Bailout Scheme Planned For LouisianaLenders
WASHINGTON - (03/20/06) Congress was working onlegislation last week to provide billions of dollars for NewOrleans homeowners whose houses were destroyed by HurricaneKatrina. The funds would be provided through Community DevelopmentBlock Grants and would be earmarked for up to $150,000 for eachflooded-out homeowner who did not have flood insurance. Authoritiesin Mississippi have set aside almost $5 billion in CDBG funds forsuch flood relief, but New Orleans and the surrounding area isprojected to need as much as $10 billion to pay for uninsuredproperties on which area banks and credit unions hold themortgages. The Federal Emergency Management Agency has alreadydisbursed more than $13 billion in National Flood Insurance Programmoney to insured homeowners in New Orleans, more than all the fundsdisbursed in the 25 years of the program. Meantime, LouisianaCongressman Richard Baker said last week wont give up on hisplan to create a tax-free development corporation, much like theS&L bailouts Resolution Trust Corp., to financing andmanage the rebuilding of New Orleans. Baker told The Credit UnionJournal in an interview he is not deterred by the WhiteHouses opposition to the proposal and still believes hisplan combines several different funding proposals and is the bestway to go to reconstruct the famed Jazz City. The Louisianalawmaker said he is working with state officials andrepresentatives of Wall Street to reformulate his proposal to makeit more acceptable to fellow lawmakers and the Bush administration.Bakers plan would use about $12 billion already appropriatedby Congress to assist in the rebuilding of Louisiana as start-upcapital for the Louisiana Development Corp. The funds would be usedto buy damaged property for redevelopment. The Development Corp.would float tax-free bonds to attract new investment to expand thepool of available reconstruction funds.