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Controversy Swirls Around Louisiana Reconstruction Plan

By Martin H. Bosworth
ConsumerAffairs.com

January 29, 2006

Hurricane Katrina • The End of the World: Louisiana is Disappearing • Mississippi Sues State Farm Over Katrina Coverage • Katrina's Legacy: A Flood-Damaged Handicap Van • Payback: State Farm Writes Off Mississippi • Judge Nixes State Farm Katrina Settlement • Judge Rules Against State Farm in Katrina Case • Victimized Twice: Hurricane Victims Scammed by Unscrupulous Contractors • New Orleans Refloats Its Cruise Ship Business • One Year Later: To Miss New Orleans --- • Katrina Archives --- What's New? • Continuing coverage of Katrina recovery efforts

A House Republican's sweeping plan to effect large-scale reconstruction in the areas of Louisiana devastated by Katrina has run into a formidable roadblock -- opposition from the official in charge of the Gulf Coast recovery.

Congressman Richard Baker's (R-Baton Rouge) H.R. 4100, the "Baker Bill," would create a corporation to buy out damaged or flooded properties in the hardest-hit areas of Louisiana, thus enabling the owners to pay off their mortgages and avoid foreclosure.

The Louisiana Recovery Corporation would then sell the properties to developers for rebuilding, with right of first refusal going to the former homeowners." The corporation would be funded by bonds backed by the U.S. Treasury.

But Donald Powell, Gulf Coast recovery chairman, is opposing the Baker bill. Calling it a "needless layer of bureaucracy," Powell said that grants already approved by Congress would be sufficient to fund the rebuilding effort.

"I think it is a much better approach (than the Baker bill), a more direct approach," Powell told the New Orleans Times-Picayuna. "It puts the process in the hands of the local people. It doesn't put government in the real estate business."

"Biggest Land Grab in History"

Baker's plan -- and, for that matter, Baker himself -- comes with no small amount of controversy.

In the first days after Hurricane Katrina, Baker was alleged to have said, "We finally cleaned up public housing in New Orleans. We couldn't do it, but God did." Baker issued a lengthy press release claiming he was misquoted.

Baker's bill has been criticized as a disguised attempt to favor the mortgage industry by bailing local lenders out with government money, rather than incurring major losses from foreclosure of the destroyed property.

Opponents of the bill point to language that claims the homeowners will receive 60 percent of the home's equity, rather than 60 percent of the land's actual fair market value.

Many homeowners might be persuaded to take a quick buyout of homes that have been so badly damaged as to be irreparable, rather than face years of mortgage payments on property they can no longer use.

Pointing to Baker's history as a real estate developer, one blogger called the bill "the biggest land grab in history."

Slow Recovery

On the other hand, the Baker bill has been touted as the closest thing to a real solution to Louisiana's post-Katrina woes, particularly in light of complex and slow-moving efforts by the federal government to effect reconstruction.

Costs for emergency housing for the displaced have doubled or tripled—costs for trailers, for instance, have skyrocketed from $19,000 to $75,000, according to the Washington Post.

Lack of oversight governing the cleanup has enabled unscrupulous contractors to quadruple costs for debris removal. The various authorities involved in the recovery are entangled in bureaucratic snafus and an inability to do very much of anything.

Critics of the federal recovery guidance, such as Sen. Mary Landrieu (D-La.), called the White House's opposition to the Baker bill an example of "a continued lack of understanding for the magnitude of the devastation and the immense rebuilding task our state faces."

Supporters of the Baker bill say that Powell's reliance on block grants supports homeowners at the exclusion of renters, who do not have as much recourse in the event of losing their residences due to natural disaster.

Relying on federal flood insurance or grants may encourage New Orleans residents to simply rebuild where they live, which may lead to renewed destruction in the event of another hurricane or flood, or leaving the homeowners in possession of essentially worthless land.

Powell has encouraged property owners to seek assistance from agencies such as the Small Business Administration (SBA), but both the SBA and the Federal Emergency Management Agency (FEMA) have been criticized for not processing loan applications quickly enough, not providing correct information to applicants, and for continually changing the procedures for getting loans.

Baker has vowed to keep his bill alive, and will push for its support when it comes up for debate by the Senate Banking, Housing, and Urban Affairs Committee on Feb. 15th. "Bills have been passed before without presidential approval," Baker said.

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