Crapo Statement at Banking Committee Hearing on Nominations
Nominees include head of FHFA, SEC Commissioners
Washington, D.C. - U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing to consider the following nominees: Representative Mel Watt, of North Carolina, to be Director of the Federal Housing Finance Agency; Dr. Jason Furman, of New York, to be a Member and Chairman of the Council of Economic Advisers; Ms. Kara M. Stein, of Maryland, to be a Member of the Securities and Exchange Commission; Dr. Michael S. Piwowar, of Virginia, to be a Member of the Securities and Exchange Commission; and The Honorable Richard T. Metsger, of Oregon, to be a Member of the National Credit Union Administration Board:
Thank you, Mr. Chairman.
We are here today to consider several nominations across numerous federal agencies and I welcome them to our Committee.
I have met with each of the nominees and I look forward to hearing from them today about their goals for the positions to which they have been nominated, as well as their qualifications.
We have many introductions to make, so I will keep my remarks focused on the highest profile position before us today.
The Director of the Federal Housing Finance Agency, or FHFA, is a unique position within all of the federal government and requires specific expertise.
Not only does the head of the FHFA act as a regulator to all of the Government Sponsored Enterprises, but as conservator, this person actually operates Fannie Mae and Freddie Mac, whose combined portfolios exceed five trillion dollars.
Because the powers of this position are so unique and unparalleled within government, any nominee to this important position must be politically independent and have the necessary policy and technical expertise.
Specifically, a nominee must understand the traditional concerns of financial services regulators such as: credit risk, market risk, operation risk and liquidity risk.
Additionally, the nominee must understand the business strategies necessary to operate two multi-trillion dollar companies in a manner that conserves their assets, until Congress determines our future housing finance system.
Finding anyone with that expertise is a challenge, but on top of that knowledge, it is essential that the individual have a history of demonstrated political independence.
This position is not a Presidential advisor or a member of a commission, who must work in a collaborative fashion.
As conservator, the Director of the FHFA acts alone, on his own authority, and possesses all of the powers of the officers, board of directors and the shareholders of Fannie and Freddie.
The current person holding this job, Acting Director Ed DeMarco, is a career civil servant and Ph.D. economist named to his post by President Obama in 2009. Since that time, I have not heard anyone question his technical expertise.
He is also an apolitical financial regulator, who has resisted political pressure from all sides of the political spectrum.
Yet since he decided against supporting the Administration's push for principal reductions in underwater mortgages, an effort has been waged for his removal.
Within that context, we have received Representative Watt's nomination.
I have previously expressed my concern about the President choosing to make an appointment that is political in nature.
This is not a reflection on Representative Watt.
The Congressman has had a long successful career in Congress and on the House Financial Services Committee representing his constituents very well.
He also is a member who is well-liked by his colleagues and someone with whom I enjoyed discussing these issues.
My concerns reflect the unique position of the FHFA Director to be regulator, operator and shareholder of Fannie Mae and Freddie Mac.
As I said, the Director has virtually unchecked power to control two multi-trillion dollar companies and, through them, our entire mortgage market.
This requires an in-depth knowledge of: the operations of the mortgage industry; the mortgage backed security industry; structured securitizations; investment portfolios; the operations of both public and private insurance and guarantees; and the expertise to oversee the nearly 12,000 employees employed by both entities.
In addition, the Director must be able to adequately transition both FHFA and Fannie Mae and Freddie Mac for whatever Congress ultimately decides for the GSEs.
Recent earning reports indicate that perhaps we have turned a corner, at least for now, as it relates to the losses at Fannie and Freddie.
However, the taxpayers have already spent nearly $190 billion bailing out these two companies.
With the size of their operations, a decision resulting in even the smallest negative variation could mean the loss of billions more and a return to the Treasury draws that have plagued these conservatorships.
With that in mind, we must gain a better understanding of Representative Watt's positions on a great variety of issues, as well as how he plans to insulate himself from the political winds surrounding Fannie and Freddie.
Thank you, Mr. Chairman.