One issue that came to light, last week, during the House consideration of legislation to create a new regulator for the housing GSEs, was the judgment of Fannie Mae’s and Freddie Mac’s current regulator, the Office of Financial Housing Enterprise Oversight’s, James Lockhart.
That’s important, because Lockhart—either with tacit White House agreement or possibly congressional support—has acted like the new job will be his, if President Bush ever gets to sign GSE regulatory restructuring legislation.
The OFHEO Director’s arrogant and aggrandizing regulatory behavior is well known to the two companies. But, it largely flew under the Capital’s media and political radar, until the House took up the GSE legislation and evidence of Lockhart’s unsuitability surfaced.
Lockhart’s truculence, repeatedly telling the world how he really feels about the GSEs’ business operations and portfolio and what his regulatory ambitions would be, if given the tools, led a House bipartisan to loudly approve (it was a voice vote) the Bean-Negebauer amendment, which altered the Financial Service’s Committee’s bill and narrowed the new regulator’s oversight scope.
(The House plans votes on final passage, possibly today. If that happens, some Member may seek a recorded vote on the B-N amendment.)
Lockhart’s act was the equivalent of spilling his meal all over himself and his agency. From the Bush Administration’s perspective, Lockhart’s behavior weakened the House legislative product.
Why would the Congress want this person to be in charge of the bright, shiny, “independent” GSE regulatory agency, which must oversee Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank System?
It’s the President’s right to appoint whomever he wants to the job, especially if he is a “friend of W’s,” as recent history has shown. But the Senate has to approve the candidate. In getting it right this time, the Congress should want to have the best and most qualified person leading the new agency.
His public persona suggests that “Two Gun Lockhart” is not the “most qualified person.”
Assuming House passage and the Senate Banking Committee planning additional hearings on GSE legislation, the Senators should consider language that would prohibit the current OFHEO Director from heading the new regulatory agency.
There is ample reason to want some fresh faces in a new oversight regime. The case against Lockhart and his bias already has been made. Moreover, several current OFHEO officials are individuals, who were on the Hill or in the Reagan Administration and worked on the “losing side” in the original 1992 legislative conference.
Following those professional setbacks, some of these individuals managed to get jobs at OFHEO and have tried mightily, but clumsily, to wreak their own form of GSE sabotage.
Those early hires contributed, mightily, to OFHEO’s 10 years of oversight failures, which missed early problems at both Fannie Mae and Freddie Mac. That’s hardly the basis for promotion. These “regulatory children” should be left behind.
Message to Congress: Building a “de novo regulatory structure,” rather than fixing the old one, is sometimes necessary and desirable. But, if “termites” from the old house come along to the new address, the results will be the same.