U.S. GOVERNMENT PUBLISHING OFFICE

32–371 PDF WASHINGTON : 2018

OVERSIGHT OF THE FEDERAL HOUSING 

FINANCE AGENCY’S ROLE AS 

CONSERVATOR AND REGULATOR OF THE 

GOVERNMENT SPONSORED ENTERPRISES 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 27, 2018 

Printed for the use of the Committee on Financial Services 

Serial No. 115–120 

( 

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HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MACARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

SHANNON MCGAHN, Staff Director 

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C O N T E N T S 

Page 

Hearing held on: 

September 27, 2018 .......................................................................................... 1 

Appendix: 

September 27, 2018 .......................................................................................... 95 

WITNESSES 

THURSDAY, SEPTEMBER 27, 2018 

Grimes, Simone ........................................................................................................ 6 

Layton, Donald, Chief Executive Officer, Federal Home Loan Mortgage 

Corporation ........................................................................................................... 54 

Mayopoulos, Timothy, Chief Executive Officer, Federal National Mortgage 

Corporation ........................................................................................................... 56 

Watt, Hon. Melvin, Director, Federal Housing Finance Agency .......................... 57 

Wertheimer, Hon. Laura, Inspector General, Federal Housing Finance 

Agency ................................................................................................................... 28 

APPENDIX 

Prepared statements: 

Grimes, Simone ................................................................................................. 96 

Layton, Donald ................................................................................................. 101 

Mayopoulos, Timothy ....................................................................................... 119 

Watt, Hon. Melvin ............................................................................................ 138 

Wertheimer, Hon. Laura .................................................................................. 154 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Duffy, Hon. Sean: 

Letter from the Manufactured Housing Association for Regulatory 

Reform ............................................................................................................ 181 

Layton, Donald: 

Responses to questions for the record from Representative Luetkemeyer .. 183 

Mayopoulos, Timothy: 

Responses to questions for the record from Representative Luetkemeyer .. 186 

Watt, Hon. Melvin: 

Responses to questions for the record from Representatives Huizenga, 

Luetkemeyer, and Meeks ............................................................................. 188 

Wertheimer, Hon. Laura: 

Responses to questions for the record from Representative Sinema ............ 194 

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OVERSIGHT OF THE FEDERAL HOUSING 

FINANCE AGENCY’S ROLE AS 

CONSERVATOR AND REGULATOR OF THE 

GOVERNMENT SPONSORED ENTERPRISES 

Thursday, September 27, 2018 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The Committee met, pursuant to notice, at 10:34 a.m., in room 

2128, Rayburn House Office Building, Hon. Jeb Hensarling [chairman of the committee] presiding. 

Present: Representatives Hensarling, Royce, Lucas, Posey, 

Luetkemeyer, Huizenga, Duffy, Hultgren, Ross, Pittenger, Wagner, 

Rothfus, Tipton, Williams, Poliquin, Hill, Emmer, Zeldin, Trott, 

Loudermilk, Mooney, Davidson, Budd, Kustoff, Tenney, Hollingsworth, Waters, Maloney, Velazquez, Sherman, Meeks, Clay, Green, 

Cleaver, Perlmutter, Foster, Kildee, Delaney, Sinema, Beatty, 

Heck, Vargas, Gottheimer, Crist, and Kihuen. 

Chairman HENSARLING. The Committee will come to order, without objection. 

The Chair is authorized to declare a recess of the Committee at 

any time, and all members will have 5 legislative days within 

which to submit extraneous materials to the Chair for inclusion in 

the record. 

This hearing is entitled, ‘‘Oversight of the Federal Housing Finance Agency’s Role as Conservator and Regulator of the Government Sponsored Enterprises.’’ I now recognize myself for 3–1/2 

minutes to give an opening statement, although I warn others, I 

may go over. 

Ten years ago, at the time of the financial crisis, Fannie and 

Freddie were thinly capitalized. They bought loans for as little as 

3 percent down. They issued mortgage-backed securities encompassing roughly half of all first lien mortgages, and they were embroiled in multiple scandals. 

Fast forward to today. The GSEs remain thinly capitalized. They 

still securitize half of new mortgages. They are buying, once again, 

high-risk, 3 percent down loans, and surprise, they are once again 

embroiled in scandal. 

Recent headlines from a newspaper, ‘‘Housing Finance System 

Roiled by Maze of Investigations.’’ Let me read the first two paragraphs. ‘‘The U.S. Housing Finance Administration has been 

rocked by a series of investigations that have raised fresh doubts 

about the Federal Government’s management of the vast system 

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that supports most of the Nation’s mortgages. The country’s top 

housing regulator is under investigation for alleged sexual harassment.’’ 

‘‘The watchdog looking into his behavior is herself under a probe, 

partly over claims that her office is too cozy with his. And the outgoing CEO of the largest mortgage financier was faulted in a report 

for failing to disclose potential conflicts stemming from a romantic 

relationship.’’ 

These headlines are not fake news. And so what we know is after 

10 years, our housing finance is in dire need of reform, and FHFA 

is in dire need of oversight. Should anybody need a refresher 

course, the Housing and Economic Recovery Act of 2008, known as 

HERA, directs the Director of FHFA to oversee the GSEs, and to 

ensure they are operated in a safe and sound manner to ensure 

that the housing finance market is resilient and competitive; that 

they are operated in the public interest. But we have already heard 

testimony within this hearing room that gives strong evidence that 

they are not. 

So for the past 7 months, this Committee has been investigating 

FHFA’s conduct as the supervisor and regulator of the GSEs, and 

this has been strongly influenced by a series of reports by their inspector general, who we will hear from shortly. Those reports 

would give very strong evidence that Fannie Mae has engaged in 

excessive spending inconsistent with its conservator status, and 

that FHFA failed to control that spending. There is reason to believe that Fannie Mae avoided the FHFA lobbying regulations, and 

FHFA failed to properly enforce these regulations. There is evidence that the GSEs have attempted to evade restrictions on CEO 

salaries with the FHFA’s consent. There is strong evidence supporting that Fannie Mae failed to appropriately address senior officer conflicts in FHFA’s failure to exercise adequate oversight in 

this area, and the list goes on and on. 

It is somewhere between folly and peril in legislative malpractice 

to continue to entrust almost all of housing finance to two GSEs 

and one unelected, unaccountable individual with omnipotent powers, a position that the Fifth Circuit has found unconstitutional. 

Now, we have three panels today. Our third panel, we will hear 

from Director Watt, as well as the CEO of Fannie, and the CEO 

of Freddie, as well. 

Our second panel will contain the Inspector General for the Federal Housing Finance Agency, and our first panel consists of one 

witness, Miss Simone Grimes. Welcome, Ms. Grimes. 

Ms. Grimes is a Senior Staffer, and she is a special advisor at 

FHFA. She has made a serious allegation of sexual harassment 

against Director Watt. She has filed an EEOC claim and a civil 

suit under the Equal Pay Act. 

We all know that accusations are a daily occurrence in this town, 

but Ms. Grimes did not just bring an accusation; she brought evidence, as to substantiate her claim. As requested, she has submitted to an interview of the Financial Services Committee staff, 

and she brought evidence as well. She deserves to be heard and she 

needs to be heard, and she has been invited as a witness. 

Now, given what is happening at the other end of the Capitol as 

I speak, I am not sure this hearing will be heard, but it should. 

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And importantly, Director Watt deserves to be heard and he will 

be. 

There has been one investigation by the Postal Inspector General 

of Ms. Grimes’ claims, and another is currently ongoing at the office of the FHFA Inspector General, who we will hear from shortly. 

This investigation must be independent, must be impartial, must 

be fair, and must be thorough. And we expect Director Watt to cooperate. 

I believe the record will show that Director Watt did not participate or cooperate in the first investigation, asserting a legal privilege which many do not recognize. 

As Chairman of the Committee, I will not hesitate to use my full 

subpoena power to compel cooperation where necessary. I am also 

aware that our Committee is not a court of law. 

We are not best-equipped to be the finder of fact nor the dispenser of justice. That is best left to a forum with formal rules of 

evidence, due process, and the rules of civil procedure. 

So after both parties are heard, we will follow closely the FHFA 

investigation and Ms. Grimes’ civil suit as we continue to conduct 

our oversight and continue to conduct our investigation. 

But today, I expect both parties to be heard and fully heard and 

treated fairly. Federal employees must be able to work in a hostilefree environment, free of harassment, free of discrimination and no 

one is above the law. And it is the business of this Committee to 

ensure that takes place. 

Now I know that this charge does not exist in a vacuum, so I 

want to make a few comments about it. One, again, I am disturbed 

that anyone would hold themselves above the law or believe that 

standards apply to their employees that do not apply to them. 

I am also disturbed that the seriousness of a charge can somehow shift the burden of persuasion or the burden of proof to the 

accused. A presumption of innocence is foundational to our society, 

as is due process. 

I am the father of two teenagers. I want them to dream big 

dreams. I want them to live purpose-driven lives. I want them to 

achieve the happiness that comes with earned success, using their 

hard work and talents. 

It is horrific to me, to think that, one day, when my daughter enters the workforce, that she might be harassed, that she might be 

discriminated against. That somebody might force themselves upon 

her or hold out a career advancement on some type of quid pro quo. 

That is intolerable to me, and I would want her to have the courage to bring those charges forward. And I would want society to 

support her and to take her charges seriously and I would want 

justice. Too long these charges were not taken seriously in American society. 

But I am also the father of a teenage son. And when he enters 

the workforce, it is intolerable to me to think that a mere accusation of impropriety would somehow deny him the presumption of 

innocence, somehow deny him his due process. That, too, is intolerable to me. And in our society, as has been stated before, where 

do you go to get your reputation back? 

These are, indeed, troubling issues, and so whatever happened 

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bolism, it ought to be about facts, it ought to be about equality before the law, it ought to be about fairness, and ought to be about 

justice. 

I do believe there is at least one inescapable conclusion, and that 

is, there is something amiss at FHFA and this Committee has to 

get to the bottom of it. 

And I will yield 5 minutes to the Ranking Member for an opening statement. 

Ms. WATERS. Thank you very much, Mr. Chairman. We are here 

today for a hearing on ‘‘Oversight of the Federal Housing Finance 

Agency’s Role as Conservator and Regulator of the Government 

Sponsored Enterprises.’’ 

FHFA plays a critical role in our housing system, and this Committee has a responsibility to conduct rigorous oversight of the 

agency and that includes all aspects of this agency. I want to say 

up front that I have been friends with Director Watt for years. Of 

course, he was a Member of this Committee and a colleague. 

In addition to that, I have dined at his home with him and his 

wife and mother, and of course, I have visited with his son in California and presented his grandchildren with gifts. We are indeed 

friends and colleagues. 

If this were a jury in a court of law I would need to recuse myself, but this is not a jury or a trial. This is a Congressional oversight matter and no matter our friendship, no matter I have visited 

his home, that I have dined with him, that I know his grandchildren and have presented them with gifts, I have a responsibility to ensure that Simone Grimes, who has raised deeply troubling allegations against Director Watt, is heard before this Committee 

Today, Ms. Grimes will testify. While there are several ongoing 

investigations into this matter, in addition to Ms. Grimes’ litigation 

against FHFA, I do not believe, given the seriousness of this issue, 

that the existence of these investigations and pending lawsuit 

should prevent Ms. Grimes from testifying today. 

As I have stated, we must face the reality that women throughout all sectors feel that existing policies and procedures have 

worked against them and left them silenced when they have complaints about discrimination and harassment. 

Sexual harassment, discrimination are wrong and against the 

law. I and others on this Committee, including some of the women 

who have been anxious to deal with this whole issue of sexual harassment, have responded. 

We have said yes, Ms. Grimes should be able to testify here 

today. And when she requested that, we did respond. 

We have been witnessing a confirmation process in the Senate, 

in which several women have come forth with grave accusations 

against Judge Kavanaugh, who has been nominated for a seat on 

the Supreme Court. 

That hearing is in process and that hearing is a travesty. And 

questions remain about whether all of the women who have made 

allegations will be allowed to testify before the Senate Judiciary 

Committee. 

I believe that we must listen to the claims of women who come 

forth with allegations of harassment, abuse, or misconduct. With 

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this Committee, my staff, and Chairman Hensarling’s staff have 

worked together earlier this week to interview Ms. Grimes so that 

she may testify today regarding her allegations. 

Director Watt will also have the opportunity to address these 

questions, with regard to the ongoing investigations and to Ms. 

Grimes’ allegations. I would encourage both Director Watt and Ms. 

Grimes to cooperate fully. And with that, I will give back the balance of my time so that we can get on with this very, very important hearing. 

Chairman HENSARLING. The gentlelady yields back. The Chair 

now recognizes the gentlelady from Missouri, Mrs. Wagner, the 

Chairman of our Oversight and Investigations Subcommittee for 

minute and a half. 

Mrs. WAGNER. Thank you Chairman Hensarling. And I would 

like to associate myself, in its entirety with your opening statements, sir. My opening statement encompasses all three panels and 

our entire work that we have been doing on the Oversight and Investigations Committee. 

Following the 2007 housing crisis, Congress passed a series of 

laws in an attempt to protect our financial markets from unnecessary exposures and liabilities. Unfortunately, 10 years later, 

Fannie Mae and Freddie Mac retain their stranglehold on the U.S. 

housing finance market with no end in sight. 

In fact, a recent CBO report confirms that, by 2028 those liabilities will almost quadruple. Earlier this year, the Oversight and Investigations Subcommittee, which I have the privilege of chairing, 

began an investigation into that complicated relationship that exists between the Federal Housing Finance Agency, FHFA, and government-sponsored enterprises, Fannie and Freddie. 

At our April hearing, the subcommittee heard testimony from 

FHFA’s Office of Inspector General, who highlighted concerns on 

extravagant buildings, a lack of oversight on the GSE cyber security programs, and whether or not FHFA had established themselves as an effective regulator. 

Unfortunately, today you will hear more of the same. Specifically, 

you will hear how Fannie Mae’s decision to consolidate and relocate 

its Northern Virginia workforce will cost taxpayers, are you ready 

for this, $727 million. 

You will also hear how FHFA spent $7.7 million to produce additional qualified commissioned examiners. Yet, after nearly 7 years, 

FHFA, in fact, has one less qualified commissioned examiner than 

they had back in 2011 when the program started. 

Mr. Chairman, I look forward to shining a light on this waste, 

fraud, and abuse and other very serious and troubling allegations 

that we are going to hear about today. I look forward to hearing 

from Ms. Grimes and from all of our witnesses. And I yield back 

the balance of my time. 

Chairman HENSARLING. Time of the gentlelady has expired. Our 

first witness today, again, is Ms. Simone Grimes, who is a Special 

Advisor at the Federal Housing Finance Agency in the Division of 

Conservatorship and the Head of the FHFA Program Management 

Office. 

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She attended George Washington University and received an 

MBA from Cornell. Ms. Grimes previously worked at 

PricewaterhouseCoopers and Grant Thorton. 

Ms. Grimes, you will be recognized for 5 minutes to give an oral 

presentation of your testimony and without objection; your written 

statement will be made part of the record. Since, Ms. Grimes, you 

have not testified before us before, please, when you testify, pull 

the microphone close to you so all can hear and ensure that you 

press the button as well. You are now recognized for your testimony, and welcome. 

STATEMENT OF SIMONE GRIMES 

Ms. GRIMES. Thank you. Thank you Chairman Hensarling, Ranking Member Waters, and Members of the House Financial Services 

Committee. I want to especially thank you for your opening comments today which were poignant, and which I agree with wholeheartedly. 

Thank you for the opportunity to testify today regarding my complaints of sexual harassment, retaliation, and violations of the 

equal pay act that I experienced at the Federal Housing Finance 

Agency. 

I appreciate the Committee taking these matters seriously and 

working expeditiously to get through the tremendous volume of evidence presented to you. I began my career with the agency in September 2010, I enjoyed my early years at FHFA, was and continue 

to be committed to its mission. 

I quickly moved up the ranks with the highest level of performance review for my accomplishments for 7 consecutive years. I 

found the agency to be mostly populated with bright, talented, and 

enthusiastic employees who are mission-driven and dedicated. I 

would like to provide a little background on my particular circumstance, and then cover three points which I believe have consequences beyond my individual matter. 

As background, in early 2015 I was asked to temporarily take on 

the role of Executive Special Advisor in the Division of Conservatorship, but I was not given the benefits commensurate with 

the position as had been paid to my predecessor. 

As time passed and I continued to serve in this temporary role, 

I raised the issue of equal pay within my supervisory chain. I was 

advised that the decision would need to be approved by former 

Congressman and FHFA Director, Melvin Watt. 

Beginning in September 2015, Director Watt made multiple unwanted advances toward me and insisted that we meet in several 

unusual locations in order to discuss my professional issues, to include my equal pay complaints. The frequency of the advances, coupled with the advice from friends in the security industry, led me 

to begin recording many of our interactions. 

I felt vulnerable and unsafe. Director Watt more than once implied that his advances were linked to my ability to receive promotions and pay increases. When I attempted to pursue other career advancement opportunities outside of his direct chain, within 

the agency, they were blocked through the use of the Office of Inspector General Hotline Complaint Process, which I believe were 

initiated at the direction of Director Watt. 

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My three points are as follows—lack of communication or corrective action after investigation concludes. When an employee musters the courage to formally file a complaint, they are looking for 

answers and resolution. The United States Postal Service investigation into my complaints concluded on August 13, 2018 and the 

agency was given a 600 page report, plus a 73 page summary. I 

was not made aware by the agency that the report was completed, 

or that the investigation was over. 

When I finally obtained a copy of the report 2 weeks ago, I was 

alarmed to learn that the agency had been sitting on the report for 

more than 30 days and had not reached out to me or taken any 

action. I reached out the Human Resources Director and my counsel reached out to the agency’s outside counsel to question what 

was the status of the report and any next steps. 

To this day we have not received any response. The act of not 

providing a timely response to an aggrieved party of a harassment 

complaint serves the same effect as the harassment itself, it is 

dismissive, demeaning, and serves to delegitimize the complainant 

and the complaint. 

Number two, the refusal of a government official to participate 

in an independent investigation into their own misconduct; as was 

stated, in an e-mail to the USPS Investigator, Director Watt indicated that he does not see himself as an employee of the agency 

and therefore is not subject to its policies. 

My fellow employees have shared with me the atmospheric shift 

they have felt inside the agency, having a leader who refuses to be 

accountable to the very policies he signs, has had a chilling effect. 

I have been further disappointed that none of the agency officials 

who own these policies have issued a statement to FHFA staff to 

directly address what has become a very pubic matter, or to offer 

any assurance whatsoever that the agency takes its own standards 

seriously. The actions of Director Watt, and by extension the lack 

of actions by his senior staff, have served to chip away at the culture of pride, ethics, and integrity that had existed at FHFA. 

My third and final point is the culture of fear that is established 

when an agency and its inspector general retaliate against victims 

for filing complaints. It is never easy to file a complaint against 

your current employer. It is even harder to codify in writing, your 

concerns about your inspector general. 

To be clear, my complaints have, from the very beginning, always 

included the lack of independence between the FHFA senior officials and the FHFA Office of Inspector General. And that the OIG’s 

processes were used to further harass and discriminate against me. 

My interactions with Inspector General Wertheimer and her staff 

surrounding my complaints have been, from the beginning, that of 

hostility, intimidation, bullying, laden with gossip, and public 

shaming. 

In early July, after learning that the Inspector General was 

doing a parallel investigation into my allegations, I raised the very 

specific question to Leonard DePasquale, the Chief Counsel for Ms. 

Wertheimer, regarding the ability of the Inspector General to investigate a matter to which it was a named party. 

To my understanding, this is a direct violation of the CIGIE 

(Council of Inspectors General on Integrity and Efficiency) quality 

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standards. The OIG denied my request for more information, refused to acknowledge the inherent conflicts of interest, and instead 

engaged in the following retaliatory tactics. 

Number one, the Inspector General made my identity as the victim of sexual harassment a matter of public record by suing me in 

court under my full name, this could have been done in a series 

of other ways that did not reveal my identity. 

On August 1, I was advised in writing that the agency would 

delay any alternate dispute resolution or mediation settlements related to my claim until I cooperated more fully with the OIG. 

And third, would decline to put me in the executive level promotion that I was selected for until the agency had time to review 

my allegations of Director Watt, and had an opportunity to review 

them and decide what to do next with regards to my promotion. 

These retaliatory and aggressive actions pursued by Ms. 

Wertheimer, coupled with Director Watt’s public statement that he 

believed the investigation would clear him, while simultaneously 

refusing to participate in said investigation, lead me to the conclusion that the OIG’s participation in this matter was solely to provide Director Watt with a ‘‘clean report’’. 

Thank you for your time, I believe hearing these issues is an important step forward in reestablishing the trust and faith that all 

public servants need to place in the systems that are designed to 

protect us and hold our leaders accountable. Thank you. 

[The prepared statement of Ms. Grimes can be found on page 96 

of the appendix.] 

Chairman HENSARLING. Thank you, Ms. Grimes, for your testimony. We know it is not always easy to be in this chair and discuss 

these types of charges. The Chair now yields himself 5 minutes for 

questions. I guess my first question, Ms. Grimes, is for the first internal investigation that was conducted by the Postal Service IG. 

When you did you learn that Director Watt—or what were the circumstances whereby you learned that Director Watt would not cooperate? 

Ms. GRIMES. During periodic updates with the investigator. I was 

given an update on the status of the investigation, and it was in 

the second week of July that I learned that Director Watt had declined to participate. 

I wasn’t given the specific reasons why he declined, and I didn’t 

learn his specific reasoning until I saw the report 2 weeks ago. 

Chairman HENSARLING. And that reasoning was as presented to 

you? 

Ms. GRIMES. That he, according to a provision as a section—as 

a political appointee, the laws of the agency were not intended to 

apply to him. 

Chairman HENSARLING. And the non-harassment policies that 

are distributed to the FHFA employees, are those signed by Director Watt, to the best of your knowledge? 

Ms. GRIMES. They are signed by Director Watt, as is an anti-harassment statement, stating that the agency will not tolerate actions 

of harassment and it will hold all employees, regardless of rank, accountable to that policy. 

Chairman HENSARLING. Is it now well known within FHFA that 

Director Watt asserted, for lack of a better term, a legal privilege 

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that imposed a standard of conduct on everyone else at FHFA but 

him? 

Ms. GRIMES. Yes, it is well known. 

Chairman HENSARLING. What is your opinion of that and do you 

have an opinion of how other Federal employees at FHFA feel 

about that assertion? 

Ms. GRIMES. Yes, other employees have shared with me that it 

has made the work environment one of hypocrisy. Just a few days 

ago, an ethics statement was issued, and I think it was viewed as 

a big joke, that the agency would issue an ethics statement when 

its leader, itself, was not conducting himself ethically. 

My personal view on his recusal to participate is just to further 

enforce the unbalanced power dynamics that exist here. By his refusing to participate, he has had full advantage of seeing a full investigative file, has had 40 days to sit with it, and can now decide 

what he will and will not say. 

The process was intended to be fair, and it was affirmed that we 

would all be required to provide written testimonies and disclosures that we would be held accountable under oath of Federal 

Government. 

Chairman HENSARLING. So I can safely assume you do not believe the first investigation is complete, since Director Watt refused 

to cooperate. Is that correct? 

Ms. GRIMES. One could say that his refusal to participate makes 

it complete, or you could say it does not. 

Chairman HENSARLING. The current investigation by the FHFA 

IG, you have stated, in your opening statement, some concerns. 

Could you go into greater detail why you seemingly have concerns? 

Again, it is an ongoing investigation, but you seem to have concerns that it will not be thorough, fair, and complete. Why is that? 

Ms. GRIMES. Number one, there is an inherent conflict in my allegations and the role of the Inspector General. My allegations 

have consistently named the Office of the Inspector General as having participated in the harassment and discrimination, as well as 

having contributed to the agency’s ability to discriminate against 

me. 

I believe that it is very hard for an inspector general to investigate a matter to which it is a named party, and it is, in fact, prohibited under CIGIE’s quality standards. A matter of independence 

is supposed to be, in fact, present, as well as perceived as being 

present. 

Chairman HENSARLING. Ms. Grimes, in the interview you had 

with committee staff, you indicated concerns about the hiring process or Director Watt’s approach to the hiring process. Can you 

please elaborate upon those concerns in this area? 

Ms. GRIMES. Yes, absolutely. On several occasions, Director Watt 

made it clear to me that while we could go through an actual employment process that appeared to be fair, that he had the ability 

and would exercise the ability to make that process a charade and 

to get to the end result that he intended to get to. 

He also mentioned that, often, employees need to go through a 

charade of process in order to feel as though the process was fair, 

even thought it would not be. 

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Chairman HENSARLING. My time has expired. The Chair now recognizes the Ranking Member for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. In at least 

1 or 2 minutes of the 5 minutes, I would like to know, Ms. Grimes, 

is there something you would like to add or expand on that you 

have not had the opportunity to do at this point? 

Ms. GRIMES. No, I am fine. Thank you. 

Ms. WATERS. Also, I would like to know, as you were pursuing 

your ability to apply for promotion or other jobs, was Mr. Watt, at 

the same time, implying, in some way, that perhaps that was possible if you cooperated with him? 

Ms. GRIMES. Absolutely. 

Ms. WATERS. Can you describe that? 

Ms. GRIMES. Yes. Every—the fact pattern was that every time I 

raised a concern in my supervisory chain, I would be referred to 

Director Watt. I didn’t reach out to Director Watt, but then he 

would reach out to me and suggest we needed to discuss my professional advancement. He suggested that we needed to meet again, 

in unusual locations, to discuss my professional advancement. He 

certainly offered me a number of positions, but he always tied it 

to the fact that he had an attraction to me. 

In a November 11 meeting, in which I clearly established that I 

would not do anything in return for these professional advances, he 

said he agreed, but then continued to discuss how attractive I was 

and his feelings for me. There was a clear correlation between the 

two. 

Ms. WATERS. How did this make you feel? 

Ms. GRIMES. Extraordinarily uncomfortable and again, unsafe. 

And I have never, in my professional career, been diminished to 

just an object. 

Ms. WATERS. And I understand that, in addition to your request 

to the IG to investigate, you also have a lawsuit? 

Ms. GRIMES. That is right. 

Ms. WATERS. Is that proceeding at this time? 

Ms. GRIMES. Yes, it is. 

Ms. WATERS. What would you like this Committee to do to help 

you pursue justice with your case? We are glad that you are here 

today. We are pleased that we are acting responsibly and that we 

are not, in any way, duplicating what is going on on the Senate 

side. 

And we want you to take full advantage of being here today to 

express yourself, to share with us any information that you have 

that will help us to understand exactly what is taking place. Feel 

free to do that. 

Ms. GRIMES. Thank you very much. The things that I would like 

to see, as stated in my civil lawsuit, is that the agency be compelled to consistently pay its female employees equally to their 

male counterparts. 

I may be the only one sitting here, but I am not the only one who 

has experienced this disparity in pay. Number two, I don’t believe 

that an inspector general who is not independent should be permitted to investigate themselves. Number three, I think that people who enter this situation would like quick resolution. 

mcarroll on FSR431 with DISTILLER

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The act of agencies creating protracted processes for victims to 

receive resolution is costly, it is punitive, it is designed to wear 

down the victim and to bleed them out financially. I believe that 

this Committee should reinforce that matters like this should receive quick and efficient resolution. 

Ms. WATERS. Thank you very much. I appreciate your ability to 

come and not be intimidated by this process and to speak freely 

and to share with us what you have experienced. And again, even 

though I only have about 1 minute left, if there’s anything that you 

would like to share with us, please feel free to do so. 

Ms. GRIMES. Since I am not infringing on your time, obviously 

I am a huge fan of yours as of the Committee and I just truly appreciate you taking the opportunity to hear me today. I found this 

to be a very warm and receptive process and I appreciate that. 

Coming forward with these matters is very difficult and challenging. I did not appreciate being named publicly, but now that 

I have been, I have heard from so many other women that are in 

similar situations that have encouraged me to go forward and 

speak about these matters. 

So I appreciate the opportunity to do so. 

Ms. WATERS. Thank you very much and I yield back the balance 

of my time. 

Chairman HENSARLING. The gentlelady yields back. The Chair 

now recognizes the gentlelady from Missouri, Mrs. Wagner, Chair 

of our Oversight and Investigations Subcommittee. 

Mrs. WAGNER. Thank you, Mr. Chairman. Ms. Grimes, thank you 

for your testimony and your willingness to come before this Committee. I admire your courage and your fortitude. I wanted to start 

this morning by talking about workplace culture. Briefly, because 

of our limited time, can you help the Committee understand the 

workplace environment at FHFA? 

Ms. GRIMES. So I would say that prior to 2015, I found the workplace environment to be dynamic, full of bright people who are very 

mission driven and who are excited and dedicated to make the 

right decision for homeowners, taxpayers, and the housing system. 

I found it to be a culture that is very professional. This only 

changed after 2014, in my experience. I believe that the notion that 

some people were exempt from the rules of the road has been percolating for several years and that this is obviously a more blatant 

explanation of that belief, but it has been unfortunate. 

Morale at the agency—it is hard to work somewhere where you 

are in fear. And from what I have heard from several others who 

have come forward with other similar complaints, using fear as a 

tactic has been prevalent for some time. 

Mrs. WAGNER. And has worked through the entire environment 

of the FHFA. 

Ms. GRIMES. That is right. 

Mrs. WAGNER. In your opinion, has this culture impacted your 

perception about upward mobility at FHFA? 

Ms. GRIMES. Absolutely. 100 percent. 

Mrs. WAGNER. Not just for you, but for others. 

Ms. GRIMES. Not just for me, for many bright and talented 

women and others who were not given the opportunity. I fear that 

the agency is setting itself up for a brain drain, where talented peomcarroll on FSR431 with DISTILLER

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ple leave because they have nowhere to move up. Additionally, I 

can’t overstate how challenging it is to be in an environment where 

none of the rules of ethics or conduct are upheld. 

Mrs. WAGNER. And I am going to get to that. Has Director Watt 

personally affected his workplace culture? 

Ms. GRIMES. My opinion is yes. 

Mrs. WAGNER. Based on your understanding, what is the harassment policy at FHFA? 

Ms. GRIMES. The anti-harassment policy is pretty explicit and it 

states that the agency does not tolerate any type of harassment 

and that all levels of agency officials are held accountable to that 

standard. 

Mrs. WAGNER. And all agency officials and employees are briefed 

on these policies, is that correct? 

Ms. GRIMES. That is correct. 

Mrs. WAGNER. And signed by the Director. 

Ms. GRIMES. Right. 

Mrs. WAGNER. As an employee, how did it make you feel that Director Watt declined to participate in the internal investigation 

based on EEOC allegations that you have put forward? 

Ms. GRIMES. I personally found it appalling and I think it was 

a disappointment to Americans everywhere to hear that there are 

leaders that believe that they are above the laws that have been 

put in place to protect their employees. 

Mrs. WAGNER. How did that affect the environment overall of 

other employees and public servants at FHFA? 

Ms. GRIMES. The response and feedback that I have heard is that 

it has had a chilling effect and has served to chip away at the morale of the employees at FHFA. 

Mrs. WAGNER. And as our Ranking Member has also generously 

done with some of her time, I also have, in my limited time remaining, I will offer you an opportunity. If there is anything else, Ms. 

Grimes, that you would like to offer based on my line of questioning or anything else to offer for this Committee. 

Ms. GRIMES. Well thank you very much. Again, I do believe it is 

important to have this type of hearing today. We will soon have a 

new Director and a new set of appointees and I believe it is important that we set a precedent for what is and is not acceptable. I 

also agree with the Chairman’s initial comments. I too have a teenage daughter and a teenage son and I would want them both to 

feel comfortable that their rights are protected, whether they are 

the accused or the accuser. 

Mrs. WAGNER. We all feel that way, Ms. Grimes. And again, let 

me say again, I appreciate your coming forward, I appreciate you 

meeting with my staff and that of the minority. I think we have 

worked well together in this process, and I appreciate your courage 

and your fortitude. I yield back, Mr. Chairman. 

Ms. GRIMES. Thank you. 

Chairman HENSARLING. The gentlelady yields back. The Chair 

now recognizes the gentlelady from New York, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Ms. Grimes, thank 

you for coming forward this morning and sharing your story. I admire your courage and bravery for stepping forward. My question 

to you, if it is not that difficult and you wouldn’t mind sharing, how 

mcarroll on FSR431 with DISTILLER

13 

did each of Director Watt’s unwanted sexual advances make you 

feel? 

Ms. GRIMES. So I would say that they grew more and more uncomfortable. I was hopeful with each encounter, as I was explicit 

in having no interest in that type of conversation, that in the next 

encounter we would move on. However, that was not the case. I did 

feel trapped and as if my back was against the wall because I was 

being ushered to him as the decision maker, no matter what other 

channels I chose to pursue. 

Ms. VELAZQUEZ. How do you feel right now in this moment? 

Ms. GRIMES. I think it is unfortunate. It is an unfortunate misuse of a process that is designed to bring some type of resolution 

and justice to all parties in this matter, but it has been misused 

to exempt certain individuals from allowing the Committee and the 

agency to reach a firm conclusion. 

Ms. VELAZQUEZ. Thank you. Do have any message for the other 

women out there who have gone through similar experiences and 

are viewing your testimony here this morning. Is there anything 

you would like to say to them? 

Ms. GRIMES. Thank you very much. I would like to say, it is difficult to come forward. I will not understate the challenges and the 

obstacles that you face, from the time you come forward until you 

have reached resolution. 

But I lean toward the statement of Martin Luther King. That the 

arc of the moral universe is long, but it bends toward justice. And 

that if we all continue to take a stand that eventually things will, 

and have already begun to get better. 

Ms. VELAZQUEZ. Thank you. And last, again, if you would like to 

share, how has Director Watt’s unwanted sexual advances, and this 

experience, changed your relationships with your coworkers? How 

has this made you feel at work? 

Ms. GRIMES. Yes. Actually, going into the work office started to 

become a very traumatic experience. There were at least 2 weekly 

meetings that I would have with Director Watt. And I knew that 

in those two meetings, either before or after, he would take advantage of an opportunity to make an inappropriate comment to me. 

It made me feel very uncomfortable. 

And my attendance at those meetings began to drop. I think it 

is very hard to lead a team, and try to instill in them morale, and 

energy, and enthusiasm when you, yourself, are feeling defeated. 

I think the act of harassing someone makes them feel demeaned, 

disempowered, and of very little value. It has been a constant contradiction to show my staff a positive and encouraging view of the 

agency when I, myself, did not have that same perception. 

Ms. VELAZQUEZ. Thank you very much. I yield back. 

Chairman HENSARLING. The gentlelady yields back. The Chair 

now recognizes the gentleman from Michigan, Mr. Huizenga, 

Chairman of our Capital Markets Subcommittee. 

Mr. HUIZENGA. Ms. Grimes, I appreciate you being here, and 

having your story be told. And, certainly, it took a lot of forethought and planning to go through and gather information, and 

do the recordings. And this must have been an extended period of 

time that you were going through this. 

mcarroll on FSR431 with DISTILLER

14 

And I think on behalf of all of us, one, we are proud of you coming here and being a part of this even though it, maybe, didn’t 

start out voluntarily. Having your name exposed that way. But the 

seriousness that, hopefully you are seeing us approach this with, 

is sincere. And it is one that we are hoping to change culture over. 

I want to try to touch on, very quickly, maybe some specifics from 

your experience. What we can do to improve that process to allow 

employees, like you, that have serious allegations to come forward? 

But as you had pointed out, there’s going to be a new Director and 

new political appointees. 

And I am curious, did you find other political appointees, who 

were there at FHFA, were somehow protective of the Director, or 

maybe covered up some of those actions, or, in any way, hindered 

that inspection from the IG? 

Ms. GRIMES. So, in terms of the appointed senior advisors that 

the Director brought in, number one, outside of this specific instance, I have the utmost respect for them, their professionalism, 

the knowledge that they bring to the agency, and have continued 

to offer to homeowners, taxpayers, and the market systems. I 

would like to start with that. 

I believe that whenever I tried to approach any of them with an 

issue or concern, they always deferred back to Director Watt with 

the assumption that he had my best interest at heart. It became 

very hard. 

Mr. HUIZENGA. I was just going to ask, were you specific about 

what was going on with them, and then they still said, hey, we 

can’t help you. You need to go talk to the Director? Or how did 

that— 

Ms. GRIMES. So, two separate issues. I first began complaining 

of prohibited personnel practices that had led to my equal pay violation in 2015. From 2015 to 2018, no action was ever taken to investigate that, or bring it forward. That was my first indication 

that, despite reporting openly, what had happened, which is a violation of Federal law, the agency was reluctant to take action 

against its senior leaders. 

When I began to disclose more fully what had happened, what 

I received was just silence. As I spoke to what I had believed to 

be colleagues, people who I had a tremendous respect for, and had 

expressed a respect for me, I was just met with silence. 

Mr. HUIZENGA. That must not feel very good. 

Ms. GRIMES. It does not. 

Mr. HUIZENGA. Because these are serious allegations. So it certainly at least implies that there were others who knew and who 

remained silent, and for whatever their reasons may be, whether 

it would be to protect the Director, or protect themselves, but certainly not helping you. 

Ms. GRIMES. That is correct. 

Mr. HUIZENGA. How can we, as an oversight committee, specifically, reform the Inspector General process, internally, to make 

sure that employees, like yourself, have a better path, moving forward, to bring these types of accusations to the authorities when 

they have a complaint like this? 

Ms. GRIMES. I think that is a very good question. I do not have 

all of the answers. I believe some of the recent ruling that has 

mcarroll on FSR431 with DISTILLER

15 

begun to question the autonomy of the agency, its Director, and its 

inspector general, are steps in the right direction. 

I hope that we continue to understand that these agencies need 

more oversight. And that, while HERA, as intended, was designed 

to create a process for these enterprises to do the best they could 

for the taxpayers with little interference. Unfortunately, when you 

have individuals who abuse that power, more oversight is needed. 

Mr. HUIZENGA. I look forward to working with you, and I know 

this Committee does as well, as you are able to relay those experiences, and how we can improve that to make sure that doesn’t happen again in the future. And, certainly, again, I just appreciate 

your willingness to come and, publicly share this, with the evidence, and the background that you have brought. 

It’s certainly a compelling story of what is going on, and the culture that has been created at FHFA. And I, for one, and I believe 

all my colleagues on both sides of the aisle, want to change that 

culture. I appreciate your willingness to be in front of the Committee. I yield back. 

Ms. GRIMES. Thank you very much. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New York, Mr. 

Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. Thank you, Ms. Grimes. 

Let me, first, absolutely associate myself to the opening remarks of, 

both, Chairman Hensarling and Ranking Member Waters. And full 

disclosure, as Ranking Member Waters has done, I need to just say 

that I have been a friend and a colleague of Director Watt for my 

entire being here at the U.S. Congress. 

But also, I have three daughters. And I am deeply concerned 

about the allegations. And I appreciate you coming here, and having the courage to come here, and to testify, and to speak on your 

scenario, and what has taken place to you. 

And I do believe that Congress has an oversight role to play 

when it comes to diversity and inclusion in our workforce, encouraging diversity, and inclusion demands stamping out a culture of 

sexual harassment that oftentimes limits women’s and minorities’ 

career advancement limits. It limits their success. It limits their 

well-being and we must make sure that does not happen. It is just 

not the right thing to occur. 

I don’t know how I would feel if my daughter—well I know how 

I would feel—so it is I think courageous upon you but it is important that you are here testifying today. In listening to your testimony and in reading the letter that your attorney talked about, the 

cozy relationship between the FHAFA’s Director and the IG’s perpetuated harassment, discrimination, and retaliation against you. 

In addition to this, I know I was listening to some of the questions that others have asked and I was wondering if there were 

other things that you might be able to tell us as far as the structural or cultural issues at the agency that continue or may foster 

a culture of harassment and discrimination that we on this Committee and Congress in general, should be aware of. 

For example, do you feel like there were adequate human resources at FHFA for potential victims of sexual harassment and is 

there something that we should be looking at as Congress to make 

mcarroll on FSR431 with DISTILLER

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sure that those resources were there so that this would not happen 

to someone ever again? 

Ms. GRIMES. Thank you very much. Thank you for the question 

Congressman, and I have followed your career and I am also a fan 

of yours, thank you and I do appreciate that it is challenging to 

enter into this hearing with friendships and I appreciate that you 

have put that to the side for today’s purposes. 

In terms of factors at play at the agency that make it challenging 

for people to come forward, I believe that the way that the agency 

has currently structured those entities that may be designed to 

protect the interests of employees certainly have taken the posture 

that they are there to defend the agency and its senior staff, regardless of what they have done. 

I found H.R. to be particularly unhelpful in this matter. I found 

that our Office of Minority and Women Inclusion, which reports directly to Director Watt at a lower level, made some attempts to 

bring independence into this issue by engaging the United States 

Postal Service. 

I think that their level of ability to exercise anything beyond that 

is limited since the decisionmaking ultimately goes to the head of 

human resources and I have found that our Office of General Counsel, and as regards to this matter, has been not only hostile, but 

has been very threatening toward me throughout this process. 

So, in approaching a situation like this, not only are you hurt by 

what has happened, but you quickly learn that all of the agency 

mechanisms that you hope would have a sympathetic ear are 

slightly hostile and make clear that their position is not to support 

you, but to defend their client, regardless of what their client has 

done. 

Mr. MEEKS. I thank you and I yield back the balance of my time. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentlelady from New York, Ms. Tenney. 

Ms. TENNEY. Thank you Mr. Chairman. I too would like to echo 

the comments and the introductory remarks by the leadership as 

well. 

I thank you Ms. Grimes for being here. I know it is a difficult 

thing to do. As an attorney, I represent a number of people who 

have been in this situation and I think it is really important and 

really credible that you were not the one that brought this forward, 

that it was brought out through a public lawsuit and, unfortunately, now you are dealing with the consequences and I think 

doing it in a very credible and very honest way. 

I first just want ask you what is the current status of your work 

right now? 

Ms. GRIMES. That is a very good question, thank you for that 

question Ms. Congresswoman. 

So currently I am still in the supervisory chain of command of 

Director Watt and the COO, both of whom are named in my allegation. We have requested on four separate occasions, for the sake of 

this process until concluded, to allow me to report to someone who 

is independent and outside of my chain of harassers and through 

communication from the agency’s outside counsel, I have been advised four times that in no way would my supervisory chain be 

changed. 

mcarroll on FSR431 with DISTILLER

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Ms. TENNEY. So you are still reporting to Director Watt? 

Ms. GRIMES. That is correct. 

Ms. TENNEY. And there is no one that is in any intermediary position on a human resources team or anyone that is in the middle. 

Ms. GRIMES. We have not been made aware of any protective or 

corrective actions that are being put in place to ensure that I am 

not retaliated against. I have already filed one retaliation complaint and never received a response. 

Ms. TENNEY. And so on your four separate times, have you been 

advised of anything in a handbook or in any human resources ethics complaint about how these are to be dealt with officially by the 

agency? 

Ms. GRIMES. The official response has been that I should stop 

complaining about it and until otherwise notified that I will maintain that supervisory chain. 

Ms. TENNEY. So the only official aspect of this for you has been 

that you have been involved in a lawsuit and then you had one 

filed against you as well. 

Ms. GRIMES. That is correct. 

Ms. TENNEY. OK. Let me just ask you about the—so now we 

are—it appears that the nature of the agency seems somewhat accountable at this point. Has Director Watt ever specifically spoken 

to you about the complaint that it could affect your career or it 

could affect your reputation in an attempt to either discourage you 

from pursuing it or an attempt to discourage you from trying to 

bring this forth? 

Ms. GRIMES. Yes, in a recording that I provided to the Committee 

which you may or may not have had an opportunity to listen to, 

Director Watt warned me of the failings of the MeToo Movement 

stating that anyone could say anything and he, in fact, could lodge 

a complaint against me tomorrow and it would have to be taken 

credibly. 

He also warned that the victims who file complaints are usually 

further persecuted by the laws that are intended to protect them. 

I thought and found this to be a threat and have found that since 

I lodged the complaint that has in fact been the case. 

Ms. TENNEY. So do you think the purpose of him making these 

statements to you was in retaliation? 

Ms. GRIMES. It was a warning, yes. 

Ms. TENNEY. A warning. Do you think that his attempts to do 

this retaliation also may have been in effect an admission by Mr. 

Watt that the process isn’t going to help you and just saying, by 

the way you are going nowhere with this? 

Ms. GRIMES. Absolutely. 

Ms. TENNEY. OK, so you would say that the process is flawed in 

terms of the accountability? 

Ms. GRIMES. It’s flawed, it has been manipulated, and it doesn’t 

hold any water. 

Ms. TENNEY. And you haven’t had any assistance from human 

resources or anyone in that vein. 

Ms. GRIMES. I have had the exact opposite. 

Ms. TENNEY. OK. Do you think that, again, let me just put this 

a different way. Do you think that Mr. Watt was trying to take admcarroll on FSR431 with DISTILLER

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vantage of the fact that there is a void in procedure, in policy, and 

a void in the accountability of the office itself? 

Ms. GRIMES. I believe he made sure that I was aware that he 

knew that there was a void and that the buck stops with him. 

Ms. TENNEY. OK. So you mentioned earlier that there was like 

a charade, maybe, I don’t know if sketchy is the right word, I am 

not trying to take your words, in hiring procedures at the FHFA. 

Do you think those were used and you indicated this and I just 

want to clarify it, that these were used to empower the Director 

versus someone like you or anyone else in this situation? 

Ms. GRIMES. Yes, so the term charade was actually a term used 

by Director Watt to describe the employment process, and he specifically stated that while he could go through what appears to be 

a fair and open process, he would know that it was a charade. 

Ms. TENNEY. So do you think sketchy is a good word to use in 

this situation? 

Ms. GRIMES. It seems appropriate. 

Ms. TENNEY. Thank you. I think I am out of time. But thank you 

for your courage and for coming out on this. I know it is not easy 

and I know you are doing this in an involuntary basis and we are 

grateful for your testimony. 

Ms. GRIMES. Thank you. 

Ms. TENNEY. Thank you. 

Chairman HENSARLING. Time of the gentlelady has expired. The 

Chair now recognizes the gentleman from Missouri, Mr. Clay. 

Mr. CLAY. Thank you, Mr. Chairman, and thank Ranking Member Waters, both of you for conducting this hearing today. And 

thank you, Ms. Grimes, for your bravery and courage in coming forward and sharing your story with this Committee. 

Let me preface my remarks by saying that I have a 24-year-old 

daughter who’s starting her professional career and I would dread 

her having to experience what you have been through. 

I have one line of questioning, wanted to know when the inappropriate advances initially began, did you have coworkers that were 

witness to this inappropriate behavior? 

Ms. GRIMES. I think Director Watt did a very good job of making 

sure that his comments and interactions with me were not in the 

public domain of employees. That being said, I reported what was 

happening to several employees along the way and provided an extensive witness list to the investigator. 

Mr. CLAY. And I haven’t read your complaint or EEOC complaint. But is that all part of the record and you gave them names 

and follow up people? 

Ms. GRIMES. Yes. 

Mr. CLAY. OK. All right. That was pretty much what I was curious about, and at this point I have no other questions. If you wanted to add something to it, feel free. 

Ms. GRIMES. So the only other comment that I would add is that 

in this process where someone is coming forward to bring an Equal 

Pay Act complaint, they are already underpaid and the process to 

do this is extraordinarily expensive. 

I think the agency knows that and protracts it as a way to get 

victims to fold much more easily. I have already spent tens of thousands of dollars on this process, and just in speaking with other femcarroll on FSR431 with DISTILLER

19 

males who lodged similar complaints against the agency, they admitted that they folded early because they simply couldn’t afford it. 

And so I think this process of dragging things out and adding 

new layers is designed to overburden the victim and in fact cause 

them to cave. I would also like to say, it has already been said, but 

I want to reiterate that the action of publicly naming me as a victim of sexual harassment, in fact, publicly shaming me also serves 

to prevent other women from coming forward. 

I did not ask to be named, and as a matter of fact, I requested 

anonymity and my attorney communicated with all Members of the 

media that we wanted to keep my identity private. I think it was 

a shameful tactic by the Inspector General to name me publicly 

and force me to speak publicly. 

Now that I am here I will speak publicly, but it is costly. 

Mr. CLAY. And what you have just described is a toxic culture 

of the FHFA and the process itself. And we as a Committee ought 

to address that. So let me say thank you again for your bravery 

in coming forward, sharing your story. 

And Mr. Chairman, I yield back. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Wisconsin, Mr. Duffy, Chairman of our Housing and Insurance Subcommittee. 

Mr. DUFFY. Thank you, Mr. Chairman. Ms. Grimes, I spent 10 

years as a State prosecutor and dealt with many, many sexual 

crimes. 

All the victims of the crimes I dealt with were women, some of 

them children, and if you deal in that environment with someone 

who has been a victim of those unwanted advances to the far extent of rape, it is incredibly hard to talk about, and I know firsthand how difficult it is and I want to thank you again for being 

here and being willing to tell your story. 

Though I do note that you didn’t want to be public, I think we 

have all heard that loud and clear. But now that you have and you 

are willing to communicate with us, we are grateful. What timeframe was this taking place? 

When did it start? When did it end? 

Ms. GRIMES. So the equal pay violation began in January, February 2015. The sexual harassment began in September 2015 and 

concluded in March when I filed my first set of complaints. 

Mr. DUFFY. So this began with Director Watt roughly 3 years 

ago. 

Ms. GRIMES. That is correct. 

Mr. DUFFY. OK. And it is unique for us, and as a former prosecutor I would hear allegations and sometimes you would have 

someone say listen, this is what happened to me and we want to 

verify and confirm with whatever evidence we can, did it happen 

or not. 

And to maybe go into your opening statement, this is more than 

your word versus Mr. Watt’s word, isn’t it? 

Ms. GRIMES. It is in fact also his words against himself. 

Mr. DUFFY. And by way of a recording. 

Ms. GRIMES. That is correct. 

Mr. DUFFY. Those who have heard it would say it is pretty damning for Mr. Watt. So in his words, we have him saying things inmcarroll on FSR431 with DISTILLER

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credibly—if we want to—I will use a soft word of inappropriate, I 

will—which maybe we would all disagree with that characterization is beyond inappropriate. 

Fair enough? 

Ms. GRIMES. I believe they were inappropriate. 

Mr. DUFFY. So in regard to your allegation, it is pretty clear cut 

what he was doing, because he is on tape doing it. 

Ms. GRIMES. I believe so. 

Mr. DUFFY. OK. Has Mr. Watt recused himself from decisions 

that affect you and your employment? 

Ms. GRIMES. Not to my knowledge. 

Mr. DUFFY. OK, so he actually might still be making decisions 

that affect your professional career? 

Ms. GRIMES. I have not been advised that he is not. 

Mr. DUFFY. That he has been recused, OK. We have consolidated 

great power at the head of the FHFA. Do you see a problem with 

the way that structure works? 

Ms. GRIMES. Absolutely. 

Mr. DUFFY. Do you have any recommendations on how that 

structure should be changed to us who could change it in this Committee? 

Ms. GRIMES. Yes, again referring back to the Fifth Circuit 

Court’s decision, I think those are the right steps to begin to question the constitutionality of the makeup as well as the limited ability for lawmakers to question the head of, not only the FHFA, but 

other similarly structured agencies. 

I believe there needs to be a lot more accountability, visibility, 

and another way for individuals, like myself, to reach out beyond 

just our own inspector general to air concerns that we have. 

Mr. DUFFY. I am going to just note that if we are doing the 

daughter game, I have five. I have five sisters. I have one mother, 

one wife. And this is unacceptable in America today. I would just 

note that today, I have never met you before until this interaction, 

and today you are here as a victim. 

But I would just note that you are far from a victim. You are a 

very accomplished woman. Well-educated who has risen through 

the ranks. Beyond this, tell us who you are, because you are more 

than what you are saying today. And I think sometimes it is important to recognize the whole of the person. 

Ms. GRIMES. Thank you. I feel like you are giving me 20 seconds 

to brag about myself. 

Mr. DUFFY. Only if the Chairman gavels us down. Go ahead. 

Ms. GRIMES. So just other forms of context, I am absolutely a devoted parent to two teenagers, a daughter and a son who support 

me fully in this endeavor. I am an active member of my community; I participate in my children’s sports teams, as well as my 

daughter’s Girl Scout troop. 

I am a very faith-oriented person. I am an active member in my 

faith-based community. And I strive always to be a good neighbor 

and a responsible person. 

Mr. DUFFY. Thank you for being here. Thank you, Mr. Chairman. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Texas, Mr. Green, the 

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Ranking Member of our Oversight and Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. I thank the witness for 

appearing today. And while I do not have children, and I have no 

siblings, like all of us, I had a mother. And I had a father. And I 

saw my mother discriminated against. I saw my father discriminated against. 

So, I have grown up with this belief that invidious discrimination 

has to be challenged. I also believe that we talk a lot about no one 

being above the law. I do it myself quite often. And I also believe 

that no one should be beneath the law. Law has to reach down as 

well as up. 

So, when you made your statements about being exposed by the 

IG, it caused me a good deal of consternation. And I would start 

by asking you what was the response from the IG after having 

been told that you did not desire to be exposed? What was the response? 

Ms. GRIMES. The response was to file a suit in court naming me 

publicly. 

Mr. GREEN. Literally those words were stated. 

Ms. GRIMES. No. My attempts to question why IG Chief Counsel, 

Leonard DePasquale, about just the specifics about what exactly 

they were investigating, how they were able to investigate a matter 

in which they were a named party. 

And how would provisions be put in place to isolate those matters in which they were implicated. I never received a response; instead, I received a lawsuit. 

Mr. GREEN. And you indicated that you made a request that you 

have your anonymity protected, and by and through your lawyers. 

If you don’t have it, I will understand. But I do intend to ask questions about this when the IG is before us. 

Ms. GRIMES. Absolutely. 

Mr. GREEN. So, if you don’t have the request, I understand. But 

do you happen to have that request? 

Ms. GRIMES. Yes. On March 27th, prior to filing the EEO complaint, but when I had filed the complaint with the OIG, they 

asked if I would wave my right to anonymity, I declined to wave 

my right to anonymity. 

Additionally, when the press began asking about my involvement 

in this matter, and I am not sure how they knew that, but they 

contacted my attorney. My attorney made several public statements, stating that I did not wish to reveal my identity publicly. 

So, in two separate instances we did communicate a lack of willingness to be named publicly. 

Mr. GREEN. I saw you turn to your lawyers. If you desire to confer, you may. That is always available to you; would you like to 

confer for a moment? 

Ms. GRIMES. I think that sums it up. 

Mr. GREEN. Thank you. And as a result of your anonymity being 

violated, have you suffered some consequences that you would like 

to call to my attention? 

Ms. GRIMES. I don’t believe I ever intended to Google my name 

and see sexual harassment over and over and over again. That 

wasn’t the legacy I was hoping to leave. 

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I think once I was put in the position of having to defend myself 

publicly, it has taken a lot of energy and effort. I am not used to 

dealing with the press. They have been very courteous; I do want 

to say that. 

But it has just added a new layer of burden that I didn’t anticipate. Additionally, just for the record, we did not file the civil lawsuit before being named publicly. We had no intention of going forward with a public lawsuit. 

Our hope was all along to settle this through an ADR process as 

advised by the Equal Employment Opportunity Commission. Those 

actions were taken subsequent to being denied any right to due 

process, internal to the agency and after being named publicly. 

Mr. GREEN. I thank you for your testimony. And I assure you 

that I plan to pursue this with the IG. Thank you very much. 

Ms. GRIMES. Thank you. 

Mr. GREEN. I yield back the balance of my time. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from North Carolina, Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. Good morning, Ms. 

Grimes. 

Ms. GRIMES. Good morning. 

Mr. PITTENGER. Thank you again for being here with us. Ms. 

Grimes, I am a father of three girls, and five granddaughters. They 

are special to me. And it would be a grievance thing for me to know 

that they had gone through what you have gone through. 

So, I want to share with you my respect for you, for the judicious 

manner that you have processed this through. You have filed in 

your grievance. You provided corroborating evidence. 

You did everything that you know would be the appropriate 

thing to do. And at the same time, you weren’t even treated with 

full respect during your process. The fact that all women should be 

treated with respect in private life, public life, the workplace—in 

all regards. I am from Charlotte, I have known Director Watt for 

some time. We are not close friends, we knew each other before I 

got to Congress—he got here before I did; shared some in this body 

together. 

The people of Charlotte have known him as a man of high regard, highly educated, very professional, skilled at what he did. 

This is a big shock to Charlotte, they are watching this very closely. 

And I would like for you to take an opportunity, if you would, 

from my perspective as a Charlottean, for what you would like for 

them to know about their person, Director Watt, and the manner 

in which the FHFA has been lead during this time. 

Ms. GRIMES. Thank you very much, Congressman. I do not have 

a personal vendetta against Director Watt, I simply wanted justice 

to be served. As a personal belief, I believe someone can do good 

things, and do bad things as well. Many of the policy decisions that 

he has made for the benefit of homeowners, I believe have been 

sound. 

And I believe that in carrying out his duties as it pertains to the 

mission of the agency, I don’t have any reason to doubt his good 

intentions there. The circumstances that occurred with me are unfortunate, and I do not have any reason to believe that I am the 

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first, hopefully the last person who has experienced this with Director Watt. 

Mr. PITTENGER. Thank you very much, I yield back my time. 

Chairman HENSARLING. The gentleman yields back, the Chair 

now recognizes the gentleman from Missouri, Mr. Cleaver, Ranking 

Member of our Housing and Insurance Subcommittee. 

Mr. CLEAVER. Thank you, Ms. Grimes. Thank you, Mr. Chairman 

and Ranking Member. Because I know Mr. Watt, I am, stunned is 

another word, but I am wondering what was the response when 

you verbalized your feelings about the advances, the sexual advances? Did you verbalize that—in that I am interested in—was 

that like, ‘‘OK, I will back off,’’ I mean, what? 

Ms. GRIMES. Right, so verbally Director Watt acknowledged my 

rejection of his advances and would state that it would not be an 

issue, however the topic came up over and over again. And as a result of me denying to engage in any type of relationship, none of 

my pay issues were remediated and I have, to this day, been denied a promotion to which I was selected because of the complaints 

that I lodged, they have been directly tied through a letter from the 

agency’s outside counsel. 

So while Director Watt would put me at ease by saying that my 

rejection of his advances were not being taken personally or would 

not get in the way, in fact they did. 

Mr. CLEAVER. Did any of your co-workers, or individuals in the 

high levels of leadership begin to treat you differently once you rejected? 

Ms. GRIMES. Once the matter became public, obviously yes. So I 

have had individuals, a large number of individuals, who have contacted me on the side, to vocalize their support but, those people 

who I worked most closely with who were in the more senior levels 

of the agency, I have just been met with silence. 

Mr. CLEAVER. I am concerned also about FHFA and the atmosphere there at this time. Are there some words that you could use 

to allow us to know—I mean, this is obviously public now and they 

know, they knew before we did so—what is the atmosphere? Is it 

like, uh-oh, or is it, this might fix things, or— 

Ms. GRIMES. In terms of this hearing? 

Mr. CLEAVER. No, in terms of the fact that your situation, or Mr. 

Watt’s situation has become public. I mean is there anticipation 

that this may create something good? That something good could 

come out of this, or are people walking around with their heads 

down? 

Ms. GRIMES. I believe people are waiting and seeing. Waiting, 

watching, and waiting to see what happens next. The failure of the 

agency to publicly issue a reinforcement of its policies, especially 

those around anti-harassment and equal employment opportunity, 

I think was a grave misstep on their part. 

I believe that the only policy that they have reinforced publicly 

with agency staff is the policy that states that staff cannot speak 

to the media. So I think that they enforced the wrong policy and 

have ignored the more important policy, the elephant in the room. 

Mr. CLEAVER. Not—policies you cannot speak to the media about 

a complaint? 

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Ms. GRIMES. There is a policy that states that all media inquiries 

have to go through the Office of Communications and Congressional Affairs, and right after this issue was made a matter of public record, staff were reminded during their staff meetings that violating that policy could be a terminable offense. 

Mr. CLEAVER. My final question, did you ever say to Mr. Watt, 

look, I have a recording here and I— 

Ms. GRIMES. Yes. 

Mr. CLEAVER. What was the— 

Ms. GRIMES. I don’t think he believed me. 

Mr. CLEAVER. Thank you. Thank you for being here. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Michigan, Mr. Trott. 

Mr. TROTT. Thank you Chairman, thank you Ms. Grimes for 

being here today and for having the courage to discuss these matters with us. I apologize if I ask some questions you have already 

answered but I had to step out, so you may have already discussed 

some of this, but you said in your statement that the Inspector 

General at FHFA has impeded, and in some respects perpetuated, 

the problem. Can you give me a little more detail around how that 

exactly has happened? 

Ms. GRIMES. For my specific instance, I first became aware of 

some targeted allegations that had been made about me for a job 

that had not yet even been posted, and for which I had not yet 

interviewed. 

After my interviewing for that position and being selected, I 

learned that a series of questions were made of coworkers and 

other staff that alluded to whether or not I was being given preference based on my race and gender, making the insinuation that 

I was potentially a diversity hire. That is very disparaging to hear. 

Once I was interviewed myself and heard the line of questions 

that I was asked, my then attorney and I became very suspicious 

that the allegations in part may have been planted by Director 

Watt, so we filed a complaint with the OIG, asking them to investigate their own process. On two separate occasions, they refused 

to investigate their own process as it related to my matter. 

Mr. TROTT. And what was basis for that refusal? 

Ms. GRIMES. They simply said that matters regarding discrimination should go to the EEO. 

Mr. TROTT. OK. And what was the timeframe when this was occurring? 

Ms. GRIMES. March. March of this year. 

Mr. TROTT. OK, so after the September 15—well after the harassment. 

Ms. GRIMES. Absolutely. 

Mr. TROTT. OK. And you mentioned, you mentioned a few times, 

there have been discussion of tapes. How many tapes are there? 

Ms. GRIMES. I believe I provided the Committee with 15. But I 

can double check. 

Mr. TROTT. That is plenty. And I don’t want to get into specifics, 

but is it fair to say if someone listened to the tapes they would find 

it clearly to be harassment in your opinion? 

Ms. GRIMES. That is my opinion. 

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Mr. TROTT. OK. You mentioned a lawsuit. You were sued, you 

are suing. Can you give me the status of any lawsuits? 

Ms. GRIMES. So the Inspector General sued me to force compliance with their administrative subpoena, which was for the recordings that I have subsequently given the Committee and they are 

still suing me for those. 

Mr. TROTT. OK. And you have no lawsuit otherwise in the civil 

court? 

Ms. GRIMES. So we filed a civil lawsuit to enforce the Equal Pay 

Act violation. Again, this was only because we couldn’t get to resolution inside the agency. 

Mr. TROTT. Right. OK. So that is the tens of thousands of dollars 

you have spent on lawyers for those lawsuits? 

Ms. GRIMES. Yes, the actions by the Inspector General more than 

doubled my legal expenses. 

Mr. TROTT. Got you. What is your current job situation? How 

would you describe your position and atmosphere? 

Ms. GRIMES. I currently have been told in writing that I will not 

be given the promotion that I was selected for until the agency has 

had an opportunity to review the results of the investigation. Those 

results have been completed for over 40 days and we have heard 

nothing. I continue to remain at the diminished position and I continue to report to my harassers. 

Mr. TROTT. OK. Great, well I appreciate your candor and I have 

no other questions and am happy to yield back any time to you if 

you want to add anything that the Committee should know. 

Ms. GRIMES. Thank you very much. I think I have covered— 

Mr. TROTT. I yield back, Chairman. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Maryland, Mr. Delaney. 

Mr. DELANEY. Thank you, Ms. Grimes. First, I want to start by 

telling you how sorry I am that you have endured what you have 

endured in your service to our country and working for the Federal 

Government. As a Member of the Congress of the United States, 

we all should take some responsibility when we allow conditions to 

exist in any agency of the Government where a situation like yours 

occurred. So on behalf of the Congress, I apologize to you. 

I want to thank you for being here. You have learned today that 

many of the Members of this Committee have daughters. I have 

four of them myself and I obviously am grateful that you are stepping forward today on behalf of all young girls and all women because what you are doing here today will lead to a world where 

women and girls are in an environment where they are not discriminated against or subject to harassment. So I am grateful for 

that and I think you are very brave and courageous to do it. 

People should care about this whether they have daughters or 

not. And I think that is also an important point to make. We 

shouldn’t just care about this because we happen to have a situation in our own family and we think about it in the context of how 

terrible we would feel if it were to happen to someone in our own 

family, which I obviously do. The thought of this happening to one 

of my daughters is very disturbing, as my colleagues have said 

about their own family situations. 

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But of course we should care about this whether we have daughters or not. I did have one question for you. In your opening statement you talked about how you would meet with your supervisor 

and you would discuss this pay inequity that you were subject to. 

And your supervisor would say that it was up to Director Watt. 

And then you said that you would never reach out to Director Watt 

about it. And it is obvious why you didn’t do that, based on what 

you were enduring. 

But it seemed like Director Watt would then reach out to you. 

So you obviously believe your supervisor was communicating with 

Director Watt these discussions they would have with you, because 

otherwise how would Director Watt know to reach out to you about 

those discussions. Is that an accurate assessment? 

Ms. GRIMES. That is correct. And I would also just like to add 

that my supervisor, I believe, was fully supportive of making an 

adjustment but felt as though his hands were tied. 

Mr. DELANEY. So do you think your supervisor, who—I am happy 

to hear that your supervisor was fully supportive of the adjustment. That speaks well to your supervisor because I am sure you 

are imminently qualified for this salary and pay adjustment. Do 

you think your supervisor was aware of the situation you were facing with Director Watt? 

Ms. GRIMES. No, he was not. 

Mr. DELANEY. Got it. OK. Well that was the only question I had. 

Again, I am grateful that you are here. I am sorry that you have 

had to endure what you have endured. I will also offer you time, 

although based on what my colleague Mr. Trott said, it doesn’t 

seem like you have any more comments. But absent that, then I 

will yield back to the Chair. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentlelady from Ohio, Mrs. Beatty. 

Mrs. BEATTY. Thank you to the Chairman and to the Ranking 

Member and to you, Ms. Grimes. Thank you for being here. I 

proudly associate myself and echo the words of our leadership. 

Being last gives you an opportunity to add something new, which 

was not asked a lot at all. So I am going to take part of my time 

to say to you how sorry I am that at this time, you have to be here. 

As a female myself, before I talk about granddaughter and grandson, being a woman of color, someone who took great pride in growing up to be a first generation college graduate and to work hard 

and pull my way up to some of the top ranks, I sit here appalled, 

angry, and frustrated for what you have had to go through. So let 

me just say how proud I am of this Congress that you are in the 

right place for us to hear you. 

Thank you also for coming in, not just putting blame and complaining but to have resolve. I was always taught when you have 

a complaint, come with an answer. I appreciate that in your statement. I have grandchildren, a granddaughter who I think is gifted, 

talented, beautiful, and bright. I have a grandson, who I think is 

sweet and naive and loves his Grammy to death. 

So my statements are for all the children out there, that today 

many eyes are watching you and I want you to know that as you 

quoted Martin Luther King, I too often quote him. But my favorite 

quote is when he says, ‘‘it is not where we stand in the time of commcarroll on FSR431 with DISTILLER

27 

fort and convenience, it is the actions that we take in the times of 

challenges and controversy.’’ 

So I say to you I believe in that moral arc of justice. I think that 

what hopefully you will leave here and feel with your children, 

when you go home, you embrace them and you tell them that 

mother was not a victim today, mother stood up for people, mother 

made a statement so your children could have a brighter future. 

As it relates to some of the departments, let me just say how 

proud I am of my Ranking Member, Congresswoman Maxine Waters, who had has stood with us whether we are with her or 

against her. I can honestly say that I have not always voted the 

same, but she has always been fair with me. 

I can also say that she entrusted me to work with OMWI, so you 

gave me great pleasure today, when you said you thought they had 

listened and been fair. For the public, that is the Office of Minority 

and Women Inclusion. So I thank you for reaching out to those departments. 

I think we put a lot of trust in the inspector general. So my one 

question, and I think my colleague who is no longer here, Mr. 

Delaney, might have hit on it. But for clarity, Ms. Grimes, you stated on May 8, 2018 that Director Watt called you and questioned 

you about an anonymous complaint you had submitted to the 

FHFA Office of Inspector General on or about March 19 or April 

the 4th. Is that correct? 

Ms. GRIMES. That is correct. 

Mrs. BEATTY. Why do you think that Director Watt called you 

about this anonymous complaint? Do you think he assumed that 

the complaint came from you? Maybe, at that time, you had told 

him about the tapes? And do you believe that he was told by somebody in the Inspector General’s office about this? 

Ms. GRIMES. I do not know for sure what happened. My assumption is the latter of your comments, that he was made aware of my 

complaint, and I was very surprised that he restated it to me, 

given that I had refused to waive my right to anonymity. 

Mrs. BEATTY. And let me be clear. You have actually worked for 

him, and I have read most of the testimony, and I have listened 

to the tapes. So you actually, really work two jobs and weren’t even 

paid the highest salary for the highest job you did. Is that correct? 

Ms. GRIMES. That is correct. 

Mrs. BEATTY. Let me tell you. I am so appalled, and I am a big 

fighter, and every day I come to this Committee and I talk about 

women in every platform and equal pay for equal work. That, 

alone, is appalling to me, and then to have to couple it with you 

being considered an object and degraded and put in any hostility. 

Let me just say the two most powerful words I can say to you, 

thank you for being strong, thank you for continuing to work, and 

thank you. I yield back my time. 

Ms. GRIMES. Thank you for your leadership. 

Chairman HENSARLING. The gentlelady yields back. We have no 

other Members in the queue who have not previously asked questions. Ms. Grimes, thank you very much for your testimony today. 

To repeat, we are not a trier of fact or a court of law, but we are 

committed, as a Committee, to the proposition that every Federal 

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employee should be treated fairly and in a work environment that 

does not tolerate hostility, harassment, or discrimination. 

Please know that we will continue to monitor this investigation 

very, very closely. You have brought serious charges. This Committee takes them seriously. And we know that it takes courage to 

stand up and be heard. And we, again, appreciate you coming forward. 

I now wish to alert Members. We will take a short recess, in 

order to seat the next panel. Ms. Grimes, you are now excused. And 

the Committee will recess for approximately 10 minutes. 

[Recess.] 

Chairman HENSARLING. Committee will come to order. Our second witness today is Ms. Laura Wertheimer. She is the Inspector 

General of the Federal Housing Finance Agency. Ms. Wertheimer 

earned a B.A. from Yale and a J.D. from Columbia. Previously, Ms. 

Wertheimer was a partner at Wilmer Cutler Pickering Hale and 

Dorr LLP. 

Ms. Wertheimer, you will be recognized for 5 minutes to give an 

oral presentation of your testimony, and then without objection 

your written statement will be made part of the record. You are 

now recognized for your testimony. 

STATEMENT OF THE HON. LAURA WERTHEIMER 

Ms. WERTHEIMER. Chairman Hensarling, Ranking Member Waters, Members of the Committee, thank you for inviting me to testify regarding the work of the Office of Inspector General for the 

Federal Housing Finance Agency. 

Created by statute in 2008, FHFA has duel responsibilities as 

conservator and supervisor of Fannie Mae and Freddie Mac, and as 

supervisor of the Federal Home Loan Banks. These financial institutions together comprise about $6.5 trillion in assets. 

As conservator of Fannie and Freddie, FHFA has the ultimate 

authority and control to make business, policy, and risk decisions 

for both of those enterprises. These business and policy decisions 

influence and affect the entire mortgage industry. In the words of 

Director Watt, it is extraordinary for a regulatory agency to fulfill 

both the role of conservator and supervisor at the same time, which 

FHFA has done for the last 10 years. 

FHFA also acts as supervisor for the Federal Home Loan Banks 

and for Fannie Mae and Freddie Mac, and as supervisor, FHFA 

conducts safety and soundness examinations of those entities similar to the exams conducted by other Prudential Federal Financial 

Regulators. Like inspectors general for other Prudential Federal Financial Regulators, we assess the effectiveness of FHFA’s supervision program for its regulated entities. 

During my tenure, FHFA OIG has issued 46 reports involving 

FHFA’s supervision of its regulated entities, where we have identified deficiencies in those programs or operations or shortcomings. 

In FHFA’s implementation of its policies and guidance, we have reported those and we have proposed 63 recommendations to address 

identified weaknesses. 

FHFA fully accepted 45 of those recommendations, or 71 percent. 

Of those 45 recommendations, we have closed 30, or 67 percent, 

based on materials and representations from the agency. 

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Unlike inspectors general for other Prudential Federal Financial 

Regulators, FHFA OIG’s responsibilities include oversight of 

FHFA’s actions as conservator of Fannie and Freddie. That work 

has looked at decisions made and actions taken by the enterprises; 

because FHFA as conservator bears responsibility for them. 

During my tenure, FHFA OIG has issued 37 reports that address 

FHFA’s conservatorship of the enterprises. 

Again, where we have identified shortcomings and weaknesses at 

FHFA’s conservatorship operations, we have reported them and we 

have proposed 39 recommendations to address identified shortcomings and weaknesses. FHFA fully accepted 33, or 85 percent, 

of those recommendations, and of those 33 we have closed 18 of 

them, or 55 percent. 

Another aspect of our work is to assess the effectiveness of 

FHFA’s internal controls for its own operations; travel and purchase cards, technology, privacy. We have issued 20 reports that 

address the sufficiency of FHFA’s internal controls, and again, 

where we have identified weaknesses and shortcomings, we report 

them and we have proposed 28 corrective actions of which FHFA 

fully accepted 27, or 96 percent, of them. Of those 27 recommendations, we have closed 17, or 63 percent. 

Recommendations accepted and fully implemented by FHFA require meaningful follow up and oversight and we conduct validation testing of those closed implemented recommendations. Since 

January 2015, we have conducted validation testing of 15 closed 

recommendations. We found that FHFA fully implemented 8, or 53 

percent. 

The 103 reports issued during my tenure reflect the independence of mind, objectivity, and professional skepticism of our professionals. 

Through our work, we challenge FHFA to improve its oversight 

over its conserved entities; enhance its supervision; put more rigorous internal controls into place; and look for and eliminate fraud, 

waste, and abuse. 

I have listened to Ms. Grimes today. I read her EEO complaint 

in July, when I first became aware of it. And there appear to be 

some significant misunderstandings about our work, which I am 

fully prepared to answer today, as well as any other questions you 

may have. 

All the work I will discuss and have discussed in my written testimony is made possible by the dedicated career staff of this agency, the senior staff of which are seated behind me. So I look forward to answering all of your questions. Thank you. 

[The prepared statement of Ms. Wertheimer can be found on 

page 154 of the appendix.] 

Chairman HENSARLING. Thank you for your testimony, Ms. 

Wertheimer. The Chair now yields himself 5 minutes for questions. 

I am glad that you heard Ms. Grimes’ testimony. I know that she 

is still in the hearing room. Hopefully I am not mischaracterizing 

what I thought I heard her say. I am not sure she questioned the 

competence of your office, but perhaps the ability of your office to 

conduct a thorough, unbiased investigation of her claims. 

So I do wish to pursue, and I think you used the term misunderstanding. First, has your investigation of Director Watt on her 

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claims, has that deviated, in any way, from any other normal harassment or discrimination investigation conducted by your office? 

Ms. WERTHEIMER. Chairman Hensarling, we are not investigating Ms. Grimes’ claims. Those sound in EEO for which the 

agency has jurisdiction. And they sound in the Equal Pay Act. And 

Ms. Grimes, as she indicated, has filed suit in Federal court to pursue those. 

We are looking at issues that are squarely within our mandate 

under the Inspector General Act, whether there has been abuse of 

position by Director Watt, and whether there has been any waste 

associated with the actions taken by Director Watt. 

Chairman HENSARLING. Can Director Watt fire you? 

Ms. WERTHEIMER. I don’t believe he can, sir. I think only the 

President of the United States can fire me. 

Chairman HENSARLING. Can he demote you? 

Ms. WERTHEIMER. I don’t believe so, sir. 

Chairman HENSARLING. Can he cut your office’s budget? 

Ms. WERTHEIMER. No, nor has he ever tried. 

Chairman HENSARLING. Do you socialize with Director Watt? 

Ms. WERTHEIMER. No, sir. 

Chairman HENSARLING. Do you consider him a personal friend? 

Ms. WERTHEIMER. I meet him on a scheduled basis with the Associate Inspector General. And Director Watt attends those meetings with two members of his senior staff. And that is the only time 

I meet with Director Watt. 

I have never, not only, socialized with him, I haven’t had lunch 

with him. I don’t eat in the cafeteria with him. If I see him on the 

elevator we exchange pleasantries about the weather. 

Chairman HENSARLING. So, does this mean you believe that any 

investigation you have of Director Watt, on any matter, you believe 

to be unbiased, is that correct? 

Ms. WERTHEIMER. I do. And I think the hallmark of the 103 reports issued during my tenure demonstrate our independence, our 

objectivity, our professional skepticism, and our willingness to 

make hard decisions and call out what we find. 

Chairman HENSARLING. Did your office leak information regarding Ms. Grimes to the Director? 

Ms. WERTHEIMER. I am not aware that it did. 

Chairman HENSARLING. You are aware that accusation is out 

there? 

Ms. WERTHEIMER. I am. And I am fully prepared to answer those 

allegations. 

Chairman. HENSARLING. So, have you investigated to ensure that 

there was not an internal leak? 

Ms. WERTHEIMER. Yes. I didn’t investigate my own people. I certainly questioned those people who had dealings with the agency. 

And I believe I understand the basis for Ms. Grimes’ concern which 

I am fully able to answer. 

Chairman HENSARLING. Do I understand correctly, that your office found, previously, that Director Watt violated policies regarding the personal use of official vehicles? Is that correct? 

Ms. WERTHEIMER. As well as use of his personal assistant for— 

Chairman HENSARLING. And what happened to that report? 

Where was that report transmitted? 

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Ms. WERTHEIMER. We wrote the report as a management alert. 

I signed it. It was given to Director Watt in unredacted form. It 

was given to our oversight Committees in unredacted form. It was 

sent to the White House and the Office of Government Ethics the 

day it was issued, in unredacted form. It was on our website, in 

redacted form because of the Privacy Act, and advice from the Office of Counsel, the most prudent force would be to redact it on our 

website. 

Chairman HENSARLING. If, in any of your reviews or investigations, your office concluded that Director Watt acted improperly, 

with regards to Ms. Grimes, what will happen to that report? 

Ms. WERTHEIMER. I believe when that inquiry is finished, it will 

result in the same written report that we have issued 103 times, 

previously. It will be given, in unredacted form, to our oversight 

Committees, to the White House, to the Office of Government Ethics. And, depending on advice from our Office of Counsel, it will either be redacted on our website, or not. I can’t answer that yet. 

Chairman HENSARLING. So much more ground to cover in your 

previous reports. That will have to be left to other Members of the 

Committee. The time of the Chairman has expired. The Chair now 

recognizes the Ranking Member. 

Ms. WATERS. Thank you very much, Mr. Chairman. I would like 

to cut to the chase. There has been an accusation that you appear 

to have some kind of relationship with Mr. Watt that is rather outsized on your decisionmaking, or on the operation of the OIG. 

Now, I don’t want to talk about whether or not you had lunch 

with him, or whether or not you had some other activity outside 

of the agency. I want to really understand your relationship inside 

the agency. You talk often on the telephone— 

Ms. WERTHEIMER. Never. 

Ms. WATERS. As we understand it. 

Ms. WERTHEIMER. I don’t have any e-mails with Director Watt. 

Ms. WATERS. I can’t hear you. What did you say? 

Ms. WERTHEIMER. I have searched my e-mails. I have no e-mail 

exchanges with Director Watt save for two. One that he sent in November 2014 thanking my predecessor for efforts on the technology 

audit, and one after a holiday party where OIG personnel participated in a choir Director Watt had assembled. And he sent an email to me, every member of the choir, thanking them for their 

participation. 

Ms. WATERS. Describe to me the hotline. What is your relationship to the hotline? Is this a hotline where people can make complaints that you then take a look at and determine whether or not 

that is within your power to deal with? 

Ms. WERTHEIMER. We use a vendor for the hotline because we 

want to make sure that individuals calling feel that they can speak 

freely to someone who, if you will, is going to have no role in deciding whether or not an inquiry should or should not be investigated. 

Those hotline complaints are taken in by the independent vendor. They are then provided to the Deputy Inspector General for 

the Office of Investigations and his Assistant Inspector General. 

And a career professional— 

Ms. WATERS. Do you have access to that information once the 

complaints are taken off the hotline? 

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Ms. WERTHEIMER. I suppose, theoretically, I do, but. 

Ms. WATERS. No, not theoretically. Just do you have access? Do 

you know? Do you listen to? Does someone share the information 

with you? Do you get the information in any shape, form, or fashion? 

Ms. WERTHEIMER. It depends on the allegation. 

Ms. WATERS. So, sometimes you do? 

Ms. WERTHEIMER. Sometimes I do. That is right. 

Ms. WATERS. OK. Evidently, Ms. Grimes used the hotline. 

Ms. WERTHEIMER. Yes. 

Ms. WATERS. And evidently, somehow, the fact that she had used 

the hotline was shared with Mr. Watt, is that right? 

Ms. WERTHEIMER. That is correct. 

Ms. WATERS. Did you do that? 

Ms. WERTHEIMER. I did. 

Ms. WATERS. So that is how he knew that she had used a hotline, is that right? And in a conversation with her, he referred to 

the hotline which caused her to suspect that you had shared this 

information. Why did you do that? 

Ms. WERTHEIMER. Thank you. There had been an investigation 

previously. Not into Ms. Grimes but there were multiple hotline 

complaints alleging prohibited personnel practice in preselecting 

Ms. Grimes for a position. These were not about Ms. Grimes, she 

was the person allegedly preselected. 

Our Deputy Inspector General put together a team of seasoned 

law enforcement professionals, career professionals, long history in 

the Office of Inspector General, as well as a senior investigative 

counsel and the head of our human relations function is a subjectmatter expert. 

They collected documents, they interviewed 12 FHFA individuals, and their fact-finding led them to believe there was no prohibited personnel practice, but because the Office of Special Counsel 

is the office that is, if you will, the personnel police, we had contacted them early in the process to say we wanted to send our factfinding to them so that they could opine on whether or not this was 

prohibited personnel practice. We did that on March 22 and we 

sent the file to them in early April. Ms. Grimes was interviewed 

by these investigators on March 16. 

On March 19, she filed, as she said, a whistleblower complaint 

that had several aspects to it. One, as she said, she suspected that 

the whistleblower complaints, all of which were anonymous, were— 

I think she testified to it—at Director Watt’s instigation. 

And the other was that there was a serious disparity in the promotion or hiring of executives, that there were something like 47 

white males promoted into executive positions and there were only 

five African-American females. 

I found that—I don’t believe that those statistics were originally 

in the whistleblower complaint but the complaint of racial disparity. It is true that we asked her to approach the EEO office because of course that is— 

Ms. WATERS. OK, let me stop you here. Thank you for all of that 

information. Thank you for giving me all of that information where 

it appears what you are doing is you are telling me that you happened to disclose the fact that she had contacted the hotline bemcarroll on FSR431 with DISTILLER

33 

cause of all of the other things that were going on and the interactions you were having but you did not mean to do that and you 

had not started out to do that but that is what happened, is that 

what you are trying to tell me? 

Ms. WERTHEIMER. No, Representative Waters, what I am trying 

to tell you is this. We got a letter from her then counsel on April 

4 saying the EEO office, FHFA, had rejected her claim. I was quite 

concerned about that because these are EEO issues, they facially 

sounded quite intensely serious to me. EEO has a pretty short 

timeline. I felt that appropriate for the EEO office to deal with it. 

Ms. Grimes had already identified herself and her complaint to the 

EEO office. 

What I said to Director Watt was very simple. We have gotten 

a complaint, that complaint is from Ms. Grimes who previously 

made it to the EEO office which rejected it and frankly, sir, you 

need to do your job and tell the EEO office— 

Ms. WATERS. Excuse me, let me stop you again. 

Ms. WERTHEIMER. Please. 

Ms. WATERS. The information about the possibility that you had 

informed Mr. Watt was prior to your conversation with Mr. Watt 

talking about what was happening at EEOC. It was Mr. Watt who 

revealed in a conversation to her, prior to that time, about her complaint having been filed on the hotline. And that is where I am trying to go. Let’s not go all the way to this conversation that you are 

discussing about what you have referred to the EEOC. 

The question is, did you, even prior to that, at any time and in 

any way, reveal to Mr. Watt that she had used the hotline? That 

is all I want to know. 

Ms. WERTHEIMER. She used the hotline to raise an— 

Ms. WATERS. Did you? 

Ms. WERTHEIMER. Yes, ma’am. And— 

Ms. WATERS. Thank you. 

Ms. WERTHEIMER. As I— 

Ms. WATERS. Thank you. 

Ms. WERTHEIMER. As I am entitled to do— 

Ms. WATERS. Thank you. 

Ms. WERTHEIMER. Under the inspector— 

Ms. WATERS. Reclaiming my time. Thank you. That is it. 

Chairman HENSARLING. Time of the gentlelady has long since expired. The Chair now recognizes the gentlelady from Missouri, Mrs. 

Wagner, Chair of our Oversight and Investigations Subcommittee. 

Mrs. WAGNER. I thank you, Chairman Hensarling. Inspector 

General Wertheimer, could you pull the microphone up a little bit 

and close to your—thank you. Thank you for your testimony and 

your willingness to come before our Committee for the second time 

this year. Previously it was before the Subcommittee that I have 

the privilege of chairing, which is Oversight and Investigations. 

Ms. Wertheimer, I have always found you to be fair and honest in 

your assessment of FHFA and the GSEs. 

You have cooperated with our oversight staff in our investigation 

and I very much appreciate that. However, our previous witness 

levied some very serious accusations against you and your office, 

so in an effort to be fair and transparent with all of today’s witmcarroll on FSR431 with DISTILLER

34 

nesses, I want to first ask you some very basic yes or no questions 

and give you an opportunity to respond. 

Again, I will try and go through these because I do have another 

whole line of questioning that I want to get into here. Ms. 

Wertheimer, have you ever retaliated against a witness in an investigation you have conducted? 

Ms. WERTHEIMER. No. 

Mrs. WAGNER. Have you ever reported anything but the facts in 

your investigations? 

Ms. WERTHEIMER. No. 

Mrs. WAGNER. Have you ever altered a report that has been critical of Director Watt because he directly asked you to? 

Ms. WERTHEIMER. No. 

Mrs. WAGNER. To the best of your knowledge, has your staff ever 

done so? 

Ms. WERTHEIMER. No. 

Mrs. WAGNER. Thank you, Inspector General. And I am sure you 

will have more time to respond to some of the claims and allegations. Mr. Chairman, with my remaining time, I would like to follow up on some items I mentioned in my opening remarks. 

Ms. Wertheimer, what circumstances led your office to undertake 

the investigation of Fannie Mae’s consolidation and relocation of its 

Northern Virginia office? 

Ms. WERTHEIMER. We received a whistleblower complaint in the 

spring of 2016, alleging that excessive spending by Fannie Mae in 

connection with consolidation and relocation of its offices. We understood from the newspaper that headquarters was clearly one of 

those offices, and so we rendered our first management alert, I believe, in June 2016. 

Mrs. WAGNER. Your office determined that there was no event 

compelling Fannie Mae to move from its Northern Virginia offices, 

is that correct? 

Ms. WERTHEIMER. That is what we determined. 

Mrs. WAGNER. Do you believe that Fannie Mae, as four FHFA 

employees asserted, could operate out of its current buildings 

which they had owned, instead of spending nearly 3 quarters of $1 

billion on new remodeled offices? 

Ms. WERTHEIMER. I have no opinion outside the record that our 

career investigators developed. We have the four individuals who 

are FHFA employees, who separately told us in interviews that 

they could remain for the indefinite future at no decrease to their 

operations and at no significant cost, but that management of 

Fannie Mae had adopted a strategy which FHFA endorsed and 

therefore the move went forward. 

Mrs. WAGNER. FHFA which is in conservatorship that borrowed—what $3–1/2 billion? 

Ms. WERTHEIMER. Well Fannie Mae has gotten in excess of $119 

billion from taxpayers and took money in February 2018 because 

of the change in the tax code that caused them to revalue their deferred tax assets and therefore they reported a loss, but that is all 

correct. 

Mrs. WAGNER. And then went forward with a $727 million renovation of—and they don’t even own this, they rent that. Is that 

right? 

mcarroll on FSR431 with DISTILLER

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Ms. WERTHEIMER. That is correct, and I think that number is 

higher because factored into that was an estimate of $140 million 

for the sale and— 

Mrs. WAGNER. Yes, they only sold it for $90 million, didn’t they? 

Ms. WERTHEIMER. Yes, ma’am. 

Mrs. WAGNER. I have so many questions, Mr. Chairman. Since 

there was no compelling event or reason, what reasons were offered 

by Fannie Mae to justify the move that we previously discussed? 

Ms. WERTHEIMER. The strategy that management had adopted to 

get out of owning real estate, and to have an open workspace plan 

where their workforce could— 

Mrs. WAGNER. An open workplace plan? 

Ms. WERTHEIMER. Yes ma’am. In the early 2000’s this became 

very popular in technology companies, and it became the rage, I 

think it is fair to say. What we looked at as our report makes clear, 

are scientific studies that have been done to show that in fact the 

proposed benefits are nil and the costs in terms of diminution and 

productivity— 

Mrs. WAGNER. Did your investigation find that these reasons 

were supported by fact and hence were a valid justification for the 

move? 

Ms. WERTHEIMER. I think we found that there was no evidence 

that they had to support the justification of open workspace, but 

the belief that it was positive. I think what we found was in fact 

the scientific evidence to the contrary. 

Mrs. WAGNER. Mr. Chairman, I will yield back and I will to ask 

for any other Members to yield me time going forward, I thank you 

for your indulgence. 

Chairman HENSARLING. Time of the gentlelady has expired, the 

Chair now recognizes the gentleman from Texas, Mr. Green, Ranking Member of our Oversight and Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. And I thank the Ranking 

Member as well. And thank you Madam Inspector General for appearing today. Ma’am, you are a Yale Magna. You were on the law 

review at Columbia, you have your J.D. from Columbia. You are a 

member of multiple bars, in fact, it would not be inappropriate to 

call you a lawyer par excellence. Given your credentials, I need not 

explain to you the benefits and detriments associated with anonymity in litigation. 

Ms. Grimes has made statements about her desire to maintain 

her anonymity. You have indicated that you were in an area where 

you could hear her commentary, is that correct? Could you hear her 

statements about her desire to maintain anonymity? 

Ms. WERTHEIMER. I was aware that she had requested anonymity in her whistleblower complaint about racial inequality in the 

executive ranks, her EEO complaint that she sent to us, that is correct. 

Mr. GREEN. Thank you. And she was quite explicit with her testimony today in terms of her desire to have anonymity. You probably 

didn’t hear my commentary about persons being above and beneath 

the law. Being beneath the law is honorous. Ms. Grimes didn’t say 

this but in my opinion she believes that she was beneath justice, 

in the sense that her desire for anonymity was violated. 

mcarroll on FSR431 with DISTILLER

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If she made the request, and if it was received, why was the request not honored for her to have anonymity? Again, as a lawyer 

par excellence you really don’t have to have me explain to you why 

her anonymity was important. So why was that request not granted? 

Ms. WERTHEIMER. So there are two issues you have raised and 

I will address both of them. The request that she asked for anonymity involved her claim of racial disparity in the executive 

ranks, which sounds in EEO, I would maintain to you the Inspector 

General Act does not authorize us to look at that claim. It is a serious claim and her then-lawyer, on April 4, told us that the FHFA 

EEO office had rejected it, thrown her out of the office. 

It seemed to me that the Inspector General Act sections four, 

five, and eight permit me to disclose where I feel it is necessary. 

Anonymity— 

Mr. GREEN. May I kindly intercede, please? 

Ms. WERTHEIMER. Yes sir. 

Mr. GREEN. Why would you believe that it was necessary to expose her given that you and I know the benefits and detriments associated with exposure? We are both lawyers. Why was it necessary 

to expose her? 

Ms. WERTHEIMER. This was an EEO racial disparity claim. The 

Director needed to tell the EEO office to do its job and look at this, 

not discard her claim and tell her to leave the office. But that isn’t 

the claim that is the subject of her concern about being outed in 

court, OK? 

We had no knowledge of any of the sexual harassment until July, 

on or about the 3rd, shortly thereafter, that Ms. Grimes had sent 

an e-mail three times to more than 100 FHFA managers that attached some transcripts of recordings and a segment of an audio 

recording, and a discussion of her harassment complaint against 

the Director. 

She had sent it on her FHFA computer from her FHFA.gov address to her lawyer, but not only to her lawyer, to more than 100 

FHFA managers. That is how I first became aware of her sexual 

harassment claims. That alone, sir, would not—let me— 

Mr. GREEN. If I may just a moment because my time is about— 

Mr. Chairman, because we don’t have an abundance of Members 

here, may I kindly have some additional time to explore this? 

Chairman HENSARLING. The gentleman may proceed. 

Mr. GREEN. Yes, ma’am. Assuming that what you have said is 

entirely correct for our purposes, whether that was done by accident or with intent, it still does not negate her desire to have her 

anonymity as it relates to litigation. 

And there are reasons beyond what the eye can see initially that 

would benefit her in having her anonymity. 

Ms. WERTHEIMER. Yes, sir. And let me address that as that is 

what I was going to get to until you wanted more— 

Mr. GREEN. My apologies, I had to get the additional time. 

Ms. WERTHEIMER. No, I completely understand. We learned from 

that exchange that there were recordings and transcripts. We made 

a request to her counsel who said she would be happy to give them 

to us. 

mcarroll on FSR431 with DISTILLER

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We made a similar request to Director Watt for all of his relevant material and the team investigating the matter we had 

opened decided that it would be best to proceed by subpoena so 

that we weren’t at the end of this process, someone didn’t come up 

with a piece of evidence and that we were then held—why didn’t 

you subpoena it, you didn’t get all the materials. 

So we issued what I would call friendly subpoenas, we told the 

lawyers in advance, they accepted service and her then-lawyer, who 

is now her current lawyer, said oh yes we will give you the recordings. Come and get them but bring your own IT person, which we 

were fully prepared to— 

Mr. GREEN. You may have to abridge if you would please. 

Ms. WERTHEIMER. Absolutely. Ms. Grimes subsequently got in 

touch with us and over a series of e-mails communicated to us that 

she was never going to give us the recordings. 

And so the team that was handling this— 

Mr. GREEN. May I kindly say this? It sounds like you are getting 

to a point where you are being vindictive. 

Ms. WERTHEIMER. No, sir. No, no. 

Mr. GREEN. Well I am just letting you know so that you can correct yourself. 

Ms. WERTHEIMER. So I appreciate that. 

Mr. GREEN. All right. 

Ms. WERTHEIMER. I am trying to move quickly and I am sorry 

if my tone is incorrect. Ms. Grimes had indicated in a series of emails to these individuals working on this inquiry that she was not 

going to give us the recordings. 

The decision was made by them in consultation with our office 

of counsel, as I understand it, to move to enforce the subpoena. We 

wanted to file that motion under seal. 

I want to be clear about that and it is demonstrable in our e-mail 

to the Eastern District of Virginia U.S. Attorney’s Office. What we 

got back was an answer that said no, exclamation point. 

I have been told that there were then a series of conversations 

between our lawyers and the U.S. Attorney’s Office for the Eastern 

District of Virginia in which they advised that Eastern District of 

Virginia local rule five, I believe favors filing under seal that the 

judge would—we would need, because of a duty of candor to the 

court, to present the e-mails that Ms. Grimes had sent to her hundred plus colleagues and the transcripts and that we would never, 

ever prevail in a motion seal and moreover, we were told— 

Mr. GREEN. If I may intercede, Mr. Chairman, I beg just this 

please, if I may just ask you this. 

Chairman HENSARLING. Mr. Green, I am—this does need to be 

your last point. It’s an important line of questioning but votes are 

imminent on the floor. We do have other Members— 

Mr. GREEN. I do apologize, Mr. Chairman, I do apologize. But 

ma’am, you have introduced hearsay, what someone told you about 

a meeting that took place, and you have also indicated that there 

was a seal but we are talking about a seal of an entire record and 

I am not talking about that. 

We are talking about anonymity as it relates to her identity. 

That is the question. Now I appreciate—I have to yield back the 

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balance of my time. But I think that an injustice was perpetrated 

when she was outed. 

Chairman HENSARLING. The time of the gentleman has long, long 

since expired. The Chair now recognizes the gentleman from North 

Carolina, Mr. Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. I yield my time to 

the gentlelady from Missouri. 

Mrs. WAGNER. I thank the gentleman for yielding. Heading back 

to Northern Virginia, Inspector General, what is the status of the 

sale of the property owned by Fannie in Northern Virginia and 

have they signed the lease for the new building which includes the 

renovations and such up to $727 million and then some? 

Ms. WERTHEIMER. I do not know the status of the sale. When I 

had written to Director Watt to ask him to direct Fannie Mae to 

suspend any sale until our report issued, Mr. Ryan, who was the 

Acting Deputy Director of the vision of conservatorship assented to 

that. 

But our report has issue, so I am not able to answer you on the 

question of have the properties been sold. With respect to the lease, 

my understanding is Fannie Mae did execute that lease months 

ago. 

Mrs. WAGNER. The lease for the new properties? 

Ms. WERTHEIMER. Correct. 

Mrs. WAGNER. The new properties, the old property that they owned they tried to sell for $140 million, only got $90 million for 

it. But we don’t know whether that sale has completed or anything? 

Ms. WERTHEIMER. I do not know. 

Mrs. WAGNER. Well I hope not, because I would sure like to see 

the taxpayers restored here. Going back, Inspector General 

Wertheimer, you appeared before my Oversight and Investigations 

Committee some months ago and we talked then about your concerns that you had highlighted about extravagant buildings and 

the lack of oversight. 

In fact, recent renovations in their locations in Dallas, Texas, I 

believe you found that they had $24.2 million in excessive cost, is 

that correct? 

Ms. WERTHEIMER. As of the time we wrote the report, yes. 

Mrs. WAGNER. There are properties in downtown D.C., $32 million in additional upgrades that Director Watt approved. Is that 

correct? 

Ms. WERTHEIMER. It is correct. 

Mrs. WAGNER. And you had that in your report also. 

Ms. WERTHEIMER. A separate report, but yes. 

Mrs. WAGNER. I see quite a pattern of taxpayer abuse here on 

the elaborate and extravagant renovations of properties that they 

lease and don’t even own. Going back again to something that I 

brought up, there was an investigation about the $7.7 million that 

was spent to produce additional qualified examiners. 

Yet, as I stated, after nearly 7 years, FHFA has in fact one less 

qualified commissioned examiner than they had back in 2011. Did 

you do a report on that, ma’am? 

Ms. WERTHEIMER. We did, we issued it I believe earlier this 

month. 

mcarroll on FSR431 with DISTILLER

39 

Mrs. WAGNER. And what did your investigations find? 

Ms. WERTHEIMER. This was what I will call a capstone report. It 

followed on previous reports we had done starting in 2015. Back in 

2011, we wrote a report about whether FHFA had a sufficient complement of qualified examiners to examine the entities they supervised, and we concluded they did not. 

And one of the things we pointed out was they lacked a commissioning program. Their counterparts, the FDIC, the OCC, the Federal Reserve were all, they have very well established commissioning programs, commissioned examiners, and those Prudential 

Federal Financial Regulators are used to lead high-risk exams and 

exams of large financial institutions which we certainly have here. 

FHFA agreed and they developed a program which they rolled 

out in 2013. And so in 2015, we did our first compliance review and 

found many shortcomings with that program, which FHFA agreed 

to address. We did a status report in 2017 and found they had done 

some of the things they had committed to do, but not others. And 

so we thought it was appropriate to now look in 2018, how far 

things have come in 7 years and what we found we reported. Not 

only do they have one less examiner, not only have they had problems with their exam, not only of the targeted exams of the enterprises in the last two supervisory circles— 

Mrs. WAGNER. Ms. Wertheimer, I am about to run out of the gentlemen’s time. 

Ms. WERTHEIMER. Sorry. Sorry. 

Mrs. WAGNER. Does Director Watt follow any of the recommendations that you, as Inspector General, put forward in your multitude, 103 plus reports? 

Ms. WERTHEIMER. I think I have testified, yes he does agree to 

certainly well more than 50 percent. I believe, I would have to go 

back and give you the exact percentage on supervision but the real 

tell here is not only what he agreed to, Madam Chairman, but 

what is actually implemented and I think as I have testified when 

you look at supervision, he has accepted 71 percent of our recommendations or 45— 

Mrs. WAGNER. But have they been implemented? 

Ms. WERTHEIMER. Only 30 have been implemented. But remember, when we went—I mean that is the point of compliance testing 

and so your questions about the HFE program are important because what did we find? Wholesale lack of implementation. 

Mrs. WAGNER. Wholesale lack of implementation. In fact, it went 

backward, one less examiner. 

Ms. WERTHEIMER. They are redoing the program top to bottom. 

Mrs. WAGNER. Again. Here we go. The gentleman’s time has expired. I again thank the Chairman. 

Chairman HENSARLING. If the gentlelady would suspend, the 

Chair was quite generous with the gavel with the previous Member 

if this gentlelady would like to ask another question or two to help 

balance the time, she is free to do so. 

Mrs. WAGNER. That is all right. I will wait for some more additional time down the road sir. Thank you kindly. 

Mr. PITTENGER. My time has expired, thank you. 

mcarroll on FSR431 with DISTILLER

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Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Missouri, Mr. Cleaver, the 

Ranking Member of our Housing and Insurance Subcommittee. 

Mr. CLEAVER. Thank you Mr. Chairman. I just have one question 

and if my colleague, Mrs. Wagner, would like to have some of my 

time I would be certainly willing to do that. 

My one question is what can be done to make certain that if 

someone comes up with a similar or, frankly, any complaint against 

the top levels of FHFA, can they be assured of anonymity and understanding that some the things that could happen as a result of 

that becoming public? 

Ms. WERTHEIMER. I certainly understand the concern you raise. 

The issue that we had in this particular matter was, and I appreciate Representative Green’s concern about anonymity. We, as I 

said, wanted to file under seal but we are lawyers signing the papers and we have court rules we must follow. 

Assistant U.S. attorneys who were handling this matter were 

told we could not file it under seal in light of the facts presented 

to them which they would disclose to the court. If there were a different fact pattern, we would not have this issue with anonymity. 

We would have— 

Mr. CLEAVER. If what, I am sorry? 

Ms. WERTHEIMER. Had we had a different fact pattern here that 

we didn’t have 1/6 of the agency with the information, we would 

have filed under seal. 

Mr. CLEAVER. OK. Friedrich Nietzsche the German philosopher 

said, ‘‘the muddied the waters to make them seem deep,’’ and I am 

not accusing you of anything, I just think we generate or we create 

all kinds of rules that appear to be too muddy for us to get the 

clear water back and see what is going on so we can make corrections. 

And I understand you have to comply with the court. You made 

that, you swore that in. But something needs to be done. I don’t 

know who needs to do it. Something needs to be done so that when 

people bring very sensitive matters up, they can be protected. I 

don’t know—look I am just a preacher. I didn’t go to law school. 

I went to the seminary. So our role every Sunday is to unmuddy 

the water. That is all I would like to know and like to see for some 

way, if this happens again, there has to be something to protect the 

person who came forth. That is not a question unless you have an 

answer but it is something that really troubles me. I just went 

through something with my niece within the military. It’s taken us 

3 or 4 years, my staff, everybody involved. She was raped in the 

military. 

Ms. WERTHEIMER. I am sorry to hear that. 

Mr. CLEAVER. Three or 4 years—I would have to ask my staff. 

Three or 4 years later we—I can say it publicly now. One time I 

couldn’t get through this. But everybody in the military knew 

about it before she had a chance to finish crying. 

It was something that was personal. I am glad this is not the 

same, I am just saying that bothers me on a personal level and I 

wish we could have some assurance that would not happen again, 

that which happened to Ms. Grimes. I don’t need an answer. 

Chairman HENSARLING. The gentleman yields back? 

mcarroll on FSR431 with DISTILLER

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Mr. CLEAVER. I yield back. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Wisconsin, Mr. Duffy, Chairman of our Housing and Insurance Subcommittee. 

Mr. DUFFY. Thank you, Mr. Chairman, Ms. Wertheimer. Welcome to the Committee. I want to talk about an article that was 

in the Wall Street Journal Thursday, I believe it was August 15th 

or 16th of this year, entitled, ‘‘U.S. Pursues One of the Biggest 

Mortgage Fraud Probes Since the Financial Crisis’’. Most people 

generally say that multi-family books of business are doing great, 

no problems. At least that is what I think the private sector would 

say. The story talks about how several owners took out mortgages 

on buildings under false pretenses. 

When inspectors would stop by the buildings, the owners would 

make vacant units look occupied. Turn on the radio, turn on the 

lights, put shoes outside the door, all kinds of gimmicks to make 

units appear to be rented when they were actually vacant. I believe 

you are working with the FBI on the investigation of several bad 

actors in regard to these tactics. 

But the story paints a pretty grim picture of apartment owners 

gaming the system. And I want to be clear, I don’t think this is all, 

this is usually a really good space, but you do have people gaming 

the system to take out larger mortgages in order to expand their 

businesses even faster. I think there was an example of one developer who has about $1.5 billion of securities issued by the GSEs. 

So the question is how did this happen? How does it happen? 

Ms. WERTHEIMER. Representative Duffy, I am in no—that is an 

open investigation. I am really not at liberty to comment on that 

or any other investigations. Multi-family is a focus for us. It has 

been a safe space, but we are looking hard at it. And beyond that, 

I think it would be improper for me to go any further. 

Mr. DUFFY. So, but if you look at maybe just—OK, fair enough. 

But policies and procedures to verify the units are occupied, is 

something missing in Fannie and Freddie’s process. 

Ms. WERTHEIMER. I don’t think I have enough information right 

now to answer that question. Stay tuned and I am sure we will 

have a better answer when we have done more work on this. 

Mr. DUFFY. Maybe I will just talk about my own experience, but 

I think when you get a mortgage—this can go to Fannie or 

Freddie—I believe I have to submit my bank records. And they 

want to actually verify that the money that I make they see going 

into my account. And they just don’t want 1 month. I think they 

wanted 3 months of my bank records so they could verify that I 

make what I said I made. 

But is that not the case for a multifamily owner? Do we not 

verify if you say listen, I got 120 units but 110 of them are rented, 

but we look at their bank records, we go where in the hell is the 

rent coming from because I don’t see it going into your account. 

Seems like a pretty—we have crafted a pretty smart solution for 

the average fellow in America, but the multi-family seems to have 

a different standard. Am I wrong on that? 

Ms. WERTHEIMER. Again, I think it is premature for me to answer your question. 

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Mr. DUFFY. Well that is, no, this is not an investigation, this is 

policies and procedures that are used. 

Ms. WERTHEIMER. It is not necessarily the policies being—that 

the policies are poor or weak or it may well be— 

Mr. DUFFY. OK, so do we verify income? 

Ms. WERTHEIMER. May be the— 

Mr. DUFFY. Do we verify income? Do you know? 

Ms. WERTHEIMER. Remember, I—remember, Fannie and Freddie, 

it is the— 

Mr. DUFFY. Multi-families? 

Ms. WERTHEIMER. I am sorry, they are not making the mortgages, it is the originators who are making the mortgages. 

Mr. DUFFY. But do we also set up policies— 

Ms. WERTHEIMER. There are policies on— 

Mr. DUFFY. And do we have policy that comes from Fannie and 

Freddie that require that there is income verification of owners of 

multi-family units? 

Ms. WERTHEIMER. I know there is verification but whether it is 

the pay statement says when you try to own a single family house, 

that I can’t answer that question. 

Mr. DUFFY. And I wanted—I know—I thought this was going to 

take less time than it is. I just, I didn’t know that I got a clear answer from you. And I knew you were trying to say a lot of things 

and maybe someone else will ask you this question. The anonymity 

issue I think was important. I think you were trying to give us an 

explanation as to the circumstances and you couldn’t fit it into 2 

minutes, and I understand that complication takes time. I would 

hope that at one point you could explain that to us, the full circumstances without interruption. 

And I know that Mr. Green was trying to move his time along. 

He didn’t have much, but that is something that I am interested 

in because I think there’s more to the story that we weren’t hearing just because we are all limited in the amount of time that we 

have and I think all of us would be interested in hearing that from 

you. And also I can’t ask it, but the cooperation from Mr. Watt has 

concerned me and I wish I could ask about that as well, but my 

time is expired. I yield back to the Chairman. 

Ms. WERTHEIMER. As I said, I would be happy to explain that 

and Representative Green, I am sorry if my tone was wrong. It was 

more that I was trying to speak very quickly. 

Chairman HENSARLING. We will grant the witness additional 

time to further address the issue. So the witness is recognized. If 

you wish to speak to Mr. Duffy’s point. 

Ms. WERTHEIMER. I would wish to speak to Mr. Duffy’s point because I think they are two separate issues here, one that—well, 

maybe three. There was an investigation. We had multiple whistleblower complaints anonymously in 2017, alleging not that Ms. 

Grimes did anything wrong. I think there was a complaint that Ms. 

Grimes was encouraging people not to apply. Our human relations 

expert said to us, doesn’t matter what she says, she is not the selecting official, she can say whatever she wants. 

That was never something we looked at because there’s no problem with that. What the claims were, were that FHFA had too 

many executive positions, but they created a new position expressly 

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for Ms. Grimes that the very senior leadership had told two senior 

managers not to apply for the position. The position announcement 

was a sham because it was only for Ms. Grimes and FHFA always 

intended to award the position to Ms. Grimes. 

That was, if true, if we were able to find the facts and OSC was 

applying the law to the facts, that would likely be a prohibited personnel practice. 

The Deputy Inspector General for investigations opened an administrative entry into those complaints. I was aware of those complaints, but those are run by career professionals. All I do is periodically ask how is it coming along. 

Our Chief Counsel went to speak to the Deputy Chief Counsel 

of FHFA to say please do not fill the position until his inquiry is 

over, because if it is a prohibited personnel action, we have no idea 

if it is or it isn’t, you would have to unwind it. 

So rather than have to do that, please don’t fill it. We note that 

Director Watt was advised of that legal hold and I did tell Director 

Watt that he and senior staff would be interviewed as part of this 

administrative inquiry. 

Again, I believe that is appropriate under my duties under the 

IG Act. That is the sum and substance of what I told him with respect to the administrative inquiry. 

Mr. DUFFY. Could I just inquire further clarification, Mr. Chairman? 

Chairman HENSARLING. One point. 

Mr. DUFFY. So just at this point, anonymity had not been violated at that point, to what you just indicated, correct? 

Ms. WERTHEIMER. No. 

Mr. DUFFY. Right, OK. So just wanted to be clear about that. 

Ms. WERTHEIMER. No. So as I said, this team of rare government 

investigators, lawyers, their subject-matter expert conducted 12 

interviews, reviewed documents, interviewed Director Watt, interviewed Ms. Grimes, was working in coordination with the OSC, 

and we sent them a letter on May 22 saying our fact-finding was 

done and we were going to send the matter over to them. 

And on April 2, we in fact collected the documentary evidence, 

summaries of the interviews and sent it to the OSC. The OSC on 

May 3, notified us that their preliminary determination was there 

was no prohibited personnel action, if we wanted to challenge that 

decision, we had 13 days. We notify them we were not going to 

challenge or otherwise comment on their letter and we notified the 

agency promptly. So you can say we cleared the way for Ms. 

Grimes to get the position she sought. 

With respect to what has been called an outing of Ms. Grimes, 

she did file a complaint with us on the 19th. Our senior investigative counsel reached out to her to ask if she would waive anonymity as well as has she been to the EEO office because this really 

sounded in EEO, and Inspectors General don’t have authority to investigate EEO complaints. 

And her then-lawyer wrote us back on April 4 saying yes, she 

had been to the EEO office and they told her because there were 

anonymous whistleblower complaints, they wouldn’t hear her complaint. Her complaint wasn’t about anonymous whistleblowers, it 

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was about racial disparity in hiring and promotion of AfricanAmerican women. That is plainly an EEO issue. 

In consultation with my staff and given the short EEO timelines 

and given the fact that no one had alerted us in this inquiry that 

there was any untoward relationship or improper conduct by Director Watt, I raised with Director Watt the fact that his EEO office 

had chewed out a claimant who appeared on her face to have a 

very valid claim, and he needed, if you will, legally to mandamus 

them, go do your job and I believe the IG Act permitted me to do 

that. 

It wasn’t until July that anyone in my office became aware of 

any claims of sexual harassment, which had nothing to do with our 

prior work. 

Mr. DUFFY. Mr. Chairman, you thought you were doing your job 

as you exposed her name. It was required— 

Ms. WERTHEIMER. To tell him that his EEO office had thrown 

her out improper. 

Mr. DUFFY. Ms. Wertheimer, thanks Mr. Chairman for the time, 

because I think it is important. 

Chairman HENSARLING. One more Member whose time has long 

since expired. The Chair now recognizes the gentlelady from Ohio, 

Mrs. Beatty. 

Mrs. BEATTY. Thank you, Mr. Chairman, and thank you for being 

here. I am going to try to be very brief because I have a lot of questions. So I am going to try to ask the short questions, ask you to 

say yes or no. So now the mystery is solved, we know you are the 

one that called Mel Watt. Had you ever about Ms. Grimes? 

Ms. WERTHEIMER. I met with him. 

Mrs. BEATTY. Met with him, shared with him— 

Ms. WERTHEIMER. Shared—yes I did. 

Mrs. BEATTY. Had you ever done that before with anybody else? 

With any other Director when something was anonymous, yes or 

no? Yes or no? 

Ms. WERTHEIMER. No. 

Mrs. BEATTY. OK, now you said it was an EEO claim which 

wasn’t in your jurisdiction. We talked about tone here. Do you 

think your tone could be a message for ‘‘handle that?’’ Like, take 

care of her, make this go away. 

Ms. WERTHEIMER. Absolutely not. It was—this is serious. 

Mrs. BEATTY. OK, did that name mean anything to you? I am 

trying to follow the years of 2017 and then this came up. So when 

you heard it was Ms. Grimes, did that ring a bell on anything like 

the other— 

Ms. WERTHEIMER. I knew we had looked— 

Mrs. BEATTY. So you know that this was someone, and you had 

never before exposed anyone to a Director. In your mind, do you 

think that tone could be, this a problem person, now I am going 

to out her and tell the Director because you knew the name. 

Ms. WERTHEIMER. But she had done nothing wrong. 

Mrs. BEATTY. It didn’t matter, it was anonymous. She went to 

something to protect her safety, to be anonymous. This wasn’t even 

in your area of jurisdiction, something you even thought about or 

cared about, according to you, because it was EEO. It wasn’t something that fell into your purview. So now you call a major Director 

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and you tell him, handle it. So let’s fast forward. When you did become aware of this same person whom you knew something about, 

with a sexual harassment, did you call Mel then and say, handle 

it? 

Ms. WERTHEIMER. No. 

Mrs. BEATTY. OK, help me understand. Somebody, who you are 

now wanting me to believe, that you knew her name when it was 

EEO and you felt that she had been mistreated, now the same person that you were trying to help versus handle it, quiet her up, 

now she has—and you are a female—now she is going through sexual harassment, you know she has had EEO, you know she is a 

person of color. You now know that there’s all this data about disparities. You didn’t pick up the phone and call Mel then? 

Ms. WERTHEIMER. Absolutely not. 

Mrs. BEATTY. Why? Why? 

Ms. WERTHEIMER. Because that complaint was clearly in our jurisdiction. 

Mrs. BEATTY. Did you tell him we have a claim in our jurisdiction? Did you pick him up and not say handle it, say, I have a complaint in my jurisdiction. 

Ms. WERTHEIMER. No. In fact, he wanted to meet with us to discuss— 

Mrs. BEATTY. How did he know you knew? 

Ms. WERTHEIMER. Because his chief of staff called the Associate 

Inspector General, and I was told Director Watt would like to meet 

to talk about how the process of the Inspector General will investigate and we said no. 

Mrs. BEATTY. Did you think it seemed unfair, unreasonable, that 

someone who is working two jobs at a lower pay and is doing two 

jobs and a higher level job, did that seem strange to you? Not in 

your jurisdiction, maybe. 

But did you call Director Watt and say, why? Look into this? I 

mean, you were comfortable enough to call him on an EEO complaint that wasn’t in yours, so now when you get this whole composite of stuff, did you call anybody and say, what is going on with 

this? 

Ms. WERTHEIMER. I think we are suggesting that we knew about 

everything in the EEO complaint— 

Mrs. BEATTY. You said you know and cited her figures. You said 

30 or 40, less than 5. You didn’t know at that time if it was true, 

but later the numbers seemed accurate. So at some point you knew 

what she was saying. 

Ms. WERTHEIMER. What I knew at the time— 

Mrs. BEATTY. Well whenever, timing doesn’t matter to me. 

Ms. WERTHEIMER. But it does matter. 

Mrs. BEATTY. No it doesn’t to me, my time. When you found out 

at any time, did you call anybody and say, do something, this is 

a problem, is she really working two jobs? Is she not getting equal 

pay for equal work? 

Ms. WERTHEIMER. We knew her EEO complaint had already 

raised those issues. 

Mrs. BEATTY. Did you talk to anybody in EEO? 

Ms. WERTHEIMER. No. 

Mrs. BEATTY. But you called Mel. It’s not your area. 

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Ms. WERTHEIMER. I did not call Mel. 

Mrs. BEATTY. You met with him. You told him, same thing. 

Ms. WERTHEIMER. I did tell him. 

Mrs. BEATTY. What was his response when you told him? 

Ms. WERTHEIMER. OK, thanks. 

Mrs. BEATTY. What did that mean to you? 

Ms. WERTHEIMER. He would look into it. 

Mrs. BEATTY. OK. Did you follow up to see if he did? 

Ms. WERTHEIMER. I didn’t. 

Mrs. BEATTY. Why? It was enough and important for you to do 

it. Why? 

Ms. WERTHEIMER. Because I knew EEO investigations took a 

while. I knew that, I have never had a situation where the Director 

has said, I would do something—well, that is not true. 

When he said he is going to agree to a recommendation, that we 

get a completion of corrective action memo, and they say they have 

done it. We have, subsequently, learned sometimes they haven’t. 

Mrs. BEATTY. OK, so I get it, and I am almost out of time. You 

are a very detailed person. You have said 103 reports— 

Ms. WERTHEIMER. Yes. 

Mrs. BEATTY. Seven times. Where we are now, how do you feel 

about this case in your role? Here’s somebody that is working two 

jobs and not being paid. And—and may I have— 

Mr. ROYCE [presiding]. The gentlelady’s time is expired. 

Mrs. BEATTY. People on both sides— 

Mr. ROYCE. They weren’t— 

Mrs. BEATTY. I am—I am the last one sitting over here. And everybody else has had 9, 7 extra minutes and I have 2? 

Mr. ROYCE. I am going to follow you, but you are wrapping it up. 

Could you respond? And then we will— 

Mrs. BEATTY. Thank you. How do you feel about a female who 

is a scholar? I mean, her academics, her work, her commitment to 

community. How do you feel about somebody working two jobs and 

not being paid, equal pay for equal work? And we are still dealing 

with this and it appears that nothing has happened. 

Ms. WERTHEIMER. I don’t agree that nothing has happened, 

ma’am. 

Mrs. BEATTY. Has she been paid? Is there equity? 

Mr. ROYCE. I am going to ask—we are going to have a response. 

We are in the middle of votes. 

Mrs. BEATTY. That is my last question, Mr. Chairman. Thank 

you. 

Mr. ROYCE. OK, thank you. 

Ms. WERTHEIMER. Ms. Grimes has pursued her claims, both, administratively and in Federal court. I am—I just— 

Mrs. BEATTY. I was just asking your feelings. 

Ms. WERTHEIMER. I cannot affect giving her any money. I have 

no power over FHFA, but the power of recommendation. 

Mrs. BEATTY. I will yield back my time because that wasn’t my 

question. Thank you, Mr. Chairman. 

Mr. ROYCE. Thank you. I want to say, Inspector General, I would 

like to make a point. And that was, in the decade leading up to the 

financial crisis of 2008, Fannie Mae and Freddie Mac spent nearly 

$200 million on lobbying activities and campaign contributions. 

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And that political pull that they had, had considerable impact 

here. In 2003, I introduced legislation, and again in 2005 in the 

form of an amendment which would have reined in these government-sponsored enterprises, allowing them to be regulated for systemic risk. 

As you know, they were able to over-leverage with these portfolios. That over-leverage got to the point of 100 to 1. And their political pull on the process, here, was used to oppose changes that 

would have allowed them to be regulated for systemic risk. 

The Federal Reserve Chairman, Alan Greenspan, backed the 

amendment. That was not enough to overcome the outsized political pressure brought by the GSEs themselves. The power and influence they wielded had few peers. You would have to go to Japan 

to see the power, then, of the government-sponsored enterprises 

that created the same political pull. 

It was very difficult for that to be reformed as well. I think it 

is critical that we avoid this distortion in our housing finance system in the future, that comes about because these entities have 

that capability. 

The GSEs are, currently, prohibited from lobbying in political activity due to the terms of the conservatorship. Do you believe the 

FHFA has properly enforced, and consistently implemented these 

regulations in terms of prohibition? 

Ms. WERTHEIMER. As my understanding is, that it is not a regulation. It’s a conservatorship directive that was put into place in 

2008 that was an absolute ban, and has been modified over time. 

I think it is fair to say that it is no longer an absolute ban. 

Mr. ROYCE. OK. Let me make this point. There have been numerous reports of senior executives at the GSEs meeting with Federal policymakers to advocate for being taken out of conservatorship, recapitalized, and released. Given the lobbying ban is not in 

statute, do you agree that it would be appropriate to make the ban 

on GSEs lobbying, permanent in law? 

Ms. WERTHEIMER. So, my personal opinion or? 

Mr. ROYCE. Yes. I will ask your personal opinion. 

Ms. WERTHEIMER. We have done no work on that. We are in 

the—that is a mistake. We are in the middle of reporting on that. 

I don’t have a basis, in the work we have done, to answer that 

question. Although, I would say to you, if you read the conservatorship directive, it gives the—under Fannie and Freddie, far more 

latitude than you might otherwise think. 

Mr. ROYCE. Hope. Than I might otherwise hope. With this in 

mind, by the way, I plan to introduce legislation with two objectives: The first, to explicitly prohibit Fannie and Freddie from engaging in lobbying activities while in conservatorship, or receivership. And second, at such time that Fannie and Freddie are no 

longer in conservatorship, to require the GSEs to promptly and 

publicly disclose lobbying contracts. 

And I would encourage my colleagues on both sides of the aisle 

to join me in this effort. And I think that, based on our experience, 

not here in the U.S. alone, but also with other government-sponsored entities in the past, that have been able to weigh in and influence judgment, and use political pull in order to over-leverage, 

which is what we have seen again and again around this globe. 

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This is a very prudent step. I yield back. And, at this point we 

have Mr. Budd from North Carolina. 

Mr. BUDD. Thank you. Again, I thank you for being here. And 

I will try to be brief, and in a very different line of questioning 

than we have had most of this morning. Perhaps it will be a little 

bit of a relief. 

I want to talk about cybersecurity, and the significant financial 

data, and personally identifiable information that the GSEs store. 

In 2016, FHFA failed to complete your cybersecurity examination, 

correct? 

And in 2017, they improved and completed four out of six. But 

I am still concerned that the exams did not address some major deficiencies that were identified. Can you tell me, and please describe, some of the issues you have identified with FHFA’s 

cybersecurity controls? 

Ms. WERTHEIMER. Controls with respect to the GSEs? 

Mr. BUDD. Correct, particularly in regards to personally identifiable information. 

Ms. WERTHEIMER. What we have seen, as you have identified, 

multiple failures to perform the supervisory activities that they 

had planned with respect to cybersecurity and you have summarized the work we have done. We have an ongoing audit that is 

looking at updating what has happened since the prior reports and 

I don’t know whether they have made improvements or not because 

we haven’t finished our field work on that. 

Certainly the findings of our prior reports gave me significant 

concerns. 

Mr. BUDD. So are you going to take it, from what you have seen 

so far, are you going to take any action to correct the identified 

problems so far and will you be sure to review their promises to 

correct FHFA, the actions that they have agreed to undertake? 

Ms. WERTHEIMER. We just don’t have the ability to do anything 

in terms of take action. We can only recommend. We have made 

recommendations in terms of accessing whether they have enough 

people in our 2017 report for example, even though in 2016 they 

said they had plenty of people, we saw in 2017 with Fannie Mae 

they didn’t do the exams they had planned and we said, ‘‘Hey you 

really need to look carefully at this.’’ And we had a memo from the 

staff saying, ‘‘No, we don’t have enough people,’’ but that recommendation is still open. 

Certainly when we hear from them we will take action to see 

whether they have implemented what they said they would do. 

Mr. BUDD. So about not completing the exams, in your mind 

what improvements need to be made so that all scheduled examinations can be completed on schedule? 

Ms. WERTHEIMER. Well there are two issues. One is the risk assessment process, because, while I have one in place as we have 

reported, it bears no relations to what the work is that they are 

actually undertaking. 

So we have recommended again and again that they beef that up 

and that the risk assessments actually tie to their planned supervisory activities. The second thing is, we have said, having looked 

and again we looked at it in 2016, we needed to give them some 

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time. We will look again now, how can you complete less than half 

of your planned examinations? 

Either you have filled the plate too big or you don’t have the 

right complement of people. I am not here to tell you they don’t 

have enough examiners. I don’t know that. What I can tell you is 

they are not doing the work they planned to do and that is a problem. 

Mr. BUDD. That is a problem. I appreciate your brevity and your 

clarity, so thank you. I am going to yield back my time. 

Mr. ROYCE. And we will stand in recess. We have 20 seconds 

until the end of this vote and we will stand in recess until the two 

votes are over. We will return after that. 

[Recess.] 

Chairman HENSARLING. The Committee will come to order. The 

Chair now recognizes the gentleman from Colorado, Mr. Tipton. 

Mr. TIPTON. Thank you Mr. Chairman, and Ms. Wertheimer I appreciate your willingness to be able to appear before the Committee 

again. The last time you were here in April, several of my colleagues and I asked you about the implementation of the Integrated Mortgage and Insurance program, or IMAGIN at Freddie 

Mac and the Committee and I were encouraged, I believe by your 

suggesting that you would look into the program and then report 

back. 

Since that time, obviously Treasury and this Committee have 

learned a fair bit more about the program, and I would like you 

to be able to speak, because on September 12 your office released 

a white paper on the subject, offering an overview of the program’s 

functions. And would you maybe explain in detail why your office 

chose to release a white paper instead of a proper investigation, either an Attorney General’s audit or a report? 

Ms. WERTHEIMER. Sure. We, as I have explained, established an 

Office of Risk Analysis to identify new and emerging risks as well 

as to look at existing risks and see if those risks have been heightened. 

That is a function that I thought was incredibly important within 

housing finance because housing finance is an evolving industry 

and rules change very quickly. When I was here the last time, and 

asked about IMAGIN, after the hearing we looked at it. It’s a pilot 

program that has barely begun, there would be nothing to report 

on. 

There would be no ability for us to have findings of a program 

that has barely gotten off the ground. What I thought was useful 

for us to do is, for purposes of transparency, explain the program, 

explain how it was authorized by FHFA because I believe I had 

questions at the last hearing about how is this possible without 

public notice and comment. 

And then explain the program itself, because we have identified 

it as a new and emerging risk, it is something we are going to 

watch, and we will subsequently report when we have some data 

to report on. 

Mr. TIPTON. OK, well when you were putting together the white 

paper, did you weigh whether or not this is a new program, a new 

activity, or should it be considered under HERA? 

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Ms. WERTHEIMER. I believe the white paper explains that the 

agency has, what I think it calls interim final regulations in which 

it says, if it is new—and I don’t want to misstate this so just give 

me 1 second, I have it here. 

The Director has discretion under his regulation to the extent 

that there it is at page eight of our report, under their regulation 

new—public comment is required for new products. 

When there are new activities, not new products, they do not require public comment that is at the discretion of the Director. As 

we explained, the Office of General Counsel wrote opinions saying 

the activity should not be considered a new product. It went 

through the considerations. And the Director decided on November 

7, 2017 that it was not a new product, therefore public comment 

was not required and they did not object to the new activity. 

Again, we are in the business of valuating against standard, the 

standard is their IFR. They had an opinion from the General Counsel, and that opinion was not unreasonable. 

Mr. TIPTON. Were you comfortable, not to interrupt, because I am 

going to be running out of time here, the white paper did adequately cover whether or not there was necessary transparency— 

it was included in rolling out the program, was there transparency 

did you feel? Did the paper cover that? 

Ms. WERTHEIMER. I think the paper discussed the roll-out, it did 

not opine as to whether or not there was transparency. 

Mr. TIPTON. And just to follow up here before we do run out of 

time, does your office intend to be able to conduct an investigation 

or have an actual full report on the IMAGIN program? 

Ms. WERTHEIMER. When we have some data to look at, yes. 

Mr. TIPTON. OK, I think as you are describing here, I believe it 

is probably a challenge for many of us, there’s some real concern 

in terms of some of the complexity of determining whether or not 

you issue a white paper is going to be required under HERA. 

And I think that we need to maybe have some real guidelines 

moving forward and have those put into place to be able to prevent 

some further abuse and make sure that we are making sure those 

taxpayer dollars are actually not being put at risk with necessary 

transparency, I believe you will probably agree is absolutely crucial. 

Ms. WERTHEIMER. Absolutely. Which is why we publish absolutely all of our work product. 

Mr. TIPTON. Thank you, I appreciate your answers and Mr. 

Chairman, I yield back. 

Chairman HENSARLING. Time for the gentleman has expired, the 

Chair now recognizes the gentleman from Michigan, Mr. Trott. 

Mr. TROTT. Thank you, Chairman and I thank you Ms. 

Wertheimer for being here today. I apologize if it was covered earlier, but I was not here. This morning, Ms. Grimes commented that 

she thought your office had either ignored or undermined her complaint with respect to Director Watt. I wonder if you could just 

comment on her concerns in that regard? 

Ms. WERTHEIMER. I heard her say that she questioned our independence for several reasons, one because he was aware of her 

whistleblower complaint and two because we outed her in a court 

filing. 

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With respect to her whistleblower complaint, let me be clear, perhaps I was not earlier. In what I will call the first phase of our 

investigation, we were looking at the allegations of prohibited personnel conduct by senior FHFA executives in the alleged pre-selection of Ms. Grimes. 

We, as I mentioned, had career law enforcement, career lawyers 

do the inquiry. Mr. Watt was interviewed on February 12, Ms. 

Grimes was interviewed on March 16. Had either of those individuals suggested, implied, reported that there was this pattern in 

practice of harassment as Ms. Grimes has now alleged, I would 

never, ever in a million years have mentioned anything to Director 

Watt. Why is that? 

Because we would have launched our own investigation into misconduct by Director Watt. What I knew was, having read the 

memorandum of interview, there was absolutely nothing in there, 

in any interview, about a potential sexual harassment issue. So 

when I became aware of Ms. Grimes’ whistleblower complaint and 

her lawyer’s report on the 4th of April that she had been told by 

the EEO people they couldn’t look at it, I was outraged. 

The statistics that were quoted; 4 women, 40 some odd, I think 

3 white men were outrageous in 2018, and I didn’t tell Director 

Watt to handle it. I told Director Watt this is your job. This is what 

the E.O. function does. Don’t tell them to get back in touch with 

her. Remember I didn’t out her; she had already gone to the EEO 

office and made the complaint. 

Her identity was well known. What I said was make them open 

it and do something about it. 

Mr. TROTT. Thank you. She apparently has roughly 15 tapes 

with conversations with Director Watt. Have you heard the tapes? 

Ms. WERTHEIMER. That is the subject of the second allegation 

Ms. Grimes has made. We have asked for those recordings. We 

have asked multiple times. Our subpoena asked for them. She has 

refused. She told us in writing, no. That is why we moved to compel. Or to enforce; I misspoke. I think there is something that has 

been lost somewhat here. Let me try to explain it. 

Our Office of Counsel understood we needed to move to compel. 

After all it is very difficult to have a fair investigation when someone has recordings and you haven’t heard them and you can’t get 

them. So she is the only one—she is a material witness to our inquiry. She has evidence; she won’t give it to us. So we have subpoena authority which we went to use. We wanted to file it under 

seal, OK? 

Speaking with the U.S. Attorney who was signing the papers, we 

explained the facts to the U.S. Attorney, the Office of Counsel, the 

Chief Counsel and his lawyers and explained that Ms. Grimes, in 

three separate e-mails on her government computer, sent to more 

than 100 FHFA managers, transcripts and a recording and then a 

long discussion of her complaint. And what we were told was, you 

cannot, this court disfavors sealing unlike some other courts and 

with this history, you don’t have a good faith basis to move to seal. 

Mr. TROTT. Thanks for clarifying. I want to, my time is running 

out, and I want to clarify, before we recess, there was a conversation about how exactly her name became public and I wonder if you 

could add any clarity to that and your role and any information 

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52 

that would be helpful and how her name became public through 

this process. 

Ms. WERTHEIMER. My limited understanding is when we moved 

to enforce the subpoena, her name was in the papers because we 

could not seal it and that is how it became public. 

Mr. TROTT. Thank you so much. I yield back Chairman. 

Chairman HENSARLING. The gentleman yields back. The Chair 

now recognizes the gentleman from Georgia, Mr. Loudermilk. 

Mr. LOUDERMILK. Thank you Mr. Chairman. Thank you Ma’am 

for being here. I also want to thank you for your testimony that 

you gave to the Oversight and Investigations Subcommittee a while 

back. Both of these have been very useful especially in our role, as 

yours is, oversight over various agencies which is extremely important especially when it comes to taxpayer funded entities and to 

our government. 

And I want to say that I appreciate your frank perspective. I 

know it is not an easy role being in oversight capacity and I have 

seen in other agencies that have not held their independences as 

independently as we would hope and I think you have done that 

exceptionally well. 

Oversight is a difficult process and quite often we just have legitimate differences of opinion but nonetheless oversight is very important. And with that said, I was a very disturbed by the reaction 

of some at Fannie Mae the last time that you testified here before 

this Committee, and I would like to read from Exhibit 1, which is 

an e-mail. It’s from Bart Harvey, the head of the Nominating Governance Committee to the Chairman of the board, another Fannie 

board member, Mr. Mayopoulos. Do you have a copy of that? 

Ms. WERTHEIMER. I believe it is in this binder. Yes I have it. 

Could you just give me a minute to get it from— 

Mr. LOUDERMILK. Absolutely. 

Ms. WERTHEIMER. OK. 

Mr. LOUDERMILK. It’s dated April 16 I believe. 

Ms. WERTHEIMER. Yes. 

Mr. LOUDERMILK. If you will indulge me, I will read what is said 

in this e-mail from Mr. Harvey. ‘‘Vince, I have seen it all now, that 

the OIG could report this to the House Financial Subcommittee is 

astonishing in Mel’s placation regime. That OIG quotes as the 

FHFA agreeing with the majority of its reports on MRAs gives rise 

to another potential wave of regulation by the FHFA. 

If I were a Member of the Committee and I got this report, I 

would have a cow that $5 trillion plus of assets may not be operated in a safe and sound manner as we know on the board, financial oversight exceeds anything the private sector gets by a multiple degree, even if a lot of it is wasted time and energy. 

The single best waste of time, money, and talent are the dueling 

agencies. Someone, Mel, ought to tell the House the load of crap 

that the OIG has heaped upon them but he won’t. The games being 

played are a waste and abuse of taxpayer’s money and stymied the 

real progress and we accept them; getting out of conservatorship is 

the only answer to this foolishness. Best, Bart.’’ 

My question to you is really simply, would you like to respond 

to that e-mail to us? 

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Ms. WERTHEIMER. Thank you for giving me that opportunity, yes 

I would like to. I have a few things to say. 

This is not a game for us. OK? It’s, as my chief counsel likes to 

say, is as serious as a heart attack. We take this mission incredibly 

seriously. We take the more than $191 billion of taxpayer money 

to keep these enterprises going seriously and we are here to protect 

that and protect their interests. 

I understand they like to say they have paid it all back, but 

plainly they haven’t read the terms of the PSPAs. They haven’t 

paid it back. They have paid back the investments on that $191 billion but they haven’t paid it back, number one. 

Number two, I think Mr. Harvey misunderstood what I was 

doing last April 12th. The article, pardon me, the report to which 

he refers is a report we issued in December 2016. It went to our 

oversight Committees, it was on our website, I was asked about it 

at this hearing and happy to discuss it. 

That is a roll-up report of 12 reports we issued previously in 

which we found significant deficiencies with every element of 

FHFA’s supervision of the enterprises save one which we didn’t 

think was very important, it is an annual plan. And we called out 

those deficiencies and we made recommendations to remediate 

them. 

And the roll-up report was to say to our stakeholders, ‘‘Wait a 

minute, don’t think these enterprises are being operated safely and 

soundly, just because they have a supervisor, because this program 

has deficiencies.’’ 

I was questioned about the use of the term, and I know I was 

admonished that I used my language loosely. I, respectfully, I don’t 

think I used my language loosely. Mr. Harvey seems to take issue 

with MRAs. MRAs, in short, are matters requiring attention. They 

are the most serious deficiencies the FHFA can find. 

Yes, some of our underlying reports were on MRAs, but not all 

of them. It was on risk assessments, the quality of the work, the 

report of the exam. I could go on and on. And we have identified 

those reports, previously. They are all public. 

But most importantly, HERA sets a standard which says, while 

in conservatorship, Fannie and Freddie are to be regulated—or 

subject to enhanced supervision. Now because they, if they were 

not in conservatorship, they would be SIFIs, which SIFIs are regulated by the Fed, because they are in conservatorship. 

The assumption is, and I think Director Watt testified to this before this Committee in October 2017, they are subject to enhanced 

supervision. And certainly, we haven’t seen that enhanced supervision. When Mr. Harvey talks about it is the single biggest waste 

of time, money, and talent, well, read our reports. 

If you think we are talking about pins on the back of elephants, 

then it is a waste of time and money and talent. I, frankly, don’t 

think we are, and I think our reports have laid it out for stakeholders to see the problems. And they don’t end with that roll-up. 

We have issued reports subsequent to the roll-up, which are pretty 

critical of the supervision program. 

In fact, we discussed the HFE Program. I mean FHFA’s own 

standard is, you need commissioned examiners to conduct high-risk 

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exams, as Chairman Wagner points out, and they have won fewer 

than they had in June 2014. 

Mr. LOUDERMILK. Yes, ma’am. I see that my time has expired. 

And I will yield back, but another colleague would yield some time 

to— 

Chairman HENSARLING. The time of the gentleman has expired. 

There are no other Members in the hearing room who have requested time. Ms. Wertheimer, we thank you for your testimony. 

You are excused now. We will recess for approximately 10 minutes, 

so that we can seat the next panel. 

Ms. WERTHEIMER. Thank you. 

Chairman HENSARLING. We stand in recess. 

[Recess.] 

Chairman HENSARLING. The Committee will come to order. We 

now welcome our third panel. On this panel, we welcome our 

former colleague, the Honorable Mel Watt, Director of the Federal 

Housing Finance Agency. He has testified before our Committee before, and needs no other introduction. 

Next, we have Mr. Timothy Mayopoulos, Chief Executive Officer 

of Fannie Mae. Mr. Mayopoulos earned an A.B. from Cornell University and a J.D. from New York University School of Law. He 

has been with Fannie Mae since 2009, serving first as Executive 

Vice President, General Counsel, and Corporate Secretary and then 

as Executive Vice President and Chief Administrative Officer. 

Prior to joining Fannie Mae, Mr. Mayopolous was Executive Vice 

President and General Counsel of Bank of America Corporation. 

Mr. Donald Layton, Chief Executive Officer of Freddie Mac. Mr. 

Layton earned his bachelor and masters degrees in economics from 

MIT and his MBA from Harvard Business School. Prior to joining 

Freddie Mac, he was Chairman and CEO of E-Trade. 

Each one of you will be recognized for 5 minutes to give an oral 

presentation of your testimony without objection. Each of your 

written statements will be made part of the record. To ensure that 

all Members can hear clearly, please pull the microphones very 

close to you, when you speak. 

And reverse order, Mr. Layton, you are now recognized for 5 minutes for your testimony. 

STATEMENT OF DONALD LAYTON 

Mr. LAYTON. Thank you Chairman Hensarling, Ranking Member 

Waters, and Members of the Committee, thank you for inviting me 

here today. Let me begin by highlighting my main theme. The 

mortgage system we have today is fundamentally better than the 

one we had 10 years ago, plain and simple. It’s more safe and 

sound, more efficient and does a far better job of protecting tax 

payers. 

Freddie Mac is similarly better, with a substantially improved 

business model. We are absolutely not the GSE of the past. As 

CEO, my job is clear, to create the best company and the best housing finance system possible under current law, especially the mission Congress assigned to us in our charter, which we summarize 

in three simple words, liquidity, stability, affordability. 

In my long career in banking, I saw a lot of good done under the 

charter, especially making 30-year, fixed-rate mortgages widely 

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available to the broad, middle, and working class. I also saw critical flaws that eroded public confidence in us. As a result, I am no 

apologist for the historic GSEs. 

I accepted the challenge of leading Freddie Mac to perform a 

public service, with the understanding that the conservatorship 

would not maintain the flawed status quo. Instead, FHFA would 

actively reform the GSEs to build upon the good and to remedy the 

flaws, as much as possible, under current law. That is why working 

closely with both Acting Director DeMarco and Director Watt, we 

spent much of the last decade addressing four major weaknesses of 

the historic GSEs. Those weaknesses were the large subsidized investment portfolios, the inadequate capital regime, the bias toward 

large lenders, and the massive concentration of mortgage credit 

risk in just two companies. 

We have made fundamental changes that address those weaknesses. We downsized our retained portfolio by more than 70 percent. We also repurposed it to solely support our mission rather 

than generate discretionary profits. We created a modern SIFI-consistent capital framework to enhance safety and soundness, and ensure our decisionmaking is in the true interest of the taxpayers 

who support us. We leveled the playing field for community banks 

and other small lenders, and we created entirely new markets to 

efficiently transfer most of the credit risk of both single family and 

multi-family mortgage guarantees to private capital markets. 

My written testimony highlights the creation of the credit risk 

transfer markets, arguably the most important development in the 

housing finance system over the past decade. Credit risk transfer 

has also created a greatly improved business model for Freddie 

Mac. 

We now buy and distribute risk instead of simply holding it. This 

puts a large and growing amount of private capital at the heart of 

the mortgage finance system and ahead of taxpayers. And this significantly reduces systemic risk. 

Additionally, the mortgage industry has long been inefficient in 

ways that harm borrowers, renters, lenders, and investors. We set 

out to improve the efficiency and safety and soundness of the system increasingly through technology-based innovation. 

Three examples cover it: Major reforms of the representation and 

warranty requirement for lenders, an automated alternative to 

some traditional appraisals to save lenders time and borrowers 

money, and an innovative form of improved mortgage insurance. 

Each of these efforts improves safety and soundness, lowers cost, 

supports our mission, and are clearly within our charter. And they 

were approved by FHFA. As we make these improvements, Freddie 

Mac continues to fulfill its mission. We buy loans from lenders each 

and every day. We help stabilize the market. And we responsibly 

provide access to credit. 

And we have dramatically reduced taxpayer exposure to our risk. 

Finally, your invitation asks for my views on housing finance reform. I offer three suggestions. First, make certain that any proposed reform will work as intended. As we all know, it has to work 

in practice, not just theory. 

Second, minimize the potential for disruption or harm during a 

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ing conservatorship to minimize that transition risk, and unintended consequences. 

In closing, I am proud of the work Freddie Mac has done to serve 

our mission, and to fundamentally reform and improve the housing 

finance system under current law. Thank you, again, for inviting 

me here today. 

[The prepared statement of Mr. Layton can be found on page 101 

of the appendix.] 

Chairman HENSARLING. Thank you, sir. Mr. Mayopoulos, you are 

now recognized for your testimony. 

STATEMENT OF TIMOTHY MAYOPOULOS 

Mr. MAYOPOULOS. Thank you, Chairman Hensarling, Ranking 

Member Waters, and Members of the Committee for the opportunity to testify today. Ten years ago this month Fannie Mae was 

placed into conservatorship. 

Before the crisis, Fannie Mae enjoyed implied government backing, profited from a large mortgage portfolio, was weakly regulated, 

and exerted substantial political influence to preserve these advantages. 

By the mid 2000’s, in an effort to maintain its declining market 

position in the face of competition from Wall Street, the company 

lowered its underwriting standards, and made imprudent investments in private label mortgage-backed securities. 

Then, as we all know, the bottom fell out of the housing market. 

That collapse signaled the end of one chapter for Fannie Mae, and 

the beginning of another. I was hired in early 2009 after the company was placed into conservatorship to help stabilize it. 

At the time, the CEO and Chairman told me that my period of 

service would, likely, be 12, at most, 18 months. And that the future of Fannie Mae would be resolved in that time. What was supposed to be a temporary timeout has lasted more than 10 years. 

My focus as CEO for these past 6 years has been: One, to repay 

taxpayers for their investment in the company; two, to stabilize the 

housing and mortgage markets; three, to reduce the company’s risk 

and improve its operations; and four, to fulfill our traditional role 

of providing access to affordable mortgage options for Americans to 

purchase and refinance their homes. 

I am proud that during my tenure, we have accomplished more 

than most people would have thought possible a decade ago. Since 

2012, the company has been profitable every single year, generating average profits of $11.4 billion, even if we exclude our extraordinary $84 billion profit in 2013. 

Fannie Mae’s rate of serious mortgage delinquencies has declined 

from a peak of 5.6 percent in 2010, to a rate of less than 1 percent 

today. We have paid $167.3 billion to taxpayers in dividends. Nearly $50 billion more than the company received in support. 

That profit is more than twice as much as taxpayers received in 

aggregate from all U.S. banks that received assistance during the 

crisis. We have transformed Fannie Mae’s business model. Today’s 

Fannie Mae is out of the business of holding a large investment 

portfolio of mortgages. Instead of holding all credit risk, today we 

distribute a significant portion of that risk to private investors in 

markets that did not even exist 6 years ago. 

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Our transformation encompasses nearly every aspect of the company. Fannie Mae today is the most productive company in the 

world as measured by profits per employee. We are leading the 

adoption of innovative technology to reduce credit risk while, simultaneously, expanding access to credit. 

We have developed tools for the industry to minimize the risk 

and magnitude of foreclosures whenever the next downturn comes. 

Our investments in multi-family initiatives allow us to play a role 

in affordable housing that neither overemphasizes nor underemphasizes home ownership. 

We did all this while providing $6.5 trillion of liquidity to the 

housing finance market, much of it when other private capital 

sources had retreated altogether. Fannie Mae and, indeed, the entire system is now more resilient than at any time in recent history 

pre- or post-conservatorship. 

None of these outcomes were preordained 10 years ago. They are 

the result of choices made by our management team, and by our 

conservator and regulator. They are also the product of the support 

provided by taxpayers in the depths of the crisis. 

And none of these outcomes would have been possible without 

the many remarkable people who work at Fannie Mae. This team 

not only weathered the storm, but succeeded beyond all reasonable 

measure. 

I am grateful to have had the opportunity to lead extraordinary 

people in a truly extraordinary time. Fannie Mae is a different 

company from the company I joined in 2009. It is more profitable, 

less risky, more innovative, non-political, and more humble. 

Whether it is the right model for the future is up to you and your 

colleagues to decide. It is not my job, and it has never been my aspiration to preserve the Fannie Mae of old. Instead, it has been to 

help to lay the foundation for a housing finance system that will 

serve this country well for decades to come. 

We will continue our hard work as you chart a course forward. 

Thank you. And I am happy to answer any questions you may 

have. 

[The prepared statement of Mr. Mayopoulos can be found on 

page 119 of the appendix.] 

Chairman HENSARLING. Thank you for your testimony. Director 

Watt, before we yield to you, as everyone in this room knows, a serious accusation of sexual harassment has been lodged against you. 

Your accuser testified earlier as I am sure you are aware. 

We wanted to give her all due fairness and we want to offer you 

the same opportunity. So if you need to go beyond your 5 minutes 

to explain your position, we want to accord you that time. 

Director Watt, I now yield to you for your testimony. 

STATEMENT OF THE HON. MELVIN WATT 

Mr. WATT. Chairman Hensarling, Ranking Member Waters, and 

Members of the Committee, thank you for inviting me to testify 

today about FHFA’s role as conservator and regulator of Fannie 

Mae and Freddie Mac. 

Since I last testified before this Committee, Fannie Mae and 

Freddie Mac have marked their 10th anniversary under the conmcarroll on FSR431 with DISTILLER

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servatorship of the Federal Housing Finance Agency, a conservatorship of unprecedented scope, duration, and complexity. 

FHFA has worked to appropriately manage and oversee these enterprises both as conservator and as regulator. I am honored to appear on this panel with the CEOs of both enterprises and to have 

the opportunity to thank them publicly for the critical roles they 

have played. 

Both recently announced that they will be leaving their post in 

the coming months. Both have provided visionary, innovative leadership and their boards, management teams, and employees have 

worked closely with FHFA to reform the enterprise’s operations, 

improve the U.S. housing finance system, and return significant 

dividends to the U.S. taxpayers. 

Because of them, these enterprises are substantially better on 

every measurable criterion than they were when these CEOs started and the taxpayers are a lot better off for it. Because of them, 

the enterprises are far different today than they were 10 years ago. 

I have described many of the reforms we have made and how 

FHFA has managed in this protracted period of conservatorship in 

my 16 page written testimony and in well over 200,000 pages of 

documents FHFA and the enterprises have provided to the Committee in response to document requests, letters, and subpoenas 

over a number of months. 

While responding to these requests has sometimes taken substantial time away from other responsibilities, we have always 

tried to be responsive because as a former Member of this Committee, I have the highest regard for the Committee’s oversight responsibilities. 

I am also happy to appear today to answer the Committee’s questions. While we believe FHFA has made good decisions, both as 

conservator and as regulator, about how to manage the enterprises 

in their present state. 

It is still the case that it remains absolutely essential for Congress to enact housing finance reform legislation. As I said during 

my confirmation process in 2013, and as I have repeated even more 

vigorously based on experience since then, conservatorship is not 

sustainable. 

The fact that conservatorship has yielded substantial reforms 

and progress in the way the enterprises operate does not diminish 

or lessen the importance of completing housing finance reform. 

Since I left Congress to become the Director of FHFA, I have 

tried to avoid expressing my views or trying to exert influence over 

what role, if any, the enterprises should play in housing finance 

after conservatorship. 

After repeated requests from Members of Congress, we released 

a document that we considered, quote, ‘‘responsible, balanced, viable, and important to consider’’ close quote. And I am happy to respond to any questions about it. 

However, I think it is important for me to plainly and unequivocally reiterate my view that it is the responsibility of Congress, not 

FHFA, to decide on housing finance reform, and my hope is that 

Congress will do so as expeditiously as possible. 

Since this could possibly be my last appearance before this Committee before my term ends on January 6, 2019, I would be 

mcarroll on FSR431 with DISTILLER

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remised to close without saying what an honor it was to serve as 

a Member of this Committee and what an honor it has been to 

serve as Director. 

Mr. Chairman, I was not made aware until 2 days ago that this 

hearing would involve the charges Ms. Grimes has made or that 

she would be a witness here to make her case in a political forum 

in addition to in the courts, where she already has claims pending. 

In light of these recent revisions, I was going to ask the Chairman for an additional period of time and I think he has already 

granted me that, so I won’t ask him for additional brief period to 

make a separate statement about that matter. 

Chairman HENSARLING. No, you may proceed, Mr. Watt. 

Mr. WATT. First let me quote what is not in dispute directly from 

the top of page 47 of the part of the Postal Investigator’s report 

that was leaked to the press by somebody. Quote, ‘‘Ms. Grimes acknowledged that Director Watt never groped her nor touched her.’’ 

Ms. Grimes testified, quote, ‘‘we have never been intimate in any 

fashion, specifically we have never held hands, kissed, or engaged 

in any sexual activity.’’ That seems to be something that the press 

has managed to avoid reporting or if it has, I certainly haven’t seen 

it anywhere. 

Second, beyond these facts that are not in dispute, there are two 

lawsuits in progress that will sort through and resolve all factual 

and legal issues related to her claims. Those issues include who 

said what to whom and under what circumstances, whether someone tampered with tapes and transcripts or what was said and if 

so, who did so? And whether anyone at FHFA denied Ms. Grimes 

equal pay or otherwise discriminated against her in her employment. 

When these issues are resolved through the legal process, I am 

confident that the resolution will confirm, as I have previously stated, that I did not take any actions or engage in any conduct involving Ms. Grimes that was contrary to law. 

I am disappointed that it appears that Ms. Grimes is now attempting to use my efforts to advise and mentor her, and my efforts to be clear about the limits of our friendship, specifically that 

it would have no impact either positive or negative on her employment aspirations as the basis of a legal claim. 

Those who know me well, know that I have a long history of having successfully mentored numerous employees, both male and female, over 22 years in the practice of law and 21 years in Congress. 

And I have continued that practice during my time as Director of 

FHFA. 

I am proud to say that some of the people I have mentored, are 

also among my very best friends. I am also perhaps even more disappointed that someone that I considered a friend and mentee, 

would for years be systematically trying to lay the groundwork to 

file a lawsuit by recording what Ms. Grimes’ verified affidavit says 

are, all conversations with me, and then selectively leaking parts 

of them to the press while at the same time, refusing to produce 

all of them to investigators or in court. 

Obviously no fair and impartial resolution of this matter can be 

made without all of these recordings being produced and evaluated. 

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Finally, I know this matter puts Members of this Committee, 

both those who consider themselves personal or political friends, 

and those who may consider themselves political adversaries, in an 

awkward position. For that reason, and because experience has 

shown me that over the years the judicial process is the only process that has the capacity to resolve contested factual and legal matters of this kind. I was hoping that this Committee would understand that it cannot deal with this matter fairly, or with due process either to Ms. Grimes or to me. 

Due process cannot be dispensed in 5-minute exchanges of questions and answers, or by politicians who either rightly or wrongly 

will be perceived to prioritize being Democrats or Republicans over 

getting the facts. Or by friends or former colleagues, some of whom 

have known me and my family for years, and know that I will be 

celebrating 51 years of marriage this November to the most beautiful woman in the world. 

Unlike what is going on in the Senate, this Committee’s process 

cannot resolve this matter, and Ms. Grimes has already started the 

legal process to resolve the claims. But here we are, and I offer this 

statement for the record, and will try to answer questions without 

compromising the ability of the courts to get to the real facts and 

a real resolution of this matter. 

[The prepared statement of Mr. Watt can be found on page 138 

of the appendix.] 

Chairman HENSARLING. The Chair yields to himself. Director 

Watt, this is awkward for all of us. You and I have served on this 

Committee together, albeit on opposite sides of the aisle. But you 

have always commanded respect. And so I don’t savor this moment, 

I hope you believe that. 

But it is this Committee’s responsibility to conduct oversight over 

FHFA and that includes your conduct as well. And again, we started today out, not just with an accusation, but an accusation that 

included evidence. Now I agree with you, this is not a court of law 

and I doubt we will get to the bottom of it, and we are not the ultimate trier of fact and we are not the ultimate dispenser of justice. 

But I do have a number of concerns, and frankly I wanted to talk 

to you about other aspects of your stewardship at FHFA. But I cannot deal with the matter that is in front of us. And if you could 

please put up the exhibit? 

Here’s the first concern I have, Director Watt. The language, 

quote, ‘‘each of us is responsible for treating one another with professionalism and respect, and we must all cooperate to maintain a 

workplace free from harassment.’’ Can I safely assume that you 

have seen that language before? 

Mr. WATT. Yes, sir. 

Chairman HENSARLING. You have seen it before, because it is 

contained in the FHFA anti-harassment policy statement that you 

signed on August 16 of last year, is that correct Mr. Watt? 

Mr. WATT. That is correct. 

Chairman HENSARLING. And as I understand it, you have maintained that you are not covered by that policy, is that also correct? 

Mr. WATT. That is correct. 

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Chairman HENSARLING. So even though we have language that 

says FHFA will hold all employees accountable for harassment and 

related misconduct, you state it does not apply to you, correct? 

Mr. WATT. That is correct. 

Chairman HENSARLING. Who are you employed by Director Watt? 

Mr. WATT. I am employed by the Federal Government as Director of the Federal Housing Finance Agency. 

Chairman HENSARLING. Well you are getting a paycheck from 

somewhere, your benefits are coming from somewhere? So if you 

are not an employee of FHFA, again, who are you an employee of? 

Mr. WATT. I don’t know who I am an employee of but I know who 

the policies of the agency cover and I have explained that fully in 

a correspondence that the Chairman, I am sure has, which I will 

be happy to read to him and tell him why I think the policies don’t 

apply to me. If the Chairman— 

Chairman HENSARLING. When you signed— 

Mr. WATT. If the Chairman would allow me? I will read it to him, 

it is an e-mail to Mr. Pierce, who was the Postal Inspector, in 

which I say on July 16, 2018, I verbally communicated to Don 

McLellan he is our EEO person. And my attorney communicated 

to Mr. Tom Magnetti FHFA’s counsel retained in relation to Ms. 

Grimes’ claim that it would be inappropriate to submit to an interview by you. 

Chairman HENSARLING. Mr. Watt if I could— 

Mr. WATT. This decision is based on the advice of my legal counsel that the FHFA anti-harassment policy and the FHFA conduct 

and discipline policy in which allegations of harassment if—to 

which allegations— 

Chairman HENSARLING. OK, Mr. Watt, I get the gist of it, and 

now it is very generous— 

Mr. WATT. No, no you don’t get the gist of it until I— 

Chairman HENSARLING. I understand— 

Mr. WATT. Until I get to why— 

Chairman HENSARLING. Sir I was very generous with your time. 

I was very generous in giving you time, but as you well know, I 

control the time. 

Mr. WATT. OK, well— 

Chairman HENSARLING. When I speak, and so I understand. You 

are asserting a legal exception, so I will take that at face value. 

You are asserting a legal exception. As we both know, many others 

do not recognize that legal exception. For argument’s sake— 

Mr. WATT. Mr. Chairman, the public needs to understand— 

Chairman HENSARLING. For argument’s sake— 

Mr. WATT. That I am not asserting that I am above the law. I 

am cooperating fully with— 

Chairman HENSARLING. I have to tell you, Director Watt, it sure 

sounds like it. 

Mr. WATT. All other investigations, and they need to understand 

why I didn’t— 

Chairman HENSARLING. Director Watt, it sounds like you are. 

Mr. WATT. Didn’t cooperate with this investigation. 

Chairman HENSARLING. Director Watt, we will be generous with 

the time, but again, when I am asking the questions, I get to control the time. We both know that, sir. 

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So here’s the question I have to ask. Let’s say for purposes of argument that you have asserted or your legal counsel has asserted 

a proper legal protection. Why wouldn’t you, as leader of this organization, voluntarily bind yourself to a policy that you expect every 

other employee to be bound by? Why would you not do that? 

Mr. WATT. Mr. Chairman, if you would allow me to get to the 

bottom of what I wrote, I think— 

Chairman HENSARLING. We—I just wish you, when you wrote it 

you wrote it for yourself, but please proceed. 

Mr. WATT. OK, I will read the rest of it if with your permission, 

or, I—you are asking me why I am—why I didn’t participate in 

this, and I am trying to answer. 

My decision is based on the advice of legal counsel, and I have 

read that the anti-harassment policy and the FHFA conduct and 

discipline policy, to which allegations of harassment is subject, 

apply only to employees, quote, ‘‘who meet the definition of an employee as stated in 5 U.S.C. Section 7511,’’ close quote. Under that 

section, Presidential appointees confirmed by the U.S. Senate are 

specifically excluded from this definition. 

FHFA’s policies clearly contemplate that the proposing official, 

the deciding official, and anyone who could determine and take any 

corrective action that may be deemed appropriate in response to 

the investigation you complete, would be someone in the chain of 

command above the person against whom the allegations of harassment have been made. 

In this case, there is no one inside FHFA with the authority to 

exercise these functions. It was for that reason that I expressed to 

Don McLellan, in an e-mail dated June 25, my concerns about what 

he intended to do with the report of investigation you will be expected to generate when you complete your work. 

His response to my e-mail raises serious concerns about whether 

your investigation could be completed in parallel to an investigation being conducted by the FHFA Office of Inspector General without jeopardizing my due process rights and without substantial duplication of expense and effort, the very things that Ms. Grimes has 

actually complained about also, which some of what she testified I 

actually agree with. 

Chairman HENSARLING. OK, Director Watt, you read the entirety 

of the relevant portions of the letter. I go back to my previous question: Was there anything in that letter that legally prohibited you 

from voluntarily adhering to the standards that you expect every 

other employee under your watch to abide by? 

Mr. WATT. Not a thing in there that would have prevented me 

from voluntarily doing that, but— 

Chairman HENSARLING. That is the question I was looking for. 

You also cited earlier in your comments you alluded to the Postal 

Inspector’s report, but at the same time as you draw conclusions 

from that report, you did not cooperate with that investigation. 

Isn’t that true? You refused to submit yourself to interviews and 

to participate in that investigation and you just cited it as a source. 

Is that correct, Director Watt? 

Mr. WATT. That is correct. I have one page in that report. It is 

the page that I just read to you. All the rest of it in this book is 

their investigation, and Mr. Chairman, I did nothing to try to obmcarroll on FSR431 with DISTILLER

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struct that investigation. I just didn’t participate in it. I didn’t tell 

any other employee in our agency not to participate, I didn’t tell 

my legal counsel that I thought he was wrong in, or anybody that 

they were wrong in applying this, in following this process. 

What I did was said, look, there’s nobody in the agency when we 

get this report who will be able to exercise the responsibilities that 

the report contemplates that they would exercise. The only person 

who has the authority to do that would be the President of the 

United States. Now the report could be forwarded to him, but the 

IG’s report can be forwarded to him. So— 

Chairman HENSARLING. Well Director Watt, I— 

Mr. WATT. Why would I duplicate efforts here? 

Chairman HENSARLING. I want to be fair to you. I also want to 

be fair to other Members, so I want to wrap this up. Again, you 

are on record citing a legal privilege that others do not recognize. 

You did not cooperate with the first investigation. There is an ongoing investigation within the FHFA Inspector General’s Office. 

I believe you have stated that you will fully cooperate with this 

investigation. 

Mr. WATT. I am fully cooperating with this. 

Chairman HENSARLING. And I don’t wish to make threats, Mr. 

Watt, particularly to a former colleague, but please know that this 

Committee will be monitoring this very, very closely. And even 

though you and I are getting ready to depart office at the same 

time, I will not hesitate for a moment to use my power of subpoena 

if we have any scintilla of evidence that you are not cooperating 

fully in this investigation. I hope that this is not how we spend our 

last few months in office. 

I now yield to the Ranking Member. 

Ms. WATERS. Thank you very much, Mr. Chairman. While I 

would like to have deep discussion about Fannie and Freddie and 

the conservatorship, which has gone on now for 10 years, and you 

are absolutely correct, Mr. Watt, that it is Congress’s responsibility 

to do whatever reform that we have talked about. 

We cannot get at that today. We cannot talk about it today, because the accusations that have been made against you are overriding this entire hearing. And I want to share with you some of 

what I said this morning in my opening statement. I said basically 

that we have been friends for years. That I have dined at your 

home with you, your wife, and your mother. 

And I have visited your son’s home in California and I have 

given gifts to your first grandchild. And so we have been friends 

for many years. And I went on to say despite that friendship, I find 

myself with the responsibility to allow Ms. Grimes to come before 

us today, as other Members of this Committee have agreed with, 

to have her say and to be able to share with us ways in which she 

believes she has been harmed basically by you. 

And I just want to say that you raised a question about why we 

would allow her to come and use this forum to present her case 

when in fact there’s a lawsuit pending. And while that has been 

the regular order of business, not entertaining those who would 

like to come before the Committee who have losses pending. 

Let me just share with you this is a different day and a different 

time. And what women have come to realize is that many of the 

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processes that are in place absolutely work against them being able 

to not only present their case but to fight for what they believe is 

justice and equality and to tell what is happening to them, particularly as it relates to sexual harassment. 

In the House, we have some of our Members who are taking a 

look at the way that we have dealt with these complaints over the 

years and they are changing all of that. 

They are changing all of that because they find that they have 

worked to their disadvantage. So any questions about why she is 

here, it is because again it is a new time and a new day where we 

are not complying with or continuing with existing policies and procedures that have worked against them and left them silenced 

when they have complaints about discrimination and harassment. 

Sexual harassment and discrimination are wrong and against the 

law. And so I and others responded to the request. I have also said 

that because of our relationship and our friendship, if this was a 

court of law I would have to recuse myself because of that relationship. 

This is not a court of law, this is a Committee of Congress with 

oversight responsibility and we have deemed with this hearing that 

we would use our oversight responsibility to allow Ms. Grimes to 

come today and share with us her complaint about that which she 

has experienced and to let us know that perhaps we need to do 

some corrections in law. 

Gave us some advice and pointed out things that could be done 

to avoid the situation that she has been involved with. Now you 

have given us your side of this story, you have explained to us why 

you have acted in the way that you have acted, you have talked 

about the investigations that are still going on and the fact that 

lawsuits are pending. 

Having said that, is there anything else that you would like to 

add to your response that would help us to understand why you 

have taken the steps that you have taken and the way that you 

have decided to deal with this issue other than what you have already said and what I have recounted to you? 

Mr. WATT. Madam Ranking Member, first of all let me just say 

how much I appreciate your friendship and my first grandchild certainly appreciates you, he thinks the world of you because you did 

give him his first California gift. 

So, and I would be remised not to say that. I heard Ms. Grimes’ 

testimony, and there were some things in there that I actually 

agreed with very much. I mean one of the concerns here is the duplication of processes makes litigating these cases extremely expensive. 

The Ranking Member well knows that I practiced law in a civil 

rights law firm for 22 years. And one of the biggest impediments 

that we saw was the ability of litigants to finance litigation in this 

area and in every other area. 

But to have multiple duplicative processes for dealing with these 

cases adds to the expense. In this case, we had the Postal Inspector’s report investigation, we then have the IG’s investigation, we 

will next have an EEO investigation. 

And that every time you have an additional investigation, and if 

the EEO investigation doesn’t resolve it and people get together 

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and resolve it through compromise, there will be litigation that will 

go on for years. 

And I found myself in the practice of law having to tell plaintiffs 

look, don’t get involved in these processes if you don’t understand 

that. The old adage that justice is slow is an absolutely true adage. 

And to it has been added, the notion that justice is also expensive. And it actually got more expensive in this case because of 

these allegations that were made against me, because at that point 

our inside counsel couldn’t deal with it, that is why people have 

been tipping around and not talking to each other. 

I was very sympathetic to that part of Ms. Grimes’ testimony. 

Nobody can talk to each other about what is going on anymore. I 

can’t provide leadership because I have been recused from every aspect of it, including the process of whether and when she will get 

promoted. 

That can be very frustrating and that part of it I can relate to 

very much to her frustrations. So anything that could be done to 

streamline this process and cut out some of the duplication, which 

is why I pointed to the expense and duplication in the last sentence 

of my e-mail to Mr. Pearce. 

Ms. WATERS. OK, Mr. Watt, let me just say this. Just as you are 

experiencing your frustration, she has been experiencing frustration also. 

Mr. WATT. Absolutely. 

Ms. WATERS. And when we talk about that kind of frustration, 

we cannot help but witness the confirmation process in the Senate, 

in which several women have come forth with grave accusations 

against Judge Kavanaugh who has been nominated for a seat on 

the Supreme Court. That hearing process is a travesty and questions remain about whether all of the women who have made allegations will be allowed to testify before the Senate Judiciary Committee. 

In this atmosphere and in this time where women have come 

forth and they have decided that they are going to step out, they 

are going to tell their story, they don’t care what the processes are 

because of this frustration. We have allowed her to come here 

today and guess what, Mr. Watt? These kinds of processes are 

going to be undone in the future over and over again in ways that 

we have never seen before. And so we are at that point in time 

where she came, she told her story, she was very articulate in telling her story, you are extremely articulate as a lawyer in telling 

your story. 

We have oversight, perhaps we will come up with even some 

laws that will deal with some of what we are learning. But the fact 

of the matter is, I think there is one lesson in all of this maybe 

for you, and that is, it is a new day, it is a new time, and the old 

processes don’t work well anymore. We can say if you have a lawsuit pending, you can be heard in this Committee, that is different. 

And so I would hope that you would have an appreciation for that 

and I thank you for your testimony, and he is about to gavel me 

to shut. And I will yield back the balance of my time. 

Chairman HENSARLING. Time of the gentlelady has expired. The 

Chair now recognizes the gentlelady from Missouri, Mrs. Wagner, 

Chairman of our Oversight and Investigations Subcommittee. 

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Mrs. WAGNER. Thank you, Mr. Chairman. Director Watt, I have 

some very important policy and oversight and investigation questions, and in my capacity as Chairman that I have to ask. But I 

would be remiss if I didn’t start by staying that earlier today, Ms. 

Grimes testified that you would not submit to the internal investigation because you believe that you could not be disciplined. 

Ms. Grimes testified that you refused to abide by the internal investigation because no outcome of that investigation would be able 

to hold you accountable. Additionally, the Fifth Circuit ruled that 

your office and your agency are unconstitutional because of your 

isolation from oversight. I have a very simple question. Director 

Watt, who do you report to? Is there anyone who you believe has 

oversight of your actions? 

Mr. WATT. I report to the President of the United States, and I 

can be removed if he finds that I have done something improper 

with cause. And that is the problem we have here. But even if my 

agency were organized in a different way, that would still be the 

case. Suppose I had a three-person commission— 

Mrs. WAGNER. You do not—I reclaim my time. You do not hold 

yourself to the same standard that you hold your employees to? 

Mr. WATT. I do, yes. 

Mrs. WAGNER. But you refuse to have participated in any investigation and do not believe that anyone has oversight? You cannot 

be disciplined for any of the allegations? You cannot possibly even 

participate in that investigation? 

Mr. WATT. Mrs. Wagner, I am fully participating in these investigations. I wish I didn’t have to, but I am— 

Mrs. WAGNER. No, I don’t think you are, sir. You were asked if 

you have admitted you could voluntarily participate but you are 

not participating in the sexual harassment proceedings and you 

have held yourself to a different standard. I am going to move on. 

Director Watt, in the 2018 IG report concerning FHFA’s Housing 

Finance Examiner Program, the IG states that not only has a new 

training program not produced new examiners, but the entire program has now been suspended after receiving an anonymous online 

tip about the quality of the training. The anonymous tip talked 

about the lack of professionalism with training, et cetera, et cetera. 

The IG reports that after this anonymous tip, FHFA suspended 

the training program. Director Watt, FHFA spent $7.7 million of 

taxpayers’ money on a crucial training program, which apparently 

lacks professionalism among other things, but more importantly 

cannot complete its mission to train even one more commissioned 

examiner. What steps has FHFA taken to remedy these problems, 

sir? 

Mr. WATT. We are constantly engaging in efforts to upgrade our 

examiner capabilities. 

Mrs. WAGNER. How many years will it take Director Watt? It’s 

been over 7, and you don’t have one new examiner? And you have 

spent $7.7 million. 

Mr. WATT. Let me give you a little history if you don’t mind. 

Mrs. WAGNER. I don’t have much time and I have a lot of ground 

to cover, sir. 

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Mr. WATT. This agency, FHFA, was a brand new agency, stood 

up as a combination of prior agencies. We inherited all of the examination staff from those prior agencies. 

Mrs. WAGNER. Have you added any new examiners? Are you in 

fact, one less down? 

Mr. WATT. Yes we have. 

Mrs. WAGNER. All right. I am going to let you submit the rest 

of this in writing. I am going to move on. FHFA—I will move on. 

Mr. Mayopoulos, let me revisit some questions I had for the Inspector General. Did Fannie Mae, and these are yes or nos, very quickly, did Fannie Mae recommend to FHFA, in 2017, that Fannie Mae 

consolidate and relocate its Northern Virginia offices to a new office 

built to Fannie Mae’s specifications? Yes or no? 

Mr. MAYOPOULOS. With respect, Congresswoman, I don’t think I 

can answer it yes or no, but we did make a recommendation to consolidate our offices. 

Mrs. WAGNER. Is it true that the primary reason Fannie Mae 

wanted to move to these new offices was because moving to these 

new offices would enable Fannie Mae personnel to work in a quote, 

‘‘open workspace environment?’’ Yes or no. 

Mr. MAYOPOULOS. No. That was one factor, but it was not the 

primary factor. 

Mrs. WAGNER. Director Watt, did you approve using and spend- ing $727 million, $727 million, three quarters of $1 billion, while 

in your conservatorship, let me remind you, of the taxpayers’ 

money to relocate the Northern Virginia workforce from buildings 

that you owned to renovated buildings that you now rent? 

Mr. WATT. The net effect of that move was to yield more than $300 million to the tax bill, Mrs. Wagner. 

Mrs. WAGNER. You said you could sell your own properties for 

$140 million, how much did they sell for, Director Watt? 

Mr. WATT. Net effect of that decision was to return over $300 

million. 

Mrs. WAGNER. It does not add up. How much did you sell that 

building for, Director Watt? 

Mr. WATT. I don’t know how much— 

Mrs. WAGNER. $90 million, let me remind you, is what you sold it for. And you spent over $727 million of the taxpayers’ money 

moving to a rented building. 

Mr. WATT. Yes ma’am. 

Mrs. WAGNER. On top of money— 

Mr. WATT. That is absolutely consistent with what we have been 

trying to do. 

Mrs. WAGNER. Director Watt, wow. 

Mr. WATT. Downsize Fannie Mae, reduce the number of employees they have— 

Mrs. WAGNER. The statutory response. Reclaiming my time. Your 

statutory responsibility sir, is to— 

Chairman HENSARLING. Time is up. 

Mrs. WAGNER. Preserve and conserve the assets and property of 

Fannie Mae. 

Chairman HENSARLING. Time. 

Mrs. WAGNER. And I would say that you have— 

Chairman HENSARLING. Time of the gentlelady. 

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Mrs. WAGNER. Statutory responsibility. I yield back. 

Chairman HENSARLING. Time of the gentlelady has expired. The 

Chair wishes to alert all Members. There is currently a vote on the 

floor. There is a series of two votes. We will clear one more Member 

in the queue. We will temporarily recess and then reconvene. The 

Chair now recognizes the gentlelady from New York, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you Mr. Chairman. Mr. Watt, I certainly 

take no pleasure in today’s hearing. In fact, it deeply saddens me 

to have a former colleague to come before us while confronting such 

profoundly disturbing allegations. I think that our Nation is entering a watershed moment. Women are stepping forward and they 

are making their voices heard. 

The fact is, any time there is an imbalance of power, there exists 

the possibility for abuse and for sexual misconduct. So I would like 

to say to you, Mr. Watt, that it is my hope that you comply completely and wholly with all the ongoing investigations. So my question to you is, it is my understanding that the U.S. Postal Service 

conducted an investigation into these allegations made against you 

and I understand exemption that you are asserting. 

But in retrospect, do you believe not submitting to an interview 

was a mistake? 

Mr. WATT. No, I don’t believe that because the statute says the 

policies don’t apply to me. I don’t know how many more times I can 

tell you that. And I have tried to explain why they don’t apply because the Postal Inspector does the report. The Postal Inspector 

sends the report to our agency. If I had done something wrong and 

the Postal Inspector found that I had done something wrong, 

there’s nobody in our agency who would have the authority to do 

anything about it and that is the bottom line of what we are talking about here. 

Now, if the Postal Inspector’s report was prepared for the President of the United States for him to make a determination, that 

would be an entirely different thing because he would have the authority to do something about it. 

Ms. VELAZQUEZ. I guess you also understand the type of example 

that you believe this demonstrates to other employees. How do you 

think they take the fact that asserting a legal exception, allowing 

you not to be interviewed, is taken by the rest of the employees? 

I understand your explanation. I guess that at some point we will 

have to address this issue. 

Mr. Watt, what type of leader do you believe you are? 

Mr. WATT. Congresswoman Velazquez, I think if you look at my 

record throughout my whole life, from the day I started in the practice of law in a civil rights law firm, you will find nobody, or few 

people, who are more committed to the things that you all have 

talked about today which is erasing all the disparities between African-Americans and other minorities and the majority community; 

erasing disparities between women and men, which is why I have 

always tried to conduct myself in a way that does exactly that. 

I am a big supporter of the MeToo Movement. I think it is a wonderful thing, but it cannot be a substitute for going through the 

legal process because, to be quite honest, this Committee can’t deal 

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with this in a legal way and redress Ms. Grimes’ claims; the courts 

can. There’s a whole EEO process to do that. 

I share, and to be clear with Representative Waters, I didn’t object to the hearing. What concerned me was that I got 2 days’ notice and we changed the whole course of a hearing that I thought 

was going to be about oversight and things that I have been trying 

to do for the last 5 years. I have not criticized anybody about having this hearing. I am just telling you there is a process about 

which Ms. Grimes’ claims will be adjudicated. This Committee 

doesn’t have the authority or capacity to do that. 

Ms. VELAZQUEZ. We understand that. I yield back Mr. Chairman. 

Chairman HENSARLING. Time of the gentlelady has expired. 

There are two votes pending on the floor. Pending those votes, the 

Committee stands in recess. 

[Recess.] 

Chairman HENSARLING. Committee will come to order. The Chair 

now recognizes the gentleman from Michigan, Mr. Huizenga, 

Chairman of our Capital Markets Subcommittee. 

Mr. HUIZENGA. Thank you, Mr. Chairman. And I am going to 

move to our other witness here in a bit, but I have one quick question for you Mr. Watt. Do you believe that you have run the FHFA 

properly and in a professional and positive and proper manner? 

Mr. WATT. I do, and I could give you some statistics on that. 

Mr. HUIZENGA. OK, that is OK. 

Mr. WATT. But I won’t bother, but yes, my answer is yes. 

Mr. HUIZENGA. Yes. And a little while ago, you acknowledged it 

has become dysfunctional. You said nobody’s talking to each other. 

You have recused yourself. Earlier, Ms. Grimes said that she was 

a direct report to you. You have said— 

Mr. WATT. She is not a direct report and— 

Mr. HUIZENGA. You have— 

Mr. WATT. Never has been. 

Mr. HUIZENGA. You have said they removed—I checked with 

counsel. My understanding is that you have delegated that authority to your chief of staff which is still connection to you. So it seems 

that there are still some things that need to be cleared up there. 

But Mr. Mayopoulos, I have a question for you, please. 

As I understand, your new downtown office building was built to 

above Class A standards appropriate for a major financial institution, that is above the standards prescribed for the quote, ‘‘most 

prestigious building competing for premier office user with rents 

above the average area.’’ Is that correct? 

Mr. MAYOPOULOS. No, I don’t think that is correct, Congressman. 

I appreciate the question, but to the extent that there were enhancements made, they relate to serve business resiliency and redundancy needs. 

Mr. HUIZENGA. I am not sure what business resiliency means. 

Mr. MAYOPOULOS. So for example, we had to install backup generators to make sure that our operations would not go down, and 

we built a trading— 

Mr. HUIZENGA. I am reclaiming my time. As I understand, 

Fannie Mae justified the level of amenities to the FHFA, as a necessary and substantial part to attract and retain talent and maintain existing employees. Is that true? 

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Mr. MAYOPOULOS. One of the factors that went into this was 

being able to attract and retain talent, yes. 

Mr. HUIZENGA. OK. Director Watt, I understand that FHFA has 

agreed with this rationale. Is that true? 

Mr. WATT. That is correct. And there a number of other rationales for what we did, but we also agree with those rationales, yes. 

Mr. HUIZENGA. OK. Mr. Layton, turning to Freddie and recognizing that not all things are the same, Freddie plans to continue 

operating its D.C. headquarters in space that is Class A but not, 

quote, ‘‘large financial institution fancy,’’ correct? 

Mr. LAYTON. Yes. 

Mr. HUIZENGA. In fact, Mr. Layton, your headquarter’s buildings 

are—I understand now that some are described as a relatively frugal Class A office space. Is that accurate? 

Mr. LAYTON. I would say it is average. 

Mr. HUIZENGA. Average? OK. I think we have a few pictures up 

here with that, on the slides. And now with this slide, in a strategic facility planning deck, from this June, I find it interesting. 

My family’s in construction. Earlier, at a previous hearing I, 

maybe this is a technical term, I freaked out when I saw some of 

the construction that was going on, including the lunch huts that 

were there, and a number of other things. 

But we have a picture of the current headquarter facility next to 

the new Fannie Mae headquarter building, and note that you have 

a bullet comparing our building to the new Fannie headquarters 

that says, quote, ‘‘very functional Class A space, but not glamorous.’’ How do you manage with that space? Are you losing—yet, 

you are losing employees. Is that correct? 

Mr. LAYTON. Are you addressing this question to me? 

Mr. HUIZENGA. Whoever wants to take this, I guess, yes, sure. 

Mr. LAYTON. We are not losing employees. We have a relatively 

low turnover rate. The buildings were inherited from many years 

ago. They are adequate, and we attract our employees by a combination of the nature of our work, we think, the culture we have. 

Many are attracted, in fact, almost everyone’s attracted by the 

mission component, as opposed to just being a commercial company, and the space is adequate for that. 

Mr. MAYOPOULOS. And Congressman, to the extent you are addressing that question to me. What I would say is that our old 

spaces were actually quite poor, in terms of condition. We have 

been in them for a very long time. 

Mr. HUIZENGA. Justifying the bridges. 

Mr. MAYOPOULOS. I’m sorry? 

Mr. HUIZENGA. I mean the previous justification to the bridges 

going across was workflow and flow of employees. I mean do you 

still feel that way? 

Mr. MAYOPOULOS. With respect to the bridges, first, two of the 

bridges are there by part of the base building. We don’t own the 

building and the developer put it up. 

Mr. HUIZENGA. We are distinctly aware you don’t own the building. 

Mr. MAYOPOULOS. And second, that was by design, frankly. We 

understood that we were to put ourselves in a position where, if we 

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needed to be wound down, we would be able to exit these spaces 

and we can do that since we lease these spaces. 

We sold our spaces in D.C. at the top of the market, and we have sent $118 million to the taxpayers as part of our quarterly dividends from those proceeds. But with respect to the bridges we did 

have an additional third bridge installed so that we could organize 

our business units that is both vertically and horizontally in a way 

that would allow the best use of the space. 

It was an effort to make it efficient. Overall, we have gone from 

3 million square feet nationwide in our real estate portfolio to 2 

million square feet. We have eliminated 80 percent of our offices, 

what offices we do have are 30 percent smaller. Almost all of our 

people work in 6 foot by 8 foot workstations made out of plastic. 

Mr. HUIZENGA. Being home to the three largest office furniture 

makers in the world, that is not a surprise. You go in to most new 

places they have workstations with no cubicles at all. So I still believe that you are behind the curve on that. With that, Mr. Chairman, my time has expired. 

Chairman HENSARLING. Time of the gentleman has indeed expired. The Chair now recognizes the gentleman from Missouri, Mr. 

Clay, Ranking Member of Financial Institution Subcommittee. 

Mr. CLAY. Thank you Mr. Chairman, I thank the panel for being 

here today. I have a question in the area of appraisal waivers. And 

here’s—I represent St. Louis, Missouri and we have a challenge 

with appraisals as far as being able to get the correct comparables 

for certain neighborhoods, especially underserved neighborhoods. 

And so I notice that the FHFA IG recently published a white 

paper that provides an overview of GSE appraisal waivers. And the 

paper states that the waiver programs that are currently structured are modest in size and include stringent eligibility standards 

making the risk from these programs small. 

However, advocates have raised concerns that these appraisal 

waivers could present significant risk for GSEs as well as borrowers, and that these waivers could be a slippery slope in the 

wrong direction. I don’t necessarily buy into that concept, but can 

you talk about the risks that these appraisal waivers present to the 

GSEs and to borrowers? I guess we will start with Mr. Layton and 

move down. 

Mr. LAYTON. Certainly. We look at appraisals as a piece of information, so we can have comfort in the credit quality of the loans 

we buy and then put our guarantee on, that is their purpose. 

They’re expensive, the history of appraisals as a technique is they 

are often good but they have some uncertainty and inaccuracy. 

And in the financial crisis they often didn’t do very well. So our 

people put attention to alternative ways to do it. And we have come 

up with a less expensive—that is to the borrower—way to do it for 

a modest percentage. Over time we will see how it goes, and we 

think it is as good, or better than traditional appraisals for that 

small segment. So we think it is very little incremental risk to us 

and it is quite a saving to the borrower. 

Mr. CLAY. Mr. Layton, I am totally in agreement with that approach. Mr. Mayopoulos, anything to add? 

Mr. MAYOPOULOS. I think Mr. Layton has described it very well. 

We likewise feel very comfortable about this. We have limited the 

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use of appraisal waivers to circumstances where we think there are 

appropriate factors to ensure that we have an accurate picture 

about the collateral value. 

Mr. CLAY. And, Mr. Watt, the white paper found that in the majority of cases where a loan was eligible for an appraisal waiver 

from Fannie or Freddie, the lender or borrower chose to get an appraisal anyway. 

Fannie and Freddie claim that these waivers provide benefit for 

lenders and borrowers by reducing cost and delays, but lenders and 

borrowers appear to be foregoing these benefits. What does this say 

about the value of these appraisal waivers? 

Mr. WATT. I think it says more about the history of appraisals 

and the way housing has been done in the past because everybody 

assumes that appraisals have sometimes more value than they actually provide to the buyer, or to the lender. 

So the notion that we could do a modest, small appraisal waiver 

program and that would eliminate people going and getting appraisals, probably, it is just not happening. But over time, if the 

appraisal waiver process proves to be effective and people start to 

understand what it does, it could have some impact. 

Mr. CLAY. And as I mentioned earlier, that is a challenge in the 

St. Louis community in particular because you cannot get fair 

comparables. Especially when you have someone who has invested 

in a property, have put a couple $100,000 into a property and the 

immediate neighborhood has no comparable properties and so I 

think it just gives an opportunity for people to get a true reflection 

of their value. And I thank the three of you for your responses, and 

yield back Mr. Chairman. 

Chairman HENSARLING. OK. Time of the gentleman has expired. 

The Chair now recognizes the gentleman from North Carolina, Mr. 

Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. Thank each of you 

for being here today. Mel, good to see you. We both have served the 

same district, we know many of the same people. You have had 

some serious allegations charged against you, I commended Ms. 

Grimes for the manner in which she processed this out. 

At the same time I would say to you, that you are due a due 

process and you should have your day to fully explain in a court 

your position and your side of this. So I am not one who jumps to 

conclusions, and allows the rampant jumping on of an issue to 

bring a conclusion to any issue. 

So with that in mind, I do thank you for the service that you offered, I do have concerns over oversights and abuse of expenditures 

and moneys. But at this moment I am going to defer to the Chairman of the Committee and give him the balance of my time. 

Chairman HENSARLING. I thank the gentleman for yielding. Mr. 

Watt it is old ground, I don’t want to necessarily re-plow it. I would 

just say this, when we were discussing your legal theory on why 

you did not have to participate in the first investigation or under 

the EOC guidelines you published. I know you to be a very intelligent lawyer, but sir it just doesn’t pass the smell test and it 

doesn’t pass the American people’s outrage test that there are people in Government who expect others to adhere to different standards than they are willing to adhere to. 

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And I, sir, I just believe that you have made a big mistake, 

please don’t make it on the next investigation. My next question, 

Mr. Watt, my first question is, there was a scorecard in 2014 that 

FHFA put forward. 

And the goals were set totally at the Director’s prerogative in 

turning, maintaining credit availability, foreclosure prevention, reducing taxpayer risk, building new secondary market infrastructure. 

Again, we know that your term is up I think you said January 

6th. There will be a new Director. And I guess my line of questioning is geared toward what can that new Director do, and I 

agree with you, ultimately through three Administrations and five 

Congresses, I am appalled that we have not been able to find common ground on reforming the GSEs. 

But isn’t it true that the new Director would be free to eliminate 

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible Advantage that has what many people view, including myself, as a 

risky 3 percent down payment programs? 

You are requiring all GSE-purchased loans to have LTVs over 95 

or higher. Isn’t it true that a new Director would be free to set new 

goals? 

Mr. WATT. That is true, the Director of the FHFA has a lot of 

discretion. 

Chairman HENSARLING. Isn’t it true then also a new Director 

could discontinue the GSE’s HARP, or Home Affordable Refinance 

Program, that enables borrowers with little or no equity to refinance their loans once the program hits its January 2019 eligibility 

deadline? 

Isn’t it true that a new Director could discontinue that program? 

Mr. WATT. Well the HARP program is going to be discontinued 

anyway because the usage of it is diminishing over time and we 

have already set a date. But the director could advance that date, 

yes. 

Chairman HENSARLING. Isn’t it true that a new director can increase g-fees? 

Mr. WATT. That is correct. 

Chairman HENSARLING. Isn’t it true that a new Director could 

suspend all GSE contributions to the Housing Trust Fund and Capital Magnet Fund as required under HERA after a finding that 

they, quote, ‘‘would contribute to the financial instability of Fannie 

and Freddie?’’ 

If a future Director made that finding, could they indeed suspend 

all GSE contributions to the Housing Trust Fund? 

Mr. WATT. That is correct. 

Chairman HENSARLING. Isn’t it true that a new Director could 

set the sole criteria for all GSE REO disposition programs like the 

Neighborhood Stabilization initiative that the sale of foreclosed 

homes maximized financial returns to the Government? 

Mr. WATT. That is correct. 

Chairman HENSARLING. Isn’t it true that a new Director could require the sale of the common securitization platform currently 

jointly owned 50-50 by Fannie and Freddie, and they could sell it 

into an open market competitive auction to the highest bidder? 

Could a new Director do that, Mr. Watt? 

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Mr. WATT. I am not sure the director would have that authority 

without serious consultation and approval by the Secretary of 

Treasury and probably legislative approval, because that would involve disposal of assets. 

Chairman HENSARLING. The point is that we have entrusted 

housing finance reform and concentrated all the risk in two institutions, and we have put one unelected relatively unaccountable individual in charge and given them plenary powers, and this is where 

we are. 

Time of the gentleman has expired, The Chair now recognizes 

the gentlelady from New York, Mrs. Maloney, Ranking Member of 

our Capital Markets Subcommittee. 

Mrs. MALONEY. I want to thank the Chairman and Ranking leader for calling this hearing and I know that I was in other meetings 

and not able to be here for the testimony that concerned harassment, but I did want to put in the record that this Congress has 

taken the issue very seriously and passed a resolution that requires, every year, Members of Congress and their staffs to take 

anti-harassment information protection to understand what it is, 

how to prevent it, how to report it, and this is required each year. 

We have also passed a bill that tasks the Committee on House 

Administration with coming out with new regulations to ensure 

that there is transparency and compliance in the offices and has 

a lot of protections for victims. 

It used to be that a harasser or a Member of Congress would 

have a free attorney, but the victim would not. Now attorneys are 

supplied to both for their positions and for getting a resolution to 

it. 

It’s a crime that has incredible damage on women, many never 

ever recover from it. It should be treated seriously and I am 

pleased that under the leadership of Jackie Speier who authored 

this and Lois Frankel and really Nancy Pelosi that this legislation 

has moved forward and been enacted. 

I do have one policy question, Fannie and Freddie are known for 

creating housing, but after the financial crisis, many people were 

losing their homes and were not able to finance it. 

And I would like to ask anyone on the panel, what are you doing 

to help people stay in their homes? Do you have flexibility to help 

them pay back their loan, to reach out to them and help them? 

They did not cause this financial crisis and many of them have 

suffered from it and have lost their homes, and I would like to 

know, are you making efforts to help people stay in their homes 

and if you are, what are they? 

Mr. WATT. I actually address that at some length in my written 

testimony. I think the industry and the GSEs and FHFA learned 

a lot from the housing meltdown about mitigation and how to deal 

with the prospect of default. 

So we have revamped all of the mitigation programs to try to 

speed up the process, first of all to try to anticipate when people 

are about to default before they default and try to deal with getting 

to them and figuring out alternatives for them to be able to continue to make their payments. 

It used to be that if somebody didn’t make their payments, it was 

perceived to be advantageous to lenders to foreclose. I think that 

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perception has completely gone 180 degrees in the other direction. 

It is not either beneficial to the borrower nor is it beneficial to the 

lender, nor is it beneficial to the GSEs and the investors who back 

these loans. 

So the whole attitude toward dealing with the prospect of default 

and default after it occurs as has changed over this time. 

Mrs. MALONEY. Would the other gentleman like to comment? 

Mr. MAYOPOULOS. One thing I would just add to the Director’s 

comments is that you can see these programs in action recently 

with respect to the terrible hurricanes and other natural disasters 

that have affected the country, last year and this year. So in the 

past, we would have and our servicers would have made it much 

more difficult, frankly, for borrowers to gain relief. 

Now automatically both Fannie and Freddie authorize our 

servicers to give relief to borrowers for up to 3 months without any 

communication whatsoever and can enter into longer-term 

forbearances up to a year with communication with the servicer, so 

there is much greater flexibility and hopefully much greater responsiveness by servicers when people end up in trouble especially 

for reasons beyond their control. 

So I think you can see those kinds of things working very effectively in response to some of the recent natural disasters. 

Mrs. MALONEY. My time has expired. Thank you. 

Chairman HENSARLING. Time of the gentlelady has expired. The 

Chair now recognizes the gentleman from Michigan, Mr. Trott. 

Mr. TROTT. Thank you Chairman. I want to thank the CEOs 

from Fannie and Freddie for all the progress that the organizations 

have made over the past 10 years. I have a question on GSE reform but I hope they will have time to get to it. Mr. Watt, this 

whole discussion today is a bit sad. You have over 30 years of dedicated public service, the North Carolina Senate, 20 years in Congress. You have been at FHFA for 4 or 5 years now and now we 

are having a discussion presumably in the twilight of your career 

in public service about Ms. Grimes. 

And with that being said, a few things you have said today bother me. So first, we have already discussed that you believe the harassment policy doesn’t apply to you because, as you explain it, you 

are a political appointee and you have no boss. Second, you said 

you didn’t cooperate with the investigation because you didn’t have 

to and then you proudly pointed to page 47 of some document 

where you said that Ms. Grimes said you never groped, touched, 

or had been intimate with her. So I will accept that as true since 

she said it, but omitted in that statement is that you never verbally harassed her or propositioned her noticeably absent. 

If I was your lawyer, I would say of those, if that is your defense 

so far, we have not mounted a very good explanation to refute 

these allegations. So do you care to provide me any other explanation as to why what Ms. Grimes says is not true? 

Mr. WATT. I already provided that explanation in the second 

point. The first point that you referred to I did say. But the second 

point was there’s ongoing processes that will determine what I did, 

what I said, what I didn’t do, and what I didn’t say, whether somebody has tampered with the tapes or not, will be decided in the 

EEO context— 

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Mr. TROTT. Absolutely, as the Chairman said, I will reclaim my 

time sir. 

Mr. WATT. Subject to those— 

Mr. TROTT. I am going to reclaim my time, Director. As the 

Chairman said, we are not a court of law that is for sure. But let’s 

talk about some of the things you said and did then. So you mentioned that Ms. Grimes was your mentee. Is that correct? 

Mr. WATT. Yes. 

Mr. TROTT. OK, so should a mentor comment in a sexually provocative way regarding a mentee’s experience, yes or no. 

Did you ever comment to Ms. Grimes about her sexual experience? 

Mr. WATT. I would not think so but— 

Mr. TROTT. But did you—you have a summer home correct? 

Mr. WATT. Pardon? 

Mr. TROTT. Do you have a summer home in North Carolina? 

Mr. WATT. Yes. 

Mr. TROTT. Did you ever invite your mentee to your summer 

home? 

Mr. WATT. I have invited male and female— 

Mr. TROTT. We are just talking about Ms. Grimes right now. 

Mr. WATT. Mentees to— 

Mr. TROTT. Did you invite Ms. Grimes to your summer home? 

Mr. WATT. I did not. 

Mr. TROTT. Ms. Grimes has never been to your summer home. 

Mr. WATT. No. 

Mr. TROTT. OK. 

Mr. WATT. And I did not invite her to my summer home. I told 

her if she wanted to use it for her own purposes or if she was going 

to North Carolina and I have offered that to other employees, male 

and female. 

Mr. TROTT. Just to reclaim my time sir. Have you ever been at 

your summer home, however fortuitous it may have been and Ms. 

Grimes was there as well? 

Mr. WATT. No. 

Mr. TROTT. Did you ever suggest to Ms. Grimes that you meet 

outside work to avoid any staff perceptions? 

Mr. WATT. Yes. 

Mr. TROTT. OK, and did you have dinner just one on one with 

Ms. Grimes a few times? 

Mr. WATT. Yes. 

Mr. TROTT. Did you ever ask Ms. Grimes to call you off the 

books? 

Mr. WATT. No. 

Mr. TROTT. No, OK. During one of the dinners with your mentee, 

did you ever say to her, Well you probably wanted to know what 

I wanted to talk to you about? I mentioned to you there is an attraction here that I think needs to be explored. In my experience 

there are four types of attraction: Emotional, spiritual, sexual, or 

friendship. So the exercise here is to find out which one exists. Did 

you ever make such a comment? 

Mr. WATT. I absolutely think if you are going to mentor somebody, you have to know what they are thinking— 

Mr. TROTT. About attraction? 

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Mr. WATT. I don’t have any recollection. 

Mr. TROTT. I have a lot of mentees, I have never discussed attraction with any of them. 

Mr. WATT. Well then you haven’t mentored them and figured out 

if they are giving the wrong vibrations and you are not clear with 

them what the expectations are, I think you have problems. 

Mr. TROTT. I am pretty confident I am a pretty good mentor over 

the years. Did you ever ask Ms. Grimes about her tattoo? 

Mr. WATT. I don’t recall. 

Mr. TROTT. Don’t recall, OK. So I thank you sir. I hope this process plays out and after 30 plus years, you have a few months to 

go and I am surprised you haven’t resigned from FHFA but I will 

leave that to you. 

I have a quick question in my last 20 seconds for the GSEs. So 

a good friend of mine from Fannie Mae, Mike Quinn, suggested 

many years ago to me—he was the head of credit risk at Fannie 

Mae, that the easiest way since Congress can’t get GSE reform 

done since it is so political and so partisan is to get Fannie and 

Freddie out of the refi business. Wouldn’t that be a simple way? 

I recognize the liquidity in the secondary market for middle-class 

families trying to refi, but on balance that would be an easy way 

because I think 2/3 of your portfolios are refi. Just a quick comment on that solution, as simple as it may be. 

Mr. MAYOPOULOS. That is obviously a policy decision for a body 

like this to make. We are in the business of providing liquidity and 

that is what we do currently today. It’s obviously up to policymakers to decide how broad and wide that program should be. 

Mr. LAYTON. There are really two separate issues. Refis are, as 

Tim said, a policy issue whether we are allowed in the business, 

but whether we are in it or not, that is not going to end conservatorship. That doesn’t raise capital. That doesn’t give a government guarantee or change the unpaid implicit support. 

Mr. TROTT. Thank you, I yield back. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentlelady from Arizona, Ms. Sinema. 

Ms. SINEMA. Thank you Mr. Chairman and thank you to the witnesses for being here today. Mr. Chairman, no one, no matter how 

powerful they are or to which political party they belong, is above 

the law. And when a Government official is accused of wrongdoing, 

we, on this Committee, must be committed to finding the facts, conducting rigorous oversight, and holding those who do wrong accountable. 

Director Watt, I am deeply concerned by allegations that you sexually harassed an employee at your agency, while serving in your 

capacity as Director. These allegations require a full and impartial 

investigation so that we can learn the facts and take actions. 

Sexual harassment is always wrong, and those who engage in 

this hurtful behavior do not deserve our trust and should resign. 

My question is not on the claims, but on your refusal to cooperate 

with an independent investigation of the allegations against you. 

The Office of Equal Employment Opportunity at FHFA requested 

an independent agency investigate and report on these claims. 

They tasked the U.S. Postal Service investigators with producing 

the report, but you refused to comply with their investigators. You 

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argued, in part, that because you are a Presidential appointee, you 

are not subject to your own anti-harassment policy. But current 

law and the EEOC’s own website make clear that our laws prohibiting discrimination and harassment apply to all employers and 

apply in every aspect of employment. 

Common sense dictates that this law covers everyone, from the 

most junior hire to the most senior executive. My question to you 

is, can you cite specific statute or court precedent that concludes 

that you, as a Presidential appointee, should be treated differently 

for the purposes of Federal employment law? 

Mr. WATT. I have cited the statute, and that has been made a 

part of the record in response to a question that the Chairman 

asked. But, be clear that I am not above the law. I don’t believe 

that I am above the law. The EEO process will play itself out. It 

will—if you think I am not going to be part of a process by which 

these allegations are determined, you are just wrong. 

I am not part of that Postal process, but I am cooperating with 

the OIG and there will be an EEO process that will apply to me 

and everybody else in this case. 

Ms. SINEMA. So Director Watt, you believe that the anti-harassment policy statement that you signed in August 2017 does not 

apply to you in the same way it applies to other employees at your 

agency. 

Mr. WATT. In this enforcement, it does not apply to me, and as 

obligations not to harass, it does apply to me. But, and I have explained this, I have tried to explain this as well as I can. When the 

Postal Inspector investigator finished his report, the report then 

comes to our agency. 

If there’s a determination that something has been done wrong, 

there’s nobody in the agency who has the authority to take action 

against me. 

If that investigation was being done for the President of the 

United States, it would be a whole different thing, because there’s 

somebody above me who has the authority to take action. But 

there’s nobody in our agency to accept that report and take any action based on it. 

And I have tried to explain that. I am trying to avoid participating in multiple investigations, to be quite honest, because they 

are expensive and they are time consuming. But I am—if you think 

I am going to—I am trying to avoid or will avoid all investigations, 

that is just not the case. 

Ms. SINEMA. So Director— 

Mr. WATT. Equal employment opportunity law applies to every 

employee in the world, in the United States. Federal employees, 

private employees, they—I still have to go through that process. 

Ms. SINEMA. So Director, you believe that, since you were not legally required to follow the anti-harassment policy, in this instance, do you believe that you have an ethical or professional duty 

to do so? 

Mr. WATT. I think I have followed the policy. I haven’t followed 

the process that policy anticipates, and I have tried to explain why. 

Ms. SINEMA. Mr. Chairman, I know my time is expired. If I 

might, a few more moments? 

Chairman HENSARLING. The Member may proceed. 

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Ms. SINEMA. Thank you. Mr. Chairman, I am not satisfied with 

the Director’s answer, and I don’t think that the folks that I serve 

back home would be satisfied with this either. Frankly, people back 

home are sick and tired of politicians and bureaucrats who think 

they can play by a different set of rules. 

So if we need to tighten our laws to clarify that everyone must 

follow the law and comply with these investigations, then, Mr. 

Chairman, I would call on my colleagues, anyone who is willing for 

us to join together and do just that. Thank you, Mr. Chairman. 

Chairman HENSARLING. Time of the gentlelady has expired. The 

Chair now recognizes the gentleman from Arkansas, Mr. Hill. 

Mr. HILL. I thank the Chairman for the time. And one of the obligations of the Congress, under the Constitution, is oversight. And 

I want to thank you and the Ranking Member for the way you 

have conducted the hearing today. 

It’s a difficult topic, and I think the Ranking Member and the 

Chairman deserve the recognition of our Members, joint Members 

in organizing and holding this hearing. It’s been a difficult one, and 

I appreciate your leadership. 

I would like to start with Mr. Mayopoulos about a Fannie Mae 

question I have. It applies to both Freddie and Fannie, but let me 

start with you. Back in the Dodd-Frank debate, Chairman Frank 

said that the profligate availability of credit is a major reason for 

the current problem. That is the housing crisis. 

Too many loans were made to people who shouldn’t have gotten 

them. We need to reduce the pattern of people getting loans who 

shouldn’t have gotten them because they couldn’t repay them. And 

he was talking about the obligations under Dodd-Frank to limit the 

debt-to-income ratio and create the definition of a qualified mortgage that all financial institutions are obligated to have when they 

originate a loan. 

But as I understand it, there’s an exception in the bill that is referred to—if a loan is eligible for purchase by one of the GSEs, they 

don’t have to follow that rule that Mr. Frank felt was so very, very 

important and such a compelling part of bad organization policies 

leading up to the crisis. 

So I would like to understand why you have gone, at Fannie, 

from 12 percent of loans that are over 50 percent debt-to-income— 

not 43 percent, which is the qualified mortgage test, but 50 percent 

in 2013 to now 36 percent of loans in March 2018. Why is it that 

you have such an appetite for loans that are well above the 43 percent DTI? 

Mr. MAYOPOULOS. Thank you for the question, Congressman. I 

appreciate it. And certainly, I would agree with you that loan origination standards, before the crisis, were quite poor. Credit standards deteriorated quite substantially, and there were lots of participants in that deterioration. 

But I do think some of the blame also lies with Fannie and 

Freddie, leading up to that. We have certainly taken that to heart, 

we have learned our lessons, and we have imposed what we believe 

are good, sustainable credit standards. 

We don’t believe, and I think the evidence bears this out, that 

there is one and only one factor that determines whether a loan is 

a good loan or not. 

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Mr. HILL. Well look, I think a lot of bankers agree with that. 

But, the U.S. Congress didn’t agree with it. I had a real problem 

with it when I was in the private sector, but that is what the law 

is in Dodd-Frank. 

Why is what is good for the goose not good for the gander in this 

instance? 

Mr. MAYOPOULOS. That’s been a policy judgment that— 

Mr. HILL. Who made that policy judgment? 

Mr. MAYOPOULOS. Fannie and Freddie did not make that policy 

judgment, that was— 

Mr. HILL. Did the Director of FHFA make that policy judgment? 

Mr. MAYOPOULOS. No, I believe that the Congress made that policy judgment. 

Mr. HILL. And based on what facts? 

Mr. MAYOPOULOS. I don’t know, I wasn’t present for that debate 

and that decision. But what we have attempted to do is to apply 

good credit standards. So we consider debt-to-income, we consider 

loan-to-value, we consider people’s ability and willingness to repay, 

we consider their credit history— 

Mr. HILL. Isn’t this a loophole right now that is allowing that 

market to creep up in a way that is not available to community 

banks across the country, and I would turn to Director Watt and 

seek your view on that from a prudence point of view as the conservator of these two organizations, that even if it were permitted by 

law in this GSE patch as it is referred to colloquially, isn’t it a poor 

financial practice to let it go from 12 percent of loans purchased to 

36 percent in a very short period of time? 

Just an answer based on your knowledge as Director, but I 

mean—or you can answer personally. But either way, I would like 

an answer. 

Mr. WATT. My answer both personally and as Director is that 

does not necessarily mean that is imprudent going— 

Mr. HILL. Well I think a lot of bankers wouldn’t say it was prudent either. A lot of factors that go into it, but that is not what 

the Congress determined for originators. 

Mr. WATT. But understand that neither Fannie nor Freddie 

makes loans, so if bankers have that opinion, nobody is forcing 

them to make those loans. So neither Fannie nor Freddie make 

loans. 

Mr. HILL. But they used to set the gold standard. My time has 

expired, Mr. Chairman. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Missouri, Mr. Cleaver, 

Ranking Member of our Housing and Insurance Subcommittee. 

Mr. CLEAVER. Thank you, Mr. Chairman. Mr. Duffy, who was 

here earlier today, and I have had a number of meetings, our offices are across the hall from one another. And so we have gone 

over to each other’s offices quite a bit, talking about GSE reform. 

And, I made myself clear, I think that the secondary market has 

to take steps to make sure that we can continue to produce more 

affordable housing, particularly in States like mine where the Governor unilaterally discontinued low-income tax credits. 

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And, of course, I believe in the Government backstop. There are 

a lot of folk who have a lot of ideas and many of them have shared 

those with Mr. Duffy and I. 

I am wondering Mr. Watt, as well as the two CEOs from Fannie 

and Freddie, do you believe that we need GSE reform, and if so, 

what would be most critical? 

Mr. WATT. I have been beating that drum for 5 years as the Director, and probably was beating it as a Member of Congress before 

that. But yes, I definitely think the conservatorship is not a sustainable form. 

And a lot of the issues really that are being raised today about 

what Fannie and Freddie should or should not do, this is the result 

of this protracted period of conservatorship where you have basically staffs of 600 to 700 people, which is what is in my agency, 

trying to micromanage the housing finance market, which has 

thousands and thousands and thousands of participants in it to a 

conservatorship. 

It’s just not a sustainable model, and until Congress takes steps 

to get us out of it, I just don’t—we are doing everything that we 

can do to maintain a good, vibrant, efficient market. 

And to make sure that Fannie and Freddie are doing their part 

of the market responsibly. But this degree of uncertainty about 

what the future of housing finance in this country is, is just not 

good for anybody. 

Mr. CLEAVER. Mr. Mayopoulos, should we just label the GSEs as 

SIFI and be through with it? 

Mr. MAYOPOULOS. Well thank you for the question, Congressman. Clearly there has been a lot of reform at Fannie and Freddie 

under the leadership of FHFA, both under Director Watt and Acting Director DeMarco before him and Director Lockhart before him. 

So lots and lots of positive change has occurred, but the taxpayers are still exposed to what seems to be an ill-defined potential 

exposure. The amount of private capital that is willing to come into 

this market I think is substantially reduced so long as this uncertainty exists, and we will continue to have some of the debates that 

we are having today, so long as we continue to operate in conservatorship. 

So to me, housing finance reform is absolutely essential if what 

we want to have is a vibrant housing finance system, because we 

won’t get market participation otherwise. The other thing I would 

say is we spend a lot of time talking about housing finance reform. 

The fact of the matter is the country has a serious housing challenge, the country needs a housing strategy. There are many people 

who cannot get access to good, affordable housing whether it is 

housing they own or housing that they rent. 

And we are spending too much time debating housing finance as 

opposed to how do we give people good housing. That should be a 

primary focus. 

Mr. CLEAVER. Mr. Layton. 

Mr. LAYTON. Yes, sir. I will just add two points to what has already been said. There are many ways to do GSE reform, it is absolutely necessary in the long run. As per my testimony, there’s certain minimum flaws in the old system which should not carry over. 

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Any version should have those flaws removed. Inadequate capitalization was not a good idea, the unlimited investment portfolios 

was not a good idea, the unpaid for implicit Government support 

was not a good idea. 

Those things should be a minimum, so I just put that out there. 

Building on Tim’s comment about the housing problem, the problem is housing production of units whether rented or owned, this 

country, based on averages, should be producing 1.5 to 1.6 million 

a year and we are only producing about 1.3 million. That is the 

problem. 

Mr. CLEAVER. Well thank you, Mr. Chairman. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Georgia, Mr. 

Loudermilk. 

Mr. LOUDERMILK. Thank you, Mr. Chairman. I thank the panel 

for being here. Director Watt, I actually have a different line of 

questioning I want to get into. But you said something a minute 

ago that is just weighing on my mind so heavy. 

I am having a hard time getting over this as a father and as a 

husband. Mr. Trott asked you about your line of questioning in 

mentoring someone regarding attraction that do you think that is 

an appropriate response, much less the responsibility of mentoring, 

is probably the most ridiculous thing I have ever heard since I have 

been in Congress. 

I can’t imagine that anyone in a management position would 

think that would be a part of mentoring, much less, appropriate. 

So I don’t expect you to respond. In fact, I just needed to say that 

to get that off my mind so we can move on to other issues. 

Director Watt, I don’t know if you saw the previous panel with 

the FHFA IG, but I discussed an e-mail among Mr. Mayopoulos 

and Fannie board members that I believe shows a profound lack 

of respect and understanding for a company that is in FHFA conservatorship and has taken more than $116 billion in taxpayer 

funds. I will read the e-mail again which is from Bart Harvey, the 

head of the nominating and governance Committee and Chairman 

of the board. 

The e-mail says, gents, I have seen it all now, that the OIG could 

report this to the House Financial Subcommittee is astonishing in 

Mel’s placation regime. That OIG quotes, as the FHFA agreeing 

with the majority of its reports on MRAs gives rise to another potential wave of regulation by FHFA. 

If I were a Member of the Committee and got this report, I would 

have a cow. That 5-plus trillion of assets may not be operated in 

a safe and sound manner. 

As we know on the board, financial oversight exceeds anything 

the private sector gets by a multiple degree even if a lot of it is 

wasted time and energy. The single biggest waste of time, money, 

and talent are the dueling agencies, someone, Mel, ought to tell the 

House the load of crap the OIG has heaped on them, but he won’t. 

The games being played are a waste and abuse of taxpayers’ money 

and stymie real progress and we accept them, getting out of conservatorship is the only answer to this pollution foolishness—best, 

Bart. 

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My question Dr. Watt is, I realize you often have legitimate differences of opinion with the IG and I respect that, but are Mr. Harvey’s comments an appropriate response to oversight? 

Mr. WATT. Certainly not an appropriate external response, but I 

don’t know the circumstances under which this was written, whether it was internal, whether it was just blowing off steam. He certainly couldn’t have expected me to come over here. I think the email actually says Mel is not going to do that. But he puts his finger on a very serious thing, which is the very thing that I have 

been saying, conservatorship is not sustainable. 

Mr. LOUDERMILK. That is a difference of opinion. 

Mr. WATT. I can’t control every single thing that people say internally, we don’t have that capacity. And I am not subscribing to 

what he said, but his final point was, we have to get out of— 

Mr. LOUDERMILK. And I understand that. And that is why I said 

I think a difference of opinion, I can understand that. My question 

is about the appropriateness of this response. Mr. Mayopoulos, are 

Mr. Harvey’s comments an appropriate response to oversight? 

Mr. MAYOPOULOS. No, Congressman, they are not. They don’t reflect my personal views, they don’t reflect the views of the board 

or the management team. I don’t think that is an appropriate thing 

for Mr. Harvey to have communicated in the way that he did. But, 

as Director Watt said, it was an internal communication among a 

very small number of Directors, and—but you didn’t see me concurring with Mr. Harvey’s comments. 

Mr. LOUDERMILK. Thank you for your direct response. Last question, Director Watt, on a different topic, have you ever stated that 

the hiring process at FHFA can be a charade process due to your 

ultimate power to make decisions one way or the other or for any 

reason whatsoever, and have you ever engaged in a charade process as it pertains to hiring? 

Mr. WATT. I have certainly tried not to engage in a charade process and I think when the full text of these conversations comes out, 

you will see that was a totally different set of circumstances, that 

didn’t even apply to Ms. Grimes in fact. 

Mr. LOUDERMILK. Thank you, Mr. Chairman. I yield back. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from New York, Mr. Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. Director Watt, this morning, I have said, and I have said it previously, that the allegations 

that are against you are of course deeply concerning and should be 

treated as such and that there should absolutely be a thorough and 

expeditious investigation to get all the facts, and action should be 

taken accordingly after all the facts are in. I have also said this 

morning that I have three daughters, as you know, and that is very 

worrisome to me when you hear any allegations like that particularly, and I admitted, is when it comes from friend. But that is how 

I feel, I said I know how it would feel if something as alleged by 

Ms. Grimes was my daughter, I would be very upset about that. 

I have been at another hearing, in and out all day, I haven’t had 

a chance to hear all of your statements, et cetera, and what the 

questions were. So what I will simply do right now is just to ask 

you if there’s anything else that you would like to say that may 

have not been asked or anything at that time, because as I said 

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we want to hear all the facts from everyone in that regard. And 

so I don’t know if there’s anything else that you would like to say 

at this particular time. 

Mr. WATT. I would certainly emphasize that if anybody here has 

the notion that I believe that I am above the law, they should dissuade themselves of that notion. I have explained why I did not 

participate in the Postal Investigator’s process but there is an 

FHFA IG process that I am fully participating in and there is an 

EEO process that has already started that I will participate in. 

So there’s going to be plenty of opportunities for the facts to come 

out and for Ms. Grimes to be heard and for me to be heard about 

the context of whatever was said. And I fully appreciate the process. So I will stop there. I just think, I am as disturbed, I guess, 

as you are about if these allegations were true. But I just don’t 

think this Committee is going to be able to determine that, that is 

going to have to be determined in a legal process. 

And I think that is the appropriate place for it to be determined, 

because there are rules of evidence, there are requirements, there’s 

a whole set of due process that is associated with that that will 

give both Ms. Grimes, and me, the opportunity to be given due 

process. 

I participated in that due process, legal process, for 22 years before I came to Congress, and I know that it is probably the best 

for sorting through contested facts and law. 

Mr. MEEKS. Thank you. I wanted to get in a substantive question, I don’t know if I can have the time. But because there was 

May 22, DOJ indicted four individuals for a multi-dollar mortgage 

fraud in New York. 

And it was applied—I am talking about multi-family housing. So 

my question really was, is the issue that the Congress should revisit to include multi-family housing so they could make sure it 

still fits under Dodd-Frank? Something specifically on multi-family 

housing there. 

Mr. WATT. Well I think in single family housing, and in multifamily housing there’s always a small group of people who are 

going to try to game the system or defraud, or do something illegal. 

There are laws on the books that say you shouldn’t do that, of 

course. And these people will be caught in the great majority of 

cases but assessment of whether apartments are occupied or not occupied—generally done by the lender, not by Fannie or Freddie— 

independently. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes gentleman from Florida, Mr. Ross. 

Mr. ROSS. Thank you, Chairman. Mr. Chairman, as a lawyer I 

have been a student of the law and I have always had a strong passion for the independence of judiciary as well as the fundamental 

nature and right of due process. 

And regardless of the outcome, Director Watt, I hope that at the 

end of the day that, with this matter before you and those that are 

contemporaneously occurring and may ensue later on, for whatever 

reason—and I hope not, but that we as a body can say that due 

process was never denied and that justice took its course. 

What I would like to do now is talk to you a little bit more about 

responsibilities of your business, and specifically with credit risk 

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transfers. We all know that the GSEs have amassed amazing 

amounts of liability and risk to the detriment of taxpayers. 

And to your credit, Mr. Watt, you have engaged in and started 

a credit risk transfer program that, from one who believes in responsible risk management and for the opportunity for the Federal 

Government to cede some of that risk elsewhere to the capital markets, because I firmly believe there is sufficient capacity out there 

to meet the need to reduce that risk. 

I would like to ask a few questions related to that program 

today. Mr. Watt, in your testimony, you say that a portion of credit 

risk has been transferred on more than $2.47 trillion of unpaid 

principal balance since 2013. 

You also note that, in 2017, the enterprises transferred a portion of credit risk on $689 billion of single family mortgages. These are 

impressive numbers, but what concerns me is the qualification of 

a portion has been ceded to the credit risk transfers. What you 

have told us is there’s some amount of risk that has been transferred from the total portfolio for unpaid balances and single family 

mortgages. 

But you have not actually given us an amount of what that portion is, or into that insight. So I wanted to give you some opportunity now, and Mr. Mayopoulos or Mr. Layton, you may also 

speak to this of, what is the quantification of that portion of credit 

risk transfers that has been employed with the GSEs? 

Mr. LAYTON. Might I go first? 

Mr. ROSS. Sure. 

Mr. LAYTON. My testimony, the written testimony gave the numbers. The quantification is hard to do, but the FHFA has recently 

put out a proposed capital system, and in there a quantification is 

possible. For new flow single family mortgages, for the last few 

years, 60 percent of the capital that would be required for the credit risk has been laid off to the private markets. We just did a new 

and enhanced structure where— 

Mr. ROSS. Sixty percent of the liability— 

Mr. LAYTON. The credit—the capital we would need for the credit 

risk has been laid off—to the private market. We just did a new 

enhanced structure where the number is over 80 percent in our 

multi-family business, the number is 80 to 90 percent. 

Mr. ROSS. Now are these frontend or backend? Are these where 

we see the risk on the securitized mortgages, or— 

Mr. LAYTON. The answer is the vast majority is backend because 

they have proven more efficient to do. 

Mr. ROSS. But doesn’t that adversely impact the market? I mean, 

if we are not doing—shouldn’t we have a balanced portfolio? 

Shouldn’t we have those on the backend being seated as well as 

those on the frontend through the private mortgage insurance organizations? 

Mr. LAYTON. Doing credit risk transfer on behalf of and officially 

for the taxpayer, means a lot of math and a lot of issues about 

what investors are willing to charge us to take the risk off their 

hands— 

Mr. ROSS. But that is all the market, we have to have the market forces play into that. What you are essentially doing is you are 

saying you are taking the less credit risk—the ones that are the 

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cherry picked if you will, and give it to the market without allowing for the upfront—the ones that have the greater risk, to be assessed and managed by the markets by putting everything in the 

backend. You have 95 percent in the backend. 

Mr. LAYTON. The backend just means it is done later in the process, the risk taking is exactly the same at the end. 

Mr. ROSS. It’s the same. So you are telling me that the backend 

risks don’t take any of the frontend risks? That they don’t take the 

first percentage of risk? 

Mr. LAYTON. I think there’s a communication problem here. 

Mr. ROSS. Yes. 

Mr. LAYTON. Backend and frontend means when it is done in the 

process, you are talking about whether it is first loss, near first 

loss—how far out it is. And so if I wanted to buy private mortgage 

insurance and require that, that would be a frontend risk. That is 

a—they tend to do a first dollar loss risk— 

Mr. ROSS. Right, but how much have you acceded of that? How 

much of first dollar loss have you ceded? 

Mr. LAYTON. I don’t have the numbers, but the largest credit risk 

transfer traditionally has been, in fact, that kind of private mortgage insurance on all our high, on virtually all our high LTV, that 

is already sent, LTV business. 

Mr. ROSS. One last question, just because I want to make sure 

that this charter creep. You all have been playing the—you are the 

market. I mean, you said that in your testimony earlier. Can you 

comment on what GSE’s role is in how to ensure that lenders, 

mortgage insurers, service appraisers, and other market participants are not pushed to the sidelines by GSEs? Anyone? 

Mr. MAYOPOULOS. First I would say I think what we provide is, 

actually both companies provide a platform for lots of market participants to participate in this market. I mean, the reality is that, 

as Mr. Layton pointed out in his opening statement, small and medium-sized lenders get to spend in this market in a way that 

they— 

Mr. ROSS. And I know my time is up, but you have an unfair 

competitive advantage is the bottom line. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Washington, Mr. Heck. 

Mr. HECK. Thank you, Mr. Chairman. Mr. Layton, you are my 

new guy. Thank you. 

Mr. LAYTON. OK. 

Mr. HECK. Thank you for saying succinctly that which I have 

been trying to get more people to say louder in more places for 

some time. We have a housing crisis in this country that is caused 

by a severe underproduction of housing units of all kinds. We need 

to build more houses of all kinds and shapes and sizes for all our 

neighbors. Period. Now let me tell you a quick story as a preface 

to a question I will ask. 

I have a friend who sold his very modest three-bedroom home in 

Northwest Seattle a couple years ago. An older home. A nice little 

home. Not big at all. He chose from among—I believe the number 

was 17 competing offers on day one of listing and he ended up selling his home for $150,000 more than he asked for it. The reason, 

we don’t have enough inventory. 

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We don’t produce enough housing units. And I want to remind 

everybody why this is important. Failure to correct the break between demand and supply—this isn’t a demand problem; this is a 

supply problem—holds back the growth of the economy. Every recession in modern history has been led out of by housing construction until this one, which is part of why it was so anemic and 

lasted so long. And the reason’s obvious, as I like to say. When you 

buy a home, that transaction doesn’t stop when they hand you the 

key to the door because you replace the doorknob and the curtains 

and you do landscaping and you do furniture, et cetera. 

It’s a very powerful propellant of our economic engine. But even 

more insidious and important, is that when we make it 

unaffordable for people to be able to purchase a home—and this is 

a rental and homeownership question—it defers the beginning of 

the single most powerful and important net worth building program that most Americans have. This is a crisis and it is underproduction for the very facts you stated earlier. So here’s my question. Why and what can we do about it? 

Mr. LAYTON. Well thank you for the question. 

Mr. HECK. You are my new guy. 

Mr. LAYTON. Yes. It is overwhelmingly not a housing finance 

issue. The GSE’s can at the margin, and do at the margin try to 

help, but it is primarily a production problem. In the usual way 

people point— 

Mr. HECK. Excuse me, Mr. Layton. When I say what can we do 

about it, I didn’t mean that this is miserable. I want to say what 

can we do about it. I did not mean the GSEs. I mean what can we 

do about this serious underproduction problem? 

Mr. LAYTON. My understanding of the problem and big problems 

like this don’t have one single cause. I have seen the problem laid 

at the feet of everything from shortage of labor, which went to 

other jobs after the financial crisis and house production, shortage 

of materials, NIMBY-ism, extensively— 

Mr. HECK. Which relates the availability of land for construction. 

Mr. LAYTON. Yes. Or zoning, allowing more dense housing versus 

less dense housing, a preference for urban housing in the country, 

that has been a big shift, and it takes a lot longer to produce housing in urban areas than usually in the suburbs, in terms of clearing 

land and getting permits, towns charging very large amounts for 

building permits because— 

Mr. HECK. The smallest home in my hometown, before you even 

begin construction, has an average of $42,000 in impact fees. 

Mr. LAYTON. Right. So— 

Mr. HECK. Now factor that into the affordability of starter 

homes. 

Mr. LAYTON. So I have given talks as part of my job, in which 

I call for, I hope that policymakers do a broad-based look at all this 

because it is many things causing this problem. 

Mr. HECK. So as it relates to the GSEs, what, if anything, do you 

do with respect to construction loans? Because I am with you, this 

isn’t a housing finance issue for the consumer but it is for production. So what you do with respect to ADC any of them—for multifamily units? 

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Mr. LAYTON. There are two things related to specifically supply 

in multi-family. One we do and the other is a discussion with the 

FHFA, some additional things we might do in pursuit of our mission. What we currently do today is we have an emphasis on redevelopment or refurbishment loans to prevent housing from falling 

out of the housing stock through not having enough money to be 

maintained. That is both something we like doing and have some 

programs on. 

Part of them are under the new Duty to Serve regulations. One 

of them is the just announced pilot we have to do mezzanine financing, which is exactly targeted at this kind of housing to be 

fixed up and maintained. And construction lending is an ongoing 

topic. It has not been a tradition of the GSEs to do that. 

Mr. HECK. I would simply encourage you to do anything and everything you can to promote increased production. And I thank you 

for accurate and important and compelling problem statement. I 

yield back, Mr. Chairman. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Illinois, Mr. Hultgren. 

Mr. HULTGREN. Thank you. I would like to yield to the Chairman. 

Chairman HENSARLING. Well I thank the gentleman for yielding. 

Mr. Layton, it has been a long time since you issued this comment. 

And let me say that I could not admire your credentials more and 

my understanding is you did not seek this job, the job sought you. 

Thank you for taking it on, sir. I don’t want to put words precisely in your mouth, but I think in your opening statement you 

said either we have a far safer and sounder housing finance system 

or we have a safe and sound housing finance system, something 

along those lines. 

Mr. LAYTON. I said we had a safer, sounder housing system than 

we had 10 years ago. 

Chairman HENSARLING. I would just say for the record, we did 

have a previous hearing on the GSE topic and we heard from Mr. 

Watt’s predecessor, Ed DeMarco, who believes that systemic risk is 

growing in the system, not fading. 

We also heard from Ed Pinto, who is a former chief risk officer 

of Fannie Mae who believes that basically the same thing, that he 

is seeing risk increase within the system and believes we have a 

risky government housing policy and an unsustainable home price 

boom. So I just wanted to let you know there are some other informed opinions who believe that maybe things aren’t quite as rosy. 

Director Watt, another question for you. 

In May, Bloomberg reporter, Joe Light, issued a story entitled, 

‘‘Fannie Mae Advocacy Ban doesn’t Stop Lawyer from Pushing 

Views.’’ I trust you are familiar with the story. Are you familiar 

with the story? 

Mr. WATT. I am generally familiar with the issue. I don’t know 

about the specific story. 

Chairman HENSARLING. It has been reported that despite your 

ban, and when I say your ban, it was put in place by one of your 

predecessors on quote, ‘‘all political activities including lobbying.’’ 

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The story says that quote, ‘‘a top Fannie Mae executive has done 

just that over the past few months, quietly meeting with people inside and outside President Donald Trump’s Administration.’’ 

The story went on to state that such lobbying happened on multiple occasions with multiple parties, with a Fannie executive stating quote, ‘‘he believes that many of FHFA goals can be achieved 

without Congress through modification to the companies’ bail out 

contracts with the Treasury.’’ 

So Mr. Watt, when did you first become aware of these allegations that Fannie officials have been engaged in lobbying activities? 

Mr. WATT. These specific allegations I have found out recently 

when we started to produce documents in response to the Committee’s request. There is a ban as we as you— 

Chairman HENSARLING. So you acknowledge the ban. 

Mr. WATT. Yes. 

Chairman HENSARLING. That is the current policy. 

Mr. WATT. Yes. That is the current policy and we have gone out 

of our way to say to both management and boards that neither 

they nor we should have a position on housing finance reform. 

Chairman HENSARLING. Director what— 

Mr. WATT. You have heard me say that over and over again. 

Chairman HENSARLING. But what does FHA do to monitor this 

and what are the consequences for violating the lobby ban? 

Mr. WATT. The notion that 600 people could monitor everything 

that is being done by both of these enterprises is one of the fallacies of conservatorship. So we tell them not to do it. When we 

find out that they violated it, we try to take action and reinforce 

it and tell them again not to do it. 

Chairman HENSARLING. I am not saying there’s a challenge. But 

I think what I hear you saying, there’s not really a formal monitoring process then, correct? 

Mr. WATT. There is. The requirement is that if they are going to 

have meetings, we expect them to notify us. We expect them to 

take one of our staff with them. 

Chairman HENSARLING. And how about consequences? What are 

the consequences for violating the ban? 

Mr. WATT. There are no real consequences other than, what do 

you say if somebody says hey, I have a personal opinion. I was in 

a meeting, somebody asked me my view. I don’t know that there’s 

a real consequence. 

Chairman HENSARLING. The time of the gentleman has expired. 

He was kind enough to yield to me. But I think, Director Watt, 

that is part of the problem. And listen, it goes beyond you but 

when I look at this system, what I think I am hearing is, again, 

there’s no consequence for violating a lobby ban if you work for 

GSEs. 

Heightened credential standards applied to every systemically 

important financial institution but the GSEs. The qualified mortgage applies to all financial institutions but the GSEs, and the 

FHFA policy on any harassment applies to all employees but the 

GSEs regulator, the head of FHFA. I would just submit for the 

record this is a problem. 

The time of the gentleman has expired. The Chair now recognizes the the gentlelady from Ohio, Mrs. Beatty. 

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Mrs. BEATTY. Thank you Mr. Chair and to the Ranking Member. 

To the panel who are here today. I had originally planned to come 

today and ask questions about the oversight of the Federal Housing 

and Financial Agency’s role as conservator and regulator of GSEs. 

You may or may not know, I have long history in housing. Unfortunately after sitting through the first panel, I decided that I would 

not talk about the housing issues and I would really make an opening statement and then direct a question to you Director Watt. 

It was difficult this morning when I walked in here and listened 

to Ms. Grimes’ statements, read much of the information she had 

provided, and listened to tapes. As a woman, as a woman of color, 

a woman who had to work my way up the ladder to success; the 

time that we are in now with women fighting, with me marching 

for MeToo, today is very sad and difficult and painful. 

To you Director Watt, someone who mentored me, helped guide 

me through this very Committee that I am on, makes it even more 

difficult. When I think about her three complaints that she listed, 

I was very disturbed when she asked for her anonymity. 

I was very clear in the panel too that I did not like that the Office of the Inspector General had called and shared with you her 

name. Nor was I pleased with the answers that she provided me. 

As a matter of fact, I was appalled. I was sad. 

More importantly, I have fought for equal pay for equal work as 

a hallmark and in the forefront of my advocacy. While I appreciated your comments, Director Watt and Ms. Grimes, stating that 

there was no sexual contact; she was very clear in her statements 

matching yours. 

Further she applauded you for your housing work. But she felt 

that she has been sexually harassed. She felt that there was hostility in the work place and uneasiness for her to come to work. 

She also stated that she had worked two jobs and not been compensated with equal pay for equal work. She also has provided to 

us and others that there was some disparity with white men and 

their pay and African-American or minority women. 

She asked us for resolve. She did not appear to be bitter or 

angry; she appeared to be disturbed and I am disturbed. I have a 

few questions. 

I would like to ask you Director Watt, does Ms. Grimes still report to you and do you think it is a problem for an organization 

or an agency that someone who has alleged sexual harassment 

should still have to report to the people she alleges harassment? 

And would you be willing to allow Ms. Grimes, if she still does 

report to you, to directly report to a third party? You can answer 

that, and then last if there are any comments that you would like 

to make. 

Mr. WATT. Ms. Grimes has never reported directly to me. 

Mrs. BEATTY. Does she report up to you in any way? 

Mr. WATT. Everybody in the agency reports indirectly to the Director. I mean, the Director is in that sense everybody reports to 

me. But she has never reported directly to me. 

Mrs. BEATTY. But do you all have direct contact about her work 

or her promotions or her path— 

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Mr. WATT. Very little contact. And that is what makes this so 

difficult, because unless you know the factual circumstances of all 

of this, you really can’t assess it. 

And it will be assessed. I mean I hear exactly the frustration 

that you are feeling. I feel the same frustration. You asked me can 

I move in such a way that she doesn’t report to me? Well— 

Mrs. BEATTY. Let me ask this because I am going to have to reclaim my time. Is there any way you could have or could get her 

the equal pay for the work, change her title to as the top. Would 

there not be some influence if you were aware of this? 

And assuming from what we have read and the tapes, that you 

all have had conversations about her employment. 

Mr. WATT. I have made a number of efforts to try to be of assistance to Ms. Grimes to move her through the process. But there are 

certain things that I— 

Mrs. BEATTY. So any reason she didn’t get through the process? 

Is there any reason that she didn’t get equal pay for equal work? 

Mr. WATT. I don’t know that. I do not know that. And I don’t 

have the capability to determine it on my own. And now I have 

been removed from the process because I don’t—there’s really nobody in the agency who really can make these decisions anymore. 

So, it is frustrating to me. I can’t reorganize the agency, especially with reference to her complaints because I have had to disqualify myself from any decisions in this process. 

So, I mean I can understand her frustration, I understand your 

frustration. But to presume, before there’s a fact-finding process, 

there has in fact— 

Mrs. BEATTY. I think my time is up, Director Watt. I yield back 

my time. 

Chairman HENSARLING. The gentlelady’s time has expired. The 

Chair now recognizes the gentleman from Maryland, Mr. Delaney. 

Mr. DELANEY. Thank you, Mr. Chairman. And I share the same 

sentiments as my friend and colleague from Ohio. I would like to 

ask Mr. Layton and Mr. Mayopoulos questions about comprehensive housing finance reform. 

As you are probably aware, the Chairman and I introduced bipartisan legislation. But after this morning’s testimony by Ms. 

Grimes which I found to be credible and highly persuasive, I am 

going to direct my questions to you Director Watt. 

But I do want to thank Mr. Layton, Mr. Mayopoulos for being 

here. And thank you for leadership in these organizations. You and 

your fine teams have done a great job stabilizing these institutions 

for the benefit of all Americans. 

And I hope you continue to be a strong voice for housing finance 

reform into the future. So thank you for being here. 

Director Watt, this is a disappointing hearing because I, like 

most of the colleagues on this panel, know you as a man who has 

dedicated most of your life to fighting against injustices. And you 

should be commended for that. 

But the testimony of Ms. Grimes this morning was very disappointing to me and I know to my colleagues. And as someone 

who spent my life prior to coming to Congress starting and leading 

two companies that ultimately became public companies, I believe 

that the tone at the top is incredibly important in any organization. 

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Whether it be a business, a nonprofit, and certainly the Government. And I think we are lacking of the right tone at the top in 

Government in particular these days. And I just wanted to ask you 

some questions to see if you agree with that assessment. 

Do you believe that a leader should do everything they can to 

cultivate a workforce or workplace that is free of harassment? 

Mr. WATT. Yes. 

Mr. DELANEY. Do you believe that a leader should act in a way 

that sets a clear example for the entire organization? 

Mr. WATT. Yes. 

Mr. DELANEY. And do you believe that the personal conduct of 

leadership personnel is important to that mission? 

Mr. WATT. Yes. 

Mr. DELANEY. So in light of the way you answered those questions, I would like to ask you, why do you then hide behind language or quibble with whether a standard that is very clear should 

also apply to you, because we are going to actually change the 

norms in society, so that we live in a world where women are not 

harassed in the workplace. 

Have equal pay for equal work, all the things that so many people fight so hard for. We cannot have people in a position of trust 

like yourself, not subject yourself to any investigation that comes 

forth. And not explicitly say that a very clear policy that you 

signed, does not apply to you. 

How can that be a defensible position in light of the fact that you 

believe that the tone does matter? 

Mr. WATT. So let me distinguish between the standards applying 

to me, which I fully endorse and the process applying to me which 

explicitly, the law says it doesn’t. 

And I have tried to explain that on several occasions, and the 

reason— 

Mr. DELANEY. Reclaiming my time Director, out of respect. But 

don’t you get the sense that no one is buying that argument? At 

its core, you as the leader could have embraced this investigation. 

You could have said, technically speaking this doesn’t apply to 

me, but I am an open book. I want this investigation. Technically 

speaking, these particular— 

Mr. WATT. And that is exactly what I am saying in the IG’s investigation. I am saying it in the EEO investigation. But to get a 

report that nobody can do anything about is, to be quite honest, a 

waste of taxpayer money. 

Mr. DELANEY. It wouldn’t have been a waste of taxpayer money 

because we would have sat here and we would have had a more 

fulsome report knowing you participated in it. And we spend a lot 

of taxpayer money sitting here and having this hearing. 

Mr. WATT. But this Committee couldn’t do anything about it either. I mean, the report that the only person really who has the 

capacity under the— 

Mr. DELANEY. Don’t you see that everyone is watching, sir. And 

it is still not too late to fully embrace this. I mean the testimony 

of Ms. Grimes this morning, as I said, was credible and it was persuasive. 

Mr. WATT. A court will determine that Mr. Delaney. It might be 

credible to you, it may not be credible, I don’t know. But I am not 

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trying to assess whether it is credible or not. I am just saying that 

there are processes in place that will make that determination. 

And I don’t think this Committee can really make that determination. And I didn’t think the Postal investigation was going to 

be able to make the determination. They would have gathered 

facts. They would have given them to who in the agency? Nobody 

was in the agency who could do anything about it. 

Mr. DELANEY. I encourage you, Director Watt, particularly in the 

context of your career, as a very dedicated public servant, as I have 

said, who’s fought against injustice his whole life, to think about 

this concept of the tone of the top and ensure that his organization 

that you lead and the position you continue to hold in public trust, 

that you are embracing a full change of the norms in our society, 

for the benefit of all women and subjecting yourself to not only that 

you believe, from a legal perspective, are appropriate, but from an 

optical perspective, are appropriate. 

I yield back. 

Chairman HENSARLING. Time of the gentleman has expired. The 

Chair now recognizes the gentleman from Texas, Mr. Green, Ranking Member of the Oversight and Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. Again, I thank the witnesses for appearing today. I do have an affordable housing question that I will be asking. But before getting there, Mrs. Beatty has 

touched upon something that is quite sensitive, in that, we now 

have someone who appears to be in a twilight-zone, wherein, she 

can’t get help because of circumstances that exist currently, in 

terms of equal pay, or adjusting, depending upon circumstances. 

Is there any way, I know, I heard your prior testimony, but is 

there any way to separate that circumstance from other circumstances? 

Mr. WATT. I don’t know what the other circumstances are. I 

mean there is a process available to assess all of this. It is the 

equal employment opportunity process, and it will be addressed. 

And if there have been equal pay disparities taking place, Ms. 

Grimes will be compensated for that. 

Now is there any way to make that happen before we go through 

that process? Mr. Green—Judge Green, you were in the legal process, you understand the legal process. I don’t have any way to 

waive that magic wand and address that. I just don’t. 

And that is why the legal process is set up, for that very purpose, 

to allow all of these determinations to be made, whether, in fact, 

there was a disparity, and if so, what it was and order then, whoever is responsible for that disparity, to make the payment. 

Mr. GREEN. I understand your point, and appreciate your scholarly recitation. The unfortunate circumstance that Ms. Grimes is 

still without benefits that she would accrue, assuming a lot of 

things—and I don’t want to assume too many things. 

And the reason I am asking is because, in about 4 months, you 

will be gone. Will, at that time, there be a circumstance such that 

she can get at least through that process or is that process going 

to go on, no one knows how long? Is that the way we will find ourselves dealing with it? 

Mr. WATT. If you understand the equal employment opportunity 

process, it could be a protracted process. I think, perhaps the next 

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Director would not be in a position where he or she would have to 

disqualify themselves from making any decisions about it. 

That might speed up the process, but the process is set up to 

make these kinds of determinations. And short of going through 

that process, there’s no way to really resolve this, I think. 

Mr. GREEN. One more shot at the dead horse, if I may. Is there 

a deputy? I don’t know your hierarchy, in the sense of who has authority when you do not have the authority for any reason. Is there 

as deputy or someone else that could do this? 

Mr. WATT. What happened is because a number of people were 

alleged to be participants in making decisions about this, including 

our own general counsel and his office. It was necessary to get outside counsel. 

I don’t know who would be making the decision down in the organization. And that is a frustrating thing. I am sure it is frustrating for Ms. Grimes, and obviously, it is frustrating for Members 

of this Committee. 

But it will get addressed through the legal process, and all of 

these, if there are disparities, all of these will be taken into account, in the compensation that Ms. Grimes gets. But the old adage 

that justice is slow is unfortunately true. 

Mr. GREEN. Mr. Chairman, my time having expired, I would just 

like to indicate, for the record, that I will submit my question with 

reference to the housing trust fund, for later answer. 

Chairman HENSARLING. So note it for the record, there are no 

other Members remaining in the queue without objection. The 

Chair notes that some Members may have additional questions for 

this panel, which they may wish to submit in writing. Without objection, the hearing record will remain open for 5 legislative days 

for Members to submit written questions to these witnesses and to 

place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous materials to 

the Chair for inclusion in the record. 

This hearing stands adjourned. 

[Whereupon, at 6:02 p.m., the subcommittee was adjourned.] 

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A P P E N D I X 

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