Shaun Donovan, President-elect Barack Obama's nominee to be housing secretary, said helping people harmed by the housing bust would be the highest priority of the new administration.

At his Senate confirmation hearing Tuesday, Donovan said the Department of Housing and Urban Development, or HUD, needs to work with Treasury, the Federal Deposit Insurance Corp. and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM) and Freddie Mac (FRE), to stabilize the housing markets.

"Clearly the most important public policy decision facing Congress and the new administration is how to best ease the economic pain that millions of American families are feeling right now because of our unsteady housing markets," Donovan told the Senate Banking Committee.

As Commissioner of New York City's Department of Housing Preservation and Development since 2004, Donovan has won praise from housing policy experts for his efforts to combat the city's foreclosure problem and for establishing a new private-public partnership to boost funding for affordable housing development.

Donovan, if he is confirmed by the Senate, will return to an agency where he served as a top official during the Clinton administration.

Donovan signaled in his testimony that he sought a role in the overhaul of financial regulation that Democrats have vowed to undertake this year.

"We will work together to reach a bipartisan consensus on how to reform the outdated and often overlapping regulatory system that failed our citizens in the run-up to the current crisis," he said.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com

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