Good Intentions Gone Bad in the Housing Market

Good Intentions Gone Bad in the Housing Market


The housing/credit crisis has a lot of causes and plenty of parents, in both the public and private sectors. One man who’s been involved in housing at the highest levels of government and at the most intimate levels of a local community is Henry Cisneros, the former mayor of San Antonio and Bill Clinton’s original Secretary of Housing and Urban Development. Through the years, Cisneros has championed the cause of turning more Americans into homeowners. Unfortunately, his well-intentioned crusade has had some disastrous results.

Yesterday, the New York Times ran an excellent article detailing Cisneros’ decades-long involvement in housing, from his decisions while HUD secretary to his involvement with KB Homes and Countrywide Financial. Along the way, he made many influential decisions that helped soften the mortgage market . He was also the key mover of a San Antonio housing development now wracked with foreclosures and other problems.

While Cisneros has made good money – enough that some could reasonably assume he’s been an opportunist – those of us in San Antonio know he truly does care about housing and helping people lead better, more secure lives. But, as the article shows, his idealism (and possibly his hubris as well) blinded him to many of the risks inherent in increasing the percentage of homeowners.

If you have a moment, read the whole article. It’s a fascinating portrayal of the housing crisis.

  • BenG


    Thanks, it was a good read to begin to make sense of the housing mkt debacle, b/c it approaches the problem from all sides – Mrtg Brokers, Developers, Gvnmt Agencies, and Homeowners. Good job. But it doesn’t persuade me to change my feelings on where to place the blame – the market makers, not the homeowners.

    Although it was alarming to hear the example of the couple who made only $17,500 and, thus couldn’t handle the payments when the rates went up, I still can’t fault them for the bad business practiced here, even though they admittedly said: “…what were we thinking?” The fact that they had a happy outcome to their story sort of proves my point, the folks that had the honest work ethics in this example made it work.

    Which finally brings me to my point. I think it’s a cop-out to blame the average homeowner for the bubble and, finally, the crash in the housing market. Even though the couple I mentioned may not have had any right owning a house, they certainly payed a high price for their bad experience but made it work out as they kept the house in the end. The true culprits here are the lenders and the Wall St. investors who bypassed the proper business practices and allowed greed to trump common sense. The inadequacies of our Govnmt oversight must be dealt with, too.

    The most eye opening part of the story is to hear about the pain and losses suffered by the big players in the businesses that were at the core of this problem, such as the owner of Countrywide and KB Homes who lost a big lawsuit to HUD. Maybe there is some truth and justice in the free market and maybe we should just let it all work itself out!

  • Jacob

    I’m not an American, so had no idea about all of this. I heard ‘sub prime crisis’ and did not know the roots. Thanks for this. It is an eye opener. The road to hell is paved with good intentions…

  • Jimmy the Dhimmi

    Jacob, be sure to tell your friends in whatever country you live in that it is not “free market capitalism run amok,” rather as this article states, it is bad social policy encouraged and enabled by our government with complicit actors on Wall-street. Otherwise, if people call for more socialism and “good intentions” to fix it, we may be doomed to repeat this mess in the future.

  • Cindy

    These warnings were there a long time ago. This is nothing new. It’s a shame that mainstream media ignored this fraud while there was time to stop it. The average American gets their news from the TV which still isn’t talking about how much fraud was and still is going on.

    The consumer org I volunteer for, as well as many other consumer org’s, economists, and others, were saying these things were wrong with housing and finance years ago. There was a lot of fraud going on and most of it was done by the industry. Even the FBI said that 80 percent was done by insiders and that was in about 2004. Consumers were complaining years ago about deceptive business practices by builders, lenders, real estate agents, etc.

    Basically anyone in the industry who chose to push aside ethics could do so and profit from it during the boom. Add speculators/flippers and fuel was thrown on the fire. Builders sometimes sold “blocks” of new houses to speculators then told prospective customers they were keeping out tht type of buyer. Artificially inflated appraisals became the norm as appraisers were black balled for not meeting the number. Builders incentives also artificially inflated prices as did bogus ‘down payment assistance programs’ that were called a scam by the IRS.

    Complaints of mortgage fraud went unheeded as law enforcement said there was nothing they could do. They told home buyers to “sue,” that it was a “civil matter.” Arbitration clauses in contracts forbade suing, and suing was impractical as the cases didn’t win enough money to attract good lawyers.

    Only when banks and investors got burnt by their own greed and stupidity did law enforcement do much. Why is it that govt was unable to act years ago when this could’ve been prevented, but was able to pass an $800 billion dollar corporate bailout almost overnight when it was their corporate CEO buddies rear ends on the line?

  • Janet Ahmad

    Genesis of “Affordable” Homeownership at What Price?

    The New York Times article “Building Flawed American Dreams” Published: October 18, 2008 is an eye opener.

    Policies Mr. Cisneros authorized while at HUD shaped the agenda of an unchecked industry that encouraged builders to carelessly throw up shoddily constructed homes overnight in the name of “affordable” housing.

    Forgotten was the lack of respect for those who were to live in these homes. Forgotten is that a builder can build quality homes, make a profit and respect the people who buy homes with the dream of a future and the commitment to pay their mortgage.

    The sad part is that Cisneros carried the water for some of the worst giants of the industry, giants like Countrywide and KB Homes. He facilitated federal policies that became the bread and butter of the building industry; a market made up of young first-time homebuyers and families that could not afford homes that were venerable to the deceptions of predatory lending.

    Henry Cisneros, a man so many people, including myself, respected and admired, was caught up in an industry motivated by greed at the expense of the “little guy,” the little guy that HUD was charged to help and protect. This goes to the heart of ethics and morality.

    HUD’s deregulation and risky policies lined the pockets of the building and banking industry under the name of affordable housing. It established the foundation throughout the banking community which disregarded basic responsible lending principles that now threaten to cripple the entire financial world. Policies Cisneros implemented while Secretary of HUD certainly appear to have been enacted for no other reason than to bolster massive profits for himself and his partners.

    One of Mr. Cisneros most notable skills is his ability to play both sides of the fence. In the wake of the current devastating housing and financial meltdown, on one side of the fence are the battered homeowners and on the other side is the building industry. The later are the sole beneficiaries of the failed policies of Henry Cisneros. In his zeal, Cisneros forgot the little guy.

    In my many years of working with literarily hundreds of thousands of victims it was foreseeable that a huge crisis of communities built with substandard self-destructing homes was inevitable however, never could I have envisioned the global affect homebuilders greed would have on this global economic crisis we are experiencing today.

    Janet Ahmad, President
    HomeOwners for Better Building