[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                           HURRICANE KATRINA:
                  THE FINANCIAL INSTITUTIONS' RESPONSE

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
               FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 14, 2005

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-53



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          HAROLD E. FORD, Jr., Tennessee
    Carolina                         RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
VITO FOSSELLA, New York              STEVE ISRAEL, New York
GARY G. MILLER, California           CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio              JOE BACA, California
MARK R. KENNEDY, Minnesota           JIM MATHESON, Utah
TOM FEENEY, Florida                  STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida           ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   AL GREEN, Texas
KATHERINE HARRIS, Florida            EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona                  MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas               
TOM PRICE, Georgia                   BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK, 
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina

                 Robert U. Foster, III, Staff Director
       Subcommittee on Financial Institutions and Consumer Credit

                   SPENCER BACHUS, Alabama, Chairman

WALTER B. JONES, Jr., North          BERNARD SANDERS, Vermont
    Carolina, Vice Chairman          CAROLYN B. MALONEY, New York
RICHARD H. BAKER, Louisiana          MELVIN L. WATT, North Carolina
MICHAEL N. CASTLE, Delaware          GARY L. ACKERMAN, New York
EDWARD R. ROYCE, California          BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
SUE W. KELLY, New York               LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      DENNIS MOORE, Kansas
PAUL E. GILLMOR, Ohio                PAUL E. KANJORSKI, Pennsylvania
JIM RYUN, Kansas                     MAXINE WATERS, California
STEVEN C. LaTOURETTE, Ohio           DARLENE HOOLEY, Oregon
JUDY BIGGERT, Illinois               JULIA CARSON, Indiana
VITO FOSSELLA, New York              HAROLD E. FORD, Jr., Tennessee
GARY G. MILLER, California           RUBEN HINOJOSA, Texas
PATRICK J. TIBERI, Ohio              JOSEPH CROWLEY, New York
TOM FEENEY, Florida                  STEVE ISRAEL, New York
JEB HENSARLING, Texas                CAROLYN McCARTHY, New York
SCOTT GARRETT, New Jersey            JOE BACA, California
GINNY BROWN-WAITE, Florida           AL GREEN, Texas
J. GRESHAM BARRETT, South Carolina   GWEN MOORE, Wisconsin
RICK RENZI, Arizona                  WM. LACY CLAY, Missouri
STEVAN PEARCE, New Mexico            JIM MATHESON, Utah
RANDY NEUGEBAUER, Texas              BARNEY FRANK, Massachusetts
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
MICHAEL G. OXLEY, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 14, 2005...........................................     1
Appendix:
    September 14, 2005...........................................    53

                               WITNESSES
                     Wednesday, September 14, 2005

Bordelon, Ken, President and CEO, E Federal Credit Union (LA), 
  representing National Association of Federal Credit Unions.....    16
Cloutier, C. R., President and CEO, MidSouth Bank, N.A. (LA), 
  representing Independent Community Bankers of America..........    18
Deaver, McKinley W., Executive Director, Mississippi Bankers 
  Association, representing American Bankers Association.........    14
Elliott, Charles, President and CEO, Mississippi Credit Union 
  Association, representing Credit Union National Association....    20
Gibbons, David, Senior Executive Vice President and Chief Risk 
  Officer, HSBC North America (IL), representing American 
  Financial Services Association.................................    26
Casey-Landry, Diane, President and CEO, America's Community 
  Bankers........................................................    24
Shelton, Hilary O., Director, Washington Bureau, NAACP...........    28

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    54
    Bachus, Hon. Spencer.........................................    55
    Biggert, Hon. Judy...........................................    59
    Carson, Hon. Julia...........................................    61
    Clay, Hon. Wm. Lacy..........................................    62
    Bordelon, Ken................................................    63
    Cloutier, C. R...............................................    74
    Deaver, McKinley W...........................................    85
    Elliott, Charles.............................................    94
    Gibbons, David...............................................   111
    Casey-Landry, Diane..........................................   122
    Shelton, Hilary O............................................   131

              Additional Material Submitted for the Record

Bachus, Hon. Spencer:
    The Financial Services Roundtable & Housing Policy Member 
      Company Hurricane Katrina Relief Efforts, September 13, 
      2005.......................................................   135
Biggert, Hon. Judy:
    Letter to Treasurey Secretary John Snow, September 8, 2005...   162


                           HURRICANE KATRINA:
                  THE FINANCIAL INSTITUTIONS' RESPONSE

                              ----------                              


                     Wednesday, September 14, 2005

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:10 a.m., in 
Room 2128, Rayburn House Office Building, Hon. Spencer Bachus 
[chairman of the subcommittee] presiding.
    Present: Representatives Bachus, Jones, Baker, Castle, 
Kelly, Ryun, Biggert, Tiberi, Feeney, Hensarling, Pearce, 
Neugebauer, Price, McHenry, Sanders, Maloney, Moore of Kansas, 
Frank, Waters, Hooley, Carson, Hinojosa, McCarthy, Green, Moore 
of Wisconsin, Clay, and Matheson.
    Chairman Bachus. [Presiding.] Good morning. The Financial 
Institutions Committee will come to order.
    I want to welcome our witnesses to the hearing today.
    Last week we had a hearing at which time we talked with the 
regulators about their efforts to work with consumers and 
customers and victims of Hurricane Katrina; also, relief 
workers who were in the area and are sometimes having trouble 
getting their checks cashed.
    And I want to commend all the associations and the 
institutions you represent. You have done a marvelous job on 
assisting the victims in cashing of their checks, a lot of 
times without a lot of identification.
    Already we have heard many reports of waiving ATM fees, of 
giving extensions on payment of loans without penalties, so I 
want to commend the industry. I think that you have done a 
stellar job of at least cushioning some of the financial 
hardship that your customers and the citizens of those three 
States have incurred.
    At this time, I am going to yield--and I am going to hand 
out a statement that I made last week at last week's hearings 
about the different things that the regulators and the banks 
are doing to ease the burden on the victims and their 
customers, and I am just going to hand that out.
    But at this time I want to turn the mike over to Chairman 
Baker and recognize all his fine work in this issue. He has 
worked tirelessly on a broad package of relief measures for 
financial institutions and their customers. Really the victims 
of Katrina is what we are focusing on.
    I strongly support his efforts and look forward to working 
with him as this process moves forward. We will probably move 
some legislation, break it out and move it, quicker than the 
entire package.
    But at this time, I yield the balance of my time and am 
pleased to recognize the gentleman from Louisiana, Mr. Baker, 
for the rest of my time.
    And at the end of his statement, then the ranking member, 
Mr. Sanders, I will yield to him for an opening statement.
    Mr. Baker. Mr. Chairman, I thank you for your willingness 
to convene the hearing, your attention to this subject matter, 
and your leadership on a broad array of issues that confront us 
as a result of Hurricane Katrina.
    Before I proceed, I just want to acknowledge that you have 
a particularly influential panel this morning.
    And I want to acknowledge Mr. Ken Bordelon, the chief 
executive of E Federal Credit Union, who is here to speak to 
credit union needs in the face of this disaster, as well as Mr. 
Rusty Cloutier--and I am helping committee members out with 
Cloutier, so in case you were wondering how that is said. Not 
only is he an ICBA member, he is the director of the Federal 
Reserve Bank of Atlanta.
    Both these gentlemen come with particular expertise and 
perspectives that I think will be of value to the committee 
this morning.
    Secondly, the assistance needed at the moment is 
encouragement to financial institutions within the affected 
area to make available debit cards, ATM cards, some portable 
method for victims to take previously authorized benefits, 
whether Social Security, veterans benefits, unemployment comp, 
workmen's comp, a whole array of regularly issued Government 
benefits, and convert them into some sort of account.
    There has been hesitancy only because of regulatory 
constraints on these financial institutions. To put a scale on 
this problem, with regard to Social Security checks issued in 
the disaster area only, not those direct deposited, only those 
checks issued which are put into the mail, there were 800,000 
issued on September 1 for the affected area.
    Not only are there not mailboxes, there are not postboxes. 
So the ability to connect that individual who is living month 
to month with that benefit is now significantly adversely 
impacted.
    In speaking with financial institution representatives, 
whether credit union, bank, savings and loan, whatever, there 
is concern that if they engage in a check cashing activity 
without the standard regulatory process in place that there 
will be a regulatory consequence to them going forward if they 
cash a check and later found to have done so inappropriately.
    At this juncture, whether it is a $500 check or a $1,000 
check, it almost does not matter. People are having difficulty 
in acquiring the basic goods and services they need in order 
to, one, be mobile, but secondly, take care of their families.
    As is stated in the media on repeated times, the million or 
so people that lived in the Orleans area are now disbursed 
across the country. But the principal area in which many have 
landed is within my congressional district, and this is of 
extreme importance to get expedient resolution of this matter.
    I think the chairman has indicated that the provision 
relative to the check cashing issue may be one which he would 
consider moving in an expeditious manner, and I certainly would 
encourage that consideration of the committee.
    Finally, I think it is important today to have regulators' 
recognition that this is a problem we have never faced before. 
The scope and breadth is far beyond anything one could have 
imagined. We have financial institutions which for the first 
time when we say underwater, it is not a figurative slogan.
    They are literally underwater, with an inability to go 
recover the records of their depositors, making it physically 
impossible for them to conduct business. This requires a 
regulatory view that we have not had, ever, in our country's 
history.
    It requires a regulator's understanding that if there is 
adverse impact on the institutions' capital standing that we 
should not follow the regular order in pursuing these 
institutions into financial distress.
    We should recognize that at least until the water recedes, 
there should be very generous grant of operating authority to 
give all affected the chance to recover in an appropriate 
manner.
    Mr. Chairman, I cannot express deeply enough my 
appreciation to you and to members for their generous 
courtesies extended and for your kind assistance throughout 
this entire matter. Thank you.
    Chairman Bachus. I thank you.
    Now I recognize the ranking member, Mr. Sanders.
    And I want to compliment this entire committee in a 
bipartisan way. We have had members on both sides that have 
assisted.
    I know Ms. Hooley has worked very hard on the check cashing 
part of the thing with Mr. Baker. And I would like to 
particularly express my thanks to her.
    Mr. Sanders. Thank you very much, Mr. Chairman, for holding 
this important hearing.
    And I want to thank all of our panelists for being here 
today, and especially those who came up from the affected 
areas. Thank you very much.
    Clearly, it is urgent that we address the extremely 
challenging financial circumstances under which people have to 
function in the wake of Hurricane Katrina. And I look forward 
to hearing from our witnesses today about what can be done as 
to how we respond in lightening the blow of this tragedy.
    By all accounts, Hurricane Katrina was a staggering 
catastrophe from which all sectors of the New Orleans and Gulf 
Coast society and economy will be recovering for a very long 
time.
    While the toll in human lives is not yet fully counted, and 
the damage to the regional and national psyche is immeasurable, 
we already have some estimates of the financial impacts of the 
storm, and they are astounding.
    We have heard numbers from $125 billion to $300 billion as 
estimates of the cost to recover and an estimate that the 
insurance industry will pay nearly $60 billion in damage 
claims.
    The disruption to people's personal financial lives has 
also been terrible. People have been cut off not only from 
their homes and possessions but from their cash, their Social 
Security checks, their paychecks, and other financial 
resources.
    Vast numbers are very stressed over their credit rating 
because they may not pay their bills on time for a whole host 
of different hurricane-related reasons. Many people have lost 
their I.D.s and most, if not all, of their financial records. 
The list goes on.
    These are concerns that nearly every person hit by the 
hurricane and subsequent flooding will face, and I hope we come 
out with some very clear direction today about how to best deal 
with these day-to-day conundrums.
    There are also some concerns that are particular to only 
some of the population impacted by Katrina. As we have been 
reminded all too well by this tragedy, there is an enormous, 
usually-out-of-sight, out-of-mind portion of our population 
that is terribly poor.
    These people, disproportionately African-American, have 
special financial troubles and vulnerabilities that we and you 
and our financial institutions must be sure to address.
    As Mr. Shelton of the NAACP points out in his written 
testimony, many of the tens of thousands of displaced persons 
now scattered throughout the South, Southwest, and elsewhere 
live their lives paycheck to paycheck, and sometimes here in 
Washington, D.C. we forget about that reality.
    If and when they were able to flee the city before the 
hurricane, many had to take out payday loans to be sure to have 
a little bit of cash in their pockets for the uncertain future.
    Many, having no access to financial services in their 
communities before the hurricane, may have kept their life 
savings in cash in their homes, and they have lost most or all 
of it in the flooding. And the problems simply go on and on.
    I would like to hear today what our financial institutions 
are doing to address the needs of everyone, including the large 
population of poor people, in the affected area and 
particularly what they are doing to address the special needs 
of those with the very least resources.
    I think many of the ideas put forward so far have merit. 
Ideas like a moratorium on foreclosures, collections, and 
deficiency judgments, for example, seem appropriate. At a time 
when a person's credit score is an asset as or more important 
than the balance of their bank account, preventing negative 
credit reporting due to late or non-payment as a result of 
Hurricane Katrina should be the least, in my view, that 
creditors can do.
    Similarly, banks and other financial institutions must 
revisit their policy on late fees and interest and extend some 
period of amnesty to these victims.
    In short, at this time of inconceivable trauma in the lives 
of so many, I hope to come away from this hearing confident 
that our Nation's banks, credit unions, and other financial 
institutions will do everything they possibly can to minimize 
the repercussions Hurricane Katrina will have on its victims, 
especially those who have not been particularly well served by 
these institutions in the past.
    Thank you very much, Mr. Chairman.
    Chairman Bachus. Thank you.
    And at this time, I am going to yield to the gentleman from 
Louisiana, Mr. Baker, on his own time.
    And, Mr. Baker, I think you might want to mention some of 
the things that the banks are doing and the regulators, and I 
know you have discussed with me business continuity loans and 
others. But I yield at this time.
    Mr. Baker. Thank you, Mr. Chairman. I will direct my 
remarks to the pending proposal that is before the committee. 
And I know the witnesses will address their concerns to the 
legislation.
    There are really five basic areas that have been brought to 
our attention by bankers or financial service providers in the 
affected area.
    Number one is the anonymous check-cashing issue that 
requires individual institutions to take a Government-issued 
check and convert that into some negotiable product, either 
cash, debit or ATM card, and to provide some relief to the 
financial institution for potential liabilities that accrue as 
a result of engaging in that activity.
    The anonymous check cashing and the Government check 
cashing are related, but the same issue applies to both.
    Loan payment deferrals with fresh start programs--under 
current circumstance, interest accrual cannot be deferred, 
although the principal may.
    A new regulatory environment to basically construct a fresh 
start loan would enable the individual who has a home that 
currently is underwater, for example, and is not likely to be 
accessible for the next 60 days to 90 days, to defer principal 
and interest payments for the 60-day to 90-day period.
    This would not avert the individual's obligation to pay 
their agreed-upon financial responsibilities but merely 
postpone the repayment or extend the repayment based on the 
construct of a new loan agreement.
    Business continuity loans--this is an area where there is, 
I think, an extraordinary deficit in the emergency response 
system. The only measure now available to a business would be 
previously agreed-upon, privately arranged insurance coverage 
because FEMA assistance is non-existent, and the only SBA 
assistance is a low-interest loan.
    For businesses that have been relocated from New Orleans to 
Baton Rouge, there is no assistance provided nor tax benefit 
granted to the business entity that pays for employees' 
relocation, pays for their housing, or any of those expenses.
    That means to the business owner an extraordinary amount of 
business expense which is not recoverable, directly or 
indirectly, through tax benefits. And the continuity loans 
provision, I think, is extremely important.
    And finally, with respect to Federal Reserve assistance, 
this makes statutory the ability to waive wire transfer fees 
and reducing charges for cash shipment. In that first 10-day 
period after the storm, we were basically reduced to a cash 
economy. There was no ability to take a credit card and pay for 
your gasoline because the systems were down.
    If you did not have cash in your pocket, you were without 
resources. Many of the local lending institutions found 
themselves under extreme duress because of the demands for cash 
by individual victims of the storm. These provisions would 
help, to a great extent, assuage those problems going forward.
    Mr. Chairman, I appreciate the construct of the bill. I 
appreciate your courtesy in enabling this hearing and believe 
that the elements of the bill now pending are, indeed, very 
responsive to the problems we face, and I deem it advisable for 
the committee to move forward.
    I thank the chairman.
    Chairman Bachus. I thank the gentleman for your statement.
    Mr. Frank?
    Mr. Frank. Thank you, Mr. Chairman.
    The importance of our working together on this and with the 
banking industry is critical, and I have to say I think it 
ought to be nice for everybody. This is one where almost 
everybody's--I think everybody's interest is together.
    This is not a case--I mean, we do not often have the head 
of the NAACP sitting side by side with all the bankers in 
complete agreement, I think, on what needs to be done. And this 
is a reminder to people of our financial institutions at their 
best, which is frequently where they are, to serve the 
constituency.
    Our function here is not, as a committee or as a Congress, 
to--I was about to say bail out. I am struck by how many of our 
metaphors have become somewhat inappropriate now because they 
were so water-based. It is not our job to worry about the 
health of the institutions. It is our job to worry about how 
the institutions serve the basic functions in the economy of 
the consumers.
    And there is an agreement here. I think this is something 
we start with, that keeping banks in business, having them 
function, is not just important to the banks; it is important 
for the citizens. It is important for the economy. And I 
believe this is why we have been able to work so closely 
together.
    There are two levels, obviously. One is the immediate 
question of having things function, and people have been 
addressing that. The gentleman from Louisiana talked about it. 
The chairman took the lead in terms of indemnification for 
check cashing. We are not sure exactly how it works out.
    I hope the regulators understand by now there is, I think, 
unanimity on this committee that they should experiment. They 
should be flexible. They should do everything reasonable to get 
money into people's hands, both because people need money to 
eat and to live and because that is the way we are going to 
bring the economy back.
    And in general we have safeguards. No one is asking in this 
crisis for there to be a total relaxation of safeguards. But I 
think it is--you know, let's be explicit. If a few people get 
some money that they were not supposed to get, that is far less 
of a problem than a lot of people not getting the money that 
they are supposed to get.
    This is a time when you calibrate, I think, less on the 
safeguards. And, you know, we need to be clear. When you are 
talking about human systems, you are talking about a balance. 
It is impossible, particularly in the chaos, disruption, and 
emotional torment of physical destruction that we are facing--
it is impossible to design a system that is going to be 100 
percent accurate.
    So let's also in advance say if and when the journalistic 
horror stories start coming that this or that individual got 
money he or she should not have gotten and this or that person 
ripped them off, that is a risk I want to take because if we do 
not take the risk of some abuse, we will not have a system 
sufficiently flexible to get the money out there.
    Now that is not an invitation for people to ignore 
safeguards, but it is a sense that in this crisis it is more 
important to get the money out, understanding that inevitably 
there will be some problems, and that is where we want to go.
    I also am strongly inclined in this situation to be 
deferential to the regulators. It is not something that I think 
we want to or should try to micro-manage. I think we understand 
here there is a common interest in liquidity--again, with the 
metaphors. There is a common interest in the money getting out 
there. And we will be supportive.
    And to the extent, obviously, that short-term legislative 
fixes are needed, I would think if we are talking about a 
legislative fix that is limited both in geography and in time, 
it is hard for me to find something I would not be for.
    If we are talking about something that is for 6 months or a 
year in the affected area--and sometimes people will say to us 
well, you are giving people special treatment.
    I do not think there is anybody anywhere in the country who 
will be envying the people in this region if we give some more 
flexibility to banking. This is not a time when we have to 
worry about that. I think the country, in fact, will be very 
supportive.
    Then we get to the next question, and I know some of the 
testimony--I have looked through it--touches on this, and those 
are the longer-term issues. And I will repeat what I have said 
before. I am particularly concerned about a potential negative 
impact on smaller financial institutions, community banks, 
independent banks, and credit unions.
    It is obviously less of a problem if you are the Bank of 
America, or Chase Bank One, or Wachovia, if you are spread out. 
But there are important institutions who are focused in that 
area.
    We had a meeting yesterday of the Democratic Caucus on the 
important question of the Federal Government's role with 
minority-owned banks. And I noticed in the sheet that we had 
that there are three African-American-owned banks in New 
Orleans, and clearly, given what is--they are at risk. And it 
is not just they that are at risk.
    So I also invite the witnesses and the regulators--and some 
of the witnesses have done this. Yes, we will meet the short-
term needs, but longer term, again, I am prepared to take some 
extraordinary steps, particularly to keep smaller institutions 
in business.
    If you are the best run institution, the most prudent 
financial institution, and you did a good job of bringing 
deposits, and you did a good job of meeting the needs of the 
community--and you were careful with your borrowers, then I 
think you could still be in trouble because much of your base 
was concentrated in this area.
    Finally, I noticed an interesting letter from the National 
Community Reinvestment Coalition to the regulators about the 
importance of giving full CRA credit for those financial 
institutions that pay particular attention here. This is 
relevant.
    Clearly, we have a situation where poor people, and 
African-Americans in particular, have been disproportionately 
hit by this and, you know, we get a lot of argument about let's 
be fair, et cetera.
    Well, I do not think anybody should argue--if people have 
been disproportionately hurt, no one should object if we are 
disproportionately trying to help them deal with the hurt. You 
can not ignore reality and get there.
    So I hope that the regulators--and I believe they will be 
keeping all of those things in mind, and they will find a great 
supportive responsive here.
    Chairman Bachus. I thank the ranking member.
    And again, I want to express to you and Mr. Sanders the 
cooperation of your staffs, Mr. Moore's staff and other 
members' staffs have shown in this thing, working with Chairman 
Baker--and I and the other members on our side of the aisle--I 
know Mr. Green, for instance, met with FEMA. He and I were in a 
meeting with FEMA about some of these problems as well as some 
members from Texas on our side. So I appreciate that.
    At this time, I am going to recognize the gentlelady from 
Illinois, Ms. Biggert, to make an introduction.
    Mrs. Biggert. Thank you very much, Mr. Chairman. I want to 
thank you for your leadership in holding this hearing.
    And I also want to express my deepest sympathies to those 
individuals and businesses affected by Hurricane Katrina.
    In addition, I would like to express my appreciation to the 
Federal and private-sector financial services community for 
responding to this catastrophe in such a resilient fashion. The 
expedited flow of resources, the funds, and other emergency 
assistance, the financial and regulatory waivers granted, and 
cooperation among the community I think have been exemplary.
    And I hope that this compassionate and cooperative activity 
will continue in the days, months, and years to come.
    FEMA and our private sector charitable organizations are 
continuing to meet the basic needs of Katrina victims, 
including shelter, food, and an initial $2,000 stipend. 
However, what these victims will need in the coming days, weeks 
and months--will need more than just a cash handout.
    Many have lost everything, and they will need to understand 
their financial rights and develop skills or retain assistance 
to navigate through another disaster, one that is financial. 
Some will need to learn how to budget their $2,000 stipend, 
while others may need to know their options for financial 
assistance, for rental housing, or building or rebuilding their 
homes.
    Our Federal agencies and financial institutions have done a 
great job at getting the funds to and providing some financial 
guidance to the victims, but more can and must be done, many of 
us who sit on this committee and are members of the Financial 
and Economic Literacy Caucus agreed.
    Last Friday, Congressman Hinojosa and I joined 28 other 
members of the Caucus and sent a letter to Treasury Secretary 
Snow. And, Mr. Chairman, I would request that the letter be 
inserted in the record at this time.
    Chairman Bachus. Thank you. Additional time, you were 
asking?
    Mrs. Biggert. No, I want to insert this letter to--
    Chairman Bachus. Yes.
    Mrs. Biggert. --Secretary Snow in the record.
    Chairman Bachus. Without objection.
    Mrs. Biggert. Thank you.
    The letter requests that Secretary Snow convene an 
emergency meeting of the Financial Literacy and Education 
Commission to coordinate Federal agency efforts to provide 
financial guidance to the victims of Hurricane Katrina and act 
as a clearinghouse for Federal and private sector financial-
related information.
    In the Fair and Accurate Credit Transaction Act, we created 
this commission, and I hope that they will hold a meeting in 
the very near future. I believe that the financial guidance 
that they will be able to provide is a critical element that 
hurricane victims need on the road to recovery.
    As Americans have proven time and time again, we can and 
will emerge from tragedy. But we must focus our activity and 
move forward together.
    And on that note, I would like to take this opportunity to 
say a word about one of today's witnesses who is not from my 
district but from one of my favorite towns in Illinois, Lake 
Forest.
    Mr. David Gibbons, who is the senior executive vice 
president and chief risk officer of HSBC North America 
Holdings, is testifying today on behalf to the American 
Financial Services Association. He is a leader and 25-year 
veteran of the financial services world.
    His leadership experience in the oversight of financial 
institutions includes banking examinations and credit risk 
policy making, and he is a former deputy controller for special 
supervision for the Office of the Comptroller of the Currency.
    Mr. Gibbons led the OCC's problem bank supervision program. 
In that capacity, he designed and implemented rehabilitation 
strategies and resolutions for the country's largest and most 
complex problem institutions. I would like to welcome him to 
the committee today.
    And finally, I would like to note that HSBC and the AFSA 
Foundation are two financial organizations that have made great 
progress in this area of financial literacy. It is my hope that 
organizations like these can partner with the Financial 
Literacy and Education Commission to work to provide financial 
guidance to the hurricane victims.
    Again, I would like to welcome Mr. Gibbons.
    And thank you, Mr. Chairman, for the time.
    Chairman Bachus. I thank the lady.
    At this time, I am going to recognize the gentlelady from 
California, Ms. Waters, for her opening statement.
    Ms. Waters. Thank you very much, Mr. Chairman. I am very 
appreciative for this hearing, and I would like to thank you 
and the other members of the committee.
    I think a lot has been said about, number one, our concern 
that our financial institutions are sound, that those who were 
harmed by the hurricane are up and working in some fashion.
    And I had an opportunity to glance briefly through some of 
the testimony, and I can see some of the creative ways by which 
some of the banks are continuing their operations. And I am 
extremely appreciative for those banks who have shown special 
concern for their customers, and they are reaching out in all 
kinds of ways to make sure that they provide services.
    I have something that I would like to--two things I would 
like to pay attention to. Number one, I have been paying 
attention to FEMA's effort to distribute $2,000 debit cards. 
They were not able to manage it. They put it out there 
basically at the Houston dome. And they had to pull it back. It 
was just almost impossible to do.
    And the alternative to that is to deposit money in the 
victims' accounts or have them go online, I believe, and make 
out applications, get registration of them, et cetera. I want 
to call your attention to our efforts, and my effort in 
particular, to do lifeline banking.
    Lifeline banking was that banking that would allow poor 
people to have accounts in all of our financial institutions 
without the kind of charges, et cetera, that are normally 
visited upon bank accounts.
    Now, many of the people of New Orleans can not have their 
money deposited in any bank because they do not have any 
accounts. And even though we have some legislation, I think, in 
the hopper that would do that, should the legislation pass, I 
would like to ask the financial institutions to pay particular 
attention to this because I think not only does it serve poor 
people and people who do not normally have accounts, but it 
seems to me the millions of dollars--billions--that will flow 
through the banks--somehow the banks should get some advantage 
from that if you hold the money for 24 hours or so. I do not 
know.
    But this is a time that I should point out that lifeline 
banking is extremely important that we get everybody in America 
who wishes to have an account the ability to do that.
    The second point I would like to make is this. There is 
going to be a lot of reconstruction and rebuilding of not only 
the infrastructure, the business sector and, of course, homes 
and residences.
    And we know that some of the no-bid contracts have been let 
already and the big guys, you know, whether it is Halliburton 
or the Shaw Group or Fluor Corporation, they have theirs.
    But what you are going to see and what I am encouraging and 
a lot of us are encouraging--we are encouraging not only the 
employment of people who were victims, and we are encouraging 
that the transitional housing be placed in areas adjacent to 
New Orleans, like in Baton Rouge and Alexandria and Lafayette 
and all of these places so that people have an opportunity to 
return, have some jobs with the rebuilding of this 
infrastructure.
    We want job training. We want jobs. But this is an 
opportunity for everybody to play--minority contractors. As you 
know, we have always talked about community reinvestment. That 
is very important to us, not imply mortgages, but also on the 
commercial side.
    We believe that you can do a number of things. Number one, 
for many of the minority contractors and women-owned businesses 
that have not had an opportunity to have access to contracting 
opportunities with cities, States, what have you, they are 
going to be there. They are going to be at your doors.
    See what you can do to pay attention to how you can create 
or shore up or redesign programs, not giving anybody anything, 
but this is business. This is the banks being able to make a 
profit, but it is also an opportunity for the banks to spread 
its wings and open up some opportunities for those who have 
been kind of excluded in this contracting business.
    So I would like to ask you to pay particular attention to 
that. I think that we have done everything that we could 
possibly do with CRA and the encouragement of minority 
participation. And we know that there are no laws that say you 
have to do anything, but I would think that in the interest of 
building of good relations, expanding all of that, that this 
would be taken into consideration.
    Thank you, Mr. Chairman.
    Mr. Frank. Would the gentlewoman yield for 10 seconds?
    Ms. Waters. Yes. I yield to the gentleman.
    Mr. Frank. I just want to reinforce particularly what she 
said about lifeline banking. It does seem to me we are talking 
about how to get money. If everybody there had had a bank 
account through lifeline banking, how much easier it would be 
to try and help alleviate this, so I just want to reemphasize 
she has taken the lead on this legislatively.
    That is why on our side in particular--and we appreciate 
the cooperation--we fought so hard for it. I think at a time 
like this we really see its value.
    Chairman Bachus. I thank you.
    Dr. Price, do you have an opening statement?
    Mr. Price. Thank you, Mr. Chairman. I want to thank you for 
holding this hearing as well.
    And I want to thank each of you for coming and especially 
to commend each of you and your association and your employees 
for what you have done so far. I have been so incredibly 
heartened by the response of Americans to what is the largest 
natural disaster in our history and the largest response, in a 
private way, by Americans. So I want to thank each of you and 
your employees and your association for what you are doing.
    I truly appreciate also the comments of my colleagues, but 
I look forward to the information that you are going to give us 
in your testimony. Thank you.
    Chairman Bachus. Thank you, and I appreciate your efforts, 
Mr. Renzi's efforts, and others, as we all worked on this bill.
    Ms. Maloney? Okay.
    Mr. Green?
    Mr. Green. Thank you, Mr. Chairman--
    Chairman Bachus. Thank you.
    Mr. Green. --and ranking member. I, too, would like to 
thank you for convening this hearing. I think it is exceedingly 
important.
    I represent the Ninth Congressional District in Houston, 
Texas, and within the Ninth Congressional District we have the 
Astrodome. I have had an opportunity to view firsthand what 
many have seen from afar, and I assure you, I am proud of the 
way Houstonians have responded. But still, there is great work 
to be done.
    And I am honored today, Mr. Chairman, that the NAACP is a 
part of this august panel. I think it is exceedingly important 
that the views of organizations like the NAACP be heard and be 
respected.
    The NAACP new president and CEO, Mr. Bruce Gordon, has done 
an outstanding job with the organization and has marshaled the 
forces of the organization behind what I believe is an 
unprecedented effort to assist the persons who have been 
devastated by this disaster. So I thank you for what you have 
done.
    I do want to also say, just for edification purposes, that 
there are still some persons referring to the persons who 
survived--there are persons referring to them as refugees. And 
I am going to beg that we please reconsider our language.
    Sometimes our diction can be less than superb, but I have 
talked to the victims, the survivors, and they do not like the 
term refugee. They really do not. They really are not. They are 
taxpaying Americans. The same Constitution that applies to us 
applies to them. And they are offended by this term.
    And so I beg that we reconsider those verbiage, and a term 
that seems to be acceptable is survivors, evacuees, but please, 
not refugees, not for Americans. Let's let Americans be 
Americans regardless of their status after a hurricane.
    I would like to let you know that my concerns will involve 
much of what the NAACP has outlined--a moratorium on 
foreclosures. I would hope that we can find a means by which we 
can give people additional time.
    A prohibition against negative credit reporting--I think 
that it is exceedingly important that we understand that this 
situation is going to take time for people to get themselves 
back on their feet, and we do not want to damage their credit. 
In America, credit is everything.
    Sometimes it is better to have credit than to have money. 
In fact, it is almost un-American not to have credit, so we 
want to make sure that we protect credit.
    Late fees mounting up--I would hope that we can find ways 
and means to deal with these late fees that will be staggering.
    And of course, we want to make sure that we do all that we 
can to deal with the invidious predatory lending practices that 
we sometimes find manifesting themselves when persons are weak 
and vulnerable. These are some of our concerns. Coupled with 
the CRA points for loans, I think that is important.
    And finally, I, too, would like to join my colleagues in 
encouraging thinking out of the box, realizing that this can 
happen to any of us. And I can say that with a degree of 
certainty because Houston, Texas, was but a few degrees away 
from that same hurricane. And while I am not an overly pious 
person, I do believe that but for the grace of God it could 
have been me.
    But I thank you, Mr. Chairman, and I look forward to 
hearing from this outstanding group of panelists that we have 
assembled.
    Chairman Bachus. I thank you, Mr. Green.
    My understanding--there are no more opening statements on 
the Republican side.
    So at this time, Ms. Carson, I recognize you for your 
opening statement.
    Ms. Carson. Thank you very much, Mr. Chairman and ranking 
member and members of the committee.
    Thank all of you who assembled here today to provide 
information about the dilemma in which the victims of Hurricane 
Katrina faces.
    My concern is based on calls that I have received from my 
constituents in Indianapolis, Indiana, in that how does one 
guarantee the safety of the resources that they already have on 
deposit. Secondly, how does the institution verify without any 
identification that that money belong to them and that they can 
have access to it, notwithstanding the absence of 
identification per se?
    If you do not have online banking where you can put in a 
code and get your money, then it is very problematic in terms 
of being able to access your resources.
    I have families in Indianapolis, Indiana, who have family 
in Mississippi and in New Orleans. And while I respect the fact 
that financial institutions have to be on guard against some 
ambivalence of taking somebody's money out of the account or 
not giving the money--to anybody, if someone could explain how 
one would facilitate legitimate transfer of money, that would 
be probably the only question that I have at the moment.
    Thank you very much, and I yield back, Mr. Chairman.
    Chairman Bachus. Thank you.
    At this time, we are going to go to our panelists, but I 
would like unanimous consent before we do so to introduce from 
the Financial Services Roundtable and the House Policy Council 
member companies a--this is a comprehensive, fairly up-to-date 
list, as of 5 p.m. yesterday, of what our larger--and these are 
our larger financial institutions--what they have done, 
donations they have made and different accommodations they have 
made for their customers.
    And it is obviously pretty extensive, and I would introduce 
that, without objection.
    And at this time, we will hear from our panelists. Our 
panelists are--I will introduce them, the ones that had not 
been introduced.
    Mr. Mac Deaver, executive director of the Mississippi 
Bankers Association, and you are actually representing the 
American Banking Association as their representative.
    Mr. Bordelon has previously been introduced by Mr. Baker.
    And Rusty--I think you said Cloutier, is that right? 
Cloutier?
    Mr. Cloutier. Cloutier, that is right.
    Chairman Bachus. Cloutier. That is close. I know Rusty, but 
I call him Rusty. That avoids all that. Mr. Baker's already 
introduced you.
    Mr. Charles Elliott is CEO of the Mississippi Credit Union 
Association, and you are representing the CUNA, Credit Union 
National Association, and I welcome you to the committee.
    Ms. Diane Casey-Landry, president and CEO of America 
Community Bankers. Appreciate your attendance.
    Mr. Gibbons, you have already been introduced by Ms. 
Biggert.
    And finally, Mr. Hilary Shelton, director of the Washington 
Bureau of the NAACP, and we welcome you and look forward to 
your testimony.
    And at this time, we will just go from my left to my right 
and start with Mr. Deaver for an opening statement.

     STATEMENT OF MCKINLEY W. DEAVER, EXECUTIVE DIRECTOR, 
MISSISSIPPI BANKERS ASSOCIATION, REPRESENTING AMERICAN BANKERS 
                          ASSOCIATION

    Mr. Deaver. Thank you, Mr. Chairman and members of the 
committee. As has been stated, my name is Mac Deaver. I am 
executive director of the Mississippi Bankers Association. Our 
organization includes 106 commercial banks and savings 
institutions that operate in the State of Mississippi.
    Approximately 1,000 locations for those banks and savings 
institutions operate in our State. We represent about 99 
percent of the banking deposits in Mississippi.
    I am pleased today to be here to speak on behalf of the 
American Bankers Association to discuss the industry response 
to Hurricane Katrina.
    Significant progress, certainly, has been made in the 
banking industry and is ongoing. I am proud to report that the 
banking industry is doing extraordinary things to respond to 
this crisis. Of course, first and foremost, this is a human 
disaster.
    This hurricane has brought personal tragedy into the lives 
of tens of thousands of Americans. Of course, a lot of those 
folks can not be here today to speak to you, but a lot of the 
bankers were also affected by this. And in the middle of this 
tragedy, they have had personal losses as well as business 
interruption.
    I would like to share a story with you that was told to me 
by Peter Gwaltney, who is the chief executive officer of the 
Louisiana Bankers Association. Peter told me the story of Mr. 
Guy Williams, who is with Gulf Coast Bank & Trust in New 
Orleans.
    He and his bank were evacuated to Baton Rouge, but Mr. 
Williams continued on a nightly basis getting in his boat and 
going from Covington, Louisiana, across Lake Pontchartrain to 
New Orleans rescuing people and taking them to shelters.
    Now if you look at a map of Louisiana, that is a pretty 
good boat ride. But he continued to do this and, of course, 
during the day he was trying to get his bank organized and 
operating in Baton Rouge. And that is just one of many stories 
that continued to occur.
    As far as the business of banking, just 1 day after the 
storm hit, there were a number of banks that were able to be up 
and running even in some of the hart-hit areas. This was 
certainly easier in my State because we did not have the long-
term flooding issues that came up in the New Orleans and South 
Louisiana areas.
    Only 4 days after the hurricane, every bank in the State of 
Mississippi was operating, I will say, on some basis in some 
locations. I am proud to say that this was accomplished in 
large part because bankers stepped forward to help bankers and 
to help others in their community.
    In numerous situations, banks provided facilities, 
expertise, equipment to the banks that were in the hardest-hit 
areas. In one case, a bank processed checks for a competitor 
bank because that competitor bank's processing center was 
disabled.
    As of this week, it has been reported that several New 
Orleans area banks are sharing a dozen branches in Jefferson 
Parish, which I understand is adjacent to New Orleans.
    Banks in the coastal areas have gone to extra lengths to be 
of service to their customers. They have done this with mobile 
ATMs, temporary facilities, shared facilities, as I have 
mentioned. Some banks have opened without any power at all. A 
bank in Richland, Mississippi, operated for several days in the 
dark with pen and paper, but they were up and running.
    Peoples Bank Biloxi, one of the hardest hit banks--their 
senior management spent the night in the bank several nights 
for various reasons, but so they could get their bank up and 
running, and they did get up and running within 4 days.
    Of course, banks have been called to serve the thousands of 
misplaced persons, evacuees from the storm. Banks are serving 
these in many different ways, through, as I have mentioned, the 
mobile ATMs, shared facilities.
    Banks have stayed open on weekends. Both weekends since the 
storm banks have stayed open to provide services in their areas 
and to accommodate the vast number of evacuees.
    One town in my State, Brookhaven, Mississippi, reports they 
have 2,000 evacuees in a town of 10,000, and that is not the 
Astrodome, but that is a big impact in that community, and the 
bankers are working hard to serve those persons.
    The industry has worked closely with bank regulators on a 
daily basis. We have been on conference call meetings with 
regulators discussing how we can best accommodate customers and 
non-customers who are in our markets.
    We are working with Government and charitable organizations 
to make sure that these persons get access to their benefits. 
This is extremely important, and I would have to say that it is 
probably the one topic of conversation in all our talks that 
has taken the most time, has been delivering those benefits, 
and how we can do it, and how we can identify customers and 
non-customers.
    I want to share quickly a story from Texas. There were two 
unaffiliated banks. Both used the name Omni Bank. One was from 
New Orleans and one was operating in Texas. Some evacuees from 
New Orleans were in Texas, and they called on the Texas bank 
thinking it was their bank. They did not know.
    I am proud to say that the bankers in Texas at Omni Bank of 
Texas took the initiative to help those people contact their 
bank, access their funds, and get the financial services that 
they desired.
    My time is running out here or has run out, but typical 
industry-wide acts include a lot of waiver of fees, suspension 
of interest, extension of grace periods, and increases of 
credit lines.
    In Mississippi, I know that a number of banks have assigned 
employees for the specific purpose of dealing with persons 
affected by the storm, both evacuees and others. Many have 
established 800 numbers for folks to call to directly access 
those services.
    Finally, I would just like to say that serving non-
customers continues to be a very serious issue. The banks are 
having to balance their need to serve, their desire to serve, 
their need to do the right thing with regulatory and 
institutional concerns.
    We hate to talk about liabilities and losses at this time, 
but that is reality. And I can tell you the bankers in 
Mississippi are working to do the right thing, and we 
appreciate the support of others in helping us do that.
    I am pleased to be here, and the ABA stands ready to work 
with the committee as we work toward solutions and success in 
this area. Thank you.
    [The prepared statement of McKinley W. Deaver can be found 
on page 85 in the appendix.]
    Chairman Bachus. Thank you, Mr. Deaver.
    I would say that the American Banking Association has been 
invaluable to the committee over the last week or so, supplying 
technical expertise as we have drafted legislation and as we 
have worked with the regulators, and they have done a 
tremendous job on keeping us posted as to the situation along 
the Gulf Coast and in New Orleans. They have done a phenomenal 
job.
    Thank you.
    At this time, Mr. Bordelon.

STATEMENT OF KEN BORDELON, PRESIDENT AND CEO, E FEDERAL CREDIT 
UNION (LA), REPRESENTING NATIONAL ASSOCIATION OF FEDERAL CREDIT 
                            UNIONS;

    Mr. Bordelon. Good morning, Chairman Bachus, Ranking Member 
Sanders, and members of the subcommittee. My name is Ken 
Bordelon, and I am the president and CEO of E Federal Credit 
Union, headquartered in Baton Rouge, Louisiana. I am here on 
behalf of the National Association of Federal Credit Unions, 
NAFCU.
    Thank you, Chairman Bachus, for your leadership on this 
important issue and for convening this hearing to examine what 
has been happening to financial institutions in the aftermath 
of Hurricane Katrina. All of our thoughts, prayers, and 
sympathies are with the victims of this terrible disaster.
    I am pleased to report to the subcommittee that NAFCU has 
been working with the National Credit Union Administration, 
NCUA, and other credit union groups since the beginning stages 
of this disaster to provide help to impacted credit unions in 
any way that we can.
    Our members are following the agency's lead for where they 
need additional equipment and resources sent. Coming up here 
yesterday from Baton Rouge and having seen much of the 
devastation firsthand, I can say that credit unions that 
survived are working together to support those that did not.
    Many credit unions in the impacted area are trying to be as 
flexible as possible, within safety and soundness limits, to 
accommodate those in need of financial assistance. The losses 
to credit unions in the impacted area are expected to be great.
    E Federal was fortunate to have suffered no loss other than 
a day and a half of limited service to our members due to power 
outages. This has allowed me to be here today in Washington to 
tell the story for many of my colleagues who are too busy on 
the front lines to join us.
    One of the biggest challenges for credit unions in the 
aftermath of Hurricane Katrina is to have the regulatory 
flexibility to deal with the challenges in serving the needs of 
the hurricane victims. Any action that Congress can take to 
signal this message to the regulators would be important.
    Some of the main concerns that credit unions would like to 
bring to your attention include the following.
    One, telecommunications problems continue. ATM and debit 
card authorizations are sporadic, which causes everyone to 
continue to want cash. The outages are affecting our shared 
credit union network and causing difficulty for those out of 
the immediate area who are trying to contact Louisiana credit 
unions.
    Several credit unions cannot get their lines rerouted out 
of the New Orleans substations, which is causing a great deal 
of distress on behalf of members who cannot get their data 
through normal methods such as automated voice response 
machines and through the Web.
    Two, the desire for cash raises currency issues. 
Institutions have been taking steps to make sure that they have 
the cash available to meet their needs. I am happy to report 
that we have experienced excellent cooperation from the Federal 
Reserve, our corporate credit union system, and our depository 
banking partners.
    Three, not all members brought their identification with 
them when they evacuated, and this makes check cashing 
extremely difficult and will make reissuance of formal 
documents difficult as well. Members wanting to set up new 
accounts are having trouble due to the requirements of the 
Patriot Act.
    We at E Federal are providing loan extensions, skip 
payments and a special needs team to assess the borrowing needs 
of those with impaired credit. In addition, we have provided 
space at two of our branches to affected credit unions to set 
up emergency operations. Many credit unions in the area have 
taken similar measures.
    One unique aspect of the credit union community is our 
shared branching network. E Federal is a member of the network. 
Consequently, we were able to serve members from credit unions 
in the New Orleans area with immediate cash needs in the wake 
of the storm.
    This process of sharing service centers, which is 
widespread in the Gulf Coast region, has been a godsend, as 
surviving institutions have been able to help many of the ones 
that suffered damage.
    Finally, I would like to bring to your attention two 
legislative proposals that would aid credit unions in the long-
term recovery from this disaster. The first would give NCUA the 
authority to allow credit unions to continue to serve and add 
members from their select employee groups after a credit union 
converts to a community charter.
    The second proposal would give NCUA greater flexibility 
with prompt corrective action, or PCA, reform. This proposal 
would give NCUA the flexibility that the other banking 
regulators currently have in dealing with PCA levels.
    In closing, I would note that the challenge for credit 
unions in the wake of Hurricane Katrina has been great. It is 
with this in mind that NAFCU stands ready to work with the NCUA 
and Congress to meet the needs of the hurricane victims.
    We support efforts that help secure the safety and 
soundness of credit unions while helping financial institutions 
meet the needs of hurricane victims. We thank you for this 
opportunity to appear before you today and would welcome any 
questions.
    [The prepared statement of Ken Bordelon can be found on 
page 63 in the appendix.]
    Chairman Bachus. Thank you very much.
    At this time, Mr. Cloutier?

 STATEMENT OF C.R. CLOUTIER, PRESIDENT AND CEO, MIDSOUTH BANK, 
   N.A. (LA), REPRESENTING INDEPENDENT COMMUNITY BANKERS OF 
                            AMERICA

    Mr. Cloutier. Mr. Chairman, Ranking Member Sanders, my name 
is Rusty Cloutier. I am a Louisiana banker. I run a bank called 
MidSouth Bank, which covers all the coast of Louisiana besides 
the coast that was destroyed. I run from Baton Rouge-Homer, 
Louisiana, to the line in Vinton, Louisiana, which is right 
next to the Texas border.
    I also have a bank in Texas, located in Beaumont, Texas, 
that is also in the Conroe market, College Station, and I agree 
with Mr. Green's statement. So be it but me, this could have 
destroyed Houston, Lake Charles, Lafayette.
    Let me first of all tell you that I was born and raised in 
hurricane country. My father was civil defense director for the 
city of Morgan City. Any of you all who know anything about 
hurricanes know that when they advertise hurricanes it is from 
Apalachicola to Morgan City, Morgan City to Corpus Christie.
    I lived through Betsy. I lived through Hilda. I lived 
through Camille. I lived through Audrey. Katrina was the big 
one of them all. They were like high school football games 
compared to the NFL. This was a terrible hurricane.
    The bankers of Louisiana responded beyond their wildest 
dreams, from rescuing and helping people individually to trying 
to get to their customers and dealing business. Let me tell you 
what we have done in Louisiana and what we continue to try to 
do.
    Even before this hurricane came, I had a sharing agreement 
with the banks in New Orleans called Community Cash. In the 
first 8 hours of the evacuation, in a small town called 
Opelousas, we gave out over $60,000 through ATMs that were 
immediately accessed from our system.
    We today still have two banks operating within our bank, 
Parish National from the Covington area, and Mississippi River 
Bank, hit so hard in Belle Chasse. We continue to work very 
closely with them. We continue to fund ATMs and cash checks and 
work with them on an ongoing basis.
    You must remember, we are on their Web sites as the bank to 
go to if they have problems in the New Orleans area, because of 
our community sharing network.
    But I want to also talk to you about the work we have done 
within the shelters. The Cajun Dome in Lafayette, which 
Congresslady Waters visited last week, was one of the first 
refuge sites between Baton Rouge and Lafayette that people were 
sent before they were moved on to Houston and other areas.
    And I have spent a lot of time visiting with them. Their 
financial considerations are great. And I will tell you it has 
had a great bit of difficulty for those people getting checks 
cashed without identification and working with them.
    I almost chuckled a little bit when FEMA talked about 
handing out $2,000 debit cards to many of these who were 
totally unbanked and would not have the slightest idea how to 
use a debit card or understand what they were doing.
    We need immediate relief for check cashing. I applaud the 
chairman and our great Congressman from the State of Louisiana, 
Mr. Baker, for taking leadership and guaranteeing checks for 
people with Social Security.
    Let me tell you just a story that came up the other day. I 
got a call from Mr. Greg Davis, who runs the Cajun Dome, a very 
fine man in Lafayette, who called me up and asked me if I could 
come over. And he had a group of people in his office who had 
no identification with checks from FEMA and asked me if we 
could cash them.
    We worked through that. But I will tell you, my compliance 
officers were not very happy. They reminded me that I was 
violating the law, that they did not have the ability to have 
identification. I will tell you, a lot of laws have been 
violated in Louisiana to make things happen.
    Don Powell, who has been great in being responsive, called 
me within 72 hours of the hurricane hitting and said Rusty, 
what do you need, what help do you need. I said Don, the 
biggest problem is going to be people down here trying to make 
things work. He said believe me, Rusty, hold me responsible; I 
will make it work. And I said well, you know, Don, we are all 
concerned about violating some of these rules. He said well, 
call me if it ever comes to be a problem.
    So I will tell you, things are coming together in 
Louisiana. I am very proud to announce today that as we sit 
here today, in exactly 50 minutes, Don Powell will hold a press 
conference in Gretna, Louisiana, announcing that a number of 
banks are going to be open under shared facilities.
    Mayor Nagin announced today that the downtown New Orleans 
may be open as soon as next week in the French Quarter, where 
some of these banks will be able to get up and running. And it 
has been a great experience.
    I am very proud that the phone numbers of every bank in 
Louisiana--there was a place to reach them within 5 days of the 
hurricane. It was amazing to me, with some of the problems they 
had, that they were able to get it together.
    Not only problems of destroying their banks--because one 
person told me I have lost 30 percent of my staff that have 
left, that were moved to Houston with Shell Oil or moved other 
places, that are never coming back, and I have to rebuild my 
bank with new people. That is very difficult to do in a 
destroyed situation.
    I would just call on a couple of other things you must 
remember, and I will give you a little quick story on this. 
There is a lot of people in trouble in New Orleans. I spoke to 
a banker yesterday who has a bulk fuel distributor who deals in 
gasoline. He has a $5 million line of credit to him.
    His receivables are at the gas stations in New Orleans, the 
bulk plant in Venice, Louisiana, which Congressman Baker will 
tell you is totally destroyed, and also he has credit out to 
the City of New Orleans, which--Mayor Nagin said today they can 
not pay their bills.
    And without flexibility for the banks to continue to deal 
with these people, we are going to have big problems. We need 
the flexibility of this committee to allow that to happen.
    We also need a continual situation in the future--and I 
call on this committee to study hard that the next time this 
happens we have relief available for the regulators to act 
quickly. You know, we need to have such things as the recision 
law not on the books.
    I had a lady in my bank the other day who wanted to get 
somebody to repair her roof, and I explained to her she had a 
3-day right of recision. And she says I do not want a right of 
recision. I want the contractor to finish my roof and pay him 
because he wants cash up front.
    So we need a lot of these considered, a lot of things to 
look at, and I know this committee will do a fine job. And I 
compliment you on the work you have done.
    On behalf of the people from the State of Louisiana, on 
behalf of the bankers from the State of Louisiana, we thank you 
for what you are doing. We never wanted this catastrophe. We 
never wanted it to happen. And certainly, we are very glad to 
work with you.
    I will be happy to answer any questions not only today, but 
please feel free to call me at any time at my bank, and I will 
be happy to work with any member of this committee. Thank you 
so much for the opportunity to testify today.
    [The prepared statement of C. R. Cloutier can be found on 
page 74 in the appendix.]
    Chairman Bachus. I appreciate that. I appreciate your 
remarks about Chairman Powell. As you know, he was an acting 
member of the Independent Bankers Association, ICBA, and was 
very concerned about our smaller credit unions and independent 
banks in the aftermath of Katrina, and we are very happy to 
know that they are all financially stable.
    And he issued a statement that the Federal Government would 
stand behind our banks and our credit unions, the full faith 
and credit of the Government and the FDIC, of the Federal 
Deposit Insurance Corporation.
    Mr. Elliott, welcome your testimony.

 STATEMENT OF CHARLES ELLIOTT, PRESIDENT AND CEO, MISSISSIPPI 
 CREDIT UNION ASSOCIATION, REPRESENTING CREDIT UNION NATIONAL 
                          ASSOCIATION

    Mr. Elliott. Members of the subcommittee, on behalf of the 
Credit Union National Association, I am Charles Elliott, 
president and CEO of the Mississippi Credit Union Association.
    I am here today to share with you the devastation that has 
impacted our credit unions, to share the remarkable relief 
efforts underway through credit unions across the country, and 
also to ask for your help.
    Hurricane Katrina took away our homes, our schools, our 
places of worship, our jobs and, in some cases, our lives. She 
altered our plans, postponed our dreams, and temporarily took 
control of our lives. However, we are working very hard to make 
sure that she does not take away the will and the hope of the 
American people living on the Gulf Coast.
    After the disaster, the Mississippi Credit Union 
Association, with the leadership of CUNA and generous 
assistance from credit unions around the country, took a 
variety of immediate actions to help our credit unions with 
their needs.
    But our most important role is to deliver hope to our 
credit unions and credit union employees so that they, in turn, 
can deliver hope to their credit union members, hope in knowing 
that they are not alone, that someone else is out there looking 
out for them, hope in believing that they can regain control of 
their lives, and hope that life again someday would be normal, 
albeit a different definition of normal.
    Our credit unions have shown a great commitment to serve. 
Only 1 day after the hurricane made landfall, in spite of the 
fact that three-fourths of our State was without electricity, 
many credit unions opened their doors for service. They 
operated offline, taking pencil and paper transactions, doing 
whatever they could to meet the needs of their members.
    Today, some of our credit unions along the Gulf Coast are 
still without data lines and phone services that they need to 
provide lifeline financial services. Our credit unions put the 
credit union philosophy of people helping people into action. 
They took steps that were neither asked nor required of them in 
order to ease financial burdens.
    They have deferred payments on member loans, increased 
lines of credit on credit cards, increased overdraft limits on 
checking accounts and, it goes without saying, waived fees.
    Regardless of the credit union commitment to serve members 
and help each other, it soon became clear to us that the 
effects of Hurricane Katrina would be devastating.
    I want to give you an example of one credit union. I think 
it encompasses all that is taking place down in Mississippi and 
the movement. Jackson County Federal Credit Union in Pascagoula 
is a $3.1 million credit union. They only have one office. Two 
of the credit union's employees do not have a home.
    The building that they were in was totally destroyed by a 
storm surge. This credit union was not in a designated flood 
zone. They did not have flood insurance. The insurance company 
deemed all of the loss for this small credit union as from 
water, and they are going to get an insurance check, but it is 
going to be for the cost of two computers and a phone line.
    This credit union went to work very quickly. They set up 
operations in the back end of a pickup truck. One of the credit 
union's employees served as the security person because he had 
a gun that he could bring down there and sit and guard them 
with.
    This makeshift credit union did everything they could to 
respond to the needs of their members. They soon moved into the 
office of another credit union, and after hours the credit 
union manager left her cell phone number on the door of that 
office.
    On her way home one evening, she got a phone call from a 
credit union member, Doug DeSilvey. He was requesting that she 
come back and give him $6,000 for burial expenses. Mr. DeSilvey 
had actually survived the storm, but he watched helplessly as 
his daughter, his ex-wife whom he was taking care of, and her 
parents--all three perished in the flood waters that breached 
their home. Mr. DeSilvey not only lost everything in this 
storm, he lost everyone in his life. His family was together 
because 2 days before Katrina they held memorial services for 
his father.
    The issue of flood insurance and housing is tremendous. 
Countless individuals and businesses across the Gulf Coast 
thought that they were fully secured and fully insured. Their 
property was not in a flood plain, had never flooded, even 
during Camille. Now they have lost everything, and they are 
facing payments on a home or business that no longer exists.
    We have 14 credit unions in Mississippi on the Gulf Coast 
that were in the direct path of the storm. Eight of them 
received major water damage to 11 of their facilities. Only one 
had flood insurance and only on some property.
    Now, those credit unions which were not located in the 
flood zone not only are struggling to reestablish financial 
services to their members, they are also facing significant 
losses which must also ultimately be borne by their member 
owners.
    But the tragedy of so many left homeless is also 
compelling. You take these same 14 credit unions--129 of their 
employees are homeless. Most of them had houses that were 
completely destroyed. They no longer have a place to live due 
to the storm, and the vast majority of those employees are also 
facing a lack of flood insurance themselves because their 
residences also were not in the flood zone.
    Unfortunately, Katrina chose to ignore the designated flood 
areas, and now these employees, the key to reestablishing 
lifeline financial services to some 200,000 credit union 
members, have no relief when the workday ends for them.
    They have no lawn to mow. They have no recliner to sit in. 
They have no rocker on the front porch. And there is also no 
insurance check on the way to help them rebuild their lives. 
There is no escaping the constant reminders that they are 
homeless and without recourse.
    Whether through temporary or permanent measures, Congress 
can play a role in assisting credit unions in meeting the needs 
of the victims of Hurricane Katrina who may still be in the 
affected area or scattered across the country.
    Providing housing must be a priority. In addition, the 
flood insurance problem must be addressed. Both of these 
barriers are significant contributors to storm victims' 
feelings of hopelessness and despair.
    The immediate removal of these barriers will provide the 
renewed will and hope so that the American people living on the 
Gulf Coast can start rebuilding their lives.
    From a unique credit union perspective, perhaps one of the 
most meaningful things that Congress can do is to address the 
problems associated with capital that will be facing our member 
credit unions. We have serious concerns that the recovery 
efforts will be significantly limited by constraints and 
restraints imposed on credit unions under prompt corrective 
action.
    PCA not only forces credit unions to restrict growth that 
results from deposit of new funds, but also requires the NCUA 
regulators to impose significant sanctions on credit unions 
that face declining net worth.
    Considerable PCA concerns may be faced by a number of 
credit unions in the path of Hurricane Katrina due, in part, to 
the relocation of their membership as well as to the uncertain 
future of their communities. We have major issues such as non-
performing loans, and these will also exacerbate this 
situation.
    Many credit unions themselves were destroyed, as were the 
assets of virtually all of their members. Also, we have growth 
concerns that are going to come in the future when people that 
do get insurance monies deposit those insurance monies in their 
credit union account.
    But we believe that the PCA changes embodied in H.R. 2317, 
the Credit Union Regulatory Improvement Act, should be made 
permanent. We also are asking Congress, at a minimum, to 
provide NCUA with temporary authority to waive certain PCA 
requirements. This authority should be applicable for credit 
unions in the affected areas as well as those serving relocated 
members.
    We are committed to working in the aftermath of Hurricane 
Katrina to help our staff, our volunteers, and our members 
rebuild their lives, their communities, and perhaps, most 
importantly, their financial well being.
    It will be a long and difficult road for the victims whose 
homes and communities were devastated beyond repair, but the 
credit union movement is ready to help them regain their 
financial independence and a secure future.
    Mr. Chairman, I do want to tell you that people get hope 
from a lot of different things, and our visits down on the 
coast prove to us that one of the most effective ways that we 
can deliver hope is through a hug. I consider that now my 
specialty, and we have given out a lot of hugs over the last 
several weeks.
    Thank you very much.
    [The prepared statement of Charles Elliott can be found on 
page 94 in the appendix.]
    Chairman Bachus. I thank you for your statement.
    And I know in your testimony you mention something that we 
are very concerned about, and that is the fact that much of the 
property and many of the homes that were destroyed or damaged 
and businesses by the storm surge and by the flooding was 
outside the designated flood zone.
    And that obviously is something that I will ask you all 
when we have time for questions is what would be your 
recommendations with respect to the Federal insurance payments 
that will be made by the Federal Government.
    Mr. Elliott. Do you want to talk about that now, or--
    Chairman Bachus. And we will do that--
    Mr. Elliott. Thank you.
    Chairman Bachus. Ms. Casey-Landry?

 STATEMENT OF DIANE CASEY-LANDRY, PRESIDENT AND CEO, AMERICA'S 
                       COMMUNITY BANKERS

    Ms. Casey-Landry. Chairman Bachus and members of the 
subcommittee, I am Diane Casey-Landry, president and CEO of 
America's Community Bankers. Thank you so much for holding this 
important hearing.
    And I also want to thank Chairman Bachus and Chairman Baker 
for their leadership and legislative efforts on behalf of 
financial institutions in the affected area. Like you, our 
thoughts and prayers are with the victims of Katrina.
    At ACB we have established, like many others, a relief fund 
that our members are contributing generously to, bankers 
continuing to help bankers as well as their customers.
    Let me begin with a brief update from the people on the 
ground in the hurricane-ravaged area. Dan Digby, president of 
the Community Bankers of Louisiana, and Peter Gwaltney, 
president of the Louisiana Bankers Association, are keeping us 
current on a daily basis. They have reported with pride and 
enthusiasm the many ways that community banks in the area are 
helping each other even while having faced huge personal 
losses.
    I want to note that Mr. Digby and Mr. Gwaltney, working 
with their bank commissioner, John Ducrest, have done an 
outstanding job in providing assistance and guidance to the 
banks, just as their counterparts have done in Mississippi and 
Alabama. They deserve our thanks.
    Mr. Digby, who was here last week and cannot be here today 
because he is with FDIC Chairman Powell in Baton Rouge, is 
still warning of a perception gap and has asked me to provide 
his views.
    He is concerned about what is going on in the hurricane-
affected areas and what the regulators have been stating is 
happening. Community banks are not fully operational in the 
worst-hit areas. They are making progress, but there are no 
banks open in Orleans Parish. There are limited services at the 
banks that are open that can be offered.
    I spoke to one of my board members last night from the New 
Orleans area, and he expressed frustration that today he still 
has only one of six branches open, and it is limited operations 
at that.
    Liquidity still remains a concern. The Federal Reserve must 
continue to provide the necessary liquidity to the banks in the 
region as long as the cash economy continues to exist, which it 
seems like it will for a while.
    Community banks throughout the Gulf Coast are also 
extremely concerned because they are cashing checks with 
limited identification, as you have heard, and they fear that 
in 12 months to 18 months bank examiners will cite them for 
violating the check cashing rules during this crisis.
    Mr. Digby has warned that many of the loans will have to be 
restructured to accommodate customers, and while these debt 
restructurings are occurring, the regulators must relax their 
historical expectations and limits on loan delinquency reports 
and loan loss reserves and allow the banks to capitalize the 
interest into the restructured loan. Let me emphasize, the 
leniency will be critical for many months to come.
    Community banks have been active in reaching out to the 
victims. Banks in the communities surrounding the most affected 
areas are sharing facilities, computers, and personnel so that 
the damaged community banks can continue to serve their 
customers. Banks in the area that are able to do so are meeting 
the challenge to serve their customers and their communities 
the best they can.
    The community banks are doing what they can do to ensure 
that their customers have access to money. As you have heard, 
cash is really important now. One bank president drove around 
to his business customers last week with excess cash, 
collecting their cash deposits, and providing a handwritten 
receipt for the business owners so they could continue to 
function.
    Community banks are waiving ATM fees and late fees. They 
are extending grace periods to customers in the affected areas. 
They have suspended mortgage payments for 60 days to 90 days, 
returning direct debited mortgage payments when they can reach 
the customer.
    They are developing alternative payment plans and providing 
penalty-free CD withdrawals. They are also working with the 
small businesses to get them up and running.
    Most importantly, Congress, the bank regulators, and the 
Administration can help more. First, the Federal Government 
must make it absolutely clear that the U.S. banking system and 
insured institutions are safe and sound. That is particularly 
true for the community banks whose footprint is limited to the 
affected area.
    Second, Congress needs to pass the legislation to indemnify 
community banks in the hurricane region from cashing the bad 
checks. Community banks are being asked to cash Government 
checks, FEMA checks, and other forms of assistance, and they 
are doing that. We just do not want them to be left to foot the 
bill.
    It is also essential that the bank regulators provide 
written guidance so that months from now bank examiners will 
not cite institutions for potential violations of the Bank 
Secrecy Act, the Patriot Act, or other regulations because they 
provided the necessary check cashing services to victims under 
relaxed standards.
    The challenge is to maintain necessary flexibility in 
regulatory policy and compliance requirements. As Mr. Digby 
repeatedly said last week, those with the boots on the ground 
have a different view than those who view the devastation from 
afar. Regulatory policy will be continuing to evolve during 
this period, but that policy must remain flexible and over an 
extended period of time.
    Jobs are also an important part of the solution. The Gulf 
Coast is home to thousands of small businesses that have been 
devastated. We recommend that the SBA offer a much more 
streamlined approval process to get loans into the hands of 
these businesses, and time is of the essence. As my bankers 
have said, people need jobs to come home to when they come 
home.
    Community banks are eager to be engaged throughout the 
recovery process, and the actions that are being praised today 
must not be exposed to criticisms tomorrow. We thank you for 
your help and your guidance. We look forward to working with 
you and with our members in the region.
    I would be pleased to answer any questions. Thank you.
    [The prepared statement of Diane Casey-Landry can be found 
on page 122 in the appendix.]
    Chairman Bachus. Thanks very much for your testimony.
    Mr. Gibbons, you have previously been introduced by Ms. 
Biggert.

STATEMENT OF DAVID GIBBONS, SENIOR EXECUTIVE VICE PRESIDENT AND 
   CHIEF RISK OFFICER, HSBC NORTH AMERICA (IL), REPRESENTING 
            AMERICAN FINANCIAL SERVICES ASSOCIATION

    Mr. Gibbons. Thanks, Mr. Chairman, members of the 
subcommittee. My name is David Gibbons. I am senior executive 
vice president and chief risk officer at HSBC North America 
Holdings.
    Today I am testifying on behalf of the 300 members of the 
American Financial Services--
    Chairman Bachus. Mr. Gibbons, would you maybe pull that 
mike up a little closer?
    Mr. Gibbons. Better?
    The American Financial Service Association represents 
companies that lend to customers and small business. AFSA 
members help individuals and families buy the houses they call 
home and the cars that give them access to work.
    HSBC North America is one of the 10-largest financial 
services firms in the United States, with business units that 
offer a full range of banking and lending products.
    In the United States, we engage in commercial banking and 
are a top mortgage, credit card, and auto lender. Under the 
brand names HFC and Beneficial, we are one of the country's 
largest consumer finance companies, with some 1,400 offices 
located in 46 States.
    Like scores of organizations, AFSA members moved swiftly in 
the days after Katrina struck to support rescue and recovery 
efforts. AFSA members have contributed more than $45 million to 
efforts so far, and that number will undoubtedly rise.
    Our industry is extending its hand to individuals and 
families who have been directly and indirectly affected by the 
hurricane. AFSA members are working with customers individually 
and generally to accommodate their needs and to help them get 
on their feet.
    For example, HSBC customers who live in the FEMA-designated 
individual assistance disaster areas may delay their September 
payments by 30 days as they move to handle more immediate 
needs.
    AFSA has heard from a number of lenders that have waived 
late and over limit fees. HSBC has waived cash advance fees for 
the same reason. And as encouraged by our Federal regulators, 
we are suppressing credit bureau reporting for hurricane-
affected individuals.
    Members of AFSA are also offering emergency credit line 
increases for many credit card and mortgage companies to help 
them get over what we hope is a temporary problem, but we 
probably know is going to be a sustained crisis.
    Our employees are also tremendously involved in this 
effort. For example, employees at HSBC and other AFSA members 
across the country are conducting fund raisers and collecting 
donations.
    With just 48 hours' notice, some 1,000 HSBC volunteers 
joined hundreds more at Capital One and other private companies 
to accept contributions during a September 2nd concert for the 
benefit of the American Red Cross, and we are prepared to do 
that again.
    As our Nation moves to the stage of rebuilding, it is of 
utmost importance that we establish a platform upon which 
hurricane-affected individuals and families can rebuild their 
homes and their lives.
    AFSA is appreciative of the subcommittee's request for its 
input on several legislative proposals outlined by the 
committee. AFSA is still in the process of gathering input from 
its members on these proposals. But all the committee's 
initiatives are worthy of serious consideration.
    While AFSA's in the process of developing its input, we do 
wish to offer some recommendations of our own for your 
consideration.
    First, consistent with the efforts of the Federal financial 
regulators, it would be appropriate to pursue administrative 
changes relaxing bank secrecy, know-your-customer and privacy 
requirements for those individuals and families needing the 
help of the financial services sector to reestablish their 
access to cash and credit.
    Second, because it is important to get cash into the hands 
of consumers, we believe it prudent for the bank regulators to 
delay implementing supervisory policy that requires lending 
organizations to assess higher minimum payments on their credit 
cards.
    Longer term, we believe that there will be a number of 
issues that need to be addressed. First, we believe there may 
be significant environmental issues that will need to be 
addressed as we learn more about what the news media has 
described as toxic soup that covers New Orleans.
    Residential lenders will need Government guidance to ensure 
that rebuilding efforts are safe from biological or chemical 
contaminants left behind by the flood waters.
    The spirit of interagency cooperation among financial 
regulators will need to be expanded to include the 
Environmental Protection Agency and other appropriate agencies 
to develop environmental cleanup policies to foster a safe 
environment for businesses and residents.
    Second, Hurricane Katrina is expected to require the 
insurance industry to pay out nearly $60 billion in damage 
claims. While the regulation of insurance is primarily a matter 
of State jurisdiction, Congress has wisely provided some 
limited Federal insurance coverage through the National Flood 
Insurance Act and Terrorism Risk Insurance Act.
    Congress may wish to consider expanding flood insurance for 
those who were underinsured because they were not located in 
Federal flood zones.
    Third, AFSA members applaud the Federal bank regulators' 
efforts to ensure customers' access to banking facilities, 
cash, and credit, and to provide some supervisory flexibility, 
but it is important to note that many AFSA members are not 
banking organizations and may not be allowed the same 
flexibility to work with their hurricane-affected customers.
    To that end, we would ask you to work with the Securities 
Exchange Commission and other State regulators to ensure that 
non-bank lenders who are critical to rebuilding efforts are 
afforded the same flexibilities to work with their hurricane-
affected customers as banks are.
    Finally, to ensure customers get the best loans at the 
lowest rates, the Government should ensure that financial 
institutions who are sharing in the credit risk of rebuilding 
are not relegated to the back of the line in the case of 
default.
    Subordinating our lien positions behind those of the 
Federal Government may ensure the Government is first in line 
to collect in the case of default, but it will assuredly 
increase the financial risk to the private sector lenders which 
inevitably will lead to higher rates and higher payments for 
all consumers, not just those affected by the hurricane.
    Mr. Chairman and members of the subcommittee, there is much 
that needs to be done. We have taken only the first of what we 
believe will be many, many steps to rebuild what Hurricane 
Katrina has damaged.
    I thank you for the opportunity to testify before you today 
and will be pleased to answer any questions you have.
    [The prepared statement of David Gibbons can be found on 
page 111 in the appendix.]
    Chairman Bachus. I appreciate that.
    Mr. Shelton?

 STATEMENT OF HILARY O. SHELTON, DIRECTOR, WASHINGTON BUREAU, 
                             NAACP

    Mr. Shelton. Thank you very much, Mr. Chairman and Ranking 
Member Sanders. Ladies and gentlemen of the subcommittee, I 
appreciate the opportunity to come before you today to talk 
about responses of our Nation's financial institutions to the 
Hurricane Katrina disaster.
    I am here on behalf of the national NAACP, our Nation's 
oldest, largest, and most widely recognized grassroots-based 
civil rights organization. With more than 2,200 units in every 
State in the Nation, including hundreds of units in the areas 
that have been most devastated by Hurricane Katrina, the NAACP 
stands ready to provide you with our concerns and suggestions 
as to how best to help the multitude of victims of Hurricane 
Katrina.
    Once the scope of the damage from Hurricane Katrina became 
apparent, as well as the fact that a disparate number of those 
most severely affected were African Americans and other racial 
and ethnic minorities and the poor, the NAACP activated our 
grassroots networks and began offering assistance.
    In preparing this testimony, I spoke extensively with the 
people in charge of the Baton Rouge, Louisiana, Biloxi and 
Jackson, Mississippi, and Houston, Texas, NAACP disaster 
command centers, and much of what I have to say here today 
comes from them, the people in the field.
    I would like to thank them all--Mr. Kwame Asante in Baton 
Rouge, Louisiana; Mr. Derrick Johnson in Jackson, Mississippi; 
Mr. James Krowell in Gulfport, Mississippi; and Ms. Yolanda 
Smith in Houston, Texas--for their insight as well as their 
Herculean efforts to help the victims of Katrina.
    At the most basic level, it is the fervent goal and 
aspiration of the NAACP to ensure that when all is said and 
done the victims of Hurricane Katrina, regardless of their 
race, economic level, or the extent to which their lives were 
disrupted by this disaster, are able to come away with all that 
they had had prior to the tragedy in terms of their finances, 
property, heart, minds, body, and souls.
    Much of this, including homes, cars, businesses, and credit 
ratings, are a result of an interaction they had prior to the 
hurricane with a financial institution.
    Thus, we are strongly urging the financial institutions 
that are represented here today to continue with all the 
Hurricane Katrina--working with Hurricane Katrina victims and 
show flexibility and compassion so that all the residents of 
the Gulf States are not further victimized and they can recover 
from the horrors of this disaster.
    I am also here today to say that the NAACP invites the 
opportunity to work with you, the financial institutions, as 
well as with every Member of Congress, to try to develop 
policies to help ensure that all of the victims of Katrina 
fully recover.
    Secondly, the NAACP wants us to learn from Katrina. When 
all is said and done, we would like to be able to say that yes, 
Katrina was a devastating nightmare and much was lost; it 
shined a spotlight on historically troubling racial and 
economic divides that still persist in our Nation, but we can 
learn from such past tragedies, and we have taken the time to 
try to establish policies and practices to try to stop, or at 
the very least stem, some of the very serious problems that 
occurred in September of 2005.
    We cannot stop natural disasters, but we can do more to 
mitigate the damage they cause with greater conviction. In the 
short term, there is much that we can and should be done by our 
Nation's financial institutions to help address the losses 
suffered by tens of thousands of people who were affected by 
Hurricane Katrina.
    According to our command center director from Houston, 
where tens of thousands of victims have been taken, there is a 
dire need to consolidate services and make them readily 
available to large numbers of people.
    Most of the victims who are housed in Houston came in by 
buses and, thus, lack transportation. To expect them to travel 
to other areas of town to obtain even the most basic of 
financial services is impractical and difficult, at best.
    Furthermore, the sheer numbers of people who have been 
evacuated to Houston and are in dire need of basic services 
demands innovative responses form all sectors, including the 
financial services sectors here.
    I should add that the NAACP recognizes that many of these 
people may not have been involved as traditional customers to 
your banks, credit unions, or et cetera. Quite frankly, some of 
them have never used an ATM or applied for a traditional 
mortgage or small business loan in their lives.
    But now is not the time for anyone, including the financial 
institutions, to turn their backs on whole communities. From a 
business perspective, it would also be a terrific opportunity 
to pursue new clients and to prove that your institutions truly 
care about a diversity of people and about their customers--
that could become your customers.
    Looking a little further out, we would like all financial 
institutions to develop a plan to ensure that everyone affected 
by the devastation, not just the wealthiest, are able to 
rebuild. We must make sure that the finite pool of capital is 
spread evenly throughout the victims and that the low-and 
middle-income Katrina victims are not left out of efforts to 
rebuild.
    To that extent, the NAACP supports the recommendations of 
the Independent Community Bankers of America that a special 
loan bailout fund be created for the Federal Government to 
purchase loans of borrowers affected by the disaster. We would 
like to be involved in the creation and implementation of that 
fund, however, to ensure that consumers and homeowners are 
protected as well as the financial institutions.
    There are a few steps that can and should be taken by all 
financial institutions to ensure that the people of Louisiana, 
Mississippi, Alabama, and the other areas affected by Katrina 
are not further victimized and do not suffer further losses.
    Many of these recommendations are especially important to 
low-and middle-income families, many of whom lived paycheck to 
paycheck and may have lost their jobs when their places of 
employment blew away or was last seen under 15 feet of water.
    Specifically, the NAACP is joining other consumers and 
civil rights groups in calling for a series of debtor 
protections, including a moratorium on foreclosures, a 
prohibition of collections and deficiency judgments on real and 
personal properties, a prohibition on negative credit 
reportings or omissions of negative events from credit scores 
when the incidents were a result of Katrina, and a voluntary 
waiver of late fees or interest on loans made to people in 
Katrina-affected areas for a period of at least 3 months.
    The NAACP is also very concerned about the predatory 
lenders, who even as we speak must be circling some of the 
worst hit areas, salivating at the potential for abuse. 
Predatory lenders have historically targeted African Americans 
and low-income Americans at disproportionate rates, so we need 
to ensure that the few protections we have remain firmly in 
place.
    Specifically, the fraud protections regarding home 
improvement contractors, including the 3-day right to 
rescission and the APR disclosure must be retained.
    Lastly, financial institutions can stem the inevitable 
preponderance of predatory loan in low-and middle-income 
neighborhoods and communities of color by establishing a 
presence of their own in these areas.
    If legitimate financial institutions opened branches in 
low-income neighborhoods or in areas predominantly occupied by 
African Americans and offered low-cost loans, then predatory 
lenders would have a harder time re-victimizing the victims of 
Katrina, which brings me to my final point, lessons we can 
learn from Katrina.
    In my discussions with Kwame Asante, the president of the 
NAACP Baton Rouge branch and the director of our hurricane 
command center in that city, one thing became clear. With the 
slow erosion of the Community Reinvestment Act over the last 
few years, traditional financial services have become, even 
prior to Hurricane Katrina, harder to come by in low-income and 
predominantly African-American communities in his area.
    As a result, when people were scrambling to find shelter or 
evacuate prior to the hurricane's arrival, Mr. Asante himself 
witnessed several mothers dragging their children from bus to 
bus to try to get to a part of town that did offer financial 
services to get money out of their accounts. The other option, 
which was used by too many other people, was high-interest 
lenders, including payday lenders.
    The lack of basic financial services in our communities has 
also led to people storing their savings in their homes, in 
their mattresses and teapots. So when their houses washed away 
or became engulfed in flood water, people lost more than their 
homes. They often lost their life savings as well.
    In closing, if we learned anything from this disaster and 
hope to avoid the devastation of these proportions in the 
future, it is that financial institutions must do more to serve 
low-and middle-income Americans and that they cannot ignore 
communities of color.
    Hurricane Katrina is a disaster of tremendous proportions, 
both in economic as well as basic human terms. Yet it also 
offers us opportunities to do better and to offer more to our 
society.
    For financial institutions, Hurricane Katrina has provided 
you with the opportunity to offer your services to people from 
all walks of life and all racial and ethnic backgrounds and to 
show a sense of compassion that has been sorely missing from 
our national history.
    The NAACP stands ready to work with you. Thank you again 
very much for allowing me to testify today and to share with 
you the concerns, challenges, and hopes of the NAACP.
    [The prepared statement of Hilary O. Shelton can be found 
on page 131 in the appendix.]
    Chairman Bachus. I thank you very much.
    My first question--we have heard reports of people walking 
into banks without a driver's license or identification trying 
to either open a bank account or become a member of a credit 
union. And the Bank Secrecy Act, you know, prevents a certain 
amount of that.
    Now it is my understanding that the bank regulators have 
asked you to sort of relax those rules. Is that correct? Are 
you getting that message?
    Mr. Cloutier. Mr. Chairman, I will tell you that the 
message is coming loud and clear from Don Powell, but let me 
give you an instance. We have formed a task force over at ICBA, 
and we had a conference call the other day, and we had some 
bankers on from Homestead, Florida, who went through Andrew, 
another major hurricane that hit Florida and then hit 
Louisiana.
    And their comments were yeah, they worked with us for 12 
months, and then they came back and they blistered us on what 
we did. And there is still a big fear of that among the 
bankers. Don and I have had long conversations about that. We 
had long conversations with John Ducrest, the banking 
commissioner.
    And, I mean, there is a lot of fear that, you know, what is 
going to happen 12 months, 24 months from now. So that is why I 
encourage you all act so much. I think it will help. It will 
help send a very clear message from Congress of what your 
wishes are, and hopefully--I know the regulators will pick it 
up and work with it.
    But there is a fear of that out there.
    Chairman Bachus. Thank you.
    I will tell you all on the currency transaction reports we 
have been working with just--and I am talking about for regular 
customers, seasoned customers, Mr. Hensarling's legislation--
does not have at this time, but we are very, very close to 
having a seasoned customer component on that.
    And with some assurance I will tell you today that we will 
probably have legislation with the backing of the regulators 
where we will not have to have as many of the CTRs.
    Mr. Deaver. Mr. Chairman, if I might add to that on the 
identification issue, we have heard the same things that Mr. 
Cloutier--
    Mr. Cloutier. Correct.
    Mr. Deaver. --okay, I am from Mississippi, not Louisiana--
that he has heard, and we have talked directly with Chairman 
Powell about this. And we are really trying to advocate, as is 
Chairman Powell, common sense in this, for still being able to 
meet the immediate needs and get our hands around those.
    And I guess we certainly are all concerned with the goals 
of the regulations that we are under. We do not put those 
aside, but we are talking about temporary emergency type relief 
in these situations, and, frankly, the bank secrecy type 
regulations did not have a Plan B, and we are advocating, I 
guess, a Plan B, a temporary limited response to these needs. 
And we appreciate any help that we can get.
    Chairman Bachus. And I know Chairman Baker said, you know, 
those things that we have got a consensus we feel like we can 
pass immediately. We need to get out--that is why this 
indemnification for check cashing and other--want to try to get 
that out, even though it does not have prompt corrective action 
in it.
    And I know that something that the credit unions 
particularly have asked for us to get. But those things are 
more controversial, and we want to move immediate relief out.
    Ms. Casey-Landry. Mr. Chairman, could I just add one 
comment--
    Chairman Bachus. Yes.
    Ms. Casey-Landry. --echoing in terms of what we heard from 
Rusty and Mac--I think it is easier to use their first names, 
that really what we need is written guidance from the 
regulators.
    And I realize that Chairman Powell has been wonderful in 
terms of his forthcomingness, but the reality is that what is 
said here in Washington and what is communicated in the field 
to the examiners can be different.
    And we need to make sure the examiners have the written 
guidance that they can rely upon and the banks can rely upon 
that.
    Chairman Bachus. And actually, we are working on a Katrina 
BSA proposal for them, something in writing, and hopefully--and 
I know Chairman Baker--we plan to have something along with 
cooperating--I know Ms. Hooley and Ms. Waters are working on 
some things.
    Let me ask this question, and this, I think, is more of a 
long-term question. We have all talked about the properties 
destroyed by the flood waters and the storm surge outside this 
designated flood plain.
    My question, and I guess I could ask it different ways, but 
I will just say should the Katrina victims outside of the 
designated flood plain be compensated in any way by the 
National Flood Insurance program? How would you recommend this 
compensation be structured? I know that is a tough question.
    Maybe two parts: Should they be compensated--
    Mr. Elliott. Yes.
    Chairman Bachus. --and how?
    Mr. Elliott. Yes. I mean, we have people down here--and I 
am not trying to place this off on someone else, but--that 
through their process of purchasing homeowner insurance were 
told by their agent look, you are not in the flood plain; you 
have never been flooded before, not even in Camille; this is a 
waste of money.
    And that is what people have judged--we have credit unions 
that go back 100 years, through all of the flood plain mapping 
and everything else. In the absence of a 100-year flood plain 
history, they will look at what happened in Camille--
    Chairman Bachus. And I know, you know, CUNA, in their 
written statement, Mr. Elliott, you did address that.
    Mr. Elliott. Yes.
    Chairman Bachus. And I guess I am curious about other--is 
there any reaction?
    Mr. Gibbons. I may comment on this. You ask about flood 
insurance compensation and extending the National Flood 
Insurance program to those not already covered. They were 
outside of flood plains.
    It may not be a matter of extending flood insurance. It may 
be a matter of finding a way for them, those people, to 
rebuild, incurring some kind of debt in addition to what they 
already carry on the house that no longer exists.
    But fundamentally, what we are talking about is some kind 
of Government assistance.
    Chairman Bachus. All right.
    Ms. Casey-Landry. I would say that we would--America's 
Community Bankers would support some type of support. I think 
whether it is an extension of the flood insurance or maybe more 
appropriately, as was just stated, some sort of assistance 
because otherwise if those borrowers turn around and walk away 
from the bank, the bank is going to be left with a loss, and we 
do not go forward anyway.
    So we need to think creatively about providing up a 
solution so that the bank continues to have a valued asset. If 
I have got some of my members today with 40 percent to 50 
percent of their portfolios or higher that are insurance 
claims, those are the ones that are insured.
    Then there is the group that are the no insurance, and so 
they also--they do not know what the value of their assets are. 
So I do think we need to look for some type of a solution, and 
it could be the flood insurance, or it could be another type of 
fund, to help those customers.
    Chairman Bachus. You know, as a policy, what we had were 
people who said flood insurance--there is no Federal flood 
insurance because you are outside a flood area when, in fact, 
along the coast we should have anticipated storm surges, that 
they were, in fact, within an area which was prone to flood 
or--which was so predictable in New Orleans.
    Mr. Gibbons. Well, we could say we should have anticipated, 
but rest assured--and be right or wrong about that, but rest 
assured, any lender will anticipate this will happen again.
    Chairman Bachus. Yes.
    Mr. Deaver. Mr. Chairman, I might add that the storm surge 
in this storm in Mississippi was over twice the storm surge 
from Hurricane Camille, and that was our benchmark, so we do 
not stop talking about Camille and start talking about Katrina.
    And like Charlie said, there are many, many areas that got 
flooded that were out of the flood zone, and there likewise are 
many, many issues related to insurance. And of course, 
everybody, even in the flood zones, you know, I guess if they 
have Federal related mortgages they are required to have the 
insurance, so there are a lot of issues involved in that and, 
frankly, probably some insurance disputes over wind, water--
    Chairman Bachus. Sure.
    Mr. Deaver. --which came first, this type of thing, so--
    Chairman Bachus. Which obviously we have all been--we have 
all heard about those.
    Mr. Deaver. But we would appreciate the opportunity to work 
with the other members of--
    Chairman Bachus. Thank you.
    Mr. Deaver. --the panel and the committee on that.
    Mr. Cloutier. Mr. Chairman, on that, I would like--
    Chairman Bachus. And actually, my time has gone over.
    Mr. Cloutier. I would just like to add one quick thing to 
that, just 20 seconds. Everybody--
    Chairman Bachus. Oh, I am sorry.
    Mr. Cloutier. --in that area played by the rule book. They 
had the rule book. They had the rule book for flood insurance. 
They had the rule book of how to run banks. These were all one 
and two rated banks. They all played by the rule book.
    Now we are only talking about who is going to pay the price 
because Hurricane Katrina did not play by the rule book.
    Chairman Bachus. All right.
    Mr. Cloutier. And that is the question.
    Chairman Bachus. All right. And I guess another thing I am 
saying--we are going to spend all this money. You know, that 
ought to be a component of it, at least--or be very much under 
consideration because there will be money that maybe will not 
be as efficiently spent, but this money obviously would be 
spent to rebuild homes of people who acted in a prudent way, 
you know, and those that loaned the money acted in a prudent 
way.
    At this time, I--you are--okay.
    Mrs. Maloney. I want to thank--
    Chairman Bachus. Ms. Maloney?
    Mrs. Maloney. --all of the participants for your really 
heartfelt testimony today, and as one who represents New York 
City--and many of my constituents suffered; our whole city 
suffered--along with all of my colleagues, we are united and 
determined to do absolutely everything we can to bring 
assistance and support to the victims and to the Gulf region 
that suffered from Katrina.
    To offer one lesson from 9/11, when you have concerns--and 
you have raised many today--it might be helpful if Treasury had 
one point person that could respond to the concerns coming in 
from the field, whether it is the written guidelines that are 
critical--I hear all of you are really rewriting the book in 
order to respond to the people, the credit unions, the banks, 
the community bankers, especially those of you who have a 
geographic area--are really doing everything you can.
    And I join with my colleagues on the other side of the 
aisle to work to get these considerations in place to help you 
do your job.
    I would like to ask Diane Casey-Landry from the Community 
Bankers Association--and you certainly are supremely affected 
because of the geographic concerns of community bankers--in 
your written testimony, you talk about the idea that the 
Federal Government should develop a mechanism for spreading 
risk for natural disasters. We obviously need to respond to 
this disaster, but we need to think for long term of ways we 
can better respond to disasters in the future.
    And my question to you, Ms. Landry, is, is there a 
particular model for doing this that you would like to put 
forward, or what features should you have--would you like to 
see in such a plan? Would you elaborate?
    Ms. Casey-Landry. Over the years, as our members from 
across the country have faced various natural disasters, 
whether they be the hurricanes that hit Florida last year, the 
Red River flooding that occurred a few years ago, the 
Mississippi River flooding--I mean, you can go through and find 
natural disasters that are unexpected, as always.
    We have thought that the development by the Federal 
Government of a way to spread the risk across all the holders 
for insured properties--in some ways, we did that after 9/11 
with the terrorism reinsurance. But if you look at what 
happened in Biloxi, in the Gulf Coast region, in New Orleans, 
you could say that we have a disaster there that was to the 
same effect of a--I guess you would say a natural element of a 
terrorist attack.
    It took away the infrastructure. It is going to expose the 
insurance carriers, all the holders of commercial real estate 
property, you know, with large, large losses. And it is 
something that has been unprecedented in amount.
    We do not have a conceptual plan in place right now. This 
is an idea that we had circulated literally, oh, probably 3 
years or 4 years ago, and we thought that Katrina gave us an 
opportunity to remind Congress that this is something that we 
could be looking at as a way to spread out the risk in a more 
reasonable fashion so you do not have it localized, whether it 
be in New Orleans or Biloxi or New York or in the Red River 
region. It would provide a way to make sure that the holders or 
carriers and the Federal Government serve a role.
    Mrs. Maloney. I think that it is an important concept. We 
are one country, and a disaster is a disaster. And it is 
something we could not control, certainly natural or terrorist 
attack, or whatever.
    And from the perspective of New Yorkers, of all the things 
that the Federal Government did, our colleagues did in 
Congress, by far the most important was the Terrorism Risk 
Insurance Act. We could not put up a popsicle stand after 9/11 
until we got the Federal support to spread the risk.
    Incidentally, it has not been reauthorized. We need to get 
that reauthorized. Otherwise, building will not move forward. 
It cannot move forward. And you will face the same challenge in 
the Gulf region for insurance and for protection against 
disaster.
    So I, for one, would like to work with you on that 
proposal. I think it is an important one, and I think it is one 
that could help us as we go forward in risk sharing and being 
prepared for disasters that move forward.
    I would like to ask Rusty Cloutier--and you spoke really 
very movingly about the efforts of yourself and other bankers 
in the region responding to the needs of the individuals with 
all their crises. I would like to ask you if the State of 
Louisiana has--they sent my office, and I assume many others, a 
memo from the National Association of Bond Lawyers, calling for 
several steps.
    One appears to be something that you also recommend and 
mentioned briefly in your remarks, and that is the creation of 
a new tax-exempt bond. This would be similar to the Liberty 
bonds that helped New York City recover. And have you had a 
chance to review the proposal that was put out by the NABL? And 
can you comment on this suggestion in more detail?
    Mr. Cloutier. I really can not. I have not had a great deal 
of opportunity to review it. But as I said, I have been working 
very closely with the city of Lafayette and the State of 
Louisiana on our relief actions for the community and working 
with the people that are affected in New Orleans.
    And I will tell you, we will have to really think out of 
the box. I mean, Mayor Nagin's statement this morning--just 
realizing what he said. He cannot pay his police or firemen at 
the end of this 2-week period that is coming up.
    He is hoping to work with banks to get some funding. We 
have been working with the city of Lafayette and the Cajun Dome 
to fund their operations, and they are awaiting money from FEMA 
as we speak.
    So it is going to have to come--a lot of creative 
solutions. The State of Louisiana has lost one-third of its 
economy, one-third. It has been destroyed. Now, it is going to 
take time to build this back, and then, hopefully, a lot of 
people will come back to the community.
    And, you know, we walked a very careful line of helping 
people who have evacuated New Orleans but not, at the same 
time, trying to settle them into our towns too quickly because 
we want to help rebuild the city of New Orleans.
    But to answer your question, I am not totally familiar with 
the bonds. I know a lot of people are working on it. The State 
of Louisiana--the State of Mississippi also--I think I can 
speak for them--have had huge financial losses. The numbers I 
heard in my last Federal Reserve meeting concern me a great 
deal.
    And so I think both of them are going to have to be very 
creative on how they finance those States and those areas.
    Mrs. Maloney. My time is up, and my colleagues and I are 
united and determined to help in any way possible. Thank you 
all for your testimony.
    Mr. Baker. [Presiding.] I thank the gentlelady.
    Mr. Cloutier, I want to engage you in trying to help 
committee members understand the nature of the potential losses 
associated with the disaster.
    If you were a commercial lender in Venice financing a 
grocery store operation and the loan was based upon 3 years' 
prior income tax returns demonstrating cash profitability 
collateralized by the commercial building structure and the 
structure's gone, the customers are done, the store owner's 
gone, obviously you would hope that there is some private 
insurance to help pay for the structure, but there is no 
business operations loss coverage and no prospect for recovery 
of the structure and initiating commercial activities again.
    Let's just assume this is a $1 million package for 
operations and collateral for the building collateralizing the 
loan. What do you do with that on your books?
    Mr. Cloutier. Well, Congressman, that is a big, big 
question. And a lot of banks are asking. I have $25 million 
worth of participations in the city of New Orleans that we do 
business with, and we are looking at each loan individually.
    You look at what other business operations those people may 
have had, were they outside of the area, because maybe we were 
fortunate in this instance they had an operation in Venice, and 
maybe they had another one over in Homer and they can pay us 
back.
    But let me give you just some of the horror stories I am 
hearing from New Orleans. People who had parking lots 
financed--those things are shut down for a year--how do they 
pay their notes? Cleaners, doctors, you know, people who have 
lost their whole practice--and you know yourself the number of 
attorneys that have moved to Baton Rouge and Lafayette--they 
have had to reestablish themselves.
    The other day when I was at the shelter I talked to a few 
people who had, you know, very small businesses in New Orleans, 
and they said I have lost my business; I have lost my home; I 
have lost everything. You know, they do not know where to turn.
    And I think, Congressman, just to be very honest with this 
committee, it is going to take 6 months to 12 months just for 
us to get a hold on some of those questions in the banking 
industry. And certainly, we would hope the regulators would 
give those banks a great deal of time to try to be able to 
consider what is going to be done.
    Can that person get an SBA loan to reestablish his 
business? Can we restart it? Can we work with him? Today, 
Congressman, I have got to be honest, and I want to be honest 
with the committee, there is no answers today on the Gulf Coast 
of Mississippi.
    Mr. Baker. Well, let me go on a little further. Let's take 
the case where someone knew they were in a flood zone. They 
have acquired flood insurance. And it is a $500,000 house.
    Mr. Cloutier. Right.
    Mr. Baker. The maximum payable for structures under the 
flood insurance program is capped at $250,000, $100,000 for 
contents, so for a $500,000 loan there is no payment from the 
private insurance because it was a flood event.
    The flood event is total capped at $350,000, so the bank 
has an exposure of $150,000, and the person may not be there, 
and the house is not there, so the collateral is no longer 
there. That is also a problem, is it not?
    Mr. Cloutier. That is correct, Chairman. I will tell you 
that many of my colleagues in New Orleans have given me figures 
anywhere from 30 percent to 60 percent of their loans are in a 
great deal of question today.
    Mr. Baker. Let me--
    Mr. Cloutier. They do not know the answer to exactly the 
points you are making, that they may had limited flood 
insurance, no flood insurance.
    Mr. Baker. Or even if they had the maximum, the maximum--
    Mr. Cloutier. The maximum--
    Mr. Baker. --the maximum flood insurance--
    Mr. Cloutier. Correct.
    Mr. Baker. --that would be paid is $250,000, period--
    Mr. Cloutier. Right.
    Mr. Baker. --business, residence, otherwise, $100,000 on 
contents. Now, let's jump to the situation where the 
structure's lost by fire, and it is a $500,000 policy and 
replacement value is $400,000.
    It is my understanding that you get the face value of the 
policy paid of $500,000 even if the loss is only $400,000 
because that is what you paid for. So as contrasting fire 
coverage with flood coverage, you can not buy more than 
$250,000 under flood. If you buy $500,000 on fire, you get the 
$500,000 even if the loss is only $400,000.
    Now, something does not make sense with this. I do not know 
how to--in the face of the catastrophe, I am becoming a lot 
more conversant with claims paid and claims not being paid.
    And then we jump to Mr. Deaver's concerns. How do you 
establish that it was the wind that took you down when you had 
a storm surge that came in some hours into the storm, and did 
the surge take you out, which mysteriously to me is called a 
flooding event, although it is wind-driven, and not covered?
    So you could have someone in good faith insured to the 
limits, $1 million policy on a $1 million house; it is gone; 
oops, that is the storm surge, no coverage.
    Is that correct, Mr. Deaver?
    Mr. Deaver. That is what is being cited in many cases, but 
I would echo what Mr. Cloutier--
    Mr. Baker. Cloutier, Cloutier.
    Mr. Deaver. --Cloutier, I am sorry.
    Mr. Baker. That is all right. We are working on you.
    Mr. Deaver. Thank you, Mr. Chairman.
    Mr. Baker. We are becoming bilingual here.
    Mr. Deaver. There are a lot of issues, and this is one of 
them--and of course, this is not just going to happen one time, 
either. But my chairman of my association said we have not got 
that far, or we have not got our hands around it, whatever 
words they used, and that is similar to what Mr. Cloutier has 
said.
    But, you know, we do not know what is going to happen here. 
And there are going to be disputes, and there is going to be, 
unfortunately, I am sure, some litigation. There needs to be 
some relief for these people.
    Mr. Baker. Well, even beyond--if we finally determine that 
storm surge is a wind-driven event and not a flood, then there 
is going to be solvency questions for the insurers, who have 
never previously priced that into their premium structure.
    So we are going to drive people out of business by changing 
jurisprudence on the issue of wind versus water. This is 
dangerous territory.
    But at the same time, if we do not acknowledge the 
difference between storm surge, fire, and flood coverage, and 
we leave banks out there to hang who have no collateral, who 
are going to get written up by regulators, whose customer base 
has been dissipated because they have moved to other places in 
the country, the economic rollout of this is devastating.
    If we just look past the energy question, we look past the 
grains in the Midwest who can not get exported because 60 
percent of that goes through the Port of New Orleans, we add on 
top of that the banking crisis, this thing goes on for decades, 
I am afraid.
    Mr. Deaver. Mr. Chairman, the amazing thing about this 
situation is the issues just in the last 2.5 weeks have 
changed. They change every day. And when we think about 
something like what you are describing, it is out there, and it 
has got to be dealt with.
    But there is a lot of other issues between here and there, 
and there is a whole lot more to work on, so--
    Mr. Baker. It is incredible for people, for example, in St. 
Bernard that is today still under 6 feet of water--a person 
files a claim to get their emergency assistance, and they are 
told we can not give you that assistance until we verify the 
loss. Well, the whole parish is under six feet of water. It 
ought to be pretty simple, but apparently it is more 
complicated than I understand it.
    Mr. Hinojosa?
    And let me point out, Ms. Waters has waived her time. Mr. 
Hinojosa has a schedule limitation.
    Mr. Hinojosa. I want to thank the Honorable Maxine Waters 
for giving me this opportunity so that I can go on to the event 
where I am going to be the keynote speaker.
    I want to express my sincere appreciation for you, Mr. 
Chairman, for holding this hearing today. I think it is 
imperative that we provide any and all financial assistance to 
the victims of Hurricane Katrina as soon as possible.
    Listening to each and every one of the presenters on the 
panel has been very, very informative. And you are right; we do 
not understand it as you do, but thank you for coming to 
Washington to educate us on this issue.
    And I want to talk about one possibility that would 
certainly make your work a little easier, and that is talking a 
little bit about the work that is being done and can be done 
with regard to financial education literacy.
    I have been working with Texas State Banking Commissioner 
Randall James and Steve Scurlock with the Independent Bankers 
Association of Texas on the Katrina relief efforts.
    We have worked to ensure that all the banks in Texas are 
provided with as much regulatory relief and liquidity as 
necessary to accommodate the increased demand for funds caused 
by the $2,000 debit cards and now the checks being cashed by 
each household impacted by the hurricane.
    I also worked with Commissioner James and with J.P. Morgan 
Chase on ensuring that households that were supposed to receive 
the debit cards last week or EFIs and checks this week would 
know how to use them, why not to trade them, how to protect 
them, and possibly suggest what to buy with them.
    However, as we all know, the issuance of those $2000 debit 
cards by FEMA last week was a fiasco. As co-founder and as the 
co-chair of the Financial and Economic Literacy Caucus, I have 
tried to ensure that the individuals and households that 
receive these checks receive some sort of guidance on how to 
use the funds without interfering with their personal 
liberties.
    It is imperative that we provide the victims of Katrina 
with some form of financial planning now, as opposed to later. 
Timing is everything, and one door has closed on us already. 
The victims should have been provided with some explanation on 
how to use the debit cards.
    To ensure that another door opens, I have co-authored and 
co-signed a letter dated September the 8th, 2005, which I have 
in my hands here, and it was co-signed by my co-chair, 
Congresswoman Judy Biggert and several members of the Financial 
and Economic Literacy Caucus. We sent it to the Financial 
Literacy Education Commission housed at Treasury. I am glad 
that Congresswoman Biggert inserted the letter earlier today 
into the record.
    And, Mr. Chairman, I want to inform you that we have yet to 
receive a response from the Treasury. And I would urge them to 
respond as soon as possible, and we need your help. Someone 
needs to coordinate, at least on this issue, because FEMA has 
failed to do so.
    I believe that providing financial education using the 
Financial and Economic Literacy Caucus, private sector, and 
nonprofit group could be one way in which we could answer lots 
of questions for these people that you are telling us about, be 
they small business, medium-sized business, or just 
individuals, professionals like you pointed out, doctors, and 
lawyers, and folks who give services to folks in Louisiana, 
Alabama, and Mississippi.
    We want to use all the available literature and information 
to provide hurrican victims with financial planning assistance, 
but without the commission responding to us and giving us some 
Federal assistance, I do not see how we can be of help to 
disseminate that information.
    Mr. Baker. Would you yield on that point?
    Mr. Hinojosa. Yes, I yield.
    Mr. Baker. I just want to note for the record that I have 
signed on to the gentleman's letter and also will be meeting 
with the Secretary of the Treasury this afternoon and intend to 
bring that to his attention.
    Mr. Hinojosa. Well, know that Congresswoman Biggert and I 
look forward to seeing the results, and we have about 67 
members of Congress as part of our caucus. They have staffs, 
and we are willing--Texas opened up its heart and its State to 
help 250,000 people, and they are asking for information.
    They are asking for answers to their questions. So know 
that we have staff in Texas and the other States impacted, 
Alabama and Mississippi and Louisiana, who also want to help. 
But we need to have some coordination among the Federal 
agencies to make it happen.
    With that, Mr. Chairman, I yield back the remainder of my 
time.
    Mr. Baker. I thank the gentleman for his comments.
    Mr. Price?
    Mr. Price. Thank you, Mr. Chairman. I appreciate that.
    I want to, once again, thank each of you for coming. I also 
want to commend you again on the work that you have done. Those 
of you in the area, you have been through a nightmare most of 
us can hardly imagine, and I want to commend you for the work 
that you have done. And for those who represented the 
associations, I want to thank you so much for the work that you 
have done and your employees and your members are doing.
    As we have watched this play out over the past 2.5 weeks, 
it has been very discomforting at times to see the images that 
we see across our televisions. But I am heartened by the 
enthusiasm and the optimism with which Americans all across our 
country have responded in a way that literally is 
unprecedented. And I know each of you have played a great part 
in that.
    I am always trying to look forward to how we--I am a 
surgeon by education and profession, so if I can not fix it, 
then I have got to find a way to fix it. So how do we move 
forward at this point, and how do we make it easier?
    And I would ask each of you if you would not mind giving me 
one or two little pearls about whether or not Federal banking 
laws are currently getting in the way of a solution and what we 
in Congress might be able to do to specifically assist in 
moving us forward as a Nation and as a region that has been 
harmed so much.
    Mr. Deaver. I will go first on that. Frankly, as I said 
earlier, we have been focusing on the immediate needs. I have 
lists of issues--a lot of them are long-term issues--that we 
really and our members have really not had time to really look 
at. As far as the immediate needs; it has been cash needs, it 
has been getting the benefits to the people that have them 
coming.
    And as far as Government getting in the way, we have had 
issues with BSA, CTRs, all the things that go with that that 
have been discussed, I think, a good bit here today. That is an 
immediate concern. As Ms. Casey-Landry said earlier, we would 
like to get that in writing because--and Chairman Powell said 
you all probably want this in writing. We said yes, we do, 
because that is just an immediate need.
    So I have added to my list, sitting here today listening to 
everyone discuss it, environmental things. I was taking some 
notes earlier. Those are things that in Mississippi, because we 
do not have water standing everywhere, we have not maybe 
focused on those as much, but they are there as well.
    Mr. Price. And we hear that. This committee, though, can 
address--
    Mr. Deaver. Right. Right.
    Mr. Price. --specific banking law, and I wondered if 
anybody had any comments about Federal banking laws that are 
currently in place that might need specific attention by us.
    Mr. Deaver. If I could add one more thing real quickly, 
concern that some folks in my association, in the ABA, have 
that some of the immediate--the most stricken areas--you know, 
they are not here today, and we do not want this to go--to be 
dealt with with folks like me sitting here talking to you when 
the folks that really need to be dealt with are not here.
    And of course, I know Chairman Powell and others have been 
down, Congressmen in his district, but we just want to make 
sure that we get those needs assembled, and we get our hands 
around them, and that we work with the Congress on a long-term 
basis to prepare for anything--
    Mr. Price. Thank you.
    Anybody have any comments about specific law? Please.
    Mr. Elliott. Yes, we have a bill, H.R. 2317, the Credit 
Union Regulatory Improvements Act. Inside of there is 
encompassed PCA that we need relief on long term from that 
standpoint, and then short-term authority for the regulators to 
waive certain requirements in PCA over the short term.
    Mr. Price. Thank you.
    Ms. Casey-Landry. I will jump in and say that echoing on 
the BSA and the Patriot Act issues, but let's go over to the 
job side. I think we need to get SBA and we need to get some 
prompt action and some creative funding out of the Small 
Business Administration so that the banks can begin lending to 
the small businesses.
    If people do not have jobs to come back to, they will not 
come home. And there have been an awful lot of small businesses 
that were destroyed, too. And I think the paperwork and the 
dotting of the I's and the crossing of the T's that is required 
through the SBA and how they do their lending today will 
actually stall the process, and we need to get that moving 
faster.
    Mr. Price. Thank you.
    Mr. Cloutier. I think the one thing--and, hopefully, I 
heard today that we are working on a long-term national 
disaster policy for financial institutions. I mean, we needed 
the Government guarantee on checks 17 days ago. We needed it 
badly. And, you know, a lot of people got nervous without 
having it.
    We need the power either given to the FDIC board or to the 
Federal Reserve board that when a national disaster happens, 
they can impose powers to do away with Government regulations 
in the short term to give that breathing room that becomes so 
important.
    Because the thing I worry about every day is not Katrina. I 
still worry about it a lot, but what if we had another 
hurricane? What if we had a number five that hit Houston? What 
do we do next? What do we do if one hits the East Coast? You 
know, we have got to have a long-term policy.
    And I will speak for the bankers in my area. They not only 
want to know what we are going to do today, but if we rebuild 
New Orleans, what rules will they know going forward? And I 
think that is very critical.
    Mr. Price. Thank you.
    Anybody else? My time is short.
    Mr. Gibbons. If I could, I think, from my perspective, 
having been in Federal policy making for a number of years in 
crisis situations, crises that occurred not because of natural 
disasters but occurred because of greed and hubris in some 
cases, the Federal Government's really got to establish its 
role here.
    It is very difficult to trim back on safety and soundness 
and compliance with laws and push bank regulators to do that 
when normal circumstances exist. But the Federal Government has 
to realize that this is not a normal circumstance. This is 
worse than 9/11 ever thought of being from an economic damage 
standpoint.
    And there will need to be some kind of consideration or 
forbearance of Federal funding on many fronts, whether it is 
forbearance in the short term for Bank Secrecy Act laws or for 
the accounting. Going to the gentleman's question, how will you 
account for that, it is a loss today. That is how the 
accountants expect it to be accounted for.
    So the agencies are making some strides at answering some 
of these questions, but there is a lot of other questions that 
have to be answered and then a unified approach taken by all of 
them.
    Mr. Price. Thank you. My time has expired.
    Mr. Chairman?
    Mr. Baker. Ms. Waters?
    Ms. Waters. Thank you very much, Mr. Chairman and members.
    I would like to try and have a frank conversation with you 
bankers about the situation that we are involved in. I think 
this may be a time when we can use this as an opportunity to 
build some new relationships and to get rid of some of the 
problems that have plagued the banking community as it relates 
to minorities and poor people for a long time.
    The HMDA data is out, and you know what that HMDA data is 
saying, that African Americans are the victims, basically, of 
predatory lending and that we pay more despite like income. 
This kind of information keeps us focused on fighting with you 
all the time.
    I would like to see if we can not use this emergency 
situation as a way to demonstrate goodwill. Number one, I am 
certainly prepared to do things that I never thought I would 
do, like relax the bank secrecy laws, the Know Your Customer 
laws.
    I think in this case, where we have people without 
identification and other kinds of things, that, you know, we 
should support something that would make life easier for the 
customers and for you.
    I am also concerned about the reserve requirements. You 
talk about, you know, all of this cash that you are trying to 
make available. You are talking about the loss that you are 
confronted with, with people whose homes are gone, who had no 
flood insurance and, you know, you have no collateral now.
    I am worried about, you know, how we can make things a 
little bit easier and relax whatever laws make good sense in 
order to keep you operating. But you are going to be a part of 
rebuilding New Orleans.
    And I am so worried about the conversations that I hear 
about not wanting poor people back in New Orleans, not wanting 
the same crowds back in New Orleans, hoping some people that 
were sent to Utah do not get back to New Orleans.
    And you are going to be important players in this. And what 
you do is going to help determine whether or not some of those 
people who did not have flood insurance can get back and can 
get home. Now some of this property has been handed down, and 
some of those homes are paid for. Others there are mortgages 
on. But they were not required to have flood insurance.
    As I understand it from some of the staff people that I 
have been talking to, if you were protected, so-called, by a 
levee, that you were not required to have flood insurance. So 
we know a lot of them do not have it. They were not required to 
have it. And if you have outstanding mortgages, I do not think 
you should bear the brunt of that loss. And I think there are 
some things that we can do.
    As you know, in the reform legislation that we dealt with 
for the GSA, we came up with a creative idea by which we would 
have 5 percent of profits monies used for low-income and 
moderate-income housing developments.
    And there is no reason why some of that money can not be 
considered for this area that we are talking about in helping 
to relieve you of the awesome debt that you may be left with.
    So I guess what I am saying is I think that a lot of 
possibility for coalitions on both sides of the aisle coming 
together to try and do everything that we can not only to help 
our constituents but to help the financial services community.
    And my question is whether or not you see your role as 
helping poor people and working people reestablish where they 
want to be and not be a part of any kind of plan that would 
exclude them from coming back and getting these jobs and 
getting contracts and being back where they want to be. Anybody 
can answer this who wants to.
    Mr. Cloutier. Ms. Waters, I will be very happy--and first 
of all, thank you very much for coming to Lafayette. I know you 
were there, and we truly appreciated your visit.
    Let me tell you that the community banks that service the 
New Orleans area--they are there to service that community. We 
have three African-American banks that are very much affected, 
and I am very proud of my working relationship with the NAACP. 
I was honored last year by the NAACP, Dr. Ernest Johnson, in 
Baton Rouge for the relationship that we have in working with 
them.
    It is going to be a challenge. It is going to be a big 
challenge. But, you know, the one thing this did show the 
United States of America--there is a lot of poverty in the 
State of Louisiana.
    Ms. Waters. Yes.
    Mr. Cloutier. And I will tell you, there is a lot of very 
significant financial institutions that have no interest at all 
in the State of Louisiana. The community bankers in there that 
we are talking about today have been there trying to build the 
State, trying to make jobs, and trying to make things happen.
    The same thing with my two friends from the credit unions 
here, and it is not usually we are always in agreement, but we 
are on the ground making things happen. And I promise you that 
the banks in those areas are trying to rebuild their 
communities, and they understand the problem.
    But it is hard for people in this room, I think, sometimes 
to understand the problems when--I mentioned about the debit 
cards. I went to the Cajun Dome where I know you visited, and 
they were handing out debit cards to people who never even had 
an idea what a business relationship was.
    Ms. Waters. Yes.
    Mr. Cloutier. They lived in a cash society, in a total cash 
society. And their lives have been destroyed, and now they are 
trying to change their lives again by how they do things. So it 
is a long, hard road.
    You pointed out a lot of problems we have in the State of 
Louisiana, but I promise you that the bankers in the State, the 
community bankers, are going to work as hard as they can to 
make it happen.
    And you are right; a lot of people played by the rules, and 
I bring that up again, and the rule book just was not right. 
Katrina did not play by the rules. And we certainly hope that 
Congress remembers that when it looks at--as all of you all 
talk about flood insurance and other things.
    But I agree with a lot of your comments. We need to work 
hard to make those--
    Ms. Waters. If I may, Mr. Chairman, just one more on the 
reserve requirements.
    I think I am thinking about this right. Are there some 
questions that you may have about what can be done in that 
area, or is that significant in looking at how we can help to 
relieve you of some of the regulations and the laws that govern 
you as you go through this crisis?
    Mr. Cloutier. Well, Ms. Waters, I will tell you, you know, 
one example is I serve Louisiana, and I am not opposed to the 
Community Reinvestment Act because I do a lot of work in my 
area, and I do not do it for the Community Reinvestment Act. I 
do it because I was growing up as a poor boy from Morgan City, 
Louisiana. And I have been very fortunate in life.
    But I can tell you there is a lot of, as I mentioned 
before, large financial institutions that I do not know how 
visible they are going to be in the city of New Orleans in 
building it. I promise you the community banks that are there 
are going to rebuild that city. They are going to do the work 
they have to do.
    And I just want you to remember those in your 
deliberations, that these people are going to need some help, 
because they did not have offices all over the United States. 
They only had offices in this area. And they are working very 
hard to get back operational.
    Ms. Waters. Don't you have to show a prudent reserve on 
your books of some kind in order to do certain volumes of 
business?
    Mr. Cloutier. I think, you know, a reserve would help. Of 
course, the question is, as Congressman Baker raised very well, 
are there going to be some relief from the flood. That is the 
big problem.
    If the Government said today look, you know, those that did 
not have flood insurance we are going to take care of if they 
played by the rules, I think the banks would be in pretty good 
shape pretty fast. That is the big question. They played by the 
rules, and the rules have now changed.
    Mr. Baker. If the gentlelady would yield on that--
    Ms. Waters. Yes. I would like to yield.
    Mr. Baker. --I am trying to help the gentlelady with 
focusing on her question. Going to my illustration of losses--
    Mr. Cloutier. Right.
    Mr. Baker. --and you write those off, it leads to a 
decrease in capitalization. And under the prompt corrective 
action requirements facing the regulators, they have no 
leniency. They have to do what the law now says.
    Ms. Waters. That is right.
    Mr. Baker. And I think the gentlelady is trying to make the 
point that unless the Congress acts specifically in a 
geographic way to say because you are now underwater or 
environmentally hampered, or whatever, because of particular 
reasons, the regulators shall not pursue the obligations under 
the prompt corrective action statute.
    Ms. Waters. Absolutely. Thank you very much.
    Mr. Baker. And that is what the gentlelady is trying to 
drive home.
    Mr. Cloutier. And, Congressman, that is exactly what we 
would need. We need the floor to be taken off for a period of 
time. I do not know what that period of time is, but there is a 
floor, and--
    Mr. Baker. Well, I am going to abuse the lady's time one 
more time.
    Mr. Cloutier. Yes.
    Mr. Baker. Let me ask this question. If I am the regulator 
and I am given authority to take reasonable action in that 
world, is that okay for you? In other words, rather than us 
specifically set a time line--St. Bernard is still underwater. 
Jefferson is not. Ought to be different rules depending on on-
the-ground conditions.
    Is that something that you are comfortable with, if we give 
the regulators that type of discretion to--
    Mr. Cloutier. I think you have to give that discretion to 
someone that they have a period of time to do away with the 
floor so that they can work through it. As you well know, 
Congressman, in our district every area is a little different. 
St. Bernard is much different than the West Bank of New 
Orleans, and so you have to work through that.
    But yes, I think that is something that could work. We have 
to think out of the box here a whole lot.
    Ms. Casey-Landry. Mr. Chairman and Congresswoman, let me 
just add, I think if the regulators were directed to provide 
some guidance--I think they already have sufficient flexibility 
today.
    One of the first issues, before we get to the PCA issues, 
will be as the insurance claims begin to come into the banks 
and they get the cash, we have been told that the banks will be 
able to hold that off balance sheet so they will not have to 
hold capital against it. That will be--that the regulators--
    Ms. Waters. That would be good.
    Ms. Casey-Landry. --have already indicated they are willing 
to do that. As we go through this crisis, as we go down the 
many months and find out the outcome of these loans, we may 
then have to start to deal with the PCA issue.
    But all the banks in the New Orleans area--I can not speak 
for Mississippi--but were very highly rated banks, one or two 
rated institutions, extremely well capitalized institutions. So 
they have a good cushion. And I think that is going to allow 
the regulators some flexibility.
    But what we do not want to see is a bank that has been a 
well capitalized institution under PCA suddenly becomes an 
adequately capitalized institution. You have dropped two 
categories, and you are not looking to be criticized by the 
regulators for falling from category one to, you know, moving 
down.
    So there, again, Congress could be encouraging the 
regulators to provide the flexibility there so that they do not 
harm the institutions as they work through this.
    Ms. Waters. That is precisely, if I may, Mr. Chairman, what 
I am talking about. And I think you said it very well. Banks 
with good reputations, you know, who have been around, who have 
been well capitalized--if all of a sudden they are confronted 
with a situation where they have to record, you know, these 
losses, we do not want them to all of a sudden be viewed or 
regulated in certain ways that make them appear as if they have 
not been operating properly.
    We want to be able to do something that would relieve you 
of that in this crisis. I do not know how that is to be 
designed. I would think that you guys would be the ones to help 
formulate how that is to be done and get it back to us so that 
we can give support to it. Thank you.
    Mr. Bordelon. Mr. Chairman, could I respond to that? For 
credit unions, it is true as far as for the banks and thrifts. 
The regulators do have flexibility to adjust our PCA levels, 
but for the credit unions we are on the statutory requirement, 
and the regulators do not currently have that flexibility.
    So in our written testimony from NAFCU and, I think, from 
my friends at CUNA, we have requested that Congress take a look 
at PCA authority levels for NCUA and adjusting those levels as 
may be needed.
    And to get back to your first point on as far as 
opportunities to rebuild New Orleans, our credit unions stand 
with you, definitely, with that issue of rebuilding the lives 
of our citizens in New Orleans.
    And I think I heard you say on T.V. maybe down in Lafayette 
that this storm hit on the absolute worst day, on the 29th, and 
not only did it affect the really poor people who are depending 
on their Social Security checks and so forth, but we had 
traffic in our lobbies of individuals who are employed, who are 
working good jobs, and are living paycheck to paycheck.
    And that payday was not until Wednesday or Thursday--
    Ms. Waters. That is right.
    Mr. Bordelon. --and they were in dire need of cash. And I 
think all of us speak here that we would be willing to work--as 
trade associations and as financial institutions, to work with 
the committee for short-term needs that need to be addressed 
immediately and the longer-term solutions, including financial 
literacy.
    Ms. Waters. Thank you very much. And we certainly--in this 
conversation I certainly want you to know we include credit 
unions in the considerations for protecting you from regulatory 
or statutory demands on you.
    And let me just say that the Cajun Dome had a hell of an 
operation going there. It was fantastic. The doctors, all of 
the medicine that had been given by the pharmaceutical guys 
there--it was a real big operation, one of the best that I saw. 
And you guys are to be commended.
    Mr. Price. [Presiding.] Thank you, Ms. Waters.
    Appreciate the members' patience and the succinct answers.
    Mr. Green?
    Mr. Green. Thank you, Mr. Chairman.
    And I would like to thank Congresswoman Waters for the 
comments that she just made. And I would endorse all that she 
said.
    Dr. King reminded us that life is an inescapable network of 
mutuality tied to a single garment of destiny. What impacts one 
directly impacts all indirectly. And I think we are seeing 
evidence of that here today.
    We have come to realize now that this really is a small 
world and that we really do need each other. And I am very 
proud to see the way we are bonding together to confront what 
may be one of the greatest crises of my lifetime.
    I am going to say that, again, the NAACP I think is 
indispensable. I would hope that this is not just a temporary 
relationship. We really out to have a marriage, and we ought to 
consider the fact that under these circumstances the NAACP's 
stamp of approval may be comparable to the Good Housekeeping 
seal of approval.
    The NAACP's credibility can add a lot to what we want to 
accomplish. I want to pledge my support to help the banking 
industry, the credit unions, because I think we all get it now. 
I think we all understand how important it is to be accessible 
and available and that credit is important for all persons in 
this country.
    I do want to ask a question about the moratorium on loan 
payments. I have read 3 months voluntarily being--that is a 
number that some of the banks are using, lending institutions 
are using. Is that enough time?
    That is my question because 3 months--many people will not 
have had an opportunity to assess the damages, to get the 
appraisals, to get the insurance company to actively engage 
them in the process. So my first question is do you think 3 
months is enough?
    And I will ask the NAACP representative to give an initial 
response.
    Mr. Shelton. First, thank you very much. As you know, we 
have members in each and every one of the affected areas. And 
of course, our members in other places are working with those 
in the affected areas, so we are hearing the stories and 
hearing the plights of those that are experiencing this awful 
travesty right now.
    The short answer to the question is no. I think 3 months is 
just the beginning of really being able to assess what is going 
on. Even in our country we talk about how long it takes under 
normal circumstances to transition from one job to another. 
Experts tell you you need at least 6 months to be able to make 
those kinds of transitions.
    And in this case, the entire infrastructure that provides 
opportunities along those lines have been eviscerated in many 
cases as well. So certainly, as we talk about 3 months, we are 
grateful that that is the beginning of a conversation as we 
assess the needs across the country.
    But indeed, I think as we look at what is happening in 
places not just in Louisiana, but even as we have talked to 
many of our friends in the Gulf Coast area of Mississippi and 
other places, much more time would be required.
    Mr. Green. Thank you. I feel a kind of kinship with all of 
you. I am from Louisiana, by the way. I was born in Charity 
Hospital. So I relate quite well.
    And, Rusty, you remind me of a lot of the folk that I grew 
up with and that I know. Would you give your opinion about the 
3 months, please?
    Mr. Cloutier. Well, Mr. Green, first of all, thank you very 
much for your comments, and congratulations on being born in 
Louisiana. But I would tell you that in our bank, in most 
community banks I know, they are handling everything on a one-
on-one basis.
    I have four people full-time. Their job right now is to 
talk to people who are in the devastated area. We do not have a 
policy of 3 months, 4 months, 6 months. You know, each case 
stands on its own. You know, it depends upon, you know, what 
happened, how soon they can get back to work, when they can get 
their business back up and running.
    And I think you will find that pretty much standard in 
community banks, and I am sure it is the same thing in credit 
unions. They are very flexible. They are able to be flexible.
    I think the standard you hear of 3 months, 6 months are 
some large financial institutions that are just saying from a 
headquarters somewhere far off, this is what we are going to 
do.
    But I can tell you in Louisiana we have many that we do not 
have any idea when they may be able to pay us again. I am very 
honest when I say that. We do not know when they may be able to 
make another payment. And, you know, we are working with those 
very closely and trying to help them figure that out.
    Mr. Deaver. Congressman Green, if I might just say 
something. I first of all would like to compliment 
Congresswoman Waters, who I do not think is in the room now, 
and yourself. I do think long term this is a great opportunity, 
certainly, for us to come together and to come up with some 
long-term solutions.
    As I said earlier today, we are trying to get our hands 
around immediate needs, and that is not the easiest thing to 
do, as you can respect. And like Mr. Cloutier said, each 
institution is dealing with this on a one-on-one basis. We do 
not kid ourselves and think that 30 days is enough in hardly 
any cases, but that we are going to have to work with the 
lenders--with the borrowers, excuse me, on these issues.
    And again, I think it is a great opportunity for us to--
when we get past these immediate issues to work with you and 
others in making some long-term plans so that we will be better 
prepared next time to deal with these issues.
    Mr. Green. Thank you.
    Ms. Casey-Landry. Can I just add one real quick comment on 
that? I think it is all size institutions, large and small, our 
community banks, our larger members--one of the largest lenders 
in that whole region is Washington Mutual, and we know they 
have made significant accommodations for all of their 
borrowers. And I think you will see it across the board.
    But this does bring to light that 90 days may not be 
sufficient. It may be 6 months. But if the loan is going to 
continue to exist, the institution must be allowed to 
restructure the loan and capitalize the interest. Today you 
cannot.
    The majority of most people's loan payments, particularly 
on a mortgage, is interest. So 6 months from now, 3 months from 
now, the bank rings you up, and you start to pay again, you owe 
all that interest. So they must be able to capitalize the 
interest, which is not currently permitted under the rules.
    So the length of time is one issue, but the capitalization 
of the interest is another issue because that is what the 
restructuring of the loan's all about.
    Mr. Elliott. Yes. Also from the credit union standpoint, 
the PCA reform is absolutely essential. We are doing things 
definitely on a 30-day, 60-day, 90-day basis for our credit 
union members, but these things are not going to be known for a 
long time.
    Working with people on individual extension agreements--and 
lord knows, it could be 12 months, 18 months before something 
could be worked out on some of our members.
    Mr. Green. Well, I thank you. The safety and soundness of 
the lending institutions is of paramount importance, equally as 
important, of course, as the safety and soundness of the lives 
of all of the people who have been devastated.
    Just for edification purposes, the NAACP is hosting an 
event over at Howard University as we speak and is very much 
involved in this. And I do not want to be overly pushy, but the 
president is a person that I think, once you have an 
opportunity to meet him, you will understand that he 
understands not only the problems of the least, the last, and 
the lost, but also the problems of lending institutions, the 
world of high finance. He is very well educated in these areas.
    Mr. Price. Thank you, Mr. Green.
    Mr. Green. And thank you, Mr. Chairman.
    Mr. Price. Thank you.
    Ms. Moore, your patience is rewarded.
    Ms. Moore of Wisconsin. And thank you so much, Mr. 
Chairman.
    I have a very kind of practical, what to do kind of 
question directed at--the example I am going to give is the 
credit unions that were in Louisiana, but anybody from the 
banking community can respond to this question.
    I had the privilege, I think, of talking with a number of 
the evacuees that made their way to Milwaukee, Wisconsin, about 
as far away as you can get from Louisiana and still be in the 
United States. My daughter promptly told them about the 50 
below wind shield factors that they would be facing this 
winter.
    But all jokes aside, the face of the victims were, in fact, 
people who found themselves stranded there on the 29th of 
August and did not have a payday, the face of those who were 
infirm and could not navigate themselves out of New Orleans, 
those folk who did not have transportation.
    I ran into a very interesting evacuee in Milwaukee who, in 
fact, had the resources to get out of New Orleans, went to her 
credit union, and because there was a run on the banks and 
credit unions they would only give her $200 of her money. So 
how does one evacuate themselves, much less their entire 
family, with $200?
    For the going forward--I am not saying this to assign blame 
to anyone. It is a really practical problem. For the going 
forward--you know, it can happen to any of us. For the going 
forward, what should we in Congress--what should you in the 
financial industry--be doing to address this problem?
    This was not a poor person who could not buy an airline 
ticket. They were a person who could not get their money.
    Mr. Elliott. I will speak for Mississippi. Yes, the $200--I 
think that was applied at least in our State not on each and 
every member, but as a whole those members that could deal with 
that amount of money was--that was appropriate for them, then 
that worked for us.
    But there were many members who got significantly more than 
that. All of it had to do with the availability of funds and 
the cash getting in there. We went through every means possible 
to get money in there. I do not think that we had a problem in 
Mississippi.
    We carried funds in a garbage bag in the back of a pickup 
truck, took it into credit unions. We did everything that we 
could. But that is a significant issue that we need to be 
prepared for in the future, because it was nip and tuck for us.
    And I can not imagine not even being able to get, you know, 
Brinks and the other delivery firms down into the city to get 
cash to the credit unions and those right outside of the city. 
It would be a major problem.
    Ms. Moore of Wisconsin. And, you know, it just sort of 
reminds me--and I--you know, about our having less the sort of 
gold standard and--or having a bit or something. I mean, what--
we do need some practical recommendations about doing that 
because it is not practical, I guess, to keep larger sums of 
money on hand everywhere.
    Some practical electronic way to do this--I guess I do not 
know what I would have done had I been--
    Mr. Bordelon. Could I, Congresswoman, try to answer that?
    Ms. Moore of Wisconsin. Yes, please do.
    Mr. Bordelon. Because we are part of the network, the CUCB 
network, that does have a $200 daily cash limit. And the 
problem probably was no matter what the member's balance was at 
her credit union where she does business, those phone lines, 
data lines, and so forth were non-existent. There was no way to 
verify that account.
    So as an offline, basically a paper and pencil, transaction 
the $200 limit is established in the network. Is that 
sufficient in a time of an emergency? We have never faced it, 
and honestly, as a network, it is something we may have to--we 
definitely are going to have to readdress.
    But there was such a run on cash, the $200 limit was also 
deemed to be fair so everyone could have at least some cash at 
the time, and especially in the Baton Rouge area where you 
needed cash to even get gasoline because the debit cards and so 
forth would not work at the pumps.
    We are all learning a lot from this disaster. A lot of 
things could have been done better, for even those of us who 
were prepared and even those of us who were not severely 
adversely affected.
    Ms. Moore of Wisconsin. I just wanted to--Mr. Chairman, I 
just wanted to put that on the list as kind of an abstract, 
obscure thing, and I did not want that to get lost because, you 
know, there was a lot of sort of blaming the victims themselves 
about not leaving. But you can not go with $200.
    Mr. Cloutier. Ms. Moore, just for the committee's 
knowledge, the Federal Reserve Bank in New Orleans had to close 
due to the hurricane. Having cash coming out of the Fed was a 
problem. But as of yesterday, we were working with Congressman 
Baker's office, the Federal Reserve in New Orleans, to try to 
get back electricity.
    They are turning on electricity to other units in New 
Orleans but it is still not turned on at the Fed, which is 
critical to get cash out to the locations. There was a very 
strong run on cash.
    I mean, we become a cash society very fast after 
hurricanes. Every one I have ever been through, you become a 
cash society. I do not think that maybe even FEMA followed 
their own rule book--supposed to be hospitals and then banks, 
to get the cash out.
    And we needed to get them out much faster. We at our bank 
shared cash with a lot of different people to try to get it out 
there as much as we could because we run our own cash shop. And 
so it was a problem.
    It is something that needs to be studied, I agree with you, 
because there was a lot of people who tried to evacuate who had 
difficulty coming up with money even though they had it in 
their banks, as we have talked about.
    Mr. Price. Thank you so much.
    Thank you, Ms. Moore.
    We thank each of you. We have heard about a lot of 
challenges and a lot of poverty on the Gulf Coast, but we also 
know there is a lot of heart. And our desire is to put in place 
that process that will allow the greatest number of folks to 
have the opportunity to recover.
    The chair notes that some members may have additional 
questions for this panel, which they may wish to submit in 
writing. And without objection, the hearing record will remain 
open for 30 days for members to submit written questions to 
these witnesses and to place their responses in the record.
    Thank you all very much. This hearing is adjourned.
    [Whereupon, at 12:52 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                           September 14, 2005


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