Mel Watt, the director of the Federal Housing Finance Agency, is under investigation amid allegations of sexual harassment. | Chip Somodevilla/Getty Images Watt allegations leave Democrats speechless

The revelation that Mel Watt, a powerful financial regulator, has been accused of sexual harassment by an employee left Capitol Hill Democrats scrambling for a response, a stark contrast to their reaction to other cases of alleged misdeeds.

“There’s a lot of people talking in the committee about what’s our role in all of this,” said Sen. Heidi Heitkamp (D-N.D.), a Banking Committee member.


Heitkamp — like every other lawmaker queried — would not comment on the matter directly, saying she needed more information on the allegations.

Even those Democrats who have been vocal supporters of the #MeToo movement and pounced on misbehavior by Trump administration officials ignored requests for comment on the claims against Watt, the last remaining Obama-appointed regulator in this administration.

POLITICO contacted the offices of two-dozen lawmakers, 19 of them Democrats, on Monday. Few responded, and those who did said they wouldn’t comment.

The White House also did not immediately comment on Watt.

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Watt, the director of the Federal Housing Finance Agency, is under investigation for alleged sexual harassment of an employee, who accused him of repeatedly making sexual advances during conversations ostensibly about compensation concerns. The employee also claims Watt withheld a promotion after she reported the harassment, according to documents obtained by POLITICO.

Senate Banking Chairman Mike Crapo (R-Idaho) and the panel’s top Democrat, Sen. Sherrod Brown (D-Ohio), both declined to comment, even though the FHFA falls under their committee’s jurisdiction.

Investors, at least initially, appeared to believe the news spelled doom for Watt, whose agency oversees the $5.4 trillion portfolio of mortgage giants Fannie Mae and Freddie Mac. Preferred shares of Fannie and Freddie spiked immediately after the report was published on Friday afternoon.

Hedge funds have been in protracted litigation with the federal government over the status of the preferred shares and the future of Fannie and Freddie, the mortgage guarantors at the center of the U.S. housing market. It’s widely believed that whoever the Trump administration nominates to replace Watt — whose five-year term ends Jan. 6 — will move to rein in the companies and put them on a path out of government control.

Watt on Friday said the investigation had been leaked “to lead to an unfounded or political conclusion.”

“I am confident that the investigation currently in progress will confirm that I have not done anything contrary to law. I will have no further comment while the investigation is in progress,” Watt said in an email.

The investigation has been open for at least a month, according to the documents, which included partial transcripts of three recorded conversations in 2016. In one encounter, Watt suggested kissing the employee’s ankle tattoo; when he was rebuffed, he changed the conversation to “resolv[ing] the pay situation you’ve been bringing up,” according to a transcript obtained by POLITICO.

An early Watt departure would likely speed up the nominating process of his successor and bring renewed attention to housing finance reform.

Under the statute establishing FHFA, the president can appoint one of three deputy directors in the event the director resigns. President Donald Trump would be able to choose from Nina Nichols, deputy director of the Division of Enterprise Regulation; Andre Galeano, deputy director of the Division of Federal Home Loan Bank Regulation; and Sandra Thompson, deputy director for housing mission and goals.

The White House could also conceivably slot a Senate-confirmed official into the position under the Federal Vacancies Reform Act, as it did with Mick Mulvaney when former Consumer Financial Protection Bureau Director Richard Cordray stepped down.

Former President Barack Obama appointed Watt, who had spent two decades as a Democratic congressman from North Carolina, to lead the independent agency in 2014. The FHFA oversees Fannie and Freddie, which buy mortgages, wrap them into securities stamped with a government-backed guarantee and sell them to investors.

The companies have been under government conservatorship since 2008, when Treasury seized control of the companies to prevent their collapse during the housing crisis. Investors in preferred shares sued after the Obama administration in 2012 changed the terms of the bailout to sweep net profits from the companies to Treasury each quarter.

Zachary Warmbrodt contributed to this report

CORRECTION: Andre Galeano’s name was misspelled in an earlier version of this article.