HUD is a Sewer (select sample)

As Assistant Secretary for Housing-Federal Housing Commissioner, I was responsible for the operations of the Federal Housing Administration (FHA), which was the largest mortgage insurance fund in the world. FHA at that time had annual originations of $50-100 billion of mortgage insurance and an outstanding portfolio of $320 billion of mortgage insurance, mortgages and properties. Leading the FHA necessitated significant understanding of how homes are built, how mortgages finance thousands of communities throughout America and how investors finance the process by buying securities in pools of mortgages.

My responsibilities included the production and management of assisted private housing; management of an organization of 7,000 employees in 80 offices nationwide; and development of network information systems and tools. In addition, I served as advisor to the Secretary of HUD on financial markets regulatory responsibilities, including the RTC Oversight Board, Federal Housing Finance Board and Federal Home Loan Bank Board System, Fannie Mae and Freddie Mac.

In the process of cleaning up the coinsurance portfolio, I got a chance to learn more about some of the tax-exempt housing bond deals that involved FHA mortgage insurance. Examples of these deals were those done through one of the Connecticut state housing authorities by a Dillon Read banker, Jewelle Bickford, during the 1980s.

Bickford had a lot of support from two of the largest future Dillon Read investors in Cornell Corrections — Ken Schmidt and Birkelund — which was hard for me to fathom. Bickford was one for shortcuts and what sounded to me like more than little white lies. Schmidt shared an intelligence background with Birkelund. He served with Air Force Intelligence early in his career as Birkelund had served in the Office of Naval Intelligence (ONI). When I later realized the role of the intelligence agencies in the HUD portfolio their comfort with HUD deals in Connecticut with high default rates seemed somehow more logical.

After Bickford’s housing bonds were embroiled in the coinsurance crash and burn, Jewelle somehow managed to get promoted up — landing at Birkelund’s old firm, Rothschild Inc. Which always made me wonder exactly whose bank accounts ended up with the $4 billion emptied out of the FHA mutual funds at HUD as a result of coinsurance, not to mention the billions more lost in the single family FHA programs.

Over $2 billion was lost by FHA/HUD in the Texas region in fiscal 1989 alone. The Texas region had included Arkansas, where the state agency, ADFA was so bad they had been disqualified at one point according to the HUD Fort Worth regional leadership. It was this state agency which was alleged to have laundered the local profit share of the arms and drug trafficking channeled through Mena, Arkansas. ¹⁾