Ed DeMarco’s FHFA seat is safe for now

Procedural vote to quickly nominate Rep. Mel Watt fails in Senate

A procedural vote designed to get Rep. Mel Watt, D-N.C., thrust quickly into the head job at the Federal Housing Finance Agency failed on the Senate floor this morning.

The failed cloture vote initiated by Democratic leaders in the Senate suggests that while Watt’s nomination is not dead, it has been significantly derailed.

If Democrats had obtained the 60-vote threshold in the procedural vote this morning, Watt most likely would have obtained full Senate confirmation within a week, Compass Point Research & Trading said. Achieving that threshold would have meant the Congressman could have obtained the FHFA spot with a simple 51 votes – a simple barrier with Democrats and like-minded Indepedents already set to give him 55 votes, analysts with Compass Point explained.

However, that was not the case. Senate Majority Leader Harry Reid, D-N.V., pushed for cloture to prevent a filibuster and procedural delays. With that vote failing this morning, Watt’s fight for the FHFA leadership post is now much more difficult. Reid's procedural vote failed by four votes, with a final 56-to-42 vote count.

"We do not believe that Senate Majority Leader Reid’s (D-NC) most recent nomination push will end if Rep. Watt’s nomination does not clear the 60-vote threshold today, but it will surely be a body blow to the effort," Compass Point said. "One way or the other, following today’s vote attention is going to quickly turn to Janet Yellen’s nomination to head the Federal Reserve as the Senate Banking Committee is expected to hold its hearing on the nomination as early as November 14."

As for what happens to the Watt vote, it’s likely to go idle for a while since it may be difficult for the administration to make a big public push for Watt ahead of his Feb. 28 filing deadline for his congressional reelection campaign, Compass Point said.

Watt went into the hearing with opposition against him.

While Watt had the backing of the Mortgage Bankers Association, conservative groups like Club for Growth released statements advising Senators to vote against cloture on the Watt nomination.

 "Congressman Mel Watt is not at issue – the policies he will pursue as head of FHFA are," said Club for Growth President Chris Chocola. "Mel Watt will almost certainly pursue a write-down of mortgage debt, which is a massive taxpayer-subsidized bailout that would create a massive moral hazard."

"Make no mistake – a vote for cloture on Mel Watt is simply a vote for a massive taxpayer-funded bailout, and the Club for Growth will treat it as such on our Congressional scorecard," added Chocola.

If Watt had obtained 60 votes this morning, his nomination would have been smooth sailing, and it’s likely he would have had the post as early as next week.

If cloture had been secured, he could have easily obtained the seat with 51 votes.

Today’s vote throws off that momentum.

Analysts with Barclays Securitized Products Research see a few possibilities from this point forward. Sen. Reid can either bring the confirmation up for another vote if Republican support surfaces, or the White House can nominate someone else such as Mark Zandi, chief economist for Moody’s Analytics, whose name has been flown around for some time now.

Other options include a White House recess appointment to make Watt director at the end of the Congressional session in December, or a decision from the administration to elevate one of Ed DeMarco’s current deputies to the position, Barclays noted.

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