Housing Watchdog Says It Explained Its Powers, Then Lost Most Of Its Funding

The Federal Housing Finance Agency’s inspector general says the agency refused records needed for at least three evaluations and interfered with its independence. FHFA denies that account, citing 56 completed document requests and 16 hour-long meetings for three recent reviews. Separately, drastic funding cuts threaten the watchdog’s ability to operate.

So we have a dispute over whether oversight received what it needed, accompanied by a plan under which oversight would have substantially fewer people available to keep asking.

The watchdog’s account contains a particularly spectacular sequence. Its lawyer presented documentation of its congressionally mandated responsibilities, including access to records. In mid-August, the office believed it had reached an understanding with the agency about its role. Two weeks later, according to the report, FHFA notified it of drastic funding reductions.

That chronology is not proof of a retaliatory motive. FHFA says the watchdog’s budget and staffing are outsized compared with other regulators. It does, however, make “we reached an understanding” a sentence that should come with protective headgear.

I’m imagining the conversation. Here is the law explaining our authority. Thank you, we understand your authority. Excellent, shall we proceed? Certainly. First, a discussion about how many of you will be present to exercise it.

The watchdog says it is entitled to all records. The agency points to the requests it fulfilled and the meetings its staff attended. Those figures deserve to be heard; they are its substantive rebuttal, not evidence that nobody ever cooperated. But the competing accounts also expose why oversight cannot be measured entirely by the number of occasions on which everybody sat down.

Sixteen hours is a lot of meeting. It is not necessarily the answer to a particular unanswered request. If I ask where the fire exit is, telling me how long we have discussed building safety does not improve my route out.

The office is examining FHFA’s oversight of major housing lenders, including Fannie Mae and Freddie Mac. These are not small decorative institutions. They underpin the mortgage market. The people checking the regulator’s work should not have to begin each inspection by demonstrating that the concept of inspection has been authorized.

An inspector arriving with a clipboard is normal. An inspector arriving with congressional documentation explaining why the clipboard may be opened suggests the building has developed strong views about clipboards.

FHFA pulled most of the watchdog’s funding, and employees have been told that cuts could reach 80 percent of staff, roughly 80 people. Those are threatened reductions, not a claim that all those jobs have already disappeared. Employees have received furlough notices and warnings to prepare; the watchdog’s leaders have been seeking help from Congress.

Acting inspector-general head James Hodge says the office would no longer be able to do its job after the cuts. FHFA defends the reductions as a correction to an oversized operation and says it respects the office’s independence.

There it is: independence, preserved in principle while the practical question is how many people will remain to use it.

I can picture the resulting org chart. A large, beautifully outlined box labeled Independent Oversight. Inside, space. So much independence. Nobody standing too close to anybody else. The remaining employee can put a chair in each corner and hold a robust internal debate by moving between them.

The actual concern is quite concrete: a watchdog that says it is being denied records also says the funding cut will prevent meaningful oversight. The agency disputes the first complaint and defends the second action. Congress has received the report.

Perhaps the next discussion should begin with a practical demonstration. Put the oversight mandate on one side of the table and enough funded staff to carry it out on the other.

If one side is missing, do not announce that the watchdog remains independent.

You have preserved the fucking doghouse.