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Irving H. Welfeld - HUD Scandals

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Irving H. Welfeld HUD Scandals

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Hud Scandals
First published 1992 by Transaction Publishers
Published 2017 by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
711 Third Avenue, New York, NY 10017, USA
Routledge is an imprint of the Taylor & Francis Group, an informa business
Copyright 1992 by Taylor & Francis.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.
Notice:
Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.
Library of Congress Catalog Number: 2012003565
Library of Congress Cataloging-in-Publication Data
Welfeld, Irving H.
HUD scandals / Irving Welfeld.
p. cm.
ISBN 978-1-4128-4781-0
1. United States. Dept. of Housing and Urban Development. 2. Political corruption--United States. 3. Waste in government spending--United States.
I. Title.
HD7293.W372 2012
364.168--dc23
2012003565
ISBN 13: 978-1-4128-4781-0 (pbk)
To all those people who cared enough to counsel me that I should not be writing this book.
I would like to thank:
Robert Haveman for offering a change of climate and Secretary Jack Kemp for deciding I was expendable.
The staff at the LaFollete Institute of Public Affairs at the University of Wisconsin for putting up with my hard returns.
Alice Honeywell for being my English maven.
The people in Orem, Utah, who produce WordPerfect.
Jim Matheny and Mary McMullen for providing me with reading material during the long cold winter.
Those who helped but whose careers will not be furthered by mentioning their names.
Chuck Lamb whose publishing campaign came at the expense of his tennis game.
My brother for showing me how health leads to wealth.
Hilbert Fefferman for holding me to the rigorous clarity standard, Even a Harvard graduate student should be able to understand it. If I failed, its not because he didnt try.
Contents
It was the summer and Trump was in the headlines. The headlines were neither about Ivana nor Maria nor about the difficulty of staying on top. In fact, they were not about the Donald. They were about his father, Fred.
It was the summer of 1954 and the media were concerned with a nondescript apartment house in what then were the far reaches of Brooklyn. He was explaining and complaining. Fred Trump was explaining how he made his fortunenot to a group of eager bookbuyers or even to a group of creditorsbut rather to the Senate Committee on Banking and Currency. He was complaining about the bad publicity. The headline on the front page of the hometown paper The Brooklyn Eagle
Charge $4 Million Windfall to Builder of Beachhaven
Federal investigators checking the housing loan scandals have accused Fred C. Trump, Jamaica, Long Island, builder of pocketing $4,070,000 windfall on the Beach Haven Apartments in Brooklyn.
Congress was investigating the Federal Housing Administration (FHA, which was then a part of the Housing and Home Finance Agency [HHFA], which in 1965 would achieve cabinet status as the Department of Housing and Urban Development [HUD]). What they found would not have come as a surprise to the Government Operations Committee, headed by Representative Tom Lantos, that in the late 1980s and early 1990s has been investigating the Abuses, Favoritism, and Mismanagement in HUD Programs.
There is a well-known Yiddish proverb that when a poor man eats a chicken, one of them is sick. When HUD appears in a headline, or is even noticed by the media, it is usually engrossed in a scandal. In the main, these headline grabbers are examples of mismanagement or nonmanagement and in recent history they border on parody:
Imagine: a cabinet Secretary sleeps through his eight-year tenure at his multi-billion dollar agency and watching soap operas. Filling the vacuum is the best-connected bar maid in Georgetown (Debbie Dean), who takes control of the department and doles out contracts for questionable projects to her pals. A host of get-the-government-off-the-peoples-back conservatives pocket huge fees for lobbying the agency. In seeking greater efficiency through privatization, the agency hands its programs over to private companies who leave the government saddled with $5 billion worth of loan liabilities. Enter Robin HUD (Marilyn Louise Harrell) who steals more than $5 million before anyone notices. Its about as far-fetched as the coup plot in Seven Days in May.
What is more interesting, although not as funny, are the silent fiascoes - the major policy mistakes that have occurred while HUD was paying dutiful attention to managing its misshapen programs. As an article entitled Why We Need More Waste, Fraud, and Mismanagement in the Pentagon put the matter:
[T]here is indeed something wrong with our defense policy and what is wrong is very serious indeed. The obsessive attention now being devoted to micro-management is the root cause of an evil far greater than any marginal inefficiency or any thievery could possibly be. Our leaders are systematically distracted from the pursuit that should be their dominant business by a wrong-headed quest for paper efficiencies and marginal savings.
In the first part of the book I will narrate and analyze seven scandals and fiascoes that have occurred since World War II. The first will be the Section 608 rental housing program in which developers were able to reap huge profits and the last will be the administrative porkbarreling of the Pierce Administration during the 1980s.
The second part of the book deals with more general questions. Why did the media, the Congress, the General Accounting Office, the Office of Management and Budget and the Office of the Inspector General do such a poor job in their oversight functions? To what extent is poor management the root cause of the failures in the past? To what extent are these failures likely to be reformed by better people and tighter administrative procedures?
The third part of the book describes a set of programs that would minimize discretion on the part of administrators and the temptation to misuse and abuse the public trust. Hopefully, these programs will also enable HUD to more effectively fulfill its missions to see to it that there is a sufficient supply of decent housing and there is assistance available to all Americans who at present cannot afford such housing.
Notes
DeParle, Jason, What the Smartest Man in Washington Doesnt Understand. And Why it Will Hurt You, The Washington Monthly, November 1989, 34.
Luttwak, Edward, Commentary, February 1982, 20.
I
Histpry in a Policy Context

The 1954 FHA Investigations
There was a time, long ago, when the Federal Housing Administration could do almost no wrong. It was one of the New Deals most respected creations. It had made homeownership easier for millions of American familieshaving insured 20 million home loan mortgages covering $30.8 billion in borrowing. It had repaid the last $85 million that the U.S. Treasury had advanced to get it started. It was netting a substantial profit. FHA was sailing merrily along and then the ship hit the shoals.
On the evening of 11 April 1954 James Hagerty the White House press secretary announced, much to the surprise of the FHA Commissioner, Guy Hollyday, (described by one and all as a good Christian gentleman), that the President would accept his resignationthat is, he was fired. At dusk of 12 April 1954, the HHFA Administrator, acting on President Eisenhowers orders, impounded all FHA files and records of the Title I property improvement loan insurance program and the section 608 rental housing insurance program.
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