Congress is in recess, actual recess with no pro forma sessions. Barack Obama can recess appoint people. Tomorrow Ed DeMarco could cease to be acting director of the FHFA (Federal Housing Finance Agency). I think that Obama should, indeed must, recess appoint Mel Watt to be FHFA director.
As acting director DeMarco has blocked all efforts to relieve homeowners who can’t pay their mortgages. His argument was that his job as Fannie/Freddie conservator was only to minimize the loss to the Treasury from the rescue. Note the past tense. This argument ceased to be operative when he vetoed a proposal to use TARP money so that relief would cost Fannie and Freddie less than nothing.
I think the easiest way to reconcile DeMarco’s behavior with the rational utility maximizing hypothesis is to assume his aim is to minimize US GDP.
As is well known the current recovery is anomalous because of declining public spending and stagnant home construction at an extremely low level. In contrast consumption, investment in equipment and software an net exports have behaved normally. It is clear that nothing will be done about public spending. An oddly widespread view is that the very sluggish recovery of housing construction shows that we must focus on the Fed, because … well I don’t get the rest. I think it is clear that the key public entities which is failing to do its job is the FHFA and Congress. While Congress is out of town, Obama can solve one of those huge problems.