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655 November 23, 2009

Three Decades of Politics and

Failed Policies at HUD
by Tad DeHaven

Executive Summary

The U.S. Department of Housing and Urban goals while pursuing personal and political agen-
Development has long been plagued by scandals, das that ended up harming taxpayers and the
mismanagement, and policy failures. Most recent- economy. Even if there were a need for federal
ly, HUD’s subsidies and failed oversight of Fannie housing programs, experience has shown that
Mae and Freddie Mac helped to inflate the hous- HUD could not implement such programs with-
ing bubble, which ultimately burst and cascaded out mismanagement, cronyism, and other abuses.
into a major financial crisis. Federal housing policies illustrate broader
Given this giant policy blunder, now is a good realities of government intervention. When mak-
time to review the many failures in HUD leader- ing decisions, policymakers usually have self-
ship over the years. This study discusses how interested goals that conflict with the broader
HUD officials operate within a highly politicized interests of taxpayers and the general public.
environment, which is heavily influenced by the Furthermore, their visions for improving society
groups that HUD subsidizes and regulates, with federal programs usually backfire because
including the housing industry, financial insti- of the distortions that those programs create in
tutions, and community activists. the economy.
At the same time, HUD leaders often put their Housing was traditionally a private concern,
personal goals ahead of those of the general public. and it should be made so again because govern-
Recent HUD secretaries have focused on gaining ment involvement has done great damage. Alas,
private benefits while doing favors for business policymakers have not learned this lesson even
interests and political insiders. These leadership after the recent housing boom and bust. Since
failures are illustrated in this study by profiles of the housing and financial meltdowns, federal
four recent HUD secretaries: Samuel Pierce in the intervention in housing markets has substantial-
1980s, Henry Cisneros and Andrew Cuomo in the ly increased, thus paving the way for further
1990s, and Alphonso Jackson in the 2000s. troubles down the road for taxpayers and the
These public officials touted seemingly noble economy.

Tad DeHaven is a budget analyst at the Cato Institute and researcher for
One reason low priority for the people who create and
that HUD has Introduction administer federal programs.

been scandal- Mismanagement, financial abuses, and

prone is that it failed policies have resulted in many scandals The Pierce Years, 1981–1989
at the $65 billion Department of Housing
administers such and Urban Development over the decades. President Ronald Reagan entered office
a large and Numerous HUD officials have enriched promising to downsize the government and
complicated array themselves or conferred benefits on people reduce federal intervention in the economy.
with political and financial connections. This His administration sought to cut traditional
of subsidies and study looks at such leadership failures during subsidies for public housing and to focus on
regulations. the tenures of four HUD secretaries under providing more flexible housing benefits to
three recent presidents: tenants. However, HUD reform was a low pri-
ority of the Reagan administration, and that
• Samuel Pierce, 1981–1989, Ronald Rea- disregard contributed to the major scandals
gan’s HUD secretary that enveloped the department during the
• Henry Cisneros, 1993–1997, Bill Clinton’s 1980s.
first HUD secretary Those scandals owe a lot to the misman-
• Andrew Cuomo, 1997–2001, Bill Clinton’s agement and corruption of Samuel Pierce,
second HUD secretary Reagan’s HUD secretary for eight years. A
• Alphonso Jackson, 2003–2009, George major review undertaken by Pierce’s successor
W. Bush’s second HUD secretary at HUD, Jack Kemp, uncovered “significant
problems” of fraud, theft, mismanagement,
One reason that HUD has been scandal- and influence-peddling in activities that
prone is that it administers such a large and accounted for 94 percent of the department’s
complicated array of subsidies and regula- budget.1 Estimated losses from this abuse
tions. Many HUD programs involve policy- ranged from $2 billion to $6 billion.2
makers in federal, state, and local govern- Pierce took a disengaged approach to HUD
ments. At the same time, HUD programs aid a —often watching soap operas with younger
large range of private interests, including aides during work hours—and allowed HUD
home builders, realtors, financial companies, to become a “dumping ground” for political
and community groups. Until recently, HUD appointees who used their positions for per-
was also charged with overseeing the vast sonal gain.3 He assigned a HUD staffer to
financial activities of Fannie Mae and Freddie work full-time on a book to be called “The
Mac. The resulting range and complexity of Pierce Years,” which ended up as an 87-page
HUD programs has created many opportuni- glossy pamphlet printed at taxpayer expense.4
ties for people in the public and private sectors Pierce enjoyed the perks of office—for exam-
to take personal advantage. ple, taking five taxpayer-funded trade junkets
Secretary Pierce’s tenure was so scandal- to the Soviet Union, which resulted in very lit-
prone that it led to 17 criminal convictions, tle business being generated.5
including convictions of three former HUD When Pierce did make hands-on manage-
assistant secretaries. Secretaries Cisneros and ment decisions, it often resulted in friends
Cuomo ignored the economic risks created by and politically connected businesses getting
their political strategy of increasing the home favorable HUD treatment, as these examples
ownership rate. Alphonso Jackson oversaw the illustrate:
inflation of the housing bubble and then the
bust, while using his office to reward friends • Pierce backed a $4.5 million HUD grant
and political allies. HUD activities sadly illus- to convert an aircraft carrier into a muse-
trate that the general public interest is often a um, a project that was championed by his

former law-firm clients. The grant was program went off course—106 loans,
approved shortly after Pierce’s former having an outstanding principle and ac-
client Larry Fisher met with Pierce to crued interest amount of $700 million,
solicit his help.6 Fisher was a wealthy real were in default. The largest coinsurer in
estate developer and a large Republican the program, DRG, which had 272 coin-
donor. sured mortgages, contributed 79 de-
• Pierce overrode the recommendations of faults and a half billion dollars in losses.
the department’s top career officials to The program was in free-fall descent—
push through a project in Durham, North 65 of DRG defaults had occurred in
Carolina, that was sought by Charles 1988. By March of 1990 the dollar vol-
Markham, the mayor of the city and a for- ume of defaults had reached $1.6 bil-
mer law firm associate of Pierce.7 The deal lion, and HUD was rushing to shut the
included a $2.3 million grant, $11.8 mil- program down.10
lion in rent subsidies, and HUD-backed
mortgage insurance.8 A year after the 223(f) coinsurance pro-
• Pierce helped his friend and Republican gram was initiated, a mid-level HUD official
Party supporter, jazz musician Lionel warned in a memo, “This is the most fraud-
Hampton, obtain a 20-year, $21 million prone system ever spawned by HUD, but we
Those sorts of
rent subsidy for a housing project in have been overruled so many times in mat- personal favors,
Newark, New Jersey.9 ters of compliance that I have given up regis- however, were
tering protests.”11 Two years later, a regional
Those sorts of personal favors, however, HUD administrator wrote to his superiors in small potatoes
were small potatoes compared to the systemat- Washington that he was “convinced that compared to the
ic abuses engineered by Pierce and his top assis- financial problems of national proportions
tants. One of the costliest scandals involved are inevitable unless something is done.”12
systematic abuses
HUD’s section 223(f) coinsurance program, However, the department’s political overseers engineered by
which was kicked off in 1983 and was designed were not interested in such naysaying. Pierce and his
to rehabilitate multifamily housing units. The In 1984, after HUD investigators deter-
program was lucrative for favored mortgage mined that DRG was inflating appraisal val- top assistants.
lenders—such as the Washington, D.C., firm ues of properties in order to collect higher
DRG—but it put taxpayers on the hook for 85 fees, the firm’s activities were restricted. DRG
percent of the value of any losses on mortgage promptly hired a particularly powerful lob-
loans. The program put mortgage lenders in byist to get the restrictions lifted: former
charge of overseeing the entire process—from HUD secretary under Gerald Ford, Carla
underwriting to foreclosure and disposition— Hills, who would later serve as U.S. Trade
and it allowed them to collect excessively high Representative under George H. W. Bush. In
fees. May 1985, a few weeks after meeting with
The end result of the program was that Hills and her team, Pierce lifted the restric-
participating lenders overmortgaged projects tions on DRG.
in order to collect the high fees. In his book, Another scandal-prone program at HUD
HUD Scandals, former HUD official Irving during Pierce’s tenure involved the Section 8
Welfeld writes: moderate rehabilitation program. “Mod-
rehab” was launched in 1979 to finance
By the middle of 1988, five years after repairs to housing units for rent to low-
the program was inaugurated, partici- income tenants. The program originally con-
pating lenders had coinsured 846 loans. tained a “fair-share” provision, which meant
The amount of the mortgages was $4.8 that funding was awarded to state and local
billion. By 1998, led by the highest- public housing authorities on the basis of
flying firm in the business, DRG, the population and demographics.

In 1984, Congress allowed HUD to waive Pierce. Wilson was a member of the Winn
the fair-share provision and make allocations Group, and was involved in five projects
subjectively by means of a panel consisting of that secured $92 million in HUD subsi-
Pierce’s executive assistant, the assistant secre- dies. As vice president at the PaineWebber
tary of housing, and the undersecretary of the Group, Wilson became an adviser to
department. But as Pierce’s executive assistant, HUD on bond sales. He was convicted on
Deborah Dean, later told the Wall Street one felony count in 1993.19
Journal, “[Mod-rehab] was set up and designed • Maurice Barksdale, assistant secretary at
to be a political program . . . I would have to HUD. Barksdale received $300,000 in
say we ran it in a political manner.”13 Dean was consulting fees for helping with secur-
at the center of the abuse, and she was initial- ing HUD approval of eight or nine pro-
ly sentenced to 21 months in prison on 12 jects.
counts of corruption, bribery, and perjury in • Michael Karem, deputy assistant secre-
1994.14 Five of the counts were later reversed tary at HUD. Karem received $360,000
on appeal, and her sentence was eventually for consulting on three subsidized pro-
reduced to three years of probation, including jects.
six months of home confinement.15 • James Watt, secretary of the interior.
Under the program, “a trove of rent subsi- Watt received $420,000 for helping
dies, tax credits, and consulting fees, totaling clients secure subsidies for three HUD-
millions of dollars on each housing project, related projects.
flowed to GOP faithful and their associates.”16 • Joseph Strauss, special assistant to Pierce.
HUD became a sort of graduate school for Strauss received $1.7 million in consult-
ethics-challenged officials to master the com- ing fees for helping win HUD subsidies
plexities of housing programs such as mod- for various projects. He worked with
rehab, and then join the private sector and use James Watt.
their connections at HUD to cash in.17 • Gerald Carmen, head of General Services
Using congressional testimony, HUD Administration. Carmen earned $2.3 mil-
documents, and interviews, the New York lion in the sale of tax credits for a subsi-
Times compiled a lengthy list of those bene- dized project.
fiting from their political connections to • Frederick M. Bush, leading fundraiser in
HUD in the 1980s. Some earned substantial the George H. W. Bush presidential cam-
consulting fees for persuading Pierce and his paign. Bush received $600,000 for con-
top aides to approve federal subsidies, where- sulting on a dozen subsidized projects.
as others used their connections to secure • Edward Brooke, former senator from
HUD subsidies for their own projects. The Massachusetts. Brooke received $183,000
following is just a sampling:18 for consulting and legal work on two
housing projects.
• Philip Winn, assistant secretary at HUD.
Winn was a cofounder of the Winn In 1990, a report adopted unanimously by
Group, which secured HUD backing for the House Government Operations Commit-
a housing project in Colorado. The Winn tee concluded, “At best, Secretary Pierce was
Group received $133 million in federal less than honest and misled the subcommittee
rent subsidies and $29 million in federal about his involvement in abuses and fav-
HUD became tax credits. oritism in HUD funding decisions. At worst,
a sort of graduate • Philip Abrams, undersecretary at HUD. Secretary Pierce knowingly lied and committed
school for Abrams was a cofounder of the Winn perjury during his testimony.”20 An indepen-
Group, and earned $100,000 in consult- dent counsel investigation into HUD activities
ethics-challenged ing fees from HUD. under Pierce’s watch was instituted in 1990
officials. • Lance Wilson, executive assistant to and wrapped up in 1996. Pierce himself was

not indicted, based on his agreement to admit helped to fuel the housing bubble and subse- HUD’s strategy
that “he created an atmosphere at HUD that quent crash in the early 21st century. of encouraging
allowed influence-peddling to go on.”21 In all, Henry Cisneros served as President Bill
the independent counsel investigation into Clinton’s HUD secretary from 1993 to 1997, riskier mortgages
HUD corruption on Pierce’s watch yielded 17 when he resigned to deal with allegations that helped to fuel the
convictions, including convictions of three for- he lied to the FBI about payments he made to
mer HUD assistant secretaries. a former mistress. Cisneros plead guilty in
housing bubble
Reflecting on Pierce’s tenure, Irving 1999 and was fined $10,000, avoiding a possi- and subsequent
Welfeld writes, “Integrity of public processes ble prison sentence. crash in the early
was replaced by partisan favoritism and the Cisneros oversaw a politicized HUD that
fragile bond of trust between the electorate mobilized to help fend off the Republicans, 21st century.
and appointed officials was shattered.”22 In who gained a congressional majority in the
reality, the “bond of trust” with federal poli- 1994 election. The resurgent GOP initially
cymakers is an illusion. Many HUD pro- sought to eliminate many departments and
grams—and programs in other agencies—are agencies as part of a plan to rein in federal
often just tools that officials use for personal spending and reduce budget deficits. HUD
and political gain. was one of the Republican targets, and
President George H. W. Bush’s HUD sec- department officials fought back in numer-
retary, Jack Kemp, spent much of his four- ous ways to ward off proposed reforms.
year tenure trying to rehabilitate the depart- HUD held a series of “standing up for com-
ment’s sullied image. Kemp was a champion munities” rallies, financed by taxpayers, which
of supply side tax cuts, but he was not very encouraged local officials and special interest
interested in restraining spending. Indeed, groups to lobby against Republican budget
HUD’s budget increased substantially during cuts. One piece of propaganda distributed by
Kemp’s tenure and his zeal for fostering HUD’s New York office warned that the bud-
homeownership would become a hallmark of get cuts “would dramatically expand Ameri-
subsequent administrations. ca’s underclass” and that “thousands of fami-
lies, many with children, would end up
homeless.”24 HUD sponsored a National
The Cisneros Years, Tenants Organization convention in Puerto
1993–1997 Rico to defend the department. That event
was so political that a HUD translator walked
In the Clinton administration, a primary out of the proceedings in protest.25 According
mission of HUD was to increase home owner- to HUD’s inspector general, an NTO official
ship rates, especially among minorities and responded that “he really didn’t care whether
low-income families. That mission was carried HUD translated or not because the point was
out through HUD subsidy programs and to get rid of Newt Gingrich.”26
through the two government-connected Cisneros used HUD as a political tool, but
mortgage finance giants, Fannie Mae and when he left office he was lauded for the
Freddie Mac. In 1992, HUD was given regula- increase in homeownership rates that occurred
tory authority over these government-spon- on his watch. Part of his apparently winning
sored enterprises (GSEs) in order to ensure strategy, Cisneros noted, was HUD’s “ability to
that they were “adequately capitalized and convince lenders, builders and real estate
operating safely.”23 At the same time, HUD agents that there was money to be made in sell-
was given new leverage to push the two firms ing housing to low- and moderate-income
into greater lending for riskier “underserved” individuals.”27 Part of this “convincing” in-
markets. We now know that HUD’s strategy of volved HUD-initiated legal actions against
encouraging riskier mortgages, which was mortgage lenders who declined higher per-
pursued on multiple fronts during the 1990s, centages of loans for minorities than whites. As

a result of such political pressure, lenders begin tors, should address both of these finan-
lowering their lending standards, which was cial barriers to homeownership.32
another contributing factor to the housing
boom and bust in the 2000s.28 The thrust is clear: if people don’t have “cash”
A key weapon in the Cisneros arsenal was or “income,” the government will help them
the Clinton administration’s changes to the get a house anyway. In the political drive to
Community Reinvestment Act. The CRA was increase the home ownership rate, old-fash-
passed in 1977 and updated in 1995 to pres- ioned ideas such as individual responsibility
sure lenders into making more loans to mod- and the riskiness of real estate investment
erate-income borrowers by allowing regula- where thrown by the wayside. Apparently
tors to deny merger approvals for banks with embarrassed by this 1994 strategy document,
low CRA ratings. Even complaints brought HUD removed it from its website after the
by activists, such as the leftist group ACORN, housing bubble burst in recent years.
were counted in a bank’s CRA rating. Coy notes that the George W. Bush admin-
Under political pressure, banks began issu- istration “continued the practices because
ing more loans to otherwise uncreditworthy they dovetailed with his Ownership Society
borrowers while purchasing more CRA mort- goals, and of course Congress was strongly
The thrust is gage-backed securities.29 As housing finance behind the push.”33 But it was the Clinton
clear: if people expert Peter Wallison noted, “The most administration that launched the all-out drive
don’t have “cash” important fact associated with the CRA is the to put people into homes that they could not
effort to reduce underwriting standards. . . . afford. That helped plant the seeds for the
or “income,” the Once those standards were relaxed . . . they housing boom and bust in the following
government will spread rapidly to the prime market and to decade, as financial expert Joseph R. Mason
subprime markets where loans were made by noted:
help them get a lenders other than insured banks.”30
house anyway. Business Week columnist Peter Coy noted The Strategy certainly helped some
that the Clinton “administration went to ri- renters achieve the dream of home-
diculous lengths to increase the national ownership. But the Strategy was also
homeownership rate. It promoted paper-thin fundamentally misused to extend
downpayments and pushed for ways to get more credit to prime borrowers, fuel-
lenders to give mortgage loans to first-time ing home price inflation. That home
buyers with shaky financing and incomes.”31 price inflation led builders to build
The Clinton administration’s approach was ever more developments, using creative
encapsulated by the 1994 National Home- financing to leverage their bets on
ownership Strategy, prepared under Cisner- home price appreciation in the bubble
os’s direction. Here is an excerpt from the environment, ultimately resulting in
plan: record foreclosures in the present mar-
For many potential homebuyers, the
lack of cash available to accumulate the Cisneros planted another seed for the
required downpayment and closing housing bubble and its subsequent burst by
costs is the major impediment to pur- putting Fannie Mae and Freddie Mac under
chasing a home. Other households do constant pressure to facilitate more lending to
not have sufficient available income to “underserved” markets.35 While Cisneros’s
make the monthly payments on mort- own HUD administration acknowledged that
gages financed at market interest rates mortgages financed by Fannie and Freddie in
for standard loan terms. Financing “underserved” areas have a higher risk of
strategies, fueled by the creativity and default, it did not see that “there need be any
resources of the private and public sec- safety and soundness impediment” to the pol-

icy.36 It was under the direction of Cisneros 1993. He replaced Cisneros as secretary in
that HUD agreed to allow Fannie and Freddie 1997, where he remained until the end of
credit toward its “affordable housing” targets Clinton’s second term. Cuomo’s housing poli-
by buying subprime mortgages.37 cies followed the same approach as his prede-
After four years of introducing economic cessor—seeking personal publicity, pandering
distortions into housing markets, Henry to special interest groups, and encouraging
Cisneros spent most of his post-HUD career those who were not financially suited for home
making money in those markets, as many ex- ownership to nonetheless move into homes.
HUD officials do. In 2000, Cisneros formed a Cuomo began cultivating his image at
housing development company in partner- HUD as assistant secretary. In 1993, he orga-
ship with KB Homes and became a KB direc- nized a lavish conference costing taxpayers
tor. The KB board also included the former $235,360 to announce a new anti-poverty
CEO of Fannie Mae, James Johnson. The New program, and he flooded attendees with slo-
York Times noted that “it made for a cozy net- ganeered shopping bags, HUD buttons, and
work.”38 Indeed, Fannie Mae bought or glossy brochures. One observer called it a
backed many of the mortgages that were in “rah-rah rally for Andrew Cuomo.”43 Cuomo
KB development projects. doubled the number of top-level staff mem-
In 2001, Cisneros joined the board of bers under him, and in one of his years as
Fannie Mae’s biggest client, the now notori- assistant secretary, he spent almost $1 mil-
ous Countrywide Financial, the company lion on travel. According to the Wall Street
that was center stage in the subprime lending Journal, the lavish spending on “image-mak-
scandals of recent years. When the housing ing . . . strained HUD budgets so much that
bubble was inflating, Countrywide and KB officials have devised plans to pay some bills
took full advantage of the liberalized lending by diverting money from projects intended
standards fueled by HUD under Cisneros. In to help people.”44
addition to the money he received as a KB Being assistant secretary was a good job,
director, Cisneros’ company, in which he but Cuomo wanted the top spot. He got his
held a 65 percent stake, received $1.24 mil- chance when Cisneros announced his inten-
lion in consulting fees from KB in 2002.39 tion to resign after Clinton was reelected in
When Cisneros stepped down from Coun- 1996. Seattle Mayor Norm Rice was thought
trywide’s board in 2007, he called it a “well- to be Clinton’s first choice to replace Cisneros,
managed company” and said that he had but he was knocked out when HUD launched
“enormous confidence” in its leadership.40 Yet an investigation into his possible misuse of a
one wonders whether Cinsneros was just try- federal loan. The investigation, which was
ing to escape before the crash. Just days before launched a week after the 1996 election, had
his resignation, Countrywide announced a been approved by Cuomo’s office. The result
$1.2 billion loss, and reported that a third of its was that Clinton went with Cuomo as secre-
borrowers were late on mortgage payments.41 tary. Rice was later cleared, but the timing of
According to SEC records, Cisneros earned a the investigation and a leak to the press sug-
$360,000 salary at Countrywide in 2006, and gested involvement by Cuomo.45
he has gained $5 million from stock sales since A HUD employee characterized Cuomo’s
2001.42 tenure “as all show and very self-promoting. He A HUD employee
always was a politician.”46 In 2000, Cuomo’s characterized
HUD administration issued 302 press releases
The Cuomo Years, in 331 working days. Most of these releases Cuomo’s tenure
1997–2001 contained headlines touting Cuomo’s role. (By as “all show
comparison, less than one-third of HUD’s
Andrew Cuomo joined the Clinton admin- press releases in 2009 have mentioned the cur-
and very
istration as an assistant secretary of HUD in rent secretary’s name in the headline). And in a self-promoting.”

With Cuomo, move reminiscent of Samuel Pierce, Cuomo ing to increase homeownership rates for
fiscally prudent spent $900,000 in taxpayer money on a minorities, but he also had an interest in pleas-
brochure detailing his own accomplish- ing mortgage industry officials who would lat-
policies took a ments.47 er help finance his gubernatorial campaign.55
backseat to When it became apparent that Cuomo Cuomo also worked hard to receive support
would run for governor of New York, he from leftist housing advocacy groups, such as
his political made 25 official HUD visits to the state—21 ACORN.56
aspirations. more than to any other state. In his final year During the Cuomo years, mortgage indus-
as HUD secretary, he announced $170 mil- try officials and housing advocates wanted
lion in HUD grant money for economic Fannie Mae and Freddie Mac to purchase
development along the Erie Canal. One for- greater volumes of high-risk loans offered to
mer HUD employee noted, “It was about me, less credit-worthy borrowers. Cuomo’s HUD
me, me, me. If he didn’t get a headline out of pressured Fannie and Freddie to increase the
it, he didn’t want to hear about it.”48 portion of their portfolios consisting of loans
One thing Cuomo didn’t like to see was crit- to moderate-income and higher-risk borrow-
icisms of HUD by the department’s inspector ers. Cuomo applied pressure by having HUD
general, Susan Gaffney. Gaffney, who had a publicly “investigate” whether Fannie and
very good reputation, was subject to a smear Freddie were sufficiently in compliance with
campaign by Cuomo’s staff that aimed to government fair-lending standards designed
undermine her and force her out.49 Cuomo to prevent discrimination.57
was reported to be angry with Gaffney over At the time, numerous financial analysts
some of her audit reports that reflected poorly saw the problems coming with these strate-
on him. One audit suggested that HUD’s gies, but policymakers such as Cuomo did
determination of which cities were designated not change course. Here is a prescient obser-
“empowerment zones” under a billion-dollar vation by a New York Times reporter in 1999:
program were subject to political manipula-
tion.50 An aide to Cuomo told a reporter, “That In moving, even tentatively, into this
was his baby—when the audit report came out, new area of lending, Fannie Mae is tak-
he went crazy.”51 Another report by Gaffney’s ing on significantly more risk, which
office found widespread mismanagement in may not pose any difficulties during
billions of dollars of HUD contracts.52 flush economic times. But the govern-
Like Cisneros, Cuomo’s main policy lega- ment-subsidized corporation may run
cy was promoting subsidies for increasing into trouble in an economic downturn,
the home ownership rate and weakening prompting a government rescue simi-
safeguards against excessive mortgage mar- lar to that of the savings and loan
ket risks. For example, Cuomo successfully industry in the 1980s.58
advocated that Congress raise the ceiling on
Federal Housing Administration–insured We know now that Fannie and Freddie’s
mortgages while lowering down-payment expansion into low-quality mortgages was a
requirements.53 Those moves helped set the huge mistake. But with Cuomo, fiscally pru-
stage for higher FHA-insured mortgage dent policies took a backseat to his political
default rates in later years. aspirations.
Cuomo also supported efforts to have
home sellers funnel money to nonprofit
groups to help pay for buyers’ down payments The Jackson Years,
and closing costs. These “down payment assis- 2001–2009
tance” loans ended up having default rates
twice that of standard FHA-insured mort- The Bush administration’s HUD com-
gages.54 Cuomo portrayed his efforts as help- bined some of the Reagan era’s corruption

with some of the Clinton era’s politicized administrator of the housing authority, plus
push for increased homeownership rates. The an undetermined amount from serving as an
Bush administration proposed tighter over- adviser to Smith Real Estate Services, which
sight of Fannie and Freddie, but it did little to received $3.5 million from HUD for work at
end the mortgage giants’ federal benefits or the VIHA. Anonymous HUD officials told a
their rapid expansion. The housing bubble National Journal reporter that “there was no
expanded and then burst on Jackson’s watch, indication that Hollis had any experience
and he and the Bush administration deserve a running a public housing agency before
share of the blame. arriving in the Virgin Islands.”61
Alphonso Jackson was named a deputy Investigators are also looking into Jackson’s
secretary at HUD a few months into Presi- role in getting his golfing buddy William
dent George W. Bush’s first term. He became Hairston $485,000 in contract work with the
the acting secretary in late 2003, and perma- troubled Housing Authority of New Orleans,
nent secretary in April 2004. He replaced Mel which had been taken over by HUD in 2002.
Martinez, who resigned to run for an open Another aspect of this investigation is that
Senate seat in Florida. Jackson resigned in HANO awarded a $127 million redevelopment
April 2008 in the midst of allegations that he contract to an Atlanta firm, Columbia Resi-
had used his official power to benefit friends dential, which owed Jackson between $250,000
The housing
and Republican Party loyalists. He remains and $500,000 for “past services” as a “part- bubble expanded
under federal investigation. ner/consultant.”62 In other words, it appears and then burst on
Jackson’s troubles began in 2006 when he that Jackson might have been looking to
told an audience that he killed a potential receive payment for helping to steer a HANO Jackson’s watch.
HUD contract after the contractor told contract to Columbia Residential.
Jackson he didn’t like President Bush. Jackson When Jackson resigned in 2008, he was in
later claimed to have made the story up. A the midst of another controversy regarding
HUD inspector general’s report found that sweetheart deals for friends, this time involv-
Jackson did instruct staff to favor friends of ing the Philadelphia Housing Authority. PHA
the president when awarding HUD contracts, executive director Carl Greene sued HUD,
but it did not find concrete evidence that his claiming that it tried to punish PHA by with-
orders were followed.59 holding funds after PHA refused to sell land to
A Washington Post investigation of HUD Jackson’s friend, music mogul Kenny Gamble,
contracting under Jackson found that “the at “rock-bottom prices.”63
proportion of contracts awarded to small Then in June 2008, Condé Nast Portfolio
black- and Hispanic-owned businesses . . . reported that influential members of Congress
rose from 6 percent to nearly 35 percent. The and other government officials had received
proportion of contracts open to full compe- very favorable mortgage loans from Country-
tition decreased from 71 percent to 33 per- wide Financial.64 Countrywide had a special
cent.”60 The practice of awarding HUD con- VIP program that sought to influence impor-
tracts to Republican-friendly minority firms tant housing officials in the federal govern-
was common under Jackson, and the Post sto- ment and Fannie Mae by offering them mort-
ry provided numerous examples. gages with reduced fees and other perks. The
A number of examples of cronyism at list of beneficiaries included Alphonso Jack-
HUD have caught the eye of investigators. son, who was on a select list known as “Friends
Major contracting work from the depart- of Angelo,” or “FOA,” named after Country-
ment was apparently given to friends of wide chairman and CEO Angelo Mozilo.
Jackson. In one instance, a no-bid contract In December 2003, while he was acting sec-
was given to Jackson friend Michael Hollis to retary of HUD, Jackson applied to Country-
run the Virgin Islands Housing Authority. wide for a $308,000 mortgage to buy a vaca-
Hollis earned $1 million as the executive tion home in Hilton Head, South Carolina.

Jackson’s loan came through a week before inators, such as Countrywide. But it was ulti-
President Bush named him HUD secretary. mately Fannie and Freddie that drove the sys-
Even before that, Jackson had refinanced a tem. First, as the GSEs purchased more loans
mortgage with Countrywide through the VIP from mortgage lenders, the lenders were able
program. Former Countrywide loan officer to originate more and more loans. Second,
Robert Feinberg says that both of Jackson’s the GSEs’ increasing purchases of subprime
loans came with special discounts.65 loans brought them into competition with
When asked if he received breaks on the private-label issuers that traditionally special-
loans, Jackson said: “Not to my knowledge. If I ized in these loans. According to Peter
did, it certainly wasn’t discussed with me.”66 Wallison:
However, a March 2009 report by the Repub-
lican staff of the House Committee on Over- The increased demand from the GSEs
sight and Government Reform concluded and the competition with private-label
that Countrywide made VIP borrowers aware issuers drove up the value of subprime
of the preferential treatment. The report not- and Alt-A mortgages, reducing the risk
ed that “at times, Friends of Angelo used their premium that had previously sup-
preferred status to refer friends or family pressed originations. As a result, many
members to the VIP department. Sometimes more marginally qualified or unquali-
the Friends of Angelo expected their friends fied applicants for mortgages were
and family to receive the same preferential accepted, and these loans joined the
treatment.”67 flood of junk loans that flowed to both
The same month Jackson sought the VIP the GSEs and the private-label issuers
mortgage for his vacation house, his daughter, beginning in late 2004.69
Annette Watkins, had a mortgage processed
through the same special program. According It was under Secretary Jackson that HUD
to the House report, “Jimmie Williams [Coun- decided in 2004 to again increase Fannie and
trywide’s Washington lobbyist] contacted Freddie’s “affordable” housing goals while
Countrywide Senior Vice President Perry on allowing the financial giants to continue the
Watkins’s behalf because ‘Jackson suggested Clinton-era policy of counting subprime
his daughter talk with Countrywide.’”68 mortgages as credit towards meeting that
In 1999, Countrywide, which had become goal. Despite Fannie’s 81-percent increase in
the nation’s largest residential housing lending to minority families in 2003, Jackson
lender, reached an exclusive agreement to sell chastised the organization for its “failure to
Fannie Mae billions of dollars in mortgages lead.”70 Jackson’s pressure on the GSEs came
in exchange for lower “guarantee” fees that despite the fact that regulators were growing
Fannie charged originators when it bought increasingly concerned with subprime lend-
their loans. The success, and then failure, of ing. The Washington Post noted that “housing
both entities became intertwined as Fannie experts and some congressional leaders now
purchased large amounts of subprime loans view those decisions as mistakes that con-
and securities, which allowed subprime tributed to an escalation of subprime lending
lenders like Countrywide to grow their busi- that is roiling the U.S. economy.”71
nesses. When the subprime market collapsed Secretary Jackson also pushed for the
in 2007, Countrywide collapsed as well. It adoption of riskier rules at HUD’s FHA. The
Secretary Jackson was bought at a fire sale price by the Bank of FHA was created during the 1930s to help
pushed for the America, while a broken Fannie Mae was tak- moderate-income families buy homes by pro-
adoption of en over by the federal government. viding a 100 percent taxpayer guarantee on
This point is crucial. Many commentators mortgages below a certain dollar limit. Over
riskier rules at put the blame for the subprime meltdown on the decades, the downpayment requirement
HUD’s FHA. the shady or overly aggressive mortgage orig- on these loans was steadily reduced from the

original 20 percent to just 3.5 percent. Such housing lobbies illustrates where policymak- An important
low downpayment requirements encourage ers get a lot of their bad ideas. driver of bad
high default rates by prompting borrowers Housing and real estate groups have long
who can’t really afford homes to nonetheless had large influence over housing policy. One policymaking
buy homes. Amazingly, at the height of the of the biggest groups is the National is the large
housing bubble, Secretary Jackson advocated Association of Realtors, which has been the
reducing the downpayment requirements on third largest contributor to federal political
influence that
FHA-insured loans all the way to zero. campaigns over the past two decades of all housing lobby
As with many federal officials, Jackson groups and corporations.76 NAR supports all groups have in
seems to have been focused on what’s good kinds of federal benefits and subsidies for the
for the government, not what’s good for tax- housing industry, such as tax credits, higher Washington.
payers. Private subprime lenders had dramat- federal loan limits, and schemes to reduce
ically reduced the FHA’s share of the housing mortgage interest rates. At the peak of the
market in prior years, and that prompted housing boom in 2006, the group’s annual
Jackson to proclaim that he was “absolutely report boasted that it was successfully lobby-
emphatic about winning back our share of ing Congress to “eliminate restrictive down
the market.”72 Another indication that payment requirements” on FHA loans.77
Jackson wasn’t looking out for taxpayers is That year it mobilized its members to flood
that default rates on loans insured by the Congress with 500,000 letters and faxes over
FHA hit record highs during his tenure and a single piece of legislation.78 This year, NAR
continued to soar into 2009.73 Indeed, tax- has continued to push for federal housing
payers continue to be in a very precarious sit- benefits in its “Housing Stimulus Plan” and
uation as the FHA’s “market share” has “Comprehensive Housing Strategy.”79
soared, and the agency now insures one in The National Association of Homebuilders
three new mortgages.74 is another powerful lobby group, ranked 23rd
Alas, like previous HUD secretaries, in contributions in the last two decades.80 A
Jackson was too busy enjoying the perks of recent press release from the group illustrates
office to worry about taxpayers’ exposure to a that it also continues to push for federal sub-
possible housing downturn. Jackson had a sidies:
taxpayer-provided chef and full-time security
detail. During his tenure, $7 million was With the U.S. Congress returning from
spent on a new auditorium and cafeteria at its August recess, the nation’s home
HUD’s headquarters, and his personal office builders are moving into the second
spent $100,000 to obtain oil portraits of phase of their “Revive Housing, Restore
Jackson and four previous HUD secretaries.75 America” campaign, urging lawmakers
in Washington to take a number of cru-
cial steps to support housing as the
The Political Environment framework for creating jobs and pulling
of HUD Policymaking the nation’s economy out of a devastat-
ing recession. . . . Expanding the tax
We have seen how both Republican and credit [for first-time home buyers] has
Democratic housing officials have made self- been the centerpiece of NAHB’s massive
interested and economically damaging deci- grassroots campaign, which began last
sions over the decades. An important driver month when association members
of the bad policymaking is the large influ- across the country began meeting with
ence that housing lobby groups have in their members of Congress.81
Washington. Ultimately, federal policymak-
ers are responsible for their actions, but a Perhaps the heaviest hitters of the housing
brief review of the political power of the lobbyists have been the finance companies,

Fannie Mae and Freddie Mac. Fannie and and 2004.86 Raines was the subject of a fed-
Freddie spent an enormous $170 million eral investigation into whether he manipu-
between 1998 to 2008 on various federal lobby- lated Fannie Mae earnings to maximize his
ing activities.82 In addition, the housing finance bonuses, and ultimately settled for a $25
giants and their employees gave campaign con- million fine. Raines was also one of the
tributions to members of Congress on commit- insiders who received a specially discount-
tees responsible for overseeing them—almost ed home mortgage rate from Countrywide
$15 million between 2000 to 2008.83 Financial.
Other than campaign contributions, hous- • Clinton deputy attorney general Jamie
ing lobby groups use many techniques to Gorelick became a Fannie Mae vice-
influence members of Congress. Fannie and chairman following her stint with the
Freddie, for example, opened “partnership administration. She earned over $26
offices” in congressional districts across the million in compensation from Fannie
country in the 1990s to help provide local Mae between 1998 and 2002.87
political support for favored members of • Former Fannie Mae senior vice president
Congress. Another way that the housing John Buckley was a Republican congres-
giants have influenced the Washington debate sional staffer and senior adviser to the
Another channel is through pro-housing policy reports, some- presidential campaigns of Ronald Rea-
of influence in times commissioned from prominent econo- gan and Bob Dole.
housing policy- mists. A 2002 issue of Fannie Mae Papers, for • Former Fannie senior vice president Arne
example, was authored by Nobel Laureate Christenson was a senior adviser to Re-
making has been Joseph Stiglitz, Jonathan Orszag, and the cur- publican House Speaker Newt Gingrich.
the revolving rent director of the Office of Management and • Rep. Barney Frank’s (D-MA) partner
Budget Peter Orszag, who was then at the Herb Moses was an executive at Fannie
door between Brookings Institution. The study concluded Mae from 1991 to 1998 while Frank sat
government that “the probability of default by the GSEs is on the House Banking Committee,
offices and the extremely small.”84 which was responsible for overseeing the
Another channel of influence in housing GSEs.
private sector. policymaking has been the revolving door • President Clinton appointed current
between government offices and the private White House chief of staff Rahm Eman-
sector. A recent report provided a list of uel to Freddie Mac’s board of directors,
prominent Washington people who have had where he earned $320,000 in compensa-
close ties to Fannie and Freddie:85 tion and sold stock worth more than
$100,000. Emanuel was a senior adviser
• Former Fannie Mae CEO Jim Johnson to Clinton between 1993 and 1998.
managed Walter Mondale’s 1984 presiden-
tial campaign, chaired the vice presidential Over the decades, Fannie Mae’s executive
selection committee for John Kerry, and suites became filled with Washington insid-
was involved in President Obama’s vice ers, who were paid big bucks to defend the
presidential selection process. Johnson company’s federal privileges. A Washington
received a cut-rate mortgage on his home Post columnist noted that “Fannie Mae . . .
from Countrywide Financial, which was a has become over the years a place where for-
major business partner of Fannie Mae’s. mer government officials and others with
• Former Fannie Mae CEO Franklin Raines good political connections can go to make
was a director of the Office of Manage- millions of dollars.”88 House hearings in
ment and Budget under President Clin- 2004 revealed that 21 Fannie Mae executives
ton. Raines, who left Fannie in the wake of earned more than $1 million per year.89
an accounting scandal, earned over $90 After many warnings over the years by
million in compensation between 1998 analysts concerned about the dangers posed

by the rapidly growing Fannie and Freddie, ment National Mortgage Association (Ginnie
the two finance giants imploded in 2008 and Mae). That agency provides guarantees on
were taken over by the government. The two mortgage-backed securities bundled from fed-
entities racked up losses of $165 billion over erally insured loans issued by the FHA and
the last two years, much of which has landed other federal agencies. By the end of next year,
on taxpayers.90 Congress generally ignored Ginnie Mae is expected to be guaranteeing $1
the risks posed by Fannie and Freddie, no trillion of mortgage securities, double the
doubt partly a result of the firms’ huge lob- amount in 2007.93 All in all, “among the FHA,
bying efforts. Ginnie, Fannie and Freddie, nearly 9 of every
Since the financial crash, one would think 10 new mortgages in America now carry a fed-
that Congress and the administration would eral taxpayer guarantee.”94 It appears that
be moving to withdraw federal housing sub- today’s policymakers have learned little from
sidies from the market because they have decades of mismanagement and failure in fed-
caused so much damage. However, the oppo- eral housing programs.
site is happening. Policymakers are following
the advice of the various housing lobby
groups that continue pushing to expand fed- Conclusion
eral intervention in housing markets. A Wall
Street Journal editorial recently raised the This review of housing policies and HUD
alarm about the expanding role of the FHA: leadership in recent decades suggests that we
need to discard the idea that federal housing
Everyone knows how loose mortgage officials act in the general public interest
underwriting led to the go-go days of when setting their agendas. HUD leaders
multitrillion-dollar subprime lending. have variously put career advancement, party
What isn’t well known is that a parallel interests, personal financial interests, and the
subprime market has emerged over the demands of lobby groups ahead of sound
past year—all made possible by the policy choices.
Federal Housing Administration . . . While government officials and advocates
Last year banks issued $180 billion of for housing subsidies view HUD programs
new mortgages insured by the FHA, through rose-tinted glasses, the reality is that
which means they carry a 100 percent federal housing intervention has done far
taxpayer guarantee. Many of these have more harm than good. The housing and
the same characteristics as subprime financial meltdowns of recent years have part-
loans: low downpayment require- ly, or largely, stemmed from the distortions
ments, high-risk borrowers, and in injected into markets by federal housing regu-
many cases shady mortgage origina- lations and subsidies through HUD and other
tors. FHA now insures nearly one of agencies. We have learned that when the gov-
every three new mortgages, up from 2 ernment intervenes in the housing industry, It appears that
percent in 2006.91 the results are often cronyism, mismanage- today’s policy-
ment, and economic distortions, not efficient
As the Journal notes, the realtor and home- policy outcomes.
makers have
builder lobby groups have been cheerleading With many members of Congress beholden learned little
for the FHA’s expansion, and they continue to the housing lobbies, it will take a strong ini- from decades of
to help block sensible reforms to FHA rules, tiative from the executive branch to reverse
such as increasing downpayment require- course and reduce housing subsidies. Unfor- mismanagement
ments and reducing the federal guarantee tunately, the Obama administration has been and failure in
from the current 100 percent.92 doubling down on the government’s interven-
At the same time, taxpayers face related fed- tions in housing markets. The HUD agencies,
federal housing
eral housing exposure from HUD’s Govern- Ginnie Mae and the FHA, could become the programs.

next Fannie Mae and Freddie Mac requiring 16. Edward T. Pound and Kenneth H. Bacon,
huge bailouts, but policymakers are encourag- “Favored Friends,” p. 1.
ing the rapid growth of these agencies.95 As a 17. See Welfeld, pp. 92–95.
result, it will be no surprise if we face govern-
ment-caused turbulence in housing markets 18. “The Nation; The Many Paths of the H.U.D.
down the road and taxpayers are hit once again Investigation,” New York Times, August 13, 1989.
with the costs of failed federal policies. 19. Joe Davidson, “Former HUD Aide, 2 Others
Convicted of Giving Gratuities to U.S. Official,”
Wall Street Journal, “January 6, 1993, p. A12.
Notes 20. Kenneth J. Cooper, “Pierce Misled Hill, Panel
1. “Still Rising: the H.U.D. Bill, and Smell,” edito- Concludes,” Washington Post, November 2, 1990, p.
rial, New York Times, July 13, 1989, p. A22. A23.

2. Ibid., p. A22. 21. Toni Locy, “Watt Pleads to Misdemeanor in

HUD Case,” Washington Post, January 3, 1996, p. A1.
3. Steven V. Roberts, Joseph P. Shapiro, and
Ronald A. Taylor, “The Undoing of Silent Sam 22. Welfeld, p. 75.
Pierce,” U.S. News and World Report, September 18,
1989, p. 29. 23. This was the Housing Enterprises Financial
Safety and Soundness Act. The Act created the
4. Edward T. Pound and Jill Abramson, “Mishan- Office of Federal Housing Enterprise Oversight
dling HUD: Pierce May Have Kept Hands Off, but within HUD.
Projects of Pals Sailed Through,” Wall Street
Journal, July 12, 1989, p. 1. 24. Ruth Larson, “HUD Rallies Criticized as
Illegal Lobbying Efforts,” Washington Times, April
5. Ibid., p. 1. 7, 1995, p. A4.

6. Edward T. Pound, “HUD Provided $4.5 Million 25. Susan Gaffney, Inspector General, Department
for Project Backed by Pierce’s Old Firm, Ex- of Housing and Urban Development, Testimony
Clients,” Wall Street Journal, August 7, 1989, p. 1. before the Subcommittee on Human Resources
and Intergovernmental Relations, House Com-
7. Steven Waldman, et al., “The HUD Ripoff,” mittee on Government Reform and Oversight,
Newsweek, August 7, 1989, p. 16. February 29, 1996, p. 15.
8. Pound and Abramson, “Mishandling HUD,” p. 1. 26. Ibid., p. 15.
9. Ibid., p. 1. 27. Judith Evans, “HUD’s Cisneros to Leave a
Legacy of Public Housing Reform,” Washington Post,
10. Irving H. Welfeld, HUD Scandals: Howling November 30, 1996, p. E1.
Headlines and Silent Fiascoes (New Brunswick, NJ:
Transaction Publishers, 1992), p. 78. 28. Lawrence H. White, “How Did We Get into
This Financial Mess?” Cato Institute Briefing
11. Edward T. Pound and Jill Abramson, “HUD Paper no. 110, November 18, 2008, p. 6.
Officials Had Warnings of Plan’s Losses,” Wall
Street Journal, July 17, 1989, p. 1. 29. Ibid., pp. 5–6.
12. Ibid., p. 1. 30. Peter J. Wallison, “Cause and Effect: Govern-
ment Policies and the Financial Crisis,” American
13. Edward T. Pound and Kenneth H. Bacon, Enterprise Institute Financial Services Outlook,
“Favored Friends: Housing Subsidy Plan for the November 2008, p. 3.
Poor Helped Contributors to GOP,” Wall Street
Journal, May 25, 1989, p. 1. 31. Peter Coy, “Bill Clinton’s Drive to Increase
Homeownership Went Way Too Far,” BusinessWeek,
14. “Former Official Sentenced, Fined for HUD February 27, 2008.
Corruption,” Wall Street Journal, February 28,
1994, p. C15. 32. Quoted in Joseph R. Mason, “A National
Homeownership Strategy for the New Millen-
15. See James P. Scanlan, Attorney at Law, http: nium,” Criterion Economics, LLC Market Com-
// mentary, February 26, 2008, p. 2.

33. Coy. Zone, Enterprise Community and Economic Devel-
opment Initiative Grant Selection Processes,” Audit
34. Mason, p. 3. Case No. 95-HQ-154-0002, August 31, 1995.

35. See John Connor, “HUD to Review Mortgage 51. George Archibald, “HUD Inspector General
Rules for Racial Bias,” Wall Street Journal, April 14, Survives Bid to Oust Her,” Washington Times,
1994, p. A6. September 19, 1997, p. A4.

36. “Housing-Aid Goals in Underserved Areas 52. Department of Housing and Urban Develop-
Proposed by HUD,” Wall Street Journal, June 20, ment, Inspector General, “HUD Contracting
1995, p. A5. Activity,” Audit Case No. 97-PH-163-0001, Sep-
tember 30, 1997.
37. Carol D. Leonnig, “How HUD Mortgage Policy
Fed the Crisis,” Washington Post, June 10, 2008, p. 53. Wayne Barrett, “Andrew Cuomo and Fannie
A1. and Freddie,” Village Voice, August 5, 2008.

38. David Streitfeld and Gretchen Morgenson, 54. John Berlau, “The Subprime FHA,” Wall Street
“Building Flawed American Dreams,” New York Journal, October 15, 2007, p. A23.
Times, October 19, 2008, p. A1.
55. Barrett.
39. Ibid., p. A1.
56. Ibid.
40. “In Brief: Cisneros Resigns from Country-
wide,” Los Angeles Times, October 25, 2007, p. C6. 57. “Fannie Mae Data Scrutinized for Bias,” Atlanta
Journal-Constitution, February 24, 2000, p. 6F.
41. Gary Martin, “Cisneros Builds on Helping
Hispanic Homeowners Avoid Foreclosure,” San 58. Steven A. Holmes, “Fannie Mae Eases Credit
Antonio Express-News, February 25, 2009, p. A10. to Aid Mortgage Lending,” New York Times, Sep-
tember 30, 1999.
42. Christopher Cooper and Amy Chozick, “Cam-
paign ’08: As Clinton Rips Countrywide Cisneros 59. Elizabeth Williamson, “Probe Finds Jackson
Isn’t Mentioned,” Wall Street Journal, February 29, Urged Favoritism in HUD Contracts,” Washington
2008, p. A6. Post, September 22, 2006, p. A15.

43. Byron York, “Andrew Cuomo, Big Spender,” 60. Carol D. Leonnig, “HUD Repeatedly Dis-
Wall Street Journal, August 17, 1994, p. A12. missed Staff Concerns about Contracts,” Wash-
ington Post, May 18, 2008, p. A10.
44. Ibid., p. A12.
61. Edward T. Pound, “A Helping Hand,” National
45. Brian Blomquist, “Cuomo Engineered His Journal, November 17, 2007, pp. 46–49.
High Rise—Used Loan Probe to KO Rival for Fed
Housing Job,” New York Post, May 21, 2002, p. 6. 62. Edward T. Pound, “HUD Probe Heats Up,”
National Journal, December 15, 2007, pp. 45–47.
46. Brian Blomquist, “Andy Was Part of Me
Generation: Colleagues,” New York Post, May 21, 63. Inga Saffron, “After a Big Bang, HUD Dustup
2002, p. 6. Lingers,” Philadelphia Inquirer, March 31, 2008, p.
47. Brian Blomquist, “Cuomo Engineered His
High Rise,” p. 6. 64. Daniel Golden, “Angelo’s Many ‘Friends’,”
Conde Nast Portfolio, August 2008.
48. Brian Blomquist, “Andy Was Part of Me
Generation,” p. 6. 65. Ibid.

49. Rochelle Sharpe, “Housing Agency Inspector 66. Ibid.

General Says Cuomo Uses ‘Dirty Tricks’ against
Her,” Wall Street Journal, September 10, 1998, p. A24. 67. Rep. Darrell Issa (R-CA), House Committee on
See also Judith Havemann, “Housing Officials Drop Oversight and Government Reform, staff report,
Complaint against IG,” Washington Post, September “Friends of Angelo: Countrywide’s Systemic and
15, 1997, p. A21. Successful Effort to Buy Influence and Block
Reform,” March 19, 2009, p. 49.
50. Department of Housing and Urban Develop-
ment, Inspector General, “Audit of Empowerment 68. Ibid., p. 31.

69. Wallison, p. 6. ers Step Up Campaign to Revive Housing, Create
Jobs,” press release, September 7, 2009.
70. David S. Hilzenrath, “HUD Chief Criticizes
Fannie Mae, Washington Post, July 2, 2004, p. E2. 82. Bethany McLean, “Fannie Mae’s Last Stand,”
Vanity Fair, February 2009.
71. Leonnig, “How HUD Mortgage Policy Fed the
Crisis,” p. A1. 83. Issa, p. 15.

72. Kenneth R. Harney, “FHA Alternatives to Sub- 84. Joseph Stiglitz, Jonathan Orszag, and Peter
prime Loans,” Washington Post, May 14, 2005, p. F1. Orszag, “Implications of the New Fannie Mae and
Freddie Mac Risk-Based Capital Standard,” Fannie
73. Department of Housing and Urban Develop- Mae Papers 1, no. 2 (March 2002): 2.
ment, Office of Policy Development and Infor-
mation, U.S. Housing Market Conditions, February 85. Issa, pp. 16–17.
2009, p. 78. See also “The Next Fannie Mae,” Wall
Street Journal, August 11, 2009. 86. Office of Federal Housing Enterprise Over-
sight, “Report of the Special Examination of Fan-
74. “The Next Housing Bust,” editorial, Wall Street nie Mae,” May 2006, p. 58,
Journal, May 5, 2009, p. A13. /747/FNMSPECIALEXAM.pdf.

75. Carol D. Leonnig, “HUD Chief Inattentive to 87. Ibid., p. 58.

Crisis, Critics Say,” Washington Post, April 13, 2008,
p. A1. 88. Albert B. Crenshaw, “High Pay at Fannie Mae
for the Well-Connected,” Washington Post, Decem-
76. Analysis by the Center for Responsive Politics ber 23, 2004, p. E3.
available at
CRP’s tally includes contributions to candidates 89. David Hilzenrath, “Fannie Mae Salaries Rile
and parties, including direct contributions, polit- Hill,” Washington Post, October 11, 2004, p. E1.
ical action committee contributions, and contri-
butions of individuals connected with each orga- 90. Jody Shenn, “Skepticism on Privatizing Fannie,
nization. Freddie,” Washington Post, September 11, 2009, p. A24.

77. National Association of Realtors, Annual Re- 91. “The Next Housing Bust,” p. A13.
port, 2006, p. 6,
pages/annual_report. 92. Ibid., p. A13.

78. Ibid., p. 8. 93. “The Next Fannie Mae.”

79. National Association of Realtors, “Realtors 94. Ibid. See also Deborah Solomon and Jon
Continue Push for Comprehensive Housing Hilsenrath, “No Easy Exit for Government as
Strategy,” press release, January 16, 2009. Housing Market’s Savior,” Wall Street Journal,
September 15, 2009.
80. Center for Responsive Politics.
95. The Wall Street Journal raises the alarm on this
81. National Association of Homebuilders, “Build- issue. See “The Next Fannie Mae.”