Lenders Bemoan Lack Of Flood Insurance InKatrina's Wake
WASHINGTON - (09/15/05) -- Hundreds of credit unions and bankscould be pushed to the brink of failure by Hurricane Katrinabecause the majority of property owners in the affected areas livedoutside the 100-year flood plain, so are uninsured for thecatastrophic flooding that resulted from the massive storm. "Mostof the flooding was outside the designated flood zone," said Rep.Spencer Bachus, R-Ala., during a hearing on hurricane reliefWednesday. As a result, credit unions and banks representativestold Bachus their constituents are going to need some kind ofgovernment assistance to pay for the billions of dollars in floodclaims for uninsured properties, or else be left holding majorlosses. Such federal assistance, said Charles Elliott, president ofthe Mississippi CU Association, "should be a component" of anydisaster relief bill. "We have people outside the flood plain, whowere told by their agents, 'you don't need flood insurance. It's awaste of money,'" Elliot told members of the House FinancialSubcommittee on Financial Institutions, which is crafting adisaster relief bill. The failure of a government assistancepackage, said Diane Casey-Landry, head of America's CommunityBankers, could be dire for banks, credit unions and other lenders."Otherwise, borrowers will walk away from the loan and leave thelosses with banks," she said. Later, NCUA Chairman JoAnn Johnsonsaid the federal regulator is monitoring the problem. "This issomething we're aware of; I know the President is aware of it,"Johnson told The Credit Union Journal. Bachus, the chairman of thepanel, said he believes some kind of coverage for non-insuredproperties ought to be part of an assistance package. "We're goingto spend all that money (on a financial assistance bill) that oughtto be a component of it," he stated.