BLOG VIEW: This month marks Edward DeMarco's third anniversary as acting director of the Federal Housing Finance Agency (FHFA). Yes, I know that sounds strange – ‘acting director’ is supposed to be a temporary position, not a long-term fixture.
How did this happen? On Aug. 25, 2009, President Obama named DeMarco acting director after James Lockhart stepped down as FHFA director. DeMarco was previously the agency's chief operating officer and senior deputy director for housing mission and goals.
Unfortunately, the Obama administration has a weird habit of leaving financial regulatory directorship positions vacant and allowing ‘acting’ directors to run the agencies. It wasn't until November 2010 when the administration proposed North Carolina Commissioner of the Banks Joseph A. Smith Jr. to take on the FHFA directorship. But Sen. Richard Shelby, R-N.C., put a ‘hold’ on Smith's nomination, calling him a ‘tool of the Obama administration,’ and the Democrat-controlled 111th Congress adjourned with Smith's nomination left in limbo. Smith withdrew himself from future consideration.
To date, the administration has failed to put forward anyone to occupy the FHFA director's position. Nor will it consider promoting DeMarco to official directorship – the regulator and the White House have repeatedly clashed on a number of housing policy issues, with DeMarco refusing to tow the administration's line – most recently, with last week's FHFA decision not to allow principal reductions for the government-sponsored enterprises' (GSEs) mortgage holdings.
At the same time, the administration has resisted calls by several prominent congressional Democrats to fire DeMarco. The idea has certainly been tossed around – earlier this year, U.S. Department of Housing and Urban Development Secretary Shaun Donovan glumly told reporters that the administration wants to ‘get someone in [the FHFA] who shares our view.’
It is safe to assume that the administration will not seek a change of leadership at the FHFA helm before the election. However, if Obama is re-elected, there is the chance that Congress will remain divided and the Capitol Hill Republicans will find fault with any FHFA director nominee presented for approval. Thus, it is quite possible that DeMarco will be able to stay in power for as long as he wants – and there is no evidence to suggest that he is growing tired of his work.
Although I've had a number of concerns about how DeMarco has run the FHFA – his wild flip-flopping on the subject of compensation for GSE executives was especially inept – I must confess that I've grown accustomed to his talent as an equal opportunity offender. Or perhaps I just numb to the circumstances. Still, it is hard to recall another regulator who has been able to anger the White House, state governors and both parties in Congress, and still carry on without bowing one micrometer to political pressure.
If the mortgage banking industry has one deep regret about DeMarco's reign, it would be that it did not come years ago. David Kittle, past chairman of the Mortgage Bankers Association and the Washington, D.C.-based senior director of industry relations for IMARC, probably said it best in a recent interview in Secondary Marketing Executive: ‘The industry always wanted a new and stronger regulator of GSEs since the 1990s. If we had a stronger regulator, we would not be in the position we're in today.’
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)
