Andrew Cuomo and Fannie and Freddie

Experts point out that borrowers usually have no idea that such a thing exists. In fact, Harvard law professor Howell Jackson discovered that the HUD booklet on settlement costs, issued for distribution to borrowers on Cuomo's watch, never mentions YSPs or how they are financed. "You may wish to ask about the fees that the mortgage broker will receive for its services" is as close as the booklet gets. "Critically absent," concludes Jackson, "is disclosure of the fact that the borrower finances the cost of YSPs through higher monthly mortgage payments." In 1997, Cuomo's proposed rule said that "a consensus" on only one point emerged from the negotiations with the department's broadly based advisory group, namely that "a rule should require that mortgage brokers inform borrowers of the role that they are serving early enough in the transaction to allow the consumer to shop for alternatives." Cuomo's final rule, much like the GSE edict, concluded: "This statement does not mandate disclosures beyond those currently required."

Glaser acknowledged that YSPs are a big cause of the crisis, though he pointedly insisted that they were "not the biggest," and he blamed them on Bush. He pointed out that Mel Martinez issued a YSP rule in late 2001, and claimed that he did so because Cuomo's ruling permitted class-action lawsuits. In fact, courts around the country had denied class-action certifications based on Cuomo's ruling, but a circuit court in Alabama decided that Cuomo's regulations were "ambiguous," which is why Martinez then issued what he called a "clarification" of the Cuomo regulations. But as a San Francisco circuit court found shortly thereafter, the Martinez clarification essentially "reiterated" Cuomo's position and "carries forward the same principles." A dissenting member of the same California panel deplored Cuomo's ruling and said "the phrase 'yield spread premium' " was a "way of avoiding calling a kickback a kickback."

Photograph by Staci Schwartz. Baby Models: Pescha and Sophia Samiljan

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Research assistance by Samuel Breidbart, Brian Colgan, Tatyana Gulko, Sarah Lavery, and Amanda Stutt

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The sad fact is that Cuomo's surrender on YSPs can't be excused as an unfortunate consequence of well-motivated policy, as his defenders have argued regarding his FHA and GSE actions. He has no cover for this one; it exposes him as an agent of special interests. And looking at his GSE and FHA policies through the lens of his retreat on these payoffs (which even Glaser, in a marked change from his MBA days, now condemns) suggests a pattern of compromised judgments.

With Martinez, who was hailed at a $250,000 fundraiser co-chaired by superlobbyist felon Jack Abramoff right after he stepped down as secretary, and Jackson, who is an FBI target now, following him at HUD, Cuomo was, in some respects, the last chance that borrowers had before the crisis hit. The grand ambitions unleashed when he orchestrated his father's win at such an early age propelled him to HUD's helm at a similarly early age, and convinced him to run for governor before he was ready. He seems more comfortable at 50 in the state attorney general's office than he has ever appeared in his public life, but the country will be living with his HUD mistakes, ill- or well-intended, for a long time to come.