When Ed DeMarco rejected participation for Fannie Mae and Freddie Mac in the HAMP principal reduction program, condemnation on the left was fast and furious. My inbox swelled with calls for DeMarco to step aside. Some were more blunt. “Fire Ed DeMarco,” Paul Krugman wailed.

The statute is a bit unclear on this point, because FHFA is a relatively new agency, particularly as a conservator for Fannie and Freddie, and because DeMarco is an acting director. The standard for firing mainly talks about how to fire a Director. And as the head of an independent agency, he or she could only be fired for cause. But because DeMarco is an acting director, there are ways around this. Georgetown Law Professor Adam Levitin explains:

The FHFA statute provides that the FHFA Director is only removable “for cause”. 12 U.S. Code sec. 4512. That sort of provision usually means that the President can only remove the officer for malfeasance or misconduct, not just a policy disagreement. (See In re Humphrey’s Executor.).

DeMarco, however, is an Acting Director…This means he can be removed at any time simply by the Presidential appointment of a Director. That would require Senate confirmation (not happening before 2013 under political realities and the ridiculous Strom Thurmond rule) or a recess appointment (possible). Given the way Obama has interpreted the recess appointment power for the CFPB Director and NLRB appointments earlier this year, the ability to do a recess appointment means he can replace DeMarco pretty much whenever he wants.

The other part of this is that even if you could fire DeMarco – some interpret the statute differently – you would under law have to replace him with one of his deputies, all of whom share his worldview and wouldn’t change the policy. Only a recess appointment can shift this.

The important part is actually what Dylan Matthews notes in passing AFTER this, that Levitin said “replacing him means Obama can’t blame DeMarco for the state of the housing sector.” This is quite right, and you can see it something I tweeted yesterday. James Lockhart left FHFA, making Ed DeMarco acting director, in August of 2009, three years ago. In the total time he has been acting director, there has been a Presidential nominee for the position for roughly two months. The Administration didn’t get around to nominating Joseph Smith – the banking commissioner of North Carolina and currently the enforcement monitor for the foreclosure fraud settlement – until November 2010, during the lame duck session. Smith was denied an up or down vote in the lame duck and he withdrew his name from consideration in January 2011. And that’s been it. There has never been a replacement nominee for FHFA Director since.

The President and the Treasury Department claim that principal reduction and refinancing are priorities (now, after three years of doing nothing toward that purpose; the HAMP principal reduction program did nothing until the incentives got tweaked this year). They claim that they strongly object to DeMarco’s position. They have rallied a large section of the housing advocacy community around to focusing attention on DeMarco, a virtual unknown just a few months ago. DeMarco, in fact, is very useful to the Administration right now. He’s an excellent foil, a means to distract attention away from the terrible housing policies of the past few years. Suddenly it’s Ed DeMarco’s fault that housing hasn’t improved. It’s Ed DeMarco’s fault that you can buy a house for the price of a Lexus in 10 cities in America. DeMarco as cartoon villain puts the guys who have been running housing policy for the last three-plus years in the white hats.

That’s been sold brilliantly, and a recess appointment would mean that Obama would have to take ownership of the policy. There’s a chance that could actually fail. And so, for three years, there’s been a named nominee for two months. This is working out nicely for the Administration.

This is not to say that DeMarco is somehow right. I think Jared Bernstein’s analysis of DeMarco’s flawed analysis is spot-on. And DeMarco re-imagining himself as the executor of all taxpayer funds – by rejecting the cost savings for principal reduction by saying it just moves money from Treasury to the GSEs, as if he has any say over how tax dollars are spent at Treasury – is a breach of jurisdiction and simply a dodge to force an ideological rejection of principal reduction. Will DeMarco stop facilitating home purchases in the suburbs because suburban sprawl forces more hydrocarbon use, leading to increased taxpayer dollars for the Defense Department to secure oil supplies? The whole thing is ridiculous.

But DeMarco knows he won’t be fired. He’s become the symbol in the story, and the Administration is much more interested in symbolism when it comes to housing.