DAVID GREENE, HOST:
That Defense Authorization Bill and also a bipartisan budget deal were not the only things Congress has been busy working on. You might remember the Democrats recently changed the rules on filibusters. Now the Senate can confirm presidential nominees with a simple majority, and this week they did that. Congressman Mel Watt is now confirmed to head the agency that controls Fannie Mae and Freddie Mac.
For people who watch the U.S. housing market, this is a very big deal. We've brought in NPR's economics correspondent Chris Arnold to talk more about it. Hey, Chris.
CHRIS ARNOLD, BYLINE: Hey, David.
GREENE: Chris, remind us if you can. Fannie and Freddie play a huge role in a lot of Americans' lives, especially Americans who are interested in owning a home. Remind us why they're so important.
ARNOLD: Right. Ninety percent of Americans who go to get a mortgage right now or to refinance, their application, their mortgage, it all flows through Fannie Mae and Freddie Mac. They guarantee mortgages. That's a crucial part of the process. So there's like this giant river of money flowing through Fannie and Freddie out into the country. That money gets used for home loans.
So whoever controls Fannie and Freddie, that's a very big deal.
GREENE: And we should remember, during the housing crisis the federal government takes them over, which really concentrated the power they have even more.
ARNOLD: Right. I mean, at least there were two companies before and they were run by CEOs. Now the CEOs are there but everything is controlled - and I think a lot of people don't realize this - by a single federal bureaucrat who sits in some little office in Washington. And the CEOs are sort of marionettes, you know, if you will, where any major decision they make has to be approved by this federal bureaucrat.
GREENE: All right. This federal bureaucrat is now going to be Congressman Mel Watt taking that job, heading something called the Federal Housing Finance Agency. What is that?
ARNOLD: Right. And don't worry if you don't know what that is but it's a very important agency because, well, like we said, it oversees all of this money moving through the economy.
GREENE: And who's had that job up until this point?
ARNOLD: A man named Edward DeMarco had that job. He is a controversial guy. He was a thorn in the side of the Obama administration. They wanted to use Fannie and Freddie post-bailout to help homeowners, basically. Said OK, look. Let's cut interest rates for people. That'll help them. They'll have more money to spend. That'll help the economy.
DeMarco said no. Republicans liked that because DeMarco wanted to save taxpayers money. He wanted to, you know, get all this - there was $200 billion that Fannie and Freddie had borrowed from the federal government. He wanted to get that paid back as a first priority. And he's actually done that. That money has been paid back.
GREENE: OK. So Republicans, you say, like DeMarco. He's getting the federal government a lot of their money back. Well, now that the Obama White House has their guy in this job, Mel Watt, how are things going to be different?
ARNOLD: Well, I talked to one person who is very close to the administration and people on the Hill. He's a deeply inside Washington policy guy in housing. He says this absolutely flips the leverage around, from favoring Republicans to favoring Democrats. And one good example of this is DeMarco was starting to wind down Fannie and Freddie and tighten credit, raise costs for homeowners.
He was putting them out of the mortgage business slowly. Mel Watt is not going to do that. There's going to be more time and less pressure on Democrats to compromise.
GREENE: All right, Chris. Thanks for coming by as always.
ARNOLD: Thanks, David.
GREENE: That's NPR economics correspondent Chris Arnold.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.