It turned out that enabling ODBC trace was causing PG to crash. Once disabled it started working, but found another
issue.
All object names in DB2 is assumed to be upper case. odbc_fdw sends queries like this
select "fld1","fld2" from "schema_name"."table_name".
So the foreign table in PG has to created in upper case within quotes. It is bit of an annoyance.