Cuomo's subprime debacle and good fortune

James Poulus:

With despair gripping New York Democrats over ethical scandals claiming Governor David Patterson, Rep. Charlie Rangel (D-NY), and Rep. Eric Massa (D-NY), New York’s Attorney General Andrew Cuomo cuts a heroic figure as the presumptive heir to the governorship.

But catching up with Cuomo is his relationship with the mortgage meltdown that nearly destroyed the American economy. Appointed by Bill Clinton as secretary of the U.S. Department for Housing and Urban Development (HUD), Andrew Cuomo has been called “the father of the subprime crisis” for the policies he orchestrated.

It was Cuomo’s directives that mandated HUD to vastly increase the amount of risky home loans bought by quasi-governmental housing giants Fannie Mae and Freddie Mac. Now, Cuomo may be haunted by his tenure as HUD secretary, where he planted the seeds for the nation’s housing collapse.

Though America’s financial fortunes suffered after Cuomo’s time at HUD, his own personal fortune soared. The bulk of this financial “windfall” came courtesy of Andrew Farkas, the billionaire real estate developer who helped Cuomo amass his wealth as a business partner and campaign fundraiser. Farkas — now Cuomo’s financial chairman as he circles the governorship — has personally given Cuomo at least $1.8 million in cash.

As New Yorkers are beginning to discover, Andrew Cuomo personifies the long reach of many at the top of the Democratic Party who built their fortunes on the mortgage bubble and the sub-prime collapse, but have yet to be tarred and feathered as architects of the nation’s worst housing crisis.

Cuomo’s heavy reliance on funds raised from big players in New York real estate, analyzed in detail by the New York Times this January, “hasn’t drawn much scrutiny yet, but it will,” said Blair Horner, legislative director at NYPIRG, the New York Public Interest Research Group, in an interview with Pajamas Media. “If and when he announces as a candidate for governor, because it’s obviously an issue that the public deserves to have explored.”

Notably, another recipient of largess while Cuomo was HUD secretary is current White House Chief of Staff Rahm Emanuel. Clinton appointed Emanuel to the board of Freddie Mac while Cuomo headed HUD. Both Cuomo and Emanuel turned their privileged positions atop the nation’s mortgage finance system into opportunities for quickly amassing personal wealth, which they then leveraged into greater political power.

Thanks to Farkas, Cuomo’s current campaign war chest for governor is $18 million – big enough to eliminate primary competition before it starts. With a past already raising uncomfortable questions for Cuomo, Farkas is deeply embedded in controversial Middle East financial dealings, having created a “Fannie and Freddie for Dubai” in the United Arab Emirates. A quick wheeler-dealer, Farkas bailed out before the Emirate’s colossal credit crisis, and made a string of similarly well-timed deals with Dubai World in 2009, with whom he flipped marquee Manhattan properties. Just last week, Farkas raised eyebrows with his acquisition of Centerline Holding Company, which services over $110 billion in commercial mortgages.

...

Farkas's timing is nothing short of phenomenal. As Cuomo's source of both personal and political wealth he will certainly be a person of interest in the Governor's race for New York. I am really more interested in Cuomo's role in the housing collapse. His poor judgment raises questions about what kind of governor he would be. New York does not ned a third ethics challenged governor.