Watt will be the first permanent director in nearly four years for the obscure but powerful housing regulator that oversees Fannie Mae and Freddie Mac, the mortgage giants that were bailed out by taxpayers in 2008 and today control more than half of the mortgage market. Fannie and Freddie wield great power over who gets a loan and at what cost — and, for struggling borrowers, who gets relief.
In nominating Watt, Obama noted that the congressman has served on the House Financial Services Committee during entire his 20 years in office. In that capacity, “Mel has led efforts to rein in unscrupulous mortgage lenders. He’s helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place. And he’s fought to give more Americans in low-income neighborhoods access to affordable housing,” the president said. “So Mel understands as well as anybody what caused the housing crisis.”
The president drew laughs as he later introduced his new FCC chairman, after praising the work of outgoing chairman Julius Genachowski.
“Now, if anybody is wondering about Tom’s qualifications, Tom is the only member of both the cable television and the wireless industry hall of fame. So he’s like the Jim Brown of telecom, or the Bo Jackson of telecom,” Obama said. “And that’s because for more than 30 years, Tom has been at the forefront of some of the very dramatic changes that we’ve seen in the way we communicate and how we live our lives.”
Obama noted Wheeler’s private- and public-sector involvement in the tech industry. “He was one of the leaders of a company that helped create thousands of good, high-tech jobs. He’s in charge of the group that advises the FCC on the latest technology issues. He’s helped give American consumers more choices and better products. So Tom knows this stuff inside and out.”
Wheeler comes to the FCC with deep ties to the nation’s biggest telecom lobbying groups. He has served as head of the wireless industry’s CTIA trade group and the National Cable and Telecommunications Association, among the most powerful and deep-pocketed lobbying groups in Washington.
Those connections have raised concerns among critics of the nomination. “I am skeptical that the former chief lobbyist of the wireless and cable industries will be capable of holding his former clients accountable for their ongoing shortcomings,” said Sascha Meinrath, head of the Open Technology Institute at the New America Foundation think tank.
Wheeler sits on the board of EarthLink, and his investment firm, Core Capital Partners, has invested in wireless equipment and data center technology firms.
Some experts say that range of industry experience may benefit an agency in need of greater technological and business expertise.
“He can’t be pigeonholed,” said Gigi Sohn, president of consumer advocacy group Public Knowledge. “He’s had a wide variety of experiences and has worked with competitive companies as well as incumbents. I truly believe he will be independent and thoughtful.”
Outgoing chairman Genachowski, who made the expansion of broadband a priority, leaves Wheeler with much unfinished business. Genachowski is expected to leave after the agency’s next public meeting on May 9.
Wheeler will inherit a contentious and drawn-out battle to auction television airwaves to wireless carriers to expand their networks. It is unclear whether TV stations are willing to sell this spectrum to make the auction, expected to take place next year, a success.
As chairman, Wheeler may also have to weigh in on the fast-changing television landscape, where traditional business models of cable and broadcast networks are being shaken up by online video providers.
Several mergers will also come before the FCC chairman for consideration, including a bidding war between Japan’s SoftBank and Dish Network over the nation’s third-largest wireless provider, Sprint.
And later this year, a federal appeals court will rule on arguments made by Verizon Wireless and MetroPCS that the FCC does not have the ability to regulate broadband Internet providers.
The agency has been under attack by phone giants who have argued that the FCC should not strap new rules to the fast-growing broadband market. But consumer groups have demanded more oversight of Internet service providers to prevent rising cable and wireless bills and a troubling lack of competition.
At the FHFA, acting director Ed DeMarco has clashed repeatedly with Obama’s economic advisers and over how far Fannie and Freddie should go to assist struggling homeowners. Obama’s team has pushed DeMarco to embrace a plan to partially forgive mortgage debt for hundreds of thousands of struggling borrowers; DeMarco has resisted, saying the move would cost the companies, and therefore taxpayers, too much.
Watt is likely to be friendlier to the administration’s views — a stance that could prompt Senate Republicans to oppose his nomination, even though he hails from Congress, a point that would augur in his favor. In Obama’s first term, Republicans refused to confirm North Carolina banking regulator Joseph Smith as Obama’s FHFA nominee, and he eventually withdrew.
After being terribly bruised in the financial crisis, Fannie and Freddie have made a strong recovery and are posting billions in profits. They still owe taxpayers well over $100 billion, however, and many industry officials say there needs to be a transformation of the mortgage market in coming years so it less reliant on federally owned companies.
If confirmed, Watt would be a principal actor in this effort. He has spent 20 years on the House Financial Services and Judiciary committees, and during that time has emphasized fighting deceptive lending and financial practices. He was a key participant in crafting the Dodd-Frank act.
Rep. Elijah E. Cummings (D-Md.) applauded the nomination of Watt to head the agency, which has been without a permanent director for nearly four years.
“Congressman Watt has deep expertise in housing policy and a record of distinguished service on the House Financial Services Committee,” Cummings said.
But Sen. Bob Corker (R-Tenn.) sharply criticized Obama’s choice, saying he “could not be more disappointed in this nomination.”
“This gives new meaning to the adage that the fox is guarding the hen house,” Corker said. The FHFA should focus first on how to rein in the power of Fannie Mae and Freddie Mac, said Corker, who sits on the Senate Banking, Housing and Urban Affairs Committee.
“Before any nominee should be considered for this post, regardless of their qualifications, the administration should explicitly lay out how they will unwind these entities,” he said.
One the opposite side of the political spectrum, some liberals are concerned that Watt is too close to banking interests in his home town of Charlotte to be effective at the helm of the FHFA.