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Mel Watt: “I Am Not Above the Law”

“There is something amiss at FHFA, and this committee must get to the bottom of it,” said Financial Services Committee Chairman Jeb Hensarling in his opening statements during Thursday’s hearing titled “Oversight of the Federal Housing Finance Agency’s role as conservator and regulator of the Government Sponsored Enterprises”.

In his opening statement, Hensarling spoke on reports from the Inspector General, which appear to back up claims that the GSEs have engaged in excessive spending and a failure of the FHFA to regulate that spending.

"There’s evidence that the GSE’s have attempted to evade restrictions on CEO salaries with the FHFA’s consent," said Chairman Hensarling. "There’s reason to believe that Fannie Mae avoided the FHFA lobbying regulations, and FHFA failed to properly enforce these regulations. There’s evidence that the GSE’s have attempted to evade restrictions on CEO salaries with the FHFA’s consent. There’s strong evidence supporting that Fannie Mae failed to appropriately address senior officer conflicts and FHFA’s failure to exercise adequate oversight in this area, and the list goes on and on."

"There’s strong evidence supporting that Fannie Mae failed to appropriately address senior officer conflicts and FHFA’s failure to exercise adequate oversight in this area, and the list goes on and on," Hensarling added. "It is somewhere between folly, and peril, and legislative malpractice to continue to entrust almost all of housing finance to two GSE’s and one unelected, unaccountable individual with omnipotent powers. A position that the fifth circuit has found unconstitutional."

Though the primary purpose of Thursday’s hearing was to discuss the ongoing conservatorship of Fannie Mae and Freddie Mac by the Federal Housing Finance Agency (FHFA), it began with the testimony of Simone Grimes, Special Advisor at the FHFA in the Division of Conservatorship and head of the Agency’s Program Management Office, who testified on her allegations of sexual misconduct and harassment against Melvin Watt, Director of the FHFA.

Among Grimes’ claims were claims of unequal pay. Grimes had recorded some of her interaction with Watt.

“Director Watt more than once implied that his advances were linked to my ability to receive promotions and pay increases,” said Grimes. “When I attempted to pursue other career advancement opportunities outside of his direct chain within the agency, they were blocked through the use of office of the Inspector General Hotline Complaint Process, which I believe were initiated at the direction of Director Watt.”

Additionally, Watt defended himself against the accusations against, him. In his questioning, Hensarling noted the FHFA Anti-harassment Policy, signed by Watt, which Watt claims do not apply to him.

"I am not above the law." said Watt, in response to Hensarling. Hensarling responded  saying "Director Watt, it sounds like you are."

Watt claims that, as has been reported, he has not engaged in any inappropriate physical contact with Grimes.

"I am confident that the resolution will confirm, as I have previously stated, that I did not take any actions or engage in any conduct involving Ms. Grimes that was contrary to law," said Watt.

Additional testimony was brought by Laura Wertheimer, Inspector General, FHFA. Wertheimer spoke on the FHFA’s dual role as conservator and regulator of the FHFA as well as the role as regulator of the Federal Home Loan Banks.

“Effective oversight makes government better and fosters positive change,” said Wertheimer in her statement. “Healthy skepticism through independent reviews of programs and operations, both by the inspector general and by Congress, acts as the 'disinfectant of sunlight' and is critical to positive and constructive change and to identifying problems, abuses, and deficiencies.”

Speaking on behalf of Freddie Mac, Freddie Mac CEO Donald H. Layton's written testimony covered the improvements made to the GSE in the years following conservatorship. According to Layton, Freddie Mac and the mortgage system as a whole have made significant improvements in the years since the crisis.

"The mortgage system we have today is fundamentally better than the one we had ten years ago, plain and simple," said Layton. "It is more safe and ­sound, more efficient and does a far better job of protecting taxpayers. Freddie Mac is similarly much better, with a substantially improved business model. We are absolutely not the government ­sponsored enterprise (GSE) of the past."

Fannie Mae CEO Timothy J. Mayopoulos made similar claims, stating that since entering conservatorship, Fannie Mae's leadership has stabilized the company, become more profitable, and built the "strongest book in the company's history."

"In short, in these past 10 years we have made our conservatorship, in spite of its origins, a clear success for taxpayers, homeowners, and renters," said Mayopoulos.

Mayopoulos also addressed concerns about the use of taxpayer money to fund Fannie Mae during the crisis.

"It is true that Fannie Mae received more taxpayer support than any other company during the financial crisis," he said. "Yet it has also returned more profits to taxpayers than any other company, measured on both an absolute basis and net of the support we received"

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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