"As Obama Nominates Key Regulator, Misinformation About Cause Of Housing Crisis Spreads"
Today, President Obama announced that he will nominate Rep. Mel Watt (D-NC) to be the director of the Federal Housing Finance Agency (FHFA), the agency that regulates housing giants Fannie Mae and Freddie Mac.
As a veteran of the House Financial Services committee, Watt is well-qualified to lead the agency. Among his accomplishments on the committee is the spearheading of one of the earliest federal efforts to combat predatory lending, and had Watt’s bill passed, it could have prevented some of the worst practices that led to the housing crisis.
Watt’s nomination comes at a crucial time for the agency, as the companies it regulates currently guarantee approximately two-thirds of new mortgages. FHFA is currently run by Ed DeMarco, an unelected and unconfirmed civil servant who is using his virtually unlimited powers to reshape housing finance in America. These decisions will impact nearly all American families whether they own their home, hope to become homeowners someday, or are simply seeking affordable rental options.
Yet instead of using Watt’s nomination to begin an open discussion about the future of housing finance, the right is already signaling they will gin up a misinformation campaign in an attempt to derail his nomination.
The first salvo appeared in a blog post from the Wall Street Journal bluntly called “Obama, Housing, and Blacks.” (Is it a coincidence that this piece was published on the same day that the Administration nominated Watt, who is African-American, and was once a chairman of the Congressional Black Caucus?)
The Journal piece begins by referencing an Urban Institute report describing the massive loss of wealth by Hispanic and black families during the Great Recession, a large part of which was due to collapsing home prices. But the piece blames this loss of wealth on “federal policies that pushed lenders to loan money to people unlikely to be able to repay it.” The piece goes on to claim that “well-intentioned housing policies aimed at low-income minorities” have only “[saddled] a lot of minorities with foreclosed homes, huge debt burdens and bad credit scores.”
In making this claim, the piece is repeating the conservative lie that Fannie Mae, Freddie Mac, and the Community Reinvestment Act caused the housing crisis. Conservatives repeat this claim not because it is backed up by empirical evidence, but because blaming the government for our housing crisis rather than out-of-control private label securitization suits their ideological agenda.
All signs point to this lie becoming a key part of the misinformation campaign against Watt’s nomination. As an anonymous GOP Senate aide said this morning, nameless senators may be concerned with Watt’s nomination because they prioritize “protecting the financial system from another housing-led, government fueled collapse like we saw in 2008.” This statement not only repeats the false claim about the government’s role in the crisis, but implies that Rep. Watt enabled the crisis while serving in the House.
In truth, the housing crisis was caused by Wall Street’s insatiable demand for risky home mortgages and for the securities they created from these mortgages. These risky loans were made possible by reckless, predatory, entirely private-sector mortgage lenders—the same group Watt took on as a member of the House.
As the Senate considers Watt’s nomination to head the FHFA, it is crucial that we have an honest conversation not only about his record, but about the future of housing finance in America. The first step will be rejecting right-wing lies about the causes of the crisis.
Our guest blogger is David Sanchez, a special assistant with the economic policy team at the Center for American Progress Action Fund.