The president picked North Carolina Rep. Mel Watt on Wednesday to lead the agency, praising his understanding of the housing crisis which crippled the economy several years ago. If approved by the Senate, Watt would replace Edward DeMarco, the acting director of the FHFA. But getting the Senate to agree that Watt's the man for the job may be tough.
While lawmakers are raising early concerns about Watt's willingness to get tough on questionable lending practices, he also comes with a history of controversial remarks.
During an Oct. 14, 2005 hearing held by the National Commission on the Voting Rights Act, Watt reportedly said that a "substantial majority of white voters" would not vote for a black candidate under any circumstances.
Multiple attempts by FoxNews.com to obtain a transcript of the hearing from the National Commission on the Voting Rights Act were not successful. But a report at the time by CNSNews.com quoted Watt saying the Voting Rights Act should be expanded and have districts changed to factor in race-based voting and help minority candidates.
He acknowledged "some" white people would support a black candidate, but said voters who refuse should be "factored out."
"I've got no use for them in the democratic process," he reportedly said.
Watt also claimed that black voters -- unlike white voters -- don't have "an absolute commitment" to voting for a candidate based on race.
Three years later, Barack Obama would become the first black president, capturing 43 percent of the vote among white voters. That does not constitute a majority, but by comparison, 4 percent of black voters supported Sen. John McCain.
Calls to the Congressional Black Caucus, which Watt used to lead, and Watt's office were not returned.
In 2004, Green Party candidate Ralph Nader also accused Watt of "using an obscene racial epitaph" against him during a meeting with the Congressional Black Caucus. According to an account at the time in The Hill, Nader said Watt called him, "just another arrogant white man, telling us what we can do. It's all about your ego, another (expletive) arrogant white man."
The comments allegedly came during a tense meeting Nader had with the Caucus on his run for the White House. At the meeting, group leaders allegedly told Nader his bid would defeat the common goal of beating then-President George W. Bush. Nader claims Watt made racist comments toward him and demanded an apology in a two-and-a-half page letter he wrote to the Caucus and released to the media. He did not get one.
The comments from Watt's past are only part of the problem, some lawmakers say.
Conservatives question Watt's record on housing finance and say he's too close to the Obama administration and the banking industry to make the critical calls needed to lead the agency.
If approved, as director of the FHFA Watt would be in charge of overseeing Fannie Mae and Freddie Mac, which own or guarantee about half of all U.S. mortgages. Because there is $5 trillion at stake, Watt's decisions would carry more weight over the housing sector and in turn the broader U.S. economy than those who previously held the position.
In the five years since the housing giants were bailed out with $187 billion in taxpayer money, they have managed to show signs of recovery. Freddie was hit with $94 billion in losses from 2007 to 2011 but earned back $11 billion last year. Even though Fannie and Freddie are on the mend, industry experts caution against putting a politician in place to oversee their fiscal health.
In the past, Watt has pushed for better access to mortgages for minority and low-income borrowers, but some say his inclusive record is exactly what should exclude him from consideration.
"I could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the hen house," Republican Tennessee Sen. Bob Corker said in a statement Wednesday. "The debate around his nomination will illuminate for all Americans why Fannie and Freddie failed so miserably."
Corker's comments echo the calls that other conservative lawmakers have made about the administration's rush to fill the top spot at the FHFA. Mark Calabria, a director of financial regulation studies at the Cato Institute and a former staffer on the Senate Banking Committee during the creation of the FHFA, said there was a bipartisan push to make sure a politician would not lead the government agency and that the post was created with a banking regulator in mind.
"We went out of our way to make sure this wasn't the outcome," Calabria told FoxNews.com Thursday.
Calabria believes the ideal candidate should have strong banking credentials and be able to stand up to political pressure which could result in bad lending practices and distort free-market dynamics.
Obama strongly endorsed Watt for the job Wednesday, saying he's helped protect consumers from the "reckless risk-taking" that triggered the financial crisis while also giving more Americans in low-income areas "access to affordable housing."
"Mel understands as well as anybody what caused the housing crisis. He knows what it's going to take to help responsible homeowners fully recover," Obama said.
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