Are White House housing plans really stymied by the regulator for Freddie and Fannie?
by Cora Currier, ProPublica

NEW YORK CITY, N.Y.
March 28, 2012 12:28pm
Comment Print Email

•  Obama has options he hasn’t tried

•  ‘Get someone in there who shares our view’


For months now, the White House and the head of the regulator overseeing Fannie Mae and Freddie Mac have clashed over principal reductions for struggling homeowners. The Obama administration says that reducing the amount borrowers owe is essential to the housing recovery. Edward DeMarco, acting director of the Federal Housing Finance Agency, maintains that principal reductions are too costly for the taxpayer-owned companies.

Frustrated by Demarco's stance, Democrats in Congress and some state attorneys general have called for his resignation. Representative Elijah Cummings said recently of DeMarco that "he and he alone stands in the way of hundreds of thousands of people, if not millions, being able to [literally] get a new lease on life."

Democrats have argued that the administration can't get around DeMarco and the FHFA's opposition to principal reduction. Is that really the case?

It wouldn't be easy, but the White House does have options.

The most straightforward thing the White House could do is nominate a replacement for DeMarco, who became acting director of the agency in 2009 after his predecessor stepped down. The administration had picked a successor more than a year ago, but Republican objections led to the withdrawal of its nominee. The White House hasn't named a potential replacement since. It also passed over the chance for a recess appointment this winter.

Obama has never called for DeMarco's resignation, though the administration has consistently urged DeMarco to adopt principal reduction. The Secretary of Housing and Urban Development, Shaun Donovan, said in February "our goal is to get a good nominee and get someone in there who shares our view."

The White House can't simply fire DeMarco. Independent regulators are supposed to be immune from political pressure, and it is rare that the president would seek to remove them. There have been cases where heads of independent agencies have stepped down amid controversy -- former SEC chair Harvey Pitt did so in 2002. But even that is rare.

There's no precedent for it at the FHFA, which is a new agency, created in 2008 just before the government bailed out Fannie and Freddie. DeMarco said this week that he felt he has experienced "a substantial attempt to influence or direct an independent regulator."

By law, the president nominates the director of the FHFA for a five-year term, and can remove him only "with cause." But unlike with some other independent agencies, the statutes governing the FHFA don't define what constitutes "cause." The agency also declined our request for comment, while the White House didn't respond.

Even if the president did pressure DeMarco to step down, all he'd get would be one of his deputies as another acting director, which is no guarantee of a shift in policy.

The Obama administration may think that it couldn't get a new nominee through Congress -- after all, the previous nominee, Joseph Smith, was opposed by some Republican senators precisely because they felt he would be too close to the administration on principal reductions. In the meantime, DeMarco takes the heat on principal reductions while other shortcomings in Obama's housing policy fall out of focus.

Despite some of the heated rhetoric and criticism, DeMarco doesn't face easy choices. His mandate to protect Fannie and Freddie's bottom line -- and thus taxpayer money -- can be in tension with his agency's duty to promote the stability of the broader housing market.

While DeMarco has opposed principal reductions on the basis that they will be too costly, ProPublica and NPR recently reported that FHFA internal estimates revised their earlier position, and that in light of new government incentives, principal reductions may now actually save the companies money. This week, DeMarco told the Financial Times that principal write-downs would amount to a giveaway to banks -- what seems to be a new argument for him.


Comment Print Email












  • How to compete against Wal-Mart
  • Stockton mom turns a need into a business
  • The entrepreneur is in
  • Writing her own success story
  • Growing a small business the family way
  • The future pencils positive for this company
  • Niche marketing -- Italian style
  • Sipping success with niche marketing
  • Roasting a business out of his passion
  • Success as an independent consultant takes more than expertise
  • Avoiding the traps of employee law violations
  • Cracking the voice-over market
  • The American Dream realized, one package at a time
  • Female winemaker plunges into business
  • A new take on nurse education
  • Family sees moving business success
  • STEM thrives in pockets of education innovation
  • STEM goes solar in Stockton
  • Quick! There’s a robot in my pool
  • Retiring seniors can mean new business
  • Predawn biotech class trains next generation of science workers
  • Staying ahead of the competition the old fashioned way
  • Central Valley sees mismatch between high-tech jobs and job seekers
  • STEM starts young
  • Get ready – the future is here now
  • STEM Education: Growing the Valley's Future
  • They’re low power in wattage only, not ideas
  • Thinking success spawns Successful Thinkers
  • Small business success can mean finding the right niche
  • This franchise has real muscle behind it
  • Getting the scoop on small business success
  • Reshoring could rebuild America's manufacturing
  • Marketing that’s deliberately anchored to the past
  • Guitar artist plays his way to success
  • Paralysis no handicap for this entrepreneur
  • Boost sales with better communication
  • Making sandwiches sexy with a franchise
  • Going solar without spending a lot of money
  • They’re cute and cuddly. But are they a business?
  • Opportunity sails forth in the Delta
  • How bad etiquette on the job could kill your career
  • Growing their way out of hunger and poverty
  • Finding small business success from floor to ceiling
  • Why he’s public enemy #1 – for gophers
  • Running a home-based business successfully
  • Your boss needs a vacation – really
  • Couple makes transition from big corporations to small business
  • Carving a small business niche with a better idea
  • Calm is the goal of computer service and education franchisor
  • Developer squeezing new life into downtown with juice franchise
  • Signs of a recovering economy
  • How to keep a family business in the family
  • Ford dealership expands despite the Great Recession
  • Utility Telephone connects with customer service
  • Crowdfunding basics
  • The roar from crowdfunding is getting louder
  • California water wars’ bulldog
  • Water wars heat up in California
  • Helping businesses grow with a stronger STEM
  • How to retain your best employees
  • Small business runs success up the pole
  • Winery expands in Lodi
  • Lodi wineries tapping into growing Chinese market
  • Has the jobs picture brightened for the Valley for 2012?
  • The right education will be needed for 21st Century jobs
  • Where new jobs for San Joaquin will come from
  • Developing jobs for San Joaquin – Part 2
  • Developing jobs for San Joaquin
  • Fruits of his labor
  • Helping grow food security in the Valley of plenty
  • Doing a business turnaround despite the recession
  • Keeping customers loyal helps build her business
  • Expo exposes businesses to utility contracting ideas
  • Drink mix maker taps expertise to blend success
  • Entrepreneur finds success in a basket
  • Tips for catching resume fraud
  • There’s no checking out for this small business owner
  • Entrepreneurs take Valley sports play-by-play to the world
  • Starting a winery from scratch
  • Job hunting tips for the long-term unemployed
  • In the Central Valley, opera isn’t always the Grand Ole Opry
  • Branding ideas for small businesses
  • The ump’s not blind, but the players are
  • Finding success by tapping your brain in a new way - Part Two
  • Finding success by tapping your brain in a new way
  • Machines talking to machines is the future
  • Getting involved in the fight against AIDS
  • Franchised divorce says it’s a better way
  • Small business owner is brewing a success story
  • To beat the Great Recession, they’ve expanded
  • Taking a swing at strokes
  • Alert your taste buds – here comes Taste of San Joaquin
  • This franchise has real muscle behind it
  • Passion for his city drives him
  • Vicente Fox speaks out on U.S.-Mexico relations
  • Give your support staff recognition and reap top performance
  • Central Valley baker gets top honors for Royal Wedding pie
  • Asparagus Festival ends on high note
  • Stockton close to annual ‘tipping’ point
  • Framing small business success
  • Small business sees Affordable Care Act helping its bottom line
  • What you eat – and when – helps local restaurants
  • Coping with the aftermath of foreclosure
  • How to raise charming children
  • Central Valley grad school goes all-iPads
  • Solution to Delta water wars voiced
  • Making sure your personal bottom line is covered
  • Small California winemaker is all family
  • Small winery relies on family and innovation to compete
  • Central Valley company says it has a better way to store solar power
  • What’s wrong -- and right -- about local TV news
  • What planning means to small business success
  • Making the leap to small business
  • Out of work at middle age? Experts offer advice
  • Small business marketing, one article at a time
  • Congress on your corner as it’s supposed to be
  • Central Valley city’s heritage rediscovered
  • Central Valley school is building students’ foundations
  • Job tips from the expert
  • Long-term jobless worker re-invents himself
  • Building a new power plant means jobs for Central Valley
  • Sacramento reaches for the stars with new science center
  • Lodi Chamber opens China’s doors to small business
  • Writing books for fun – and sometimes profit
  • Black Friday shopping? How to protect yourself from scams
  • California winemakers can find added rewards overseas
  • Wine makers tap overseas markets from Lodi
  • A new revenue stream for Central Valley small businesses
  • Food bank seeks more business support
  • Tips for finding a job in the Great Recession
  • State may solve some of its prison woes with new Stockton facility
  • A solution to underwater mortgages
  • Should public libraries be managed by private firms?
  • Central Valley moves ahead with critical water project
  • Dee Dee Myers and the increasing impact of women on small business
  • How women are growing their small businesses
  • A market with a mission
  • Retailer 'paints' solutions to cash flow challenge
  • An answer for the unemployed – return to school
  • A ‘golden’ small business success story
  • Central Valley winegrapes blessed
  • Rubbing out the recession with a franchise
  • Surviving the recession as a small business
  • It’s personal, union says of Stockton fire cuts
  • How old it too old to start a new business?
  • They've found the recipe for small business success
  • MBA students help revive Central Valley farmers market
  • Classic wooden yachts anchor in Stockton for weekend
  • Foreclosures, short sales – a bank president comments
  • The strength of family helps this small business compete
  • Festival spears success in Central Valley
  • Social media helps keep family business prospering
  • Central Valley students get training in ‘green’ futures
  • Knives readied as Valley cities slash services
  • Central Valley jobless picture still grim
  • Delta residents told to ready for water war
  • Opportunities outlined for Central Valley small businesses
  • Rewiring your brain for success
  • Central Valley no longer ‘shell shocked’ by recession
  • To fix California’s government, look to London
  • Taking your sales pitch to the next level