Peter S. Goodman, Business Editor, Huffington Post

The single largest obstacle to meaningful economic recovery is a man who most Americans have probably never heard of, Edward J. DeMarco.

From his perch as acting director of the Federal Housing Finance Agency, DeMarco oversees Fannie Mae and Freddie Mac, the government-owned mortgage behemoths that collectively control about half of all home loans in the land. What he does shapes both the national housing market and the ability of troubled borrowers to hang on to their homes. What he has been been doing lately has been so unhelpful that Democratic lawmakers and grassroots advocacy groups are properly demanding his ouster.

DeMarco steadfastly refuses to allow Fannie and Freddie to help distressed homeowners by writing off principal balances on their mortgages. This has ensured that tens of millions of borrowers remain “underwater,” meaning they owe the banks more than their homes are worth — a status that has an alarming tendency to portend foreclosure. His refusal is based on logic that is both elegantly simple and tragically flawed: He is responsible for cleaning up the books at Fannie and Freddie, so he is against spending money.

If DeMarco were fire chief and your house became engulfed in flames, you could forget about calling 911. By his reasoning, the taxpayer would be best served by keeping the fire engines in the station, lest they get damaged in the line of duty. It would not matter whether the flames licking your windows were the result of your recklessness or the product of an explosion at, say, the methamphetamine lab down the street. He would not run up the municipal water bill by saving your block.

Many housing experts have long argued that writing down balances for underwater homeowners is the key to limiting foreclosures. Even the Obama administration — which previously fought against principal reduction — has come to embrace this strategy. The $25 billion foreclosure settlement that the administration brokered last month with the nation’s five largest banks includes provisions that will write down balances.

But if DeMarco keeps refusing to go along, the new program will be irrelevant. Only he has the power to make principal reduction happen broadly because only he has his hands on the levers at the institutions that control most of the mortgages.

“He is standing in the way,” Rep. Jerrold Nadler, the New York Democrat, told me on Thursday. “He is single-handedly saying that he’s opposed to any write-downs because all he cares about is the fiscal solvency of Fannie and Freddie — a legitimate concern, but not the only concern. If he doesn’t do what he ought to do, then he ought to be fired.”

A day earlier, Nadler stood on Capitol Hill with a dozen other lawmakers and a coalition of activist groups, the New Bottom Line, to call for DeMarco’s removal. The group delivered petitions to the Federal Housing Finance Agency headquarters bearing the signatures of 85,000 Americans demanding DeMarco’s firing. They sent the petitions to President Barack Obama.

How does the president view these calls for DeMarco’s removal? Let me know if you find out. The White House declined to talk.

Secretary of Housing and Urban Development Shaun Donovan has been vocal about his unhappiness with DeMarco. “Our goal is to get a good nominee and get someone in there who shares our view,” he recently told Huffington Post editors and reporters.

Last year, the Obama administration tried to replace DeMarco by appointing Joseph Smith, the respected North Carolina banking commissioner. But the Senate refused to confirm him, leaving DeMarco in place.

Some reports suggest the White House cannot remove DeMarco because he is the head of an independent agency. But that’s nonsense. He is merely the acting director and was never confirmed by the Senate. Under the 2008 law that created the Federal Housing Finance Agency, the White House could designate someone else inside the agency to take his place (though the other options bring similar ideological baggage). Better yet, the administration could circumvent the Senate with a recess appointment.

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