The best coverage on this issue to date has come from the Village Voice, of all places. Wayne Barrett, an excellent political reporter and even better gadfly who used to relentlessly hound Rudy Giuliani as well as my old employer, the Manhattan Institute (Giuliani’s think tank of choice), wrote a 2008 cover piece called “Andrew Cuomo and Fannie and Freddie.” The illustration shows a stunned Cuomo clutching two twin infants supposed to represent the federally chartered mortgage giants. Ignorance and Want, the two allegorical twins from A Christmas Carol,spring to mind.
According to Barrett:
Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.
Not all the blame, of course, rests on poor Andrew. There was near-universal consensus during the Clinton and George W. Bush administrations that homeownership was for everyone. There was an earnest and noble desire to help low-income families and members of racial minorities achieve the American Dream. There were the cynical extortion rackets run by community organizers like Obama and outfits such as the Greenlining Institute, a Berkeley-based nonprofit that waged pressure campaigns against banks to dole out loans to unqualified borrowers lest they be branded as racist. There was the complicity of those in Congress such as Barney Frank, who rewarded the cause of the extortionists with Community Reinvestment Act funds. There was the irrational exuberance of the investors who purchased the mortgage-backed securities, spurred on by embellished claims of safety promoted by the government and private investment firms. In the end, the housing bubble did what it had to do, what all speculative bubbles do: It burst.
But something more insidious was going on under the surface while Cuomo was the man in charge at HUD. Way back in 2001—a political lifetime ago for Cuomo, and perhaps longer in the memory of voters—Stephen Hayes wrote in rhe Weekly Standard that Cuomo, who had launched his first failed campaign for governor only nine days after departing HUD, had used his federal gig to pay “lavish attention to New York. He showered his home state—particularly the electorally important upstate region—with federal dollars.” Cuomo, alleged Hayes, had used HUD as his de facto campaign office, making risky bets with the house’s money in the process. Cuomo pegged funds for upstate improvement projects to Section 108 loans, which require small towns to put up future HUD allocations as collateral for present loans. If the loans go south, the towns lose out on the future cash. One senior New York State housing official told Hayes at the time that “we’ve got a black cloud over us for the next 18 years, all so he could issue press releases.”
Cuomo was so busy building his political reputation by spreading taxpayer wealth around that he forgot to keep his eyes on the money going out the door. The New York Post reported in October that tens of millions of dollars in late ’90s HUD funds pegged for the New York-New Jersey region were instead funneled to scammers. Incidentally, Cuomo’s director in the region at the time was Bill de Blasio, who is about to be sworn in as New York City’s mayor. Being an incompetent HUD administrator is a surefire path to political success, it seems.
Worse yet—though perhaps predictably—instead of performing his congressionally invested role of regulating the GSEs, Cuomo cozied up to them. At the same time that he increased the number of risky loans that the GSEs had to buy, he declined to institute reporting requirements that would have provided a clear picture of just how many had been purchased. He also reneged on a recommendation from his own office that the GSEs should be barred from purchasing loans with high costs or predatory features—you know, the kind that people are likely to default upon in droves contributing to a massive economic crash. Cuomo got his pieces of silver for this, according to Barrett who reported that at least three of the 88 lobbying firms working for the GSEs made campaign donations to Cuomo once he left HUD.
Cuomo rarely speaks about his tenure as HUD secretary these days, and for obvious reasons. Barrett noted that Cuomo’s attorney general gig created the awkward potential that he would have to bring suits against real estate interests whose practices he had previously condoned—or even encouraged. Even if Cuomo can successfully minimize his role in the crisis, it remains a political hot potato. To the extent that he has commented, Cuomo’s explanations have been facile and unsatisfying. In 2010, when running for governor, he claimed that the charges that he is partly to blame for the financial crisis are “devoid of reality.” “I was HUD secretary,” he said. “We were promoting home ownership. The administration that came in after the Clinton administration was more aggressive in promoting home ownership. There was no evidence of the sub-prime problem for years and years and years after I left HUD.” Of course, he misses the point that promoting home ownership, no matter how laudable, does not insulate you from the consequences of poor policy decisions, nor does the fact that those bad practices continued after his tenure exonerate him. As essentially one of the only men who had authority over the epicenter of the housing collapse, he can’t just wash off the stink.
Should “This action will transform the lives of millions of families across the country” be ranked up there with “I did not have sexual relations with that woman, Miss Lewinsky”? With “If you like your health plan, you can keep it”? The difference, of course, is that Cuomo’s statement was issued in earnest, whereas the other two were bald-faced lies. But that does not change the fact that he led us into one of the worst financial disasters in American history. Democratic voters must ask themselves whether that is an excusable offense. The rest of us are just glad that if we’re stuck watching a performance art piece, at least it’s an interesting one.
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