As #MeToo engulfs Capitol Hill, FHFA's Watt feels the heat

September 27, 2018 5:50 PM

WASHINGTON — On a day when the nation was engrossed by the testimony of Christine Blasey Ford and Supreme Court nominee Brett Kavanaugh, a similar dynamic was at play across the Capitol at a House hearing for Federal Housing Finance Director Mel Watt.

Watt stands accused of sexually harassing Simone Grimes, an agency employee, and denying her a pay increase. It is just one of several scandals that has roiled the agency. FHFA Inspector General Laura Wertheimer is also under investigation for allegedly bowing to pressure from Watt to lessen her oversight of the agency.

The hearing before the House Financial Services Committee was initially scheduled to look at other criticism of the FHFA, Fannie Mae and Freddie Mac, and the CEOs of the two mortgage giants were called to testify. But Grimes' testimony and Watt's defiant denials of impropriety overshadowed the hearing, where members of both parties took the FHFA director to task for his alleged behavior.

Grimes, the first witness, not only recounted misgivings about Watt, but also the agency's culture under his watch and how Wertheimer responded to her allegations.

“I would like to say it’s difficult to come forward. I will not understate the difficulties and obstacles I have faced,” Grimes said.

Watt, whose term ends in January but has faced pressure to resign sooner, insisted to the committee that he had not crossed a line with Grimes and strongly disputed the allegations levied against him, sometimes angrily.

“I am confident that the resolution" of the legal process "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,” Watt said.

Here are four key takeaways from the hearing:

Watt believes the FHFA's anti-harassment policy does not apply to him

In defiant testimony, Watt admonished the committee for allowing Grimes to appear, and said in his opening statement that he “was not made aware until two days ago that the hearing would involve the charges Ms. Grimes has made or that she would be a witness.” Grimes was not invited to testify until Tuesday.

“I am a big supporter of the #MeToo movement,” he said, “But it cannot be a substitute for going through the legal process. To be honest, this committee can’t deal with this in a legal way.”

However, Rep. Maxine Waters, D-Calif., the committee's ranking member, pushed back, saying that even though it had previously been the committee’s policy to not allow for a witness with pending lawsuits to testify, times were changing.

“While that has been the regular order of business … this is a different day and a different time,” she told Watt. “What women have come to realize is that many of the processes in place work against them.”

Watt summarized his defense of Grimes' allegations in two ways. While Grimes taped conversations in which Watt is heard to be making inappropriate comments, Watt said in his testimony that their involvement never included physical intimacy.

“Specifically we have never held hands, kissed or engaged in any sexual activity,” he said.

Additionally, Watt has said that as the agency's director, he is not covered by its anti-harassment policy.

“If there’s a determination that something’s been wrong, there’s no one in the agency that has the authority to take action against me,” he said. But, he added, “To be clear, I am not above the law.”

The hearing called into question the FHFA's culture under Watt

In the committee's questioning of Grimes, Watt's accuser described a toxic workplace culture at the FHFA. She recounted concerns from colleagues that superiors at the agency use fear as a tactic and said talented staff have left after not getting opportunities for advancement. She added that the culture has gotten worse since her sexual harassment allegation became public.

Before Watt took the helm of the agency in 2014, the FHFA was a “bright and dynamic workplace,” Grimes said.

“The actions of Director Watt … have served to chip away at the culture of pride ethics and integrity that had existed at the FHFA,” she said.

When the agency released a statement meant to bolster the FHFA's ethics policies, Grimes said it was viewed by employees as a "joke."

“Other employees have shared with me that it has made the work environment a hypocrisy,” she said.

Rep. Ann Wagner, R-Mo., asked Grimes if the culture at the FHFA affected upward mobility, to which she answered, “Absolutely, for many bright and talented women.”

“The response and feedback that I’ve heard was that it has had a chilling effect,” she said.

Grimes also claimed that the human resources department at the agency was “particularly unhelpful” in responding to her concerns about Watt.

Because Watt is in the chain of command of people Grimes says she reports to, she asked if she could report to someone else while the sexual harassment investigation was ongoing, but was told it was not possible four different times.

“I did feel trapped, as if my back was against the wall, because I was being ushered to him as the decision maker,” Grimes said.

Lawmakers on both sides of the aisle criticized Watt and FHFA's oversight

Rep. Maxine Waters, ranking member of the House Financial Services Committee, and Chairman Jeb Hensarling.

Representative Maxine Waters, a Democrat from California and ranking member of the House Financial Services Committee, left, speaks with Representative Jeb Hensarling, a Republican from Texas and chairman of the House Financial Services Committee, listen as Ben Carson, secretary of Housing and Urban Development (HUD), not pictured, testifies during a hearing on Capitol Hill in Washington, D.C., U.S., on Wednesday, June 27, 2018. Carson is testifying to discuss oversight of his department. Photographer: Al Drago/Bloomberg

Al Drago/Bloomberg

Both Democrats and Republicans criticized the FHFA and Watt — who was a former member of the House committee when he served as North Carolina congressman — and questioned whether there was appropriate oversight.

“I’m disturbed that anyone would hold themselves above the law or believe that standards which apply to their employees do not apply to them,” said House Financial Services Committee Chairman Jeb Hensarling.

The exchange between Hensarling and Watt appeared heated at times. Hensarling noted that he would not hesitate to use his full subpoena power “to compel cooperation where necessary.”

Even Waters, who spoke of her friendship with Watt, reiterated her commitment to allowing Grimes to testify and repeatedly reproved Wertheimer for her handling of the investigation.

“No matter our friendship … I have a responsibility to ensure that Simone Grimes, who has raised deeply troubling allegations against Director Watt, is heard before this committee,” she said.

Watt was also met with pushback from several committee members as he justified his refusal to participate in a U.S. Postal Service investigation to look into Grimes' sexual harassment allegations. Watt reiterated that the FHFA’s anti-harassment policies did not apply to him because he was a presidential appointee.

“You do not hold yourself to the same standards you hold your employees to?” asked Wagner. “You cannot possibly even participate in that investigation?”

Rep. Nydia Velazquez, D-N.Y., echoed Wagner’s incredulity.

“I guess you also understand the type of example that you believe this demonstrates to other employees,” she said.

Wagner also pointed to a July court decision that ruled that the single-director leadership structure of the FHFA was unconstitutional. She asked Watt to whom he reported.

“The president of the United States,” he responded.

The questioning of FHFA's inspector general was at times heated

Wertheimer, the agency's inspector general, encountered tough questioning over how she handled Grimes' allegations and other investigations of the agency under Watt's leadership.

Wertheimer in particular was grilled for steps she took that revealed Grimes' identity as the FHFA employee bringing accusations against Watt.

During her testimony, Grimes repeatedly stated that she did not originally wish to come forward publicly, but did so after Wertheimer sued to gain access to records and in doing so revealed her name in public documents.

That was not all. According to Wertheimer, Grimes at one point called an agency hotline — meant for claims about fraud, waste or abuse — to report an Equal Employment Opportunity complaint she had filed centered on racial disparity.

But Wertheimer informed Watt of Grimes having called the hotline. Under questioning from Waters, the inspector general claimed she contacted the FHFA director because EEO complaints fall outside her office’s jurisdiction.

“The director needed to tell the EEO Office to do its job,” Wertheimer said, while noting that she was aware that Grimes had requested anonymity in her complaint.

When asked why she failed to preserve Grimes’ anonymity, Wertheimer said that “the complaint wasn’t about anonymous whistleblowers.”

“There appeared to be some significant misunderstandings about our work,” she said.

She also said that she was told Grimes needed to be named in the paperwork related to filing a subpoena for records, which included audio tapes Grimes had recorded of her conversations with Watt.

Wertheimer also alleged that Grimes had sent the recordings and details of her complaint to more than 100 FHFA managers using her office email.

Wertheimer denied that she maintains a personal relationship with Watt, claiming that she has never socialized with him.

“If I see him on the elevator, we exchange pleasantries,” she said.