON — President Barack Obama's nominee to lead Fannie Mae and Freddie Mac pledged to Congress Thursday to offer not just management, but leadership, if he becomes the new chief of the troubled housing agencies.

Joseph A. Smith Jr., the North Carolina banking commissioner, has been in Washington most of the week, meeting with senators, congressional staff and other officials.

He testified Thursday before the Senate Banking Committee, the panel that will consider his nomination to be the director of the Federal Housing Finance Agency. The FHFA oversees not only the two mortgage giants, but also a dozen federal home loan banks that lend to community banks across the country.

Smith's nomination comes as Fannie and Freddie remain in federal conservatorship, receiving $151 billion from the Treasury Department to maintain their work in the housing market. Obama must offer Congress a plan in January for reorganizing the agencies.

Both play a critical role in the housing market by buying bundled mortgages from lenders and keeping cash in the system.

If confirmed by the full Senate, Smith would hold much of the responsibility for carrying out Obama's plan.

"The activities of Fannie Mae and Freddie Mac are national in scope but local in impact, directly affecting communities across the country," Smith said. "Leadership in this context means determining how to address critical local needs in conjunction with the agency's duties of conservatorship."

The Senate Banking Committee, and then the full Senate, must vote on Smith's nomination this month before Congress adjourns. Otherwise, the nomination expires and Obama must put forward his name again in the next Congress.

Smith faced tough questions — but no time for answers — from Sen. Richard Shelby of Alabama, the committee's top Republican. In a hearing cut short by Senate floor votes, Shelby used his time to pepper Smith with questions, but he said he'd wait until later for written answers.

In one exchange, Shelby asked whether Smith would resist pressure from the Obama administration to have Fannie and Freddie write down the principal on some troubled mortgages — a move that could help individual homeowners but would cost taxpayers, Shelby said.

"Will you be independent, if you're confirmed?" Shelby asked.

"I will," Smith replied.

"Will you be subject to pressure from everybody?" Shelby asked.

"Well, I will be pressured by a lot of people."

"Will you be subject to that pressure?" Shelby insisted.

Smith tried again. "I've got to look at it through the screen of, first and foremost, protecting taxpayers."

Shelby cut him off again, asking for a written response: "I hope you'll elaborate for the record."

Banking Committee Chairman Christopher Dodd, D-Conn., endorsed Smith and praised his qualifications, saying in a statement that he'd work with top Senate leaders to get Smith confirmed before Congress adjourns.

Smith would bring to the housing agencies his reputation as a champion for states' abilities to protect consumers against abusive mortgage practices. He oversaw implementation of North Carolina's laws against predatory lending, considered some of the toughest in the nation, and he testified Thursday that he worked to get "undesirable characters" out of the mortgage licensing system.

He also has supported Fannie Mae's and Freddie Mac's ability to support home ownership.

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