HUD Pick Foresaw Subprime Crisis In '04

(The Politico)  Barack Obama's pick for HUD -- former New York City Housing Commissioner Shaun Donovan -- was one of the earliest public officials to foresee the magnitude and destructive capacity of the subprime crisis.

In the middle of 2004, I sat down with Donovan (I was at Newsday at the time) for a chat about Mayor Michael Bloomberg's initiative to tackle the shortage of low- and middle-income housing in the city.

To my surprise, Donovan brushed aside my questions about the city's initiatives and began taking at length about the coming "flood of foreclosures" he anticipated among highly leveraged apartment buildings purchased by recent immigrants -- and a looming subprime crisis for one- and two-family homeowners in up-and-coming neighborhoods in southeast Queens and central Brooklyn.

I left the meeting a little shaken: At the time housing prices in previously depressed parts of the city were booming and the city had been able to sell off almost of all its once-massive stock of foreclosed properties to private owners and investors. The future looked bright to almost everyone -- but not to Donovan, who was planning for the looming disaster.

Bloomberg's housing program has received mixed marks from advocates, but Donovan is extremely well regarded among groups that have often clashed with City Hall, in part, because he's focused on improving conditions in rental housing at a time when many officials spurned such initiatives.

And, unlike many Clinton-era housing officials, the 42-year-old financing expert never subscribed to the prevailing (and deeply misguided) belief that low-income homeownership was the panacea for all the nation's housing ills.