San Antonio Mayor Julián Castro faced kid glove treatment from the Senate Banking, Housing and Urban Development Committee, Tuesday, with questions mostly focused on what his plans might be and his position on GSE reform should he take over the Department of Housing and Urban Development.
The next step is a vote before the committee, which is not scheduled, which would be followed by a vote on the full Senate floor.
Castro was tapped by the White House to replaced outgoing HUD secretary Shaun Donovan, despite the fact that Castro has little executive experience and a controversial history mismanaging HUD programs and funding in his own city.
Castro follows the footsteps of former San Antonio Mayor Henry Cisneros, who served as President Clinton’s HUD secretary.
Castro is a mayor in a system where the mayor is a mostly ceremonial job, having no executive powers. His job mainly consists of lobbying businesses to move to San Antonio and making ceremonial speeches. In Texas it’s a common system of strong city manager and council and weak mayor.
As evidence, the city manager makes $355,000 a year; the mayor is paid about $4,000 a year.
Most of the Senate questions were in the form of softballs from the majority members, and a few policy questions from minority Republicans. It is a far cry from other hearings. Consumer Financial Protection Bureau Director Richard Cordray faced intense grilling from U.S. Senators as lawmakers considered him for a second leadership term, last year, by way of example.
“As mayor, I’ve made it my mission to help create a vibrant, economically prosperous urban core that expands housing opportunities for all San Antonians,” he said in his opening statement.
On GSE reform, Castro took a broad view and offered no specifics.
“The status quo is not in the best interest of Americans…. The current conservatorship of Fannie (Mae) and Freddie (Mac) is not sustainable for the long term,” he told the committee. “It’s a balancing act. I know that there are concerns about access to credit.”
Sen. Mike Crapo, R-Idaho, asked Castro about the $1.7 billion Treasury had to spend to cover losses at the Federal Housing Authority.
“I share your goals in ensuring that we have a housing finance system that both protects the taxpayers … … and also balances access to credit for folks of modest means,” Castro said.
He also said that he doesn’t want bad loans, the kind which lead to the housing crash, to cost taxpayers.
“I share with you a commitment to ensuring that the FHA has a positive capital reserve ratio… and that it does not need another mandatory appropriation,” Castro said.
A few senators raised questions about Castro’s income, and about a 2012 Inspector General report from HUD that said Castro mismanaged millions in HUD funding for blighted housing areas.
Castro said the city had paid back $125,000 of the misused funds.
“Compliance was strengthened. Personnel were removed,” he said.
Despite the IG report and other questions about Castro’s fitness, he is likely to have smooth sailing through the Democrat controlled committee and on the Senate floor. Castro was warmly introduced by fellow Texan, Senator John Cornyn, R-Texas, and Sen Bob Corker, R-Tennessee, openly expressed his support.
“I look forward to supporting you in this nomination,” Corker said.
The IG report said that Castro failed to properly spend funds approved by Congress to combat the housing crisis in the Alamo City while the Castro was mayor.
The report could hurt Castro, considered a rising star in the Democrat party, who wants to up his national profile as a way to run for higher office.
According to the HUD IG report, a copy of which can be read here, San Antonio was awarded $8.6 million from HUD in 2008 as part of the national Neighborhood Stabilization Program.
The cabinet department’s IG audited how the money was being spent from 2009 to 2011. Castro first took office in 2009.
The findings were that the city awarded $2.5 million in renovation contracts without a competitive bidding process, as is required.
The IG said San Antonio also misused $1.1 million while buying and fixing properties because some of the properties were not put toward housing lower-income families as required by HUD.
From the report:
The City did not administer its program in accordance with program monitoring, cost eligibility, and affordability requirements. This condition occurred because the City did not understand the program rules. As a result, it could not support more than $1.1 million in program expenditures, including more than $1 million that it used to acquire, renovate, and resell residential properties without the required affordability provisions and $124,555 for unsupported residential renovation reimbursements. The City also paid more than $2.5 million for renovation contracts that it could not show were competitively procured or reasonably priced.
The City did not ensure that home buyers were aware of affordability provisions and did not execute agreements to ensure compliance with minimum affordability provisions. It provided various entities more than $1.8 million in program funds to renovate and resell 15 residential properties. At nine of these properties, with renovation costs of more than $1 million, the City did not properly notify home buyers of or execute agreements with the required affordability provisions. The lack of proper affordability agreements occurred because the City was apparently unaware of the requirements.
The City did not have support for $124,555 in reimbursed renovation costs because it did not fully understand program requirements. It entered into agreements with six local for-profit and nonprofit entities to acquire, renovate, and resell residential properties to eligible program participants. The City reimbursed more than $1.8 million in program funds to the 6 local entities for renovation costs related to the 15 resold residential properties. It reimbursed $219,003 to one local entity for the renovation of seven residential properties. Of that amount, the City did not have support for $124,555, or about 57 percent, of the amount paid to the local entity for renovation reimbursements.
The City did not have support for $2.5 million in development contracts. This condition occurred because the City did not take steps to ensure that its developers did not receive undue enrichment from development contracts. The City entered into contracts totaling more than $5 million with the developers of three multiple-unit housing developments. It reviewed support for $2.5 million in construction costs for one of the three properties. However, it did not take steps to monitor the remaining $2.5 million in renovation contracts at the other two housing developments.
On the issue of Castro’s income, the bulk of Castro’s personal earnings come from an advance on a book he is writing about himself, a few speaker’s fees and a controversial, undocumented seven-figure “referral fee” from an attorney who is a heavy-hitter Democrat donor.
Castro came to national prominence after his widely lauded speech at the 2012 Democrat National Convention, after which some media including Al Jazeera asked if Castro is “the next Obama?”
All of this raises questions: Is a man with no executive experience but who makes good speech and who is being groomed by Democrat donors and power brokers really properly qualified to run a complex, $42 billion cabinet department?
Democrats on the committee seem to think so – they raised few hard questions for Castro and mostly spoke of their support for his nomination in their opening statements. Republicans seemed recalcitrant to bring up really hard questions, though they did make mention of the 2012 IG report.
But if one of Castro’s refrains from the committee hearing and one of the points the White House raised repeated – that Castro “brought a sense of urgency” to urban revitalization in San Antonio — did the nominee just not know about the millions in abuse and waste of HUD money in his own city, and if so, what does that say about him?