Did Andrew Cuomo cause the subprime meltdown?

[Stephen Eisel]

http://www.villagevoice.com/content/pri ... atrick.net

There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

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.

What he did is important—not just because of what it tells us about how we got in this hole, but because of what it says about New York's attorney general, who has been trying for months to don a white hat in the subprime scandal, pursuing cases against banks, appraisers, brokers, rating agencies, and multitrillion-dollar, quasi-public Fannie and Freddie.

It all starts, as the headlines of recent weeks do, with these two giant banks. But in the hubbub about their bailout, few have noticed that the only federal agency with the power to regulate what Cuomo has called "the gods of Washington" was HUD. Congress granted that power in 1992, so there were only four pre-crisis secretaries at the notoriously political agency that had the ability to rein in Fannie and Freddie: ex–Texas mayor Henry Cisneros and Bush confidante Alfonso Jackson, who were driven from office by criminal investigations; Mel Martinez, who left to chase a U.S. Senate seat in Florida; and Cuomo, who used the agency as a launching pad for his disastrous 2002 gubernatorial candidacy.

[ryan costa]

the post-industrial economy is based on sprawl and real estate speculation. converting mortgages into tradable bonds began in the early 1980s.



if anyone else was in the drivers seat at fannie mae, freddie mac, HUD, etc., would have Okayed the same policies. it was "good for the economy". It was important the economy be full of "goodness" at the time: this made it easier for politicians and pundits to promote NAFTA, CAFTA, and globalism with straight faces.

the initial adjustable rate mortgages were obviously bad. the investment firms who bought the bonds or securities derived from these mortgages have no one to blame but themselves: it should have been obvious to them folks would fall behind on payments when the interest rates went up. I'm not sure what the 700 billion bailout Bush is pushing is for: is he paying these bankers the interest they expected, or just the initial purchase price of the securities? Is he paying the overtime of sheriffs deputies to evict residents who can't keep up with the interest hikes?