Storm Raises Range Of Financial Issues
Hundreds of millions of dollars have been distributed to victims of Hurricane Katrina over the past two weeks, much of it deposited or cashed at credit unions and banks, in the largest disaster relief effort ever launched in the United States.
Even though the Federal Emergency Management Agency, which is coordinating the relief effort for the federal government, scrapped a massive stored-value card project a day after it was introduced, the federal emergency agency had distributed $820 million in cash or cash equivalent assistance in the week immediately following the massive hurricane-by far the biggest emergency financial assistance ever organized by the federal government.
That included $423 million in direct deposits to credit unions and banks, $375 million in checks, and $20 million in FEMA's short-lived stored value card program, according to Barbara Ellis, a spokesman for the disaster relief agency.
And the American Red Cross had earmarked most of the more than $500 million it had collected in donations for the hurricane recovery to provide financial assistance, most of which will flow into depository institutions over the coming days and weeks. "What we're trying to do right now is provide a bridge for people," said Beth Boone, a spokesman for the Red Cross. The Red Cross will continue to distribute cash assistance "for as long as it's necessary," Boone said.
The Red Cross is providing the assistance in the forms of cash vouchers, direct cash or checks, which credit unions around the country have pledged to accept, even for non-members. The relief funds are being used immediately to help victims from New Orleans and other affected parts of Louisiana, Mississippi and Alabama buy food, shelter, toiletries, and other necessities.
Credit unions, enabled by an emergency NCUA directive, were stepping outside of their normal operating boundaries to help hundreds of thousands of non-members cash or deposit vouchers, stored value payments and relief checks. Ray Cromer, president of Envision FCU in Tallahassee, Fla., said his staff worked through the long Labor Day weekend to cash 112 Red Cross vouchers for non-members who had been transported to the Florida capital after their homes were destroyed.
And credit unions in the Houston area, where as many as 250,000 displaced refugees had been relocated, were also working overtime to cash and deposit non-member relief payments. "The credit unions in the Houston area have stepped into the forefront of this relief effort," said Lynda Milton, president of Houston Teamsters FCU.
The CO-OP Network said it was waiving surcharge fees for any users of FEMA or Red Cross stored value cards issued for the disaster.
The credit union's efforts were aided by a special directive by NCUA allowing them to provide services to non-members on an emergency basis. This was being done by credit unions all over the country where hundreds of thousands of hurricane refugees were being relocated.
The short-lived stored value card program, by which FEMA hoped to distribute as much as $1 billion in cash assistance, proved to be a major embarrassment for the federal agency. Near rioting broke out in Houston's AstroDome during the initial disbursements, as people waited for hours in high temperatures and were confused by a simultaneous disbursement of Red Cross financial aid.
Hundreds of poor people already living in the surrounding communities tried to break into the AstroDome to receive one of the MasterCard-branded stored value cards that had $2,000 on them. Several local financial institutions also criticized the card, issued in conjunction with banking giant JP Morgan Chase.