David M. Halbfinger and Michael Powell, NY Times
As Andrew M. Cuomo campaigns for governor, he points to his leadership of the Department of Housing and Urban Developmentduring the Clinton administration as proof he possesses the ability and vision needed to lead New York out of its fiscal and political swamps.
Mr. Cuomo was housing secretary at a critical moment for the nation, just as its subprime mortgage fever was beginning to spike. It was during his tenure that the banking industry began to embrace predatory loans, and these creations led to a housing bubble that badly damaged America’s banks and nearly toppled its financial system.
An examination of Mr. Cuomo’s tenure atop the agency shows he was quick to warn about Wall Street’s dangerous hunger for predatory subprime loans — generally more expensive mortgages sold to people with poor credit. He counseled caution when many influential players, including the Federal Reserve and Congress, resisted any suggestion that they slow the country’s stampede to home ownership.
He also called attention to a pernicious mortgage-broker incentive payment that drove up interest rates for borrowers — secretly, in many cases — and that helped put many home buyers into loans they later found they could not afford.
And, in an effort to reverse decades of discrimination against blacks and Latinos, Mr. Cuomo pushed the government-sponsored banks, Fannie Mae and Freddie Mac, to buy more home loans taken out by poor and working-class borrowers.
But when presented with chances to throttle back on the exploding subprime market, guard against predatory lending and reel in mortgage brokers and lenders, Mr. Cuomo several times faltered and backed down, interviews and records show.
He did not heed local officials and others who wanted him to make Fannie and Freddie publicly report details about the loans they bought.
And he chose not to impose penalties and other deterrents to ensure that the giant public banks did not promote dangerous lending.
He also reversed himself, under heavy lobbying pressure from mortgage brokers and bankers, on the arcane but costly mortgage-broker payments known as yield spread premiums. These were lucrative bounties that banks paid to brokers who found new clients; the unwitting borrowers paid higher-than-market interest rates as a result.
Yield spread premiums fueled the subprime frenzy, according to official post-mortems on the crisis.
Nearly every political leader whose hands touched the fiscal and housing crises has had decisions scrutinized, actions questioned. Already, Mr. Cuomo has heard such rumblings from supporters of his likely Republican opponent, Rick A. Lazio, a former congressman.
Mr. Cuomo, whose tenure at HUD ended in early 2001, refused repeated requests to talk about his experience running the nation’s housing agency and how he wrestled with such policy questions. He gave no reason for his reticence. Instead, his staff issued a statement, and his former chief of staff at HUD, Howard B. Glaser, took the role of surrogate for the candidate.
Mr. Glaser, now a consultant to the mortgage industry, produced an inch-thick binder that sang Mr. Cuomo’s praises, attacked criticisms and deflected blame. Its title: “The Myth of Andrew Cuomo and the Subprime Crisis.”
Some people, particularly from the ideological right, argue that Mr. Cuomo’s decisions helped set in motion the nation’s economic decline. Such claims seem likely to grow louder as Congress takes up the question of the future of Fannie Mae and Freddie Mac.
“Raising the affordable housing low- and moderate-income goal to 50 percent was the key initial step in setting Fannie and Freddie on a path to insolvency,” said Peter J. Wallison, a conservative scholar who sits on the Congressionally appointed Financial Crisis Inquiry Commission, which was created in 2009.
That argument, the record suggests, seems overdrawn. The record shows that the mortgages bought by Fannie and Freddie during Mr. Cuomo’s tenure had low default rates. More broadly, if Mr. Cuomo was less prescient and gutsy than he now claims, no one seriously argues he deserves some outsize share of the blame for the subsequent collapse.
Far more powerful actors, including the finance industry, its various regulators, two presidents and Congress, helped create the environment and wrote the policies that caused it.
Read more here: http://www.nytimes.com/2010/08/24/nyregion/24hud.html?_r=2&ref=nyregion
