Republicans sent the Obama administration back to the drawing board Thursday, blocking an up-or-down vote on the nomination of Rep. Mel Watt, D-N.C., to head the little-known but vital Federal Housing Finance Agency.
With Vice President Joe Biden presiding over the Senate, having just sworn in new Sen. Cory Booker, D-N.J., senators fell short of the 60 votes needed to end debate and move to a vote on the nomination.
Senate Majority Leader Harry Reid, D-Nev., voted with those opposed once it was clear that he lacked the necessary votes, allowing him to bring up the nomination again in coming weeks.
“Despite this setback, I remain thankful for President Obama’s nomination and humbled by his confidence in me,” Watt said in a brief statement. “I do not plan to withdraw as the nominee for the position and remain hopeful that we will prevail when the motion for reconsideration is taken up in the Senate.”
The tally was 56-42, with Sens. Ted Cruz, R-Texas, and James Inhofe, R-Okla., not casting votes.
“I will exercise my right as majority leader to reconsider these nominations at some point in the very near future,” Reid said in a statement. Aides suggested that would be within weeks. “I hope my Republican colleagues will reconsider their continued run of unprecedented obstructionism. Something has to change, and I hope we can make the changes necessary through cooperation.”
The White House reacted angrily.
“It is enormously disappointing that Republicans would filibuster this nomination of a highly qualified nominee,” White House spokesman Jay Carney said shortly after the vote. “And we hope that . . . those senators will reconsider that vote and that Mr. Watt will be confirmed in the future."
The Federal Housing Finance Agency oversees the mortgage finance giants Fannie Mae and Freddie Mac. It was put into government conservatorship at the start of the 2008 financial crisis and its future is a subject of intense congressional debate.
Only two Republicans supported the move to end debate on Watt, one of the highest-ranking minority lawmakers. One was a home-state senator, Richard Burr, and the other was Sen. Rob Portman of Ohio. Burr’s office had no comment on the vote, pointing to an earlier statement of support for his fellow North Carolinian.
The Congressional Black Caucus said it would be the first rejection of a long-serving sitting member of good standing since 1843, when the Senate rejected Massachusetts Rep. Caleb Cushing for the post of treasury secretary.
“What happened today has only occurred once in the history of this Congress,” Congressional Black Caucus Chairwoman Rep. Marcia Fudge, D-Ohio, said in a statement. “This is a disgrace to this body and a disservice to the American people.”
North Carolina’s other senator, Democrat Kay Hagan, said “Mel would continue to champion policies that benefit middle-class families in North Carolina and around the country.”
Republicans accuse Watt of supporting lower requirements for obtaining a mortgage, which contributed to the need for the government to take over the quasi-government entities. They favor someone with greater experience in housing finance and are happy with acting Director Ed DeMarco, who’s resisted administration efforts to relax tight standards on mortgage lending.
“America needs someone with technical expertise and experience to run Fannie and Freddie’s conservator and ensure that we don’t repeat the same mistakes that led to the last financial crisis,” Senate Minority Leader Mitch McConnell, R-Ky., said in a statement. “This is the second FHFA nominee that President Obama has sent who did not meet those standards.”
The administration’s first nominee, then-North Carolina Banking Commissioner Joseph Smith, withdrew his name from consideration in January 2011 after losing support from Republicans.
Republicans want Fannie and Freddie to keep their focus on profitability and returns for investors who purchase mortgage bonds, and not on loosening lending standards in order to support more home sales in the still-impaired housing sector.
Democrats think the mortgage-finance companies should play a bigger role in making access to mortgage lending easier for all Americans, especially for underserved minority communities, and they want someone in place at the mortgage-finance regulator as soon as possible.
“The time has come for some permanency and some certainty,” Sen. Elizabeth Warren, D-Mass., said in a floor speech Thursday shortly before the vote.
Democrats noted that Watt’s nomination won support from groups such as the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association. Those groups, coincidentally, favor having Fannie and Freddie loosen the underwriting requirements for the mortgages they purchase from banks.
The Federal Housing Finance Agency polices the two quasi-government companies, which buy mortgages from banks and bundle them together as mortgage bonds for sale to investors in a $10 trillion market. This process, called securitization, allows banks to clear their balance sheets by passing along loans to a secondary market _ dominated by Fannie and Freddie _ and freeing themselves to keep lending to consumers and businesses.
What to do about Fannie and Freddie is on the plate of whoever takes the job. The Republican-led House Financial Services Committee passed legislation in July that would liquidate Fannie and Freddie and largely eliminate a federal backstop for the housing market.
The Senate Banking Committee is considering legislation that would get Fannie and Freddie out of the government’s hands and would leave them as private entities that still enjoy some federal backstop. It held a hearing on the matter Thursday as the full Senate debated Watt’s nomination.