Cisneros Rewriting HUD History
In a recent speech to real estate interests, former Clinton HUD secretary Henry Cisneros preposterously claimed that the recent housing meltdown “occurred not out of a governmental push, but out of a hijacking of the homeownership process by some unscrupulous interests.”
The only criticisms Cisneros could muster for the government’s housing policies over the past 20 years were that regulations weren’t tough enough and it should have focused more on rental subsidies.
The reality is that Cisneros-era HUD regulations and policies directly contributed to the housing bubble and subsequent burst as a Cato essay on HUD scandals illustrates:
- Cisneros’s HUD pursued legal action against mortgage lenders who supposedly declined higher percentages of loans for minorities than whites. As a result of such political pressure, lenders begin lowering their lending standards.
- On Cisneros’s watch, the Community Reinvestment Act was used to pressure lenders into making more loans to moderate-income borrowers by allowing regulators to deny merger approvals for banks with low CRA ratings. The result was that banks began issuing more loans to otherwise uncreditworthy borrowers, while purchasing more CRA mortgage-backed securities. More importantly, these lax standards quickly spread to prime and subprime mortgage markets.
- The Clinton administration’s National Homeownership Strategy, prepared under Cisneros’s direction, advocated “financing strategies, fueled by creativity and resources of the public and private sectors, to help homebuyers that lack cash to buy a home or income to make the payments.” In other words, his policies encouraged the behavior that he now calls “unscrupulous.”
- Cisneros’s HUD also put Fannie Mae and Freddie Mac under constant pressure to facilitate more lending to “underserved” markets. It was under Cisneros’s direction that HUD agreed to allow Fannie and Freddie credit toward its “affordable housing” targets by buying subprime mortgages. Fannie and Freddie are now under government conservatorship and will cost taxpayers hundreds of billions of dollars.
Cisneros now serves as the executive chairman of an institutional investment company focused on urban real estate. Might that explain why Cisneros is now a fan of subsidizing rental housing?
“Unscrupulous” would be a good word to describe the millions of dollars Cisneros has made in the real estate industry following his exit from government.
From the Cato essay:
In 2001, Cisneros joined the board of Fannie Mae’s biggest client: the now notorious Countrywide Financial, the company that was center stage in the subprime lending scandals of recent years. When the housing bubble was inflating, Countrywide and KB took full advantage of the liberalized lending standards fueled by Cisneros’s HUD. In addition to the money he received as a KB director, Cisneros’s company, in which he held a 65 percent stake, received $1.24 million in consulting fees from KB in 2002.
When Cisneros stepped down from Countrywide’s board in 2007, he called it a “well-managed company” and said that he had “enormous confidence” in its leadership. Clearly, those statements were baloney—Cisneros was trying to escape before the crash. Just days before his resignation, Countrywide announced a $1.2 billion loss, and reported that a third of its borrowers were late on mortgage payments. According to SEC records, Cisneros’s position at Countrywide had earned him a $360,000 salary in 2006 and $5 million in stock sales since 2001.
Tuesday Links
- How the Tea Party movement can prove its authenticity.
- Why Americans’ first loyalty must be to the Constitution
- “Snowmageddon!” If you’ve been watching the news, recent snow storms both prove and disprove global warming, depending on who you talk to. According to Pat Michaels, both sides are wrong: “The fact of the matter is that global warming simply hasn’t done a darned thing to Washington’s snow. The planet was nearly a degree (Celsius) cooler in 1899, when the previous record was set. If you plot out year-to-year snow around here, you’ll see no trend whatsoever through the entire history.”
- Did last week’s government shutdown actually save American’s billions of dollars?
- Podcast:”Scrap ‘Don’t Ask, Don’t Tell’” featuring Christopher A. Preble.
Robbing Peter to Pay Paul
The FDIC’s insurance fund, which it uses to pay off despositors in failed banks, is getting low. One way it can bolster its reserves is to draw on a $100 billion line of credit from the Treasury. Instead, however,
Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.
A brilliant scheme to avoid another taxpayer bailout? Not really.
The banks are willing to lend because the FDIC will pay them a good interest rate. Repayment is virtually guaranteed because the FDIC can always draw on its line of credit. Thus the banks are getting a better deal than they would in the marketplace (that’s why they are doing this), so the scheme is a backdoor way of further bailing out the banks.
Why go through this charade? Apparently, using the Treasury credit line
is said to be unpalatable to Sheila C. Bair, the agency chairwoman whose relations with the Treasury secretary, Timothy F. Geithner, have been strained.
“Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,” said Camden R. Fine, president of the Independent Community Bankers. “She’d do just about anything before going there.”
Instead, the FDIC will con the taxpayers. The FDIC has no choice under existing policy, of course, but to pay off depositors of failing banks. They should just be honest about how who is paying for it.
The Stimulus Feeding Frenzy
Billions and billions of dollars! Get yours today!
I’ve written before about the massive lobbying game in Washington to get your own special interests written into the stimulus and budget bills. And about the efforts to pressure governments into spending that money NOW.
Today a friend sent me a new piece of the incredible expanding stimulus economy. A publishing company has created a new newsletter on how to keep up with “ever-changing opportunities and the complex requirements to apply for them” — The Money for Main Street Monitor. Yes, for only $229 a year, with this special offer, you can keep up with the lucrative and ever-changing “new stimulus funding opportunities.”
I’m omitting the specifics so as not to give this parasitical industry any more publicity, but here’s the text of the email advertisement:
Dear Nonprofit Professional,
Billions of dollars from the Obama stimulus plan are becoming available daily for funding thousands of new state, local and nonprofit programs!
And while it’s extremely time consuming and difficult to keep up with the ever-changing opportunities and the complex requirements to apply for them, we can help make that task easier than you’d imagine.
That’s why [the company] is proud to introduce our newest and much-needed online service: The Money for Main Street Monitor.
Just click on or cut and paste the following link into your Web browser to take advantage of a special one-week offer on this continuously updated service:
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Continuous Stimulus Funding Updates
While we have diligently kept our readers up to date on the billions of dollars in funding coming from the Obama stimulus package, many tell us they need much more coverage!
Consequently, we have assigned a team of experienced Washington, DC-based editors to focus exclusively on new stimulus funding opportunities for health care, family services, education, mental health, disabilities and substance abuse programs, housing and community development!<
Through continuously updated articles, subscribers to this new online service will be kept up to date on the latest funding opportunities as soon as they emerge. And with our online format, subscribers will have access to our user-friendly search tools to instantly find the funding opportunities most suited for their organizations!
Plus, our updates — unlike those on government Web sites — are in plain English and easy to find. And, we’ve included a wealth of grant-writing tips designed to help your organization get its share of stimulus funding!
We know how important it is for every organization to watch their dollars closely these days, and we’re doing are best to help. That’s why we are offering you a specially reduced rate for this much-needed publication, The Money for Main Street Monitor.
Just click on or cut and paste the following link into your Web browser to find out more about this special one-week offer:
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Or you can call in your order toll free at 1-800-[GET OTHER PEOPLE'S MONEY].
This isn’t the only company making such offers. Lobbyists, consultants, newsletter publishers, and others will be making money this year guiding their clients to the pot of gold at the end of the stimulus. But in economic terms, all this effort is deadweight loss. Instead of devoting time and talent and resources to the production of real economic value, these people are being lured into the parasite economy, jockeying for money extracted from productive workers and businesses and redistributed by a Washington bureaucracy and the lobbyists that revolve around it.
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