I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. – Thomas Jefferson
The problem with socialism is that eventually you run out of other people’s money. – Margaret Thatcher
The Department of Housing and Urban Development (HUD) was founded in 1965 as part of the “Great Society” program of President Lyndon Johnson. The original mission of HUD was to take responsibility for federal participation in the planning and development of housing in large, urban areas. Welcome to the projects!
The annual budget for HUD has significantly increased since its inception. In 2000, Congress appropriated $47.45 million, but $47.45 million is nothing compared to HUD’s budget of $45.46 billion this year. That’s right, I did not accidentally type billion instead of million. The Obama administration has already requested a $46.66 billion HUD budget for FY 2015. The following is a brief summary of HUD’s proposed FY 2015 budget based on written testimony of former HUD secretary, Shaun Donovan, presented to the House Committee on Appropriations:
- $60 million for housing and homeowner counseling through HUD.
- $120 million for “Choice Neighborhoods to continue to transform neighborhoods of concentrated poverty into opportunity-rich, mixed-income neighborhoods.”
- $280 million in the Opportunity, Growth and Security Initiative – “Used to revitalize HUD-assisted housing and surrounding neighborhoods through partnerships between local governments, housing authorities, non-profits, and for-profit developers.
- $20 billion for the Housing Voucher Program.
- $9.7 billion for the Project-Based Rental Assistance program – provides operating and capital subsidies to preserve affordable public housing.
- $332 million to modernize the Housing for Persons with AIDS. (Based on the third world diseases being brought into the U.S. by illegal immigrants, it is possible HUD will soon provide housing based on other diseases.)
Donovan also requested $171.6 billion in mortgage loans, $400 billion in loan guarantee authority for the Mutual Mortgage Insurance Fund, and $30 billion in loan guarantee authority for the General and Special Risk Insurance Fund. To summarize, the Obama Administration wants to waste $46.66 billion of your hard-earned money, and expose you to $601.6 billion of risk.
Care to hazard a guess as to what plagues all of the aforementioned HUD initiatives? The usual cancer that plagues federal government departments and agencies, fraud, corruption, and crony capitalism. The CATO Institute published an Executive Summary titled, Three Decades of Politics and Failed Policies at HUD, that provides a detailed history of how HUD officials have betrayed the trust of the American people and put their personal agendas above all else.
What has HUD accomplished in 49 years of existence? Nothing! HUD’s policies were the primary cause of the housing market crash of 2008. It was the HUD’s mortgage loan origination practices, mortgage loan guarantees, and purchasing of mortgaged-backed securities that led to a taxpayer bailout of approximately $317 billion for Freddie and Fannie.
The narrative that has been pushed by the mainstream media (scribes for Obama) and liberal politicians is that banks caused the 2008 housing market collapse. However, you would have to suspend all reason to think that the banks were writing subprime mortgage loans because they were interested in mixing it up a little by writing high risk loans. It was HUD, in partnership with other federal regulatory agencies, that coerced banks into writing subprime mortgage loans.
The Community Reinvestment Act (CRA) signed into law in 1977 declares that banks have an obligation to meet the credit needs of the local communities in which they are chartered. The law establishes a regulatory hierarchy to monitor the level of lending services banks are providing to low income and moderate income neighborhoods. There are four agencies that are tasked with monitoring the lending practices of banks: Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, and the Federal Reserve Board. These regulatory agencies audit banks and assign evaluations based on their examinations of banks’ lending practices. A bank is given an evaluation of “outstanding, satisfactory, needs to improve, or substantial non-compliance.” If a bank receives an evaluation of “needs to improve” or “substantial non-compliance,” it will find itself in an unenviable position with the feds. A bank that does not write subprime mortgage loans to satisfy HUD will more than likely experience delays or denials of any mergers, acquisitions, or expansion into new markets.
In the 1990s, it was HUD Secretaries Henry Cisneros and Andrew Cuomo, under directions from Bill Clinton, who started aggressively pushing home ownership by having the Federal Housing Administration (FHA) ramp up the number of subprime mortgages it insured. The Clinton Administration wanted to increase home ownership from 64 percent to 67.5 percent, which meant 8 million new home owners. How do you suppose the Clinton Administration could accomplish such a feat? You guessed it, the feds would force banks to write more subprime mortgages, and the HUD would insure the mortgages on the taxpayers’ dime. The rest is history!
What has changed at HUD since the collapse of the housing market? Nothing! The housing market is almost completely controlled by HUD. Currently, nearly 9 out of every 10 new mortgages are guaranteed by taxpayers. What about those toxic mortgaged-backed securities? Well, the Government National Mortgage Association (Ginnie Mae) guarantees over $1 trillion in mortgage- backed securities, which is double the amount in 2007.
One of the problems with government is that it is comprised of bureaucrats who are unaccountable to the American people. Bureaucrats and politicians can dream up all sorts of programs that they deem as necessary and noble as long as they can use other people’s money to fund their programs. The HUD has been interfering in the housing market for decades and its efforts have produced atrocious outcomes for taxpayers, but no need to change course because there is plenty of money to be confiscated from taxpayers, and if the taxpayers cannot foot the bill, the federal government can always borrow the money.