Watts the second North Carolinian to be nominated for the post by Obama. His pick in 2010, North Carolina Bank Commissioner Joseph Smith, was rebuffed by Republicans. North Carolina, home to Bank of America, has been more aggressive than most states in policing lenders and forcing banks to work with homeowners whod been given unsuitable mortgages.
Watt has served 20 years in Congress, many of them on the influential House Financial Services Committee. Sen. Elizabeth Warren, D-Mass., called him a thoughtful policymaker with a deep background in finance and a long record as a champion for working families. Rep. Elijah E. Cummings of Maryland, the top Democrat on the House Committee on Oversight and Government Reform, said Watt has deep expertise in housing policy and a record of distinguished service in Congress.
His nomination comes as Obama faced criticism for a lack of Cabinet diversity. On Monday, the president countered those criticisms when he nominated Charlotte Mayor Anthony Foxx to serve as transportation secretary.
A graduate of the University of North Carolina at Chapel Hill and Yale Law School, Watt served in the state senate before election to Congress in 1992. He also is a former chairman of the Congressional Black Caucus, which praised his selection.
Republicans are sure to scrutinize the nominees 20-year voting record in Congress. Close looks at past decisions made by Obamas picks to head the Labor Department and the Bureau of Alcohol, Tobacco, Firearms and Explosives have delayed their confirmations.
Obama joked about this when ending his White House remarks on Watt and Tom Wheeler, who was nominated to head the Federal Communications Commission.
And Im going to go ahead and thank the Senate now for what Im sure will be a speedy confirmation process so these two gentlemen can get to work right away, the president said.
Up until the financial crisis and conservatorship in 2008, Fannie and Freddie operated as private enterprises with oversight from Congress and the Federal Housing Finance Agencys predecessor, the Office of Federal Housing Enterprise Oversight.
How to unwind Fannie and Freddie is a complicated question. For now, theyre the only game in town. Before the financial crisis, sparked by a housing bubble and a collapse in lending standards, Wall Street banks had aggressively gone after Fannies and Freddies business, capturing a large share of the market long enjoyed by the two quasi-government entities.
Since late 2008, so-called private-label mortgage bonds bundled together by Wall Street banks and hedge funds have all but disappeared because investors wont touch them. Wall Street banks have admitted to few controls over the quality of mortgages they were bundling for sale to investors. A special government commission showed how rating agencies such as Moodys Investors Service were complicit in giving gold-plated AAA ratings to Wall Street mortgage bonds that turned out to be junk, and the Justice Department recently sued Standard & Poors for this.
Doing away with Fannie and Freddie has been a Republican rallying point, placing calls for their dissolution in the Republican Party platform during the 2012 elections.
Fannie Mae and Freddie Mac were a primary cause of the housing crisis because their implicit government guarantee allowed them to avoid market discipline and make risky investments. Their favored political status enriched their politically-connected executives and their shareholders at the expense of the nation, the platform read.
That looks past the lead role that Wall Street played in the housing crisis. But five years later, lawmakers continue to debate just what to do with both Fannie and Freddie. Legislation is expected late this year in the House of Representatives and the Senate, and since each are controlled by a different party, very different approaches are expected.
Experts such as Kim Wallace, who until recently was a Treasury Department liaison with Congress, dont expect huge changes now. But Wallace thinks that both borrowers and lenders will face additional fees when taking out a mortgage to help cover regulatory costs and reduce taxpayer burden.
Washington is still in a posture that they dont want to risk derailing whats left of this housing rebound, but at the same time, they have to deal with the increasing cost of the housing subsidies through the two entities, said Wallace, now an analyst for Renaissance Macro Research.
White House correspondent Lesley Clark contributed to this report.