Bush Picks Executive for HUD
Saturday, April 19, 2008
President Bush yesterday named Steven C. Preston as his new secretary of Housing and Urban Development, installing a well-regarded corporate and government administrator -- yet one with little experience in housing issues -- as his point person in dealing with the consequences of the subprime mortgage meltdown.
For the past 18 months, Preston has headed the Small Business Administration, where he upgraded an agency that had been criticized for its response to Hurricane Katrina. He came to government from a career in the private sector, most recently as executive vice president of ServiceMaster, the large home-cleaning and pest-control company.
Preston, 47, will replace Alphonso Jackson, who resigned last month amid allegations of favoritism in his dealings with a Philadelphia developer. Jackson, who was present yesterday at the White House for the announcement of his successor, was praised by Bush as a "decent man" who "has transformed a lot of lives."
In explaining the appointment, Bush singled out Preston's work in managing loan guarantee programs at the SBA, which he likened to the work he will be doing at HUD if he is confirmed by the Senate. He cited Preston's success in clearing a lengthy backlog of loans for businesses devastated by the hurricane in the Gulf Coast.
"The department requires strong leadership at a time when our housing market is experiencing a period of challenge and uncertainty," Bush said, describing Preston as "a reformer who would act aggressively to help Americans obtain affordable mortgages."
If confirmed by the Senate, Preston would take over a $38 billion agency that has been a key player in the administration's response to the mortgage crisis. A debate has raged in Washington in recent months over how aggressive the government should be in helping borrowers saddled with high-rate loans refinance their mortgages and prevent foreclosures. Consumer groups estimate that each week an additional 20,000 homeowners are late on their mortgage payments and face the threat of foreclosure.
The selection of Preston drew a mixed response. Those who have worked with him on small-business issues appeared impressed, with Sen. John F. Kerry (D-Mass.), who chairs the Small Business Committee, declaring himself "sorry to see him go" from the Small Business Administration. "Mr. Preston inherited an agency in disarray, and he's worked hard to right its course," Kerry said in a statement.
But consumer advocates and some other housing experts appeared surprised by the selection. Howard Glaser, a consultant and former HUD official in the Clinton administration, predicted Preston would be a "caretaker" until the next administration arrives.
"Installing someone at HUD who continues to have no expertise in housing is a major flaw," he said. "We've gone through this entire crisis without any significant leadership from HUD, and it doesn't look like it's going to change."
Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), whose committee will consider the nomination, said the department is facing the "biggest housing crisis" in recent history.
"These priorities call for a leader with expertise in housing issues, yet the president's choice has no apparent housing background, which raises questions," Dodd said. "Nevertheless, I look forward to learning more about Mr. Preston and his qualifications for this important job at this trying time in our nation's economy."
White House spokesman Tony Fratto said fears about the nominee's experience were misplaced. "Preston is a rock-solid manager, and he understands how markets work -- which is a pretty valuable asset these days when we're talking about housing," he said.
The U.S. housing industry is in the midst of a sharp downturn, with prices dropping throughout the country and a record number of homeowners falling behind on their mortgage payments. HUD has been on the front lines in responding to the crisis, but there's been an intense and growing debate over how far it should go in helping struggling homeowners refinance with lower-rate mortgages.
Democrats and consumer advocacy groups have complained that the existing FHA Secure program has not made much of a dent in the foreclosure crisis, largely because of limitations on which borrowers qualify for government assistance. So far, only 2,000 FHA Secure loans, which carry lower interest rates, have been issued to borrowers who were at risk of default. But the White House has resisted efforts to expand the program dramatically because of concerns that the government might be bailing out people who have little hope of repaying any loan or who bought a house they could not afford.
"We'd like to see HUD become a real player in preventing foreclosures," said Alan Fishbein, housing director of the Consumer Federation of America. "Their efforts have been too minimal to have any real impact, given the scope of the problem and the number of people facing foreclosure. And Preston has to restore the credibility of the agency that is supposed to be a major player in the housing crisis. "
For his part, Preston offered few clues yesterday of his plans for the agency in his brief appearance with Bush. "As we help people pursue the American Dream, we need to have a market to operate fairly and effectively for all Americans," Preston said. "And our solutions must restore confidence in our markets while not erecting barriers to future entrepreneurs, investors and home buyers."