HUD Badly Needs Thorough Housecleaning

THE reputation of the person who holds the job of secretary of housing and urban development eventually seems to be tarnished once out of office. For example, President Reagan's HUD secretary Samuel Pierce, a man famously loyal to his boss, is still smarting from the 1980s HUD scandals.

When asked at the beginning of his tenure how the public could be assured that its money would be well spent, HUD Secretary-designate Jack Kemp replied: "Because Jack Kemp is in charge now."

Ironically, it is now Mr. Kemp who could take a beating from HUD's new political appointees. According to a confidential report leaked to the press, Secretary Henry Cisneros and his researchers have discovered persistent "fraud, waste, abuse, and mismanagement" throughout the agency under Kemp's tenure. The report indicates that $1 trillion in housing programs are affected.

The problems include poor financial management, inadequate record-keeping, and scant accountability. Investigations raise serious questions about the whereabouts of millions of dollars; funding estimates in the long-troubled Section 8 program are "off by as much as $1 billion in either direction," says the transition report.

The Federal Housing Administration (FHA), which manages $378 billion in insurance and another $12 billion in assets, is holding thousands of buildings and properties it would dispose of, but doing so would risk billions in loan defaults. In an FHA program in which the private sector co-insures low-income apartments, 30 percent of its $10 billion in loans is already in default.

The report says the Reagan and Bush administrations inflicted a "long-term pattern of fundamental systemic mismanagement." These revelations come as little surprise to anyone who has tracked HUD's financial record. Every report by the inspector general that appeared during the Kemp years warned of troubles.

How did Kemp avoid scrutiny of HUD's mismanagement during his tenure? His personal style proved to be a useful distraction, and his excellent press handlers worked overtime. Moreover, Republicans did not want to criticize one of their own, and Democrats were too bedazzled by the number of new programs that Kemp initiated to complain. In short, hardly anyone seemed to care that billions of taxpayer dollars were slipping through the cracks of HUD's concrete walls.

Regarding the current troubles, Republicans will be quick to accuse the Cisneros team of playing budget politics; nearly all of the team's recommendations involve more money and more staffing. On the other hand, Republicans were the first to scream when Democrats tried to curtail Kemp's spending, which added $9 billion to HUD's budget. The Democrats may feel they are entitled to at least that much new money.

It is hardly surprising that the liberal Democrats now occupying HUD offices believe there is nothing wrong with government that can't be cured by more government. Less comprehensible is that Kemp, who is supposed to be more skeptical of government, demanded ever bigger budgets and claimed to be cleaning up his predecessors' mess. Yet the problems continued to mount.

It is the nature of bureaucracy not to have workable checks on resource use. There are no real "customers" demanding its services in the market; there are only special interests lobbying for largess. There are no "investors" other than taxpayers; and managers have little incentive to save money since it is not theirs in the first place. Restricting bureaucracies' budgets and power is the only way to keep them in check.

GIVEN HUD's history, the agency's budget should be cut. Clinton could start start with the billions that HUD hands out to nonprofit organizations. During Kemp's tenure, for example, the list of grants to these groups ran hundreds of pages long.

Much of this money went to liberal activist organizations for studies and conferences, not for housing services. These groups include the Association of Community Organizations for Reform Now (given $50,000 on Feb. 22, 1991), the Lawyers Committee on Civil Rights (given $235,040 on July 26, 1991, $227,408 on Sept. 24, 1992, and $325,000 five days later), the American Association of Retired Persons (given $149,510 on July 24, 1992), the National Association for the Advancement of Colored People (given $12 ,436 on Sept. 17, 1991, and another $40,000 six days later), the National Federation for Neighborhood Diversity (given $88,995 on Sept. 25, 1992), the Enterprise Foundation (given $2 million on Sept. 27, 1990), and more than $10 million to the Urban Institute.

Mr. Cisneros should also go after the programs that are in the most financial trouble. It makes no sense to spend more money on programs that are already wasting money. If Kemp pursues the presidency, he should be judged in part by whether he kept his pledge "to restore honor and integrity at the department." By that test, he fails. Yet Cisneros also should be careful. Recent history has not been kind to those who occupy the office of secretary of HUD.

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