On May 13, 2014 Director Watt, during his first speech as FHFA Director, at the Bookings Institution said, “Well, clearly we have the authority to end the conservatorship; it’s in the statute. The statute gave us the authority to start it and it goes with that the authority to end it.”
However, three days later when questioned by Clea Benson during a C-SPAN interview, Director Watt backed away from the previous statement. Even when Ms. Benson asked Mr. Watt about the previous Bookings statement just three days earlier, Mr. Watt said in effect that any changes to the conservatorship will need to come from Congress.
When Ms. Benson asked Mr. Watt about the Sweep agreement and shareholder rights, Mr. Watt said, “I don’t lay awake at night worrying about what’s fair to the shareholders.” Mr. Watt stated that he only serves taxpayers.
During his testimony at the Senate Banking Committee on November 19, 2014 Mr. Watt stated that “conservatorship cannot, should not be a permanent state,” and “it is the role of Congress to define what a future state is.”
However, when reacting to Senator Johnson’s statement to Director Watt that FHFA should engage with the US Treasury to end the conservatorships, Mr. Watt told reporters after the meeting that the US Treasury would need to initiate those discussions.
Director Watt has the unique opportunity today to make a clear statement on his position on ending conservatorship. As an independent agency not subject to the control of any other agency or person, it is Mr. Watt’s responsibility to improve the financial stability and viability of Fannie Mae and Freddie Mac.
If he feels an allegiance to President Obama because the President nominated and supported Mr. Watt despite widespread opposition to Mr. Watt supposedly due to his lack of experience, that needs to be set aside. President Obama requested that Harry Reid use the so-called Nuclear Option to get Director Watt confirmed.
The President has been outspoken about winding down Fannie and Freddie. Mr. Watt has to put past allegiances aside and do what is right for these two private companies. Director Watt can feel a personal loyalty to President Obama, but that loyalty cannot cloud Mr. Watt’s professional decisions to act in the best interest of Fannie Mae and Freddie Mac…for-profit, publicly owned companies.
Mr. Watt has a unique opportunity to speak clearly and directly today. No wishy-washy “that’s not my job”…”it’s in the statue”…”I am responsible to the taxpayers…”
The Sweep Agreement was the worst thing to happen to Fannie and Freddie. How can there be any debate over that fact? As Conservator, Mr. Watt should be doing everything within his powers to reverse the misguided and illegal actions of his predecessor.
Director Watt, as Conservator you are responsible for “restoring financial safety and soundness” to Fannie Mae and Freddie Mac. It is not up to President, it is not up to the US Treasury and it is not up to Congress.
It’s up to you, Mr. Watt.