By Benjamin Goad - 04/18/13 06:45 PM EDT
Democrats, including Sen. Jon TesterJon TesterOvernight Finance: Senate rejects funding bill as shutdown looms | Labor Dept. to probe Wells Fargo | Fed to ease stress test rules for small banks Overnight Energy: Judges scrutinize Obama climate rule Funding bill rejected as shutdown nears MORE (D-Mont.), also had kind words for DeMarco.
Sen. Elizabeth WarrenElizabeth WarrenOvernight Cybersecurity: FBI probes possible hack of Dems' phones | Trump's '400-pound hacker' | Pressure builds on Yahoo | Poll trolls run wild Wells Fargo board to decide on executive clawbacks Labor Department launches Wells Fargo review MORE (D-Mass.), who has been a harsh critic of financial regulators during her brief time on the panel, was not at the hearing. Warren was en route to Boston with President Obama to attend a memorial service for the victims of the Boston Marathon bombing.
In 2008, the FHFA took control of Fannie Mae and Freddie Mac in an effort to stabilize the plummeting market. DeMarco was named acting director the following year and has led efforts to stem the tide of foreclosures, in part through a set of loan modification programs.
Under pressure to end the government’s control of Fannie and Freddie, DeMarco and his team have developed a plan to wind down the conservatorship. But he said Congress must take the lead by passing legislation that could provide the framework for rules that would offer a picture of what the post-conservatorship world would look like and attract the necessary private investment capital.
“We view the way out of conservatorship is for the Congress of the United States and administration to get together on legislation that determines what the future looks like,” he testified. “Without a set of rules, people seem unwilling to dip their toe in the water."
The only significant criticism came from Sen. Jack ReedJack ReedOvernight Finance: McConnell offers 'clean' funding bill | Dems pan proposal | Flint aid, internet measure not included | More heat for Wells Fargo | New concerns on investor visas Senate Dems call for investigation into Wells Fargo's wage practices Week ahead: Negotiators near deal on defense bill MORE (D-R.I), who chided DeMarco for blocking the companies, which back roughly half of the nation's home loans, from lowering the principals of loans of underwater borrowers.
"This was a fundamental rejection of what we all thought was going to be one of the most significant improvements, not only in the housing market, but in the overall economy," Reed said.
DeMarco countered that, because Fannie and Freddie are supported by taxpayer dollars, such a move would be different than a scenario in which a private lender decided to forgive a portion of the loan.
"I concluded ... pursuing that program is inconsistent with our mandate as conservator," he said.
Meanwhile, the Obama administration is reportedly considering well-known economist Mark Zandi to replace DeMarco as the FHFA's permanent director, which would require Senate confirmation.
The matter did not come up during Thursday's hearing.
This story was updated at 1:56 p.m.