At his confirmation hearing before the Senate Committee on Banking, Housing, and Urban Affairs Thursday morning, Mark Calabria, President Trump’s nominee to take over the Federal Housing Finance Agency, said the rumors were true: He did, in fact, discuss plans to recapitalize the government-sponsored enterprises with administration officials.

This was in response to questions from ranking member Sherrod Brown, D-OH, about news reports that FHFA acting Director Joseph Otting had said Calabria was on board with the administration’s GSE plans. Calabria said he recommended a “modest capital buffer,” but also tried to minimize his role in the process and establish his independence.

“Let me be very clear,” he said. “I’m here today speaking for myself. I have not heard Director Otting’s words, but my read on what he said was that he wanted to convey a sense of urgency to FHFA staff. I believe he was referring to my long-standing advocacy for reform. This is an agency that for the last 10 years has been in a position where staff don’t even know if the agency will still be here in the future.”

This was just one of the controversies that came up in Calabria’s confirmation hearing. Most of the others surrounded the nominee’s long history of inflammatory public statements about FHFA and the GSEs it regulates.

Brown touched on one of those controversies. He asked about Calabria’s previous recommendation to eliminate the affordable housing goals from the charters of Fannie Mae and Freddie Mac. Calabria claimed that his criticism of the affordable housing goals is they encourage the GSEs to take risk without establishing accountability. The issue, he said, was the current system privatized gains while the taxpayer held the risk.

Sen. Bob Menendez, D-NJ, asked Calabria about his controversial past proposal to immediately reduce Fannie and Freddie loan limits to $200,000 from the current level of $484,350. Menendez pointed out that tens of thousands of people in New Jersey would no longer be able to get mortgages under that regime. “In 2017, 70% of all new mortgage loans in New Jersey were greater than $200,000. What percentage of those borrowers would be pushed out under those limits?” he asked.

Calabria demurred, claiming that, as FHFA director, he would have no power to change loan limits. “That would appropriately be in the purview of Congress,” he said.

Menendez said he had a different understanding of what his authority would be as director, and Calabria seemed to equivocate, saying he believed, as director, reducing loan limits would be inconsistent with his duties as conservator.

Sen. Jon Tester, D-MT, asked Calabria about earlier comments in which he blamed the financial crisis on the Federal Reserve. The nominee acknowledged that blog posts were an ineffective means of communication.

On a more technical matter, Tester asked Calabria about his previous opposition to the government guarantee for the 30-year fixed-rate mortgage. After briefly attempting to explain his position, Calabria got to the point: “Senator, I’ll absolutely guarantee you that, at the end of my five-year term as director, the 30-year mortgage will still be widely available.”

Pressed further on the issue, he added, “We’ll continue to have a government guarantee of the 30-year mortgage.”

– dhollier@imfpubs.com