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Last updated: October 31, 2013 11:07 pm
Democrats fell three votes short of the 60 required to advance his nomination to lead the Federal Housing Finance Agency.
The FHFA garnered a $5.1bn settlement from JPMorgan last week related to the alleged mis-selling of mortgage-backed securities. The settlement involved the bank and two others it bought during the 2008 financial crisis, Bear Stearns and Washington Mutual.
The agency, led by acting director Edward DeMarco, is pursuing other cases against Bank of America and others, and this work is expected to continue regardless of the Watt setback.
The chances for the Watt nomination passing had looked slim because of continuing Republican opposition which has held up the issue for months. Some Republicans, such as Senator Bob Corker, argued that the FHFA needs to be led by a technocrat, not a politician.
Supporters of Mr Watt, a lawyer with a Yale University law degree, argued he is qualified, having been a small-business owner and practising in the legal matters of economic development. He has also worked as a member of the House financial services committee.
The White House earlier this week made a renewed push for Mr Watt’s nomination, with senior officials meeting leaders in the housing industry on Monday.
“The President believes that Representative Watt is the very best person to lead the agency at this important time for the housing market and our economy,” the White House said in a statement.
The failure of Mr Watt’s nomination increases the acrimony between the political parties that’s been brewing since the stand-off that led to the government shutdown earlier this month.
Harry Reid, the Senate majority leader, threatened to pursue a measure to get around Republican opposition to nominees, but Republicans said this would be dangerous.
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