Pro Publica continued its jihad against Ed DeMarco yesterday with yet another piece blaming him for the sins of the Administration’s housing policy. This is just an overview piece that muses about how to best get rid of DeMarco. Actually, it’s a bit off-message, because they’re just supposed to say that the White House has no choice and this one dude is holding up an economic recovery single-handedly.
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 nominee’s withdrawal. The White House hasn’t named a potential replacement since. It also passed on the chance for a recess appointment over the winter [...]
By law, the president nominates the FHFA director for a five-year term, and can remove him only “with cause.” But unlike those of some independent agencies, the statutes governing the FHFA don’t define “cause.” The agency declined our request for comment, while the White House didn’t respond.
Even if the president got DeMarco to step down, the administration would only wind up with one of DeMarco’s deputies as another acting director, which wouldn’t guarantee a shift in policy.
This is internally inconsistent. The White House would not end up with one of DeMarco’s deputies as acting director if they made a recess appointment. And if it were the case that DeMarco is the single-handed block to an economic Valhalla, you would go ahead and do that, no?
Considering that David Stevens left as head of FHFA in 2009 and the White House has had a nominee in place for about three months out of the next three years, I think we can be confident that it’s not a high priority for them. But sure, let’s get on Ed DeMarco for holding back that recovery!
Pro Publica does dial back the criticism of DeMarco long enough to mention that “other shortcomings in Obama’s housing policy fall out of focus” with the attention on FHFA. They also obliquely reference the second lien issue. OCC put out guidance in January 2012 about how banks should “adequately assess the probable loss incurred within junior lien portfolios.” That’s regulator-speak for write-offs. Banks mostly have their second liens at par on their books, against regulatory guidance. OCC could go even further. And it would significantly benefit a section of the market. But I’m not seeing the take-outs on “John Walsh (acting director of OCC), the one man holding back housing policy.”
But the biggest sin in this article is that Pro Publica continues to stand behind their reporting that there are new internal estimates from Fannie and Freddie that show principal reduction in a positive light. They very subtly shift this to say that “in light of new government incentives, principal reductions may now actually save the companies money,” without attaching a new analysis to it. Because it’s becoming clear that such an analysis doesn’t yet exist.
Incidentally, it’s not like there’s no way that you can go after Ed DeMarco. This new IG report shows that FHFA is not doing its job in oversight and enforcement of Fannie and Freddie (except for principal reduction, I guess). FHFA has a pretty daunting task, as both a conservator and a regulator, and they haven’t performed admirably in all cases. But there’s no need to turn Ed DeMarco into a super-villain in the process.