Policy Implications of FHFA Leadership Developments

Based on recent allegations of sexual harassment made against FHFA Director Mel Watt, some observers have noted the possibility of an accelerated timeline for President Trump to nominate a new FHFA Director before Mr. Watt’s terms is set to expire in January 2019. Isaac Boltansky of Compass Point writes that the allegations increase the odds that Mr. Watt either step down, or that the White House attempts to remove him “for cause.” In any event, a transitional Director may fill the gap between Mr. Watt’s departure and the time when a Presidentially-nominated, Senate-confirmed Director could lead the agency.

Under the Housing and Economic Recovery Act, such transitional leadership could be designated from one of three positions currently staffed by FHFA personnel, which is how Acting Director Ed DeMarco initially came to lead the Agency after the previous Director, James Lockhart, stepped down. Another potential option would be for President Trump to use the Vacancy Act, which allowed the Senate-confirmed Director of the OMB, Mick Mulvaney, to lead the Consumer Financial Protection Bureau as Acting Director after Director Richard Cordray stepped down.

Mr. Boltansky writes that the practical policy implications for the new Director likely mean narrowing the footprints of the Government-Sponsored Enterprises (GSE), including a reduction in multifamily lending, a broader consideration of GSE missions under their charter, and a curtailment of certain residential products offered by the GSEs.

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