The American Spectator

Print Email

Text Size

TAS Live

(Page 2 of 3)

First, a word about Richard Baker: He's a conservative stalwart and a long-standing supporter of all things Bush. The National Journal just ranked him as the 17th most conservative member in the House, and he served as the Louisiana campaign chairman way back when for Bush pere. That's why it has been so baffling to see the current Bush White House treat him, with attacking press conferences and op-ed pieces, as if he were a hated member of the Schumer- Pelosi brigades.

Baker was a self-made success in real estate at an early age before entering politics, and he long has been valued by conservatives for his expertise on banking and investment issues. What he alone recognized, and what he developed a solution for, was that devastated southern Louisiana faces obstacles to rebuilding that are uniquely extreme in both kind and scope. State officials say that Hurricanes Katrina and Rita destroyed at least 128,000 homes in Louisiana, while at least 75,000 other homes sustained severe damage. As of five months after the storm, some two-thirds of the city's residences still were without power.

Enter Baker with a very Jack Kemp-like idea: Help New Orleans and its surroundings by promoting home ownership and private development, specifically in areas deemed safe and sustainable, while "re-creating the market" with a short-term infusion of government cash that itself is reimbursable to the taxpayers.

"The market cannot work," Baker told me, "without some entity to aggregate titles to properties and clean them up." Toward that end, the Baker bill would set up a Louisiana Recovery Corporation (LRC) as a "revolving fund" that effectively would use most of the same money over and over again. The semi-private LRC, overseen by a board appointed by President Bush, would borrow money from the U.S. Treasury, buy Louisiana properties, bring them up to new environmental and zoning requirements, and resell them to developers. The money earned from those sales would return to the Treasury, to be borrowed again for the next round of properties. It's akin to the lines of credit many businesses use routinely. The taxpayers would get the bulk of their investment back -- rather than just making direct grants never to be repaid -- while the property owners, and the financial institutions that hold their mortgages, avoid foreclosures and crushing debts.

The Baker bill acknowledges that much of the property in southern Louisiana isn't now worth nearly what it was six months ago, so it provides for the LRC to buy the properties at a discount. Homeowners would get at least 60 percent of whatever pre-Katrina equity they had in their properties, while the banks would receive up to 60 percent of the outstanding mortgages. In short, nobody would be exactly "made whole," but at least most people and banks would avoid bankruptcies and collapse. Meanwhile, by buying up whole swaths of property at once rather than waiting on individual property owners to scrape up their own resources, the LRC would jump-start the housing market while bringing back whole neighborhoods at a time.

That's an essential concept, because right now even the most active of redeveloping neighborhoods are subject to what locals are calling the "jack-o'-lantern effect," meaning the properties are being refurbished in an almost scary, zig-zag, gap-toothed fashion: one property here, another across the street, a third one catty-corner, and maybe another a block away, while the owners in-between are too broke or otherwise ill-equipped to rebuild. Many owners still are waiting for insurance settlements, while others want to rebuild but can't because the Department of Housing and Urban Development (HUD) hasn't yet promulgated the required new regulations. Some owners might be able to rebuild, but can't risk putting more money into property that will hold its value only if the rest of the neighborhood comes back.

As Baker told me, "Even if you are a homeowner who has money in your pocket and you could elect to rebuild, why would you do it unless you know your neighborhood will be rebuilt: If no one else comes back, you have not restored value because of the desolation of the remainder of the area." Otherwise, as described in the Times-Picayune, the nearby "idle, blighted and unoccupied buildings will pose a fire hazard or become breeding grounds for mosquitoes and rodents."

AND THOSE ARE THE GOOD PORTIONS of the flooded sections of New Orleans. Worse neighborhoods resemble not a jack-o'-lantern but a ghost town -- which of course is even more frightening. Property owners can't move forward until the banks help them out; the banks can't move until their cash flows are restored and until government regulations say more loans are safe; and owners of rental units can't move until there are renters in the market, which can't happen until the economy will provide jobs.

Under Baker's plan, homeowners would not wonder whether they would be the only ones to rebuild in their neighborhoods, because the LRC would make refurbished properties available in big chunks. To protect taxpayers, the Baker bill would impose a $30 billion limit for the LRC's borrowing. And, as noted earlier, the vast bulk of that would be eventually repaid to the Treasury. Unlike direct, onetime grants for home repairs, the LRC money would, by "revolving" so many times, achieve four or five times the bang for the same bucks. Furthermore, taxpayers would know that the LRC would avoid the problem of funneling money through the supposedly corrupt and incompetent Louisiana state government. The quasi-independent corporation would be free of most governmental bureaucracy, but it would answer to federal standards. To keep the LRC from being a permanent bureaucracy, its mandate would expire in ten years (or less). But its positive impact would be immediate, as banks probably would stop foreclosures as soon as the Baker bill passed, in anticipation of the coming aid.

Just before Christmas, the key House committee passed the Baker bill by a bipartisan, 50-9 vote, and the bill enjoyed bipartisan, indeed universal, support from Louisiana's otherwise fractious conglomeration of elected officials. But the Bush administration, inexplicably, opposes the plan, and vociferously so. The administration's explanations have been shifting, misleading, and confused. Worse, as late as the end of January, the Bush proposals would have helped repair only 20,000 of the 200,000 damaged or ruined properties. But when in mid-February the Baker plan again seemed to be gaining some legislative momentum, the President hustled to stick taxpayers instead with yet another $4.2 billion in Community Development Block Grants (CDBG) for Louisiana, as part of a "supplemental Appropriations" request for Congress to pass in the spring. He loudly trumpeted the idea that these grants were to help property owners rebuild neighborhoods.

The problems with this approach were manifold. First, the block grants can't be doled out until HUD finishes its regulations. Second, the grants would be funneled through the same Louisiana government that taxpayers in the rest of the country distrust (whereas the Baker plan would set up a quasi-independent, public-private corporation far less hamstrung by the inertia of government bureaucracies). Third, the money won't be recycled: Not a penny would return to the Treasury upon resale. Fourth and most importantly (not to mention most idiotically), the legislative language requested by the Bush administration would actually preclude the money's use for rebuilding and repairs -- and "in perpetuity" to boot.

It was Baker, again, who found the joker in the deck. The Bush language provided that the funds "be subject to the requirements of section 404" of the Stafford Act -- which is a FEMA-related section that forbids commercial or residential uses of the land forever. Instead, the properties "will be dedicated and maintained in perpetuity for a use that is compatible with open space, recreational, or wetlands management practices."

There can be no doubt that part of New Orleans, maybe 10 or 15 percent of it, should revert to wetlands or other green space. As it will do, according to the local planning committees working on the subject. But the President specifically said this new $4.2 billion was for rebuilding, not for eco-management. For his legislation to actually forbid the use that he advertised is a mark either of dishonesty or extreme incompetence.

When the discrepancy was pointed out, administration officials rushed to say that it would be okay in the end because state agencies could just request a waiver from HUD from the normal Stafford Act requirements. Two problems: First, the waiver process is slow, unpredictable, and full of red tape. (Not very conservative, that.) Second, and most amazingly, while CDBG grants are a HUD program, the Stafford Act involves FEMA. How, pray tell, can HUD bureaucrats issue a waiver from requirements under the jurisdiction of a totally different department?

Then there's this: Community Development Block Grants have sometimes been notorious for abuse. Indeed, at the very same time that the Bush administration is touting CDBG as the solution for New Orleans, its own budget request for 2007 proposes ending CDBG altogether by folding it into another program. In short, what's supposedly good for New Orleans is the same program otherwise too problematic for the rest of America. Go figure.

topics:
Business, Environment, Law, Oil