Last week, I wondered whether Senate Republicans would continue to obstruct President Obama’s nominee to run the Federal Housing Finance Agency (FHFA) — North Carolina banking commissioner Joseph Smith — if he were renominated. The GOP ran out the clock on Smith’s nomination last session, but Obama had reportedly been leaning towards submitting Smith’s name for consideration again.
However, that won’t be happening because, as the Wall Street Journal reported, Smith has taken himself out of the running:
The Obama administration’s pick to run the agency that oversees Fannie Mae and Freddie Mac doesn’t want to be renominated after his candidacy ran into strong Republican opposition, a White House official said Thursday…Mr. Smith faced resistance from Sen. Richard Shelby (R., Ala.), who suggested he would be “a tool of the administration.”
The Republicans’ concern with Smith is that he might have been sympathetic to allowing Fannie Mae and Freddie Mac — for which the FHFA acts as chief regulator — to write down mortgages for underwater homeowners (thus reducing the total amount owed on the mortgage, to better match the current value of the house). Smith has never publicly said that he supports such a move, but the Obama administration has been extolling its economic virtues.
At this point, it’s becoming quite clear that Republicans have no interest in addressing the ongoing foreclosure crisis, even though there were more than one million foreclosures last year and will likely be more than one million again this year. Rep. Randy Neugebauer (R-TX) said last week that federal foreclosure prevention efforts “need to stop.”
The Obama administration’s foreclosure prevention efforts have been lackluster, particularly the Home Affordable Modification Program (HAMP), which suffers from design flaws that are blunting its effectiveness. But having Fannie and Freddie reduce payments for underwater homeowners would definitely help, as Treasury Secretary Tim Geithner explained:
Treasury Secretary Timothy Geithner told a congressional panel on Thursday there “is a pretty good economic case for Fannie Mae and Freddie Mac to participate in those programs”…While writing down mortgage principal could lead to larger upfront costs, Mr. Geithner encouraged policymakers on Thursday to take a broader view. “If you do things that improve the odds that home prices will be higher in the future, that defaults will be lower in the future, then you can…reduce the overall losses to the taxpayer,” he said.