[Senate Hearing 109-980]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-980

 
                          REBUILDING NEEDS IN
                         KATRINA-IMPACTED AREAS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   ON

 REBUILDING NEEDS IN HURRICANE KATRINA-IMPACTED AREAS, FOCUSING ON THE 
  FEDERAL RESPONSE TO THE HURRICANES IN THE GULF OF MEXICO, INCLUDING 
ONGOING EFFORTS TO ASSIST AFFECTED FAMILIES AND INDIVIDUALS IN FINDING 
BOTH SHORT-TERM AND PERMANENT HOUSING, AND THE OVERALL PROGRESS OF THE 
              RECOVERY EFFORTS IN THE FIVE AFFECTED STATES

                               __________

                           FEBRUARY 15, 2006

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate/
                            senate05sh.html



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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah              PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado               CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming             TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska                JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania          CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky                EVAN BAYH, Indiana
MIKE CRAPO, Idaho                    THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire        DEBBIE STABENOW, Michigan
ELIZABETH DOLE, North Carolina       ROBERT MENENDEZ, New Jersey
MEL MARTINEZ, Florida

             Kathleen L. Casey, Staff Director and Counsel

     Steven B. Harris, Democratic Staff Director and Chief Counsel

           Mark A. Calabria, Senior Professional Staff Member

                         Mark Oesterle, Counsel

             Jonathan Miller, Democratic Professional Staff

          Alex Sternhell, Democratic Professional Staff Member

   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator

                       George E. Whittle, Editor

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                      WEDNESDAY, FEBRUARY 15, 2006

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Dodd.................................................     3
    Senator Allard...............................................     4
    Senator Menendez.............................................     6
    Senator Bunning..............................................     7
    Senator Bayh.................................................     7
    Senator Stabenow.............................................     8
    Senator Sarbanes.............................................     9
    Senator Reed.................................................    29

                               WITNESSES

Mary L. Landrieu, a U.S. Senator from the State of Louisiana.....     9
David Vitter, a U.S. Senator from the State of Louisiana.........    12
Richard Baker, a U.S. Representative in Congress from the State 
  of 
  Louisiana......................................................    14
Alphonso R. Jackson, Secretary, U.S. Department of Housing and 
  Urban Development..............................................    22
    Prepared statement...........................................    56
    Response to written questions of:
        Senator Menendez.........................................    73
        Senator Sarbanes.........................................    73
        Senator Reed.............................................    79
Donald E. Powell, Federal Coordinator, Office of Gulf Coast 
  Rebuilding.....................................................    37
    Prepared statement...........................................    60
    Response to written questions of:
        Senator Sarbanes.........................................    89
        Senator Reed.............................................    91
David Garratt, Acting Director of Recovery, Federal Emergency 
  Management Agency, U.S. Department of Homeland Security........    40
    Prepared statement...........................................    63
Martin J. Gruenberg, Acting Chairman, Federal Deposit Insurance 
  Corporation....................................................    42
    Prepared statement...........................................    66
    Response to written questions of Senator Reed................   110
Herbert Mitchell, Associate Administrator, Office of Disaster 
  Assistance, Small Business Administration......................    45
    Prepared statement...........................................    70

                                 (iii)


                          REBUILDING NEEDS IN 
                         KATRINA-IMPACTED AREAS

                              ----------                              


                      WEDNESDAY, FEBRUARY 15, 2006

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 10:03 a.m., in room SD-538, Dirksen 
Senate Office Building, Senator Richard C. Shelby (Chairman of 
the Committee) presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    Before we turn our attention to discussing the rebuilding 
needs of areas impacted by Hurricane Katrina, I would like to 
take a few minutes and highlight how troubled I am by some of 
the reports of the massive amounts of fraud and waste 
associated with disaster assistance to hurricane victims.
    While recognizing the dilemma of acting quickly, I believe 
we must do more to minimize the opportunity for fraud. That 
said, I think these troubling events also underscore the fact 
that disasters often bring out the best and worst of human 
behavior. While in the face of tragedy, many people rose to the 
challenge and performed countless acts of sacrifice and 
assistance. Others chose a lesser path and took advantage of 
the victims and those trying to assist them. Unfortunately, we 
have seen that such greed and mismanagement did not end in the 
immediate aftermath of the hurricane. We are still hearing that 
there are some preying on the victims of Katrina through rent 
gouging and construction scams. Additionally, many still fall 
through the cracks of an often too uncaring and unresponsive 
bureaucracy.
    At this point, the fraud, waste, and abuse compound the 
difficulties of those who have survived this tragedy by making 
it harder for them to repair and to move on.
    Going forward, we need to take a measured approach to 
ensure that we do best to prevent any further fraud, so that we 
can meet the commitments we have made to help the victims 
recover.
    Our first priority in this effort is to determine what 
steps have been taken to this point, as well as to assess the 
nature of the region's remaining needs. Beyond the particular 
facts associated with the Gulf Coast, today's hearing also 
offers the Committee an opportunity to examine the respective 
roles of the State, local, and Federal Government, as well as 
the principles of disaster assistance and recovery.
    Perhaps the most important lesson from the overall initial 
response to Hurricane Katrina was a lack of clear lines of 
responsibility. Without such clear responsibility, it is all 
too easy to simply point fingers. I believe it is vital we do 
not make the same mistake in rebuilding the Gulf region.
    In the process of rebuilding, it is also critical to not 
lose sight of what cannot be rebuilt. Hurricane Katrina claimed 
over 1,000 lives. We can and must assure that rebuilding does 
not continue to encourage families to live in harm's way. Thus, 
to simply rebuild the Gulf region as it was, whether lives 
remain at risk, I think would be a tremendous mistake.
    As this Committee moves forward in evaluating the programs 
under our jurisdiction, I hope to establish on the record a 
clear accounting of where and how existing funding is being 
spent. To this end, the Committee continues to examine the 
National Flood Insurance Program. Over $23 billion in flood 
insurance payouts will go to rebuilding homes in the Gulf 
States. In addition, $11.5 billion in Community Development 
Block Grants have been appropriated to assist in rebuilding.
    I believe it is the responsibility of this Committee to 
closely examine how those funds are being used, and assure that 
they are reaching the intended recipients effectively.
    While this Committee retains primary jurisdiction over 
housing and community redevelopment, a variety of programs 
outside this Committee's jurisdiction will play significant 
roles in rebuilding the Gulf. Included in these are the over $1 
billion in low income tax credits recently allocated to the 
Gulf States. In addition, SBA's Home Disaster Loan Program is 
an important tool for helping families to rebuild their homes. 
Rather than acting in a piecemeal fashion, I hope this 
Committee will look at the various tools for rebuilding in a 
holistic manner.
    Guiding these decisions should be the individual choices of 
families displaced by Hurricane Katrina. Federal assistance to 
rebuild must be focused upon helping those who cannot help 
themselves. Federal assistance should also support the 
functioning of the private market.
    I believe efforts to superimpose a one-size-fits-all 
centralized solution would do more harm than good. We must bear 
in mind that the policy choices we make today will have real 
long-term consequences, not only for the Gulf States, but also 
for future disaster recovery efforts.
    We will begin our hearings on Katrina rebuilding with a 
very distinguished panel of witnesses, and I would like to 
welcome all of our witnesses to the Committee. Our first panel 
this morning includes our colleague, Senator Mary Landrieu, our 
colleague, Senator David Vitter, and Congressman Richard Baker. 
I want to welcome all of them to the Banking Committee.
    Our second panel will be HUD Secretary Alphonso Jackson.
    And our final panel will be Mr. Donald Powell, the Federal 
Coordinator of the Gulf Coast Rebuilding; Mr. David Garratt, 
Acting Director, Recovery Division, FEMA; Mr. Martin Gruenberg, 
Acting Chairman, Federal Deposit Insurance Corporation, and Mr. 
Herbert Mitchell, Associate Administrator for Disaster 
Assistance, Small Business Administration.
    Senator Dodd, do you have an opening statement?

            STATEMENT OF SENATOR CHRISTOPHER J. DODD

    Senator Dodd. Thank you, Mr. Chairman. Let me begin by 
thanking you for holding this hearing. Obviously, as a Senator 
from Alabama, you have more than just an intellectual interest 
in the subject matter here.
    I want to thank our three colleagues, not only for being 
here today, but also for your tireless efforts. I have not had 
a conversation with Mary Landrieu in the last 6 months where 
this has not been the number one item she talks about. David 
and I do not know each other as well, but I know he feels 
similarly strongly about this issue and the importance of 
getting it right.
    I am hoping, Mr. Chairman, that what you are doing here 
today will provide that renewed sense of energy about what we 
need to do to get moving here. This issue not only needs to be 
on our agenda, in my view, but also it needs to be at the top 
of our agenda. This could happen anywhere in our country. It 
happened to hit the Gulf States. But it could easily have been 
New England, it could have been the center part of the country 
as well.
    I remember when I went down for the first time to pay a 
visit right after Hurricane Katrina with a group of colleagues 
here, we were in Pass Christian in Mississippi, and it was 
devastated. Obviously, there was not a building standing in 
that community, just leveled. The Mayor of Pass Christian came 
up to me, and we were talking, and he asked me where I was 
from. I told him Connecticut. He told me a compelling story. 
Right after the hurricane, he went back and was standing there, 
and a car pulled up in Pass Christian. A couple of people with 
hair like Jim Bunning's and mine got out of the car, and the 
Mayor asked them what he could do for them. They said, ``We are 
from Windsor, Connecticut and we heard about what happened down 
here.'' Retired people, got in their car and drove down to 
Mississippi, and got out of the car and said, ``How can we 
help?''
    I suspect while not every American obviously is going to be 
able to do that, those are the sentiments I think of all of us 
here. I would like to think that if something like this 
happened in my State, that a car might pull up from Louisiana 
or Mississippi or Alabama, and say, ``How can we help?''
    I feel very strongly that this is something we really need 
to weigh in on and have a sense of urgency about it so we get 
it right. There is this eerie reaction I am having that this 
rebuilding program is the same response we got at the time that 
the levees broke, that we are dragging our feet along here, 
this bureaucratic kind of stumbling, rather than getting to 
this issue. It is important, not just for the millions of 
people who have been adversely affected by this, but getting 
this right is going to be critically important for the rest of 
our country, because how we do this will set, in a sense, the 
model on how we can deal with other future problems that we may 
face along a similar vein.
    Mr. Chairman, I am very grateful to you for doing this 
today. We need to worry about some short-term needs here, 
immediately. There are some long-term problems. I am with you, 
the Government Affairs Committee and others are doing a good 
job, I think, of going back and reviewing what happened at the 
time, and we need to talk about the future now, what can be 
done. But you are going to have in just a matter of days here, 
we have literally thousands of people that are being put out of 
hotels, the headlines and so forth. Where are they going to go? 
Are they going to get any kind of assistance at all or support? 
The rebuilding of homes, I think there are some 420,000, I 
read, homes in Louisiana alone that are probably uninhabitable, 
going to have to be rebuilt. That number may be low. I do not 
know.
    It seems to me we have to have a heightened sense of 
urgency about this. I do not think that has been the sense. I 
say with all due respect to those in charge--and I am anxious 
to hear today what they are going to do in the short-term--
long-term I am interested as well--but there are some immediate 
problems that need to be addressed immediately. And I am again, 
very grateful to you, Mr. Chairman, for holding the hearing, 
and very grateful again for our colleagues and their 
willingness to weigh in as heavily as they have on this issue, 
and I look forward to doing what we can. This is a job we 
really have to put at the top of our agenda.
    Chairman Shelby. Senator Allard.

               STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Thank you, Mr. Chairman. I would like to 
join you and the rest of the Committee Members in welcoming the 
first panel here. I know that it has been a challenge the last 
number of months because of Hurricane Katrina.
    I had an opportunity to serve on some committees with 
Senator Landrieu and Senator Vitter, and then, Congressman 
Baker, served with you over in the House. It is good to see you 
here.
    I know that a lot of the meetings I have been in, Senator 
Vitter has constantly reminded us of the challenges, the 
suffering, and the problems that we are having down there as a 
result of Hurricane Katrina. I have had an opportunity to get 
down to that area myself, and have seen the devastation from 
the hurricane.
    So, Mr. Chairman, I would like to thank you for holding 
this hearing, and particularly, I would like to thank you for 
taking a positive approach to the needs of the Gulf Coast area. 
We are focusing on long-term solutions, like Senator Dodd 
mentioned, short-term issues and whatnot I think are being 
pretty well-covered in other committees.
    As we all know, following the devastation caused by 
Hurricane Katrina, Federal, State, and local officials did a 
number of things that could have been improved upon. They also 
did a number of things right. Certainly it is important to 
examine what happened so that we can learn for future 
disasters. However, some people have gotten trapped in the 
blame game, and so they are intent on fixing blame for what 
happened, but they are ignoring the present and future needs of 
the Gulf Coast.
    Instead of pointing fingers, Chairman Shelby's leadership 
will allow this Committee to take the steps necessary to 
actually help those constituents, as well as others affected by 
Hurricane Katrina. I share his desire to move forward in a 
positive, productive manner. Toward that end, I have introduced 
the Hurricane Katrina Recovery Homesteading Act of 2005, Senate 
Bill 2088, modeled on the United States 19th century 
homesteading initiatives and similar urban programs in the 
1970's.
    This legislation will help us begin to rebuild the Gulf 
Coast area destroyed by the hurricane and flooding, providing a 
fresh start for families victimized by this tragedy. I am 
pleased to be joined in this effort by my Banking Committee 
colleagues, Senators Enzi, Sununu, and Dole, as well as Senator 
Vitter.
    The new Urban Homesteading proposal will serve several 
purposes. First, it is an initial step toward rebuilding and 
revitalizing the hurricane ravaged Gulf Coast. Second, the new 
Urban Homesteading Initiative will be one way to begin to 
address the housing needs of those displaced by Hurricane 
Katrina. Third, the Hurricane Katrina Recovery Homesteading Act 
is a productive way of dealing with government-owned 
properties.
    I would like to briefly describe how the initiative will 
work. I am pleased it is based on a Federal-local partnership, 
as well as a partnership between Government, nonprofits, and 
private sector. HUD will identify potential government-owned 
property for transfer without cost to units of local 
government. The local government would establish an equitable 
procedure for selecting low-income families affected by the 
hurricane for participation. HUD and the local government would 
work with partners such as Habitat for Humanity, mortgage 
lenders, and others to help the new urban homesteaders find 
resources to construct their new homes.
    Participating families must agree to occupy the property 
for 5 years as the principal residence, to bring the property 
up to health and safety codes within 1 year, and to build a 
house to applicable code standards within 3 years. They must 
also agree to periodic compliance inspections. In exchange, the 
family would receive title to the property. Obviously, the 
recent flooding raised very important safety concerns, and my 
bill takes that into account.
    The last thing we want to do is to put a low-income family 
in harm's way in an effort to help them back on their feet. The 
Urban Homestead Initiative specifies that when determining the 
suitability of a property for inclusion in the program, the 
Secretary shall not endanger the health or safety of the 
individuals living in or near the home.
    I would like thank President Bush and Secretary Jackson for 
working with me on this effort. I hope that my Banking 
Committee colleagues will join me as a cosponsor in this effort 
to being to address some of the needs of the Gulf Coast area. 
Frankly, I can think of no reason we should not do this. We 
should not delay desperately needed assistance simply because 
it will not meet all existing and future needs. To the families 
that this bill can help, it will be very worthwhile. I am 
hopeful that the Committee will take up my bill in the near 
future.
    Thank you, Mr. Chairman, for holding this hearing, and I 
looked forward to working with you on the Urban Homestead 
Initiative, as well as other proposals to address the 
rebuilding needs of the Gulf Coast.
    Chairman Shelby. Senator Menendez.

              STATEMENT OF SENATOR ROBERT MENENDEZ

    Senator Menendez. Thank you, Mr. Chairman. I appreciate you 
having this hearing and the spirit in which you are doing it. I 
appreciate Senator Landrieu, who has, in my short time here, 
made it her business and her advocacy to let me know about the 
challenges that the residents of her State are facing as a 
consequence of Hurricane Katrina, and she has done such a 
fantastic job, at least in our caucus, of letting us all know 
of these challenges.
    Mr. Chairman, 7,000 evacuees from Louisiana came to New 
Jersey after Hurricane Katrina. Many are still there. Some of 
them still face some enormous challenges. They have found a 
hospitable State, but home is still Louisiana, not New Jersey, 
and they want to return.
    There was a recent report that I think speaks about some of 
the challenges these individuals are facing, talk about two 
sisters, one who was a former credit analyst, who exhausted her 
savings, spent what was left of her 401(k) retirement. Her 
sister ended up in two hospital emergency rooms, the result of 
an extremely poor diet. They are stuck in a cycle in which they 
are stranded with little cash in a hotel in Morris Plains, New 
Jersey, that is now paid for by FEMA. They cannot move out of 
the hotel because FEMA has been slow to provide them with 
rental assistance that will help them land an apartment. And to 
use one of the sister's words, ``It is a nightmare that will 
not end. It is degrading having to beg and even begging gets 
you nowhere.''
    So those are individuals who, obviously, are seeking to go 
back home, and have found themselves in a cycle in which they 
cannot simply break out of it, even though they had gainful 
employment when they were in Louisiana.
    It has been 6 months since the Gulf Coast was hit, and in 
another 6 months it has the potential of being hit again. So 
the timing of his hearing could not be more propitious because 
we have to figure out how we meet the challenges so that the 
next season does not create a blow to New Orleans and to 
Louisiana that you simply cannot recover from.
    In that respect, I think all of us have to understand that 
there but for the grace of God, go I. And the reality is, is 
that we must learn--and this is not about finger pointing--but 
it is about learning what we in fact did not achieve 
successfully, so that we can learn from that and be able to 
resolve the deficiencies in our ability to respond, whether it 
be in Louisiana or in any other part of the country. I do not 
look at the questions of what has gone wrong as ascribing 
blame, as much as understanding what is wrong that needs to be 
fixed in a structure that will be called undoubtedly again to 
respond to the residents of our country.
    If there is one thing that the government, certainly the 
Federal Government, is responsible for, is the safety of its 
citizens, regardless of how that safety might be endangered. 
While we have supplementals, we clearly have a long way to go, 
and I am looking forward to all of our colleagues, Senator 
Vitter as well as Congressman Baker, their testimony, because 
they are on the ground firsthand.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you.
    Senator Bunning.

                STATEMENT OF SENATOR JIM BUNNING

    Senator Bunning. I will try to be short, Mr. Chairman. 
Thank you for holding this hearing.
    First of all, welcome classmate Baker. We came into the 
House together, so I have an unusual alliance with him, and my 
two colleagues from the Senate. If I have heard anything out of 
your mouth in the last 6 months, it is about the problems on 
the Gulf Coast. That is besides other things, but mainly those.
    This hearing is very important to the point of moving 
forward. We know what we have down there. We know that the 
service immediately following and continuing was inadequate, 
but we have to get on with the lives of many people and the 
reconstruction of the coast.
    I read yesterday in the paper they are talking about Mardi 
Gras in New Orleans. I did not think they would ever have Mardi 
Gras in New Orleans, and I am so happy that they are going to. 
We have a problem with our flood insurance program, and we have 
had hearings on that, and we are trying to get that 
reconstructed to the point where the Federal Government can 
have a flood insurance program that is viable and it pays for 
itself. Obviously, it did not work this time, even though we 
tried to update it just 2 years ago.
    The whole point of this hearing, I hope, will be to move 
forward rather than to look backward, and to see what we can do 
in the future to prevent the mistakes of the past, and really 
work to relieve the suffering and pain that the people of that 
are presently involved in, and will continue to be involved in 
until we get it reconstructed as we want it.
    So, Mr. Chairman, I yield the rest of my time.
    Chairman Shelby. Senator Bayh.

                 STATEMENT OF SENATOR EVAN BAYH

    Senator Bayh. Thank you, Mr. Chairman, for holding this 
hearing, and I too want to welcome our panel members, Senator 
Vitter and Senator Landrieu.
    Senator Bunning, I have had a similar experience to yours. 
Senator Landrieu and I talk from time to time because we have 
been friends over the years. We have children of about the same 
age, and I always say to her, ``Mary, how are the kids?'' She 
said, ``Fine, Evan, but what are we doing about New Orleans?'' 
And rightfully so. I mean, all of these individuals have been 
champions for their people in times of distress, and that is 
why we are all here, so I compliment you for taking this issue 
on so aggressively and coming before us today.
    In the long, unfortunate catalog of human tragedy, New 
Orleans is going to occupy a prominent place. There is not much 
we can do to control Mother Nature, but there is a lot we can 
do to control how we respond to it. As I think we all 
recognize, the response so far has been terribly inadequate. We 
need a new sense of urgency, a new sense of competence, and I 
think that is what your initiative brings to the table here.
    Mr. Chairman, during my previous life as Governor of our 
State, 88 of Indiana's 92 counties were declared disaster areas 
at some point in time, floods, tornadoes, ice storms. Nothing 
approaching the magnitude of what hit New Orleans, but we know 
a little bit about coming together and getting the job done, 
and that is why I think your idea is an excellent one. It 
brings a scope and a commitment that is necessary to tackling 
this problem, to giving people hope, to getting on with 
restoring the city.
    If I could make just one modest suggestion. I know as this 
legislation goes forward, you will be tweaking it here or 
there. I had heard concerns from less fortunate individuals 
that if they are not given a place, they are wondering will 
they ever get home? And we have to make sure we reassure them 
about that and that there is a low-income housing component of 
some kind that addresses those concerns, but the overall idea, 
as I said, the urgency, the scope that is brought to this, plus 
including the public and the private sector together. We have 
had some pretty good experiences with public/private 
partnerships in Indiana, and I think that is what you envision 
here.
    I laud you for this. I support you for this. Let's go get 
the job done. I think that is what the people are looking for.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Stabenow.

              STATEMENT OF SENATOR DEBBIE STABENOW

    Senator Stabenow. Thank you, Mr. Chairman.
    Welcome to my colleagues who have been working so hard. 
Senator Landrieu, I know every day I think we talk on the floor 
of the Senate about what you are addressing.
    Senator Vitter, thank you so much, both of you as a team. 
And Congressman Baker, welcome. It is good to see a former 
colleague.
    This is such an important topic, and I think that is 
really, in addition to the efforts that you are focused on, 
really about a larger message, and in terms of our Nation's 
response to thousands of people who want their lives back. And 
we have over 2,000 of those individuals in Michigan that our 
communities, our families, our churches have reached out to 
help, and will continue to do that until the job gets done and 
they get to go home.
    I was, frankly, disappointed that in the present State of 
the Union only 7 lines were given to Katrina reconstruction, 7 
lines, that failed to mention the 350,000 displaced families 
that were denied vouchers, the 693,000 families whose rental 
assistance has not been extended into the new year. Also 
missing were the 4,500 evacuees who will be forced out of their 
hotels in exactly 2 weeks, some in Michigan, and the 100,000 
registered voters who are temporarily displaced, many may not 
be able to vote in the April elections. Seven lines, I am sure 
you would say does not capture what is really going on for each 
of you, and what is going on for your communities, and how 
important it is that people be able to return to their 
communities.
    I know that you have excellent ideas, and I support those 
for what needs to be done. I also know that each of my 
colleagues would say that things have not moved fast enough for 
the families involved and need our help. The truth is, many 
people needed our help before the floods, as well as needing 
our help now.
    So, I welcome you to the Committee. I hope that we are 
going to have the sense of urgency that I know each of you feel 
every day with your own families, and the families that you 
represent and that we will be committed to get the job done for 
a group of Americans who have gone through a horrendous 
tragedy.
    Thank you.
    Chairman Shelby. Senator Sarbanes.

             STATEMENT OF SENATOR PAUL S. SARBANES

    Senator Sarbanes. Thank you very much, Mr. Chairman.
    First of all, I want to welcome our colleagues here. I know 
how intense and consistent the concern and interest of Senator 
Landrieu, Senator Vitter, and Congressman Baker, as well as the 
other members of the Louisiana delegation, and the Mississippi 
and Alabama delegations in the Congress has been with respect 
to the hurricanes which struck the Gulf Coast.
    The President, when he went to New Orleans on September 15, 
said, ``We will do what it takes. We will stay as long as it 
takes to help citizens rebuild their communities and their 
lives.'' I think we are still struggling with giving reality to 
that rhetoric, and I am hopeful that this hearing, Mr. 
Chairman, will be a very important step on the path of really 
coming to grips with this situation.
    One of the great cities of our country which has been 
devastated. A city of great historical significance and 
continued economic significance. It is the gateway from the 
Midwest in terms of moving goods out into international 
commerce. There is a huge energy industry focused in this area, 
and so the economic underpinnings in many respects remain. They 
can say, well, New Orleans is tourism, but that tourism is 
built on something else that is of a significant and lasting 
economic consequence for the Nation.
    The Congress has been trying to put money in there. We need 
to find the framework within which all of this operates, and I 
know that is what we are going to, in part, be hearing about 
from our colleagues here today.
    Mr. Chairman, I want to commend you for holding this 
hearing. I think it is extremely important and I do want to 
recognize the efforts that our colleagues have been making with 
respect to the situation that exists along the Gulf Coast.
    Thank you very much.
    Chairman Shelby. We will start with you, Senator Landrieu.

                 STATEMENT OF MARY L. LANDRIEU

           A U.S. SENATOR FROM THE STATE OF LOUISIANA

    Senator Landrieu. Thank you, Mr. Chairman. I thank all of 
the Members of this Committee for your opening statements of 
concern and observation and direction. Each of you hit on a 
extremely important part and facet of the great challenge that 
is before us.
    We are not here to point blame, but to point the way ahead, 
which is for us the most important, to find a way ahead for New 
Orleans, for the region, for South Louisiana, and frankly, for 
the Gulf Coast. While some comments were made--and I will say 
briefly before I get into my statement--on urban homesteading, 
which are appreciated by my colleague, Senator Allard, let me 
reiterate that neighborhoods of million dollar mansions were 
washed away, neighborhoods with $500,000 homes of middle-income 
families were washed away, and low-income neighborhoods were 
washed away. So we need a very comprehensive approach.
    As one of my colleagues said, this is not just--I think it 
was Senator Menendez--this is not just about, Mr. Chairman, 
what we need to do today for New Orleans and the region, but 
this is about laying a framework down that could be available 
for the next time this happens. Let me rest assured, it will 
happen again somewhere, maybe not the same. So it is about 
designing something that works for the near future and the 
long-term.
    When I speak about the city which I have represented 
proudly for many years, let me be clear that I am speaking 
about a region of over 2 million people in South Louisiana that 
has about 2.5 million people. We were hit, not by one storm, 
but by two, Katrina on the southeast, Rita on the southwest, 
and literally from Pass Christian to Bogalusa--I am sorry--from 
Pascagoula to Beaumont, there is devastation along the Gulf 
Coast, large cities, small cities, and villages. So let me get 
into my remarks.
    I think it would be appropriate, since this is 
unprecedented in the Nation's history, to go back a little ways 
and then come forward. One hundred ninety-eight years ago, 
every public building in this city was razed to the ground by 
invading soldiers of the British Army. Imagine the questions 
that must have occurred to Members of Congress at that time. 
Should we rebuild? Where should we rebuild? Are we too close to 
the water? Are we too much of a target for the British Navy? 
Where should we go, higher, lower? I understand those questions 
are important, but they were answered, and in the true American 
spirit, President Madison did what every American President has 
done before, and hopefully every one in the future, they 
committed themselves to rebuilding with a spirit of optimism 
and hope, and they built better, stronger, and smarter, and 
that is what we intend to do in this region.
    MIT Professor Lawrence Gale's recent book, ``The Resilient 
City,'' he notes that in ancient times this planet was dotted 
with lost cities. These were places that civilizations 
literally abandoned after natural disasters. However, in the 
last 200 years, I would like this Committee to note, every 
major city that has experienced catastrophic disaster has been 
rebuilt. In many cases, this includes cities which have 
actually experienced worse devastation than New Orleans. They 
include places like Warsaw, Poland, where 80 percent of its 
buildings were left in rubble at Hitler's orders, and 800,000 
of its 1.3 million residents were killed or murdered by the 
Nazis. Yet a decade later, it was a city of over 1.3 million 
people again.
    Many cities in China, one in particular, Tangshan China, 
experienced the worst urban earthquake on record, killing as 
many as a half a million people. Ninety seven percent of its 
residential buildings were destroyed, and 78 percent of its 
industries were ruined. Yet 10 years later, that city had 
returned larger and more populated than before.
    And finally, closer to home, a few decades ago, Galveston, 
Texas was all but destroyed after a hurricane put a 16-foot 
storm surge over the 9-foot high island. Six thousand to 8,000 
of the city's 37,000 residents were left dead. But Galveston 
recovered. Over the next 11 years, the city, including a 3,000 
ton church, was raised by as much as 17 feet and sheltered by a 
seawall because the people of Galveston refused to give up.
    Mr. Chairman, I note these examples in the history to say 
that New Orleans and South Louisiana will be rebuilt. The 
Nation, this region deserves to be rebuilt, not only because of 
the people that live there, but also the mighty and spectacular 
contribution that has been made by this region to the 
development of this Nation and its continued impact, and as 
Senator Sarbanes has said, on the economic vitality of this 
Nation, and its essential strategic location at the mouth of 
the Mississippi River.
    My colleague, Congressman Baker, has pointed a way forward, 
and I support his way. I understand that we may need 
suggestions and modifications. We are most certainly here 
before this Committee to humbly say that we will take all and 
every reasonable suggestion.
    There are several key virtues of the Baker plan that I 
believe need to be incorporated into any plan. First, it is a 
collaborative approach. It is a framework. It takes 
representations from all levels of government, which, believe 
me, Mr. Chairman, we will need the best at the Federal, State, 
and local level to get the job done. It mandates planning and 
institutes a mechanism for everyone to be heard, while creating 
a unified vision for redevelopment.
    Second, the bill treats both mortgage lenders and 
homeowners equitably. Congressman Baker has been very 
scrupulous in keeping his eye on the target. Our objective is 
to help families, homeowners, and people in need, not just 
institutional investors. So under his legislation, homeowners 
would be guaranteed a return on their pre-Katrina equity, and 
mortgage lenders would be required to absorb their fair share 
of the losses.
    Finally, the Baker bill would provide stability, certainty, 
while giving local planning agencies a realistic timeframe to 
develop a comprehensive plan for rebuilding the region. One of 
the greatest dangers the city and region now face is a rush to 
create uncoordinated plans, instead of doing true strategic 
thinking, and without the benefit of analysis that would help 
drive what really needs to be done, not only to keep people 
safe, but to also keep this region the vital, economic center 
it is for the Gulf Coast and the Nation.
    In this sense the disaster in the New Orleans region is 
very different from along the Gulf Coast of Mississippi, which 
let me say for the record, we love just as dearly. But you can 
tell where the danger is going to come from. It is going to 
come from the Gulf. It is going to come off of that water. You 
can define it a lot better than when you have a city and region 
like New Orleans that lives between many bodies of water and 
sits low like the Netherlands has sat for over 1,000 years, may 
I say, 21 feet below sea level, not the 5 or 8, and they have 
successfully managed those ever-present challenges.
    Mr. Chairman, it is easy to forget, when we talk about 
facts and figures and process and government that we are 
talking about people's lives. As Senator Stabenow has so 
eloquently said, Louisiana has 650,000 displaced people from 
the storm. The only thing that compares in this country to this 
mass displacement was the Civil War. We have lost over 217,000 
homes. That means a lot of lives that have to get started over.
    As I conclude, let me say, it is not just homes. In one 
weekend people lost their homes, their businesses, their 
churches, their synagogues, and their schools, and it deserves 
more than a few lines in a State of the Union. It deserves more 
than a few old programs that are on the shelf, taken down to 
see what will work and what will not work. It takes a 
coordinated effort.
    Congressman Baker, I commend him for bringing this bill 
forward. I am proud that Senator Vitter and I put a companion 
bill in the Senate to work until we find solutions.
    I thank this Committee for giving this issue its full 
attention, and the catastrophe warrants such a focused 
attention.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you, Senator.
    Senator Vitter, before I call on you, I just want to 
acknowledge the article that you penned for the Washington 
Post, ``The Path to Louisiana's Footprint.'' That is a very 
thoughtful article. I would expect nothing less from you, a 
Rhodes scholar though. Thank you.
    Senator Vitter.

                   STATEMENT OF DAVID VITTER

           A U.S. SENATOR FROM THE STATE OF LOUISIANA

    Senator Vitter. Thank you, Mr. Chairman, and Ranking Member 
Sarbanes, and all of the Members of this Committee, for this 
important hearing on the rebuilding needs in Katrina-impacted 
areas. I am also honored to be joined by my colleagues, Senator 
Landrieu and Congressman Baker.
    I wanted to focus on two things, first, why I also strongly 
support the Baker bill, and why it is a very important 
mechanism that can help us move forward in the rebuilding 
process; and second, and just importantly, really, the subject 
of that op-ed which you just held up, which is why I think we 
are in a bit of a log jam, and how we break through that 
log jam in a positive way and move forward, using the mechanism 
of the Baker bill or something similar.
    First of all, let me reiterate very clearly, that I am very 
supportive, along with Senator Landrieu, of Congressman Baker's 
bill, H.R. 4100. Of course, we have a Senate companion bill 
before you, S. 2172. And very broadly speaking, I am supportive 
of it for two important reasons. First of all, it gives some 
financial recovery and sense of hope to tens of thousands of 
people, many of whom lost everything they own on this earth, 
others of whom lost so much through absolutely no fault of 
their own. And it is really even worse than simply not being 
through any fault of their own, most of them lost this not 
because of a natural disaster but because of a man-made 
disaster.
    What do I mean by that? I mean that the great majority of 
the catastrophic flooding in New Orleans occurred not from 
levees being overtopped by water coming over the levees, but by 
failures of those levees due to fundamental design flaws of the 
U.S. Army Corps of Engineers. That is beyond dispute at this 
point, and the Baker bill helps make those people at least 
semi-whole.
    The second reason I am supportive of the mechanism is that 
it puts a mechanism in place that can help jump-start the 
redevelopment of entire devastated neighborhoods, in which, 
quite frankly, redevelopment will be problematic at best if it 
just depends on individual decision. No one individual 
homeowner, for instance, wants to go way out on a limb, having 
no idea who is following him or not following him in a 
completely devastated area. There needs to be some more 
coordinated approach, and the Baker bill is a mechanism that 
offers that.
    Let me move on to the second topic I want to touch on, and 
again, it is really the heart of the op-ed which you mentioned, 
and it is why I think we are at a bit of an impasse over the 
Baker bill, but really more broadly, over the rebuilding 
effort. I believe it largely comes down to this: I think a lot 
of the hesitation has to do with what many people in the 
Administration and in Congress and around the country feel is 
the lack of a clear rebuilding plan.
    President Bush on January 27, stated, ``The plan for 
Louisiana hasn't come forward yet, and I urge the officials, 
both State and city, to work together so we can get a sense for 
how they are going to proceed.'' And February 2, in a op-ed 
piece, Donald Powell, who you will hear from, wrote, that the 
Baker bill ``is not a long-term plan'' that includes ``key 
elements, among them decisions on where and where not to 
rebuild.''
    Now, as you can probably guess, many in Louisiana took 
great offense at these comments. A lot of people said the Baker 
bill is our plan, and we have numerous planning commissions at 
work on things like the footprint question, where and where not 
to rebuild. I think one thing all of us, including all of us in 
Louisiana, have to understand is that the Baker bill is a great 
mechanism to go forward, but that is not the same as a 
substantive plan making the substantive decisions about what is 
going to happen and where it is going to happen, where and 
where not to rebuild. And I think that is what so many people 
in Washington and around the country are looking for. They do 
not want to see numerous planning commissions. They want to see 
a single substantive plan. They do now want to listen to a 
footprint discussion. They want to see a footprint, and one 
that does not include areas that are likely to suffer 
catastrophic flooding again.
    I think there are other things that the President and 
people up here have to understand too. They have to understand 
that this is not as simple as saying you cannot build in a 
floodplain. The White House is built in a floodplain. It is not 
as simple to say you cannot build below sea level. If you say 
that, the country will have to sacrifice a vitally important 
energy hub and port system. Most of all, they have to 
understand what I said a few minutes ago, that the great 
majority of New Orleans catastrophic flooding occurred because 
of breaches in levees that were not overtopped by water, but 
rather, that failed from below because of gross design mistakes 
of the U.S. Army Corps of Engineers.
    If you put all of this together, what is the plan for 
moving forward and breaking through this impasse? I believe 
that it demands action from both sides. First, the Governor of 
Louisiana, the Mayor of New Orleans, parish presidents, all of 
their commissions must produce one single, fully fleshed-out, 
detailed substantive plan. This cannot just be another request 
for billions in Federal assistance amidst vague discussion of 
the tough local issues, but a specific plan that addresses 
those issues head on, including the footprint question. In 
other words, a denser New Orleans with a smaller footprint, but 
also one that can accommodate everyone who wants to return, and 
that can be defended against future hurricanes at significant 
but manageable expense.
    This plan should also detail bold reforms, such as 
replacing the failed Orleans Parish Public School system with a 
diverse collection of charter schools, and replacing the 
outdated charity hospital system with coverage that offers the 
needy solid, preventative, and other care through numerous 
providers. That is the Louisiana side.
    But what about the Federal side? Well, for its part, the 
Bush Administration and Congress must endorse this general path 
now to encourage bold, courageous Louisiana decisions, and this 
endorsement must mean that we will take the lead in funding a 
responsible plan once it is produced. The $6.2 billion in CDBG, 
block grant funding approved in December, is a real 
downpayment, but additional Federal dollars will be needed to 
buy out areas that can be converted to natural flood basins, 
and to help rebuild others. This could be done through the 
Baker bill or some modification of it, perhaps a State Baker 
bill with Federal funding.
    Up to now, the difficult footprint discussion has been 
framed almost entirely in terms of some people not being able 
to return to their neighborhoods, but the path I am suggesting, 
using the Baker bill or something similar as a mechanism, would 
offer these residents much greater financial recovery through 
buyouts that they could possibly enjoy otherwise, coupled with 
the ability to rebuild their lives in nearby parts of a safer, 
stronger community.
    As difficult a path as this is, I truly believe that the 
people will accept it in Louisiana and across the Nation. The 
real question is, will the Louisiana and national politicians?
    Let me end on a very hopeful note. I believe we are seeing 
movement down this path on both sides. I am very hopeful that 
in the very near future, we will have some very positive 
progress involving increased additional support for housing and 
other needs on the ground in Louisiana. If we do that--and I am 
hoping we will--I hope that will be coupled with the 
culmination of a lot of work going on in Louisiana to produce 
that single, unified, bold plan that can gain the confidence of 
people here in Washington and around the country. I believe 
that is the combination that can allow us to move forward 
through the mechanism of the Baker bill or something very 
similar.
    Thank you very much, Mr. Chairman.
    Chairman Shelby. Thank you.
    Congressman Baker.

                   STATEMENT OF RICHARD BAKER

               A U.S. REPRESENTATIVE IN CONGRESS

                  FROM THE STATE OF LOUISIANA

    Representative Baker. Thank you, Mr. Chairman. I want to 
express my deep appreciation to you. I came to you in the 
hurried moments of last session, asking you to consider a 
legislative matter. You indicated to me that it was important 
to you, that you would make it a priority and that early this 
year you would convene a hearing to consider the subject 
matter, and for that commitment and your honoring of that 
commitment, I want to express my deep appreciation to you, 
understanding the many demands made on the Committee's time.
    To the Members here present, I wish to express my deep 
appreciation for your kind interest and continuing courtesies 
that have been extended. It is clear that we are in a 
circumstance not of our making of enormous complexity, and 
resolution is not going to be easily attained.
    Having said that, the American taxpayers have been 
extraordinary by actions of this Congress. The amount of funds 
made available to us so far in the Gulf Coast have truly been 
extraordinary, either by taxpayer appropriation or by 
charitable contribution. It is amazing to watch this country 
work when they sense true and honest need.
    I would like to speak just for a moment in very general 
principles about the proposal the Senators have introduced, and 
the one that I have introduced, only as to its operative 
intention, not as to detail. But certainly, if Members wish to 
engage in questions concerning that, I would welcome your 
interest in the matter.
    The difficulty we face is that we need some aggregating 
entity. We need an ability to get into subdivisions and 
communities and get title to property so that it can be swept 
clean. Once done, the property then can be readied for sale 
into the private market, the proceeds of which, I feel, would 
be highly appropriate to go back to the American taxpayer. It 
is the first time to my knowledge, in response to a natural 
disaster, that the recipient victim is suggesting the taxpayer 
should share in the upside benefit of any speculative 
environment which may result. I do believe, because of the 
necessary economic function within the region, from oil and 
gas, to exporting 65 percent of the Nation's grains, to the 
seafood industry, to a whole host of other assets, people will 
return. People will live there because they are jobs of 
necessity. But that means children must go to school. It means 
firemen must be on duty. It means police must be ready to 
respond.
    How does one begin when you look across Lakeview with truly 
700,000, 800,000 homes as far as the eye can see, but you can 
look in the front elevation, look out the back, look through 
the back elevation of a house in the next lot, out the front 
door on the next street, and look as far as you choose to look. 
Much has been lost more than just homes and structures. Hope is 
on the border of being lost. Who goes back first? Does the 
fireman move into his house? Where does he buy gas for his 
vehicle? Where do his kids go to school? Where does the family 
shop for groceries?
    We must have a plan of community restoration, where we all 
go back hand-in-hand all together. We are not asking the 
Federal Government to make whole people who moved into a 
floodplain and who had the misfortune to be caught short 
because the insurance was either lacking or less than the 
financial obligations for which they were owed. Under the 
proposal we are suggesting you consider, everybody loses. The 
homeowner loses. The banks lose. Certainly, the Federal 
taxpayer will lose. But we are hoping to offset the scope of 
that loss by the sale of reclaimed properties into the market, 
and give those proceeds to the American taxpayer for their 
generosity in providing us a bridge loan. They are going to 
help us out when we are a little short.
    Second, going forward, I am not suggesting--and I know 
neither Senator has suggested--that we build unwisely. 
Certainly, we should build to hurricane-proof standards. 
Certainly, we should have areas where we closely and carefully 
evaluate the advisability of rebuilding. Certainly, Senator, I 
want to join with you. If it could be made part of this 
proposal, I pledge to you my support in looking at the 
advisability of how our flood insurance premium system works. 
It should be, as close as possible, actuarially sound. We 
should not have someone who owns a second home in the panhandle 
of Florida that is looking out at the water break on a sandy 
beach at Destin, paying $494 a year for Federal protection from 
damage accruing to that multithousand dollar home. That is not 
right.
    Now, this is a painful offer. This is not something that I 
run for reelection on, saying, ``Let us go home and raise flood 
insurance premiums, Senator.'' So my heart is here fully 
committed to this.
    I am also suggesting that as we make those reforms, we need 
to provide a mechanism of hope for this important economic 
center of our country. Now, once we aggregate the land and sell 
it back to the developers for future development, one might 
say, well, that is a top-down approach. The President's has 
been insistent on a bottom-up approach. Legislation provides 
for local planning councils. Under the terms of the bill, money 
cannot be spent that is inconsistent with the plan developed at 
the local level. We do not go in and march on communities as a 
Federal enterprise, saying, ``We are here to help you.'' You 
have to pass a resolution at the local level, city council, 
parish governing authority, and say, ``Please come on in, we 
want your help.''
    So it is a negotiated process led at the local level by 
planning, invited in by the local governing authority, and we 
come in and acquire properties, take the bank out, and leave 
the homeowner with a small amount of cash and no mortgage 
obligation.
    How does that work? For a $200,000 home. Let's assume you 
have $150,000 mortgage. Under the terms of the bill as 
currently constructed, we would offer the homeowner $30,000 
cash, and we relieve the bank of its financial obligations by 
paying it 60 percent maximum, would be $90,000 to the lending 
institution. Had not been widely noted, but it is important to 
note, I think, in fairness to this Committee, the bill 
prohibits the acquisition of properties from lending 
institutions which are the result of foreclosure. We do not 
want to incent social behavior that is not consistent with the 
recovery. So we are suggesting that where lending institutions 
work with us, provide longer forbearance, that there is an 
upside to them as well. If they choose to hold onto that 
property, we provide a mechanism for a partnership arrangement 
under the redevelopment proposal, where we do not pay you 
anything, but in the course of the clean-up, we will sweep the 
lot clean, and we will transfer back to you the surface rights 
of that tract once it is improved, but you have to pay us your 
pro rata cost of the clean-up. But you can hang onto that 
property throughout the duration if you choose to have your lot 
back in your community the way it was prior to the storm, and 
then you build your own home, because we did buy you out.
    We have tried to give every possible consideration some 
answer. One of the most disturbing would be for those low-
income individuals who were displaced by the storm, and 
surprisingly to many people--not to me--in the lower Ninth 
Ward, the absolute outright homeownership right was 43 percent, 
meaning 43 percent of the occupants of the Lower Ninth owned 
their home outright. Many had no insurance. Why should they be 
displaced by the storm, and even if redevelopment occurs, not 
allowed to come back? That is why we have had some controversy 
on the House side, a provision that allows for an individual to 
exercise a specifically limited timed option. So if you do not 
believe the Government--there are some people out there, 
amazingly enough, who do not believe the Government--and you 
want to come back and look and see what the deal really looks 
like, you will be given a brief window, and if you want to 
repurchase your lot, for which you were paid a fee, you have 
the right to do so. Even more importantly, the option is 
negotiable. You can sell the option to somebody else. My view 
is that money is somewhat helpful as a cure to poverty. Let 
people make some money as the recovery goes forward.
    I am not suggesting this plan is perfect. Since I discussed 
it with you, Senator, in December, there have been a number of 
modifications. Ms. Landrieu and Mr. Vitter have worn me out 
with modifications. I think my name is modification.
    [Laughter.]
    And I am not here to say to you that what we have before 
the Committee today is the plan. But I will suggest, and I 
hope, in a manner that you will understand I hold quite 
strongly, I am a former real estate guy, I am a former home 
builder. Before I lost my mind and came to Congress, I did that 
full time.
    If we let this go to normal market process, where we go 
through foreclosure cycle, speculators have signs up already, 
``I buy houses. Call me.'' They are preying on the elderly. 
They are preying on the uneducated. They are preying on the 
desperate. And they are going to pay them cents on the dollar 
and ride it out, because they know, they know that this great 
city will come back, and it is going to come back at a value 
and a level nobody can appreciate today. The question is, is it 
going to take months? Is it going to take years, or is it going 
to take decades?
    And in the course of that consideration, I would point out 
there are much more cost-beneficial ways to manage the 
resolution. Sure, it requires work. We would take on Federal 
responsibility for its failure. But if we do it right, we can 
minimize the adverse impact on the taxpayer, we can give a city 
back its culture, and we can give people hope. They need hope, 
Senator. They need to know that something is going to be done. 
Doesn't have to be done tomorrow, but it has to be done.
    Thank you Mr. Chairman.
    Chairman Shelby. Thank you.
    Any questions of this panel?
    Senator Dodd.
    Senator Dodd. First of all, congratulations to all three of 
you here, and I gather we do not have a bill that has been 
written up yet in the Senate?
    Senator Landrieu. We do.
    Senator Dodd. I want to take a look at it, but I am very 
intrigued by what you just said. I think it is very creative, 
and I want to commend you, Congressman Baker, for a very 
thoughtful approach, imaginative approach on this, and I am 
very excited about it. I will be talking with my two colleagues 
here about it as well, more modifications, not what you want to 
hear about. I love your presentation. I think it is very, very 
thoughtful.
    Why did the Administration just reject this? It seems to me 
they may have some ideas they want to bring to it, maybe want 
some modifications themselves, but why would you reject what 
sounds to me like a very reasoned, well-thoughtout proposal 
here that would bring us all together, and particularly the 
notion of hope, I think, and creative.
    Chairman Shelby. Senator Dodd, as you know, the 
Administration will testify in just a few minutes.
    Senator Dodd. But I am curious about the Congressman, about 
his analysis of why the rejection.
    Representative Baker. Even as I came to the Chairman it 
was--I fully focused on the House consideration only. We were 
fortunate to get a bill out of House Financial Services by a 
50-9 vote, bipartisan. When I came to the Chairman, it was a 
very new topic on a very complicated problem, and he suggested 
we need some time for Senators to review it and come to a 
better understanding before we act on it, and I certainly 
understand that.
    In the case of the Administration, I want to compliment Mr. 
Powell. We have worked, over the past few months, for many 
hours, trying to come to some agreement on how to proceed. Much 
of what the Administration's views would be--and I hope I am 
not inappropriate to characterize it--is we have a response 
mechanism in place, which we feel, if properly funded and 
supervised, can give the people of Louisiana the assistance 
they need much more quickly. I will say, in their defense and 
in some criticism of my own approach, to get the corporation 
created, to appoint the board, to have staff capable of going 
out and running down the mortgage obligations and finding out 
who the true owner is if they happen to live in Wisconsin or 
wherever. It is going to take time.
    So if one is focused on immediate response, although I am 
not all that excited about--I do not think my colleagues are--
with the cruise ship FEMA trailer response--I am saying to you 
that doing something now is the right thing to try to do. This 
is a grander, longer term--the one dispute I will have with the 
characterization of the approach is it is a long-term plan, it 
is a very long-term plan. If there is any problem with it, it 
is a really long-term plan.
    Senator Dodd. You are not suggesting this is an either/or 
situation. Obviously, there are immediate needs that need to be 
addressed, which I think all of us would like to see us do 
something about. What you have created or at least envisioned 
here is some longer-term proposal. Senator Bayh, I think, 
raised earlier the question of some low income issues and so 
forth. There are some immediate issues, but I do not know how 
that should be in conflict necessarily.
    Representative Baker. I would defer to the Committee's 
judgment on that matter. I am very concerned that as we 
repeatedly come to this Congress and ask for assistance, that 
at some point people are going to say enough is enough. My 
sense of urgency was to offer this as the initial response. I 
know there is under consideration, for example, an $18 billion 
supplemental. I do not know the allocation of those resources. 
I do not know what is intended for that. I am hopeful my two 
Senate colleagues will have a significant hand in making that 
determination. I do not serve on appropriations. I am just a 
banking guy, so I am really reliant on your leadership and 
those of my two Senators to help us navigate.
    Senator Dodd. Let me ask our colleague, Senator Landrieu 
about this. We have talked about this, in fact, I think in our 
trip when we went down to Coretta Scott King's funeral 
together. We talked about this, and you told me about this idea 
and proposal. Tell me what your visions are of all this.
    Senator Landrieu. Let me add my comments to that very 
important question, why the Administration to date has opposed 
this concept. It is not because Congressman Baker is not 
willing to talk, but he needs somebody to talk to. They have 
mischaracterized this as a big Government approach, and nothing 
could be further from the truth. It allows the Federal 
Government to do what only the Federal Government can do, which 
is step up and create a secure framework in order for the 
private sector to work, and in order for many local 
governments--it is not just one. These are--I do not have the 
full number. If my staff will tell me, but I would say, 
estimate it is over 60 to 65 counties and parishes that were 
affected.
    The way the Baker bill is now drafted is for Louisiana 
only, but let me go on record to say this has great merit for 
Mississippi and Louisiana, should they choose. They have 
decided they did not want to, so we had to kind of proceed by 
ourselves, alone, but it is not meant to exclude them. But only 
the Federal Government, Senator Dodd, can create this framework 
in order for the private sector to be maximized. Otherwise, as 
Congressman Baker said, speculators will rule.
    Now, let me say I have no problem with people making a 
profit. I understand that is the way this Government operates, 
but I think given what Senator Vitter said about thousands of 
homeowners who saw their property destroyed, not because they 
did not pay their taxes, stay out of trouble, send their kids 
to school, but because our levees broke. We have more of an 
obligation to help them have a fighting chance to get back to 
the neighborhoods that they loved so well, whether it is the 
Ninth Ward or Lakeview, et cetera.
    I think the Administration has a lack of understanding of 
the magnitude, which they have not demonstrated, at least to 
this Senator, that they quite grasp yet. They think it is a 
Government approach, when it is exactly the opposite. And they 
have said it is too expensive. Let me, for the record, say that 
according to Congressman Baker and what he has worked out, if 
it is done properly and we are careful with the taxpayer money, 
we might make money for the taxpayer. I do not want to over 
promise, but I think a careful review will show that over time 
we could maybe break even because the property is devalued now. 
But if we all work to increase the value of this great region 
with homeowners and families sharing that rise up, taxpayers 
may be able to actually create something that would not, 
Senator Shelby, be a drain like the flood insurance program, 
like some of the other things we have done.
    Chairman Shelby. Senator Sarbanes.
    Senator Sarbanes. I just wanted to follow up on what 
Senator Landrieu said about the levee breaking. Who was 
responsible for the levee? Who built the levee and who 
sustained the levee?
    Senator Landrieu. Senator Vitter can give you more detail. 
He is on the oversight committee. I am on the funding 
committee. But the bottom line is these are Federal levees that 
were built with Federal funding with a local match. The 
maintenance of the levees is distributed between the locals and 
the State, but there is no question--because several studies 
have now been conducted--that it was a gross failure of design 
of Federal levees that broke and flooded areas that have never 
been flooded before.
    Having said that, let me ask Senator Vitter to fill in 
because he is on committee.
    Senator Sarbanes. I think Senator Vitter--is that right?
    Senator Vitter. Yes, that is exactly right. In terms of the 
design and construction, the lead is always the U.S. Army Corps 
of Engineers. Now, maintenance is more, not exclusively, but 
more a local matter. But when you look at the specific breaks 
we are talking about, I think it is absolute universal 
consensus that they were 98 plus percent caused by fundamental 
design flaws. That is the Corps and its contractors.
    If I could just briefly answer Senator Dodd's question as 
well.
    Senator Dodd. This is great. You did a good job with this 
piece, by the way.
    Senator Vitter. I appreciate it. I wanted to go back to 
that quickly. You said why is the Administration opposed to 
this? I do not want to speak for the Administration--and they 
have mentioned a bunch of things--but I think a key, not only 
there, but also up here in general, is people wants to see what 
the substance of the rebuild plan is. Congressman mentioned, 
appropriately, this local planning work that is ongoing. 
Basically, I think a lot of people want to see the result of 
that before they sign the check or pass the bill, and that is 
what I am suggesting, that we just marry up. So let people see 
the result of that, or create a mechanism that everything is 
contingent on that confidence inspiring plan.
    Senator Dodd. Let me just react quickly to that, and ask 
Senator Landrieu this. My only concern with that would be that 
asking that many local entities, all the people at the local 
level in Louisiana to come together on one plan to precede 
this, my suggestion would be--just on reacting--you do the 
Baker-Landrieu-Vitter plan, get this thing moving, you will 
then get the reaction at the local level. That would be my 
assumption here. I think waiting for this to occur 
simultaneously is, I think, dreaming.
    Senator Landrieu. Could I add something to that, if I 
could, Senator Dodd? I do not disagree with what Senator Vitter 
said about the importance of having coordinated plans at the 
local level, but I do want to strongly agree with what you just 
said. This is a chicken or egg situation, and to expect these 
parish governments from the last 6 months, that have no idea 
what FEMA will reimburse them for and under what conditions and 
how quickly, they have no idea how much money they have to work 
with, they have no budgets to work on. Seventy-five percent of 
their operating budgets were swept out from under their feet. 
They do not have fire trucks. Police officers do not have 
houses. Teachers have no schools to teach in. Nineteen 
hospitals were shut down and 6 universities. To ask these 
communities to come up with a great plan that everybody signs 
off on and thinks is great, and then march themselves to 
Washington before they can get help is ludicrous. It will not 
happen and it cannot happen.
    Now, we are not asking for a bailout. The Federal 
Government should set up a framework, which is what the magic 
of the Baker bill is. It is not perfect. We have never done it 
before. How could it be perfect? We do not know. But it is a 
framework in order for these communities to get a sense of what 
might be available. Then they can talk about what they might 
do. So there is some urgency, and I hope this Committee will 
take a close look, and not just go with the Administration 
line, which is just throw more money down there and think 
something magically is going to grow like a garden in order.
    Senator Vitter. I think there is a way to do both. The way 
is for us to lead up here in Washington, the Administration, 
Congress, and create a mechanism to move forward, and a 
commitment, and all of it is contingent on a clear plan being 
developed from Louisiana and married to that. And things do not 
happen, the money is not spent, the money is not disbursed 
until that happens.
    Senator Dodd. Got to start here. though. I think you have 
to start here first.
    Senator Vitter. Well, I am actually hopeful we are going to 
embark on that path. I am hopeful that at the Federal level we 
are going to have a breakthrough soon either with the Baker 
bill or a modification of it or increased Federal commitment, 
and then that has to be married with that vision and detailed 
plan from Louisiana.
    Representative Baker. Senator, if I may, just to point out 
that the construct of the corporate organization will take a 
while. It certainly could be another component of the bill to 
require at some point, maybe not a systemwide storm damaged 
impact area, but at least at the parish level a recommendation 
for consideration be developed over the next 6, 8, 10 months 
while this is all being stitched together. That certainly is 
attainable, and I do not expect people at your level to 
appropriate money not really knowing where it is going to wind 
up.
    At the same time, I want to hit something that has come up 
in press reports about the spending level, somewhere $100 
billion figure came from; for a while it was down at $85 
billion. This proposal has morphed over time. There is a cap in 
the bill today at $30 billion that was adopted in the House. 
Since that time, I think we could get that figure below $20 
billion, because an operating line of credit at $20 billion 
would fund this corporation quite adequately. And then with the 
sale of assets going forward, we would be in pretty good shape. 
So, I do not want the dollar bill consideration to be the basis 
on which the Committee would reject the proposal.
    Senator Dodd. Thank you. I apologize taking so much time.
    Chairman Shelby. I have a question, Congressman Baker. I 
hope you are not contemplating by this plan to build back in 
areas that we have reason to believe will flood again, and put 
money in those areas, because if you do, a lot of us would not 
want to be part of that. But we do want to be part of something 
to rebuild the area the right way.
    Representative Baker. Yes, sir. I think reasonable people 
can agree that the structures themselves should be to some 
predetermined hurricane standard, that where the structures are 
located needs to be carefully constrained, that where we have 
people still in the floodplain behind levees, their premiums 
for their flood insurance reflects the risk associated with it. 
I think we would take any guidance, Senator, that you would 
choose to require of us, understanding that those same 
constraints might be applicable one day to the good people of 
Alabama.
    [Laughter.]
    Chairman Shelby. I think they should be. I thank all of you 
here this morning. We appreciate your appearance and your 
contribution.
    Senator Landrieu. Thank you.
    Senator Vitter. Thank you.
    Representative Baker. Thank you.
    Chairman Shelby. We will go to our second panel. Our second 
panel will be the Secretary of Department of Housing and Urban 
Development, Alphonso Jackson.
    Secretary Jackson, welcome again to the Committee. You are 
no stranger to the Banking Committee. We welcome you again, and 
we understand you are on a tight schedule, and we will try not 
to keep you any longer than you can stay.
    Secretary Jackson. Thank you, Mr. Chairman.
    Chairman Shelby. Your written statement will be made part 
of the record in its entirety. You proceed as you wish.

          STATEMENT OF ALPHONSO R. JACKSON, SECRETARY,

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Secretary Jackson. Thank you so much.
    Mr. Chairman, Ranking Member Sarbanes, and distinguished 
Members of the Committee, it is a privilege to appear before 
you today.
    I would like to say a few words about HUD's overall 
responsibility to the devastation in the Gulf Coast, and then 
specifically highlight the efforts of us through mortgage 
assistance, Community Development Block Grants, rental 
assistance, and fair housing enforcement.
    Immediately after Katrina made landfall, I established a 
Disaster Response team within HUD to tap the Department's 
expertise in all of its program areas, and I am proud to report 
that when the call went out for HUD volunteers, hundreds of 
HUD's employees stepped forward. By early September, we 
identified nearly 6,000 vacant HUD-owned properties in 11 
nearby States that could be provided, rent-free housing for 
evacuees for up to 18 months. To date, 2,300 of these homes 
have been repaired and made available to these families. More 
than 1,000 are currently occupied, and another 800 families are 
in the process of moving in. Of the remaining HUD-owned homes, 
those that can be made habitable will be offered to families 
rent free after they are repaired, or be sold at a discount to 
those evacuees who want to purchase them.
    Immediately after Hurricane Katrina I imposed a 90-day 
foreclosure moratorium to help all FHA-insured homeowners who 
found that they could no longer pay their mortgage. Right 
before Thanksgiving, as the initial 90-day moratorium was about 
to expire, it was clear that the people needed more time, and I 
extended the moratorium another 90 days.
    But recognizing that many FHA-insured families still needed 
help, we did something extraordinary. HUD announced a Mortgage 
Assistance Initiative. HUD has made funds available to pay the 
mortgage of certain eligible families insured by FHA for up to 
one year. These payments constitute an interest free loan. 
These families are not required to pay back this loan until 
they sell their house, refinance their first mortgage, or pay 
off their preliminary home loan. We are cutting red tape and 
allowing State and local leaders to put the funds to work as 
quickly as possible.
    Since the storm, HUD's Office of Community Planning and 
Development has issued more than 40 waivers to its normal 
program rules. When Congress appropriated $11.5 billion to the 
Community Development Block Grant fund to 5 Gulf Coast States, 
it asked HUD to develop a method of allocating the monies. The 
law required that we target the assistance to the most impacted 
and stressed area within those States. The decision as to how 
we allocated the block grant funds was wrenched with particular 
sensitivity to the utmost housing needs in the area of 
concentrated housing destruction.
    I believe that HUD has both satisfied, Mr. Chairman, the 
spirit and the letter of the law in allocating these funds. 
More than a million homes were damaged in these five States. 
Upon inspection, FEMA classified over 300,000 of these homes as 
having major or severe damage. Those homes were concentrated in 
various States as follows: 67 percent in Louisiana, 21 percent 
in Mississippi, 7 percent in Florida, 4 percent in Texas, and 1 
percent in Alabama. Within HUD's own FHA portfolio in these 
States, nearly 17,000 homes suffered significant damage. Of 
those properties 56 percent are in Louisiana, 40 percent in 
Mississippi, 2 percent in Florida, 1 percent in Texas, and 1 
percent in Alabama.
    Congress required that HUD not allocate more than 54 
percent of the block grant fund to any one State. Under this 
cap, the State of Louisiana was allocated $6.2 billion. By any 
measure, the greatest need in Louisiana is in New Orleans. 
Nearly 90 percent of the Louisiana housing damage occurred in 
the metropolitan area of New Orleans.
    Rental assistance. Although it is FEMA's core mission to 
provide emergency assistance to those adversely affected by 
natural disasters, HUD has worked in partnership with FEMA to 
address the immediate housing needs of displaced families. In 
fact, on September 23, Secretary Chertoff and I announced the 
Katrina Disaster Housing Assistance Program, better known as 
KDHAP. I think it is important to point out that HUD's mission 
assignment for FEMA was, and still is, to help individual 
families who received HUD-funded rental assistance prior to 
Hurricane Katrina.
    Recently, Congress appropriated $390 million directly to 
HUD to fund the Disaster Voucher Program that will expand the 
assistance to include those directly affected by Rita and 
Wilma, but again, the rental assistance is only available to 
persons who previously had HUD assistance. HUD's Office of 
Public and Indian Housing is also working closely with the 
public housing authorities to help find housing for our clients 
independent of the Disaster Relief Program. Approximately 
15,000 families are currently enrolled and receiving rental 
assistance through HUD's mission assignment from FEMA.
    Fair housing. Our Office of Fair Housing and Equal 
Opportunity is diligently working in the Gulf Coast region to 
make sure that those families who were victimized by these 
hurricanes are not victimized again by landlords who will 
illegally deny them housing.
    In conclusion, Mr. Chairman, Ranking Member Sarbanes, and 
Members of the Committee, all of us have been working on the 
ground in the hurricane ravaged area now, and the damage is 
clearly heartbreaking. I can assure you the people of HUD will 
always remember that they come to work, not merely to do a job; 
we know that we are serving our fellow human beings with real 
faces and very pained stories. Within the limits of the mission 
assigned to HUD by Congress, the HUD team will do whatever it 
takes to help people find housing that they need, to help 
communities help themselves rebuild.
    I want to thank you very much for giving me this 
opportunity, and I will be willing to answer any questions.
    Chairman Shelby. Thank you, Mr. Secretary. I have a number 
of questions. I will try to run through them. If you cannot 
answer them now, if you will answer them for the record, and 
help us build this record.
    Secretary Jackson. Sure.
    Chairman Shelby. With a large share of the housing in 
Katrina-impacted areas either destroyed or uninhabitable, as 
you mentioned, there have obviously been tremendous pressures 
on the rental market, what is left of it. The Committee has 
heard a variety of instances, Mr. Secretary, of rent gouging, 
often seeing rents double or triple beyond their pre-Katrina 
values only 6 months previously. Is this something that HUD has 
been seeing as well? Does there appear to be rent gouging in 
areas in Louisiana, New Orleans area, and also Houston or 
Dallas? If it is in fact occurring, what can HUD do to moderate 
this?
    Secretary Jackson. We have seen rent gouging, especially 
around Baton Rouge and those areas. We sent our team of fair 
housing equal opportunity immediately down to make sure that 
this was stopped.
    In Houston, Dallas, that has not been the case. They have 
been extremely willing to work with us to find housing, and it 
is still very moderate. The fair housing market has not been 
enhanced very much in those areas. But we saw it exacerbated 
tremendously in and around the Baton Rouge area.
    Chairman Shelby. Secretary Jackson, will HUD's plans for 
rebuilding public and assisted housing take into consideration 
the risk of future flooding at any specific location? In other 
words, of the Nation's entire stock of public and assisted 
housing, do we have any sense of how much of that stock is 
located in a floodplain or subject to great risk from other 
natural disasters such as earthquakes?
    Secretary Jackson. I can tell you in a number of cities, 
the way we built public housing back in the 1930's and 1940's 
were located in floodplains. Of late, that has not been the 
case. We believe that clearly--and I have had a number of 
conversations with the Governor of Louisiana, with the Mayor 
New Orleans, with the Governor of Mississippi, and we are 
exploring ways first to make sure that we first shore up the 
levees, second, that we build the kind of housing that if we 
have this kind of storm again can withstand it. We have not 
done that in the past. If you will remember, Mr. Chairman, in 
Florida we have done some experimental housing which withstood 
hurricanes, and was easy to clean out. We will continue that.
    But President Bush has made it very clear we are not going 
to impose our will on any of the States, we are going to work 
in tandem with them to make sure that they know that we are 
there and we are going to assist them. We have sent our college 
of experts into Mississippi, into Alabama, and into Louisiana, 
to work with the Governors, to try to decide how best to 
rebuild those States.
    Chairman Shelby. But you are hoping not to repeat the same 
mistakes, are you not?
    Secretary Jackson. Absolutely. It is important that we look 
at where we build public housing from this point on in this 
country.
    Chairman Shelby. You referenced this earlier. Congress 
appropriated $11.5 billion in Community Development Block Grant 
funding to assist in the rebuilding of the Gulf area. There is 
a lot of flexibility here, as you well know. Secretary Jackson, 
could you for the record, share with the Committee what the 
overall plan is at the moment for using the recently 
appropriated Community Development Block Grants and how you 
will coordinate this with the impacted States?
    Secretary Jackson. What we have asked each Governor--and we 
have had conversations with each Governor--is to submit us a 
plan. Your instructions are very clear, that this money should 
be used basically to rebuild those respective areas. We are 
expecting the Governors to send us a plan very soon. Then we 
will sit down, discuss those plans and work with them. We have 
had tremendous and positive dialogue with Governor Barbour, 
Governor Riley, and Governor Blanco, and we expect to see those 
plans very soon, and we are going to move very, very quickly 
and judiciously to begin to operate.
    Chairman Shelby. So you will be closely monitoring the use 
of these funds, because you are talking about at the moment 
$11.5 billion is a lot of money.
    Secretary Jackson. I can assure you we are going to 
monitor, because in the final analysis, you all are going to 
hold me responsible if it is not spent wisely.
    Chairman Shelby. Thank you. The use of vouchers, you have 
had a lot of experience in this area. In the aftermath of 
Hurricane Katrina, there was perhaps no greater issue than 
finding housing for displaced families, probably still is. The 
principal form of disaster housing assistance is the Stafford 
Act's 408 assistance. Some have suggested instead of using 
vouchers in the existing public housing network for disaster 
assistance. I believe your experience in having run--was it the 
Dallas Housing Authority?
    Secretary Jackson. Yes.
    Chairman Shelby. Gives you perspective on this issue, as 
the Dallas Housing Authority historically, has a turnover, I 
understand, of about 1,000 vouchers per year?
    Secretary Jackson. That is correct.
    Chairman Shelby. Do you believe you would have the capacity 
at HUD to process close to, say, 100,000 vouchers in a matter 
of weeks?
    Secretary Jackson. Not at this present time, no. We cannot 
do that. I think that what we have done in the last 12 to 14 
weeks in housing some 7,500 of those displaced persons, plus 
giving vouchers to another 7,500 has been done very 
expeditiously, and in fact, I must say to you, without the 
support and help of Texas specifically, and many other States, 
this could not have been done so quickly.
    Chairman Shelby. I just want to reference the Low Income 
Housing Tax Credit that you are very familiar with. Congress 
recently allocated over $1 billion in additional low income 
housing credits to States impacted by Hurricane Katrina. This 
additional funding will be used to rebuild rental housing 
destroyed by Katrina, is my understanding.
    Secretary Jackson. That is correct, on top of the $11.5 
billion. That is not in addition to, that is on top.
    Chairman Shelby. Traditionally, a lot of the tax credit 
properties have tended to be large urban apartment complexes. 
Most renters in the Gulf States live in single-family homes or 
smaller apartment buildings. What plan do you have at HUD to 
work with the State housing finance agencies in assuring that 
the new tax credit developments, $1 billion, will meet the 
needs of displaced families? It looks to me like that is where 
you should target.
    Secretary Jackson. Again, we have asked the State and the 
local officials, the parish officials, to come together--and I 
know it has been said it is very difficult to get them to come 
together. But I think if we are going to do this logically and 
in an expeditious manner, they are going to have to come up 
with a plan as to how best we can serve each one of those 
communities but yet not leave one of those communities behind.
    Chairman Shelby. But you cannot have every community come 
out with a plan, can you, Secretary Jackson, where the Federal 
Government is the big payor here?
    Secretary Jackson. No, but once we give the low income tax 
credit, the State is the allocator of those dollars. And so 
what we are asking them again to do is to get with their local 
parish, their local cities, and come up with a plan that they 
can address.
    We will allocate the dollars as you have asked us to do, 
but in the end--and I think President Bush has made this very 
clear--we are not going to dictate to any one of those States 
how to utilize their money, either the Community Development 
Block Grant or the low income tax credit. But we are going to 
be there to augment and work with them to see if we can speed 
up the process, because we are very sensitive to the needs of 
those persons who have been displaced to get back to where they 
want to be. Many of the people of late--and I will tell you 
this: Surprisingly, but very pleasing, according to what the 
President said, many of the people now want to come back home, 
and we want to do everything in our power to help them get 
back.
    Chairman Shelby. But you do not want to build again in 
harm's way, do you?
    Secretary Jackson. Absolutely not, and I do not think the 
Governor and the mayors of those cities want to do the same 
thing.
    Chairman Shelby. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your testimony, and while it 
focused on HUD's response, I want to talk about where we go 
from here. And I also listened intently to your answers to the 
Chairman's questions, and I also appreciate the view of the 
Administration not dictating. But while we do not dictate, I 
also hope that we ensure that one of the great aspects of New 
Orleans and Louisiana was a multiracial society in which all of 
the elements of society we have in America were represented 
there. And, you know, we can ultimately have a plan that does 
not give us the opportunity for all of the residents that you 
just talked about going back to get back.
    Secretary Jackson. Sure.
    Senator Menendez. And so there is a balance between 
dictating and ensuring certain things, and that is what I want 
to pursue.
    As I understand it, there are 100,000 public housing units 
that were destroyed in Louisiana by both Hurricanes Katrina and 
Rita.
    Secretary Jackson. No, not 100,000.
    Senator Menendez. How many were there?
    Secretary Jackson. Just about 10,000.
    Senator Menendez. Ten thousand?
    Secretary Jackson. Well, not 10,000. We had to evacuate 
all, but we had probably of that number, about 3,000 that 
really suffered tremendous damage in the flood.
    Senator Menendez. So all the other units presently are 
inhabited by individuals?
    Secretary Jackson. Not necessarily so because of the rain, 
the problem with mold, the problem with a number of other 
issues that we are trying to get them habitable.
    Senator Menendez. So 3,000 were roughly destroyed beyond 
repair?
    Secretary Jackson. Not beyond repair, but needed 
substantial repair.
    Senator Menendez. Substantial repair. How many units exist 
in which they are vacant because mold or whatever other 
circumstances that are less than the substantial repair of the 
3,000?
    Secretary Jackson. A number of the units right now, and I 
cannot give you that number.
    Senator Menendez. Could you give the Committee that through 
the Chair?
    Secretary Jackson. Yes, we have a number.
    Senator Menendez. I would appreciate it, because part of 
the challenge, it seems to me, is what do we do with that part 
of the society that were living in public housing.
    Secretary Jackson. We are really making every effort, 
Senator, to bring them back. We have brought back now about 
700, and we are doing everything in our power to clean up the 
units.
    One of the things I did not want to do is put people in 
units that were sub-standard. Many of the units, when we took 
over the housing authority, had been sub-standard for 20 years, 
and it is important to understand that we had almost 10,000 
units. But about 6,000 were habitable, and 4,000 had basically 
been unhabitable for more than 15 years.
    So we are in the process of totally revitalizing the 
housing market in the city of New Orleans at this point.
    Senator Menendez. Well, that is good news. I am glad to 
hear that we are not going to put people in sub-standard 
housing. Now the question becomes: What is it that, while not 
dictating, is HUD's plan to make sure that those who were in 
some form of public housing now will be able to come back, 
hopefully in better housing than they had, using this 
catastrophe and maybe turning it into a more positive 
consequence? What is the expectation? For example, does HUD 
plan to seek the replacement of all of those public housing 
units that you described, the 3,000 that were significantly 
affected plus the others that had some degree of affect? And if 
so, are you seeking a supplemental for that?
    Secretary Jackson. No, because we have insurance, we have 
other ways of doing that. We have houses that we have just 
finished, like Desire that was totally submerged. But we have 
some that clearly we had on the drawing board to totally rehab, 
reconfigure. And we are still moving in those directions to do 
that.
    Now, those that are not presently on the drawing board, we 
are going in and fixing those up completely so that people can 
move back in. But we have a plan, which we have a team of 
receivers in now, that we have talked about how we are going to 
revitalize all of the housing that exists for public residents 
in New Orleans.
    Senator Menendez. Is this plan available so that the 
Committee could review it?
    Secretary Jackson. Absolutely.
    Senator Menendez. I would appreciate your submitting it 
through the Chair to the Committee.
    Secretary Jackson. Sure.
    Senator Menendez. Last, let me ask you, with reference to 
as you create the opportunity to take the disaster and turn it 
into something good and not put people back in sub-standard 
housing but still to provide a significant element of society 
that may not have, at least at this point, the opportunity for 
homeownership, do you see, for example, a HOPE VI-type of 
opportunity here? It has in my own State of New Jersey 
transformed the lives of people who were in public housing, in 
sub-standard housing, into a sense of neighborhood and economic 
empowerment. Do you see that as a potential model here in 
Louisiana?
    Secretary Jackson. New Orleans has a number of HOPE VI that 
they are utilizing. In fact, when I talked to you about Desire, 
Desire was one. When I talked to you--I am trying to think of 
the one that was also underwater. What was it? Florida was HOPE 
VI at the same time, and we are going right back in now and 
revitalizing those at this point in time.
    Senator Menendez. We will need some help because the 
President's budget zeroes out HOPE VI.
    Secretary Jackson. I understand.
    Senator Menendez. And that is not much hope. So hopefully 
we can change that.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you.

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Thank you very much, Mr. Chairman and Mr. 
Secretary.
    Initially, HUD estimated that approximately 65,000 families 
would be eligible for the Katrina Disaster Housing Assistance 
Program. HUD staff have stated that 15,100 people are receiving 
these vouchers and 7,200 have executed leases. The number of 
families seems exceptionally low, basically 50,000 families 
that have not been reached or accommodated. You have received 
$82 million in mission assignment from FEMA as well as $390 
million from Congress.
    Given that only 7,200 families have been leased up, it 
appears that much of these funds will go unspent. How much have 
you spent on the KDHAP--however you pronounce it?
    Secretary Jackson. KDHAP.
    Senator Reed. KDHAP.
    Secretary Jackson. I cannot tell you now at that point, but 
your figures are absolutely correct, Senator. We started out 
with what we perceived as about 64,000 people, but after our 
evaluation with FEMA, we brought it down to about 32,000 people 
and then brought it down to about 24,000 people, is what FEMA 
told us we had--what they were allocating us to serve. And we 
are making every effort to serve that number of people today.
    But when you say we estimated, no, we thought there were 
64,000, but after talking with FEMA, who was the first 
responder, they came to the conclusion that it was really about 
24,000.
    Senator Reed. It appears to me that these 65,000 families 
were receiving assistance before the storm. Is that correct? 
That is the basis of the initial estimate?
    Secretary Jackson. Senator, that was the initial belief, 
that there were 65,000 families. That is initially what was 
conveyed to us. After scrubbing what they perceived as the 
list, FEMA has said that it was about 32,000 families that were 
eligible based on being public housing residents, 202, 811, or 
Section 8 recipients.
    Senator Reed. It would seem to me that HUD would have this 
initial information themselves, that you would know--FEMA would 
be considered out of the loop when it comes to how many people 
have housing assistance in Louisiana, Mississippi, and Alabama, 
that you would know this.
    Secretary Jackson. No. No, that is not what I am saying, 
Senator. I am saying to you that we agree with you. That was 
our postulation. But FEMA is the first responder.
    Senator Reed. Right.
    Secretary Jackson. They allocated the names of the persons 
who we were to serve, and we were basically working with the 
interagency agreement to serve that. We have had discussions 
about, but that is the number that has been conveyed to us.
    Senator Reed. I appreciate that, Mr. Secretary, but what it 
seems is there is a possibility that it could be 50,000 
families that were receiving assistance, according to your 
records, prior to the storm. And now only 15,000 have been 
identified, 7,200 have actually got leases that are supported 
by HUD funding. Have we lost 50,000 families?
    Secretary Jackson. I hope we have not, but I am saying to 
you--I understand your question very well.
    Senator Reed. What efforts are you making, Mr. Secretary?
    Secretary Jackson. We have made efforts. We have gone to 
the hotels, we have been going around cities to find these 
people, and we have been conveying it to FEMA.
    Senator Reed. FEMA has not exactly the best track record 
when it comes--so relying on their estimates, I think it might 
be an invitation to have a lot of Americans out in the cold, 
literally, or at least the wet and rainy weather of the last 
several days down there.
    Secretary Jackson. And I understand what you are saying, 
but under the Stafford Act, FEMA is the first responder.
    Senator Reed. I understand that. But under the principle 
that we have to help these people, I suspect HUD should step up 
a little bit more and find out what happened to 50,000 
families.
    Secretary Jackson. We are doing everything in our power, 
but if we are going to change the process, that is in your 
hands, not in ours.
    Senator Reed. Let me change gears slightly. Do you have a 
timeline, Mr. Secretary, for when the public housing stock will 
become reconstructed, public, assisted housing, FHA-supported 
housing? Do you have a timeline? And how does that compare with 
the private renter and owner-occupied housing?
    Secretary Jackson. I cannot tell you how it compares with 
the private, but I can tell you that Mayor Nagin has been 
working very well with us, and we are using a timetable in 
conjunction with his staff and the receiver staff that we have 
there. We have started the process on a number of units, 
rehabbing them, bringing them back online as quickly as 
possible. But we have some concerns that have been raised by 
you and by the Senators and Congress people before. Do we build 
before the levee is secured? Do we build after the levee is 
secured? And that is a decision, if the mayor makes tomorrow to 
do it, we will do it tomorrow. But it is his decision. We are 
not going to preempt his decision. And in many cases, he has 
been working very well with us, I have to tell you that. And we 
are making great headway in revitalizing and restructuring a 
lot of the public housing developments and putting people back 
into Section 8.
    When you talk about multifamily, our Assistant Secretary 
just met with owners of multifamily housing, 202's, 811's, and 
they are in the process of moving very quickly to get people 
back in homes. We are doing everything to get those persons who 
want to return back.
    Senator Reed. Thank you, Mr. Secretary. Let me associate 
myself with the comments by Senator Menendez about the proposed 
cuts to the HOPE VI program and to the CDBG funding. Whatever 
we have appropriated in the past, these funds can be very 
useful in terms of continuing the momentum. That is one concern 
we have: First, getting it going, and then, second, once we 
have got some momentum, sustaining that momentum. And without 
CDBG in the years ahead that could be applied to these areas 
and with the demise of HOPE VI--which this to me would be a 
perfect place for HOPE VI projects where you are actually going 
in and creating mixed-income developments that would literally 
rebuild previous public housing. And my understanding of HOPE 
VI is, you know, you really go in and you eliminate old public 
housing and then you build this new mixed-income--and we have a 
great example up in Newport, Rhode Island. Well, the first step 
Mother Nature has taken care of first us.
    Secretary Jackson. Right.
    Senator Reed. Now, we have the perfect place to do this, 
and this program is scheduled for total elimination. Not just 
for the Gulf Coast but for the rest of the country, I think it 
is an important program. And, again, I think Senator Menendez's 
concerns are appropriate in terms of both these programs.
    Secretary Jackson. Let me say this: As you know, we have 
implemented at your directions the Community Development Block 
Grant funds to the five States that you told us to. Also, I 
think we have had this discussion before about the HOPE VI. 
When you look at the amount of money that we have allocated 
over the last 20 years and the amount of units and cities that 
have appropriated that money in a timely manner, it is clear to 
me that those cities who have done well, like you talk about 
Providence, Dallas, Charlotte, or even New Orleans--New Orleans 
and Desire--the best example I can give you is Desire. Until we 
took over New Orleans, Desire had been on the drawing board for 
20 years with the HOPE VI, and nothing had happened. We came in 
and working with the mayor and through a receivership and made 
it happen. I think to date we have only had--of the 200 or so 
HOPE VI allocated, we still only had about 35 that have been 
completed in the last 20 years. And my position is, my 
suggestion before to the President and to everyone else is the 
program is not working like it was intended to work, and we 
cannot keep funding programs if we are not developing.
    Now, getting back to Community Development Block Grants, it 
has worked very well, and we are going to continue to fund it, 
and we are going to continue to work with cities, because I 
think it is appropriate. But we must gear the money and the 
block grant programs to those cities and those communities that 
are most in need. And I think in this case, clearly, all five 
of those States fit that category.
    Senator Reed. Well, I think they do, but I think most 
cities would claim that they have a certain degree of need.
    Mr. Chairman, you have been very kind. I believe Senator 
Sarbanes is going to return in a few moments, and I have one 
other question.
    Chairman Shelby. Go ahead.
    Senator Reed. Thank you, Mr. Chairman.
    I am also concerned, Mr. Secretary, about the timing issues 
associated with HUD grant programs to the affected areas. 
Section 8 public housing programs, homeless programs, and 
others may experience reductions because of reduced numbers of 
clients, tenants, and program staff unless HUD takes some 
action to ensure that funding is based on pre-Katrina 
population. These cuts in funding are likely to occur just as 
people are starting to return to the affected communities, 
creating another crisis.
    Essentially these population-related programs in terms of 
staffing and support, you could find yourself, if you use 
existing figures because of the depopulation, underfunding at 
just the time people are coming back in. How are you going to 
deal with that?
    Secretary Jackson. We have not taken any money from the New 
Orleans Housing Authority. The vouchers are still there because 
we are using KDHAP and then we will use the disaster vouchers. 
So that is not an issue.
    The 202's are still in place, the 811's are still in place. 
I do not see a cut in funds. In fact, we allocated $1.2 billion 
more for Section 8 in this budget than we had last time, so I 
am not sure exactly what you are asking. I do not think New 
Orleans is going to suffer. Right now, many of the vouchers are 
basically in limbo because people are using other means of 
housing around the country.
    Senator Reed. What about program staff ? In terms of if 
this takes several years to get back up to a critical mass, 
will you have pressures on your program staff to cut back in 
those areas? Or will you be perhaps even putting more in? What 
is that situation?
    Secretary Jackson. To be very honest with you, Senator 
Reed, I have not given that thought, because our thoughts have 
been first to get people housed who want to get housed. And I 
will give that a thought and get back with you. I had not 
thought about that.
    See, presently, from my understanding, the staff at HANO 
has been paid, and many of them have not been in the city. But 
people who are concerned about not paying them with the--if we 
did not pay them, the chances of them returning might not be 
great. So many of the people are now returning. So for 3 or 4 
months, they were paid but they were not there because of the 
flood.
    So, I guess if I answer, I do not think that is a problem 
because they are returning now.
    Senator Reed. Thank you, Mr. Chairman. I do think, though, 
that Senator Sarbanes is en route.
    Chairman Shelby. He is on his way, I understand.
    Senator Reed. Thank you.
    Chairman Shelby. Mr. Secretary, the Community Development 
Block Grant program seems to me is a step in the right 
direction down there. This would be under your supervision and, 
of course, our oversight.
    Secretary Jackson. That is correct.
    Chairman Shelby. Have you thought about expanding that? 
Have there been any suggestions on that? I think we have heard 
Congressman Baker's plan, Senator Landrieu's, Senator Vitter's 
here this morning. I do not think there is any plan that cures 
everything in New Orleans, but I think we all want to help. But 
we want to make sure that money is spent well. We want to make 
sure that money is used for the right reason. And I personally 
want to make sure, if I can, as much as I can, that we do not 
rebuild in harm's way. Whether it is in Lakeview--is that an 
area down there, the upper-income area?--or whether it is in 
the Ninth Ward, it does not matter to me.
    Secretary Jackson. That is correct.
    Chairman Shelby. I just think that is foolish on our part, 
trying to help people and also protect the taxpayer.
    Secretary Jackson. I think, Mr. Chairman, that we at HUD 
understand the needs of the people and the affected area. And I 
can tell you, we share the common goal of Congressman Baker to 
provide effective and responsible support for the region. If we 
did not, clearly, we would not have allocated $6.2 billion. I 
think they have monies to start doing exactly what they were 
talking about. The key to it is all they have to do is submit a 
plan. And I think if they demonstrate submitting a plan and 
began to work, you will be amenable to adding more money.
    Chairman Shelby. What is the holdup on the plan? This is 6 
months now. We are in the sixth month since the disaster. What 
is the holdup? Is it petty politics?
    Secretary Jackson. You know, I do not know. I know you have 
allocated the money, and we have asked them to submit a plan. 
And I have talked to the Governor, and she said she is going to 
submit us a plan. We have the plan and the process.
    Chairman Shelby. Okay.
    Secretary Jackson. So my position is that--I have heard it 
said, ``Well, we cannot get started.'' The money is there. They 
can get started. And if they demonstrate that the money is 
being spent wisely and judiciously to bring people back, then I 
am convinced you will allocate more money.
    Chairman Shelby. But we cannot just allocate money without 
a plan, and without a plan that makes sense.
    Secretary Jackson. I agree.
    Chairman Shelby. A plan that will work and will help people 
now and in the long-run. Is that correct?
    Secretary Jackson. That is correct, because in the end, if 
the money is not allocated properly or not spent properly, you 
are going to look to me and GAO is going to look to me and ask 
me why didn't I make sure the money was spent properly.
    Chairman Shelby. That would be our responsibility.
    Secretary Jackson. That is right. And as you asked us with 
the Lower Manhattan Development Corporation, we have made sure 
that that money was spent properly by audits every 3 months, 
having the Inspector General go in, and we will do the same 
thing in the Gulf region.
    Chairman Shelby. Thank you.
    Senator Sarbanes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    Secretary Jackson, members of our staff recently toured the 
devastated areas down there. One of the reports they brought 
back was the failure of HUD and the Housing Authority to work 
together to take action to preserve some of the public housing 
stock. Let me give you a very specific example: The Lafitte 
Housing Development survived the hurricane apparently pretty 
well. They suffered about 12 inches of flooding, but otherwise 
it was undamaged and, in fact, people were coming--nonresidents 
were coming trying to get shelter at that particular housing 
project.
    But no one moved in to do anything about cleaning up the 
situation, so the mold took over. And now they have floor-to-
ceiling mold. Now we have a really big problem.
    How did this happen? How did we let it just get out of hand 
like that?
    Secretary Jackson. We did not let it get out of hand. The 
mayor is the mayor of that city, and he made a decision that he 
did not want people back, nor did he want us in that area. The 
moment he has permitted us to do that, we have gone in and 
worked with the Housing Authority. The Housing Authority and I 
are not in conflict. In fact, Senator Sarbanes, the Housing 
Authority is in receivership. We are controlling it, so we 
cannot be in conflict.
    Also, we agree with you that the Lafitte mold problem has 
been a problem, and we are cleaning it up right now, bringing 
people back.
    Senator Sarbanes. No, I want to know why was a little 
problem allowed to become a very big problem?
    Secretary Jackson. That is very simple.
    Senator Sarbanes. The mayor would not let you go in and 
deal with a little problem?
    Secretary Jackson. That is right. It sat there a week under 
water. So, clearly, mold was going to set in. And the moment we 
had the opportunity to go in, which was about 3 weeks later, 
which he said, we began the cleaning process.
    So if you are saying did we have control, no, because the 
mayor was controlling the city.
    Senator Sarbanes. So he would not allow you in in order to 
clean it up?
    Secretary Jackson. That is right, because it was flooded 
and we had to let the water recede. The same thing happened in 
Desire. The same thing happened in Florida. We could not go 
into those areas until the water receded.
    Senator Sarbanes. And you were in there as soon as the 
water receded?
    Secretary Jackson. Yes, we were.
    Senator Sarbanes. Or the mayor still kept you out?
    Secretary Jackson. No. We were in there. But the mayor made 
it clear that he did not want people in certain areas of New 
Orleans, and we did not go in.
    Senator Sarbanes. Well, you have given us a pretty good 
factual exposition for examination, and we will examine it very 
carefully.
    Secretary Jackson. And please do.
    Senator Sarbanes. Now, there have been reports that because 
of the limited housing stock in New Orleans, rents have risen 
dramatically, but HUD has not increased the fair market rent 
which guides how much voucher holders receive in rental 
assistance. It also guides what FEMA can provide in housing 
assistance. So it is not just solely a HUD-related problem 
because others use that standard for various aspects of their 
program.
    What can we do to address this fair market rent problem in 
the impacted areas so they more accurately reflect current 
rental conditions?
    Secretary Jackson. I am not sure, Senator, who gave you 
that information. First of all, it has been difficult for us to 
find apartment complexes in and around New Orleans. Had they 
said that we had a problem in and around Baton Rouge, they 
would be absolutely correct, and we have sent our Fair Housing 
Equal Opportunity people in there to make sure that these 
residents in and around Baton Rouge are not gouged. But that 
has not been a substantial problem in and around New Orleans, 
not since the flood, because many of the residents have not 
been able to go back. And, in fact, that is why the mayor and 
many of the parish presidents have asked for trailers to come 
in because they do not have enough rental apartments in and 
around to be utilized.
    Second, that is why we met with many of the owners of our 
multifamily properties, because they were submerged in water, 
and they are getting in the process of redoing those 
apartments. So if the person had said that we have a problem in 
and around Baton Rouge, I would agree with you, and we have 
been very active in making sure that that is addressed.
    Senator Sarbanes. You have addressed the fair market rental 
problem there?
    Secretary Jackson. Yes, we have.
    Senator Sarbanes. Okay. Now, let me ask you, we passed in 
the Senate emergency voucher legislation. The thinking was that 
we would provide these emergency housing vouchers. The 
Administration could then move with those housing vouchers and 
get people into housing. I mean, there is not much housing 
there, but in other parts of the country. So they could get 
them out of temporary housing and into more permanent housing.
    The private sector had come along and said, you know, we 
are doing surveys of our ownership, the multifamily people, the 
apartment owner people, and we are ready to provide a list of 
available opportunities. The Administration did not support 
that in the House side, and it died over on the House side.
    Why did you let a possibility for something that clearly 
could produce, we think, good, quick results to falter?
    Secretary Jackson. Because you all had allocated billions 
of dollars through FEMA, which we had an interagency agreement 
with to provide our public housing, Section 8, 202, 811 people 
with apartments around the country, and we did that.
    Senator Sarbanes. Yes.
    Secretary Jackson. So we did not--I cannot tell you why it 
has died, but I can tell you we had money, whether it is 
Philadelphia--and I went to a number--Houston. We have people 
housed right now in KDHAP. That is Federal money that is up to 
18 months, and once that is done, they are going to the 
disaster funds that you have allocated just lately of $360 
million.
    Senator Sarbanes. But those were for people already 
receiving that form of assistance, correct?
    Secretary Jackson. That is correct, from New Orleans and 
the Gulf area.
    Senator Sarbanes. What about people who were not already 
receiving that form of assistance but are in dire circumstance 
and, if fed into the voucher program, it would have met their 
needs?
    Secretary Jackson. That is the responsibility of FEMA, not 
ours.
    Senator Sarbanes. Did you suggest to anybody that you all 
could get in there and do a good job of this? That is what we 
said on the floor. If you go back and look at some of the 
discussion, without casting invidious comparisons to FEMA, some 
nice things were said about HUD's ability to work this Section 
8 voucher program.
    Secretary Jackson. And we appreciate that. I have made 
strong suggestions, but I think the key to it is, as I just 
said, I think to Senator Reed or Senator Menendez, that has to 
be changed. The Stafford Act has to be changed. The Stafford 
Act is clear. FEMA is the first responder, and we have an 
interagency agreement to work with them. And those persons who 
they designated for us to house, we have housed.
    Senator Sarbanes. I think the FEMA person is going to be 
before us shortly. Is that right, Mr. Chairman?
    Chairman Shelby. That is my understanding.
    Senator Sarbanes. Thank you very much, Mr. Secretary.
    Secretary Jackson. Thank you, Senator.
    Chairman Shelby. Senator Reed, do you have any questions?
    Senator Reed. I do not, Mr. Chairman. Thank you.
    Chairman Shelby. Mr. Secretary, I know you are on a busy 
schedule and you have to catch a plane. We appreciate your 
candor with us, and we will continue these hearings. As you 
will probably realize, we are going to bring in the local and 
State people and see what their perspective is on all this as 
soon as we get back from our recess and schedule this. And I 
know you will be watching that, too.
    When you get a specific plan, a workable plan, I hope you 
will share that with the Committee.
    Secretary Jackson. I surely will, because Senator Reed and 
Senator Menendez----
    Chairman Shelby. Absolutely.
    Secretary Jackson. Thank you.
    Chairman Shelby. Thank you, Mr. Secretary.
    Chairman Shelby. Our third panel will be Mr. Donald Powell, 
the Federal Coordinator of Gulf Coast Rebuilding, no stranger 
to this Committee; he was Chairman of the Federal Deposit 
Insurance Corporation; Mr. David Garratt, Acting Director, 
Recovery Division, Federal Emergency Management Agency; and Mr. 
Martin Gruenberg, Acting Chairman, Federal Deposit Insurance 
Corporation, no stranger here; Mr. Herbert Mitchell, Associate 
Administrator for Disaster Assistance, Small Business 
Administration.
    Gentlemen, we appreciate all of your patience here today. 
We think this is a very important hearing. We will have more, 
as you can tell we will need, to better understand the program, 
to make sure we are informed as to the possibilities and 
probabilities of what we can help you do and do it right.
    All of your written testimony will be made part of the 
record in its entirety, and if you will briefly sum up whatever 
you want us to hear here today. Mr. Powell, we will start with 
you. Thank you, and welcome back to the Committee.

                 STATEMENT OF DONALD E. POWELL

                      FEDERAL COORDINATOR,

                OFFICE FOR GULF COAST REBUILDING

    Mr. Powell. Thank you, Mr. Chairman, Ranking Member 
Sarbanes, and Members of the Committee. I appreciate your 
asking me to appear before you today.
    In the aftermath of one of the most powerful and 
destructive natural disasters in our Nation's history, 
President Bush created the Office of the Federal Coordinator 
for the Gulf Coast Rebuilding and asked me to head it within 
Secretary Chertoff's DHS. I knew it would not be easy, and that 
is an understatement. But the work is very important to the 
people of the Gulf Coast, as well as our Nation as a whole. The 
President remains steadfastly committed to supporting the local 
recovery and rebuilding efforts in the most responsible and 
effective way possible.
    In this role, I am tasked with coordinating the long-term 
Federal rebuilding efforts by working with State and local 
officials to reach consensus on their vision for the region. 
Today, I plan to outline the progress we have made in the Gulf 
Coast region, and by region I mean not just New Orleans but the 
entire Gulf Coast, from East Texas to Florida.
    The entire Gulf Coast region is of great historical, 
cultural, and economic importance to this country, and we will 
make sure that these Americans get back on their feet and 
rebuild their lives. Whole communities have been ravaged by 
Katrina and Rita, but I am confident that together we will 
ensure that these Americans get back on their feet and rebuild 
their lives. My fundamental job is to work with the people on 
the ground to identify and prioritize the needs for long-term 
rebuilding.
    The President has made it abundantly clear that the vision 
and plans for rebuilding the Gulf Coast should come from the 
local and State leadership, not from Washington, DC. Rebuilding 
should not become an exercise in centralized planning. It is my 
belief that if the Federal bureaucrats determine the path of 
rebuilding, local insight and initiative will be overrun and, 
therefore, local needs overlooked. If the heavy hand of the 
Federal Government impedes the private sector's proven ability 
to speed the recovery, it will take longer and be more 
expensive to rebuild.
    President Bush has made a commitment that the Federal 
Government would be a full partner in the recovery and the 
rebuilding of the areas devastated by Hurricanes Katrina and 
Rita, and he is keeping that promise. To date, the Federal 
Government has already committed over $87 billion for the 
recovery effort, and another approximately $18 billion is being 
requested in the upcoming 2006 supplemental package, which 
would bring the total Federal commitment to over $100 billion. 
Those are real taxpayers' dollars being used every day for 
short- and long-term housing, economic development and job 
creation, loans to businesses and homeowners, aid to farmers, 
schools, and infrastructure projects, like the levees, roads, 
bridges, and the ports.
    I was a community banker for close to 40 years before I 
came to Washington, so I understand the importance of a 
fiduciary. And we must all work together to be good stewards of 
the substantial amounts of money that have been and will 
continue to be spent on this effort. Each of you and all 
Members of Congress have an important role in protecting the 
health of the American tax dollars. If Americans see their tax 
dollars being ill-spent, their critical support for the relief 
and recovery effort in the Gulf will wane. It is my duty to 
ensure that any plans or strategies are conducive to the 
prudent, effective, and appropriate investment of the taxpayer 
dollar. That is why we have always said it is important for 
State and local leaders to have a solid plan in place for use 
of the rebuilding funds.
    When I made my first trip to the Southeast Louisiana region 
last fall, I asked everyone I visited with, ``What are the 
three most important issues?'' The answer time and again was, 
``Levees, levees, levees.'' So, I went back to Washington and 
told the President what I had heard and saw, and that safety 
was the first critical issue that needed to be tackled as part 
of the long-term rebuilding in the New Orleans area. People 
must feel safe and secure in their decision to come back--
whether as a resident or a business owner.
    The President responded quickly to this need and requested 
Congress to double the Federal commitment to $3 billion to make 
the levees that surround the New Orleans area stronger and 
better than ever before. Besides returning the levee system to 
better than pre-Katrina levels before next hurricane season, 
the President's request to Congress also included the addition 
of floodgates and pumping stations to interior canals, 
selective armoring of levees, the initiation of wetlands 
restoration projects, and additional storm-proof pumping 
station. I receive routine briefings from the Army Corps of 
Engineers, and they are on track to meet their deadline to 
repair the damage from Katrina and to improve design flaws 
before the beginning of next hurricane season.
    I knew our next focus needed to be housing. Throughout the 
Gulf Coast, people are worried about where to live, where to 
rebuild, and to what building code. Late last year, Congress 
set aside $11.5 billion in Community Development Block Grant 
funds for the Gulf Coast. The CDBG program is a well-tested 
mechanism that provides States with great flexibility in how 
funds may be spent. CDBG allows those closest to the problem to 
make direct grants. In fact, that is the greatest attribute of 
the CDBG funds: They allow the State leaders, those closest to 
the local issues, to make the decisions on where to best use 
the money.
    Just last week, the Louisiana Legislature submitted its own 
legislation to use CDBG monies and other Federal assistance to 
create a housing corporation on the State level. My office is 
currently working with the State on that plan. We believe that 
it may be a more workable solution than H.R. 4100, a bill that 
would create a Federal bureaucracy and put Uncle Sam in the 
real estate business, a plan that we did not support. Let us be 
clear, and you have my promise here: If after spending all the 
allocated Federal funds there remain unmet needs, I will come 
back to Congress and ask you to help ensure that additional 
resources are available and needs are met.
    Of course, there is no need for housing if there are no 
jobs or the economy grows stale. That is why at the end of 
2005, the President signed into law the Gulf Opportunity Zone 
Act. The legislation, providing approximately $8 billion in tax 
relief over 5 years, will help revitalize the region's economy 
by encouraging businesses to create new jobs and restore old 
ones. Here are just a few aspects of the GO Zone: Tax-exempt 
bond financing for both residential and nonresidential 
property; changes to the low-income housing credit; bonus 
depreciation; expensing for certain demolition and clean-up 
costs. Simply put, this law renews businesses, rebuilds homes, 
and, more importantly, restores hope.
    Other parts of the Government have been working to help get 
the economy back on its feet. For example, the SBA has adopted 
and ramped up its capacity in order to provide loans and 
working capital to small businesses and families. SBA disaster 
loans provide vital low-cost funds for homeowners, renters, and 
businesses to cover uninsured disaster recovery costs as well 
as loans for the working capital needs of businesses affected 
by the disaster. Since last year's hurricanes, SBA's Disaster 
Loan Program has approved over $4.3 billion in disaster loans 
to over 60,000 homeowners, renters, and businesses affected in 
the region. Given SBA's ongoing commitment to small business 
owners in this region, it is imperative that Congress approve 
any monies to SBA in the upcoming 2006 supplemental package.
    Workforce development will also be critical to long-term 
economic security. The Secretary of Labor and I attended a 
meeting in December 2005 with the President, labor leaders, 
civil rights groups, and business associations to discuss 
workforce initiatives and overall employment issues facing the 
region. She and I tasked those leaders with devising a plan to 
prepare the workers of the region for the future of the Gulf 
Coast economy. We recently completed the plan and look forward 
to implementing the program in May of this year in New Orleans. 
Our goal is this: We want to help create as many jobs as 
possible in the Gulf Coast and prepare its residents to fill 
those jobs. We will continue to work to help make the Gulf 
Coast not just a great place to live, but also a great place to 
invest and to do business.
    Let me close by saying that the Federal Government will 
continue to help strengthen, but not replace, State and local 
government or private initiatives. We will continue to help 
that our fellow citizens meet the challenges of reconstruction 
and rebuild their lives and communities for the years to come. 
There is no doubt that a tremendous amount of work is still 
ahead of us, and we are heartened and encouraged by the 
progress made. I look forward to continuing to work with the 
leaders in Alabama, Louisiana, Mississippi, Texas, and Florida 
in the days, weeks, and months ahead to assist in the 
implementation of their respective visions while also serving 
as a good steward of the taxpayer dollars, which the 
distinguished Members of this panel, along with your 
colleagues, have helped secure.
    The residents of this area and the President agree on this. 
Failure is not an option. Working together, we can return the 
Gulf Coast to its rightful place in the American landscape. 
While the hurricanes caused much tragedy, I believe, as my 
father used to say, ``Good things can come from bad.'' It is 
too important a task not to do it right.
    Mr. Chairman, this concludes my testimony. Thank you.
    Chairman Shelby. Mr. Garratt.

                   STATEMENT OF DAVID GARRATT

                  ACTING DIRECTOR OF RECOVERY,

              FEDERAL EMERGENCY MANAGEMENT AGENCY,

              U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Garratt. Thank you, Chairman Shelby and Ranking Member 
Sarbanes. I am David Garratt, the Acting Director of Recovery 
at FEMA, and I am representing Secretary Chertoff and Acting 
FEMA Director David Paulison. It is my honor to appear before 
this Committee to summarize and discuss our emergency 
sheltering and housing efforts in support of Hurricane Katrina 
and Rita victims, as well as our overall efforts to contribute 
to the rebuilding of the Gulf Coast.
    We at the Department of Homeland Security and FEMA 
appreciate your interest in the housing challenges presented by 
the scope and scale of these unprecedented disasters. I think 
we all recognize that these hurricanes, and Katrina in 
particular, have thoroughly tested the capabilities of impacted 
State and local governments, FEMA, the Department, and the 
Nation, including the many States and communities nationwide 
who are hosting displaced victims and evacuees from the 
affected Gulf region. And yet while these events have tested 
our plans and processes as never before, FEMA's sheltering and 
housing programs have provided or facilitated the means for 
hundreds of thousands of evacuees to quickly secure interim 
accommodations, even as we continue to fund and facilitate an 
aggressive strategy to transition those individuals and 
families into longer-term, and more stable, housing solutions.
    It has been a challenging time--nearly 6 months since 
Hurricane Katrina made landfall--for victims, communities, 
States, voluntary agencies, and the Federal Government alike. 
And while we have made significant strides in addressing the 
pressing housing needs of victims across the country, many 
challenges and difficult decisions remain. Nevertheless, we 
have been and remain committed to helping households recover 
and reestablish themselves.
    Recognizing that the road to recovery required that we 
remove families from congregate shelter environments as quickly 
as possible, FEMA authorized States, within days of Hurricane 
Katrina's landfall, to relocate families to hotel and motel 
rooms. At the same time, the American Red Cross initiated a 
similar hotel/motel subsidy program, as authorized by a 
statement of understanding with FEMA. Together, FEMA, the 
States, and the American Red Cross facilitated the relocation 
of thousands of families to more private and humane living 
conditions. In late October 2005, FEMA agreed to assume 
responsibility for funding the hotel/motel subsidies of those 
households placed by the American Red Cross, which has been, 
and remains, a stalwart and dependable partner of FEMA and the 
Federal Government in disaster response and recovery 
operations.
    Throughout the intervening months, we have worked with more 
than 7,500 hotels and funded over 3 million room nights. 
However, nearly 6 months removed from Katrina landfall, the 
time has come to end the sheltering phase of the recovery and 
complete the transition of Katrina and Rita evacuees to more 
stable temporary housing and, where feasible, permanent 
housing. For many, this will be a difficult transition, as not 
every household will be eligible for Federal assistance, nor 
will every household be able to immediate return to their 
predisaster homes or hometowns. Nevertheless, during this 
period we have diligently and ceaselessly, using community 
relations and voluntary outreach teams, made repeated efforts 
to contact every victim registered and subsidized in every 
single hotel or motel room across the United States, to make 
sure every hotel and motel occupant household has every 
opportunity to take advantage of all available transition 
assistance.
    One of the biggest challenges facing the recovery effort is 
finding and securing sufficient rental assets to meet the huge 
demands created by this mass exodus of evacuees. Fortunately, 
numerous dwellings have been made available by other Federal 
agencies. To date, over 11,000 evacuee households have been 
placed in Federal housing resources across the Katrina-Rita 
impact areas. For example, the U.S. Department of Agriculture 
has made thousands of such dwellings available. In Louisiana 
alone, 1,100 families have been placed in USDA houses. We have 
also entered into an interagency agreement with the Department 
of Veterans Affairs to make their unsold housing units 
available for evacuee rental and are actively pursuing a 
similar arrangement with Fannie Mae.
    In addition, the U.S. Department of Health and Human 
Services recently announced $550 million in funding to the 50 
States and the District of Columbia for additional hurricane 
relief. These funds will come from the Social Services Block 
Grant program administered by HHS' Administration for Children 
and Families. They will be given to States to provide health 
care, mental health, and social services, as well as for the 
repair, renovation, and construction of facilities providing 
those services to victims of Hurricanes Katrina, Rita, and 
Wilma.
    We have been collaborating closely with HUD from the outset 
of this event, working together to reconcile and apply our 
respective authorities and capabilities to provide maximum 
benefit to those most in need of housing assistance. In 
addition to partnering with the Department of Homeland Security 
and FEMA through their KDHAP program, HUD has made repossessed 
houses available to FEMA-eligible disaster households and has 
placed hundreds of disaster victims in houses in the four-State 
area, including 207 families in Texas alone. Today, both here 
and in the field, HUD teams and personnel continue to work 
closely with FEMA to identify and assist eligible disaster 
victims, wherever they may be.
    HUD also recently announced its plan to allocate $11.5 
billion in disaster funding among five Gulf Coast States 
impacted by Hurricanes Katrina, Rita, and Wilma. The emergency 
funding is provided through HUD's Community Development Block 
Grant program to specifically assist Louisiana, Mississippi, 
Florida, Alabama, and Texas in their long-term recovery 
efforts. This along with HUD's Disaster Voucher Program, 
created through a $390 million supplemental appropriation in 
the Department of Defense Appropriations Act of 2006, will 
provide ongoing temporary rental assistance for people 
displaced by Hurricanes Katrina and Rita who at the time lived 
in public housing, had a voucher, or were homeless.
    While transitioning so many displaced households into 
temporary housing has been and will continue to be a challenge, 
FEMA and its partners at every level of government and within 
the private sector are committed to work together to find 
timely and equitable solutions.
    Recognizing the immense scale and complexity of the long-
term recovery challenges and considerations facing the Gulf 
Coast, the President established the Office of the Federal 
Coordinator for Gulf Coast Rebuilding and appointed Chairman 
Powell to lead that organization's efforts. To help ensure that 
the Department of Homeland Security and FEMA are coordinating 
fully with Chairman Powell, and that maximum collaboration 
takes place between our organizations, FEMA recently appointed 
Mr. Gil Jamieson as the Deputy FEMA Director for Gulf Coast 
Recovery. In this role, Mr. Jamieson will oversee FEMA recovery 
operations across the Gulf States and will be coordinating 
closely and routinely with Chairman Powell and his staff.
    We all realize that this road to recovery will be a long 
one, fraught with challenges and frustrations along the way. 
Nevertheless, this Agency, this Department, and this 
Administration remain committed to the mission: The successful 
restoration of a socially and economically vibrant Gulf Coast.
    Thank you. I am prepared to answer any questions you may 
have.
    Chairman Shelby. Mr. Gruenberg.

                STATEMENT OF MARTIN J. GRUENBERG

                        ACTING CHAIRMAN,

             FEDERAL DEPOSIT INSURANCE CORPORATION

    Mr. Gruenberg. Thank you, Mr. Chairman, Senator Sarbanes, 
Members of the Committee. I appreciate the opportunity to 
testify on the efforts of the FDIC and the other Federal 
regulatory agencies to respond to the impact of last year's 
devastating hurricanes on federally insured financial 
institutions and their customers in the Gulf Coast region.
    Before I begin, I would like to express the gratitude of 
the FDIC to the Committee for the enactment of the deposit 
insurance reform legislation. The FDIC believes that the 
legislation will result in a more safe and sound deposit 
insurance system, and we understand it would not have occurred 
without your leadership and support.
    I would also like to acknowledge former FDIC Chairman 
Powell's critical role in that effort.
    Chairman Shelby. Thank you.
    Mr. Gruenberg. Mr. Chairman, in December, I traveled with 
FDIC staff to New Orleans and Mississippi. We met with local 
financial institutions, the State banking commissioners, and 
local community group leaders. As many have observed, it is 
difficult to appreciate the challenge confronting the Gulf 
Coast region until visiting the area and seeing firsthand the 
scale of the damage. It is also impossible for me to visit the 
area and witness the determination of the local financial 
institutions and community leaders to rebuild their communities 
without feeling a renewed sense of the obligation of the FDIC 
and the other Federal financial institution regulatory agencies 
to do all we can to assist them in that effort.
    I will briefly summarize my written testimony, which 
reviews the actions taken by the FDIC and other regulatory 
agencies following the storms. I will also provide the FDIC's 
current assessment of the impact of the hurricanes on the 
condition of the federally insured financial institutions in 
the region and discuss outreach efforts planned in the near-
term.
    Chairman Shelby. The full statement will be made part of 
the record. Yes, we need to move on.
    Mr. Gruenberg. At the outset, I want to point out that much 
of the work of the FDIC described in the written testimony took 
place when Chairman Powell was Chairman of the FDIC. We wanted 
to acknowledge that as well.
    When Hurricanes Katrina and Rita hit the Gulf Coast, they 
impacted the operations of at least 280 financial institutions, 
with 120 of these institutions headquartered in the 49 counties 
and parishes in Alabama, Louisiana, and Mississippi designated 
by FEMA as eligible for individual and public assistance. 
Similar to other sectors of the Gulf Coast economy, financial 
institution facilities were destroyed, communication and data 
processing capabilities were disrupted, and financial 
institution employees saw their homes destroyed or inundated 
with flood waters.
    In the aftermath of the storms, the FDIC, along with the 
other State and Federal agencies, were committed to doing 
everything possible to preserve public confidence in the 
financial system and restore essential financial services. The 
agencies immediately began working with financial institutions 
to help them resume operations and with customers to 
communicate accurate information about their institutions and 
how they could get needed cash.
    From the outset, the agencies recognized that we were 
dealing with extraordinary circumstances. Immediately after 
Katrina made landfall, the agencies urged financial 
institutions to be flexible with borrowers experiencing 
disruptions due to the storm. During the past 6 months, the 
agencies have encouraged financial institutions to work with 
borrowers by deferring loan payments, extending repayment 
terms, restructuring loans, easing terms for new loans, and 
providing short-term loans for living expenses until insurance 
proceeds are received.
    Historically, no financial institutions are known to have 
failed as a result of natural disasters. In fact, community 
financial institutions traditionally have played a critical 
role serving the areas most severely affected by the 
hurricanes. However, due to the scale of destruction left by 
these storms, it remains difficult to determine the 
applicability of experiences from previous disasters to the 
current situation.
    The 120 insured institutions headquartered in the 49 
designated disaster counties and parishes are relatively small 
community financial institutions. According to financial data 
for these institutions, about three-quarters of them hold less 
than $250 million in assets, and only five have assets greater 
than $1 billion.
    Although most of these 120 institutions were financially 
strong before the hurricanes, financial results to date do not 
yet provide a clear picture of the full effects of the storms 
since many of the institutions in the area continue to extend 
loan deferrals and are still communicating with customers to 
develop long-term rebuilding plans. Nevertheless, recent 
financial results provide some indications of how the 
institutions may be reacting and adjusting to the effects of 
the hurricanes. Post-hurricane data reveal that a number of 
institutions operating in areas hit hard by Katrina are moving 
fairly aggressively to build loan loss allowances and 
experienced a pick-up in charge-off rates. Consistent with 
this, 20 institutions reported net operating losses for the 
fourth quarter. Despite these losses, all institutions remained 
``well-capitalized'' or ``adequately capitalized,'' reflecting 
the strong capital positions of most institutions prior to the 
hurricanes. Liquidity for most of the institutions also remains 
strong.
    Looking ahead, there is considerable uncertainty regarding 
the prospects for the institutions most directly affected. Over 
the medium-term, the greatest source of uncertainty is the 
effect of the hurricanes on credit quality. Over the longer-
term, the prospects for these institutions will be determined 
largely by the economic prospects of the communities they 
serve.
    With respect to credit quality, the outlook for each 
institution will depend on a variety of currently unknown 
factors, including reimbursement amounts and timing of 
insurance proceeds, borrowers' repayment capability, collateral 
protection, and the availability of financial assistance 
programs. The FDIC is utilizing both supervisory outreach and 
data analysis to assess the extent to which the insured 
institutions in the region may experience medium- to long-term 
credit quality and profitability issues.
    The FDIC and other agencies contacted all 120 insured 
institutions previously mentioned in the aftermath of the 
hurricane. During December 2005, examiners from the FDIC and 
other agencies also visited many of these insured institutions. 
Beginning in January, the agencies resumed their comprehensive 
examination programs that were suspended at the time of the 
storms.
    In addition to this type of supervisory analysis, the FDIC 
is conducting off-site research utilizing mapping tools and 
data from a variety of sources to provide us with additional 
information.
    As a result of these efforts, we have narrowed our focus 
from the initial group of 120 institutions to a small group of 
institutions, which we will continue to monitor most closely. 
As suggested earlier, the prospects for the financial 
institutions most affected will depend in large measure on the 
efforts underway to rebuild and revitalize the communities they 
serve.
    Mr. Chairman, with one last note, if I may, in addition to 
the regular supervisory activities of the agencies, the 
agencies are hosting a forum in New Orleans on March 2-3. ``The 
Future of Banking on the Gulf Coast: Helping Banks and Thrifts 
to Rebuild Communities'' will focus on short- and long-term 
challenges facing banks and thrifts operating in areas affected 
by the hurricanes and ways to help these institutions rebuild 
their communities. The agencies are inviting to this forum 
executives from all the community financial institutions in the 
region, the larger regional financial institutions, as well as 
a number of large institutions from around the country with 
operations that are national in scope. State banking 
supervisors and other Federal Government agencies will also 
participate in the forum.
    The purpose is to encourage partnerships between the large 
and the smaller institutions, which will be, we believe, both 
to their mutual benefit and to the development of the economy 
of the region.
    Thank you very much, Mr. Chairman.
    Chairman Shelby. Mr. Mitchell, if you would just briefly 
sum up your testimony.

                 STATEMENT OF HERBERT MITCHELL

                    ASSOCIATE ADMINISTRATOR,

                 OFFICE OF DISASTER ASSISTANCE,

                 SMALL BUSINESS ADMINISTRATION

    Mr. Mitchell. Certainly, Mr. Chairman, and Senator 
Sarbanes, thank you for the opportunity to appear here today. 
My name is Herb Mitchell. I am the Associate Administrator for 
Disaster Assistance at the Small Business Administration.
    The SBA Disaster Assistance Program, administered by the 
Office of Disaster Assistance, is the primary federally funded 
disaster assistance loan program for funding long-term recovery 
for renters, homeowners, and nonagricultural businesses. It is 
the only program at SBA that is not limited to small 
businesses.
    Hurricanes Katrina and Rita unleashed an unprecedented 
tragedy on the Gulf Coast, demanding an unprecedented response 
from the Federal Government, including SBA. The numbers, 
obviously, that we have seen in this disaster have just simply 
been staggering. We have not seen anything like it in the 
history of the Disaster Loan Program. In the first 70 days 
after Katrina hit, SBA received over 220,000 disaster loan 
applications, and as of this week, we have received 375,000 
applications from victims in the Gulf Coast.
    To put this in perspective, after the four hurricanes in 
2004, SBA only received a total of 202,000 applications. That 
number is approximately one-half of what we ultimately expect 
to receive as a result of Hurricane Katrina.
    The disaster affected an area of more than 90,000 square 
miles and five States. We have mailed, in response to those who 
have registered with FEMA over, 2 million applications. And 
just to put it in perspective again, the largest previous 
disaster we responded to being the Northridge earthquake, we 
received 250,000 applications over a period of 18 months. To 
date, after 6 months, we have already received 375,000 
application, and the expectation is that it will exceed 400,000 
by the deadline of March 11.
    Despite the damage that occurred and the volume of 
applications that we have received, in the first 88 days, 
approximately 90 days from the time of the declaration to that 
point, we had approved $1 billion in disaster loans. But we 
certainly have put a lot of things in place to expedite the 
process, bringing on almost 3,200 employees. At the time we had 
about 800 employees, we are now well over 4,000. In 28 days, we 
approved the next billion; in 17 days we approved another 
billion. And it is basically going at a pace of almost every 10 
to 15 days an additional $1 billion is being approved through 
the Disaster Loan Program.
    Due to the improvements in the loan processing 
capabilities, the SBA is well-prepared to continue to respond 
to the victims in the Gulf. We have completed over 90 percent 
of the property damage inspections that we need to do. We have 
completed 247,000 inspections. We have completed close to 85 
percent of the business applications. Those businesses 
requesting assistance only for working capital, well over 90 
percent of those applications have been completed. And we are 
certainly well on our way to completing the remainder 
applications from homeowners and renters as well.
    With that, I would certainly be glad to answer any 
questions that you have.
    Chairman Shelby. Thank you very much. Mr. Powell, would you 
very briefly share with the Committee what do you see as the 
respective roles of the State, local, and Federal Government in 
rebuilding the Gulf area?
    Mr. Powell. I think the roles of the State and local 
governments are paramount. As I mentioned in my testimony, I 
think the plans for rebuilding the Gulf Coast area must be 
theirs, and the Federal response is to understand those plans, 
understand the strategies to implement those plans, and the 
cost associated with it.
    Chairman Shelby. Why is it taking so long to put a plan 
together?
    Mr. Powell. I think Mississippi has a plan.
    Chairman Shelby. Let us just focus on Louisiana, then we 
will go to Mississippi.
    Mr. Powell. Okay. In Louisiana, you have a large 
metropolitan area, and you have parishes that have presidents 
that are responsible to the people, and they have council 
members. The politics of Louisiana is somewhat unique, and the 
people are very engaged on the local level, and you have 
competing demands as well as you have the State legislature, 
you have the north and the south, and you have also the 
southeast. So it is a more complex issue. You have a large 
metropolitan area and you have these parishes that are unique 
by their very nature, and they have individual and distinctive 
needs.
    Chairman Shelby. But is not the common denominator that has 
to come with any plan, it has to be a viable plan, it has to 
make a lot of sense. It cannot just be 100 plans.
    Mr. Powell. That is true. That is my job. I have met with 
all those people, and encouraged them, Mr. Chairman, to come 
with one plan, one vision, one spirit for rebuilding their 
areas, and I am convinced--and I have listened to a lot of 
people and I have talked to a lot of people--that first of all 
they have some plans that are being developed, that we will 
have one coordinated plan in a very short order.
    Chairman Shelby. That plan, I hope, is not going to 
encourage people to build back in a flood area or an area that 
is more than likely to flood where the taxpayers will be the 
risk again as the people will be at risk.
    Mr. Powell. The people of Louisiana understand that, but it 
must be their plan, and they must plan for their individual 
neighborhoods. I think that is a very important element of it, 
but they understand they do not want people rebuilding in 
harm's way. The cost of that associated with is important, but 
there are unique challenges with all of those. Again, I am 
convinced that the people will come together with one plan.
    Chairman Shelby. Mr. Gruenberg, to what extent did FDIC-
insured institutions in Katrina-impacted areas comply with the 
flood insurance program's mandatory purchase requirements, if 
you have that? If you do not, you can furnish it for the 
record. Go ahead.
    Mr. Gruenberg. Mr. Chairman, for the FDIC-supervised 
institutions, our examiners do review that as part of a 
compliance review for every institution. Based on the reports 
we have, it appears that most institutions are generally 
complying with the requirements.
    Chairman Shelby. What does generally complying mean?
    Mr. Gruenberg. It means in the exams they have programs for 
implementation and they are meeting the requirements of the 
programs, which is not to say that every loan they make is in 
compliance, and I think to the extent you want to know is every 
loan in compliance, that is something we would have to----
    Chairman Shelby. Can you get that information for the 
Committee?
    Mr. Gruenberg. We will try to do that.
    Chairman Shelby. Would that be hard to get?
    Mr. Gruenberg. It may be difficult, but we will make an 
effort because it is an----
    Chairman Shelby. Important for you to know too.
    Mr. Gruenberg. It is an important issue. I can tell you, 
Mr. Chairman, when we went down to Mississippi and New Orleans, 
one of the local bankers in Mississippi mentioned that 3 months 
before the hurricane he had a compliance exam, and the agency 
required him to comply with the flood insurance. And he was 
upset at the time, but he was less upset when we saw him down 
in Mississippi.
    Chairman Shelby. Mr. Powell, I think you--and I may have 
cut you off, I did not mean to. You were going to say something 
about the Mississippi plan. Is it different from the Louisiana 
plan? Are they progressing or what?
    Mr. Powell. Yes. I think the plans for rebuilding in 
Mississippi is somewhat further along. Again, the devastation 
was just as severe.
    Chairman Shelby. We have seen.
    Mr. Powell. But the complexity of Mississippi along the 
Gulf Coast, those plans are being developed and have been 
developed, and they are implementing those plans. I know that I 
am going to be in Gulfport next week, and Gulfport is an 
example where they are going to sit down with citizens in 
Gulfport and visit with architects about rebuilding. So their 
rebuilding is further along. They are down the road.
    Chairman Shelby. The Committee has seen a variety of 
statistics on insurance coverage in areas impacted by Hurricane 
Katrina. I understand that the majority of Louisiana homeowners 
that were impacted had some form of insurance, either flood or 
hazard insurance. Mr. Powell, do we have any sense of the 
extent of individual insurance coverage in Louisiana? Did most 
insured households simply insure up to their mortgage, or did 
most have coverage beyond their mortgage amount? Do you have 
that information?
    Mr. Powell. I can get you that information, Mr. Chairman. 
We will be happy to supply that information to you.
    Chairman Shelby. Mr. Mitchell, you are here on behalf of 
the Small Business Administration. The Committee has heard from 
several displaced families about their difficulty in qualifying 
for an SBA Disaster Home Loan. Could you describe to the 
Committee the relevant underwriting standards for the Disaster 
Home Loan Program? What are the most frequent reasons for a 
loan being denied?
    Mr. Mitchell. Certainly, we can get you all of the denial 
reasons and those stats. But basically there are three 
components to the SBA Disaster Loan, Obviously, one is 
eligibility in terms of being in a declared area and having 
eligible damage that is uninsured or underinsured. The primary 
two areas that we look at in underwriting are whether or not 
you have the ability to repay the loan, and that there is 
sufficient cashflow to pay some amount. And unlike standard 
lending, we have a flexibility to go as high as 30 years 
regardless of what we are funding. We can do a $5,000 loan for 
personal property for up to 30 years if that is all you can 
afford to pay. So we have that flexibility.
    The third aspect is satisfactory credit. The majority of 
the declines that we have seen so far has been almost 3-to-1 
for unsatisfactory credit history. Generally, it is about half 
and half of lack of ability to repay and credit, but in this 
disaster it has been unsatisfactory credit history, at least of 
those that we have processed so far. It has been 3-to-1 
unsatisfactory credit.
    Chairman Shelby. Do you bend over to try to make a disaster 
loan, assuming there is merit to the----
    Mr. Mitchell. Absolutely. What we try to do is to make sure 
we understand the reasons for the credit history. Obviously, if 
it is related to circumstances beyond their control, certainly 
we have the flexibility to move forward on that.
    There are some things, obviously, in law that we cannot 
overcome unless it is worked out, for example, if you are 
delinquent on your taxes, Federal debt, or child support 
payment. Those things need to be worked out. You need to have a 
payment plan in place and bring that to a satisfactory point 
before we can move forward with a loan.
    Chairman Shelby. How many loans have you actually made, 
say, in Louisiana and Mississippi and even Alabama, which we 
were impacted some thus far?
    Mr. Mitchell. Louisiana, we have approved 35,000 
applications----
    Chairman Shelby. So, 35,000 SBA applications; is that 
right?
    Mr. Mitchell. In Louisiana.
    Chairman Shelby. That is a lot.
    Mr. Mitchell. In Mississippi, the approvals are--and I am 
rounding off--20,000. And in Alabama, they are a little under 
2,000.
    Chairman Shelby. The Flood Insurance Program presently 
requires that preflood insurance, you know, pre-FIRM houses 
that suffer 50 percent or more damage must be rebuilt to meet 
the current flood insurance mitigation requirements. There have 
been some anecdotal reports that people in New Orleans with 
severely damaged homes, some, have had the damage purposely 
assessed at less than 50 percent, in other words, to game the 
system, to avoid meeting the mitigation requirements as part of 
their rebuilding efforts.
    Are any of you panelists--and we will start with Mr. 
Powell--aware of such efforts, and if so, what are you doing 
about it?
    Mr. Powell. I have heard the same thing you have heard, Mr. 
Chairman, and I visited with the parish presidents about that 
issue, and the mayor, and made them aware of our concerns about 
that.
    Chairman Shelby. So you believe it is happening, do you 
not?
    Mr. Powell. I do.
    Chairman Shelby. Mr. Gruenberg, what about you? You have 
any information?
    Mr. Gruenberg. Mr. Chairman, I do not believe we do have 
any information on that issue.
    Chairman Shelby. Mr. Garratt, do you know?
    Mr. Garratt. Just anecdotal reports, sir, but I do know 
that our Mitigation Director, Mr. David Marstad, is taking them 
seriously, and he has been working with the Joint Field Offices 
to make sure----
    Chairman Shelby. But that would undermine our whole plan, 
would it not, if we let that go on?
    Mr. Garratt. Yes, sir.
    Chairman Shelby. Because that goes to the integrity of the 
whole plan.
    Monday's Times-Picayune, the New Orleans paper, reported 
that the five most impacted parishes had reached an agreement, 
Mr. Powell, on a buyout plan similar to that proposed for 
Mississippi. Have you any details of this plan, and what is the 
Federal role in this plan?
    Mr. Powell. Yes, sir. I have visited with the Mayor of New 
Orleans, and received a report about that meeting. The plan, I 
have not read the plan in detail, but I know the general 
requirements of the plan, and believe it is a plan that they 
together will be working with the LRA, the State essential 
planning system, and hopefully, in very short order will come 
with a consensus of that plan with the LRA.
    Chairman Shelby. Senator Sarbanes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    First of all, I want to say that we are pleased to have Don 
Powell back before the Committee.
    I thought the testimony of the two Louisiana Senators, 
Senator Landrieu and Senator Vitter, and of Congressman Baker, 
was very powerful testimony at the outset of this hearing. It 
is not quite clear to me why the Administration is so resistant 
to the concept of the bill they have put in in order to address 
this problem. I am prompted to focus on this because of this 
letter that was sent to President Bush, which I assume you have 
seen, by the three former Republican Governors of Louisiana, 
Mike Foster, Buddy Roemer, and David Treen on February 1.
    In that letter they say, ``The bottom line is this: It is 
difficult to understand how Louisiana rebuilds if its landscape 
is littered with the remains of over 200,000 unusable homes and 
business properties. Something eventually has to be done about 
them, or else the alternative is that they lie like ruins, tied 
up in a legal mess, impenetrable to the private market for 
years to come.'' And the Vice President of the Mortgage Bankers 
Association has echoed this concern, citing fears of widespread 
foreclosures and abandoned properties.
    I thought our three colleagues this morning focused on that 
very well. You have an incredibly complex problem in New 
Orleans and its environs. You have a serious problem elsewhere, 
but the complexity of it, I do not think is at the same level. 
How do you get this going if you cannot move in with a 
framework and a plan that gives everyone confidence in terms of 
what is going to happen, and enables people to make 
calculations about their individual investment decisions or 
business investment in the context of a framework that is 
responsive to the problem? I do not see how we get there 
otherwise. The situation will just continue to fester, will it 
not?
    Mr. Powell. Senator, it is complex. It is very complex. As 
I said in my testimony, the most important thing after going, 
especially in Louisiana, to the people of Louisiana was safety, 
and that is the reason we addressed the levee situation first. 
And there is something like $3 billion that the President 
requested of the Congress to speak to the levee situation. So 
safety was the most important thing.
    And also, as I said in my testimony, housing then becomes I 
think the second most important thing. Jobs are important. 
Health care is important. Education is important, as is the 
housing issue. I have had a lot of meetings about housing, and 
I have had constant dialogue with leaders in the area, in the 
State, city, the parishes, former elected officials, elected 
officials, business people, community leaders, about all of the 
housing issues. We have data about the housing situation.
    I think the first thing we attempted to do was agree upon 
the data, how many homes were destroyed. In working with the 
State officials, the LRA, we have consensus about data, about 
how many homes where they were located were destroyed. Then I 
too have worked and have the utmost respect with Congressman 
Baker. I worked with him when I was at the FDIC, and we have 
had lots of discussions about how best to address this whole 
housing issue.
    I have been encouraged with the recent dialogue with the 
people on the ground and the LRA specifically about what plans 
they would have to meet the needs of these homeowners whose 
homes were devastated, together with also the needs of renters, 
people that did not own their homes but were housed in some of 
these areas. So, I have had lots of dialogues. In fact, we are 
in the process of briefing Congress on some details of 
recommendation in this supplemental that hopefully will be 
released very shortly.
    As you know there has been, to Louisiana specifically, $6.2 
billion in CDBG money, and hopefully in the supplement there 
will be some additional funds coming to meet some of those 
needs.
    So it is a complex issue, and it is an important issue that 
they begin to rebuild. But I believe that the vehicle of the 
CDBG monies will meet those needs.
    Senator Sarbanes. It is not just the money, it is the 
framework within which all of this is done.
    Mr. Powell. Yes.
    Senator Sarbanes. Which provides the necessary assurances 
to the private sector for them to start putting in their money. 
It seems to me that is the missing linchpin at the moment, and 
it would seem to me the Administration should be working more 
closely with our colleagues that we heard from at the opening 
of this hearing, to see if they cannot develop a common 
approach in that regard?
    Mr. Powell. I am in constant dialogue, and our staff is in 
constant dialogue with the three Members of Congress, and for 
that matter, the entire Louisiana, Mississippi, Alabama, all 
the delegation of the affected area. We talk to them a lot.
    Business has the same interest that individual citizens do. 
They want to make sure their people are safe, the levees. They 
want to make sure there is housing for those people. They want 
to make sure that the infrastructure is up and going, city 
government, fire protection, police protection, criminal 
justice system, education system, health system. So we are 
working on all of those fronts and coordinating that.
    We also are reaching out to business. As I mentioned in my 
testimony, we are talking about a job training program, where 
the local people will be properly trained to meet the job 
requirements of that area. The Secretary of Commerce and I will 
be hosting a forum in about 30 days, where we are going to 
invited Fortune 500 companies to come to New Orleans to look 
for themselves about the unique opportunities that they will 
have to expand their business. So there is lots of fronts, but 
this housing issue, as I mentioned, is a very important 
component of that.
    Senator Sarbanes. Mr. Garratt, The New York Times had a 
story a couple of days ago. Mobile homes worth hundreds of 
millions of dollars are deteriorating in a muddy field in 
Arkansas, may never be used to house victims of Hurricane 
Katrina. And the Inspector General of the Department of 
Homeland Security, in his testimony earlier this week before 
the Senate Homeland Security and Governmental Affairs Committee 
said, ``At one emergency housing site in Arkansas, there are 
10,777 manufactured homes, costing approximately $301.7 
million, sitting on runways and open fields. Since they are not 
properly stored, the homes are sinking in the mud, and their 
frames are bending from sitting on trailers with no support. 
FEMA is now in the process of installing jacks under the 
manufactured homes to help steady the frames. As of January 
2006, none of the manufactured homes stored at Hope, Arkansas, 
have been moved out of house evacuees.''
    What is going on? This is a pitiful account. Is it 
factually correct?
    Mr. Garratt. No, sir, it is not.
    Senator Sarbanes. In what way is it not factually correct?
    Mr. Garratt. FEMA was as surprised by that New York Times 
article as we were by the IG report, and we immediately asked 
our logistics staff to either validate or invalidate both 
reports. We have asked them to do that twice in the last 2 
days. We have 10 full-time staff at that Hope, Arkansas site to 
provide maintenance and to provide caretaking for those mobile 
homes. And their report back is that none of the mobile homes 
are unusable. None of the mobile homes are sinking in mud. 
There have been instances, for example, of flat tires, but all 
of the mobile homes are fully usable.
    We do recognize that there is a potential over time, 
because those mobile homes are on a surface that could be 
susceptible to the weather, that we are going to, and have 
obligated funding to provide a crushed gravel surface over that 
entire area to remedy that potential problem, but at this time 
we cannot and do not validate those stories, with one 
exception. And that would be the observation that these mobile 
homes may not ever be used to support Hurricane Katrina 
victims. It is possible that many of these mobile homes will 
never be used to support Katrina victims.
    Senator Sarbanes. Are there almost 11,000 mobile homes 
there on that site?
    Mr. Garratt. Yes, sir, those figures were correct. I think 
it is 10,700 plus.
    Senator Sarbanes. Did they cost over $300 million?
    Mr. Garratt. Let me check that figure sir, and if I 
cannot----
    Senator Sarbanes. And you say the Inspector General, when 
he says they are not properly stored and some are sinking in 
the mud and their frames are bending?
    Mr. Garratt. Not validated by our logistics staff, sir.
    Senator Sarbanes. Is FEMA in the process of installing 
jacks under the manufactured homes to help steady the frames?
    Mr. Garratt. We are installing jacks in some instances, 
yes, sir.
    Senator Sarbanes. Why are you doing that if the frames are 
not bending from sitting on trailers?
    Mr. Garratt. That is a good question. I would say that it 
is probably preventive in most cases or it is recognition that 
there is a potential, because of how the individual mobile 
homes are situated on the terrain, but in terms of actual 
damage that has rendered any of those mobile homes unusable, 
that has not occurred. All of the mobile homes at that site are 
fully usable, and we expect this 10-percent maintenance crew 
that is there to do exactly that preventive maintenance.
    Senator Sarbanes. What is going to happen to these homes?
    Mr. Garratt. Those 10,700 mobile homes, plus the additional 
mobile homes which will be arriving at that site, if we do not 
use those in response to the impacted areas in Louisiana and 
Mississippi and Alabama and Texas, we will have those mobile 
homes ready for the 2006 hurricane season.
    The reason that those mobile homes have not been used to 
the extent that we had initially hoped is that the front end of 
the disaster, back in very late August as Hurricane Katrina was 
approaching, we established a housing area command in the AOR, 
in the area of responsibility. The purpose of that housing area 
command was to begin identifying the potential housing needs 
that were going to result from Hurricane Katrina, in what we 
expected to be, and what ended up being an unprecedented amount 
of devastation. They went out and began identifying prospective 
candidate group sites, as well as individual sites throughout 
the area, and immediately began ordering both travel trailers 
and mobile homes based on the anticipated need for those mobile 
homes. And we wanted those manufactured housing units rolling 
in even as we were engaged in the response side of this, 
because we wanted to be able to begin providing those as soon 
as possible.
    As it turns out, the vast majority of the devastation took 
place in floodplain areas, and the need for mobile homes, which 
we cannot place in a floodplain, was far less than the need or 
the desire for travel trailers.
    Nevertheless, we have in place a policy that says if 
someone desires manufactured housing in the area, if they are 
eligible for that, and if that site will support a mobile home, 
then that is what we will provide them, a mobile home. In those 
instances--and these are the majority--where a mobile home is 
not authorized because of floodplain restrictions, then we will 
provide a travel trailer.
    As a result of all of this, we have an excess of mobile 
homes, but that excess--we hope that excess is never used, but 
if in fact that excess is needed in 2006, again, the excess 
which we cannot use in support of Hurricane Katrina and other 
disasters, that will be available.
    Senator Sarbanes. It is enough to make you weep, just 
listening, I have to tell you. I mean it is really very 
depressing.
    Chairman Shelby. Waste.
    Senator Sarbanes. They had the Inspector General in front 
of the other committee, and they asked him about these things, 
and he went on and he said this about selling some of them as 
surplus property. ``What kind of return can you expect on 
that?'' ``It is certainly not going to be very high,'' he 
responded, ``given the way they were being stored at a spot 
where some were sinking into the mud. Some of the trailers that 
we inspected are actually warping, have lost wheels, and some 
have been cannibalized, parts taken out, and we do not even 
know where the parts are right now, so their value is going to 
decrease tremendously.''
    Now you are saying that is all make believe; is that right?
    Mr. Garratt. No, sir. I am saying that parts may have been 
cannibalized from one mobile home to be used on another one, 
that is entirely possible. It is entirely possible that mobile 
homes have been delivered that sustained some damage during the 
delivery process. What we are saying to that is, as a result of 
the storage at the Hope, Arkansas site, that none of the mobile 
homes have sustained damage as a result of that storage.
    Senator Sarbanes. Let me ask you this question. I have been 
concerned by FEMA's insistence on making decisions about 
eligibility for housing assistance on a case-by-case basis 
instead of putting out clear and transparent guidance. Congress 
included in the appropriations bill, the conference report, the 
following directive, ``The Conferees are concerned with the 
lack of guidance on housing assistance. Within 2 weeks from the 
date of enactment of this Act, the Director of FEMA shall issue 
guidance used to determine continued eligibility for housing 
assistance under the Section 408 Program. Consistent with 
current FEMA regulations, such guidance shall include the 
extension of assistance if the recipient is unable to afford 
local housing at the fair market rent level.''
    The two-week deadline painted in that legislation, passed 
on January 13, and no guidance has been issued yet. When will 
FEMA issue the guidance?
    Mr. Garratt. We did respond to that report, sir, and we did 
provide a response back to the Senate to that request.
    In terms of the guidance that we are operating under for 
making eligibility determinations, that is the guidance--we 
operate under the----
    Senator Sarbanes. The lights seem to go out when FEMA 
testifies. That is pretty symbolic, I guess.
    [Laughter.]
    Mr. Garratt. We made an initial response to the Senate.
    Senator Sarbanes. I am sure it was by accident.
    [Laughter.]
    Mr. Garratt. We subsequently had discussions with members 
of the Senate staff. They asked us to revisit that and come 
back with another response, which we have virtually completed. 
It is far more detailed, and it will be answering a number of 
the questions that they had questions about regarding our 
initial submission.
    Senator Sarbanes. What is going to happen to the people in 
New Orleans now who have been moved out of the hotels and the 
boats, the ships, in terms of where are they going for housing 
now?
    Mr. Garratt. A number of different options exist for those 
individuals. For individuals who have received or will be 
receiving a travel trailer, mobile home, they will be moving 
from hotels and motels into those travel trailers and mobile 
homes, and our Joint Field Office staff is working to match 
individuals up from hotels and motels as well as cruise ships 
into alternative temporary housing solutions.
    Senator Sarbanes. For what period of time do you provide 
some assurance on the housing? Three months; is that right?
    Mr. Garratt. What we provide is, when we provide rental 
assistance, rental assistance in 3-month increments. We can 
provide assistance for up to 18 months.
    Senator Sarbanes. Well, now, that is one of the problems. 
How is a landlord going to deal with these 3-month increments? 
Some have suggested that you should be providing at least a 
year so there is some stability in the leases, and also people 
can plan their lives and the lives of their children and their 
families in a more rational way. How do you do it on this 3-
month basis?
    Mr. Garratt. How does an individual obtain a lease when 
they are only receiving rental assistance in 3-months 
increments?
    Senator Sarbanes. Yes.
    Mr. Garratt. What we have found is that an awful lot of 
individuals are able to obtain leases based on the rental 
assistance, based on income that they are getting from jobs, 
supplementing their rental assistance. We have found that this 
is an anecdotal--the majority of individuals who we provide 
rental assistance to are, in fact, able to find temporary 
housing, in apartments or in other types of temporary housing, 
including travel trailers, mobile homes. And we are also taking 
some initiatives in New Orleans to address that issue from a 
rehabbable apartment standpoint. For example, we are 
encouraging apartment owners who have apartments that are not 
suitable for habitation now but with some minimum modest amount 
of rehabbing, they can make those apartments available. And we 
are guaranteeing those apartment owners that if they will 
invest their money and rehab those apartments, we will 
guarantee them that someone will lease those apartments from 
them for up to a year to encourage them to bring those units in 
New Orleans online and make additional housing available for 
evacuees.
    Senator Sarbanes. Now, do you do that on a case-by-case 
basis? Or have you issued guidance to that effect? If I am a 
landlord in that situation, do I have to come in and get my 
specific proposal approved by FEMA? Or is there a standard 
policy that tells me and all other landlords roughly similarly 
situated that we can move ahead?
    Mr. Garratt. Yes, sir, there is. We have worked out a 
contract arrangement with Corporate Lodging Consultants. 
Corporate Lodging Consultants will visit the apartment owner, 
explain the terms of the program, the fact that they are going 
to have to bring this up to a level of habitability that is 
certified by FEMA, that it meets certain standards. And once 
they do that, and if they do that within the time that they 
agree to do that, we will guarantee that we will be putting an 
individual who is eligible for financial assistance from FEMA 
into that apartment for 12 months.
    Senator Sarbanes. All right. Thank you, Mr. Chairman.
    Chairman Shelby. I want to thank the panel, but I have an 
observation. I do not know if you would share this. But before 
we spend a lot of money in New Orleans, it seems to me we have 
to strengthen the levees. We have to protect what we can 
protect there in a meaningful way. Do you agree with that, Mr. 
Powell?
    Mr. Powell. Yes, sir.
    Chairman Shelby. Mr. Garratt, what about you?
    Mr. Garratt. Yes, sir.
    Chairman Shelby. Mr. Gruenberg? All of you.
    We know you are not the Corps of Engineers, but we would be 
interested in probably hearing from them as to the status of 
their strengthening of the levees, because there are all kinds 
of stories. I know Senator Vitter was quite clear here today--
and some of you heard it--that the Corps was not up to their 
job, and perhaps some local people were not up to their job.
    Thank you very much for appearing here today.
    [Whereupon, at 1:08 p.m., the hearing was adjourned.]
    [Prepared statements and response to written questions 
supplied for the record follow:]

               PREPARED STATEMENT OF ALPHONSO R. JACKSON
      Secretary, U.S. Department of Housing and Urban Development
                           February 15, 2006
Introduction
    Mr. Chairman, Ranking Member Sarbanes, and distinguished Members of 
the Committee, it is a privilege to appear before you today.
    The purpose of my testimony this morning is to share with you the 
Department of Housing and Urban Development's immediate response to the 
hurricanes in the Gulf of Mexico, our ongoing efforts to assist 
affected families and individuals--people who have lost so much, too 
often everything--in finding both short-term and permanent housing, and 
the overall progress of the recovery efforts in the five affected 
States.
    HUD has worked closely with FEMA, the Department of Agriculture, 
the Department of Veterans Affairs, the Department of Health and Human 
Services, and others to get immediate housing assistance to those who 
have been displaced and uprooted by the recent hurricanes. As I am sure 
you can fully appreciate, the challenges HUD has faced are truly 
unprecedented, but we have worked as we have never worked before and as 
you will soon see our response has been equal to the difficult task at 
hand. Furthermore, we continue to satisfy the different housing 
missions assigned to us.
    In my presentation to the Committee, I intend to summarize the 
immediate steps taken by the Department in the days and weeks following 
Hurricane Katrina, as well as to provide a detailed summary of the 
actions taken by individual HUD program offices to assist in the 
recovery efforts. I also intend to discuss how our 
Department is assisting those HUD-assisted families who were impacted 
by Hurricanes Katrina, Rita, and Wilma. And I will update the Committee 
on HUD's execution of the recently enacted supplemental Community 
Development Block Grant (CDBG) funds.
    Hurricanes Katrina, Rita, and Wilma are thoroughly testing all of 
us and the President has directed Federal agencies to adapt to the 
extraordinary challenges presented by one of the most extensive series 
of disasters in our nation's history.
Immediate Actions Taken by HUD
    Prior to Hurricane Katrina's landfall on August 29, 2005, I 
established a working group to prepare for the possible problems that 
could arise from this powerful hurricane.
    As soon as the level of Katrina's destruction was understood, I 
established HUD's Hurricane Recovery and Response Center (HRRC). This 
emergency management center served as a command post for HUD efforts 
and was staffed with housing and community development professionals 
from every program office within the Department. This Center reported 
directly to me and operated out of HUD Headquarters. Shortly after its 
inception, the HRRC directed HUD's field offices to conduct a 
nationwide survey of vacant rental housing units in HUD's portfolio.
    The HRRC proved to be an effective communications tool during the 
emergency phase of the disaster, allowing every HUD program to 
coordinate from one central location. Once we moved into the recovery 
and rebuilding phase, however, Deputy Secretary Roy Bernardi and I 
replaced the HRRC with the HUD Assistance and Recovery Team (HART). 
This team of senior department officials continues to be 
responsible for coordinating all HUD deployment with FEMA and ensuring 
that program offices are fulfilling their mission as well as 
coordinating policy decisions.
    In addition, through our FEMA mission assignment, nearly 100 HUD 
employees were deployed to disaster recovery work in the Gulf Coast 
region within 2 weeks of Katrina's landfall. Some worked closely with 
FEMA and supported their response efforts, while others worked to 
address the region's exponentially growing housing needs. These HUD 
specialists brought years of experience in reconstruction and community 
planning to the region.
    Within this mission assignment, in conjunction with FEMA, we 
established the Joint Housing Solutions Center (JHSC), located in Baton 
Rouge, Louisiana. The Joint Housing Solutions Center focused on 
combining Federal resources with private sector, nonprofit, and faith-
based efforts. These pooled resources were then offered to local and 
State governments, as well as community stakeholders, to assist them in 
their efforts to place evacuees in temporary housing.
    Recently, in response to concerns about the living conditions in 
temporary travel trailer communities, the JHSC developed plans for 
Transitional Communities where travel trailers would be incorporated 
with a supportive neighborhood structure. The footprint of these 
communities and the utilities and streets developed to support them 
will subsequently support the development of permanent affordable 
housing when the temporary trailers are removed.
    Governor Barbour of Mississippi has endorsed the Transitional 
Community design, and all temporary trailer facilities in that State 
will now utilize the Transitional Community concept. This is just one 
example of the way in which the JHSC continues to be a vehicle for 
bringing together a broad array of resources and focusing them on the 
long-term recovery of housing in the region.
    In September, HUD worked with other organizations to set up ``one-
stop'' centers in major shelters across the Nation--from the Reunion 
Arena in Dallas to the DC Armory here in Washington. These centers 
allowed HUD officials to meet one-on-one with evacuees and determine 
how the Department could assist them in finding housing in their host 
city. In the first few weeks after Katrina hit, we placed nearly 10,000 
families in subsidized units. To date, HUD employees in 20 cities 
across the country continue to serve evacuees.
    On September 12, 2005, HUD and FEMA signed an Interagency Agreement 
that set forth the conditions for the transfer of HUD-owned properties 
held off the market and made available for lease to displaced families. 
This agreement identified more than 6,000 single-family homes within a 
500-mile radius of declared disaster areas. Despite the fact nearly 
every one of these homes required significant repairs and were spread 
across an 11 State area, more than 1,000 families have moved in and 
another 800 are in process. The remainder of the homes will be offered 
to evacuees either as temporary housing or through a discounted sale 
program.
    Shortly after Hurricane Katrina hit the Gulf Coast, I reached out 
to the United States Conference of Mayors and the National Association 
of Counties to seek their support in finding more housing opportunities 
for hurricane victims. The response to this call to action has been 
tremendous from across the country--including Detroit, Philadelphia, 
Allegheny County (PA), and Miami-Dade County. Each of these communities 
opened its doors to more than 1,000 displaced individuals.
    Our efforts to respond to the immediate aftermath of Hurricane 
Katrina were extensive, and I will now turn to specific actions taken 
by HUD's program offices.
Actions by Program Offices
Office of Community Planning and Development
    Senior officials in HUD's Office of Community Planning and 
Development (CPD) gathered to explore ways to help the affected 
communities. Based on past experience, we knew CPD programs--especially 
CDBG and HOME--have been especially effective in addressing both the 
immediate and long-term recovery needs that arise from natural 
disasters. On September 5, 2005, Assistant Secretary Pamela Patenaude 
began issuing a series of waivers to streamline our existing grant 
programs so grantees could reprogram their existing HUD funds for 
disaster relief. To date, CPD has issued more than 40 waivers affecting 
existing normal program requirements to its normal program 
requirements. CPD has also given special attention to the opportunity 
to meet the needs of persons who were homeless before the hurricanes, 
and to homeless programs funded by the Department whose operations were 
affected.
    CPD also reached out to Governors Blanco, Barbour, and Riley to 
offer them the support and flexibility they needed to retarget their 
resources to better assist their communities. In response to a request 
from Governor Blanco, we issued a series of waivers in the CDBG and 
HOME programs. The HOME program waived requirements to allow for 
source-certification of income and elimination of the match 
requirement. These waivers provided greater flexibility in the use of 
HOME and American Dream Downpayment Initiative funds to help low-income 
Louisianans receive tenant-based rental assistance, and rehabilitate 
and buy homes. They also offer the same flexibility to Governors 
Barbour and Riley.
    CPD also issued a series of waivers for the CDBG program, the 
Emergency Shelter Grants program, and the Housing Opportunities for 
Persons with AIDS program to make them more responsive to the immediate 
needs of the affected communities. The City of Houston, which received 
thousands of evacuees from New Orleans, was the first to ask for a 
waiver of CDBG's 15 percent cap on public services. This request was 
granted for Texas and the 4 other affected States, providing 
communities more flexibility to help their citizens. We also simplified 
the citizen participation requirements to give communities more options 
on how to refocus their programs to meet their changed environment and 
needs. At the request of specific communities, we also waived a number 
of other requirements including: Allowing presumption of low- and 
moderate-income benefit in certain circumstances in CDBG; extending 
deadlines for reporting submissions; and extending the deadline for 
spending funds in order to give affected communities time to consider 
their needs and options after the disaster. To help Gulf Coast 
communities develop long-term affordable housing plans and respond to 
the needs of local community housing development organizations and 
homeless providers, we are providing technical assistance through HUD 
field offices and HUD-contracted technical assistance providers such as 
the College of Experts.
    Most recently, CPD has been at the forefront of the Department's 
efforts to administer the $11.5 billion in CDBG disaster funding 
approved by Congress and signed into law by the President on December 
30, 2005. On January 25, 2006, HUD announced the allocations for the 
five affected Gulf States, and on February 13, 2006, HUD published in 
the Federal Register guidance on how each of the States is to submit an 
Action Plan for disaster recovery on the uses of the grant funds to 
assist with long-term recovery and infrastructure restoration.
    Our overriding goal is to make sure the funding provided by 
Congress is swiftly made available to the States for their recovery 
efforts, and that the funding is used in a manner consistent with the 
intent of Congress and in the context of the comprehensive 
reconstruction plans being developed by each of the five States.
Office of Housing
    In the Office of Housing, FHA immediately urged approved lenders to 
provide forbearance to FHA borrowers displaced by the storm and unable 
to make regular monthly payments. HUD took the lead in providing the 
first 90-day foreclosure relief for FHA borrowers in presidentially 
declared Major Disaster Areas affected by Hurricanes Katrina, Rita and 
Wilma. On November 22, 2005, Housing Commissioner Brian Montgomery and 
I extended foreclosure moratoriums in those counties declared eligible 
for individual assistance as a result of Hurricanes Katrina and Rita 
for an additional 90 days to February 28, 2006. The extended 
foreclosure relief will provide mortgagees additional time in which to 
confirm the mortgagor's intention and ability to repair the home, 
resume regular mortgage payments and retain homeownership.
    On December 1, 2005, the Department announced an additional 
homeownership retention initiative to help homeowners with FHA-insured 
mortgages who are unable to maintain their payment obligations due to 
hurricane-related property damage, curtailment of income or increased 
living expenses. Under the initiative, FHA will advance mortgage 
payments for up to 12 months for eligible borrowers who are committed 
to continued occupancy of their homes as a principal residence and are 
expected to have the financial capacity to repair storm damage and 
resume making full mortgage payments within a 12-month period. This 
unprecedented mortgage relief is expected to help several thousand 
families to remain homeowners while they concentrate on repairing their 
homes, finding jobs, and putting the pieces of their lives back 
together.
    In addition, I have personally encouraged lenders to undertake 
actions such as mortgage modification, refinancing, and waiver of late 
charges for those homeowners in the Katrina disaster area and to 
refrain from reporting derogatory credit information to credit bureaus.
Office of Public and Indian Housing
    The Office of Public and Indian Housing (PIH) has issued guidance 
to the Nation's more than 3,000 Public Housing Authorities (PHA's) on 
how to assist public housing residents displaced by Hurricane Katrina. 
Titled ``Guidance for Public Housing Agencies in Assisting Families 
Displaced by Hurricane Katrina,'' this document has been posted on 
HUD's website and distributed to every PHA and HUD field office.
    HUD's KDHAP is providing housing vouchers for evacuee households 
that were previously receiving public housing and other HUD housing 
assistance, including persons experiencing homelessness. Under KDHAP, 
participating individuals and households are eligible to receive rental 
assistance payments for up to 18 months. These payments are calculated 
at 100 percent of the fair market rent in any community in the country 
the evacuee selects, from Portland, Maine to Portland, Oregon. I am 
pleased to say that nearly 15,000 families have received KDHAP 
vouchers. With the additional $390 million in funds awarded by Congress 
in 2005, thousands more HUD-assisted families and individuals who were 
homeless in the affected areas prior to Katrina will be eligible for 
assistance.
    HUD has now verified which vacant public housing units are in 
livable condition and available to house evacuees. To accomplish this, 
our field office staff contacted every PHA in the Nation to identify 
the number of public housing units currently available, those that 
could be made ready for occupancy in 5 to 7 days, and the number of 
available vouchers. As a result, HUD has identified more than 39,000 
vacant public housing units and available vouchers nationwide.
    HUD's Office of Native American Programs (ONAP) has consulted with 
every tribe affected by Hurricane Katrina. The Chitimacha Tribe of 
Chareton, Louisiana and the Tunica-Biloxi Tribe of Marksville, 
Louisiana are now housing displaced tribal families evacuated from New 
Orleans and coastal Mississippi. The Chickasaw Nation Housing Division, 
located in Ada, Oklahoma, is housing displaced families in various 
sections of their service area, most of whom are not tribal members.
    Indian Community Development Block Grant (ICDBG) Imminent Threat 
funds in the amount of $2.4 million are currently available for 
distribution to tribes affected by Hurricane Katrina. Requests are 
being processed for each tribe in need of assistance in the amount of 
$425,000 per tribe. These funds become available on a first-come, 
first-serve basis as soon as the request is received and approved by 
HUD.
    The Public Housing Capital Fund has a Reserve for Emergencies and 
Natural Disasters in the amount of $29.7 million for fiscal year 2005. 
These funds can only be used to repair and replace existing public 
housing that was directly affected by Hurricane Katrina. PHA's must 
submit applications to HUD for these funds. The Housing Authority of 
New Orleans (HANO) received a $21.8 million grant from the Capital Fund 
Reserve for Emergencies and Natural Disasters, which was approved on 
September 28, 2005. This request was for a preliminary grant until a 
full assessment of the damage and the cost to repair and/or replace its 
public housing inventory is completed. These funds will be primarily 
used to: Make minimal repairs to four properties to make them 
habitable; secure uninhabitable properties; and pay relocation costs 
for displaced families.
    PIH awarded a contract for general disaster assistance within 3 
days of Hurricane Katrina. The contract covers: Assessment of damage; 
general assistance to HUD staff, PHA's, and residents; assistance in 
facilitating communication and transportation among HUD and PHA staff 
and other service providers; assistance in identifying and coordinating 
temporary shelter for flood victims; assistance in coordinating social 
services and other special needs activities for elderly, disabled, and 
others; assistance in facilitating space to coordinate HUD response 
activities; and other emergency activities as identified by site 
visits.
    PIH set up two hotlines within days of Hurricane Katrina. The first 
hotline is for PHA's to verify the status of persons claiming to be 
displaced public housing residents or voucher holders. The second 
hotline is for public housing residents or voucher holders that need 
assistance and information on available public housing.
    HUD assisted the Housing Authority of New Orleans, which has been 
under HUD receivership since February 2002, in quickly setting up 
headquarters operations in Houston, and a satellite office in Dallas. 
We worked closely with the Houston Housing Authority, which provided 
extensive facilities and assistance to HANO. As a direct result, HANO 
was able to set up a booth in the Houston Astrodome to process 
residents and voucher holders within the first week.
    Notice of a broad regulatory waiver process was published in the 
Federal Register on October 3, 2005. The PIH waivers facilitate the 
administration of properties in the Hurricane Katrina declared disaster 
areas and relieve PHA's affected by the hurricane or assisting in 
hurricane relief of numerous administrative requirements. In all, 23 
items can be suspended or requested for expedited waiver. Waivers 
include such items as: The granting of time extensions for submitting 
verification information; the use of previous year Public Housing 
Assessment System scores for certain PHA's; the deferral of Section 
Eight Management Assessment Program requirements for 1 year; and the 
lifting of cost limitations for public housing until new total 
development costs are published. An expedited electronic submission 
system has been set up to receive notifications and requests.
Fair Housing and Equal Opportunity
    One of our Department's top goals is to ensure people have access 
to affordable housing free from discrimination. Immediately following 
Hurricane Katrina, our FHEO office deployed staff to Baton Rouge, and 
later to Mississippi, to assist Gulf Coast evacuees who had reported 
housing discrimination. Our staff obtained immediate relief for people 
facing discrimination before there was a need to file formal 
complaints. For example, staff helped open a mobile home community to 
families with children after receiving a complaint that the park was 
unlawfully excluding them. As of February 1, 2006, HUD has received 94 
formal complaints of post-hurricane discrimination.
    To help raise awareness of housing discrimination--especially 
discrimination experienced by victims of recent hurricanes--HUD 
launched a series of print and broadcast public service announcements 
that make this case in a very compelling way.
    In addition, HUD worked with FEMA to create new design 
specifications for fully accessible manufactured housing to ensure that 
temporary housing is available for people with disabilities, we held 
seminars in Louisiana and Mississippi to make certain that all new 
multifamily housing complies with Federal requirements for disability 
accessibility, and we also provided additional funding to private fair 
housing groups and State fair housing agencies in the affected region 
to assist them in responding to the fair housing needs of evacuees.
Center for Faith-Based and Community Initiatives
    The Center for Faith-Based and Community Initiatives has been an 
active participant with the rest of the Department in responding to the 
hurricanes. The Center published on the web and in hardcopy the 
Disaster Recovery Toolkit. It has 
expanded its affordable housing pilot project to include Houston and 
Tampa. The Center holds weekly teleconference calls with HUD's 10 
regional faith-based and community liaisons to better coordinate the 
Center's national resources and disseminate relevant information from 
the daily HART calls. The calls serve as a forum in which to exchange 
information about successful local public-private partnerships to 
assist evacuees, and to help the liaisons prepare their local faith-
based and community organizations for assisting those evacuees who will 
have to leave their current locations for more permanent housing once 
FEMA subsidization of hotel lodging comes to an end.
    The Center has also contacted nearly 20,000 faith-based and 
community organizations to recruit their engagement in the Department's 
KDHAP enrollment efforts. The Center's Region IV Regional Faith-based 
and Community Liaison has been detailed to the Joint Housing Solution 
Center in Baton Rouge, in order to engage faith-based and community 
organizations in constructing or rehabilitating 60,000 units of 
housing. That regional liaison also spearheaded an innovative, 
comprehensive approach to securing housing, as well as furnishing, 
employment, and transportation for evacuees establishing new domiciles, 
all in conjunction with the National Association of Real Estate 
Brokers, its Women's Council, and other faith-based and community 
organizations. The Center is studying ways of replicating this model 
wherever groups of temporarily housed evacuees may relocate.
Conclusion
    I want to conclude by saying a word about the 85 HUD employees 
previously located in our New Orleans Field Office. I am both relieved 
and pleased to say that we have been in close contact with all of them 
over these last 5\1/2\ months. I am proud to report that as of February 
6, 2006, 56 members of our New Orleans field office staff have returned 
to work in that office. Their courage and tenacity are truly 
inspirational. But I have to say that the dedication and commitment of 
the entire HUD family to assist those in need has been equally 
inspirational.
    Thank you.
                               ----------
                 PREPARED STATEMENT OF DONALD E. POWELL
         Federal Coordinator, Office for Gulf Coast Rebuilding
                           February 15, 2006

    Chairman Shelby, Ranking Member Sarbanes, and Members of the 
Committee, I am pleased to appear before you today as the Federal 
Coordinator for Gulf Coast Rebuilding to discuss the progress we have 
made in the Gulf Coast region and the challenges and opportunities we 
face in the intermediate recovery and long-term rebuilding effort.
    In the aftermath of one of the most powerful and destructive 
natural disasters in our Nation's history, President George W. Bush 
created the Office of the Federal Coordinator for Gulf Coast Rebuilding 
by Executive Order 13390 to be housed under DHS and Secretary Chertoff. 
I was charged by the President to coordinate the long-term Federal 
rebuilding efforts by working with State and local officials to reach 
consensus on their vision for the region.
    Let me begin by telling you it is a great honor to have been 
appointed by the President to this very important post. He is committed 
to doing whatever it takes to support the recovery and rebuilding 
efforts of Alabama, Florida, Louisiana, Mississippi, and Texas along 
the Gulf Coast. The entire Gulf Coast region is of great historical, 
cultural, and economic importance to this country, and we will make 
sure that these Americans get back on their feet and rebuild their 
lives. Whole communities have been ravaged by Katrina and Rita, but I 
am confident that together we will see a better tomorrow for our fellow 
Americans in these affected areas.
    Our job is to work closely with people on the ground to identify 
and prioritize the needs for long-term rebuilding. We then communicate 
those realities to the decision makers in Washington, and advise the 
President and his leadership team, including Secretary Chertoff, on the 
most effective, integrated, and fiscally responsible strategies for a 
full and vibrant recovery.
    The President has made it abundantly clear that the vision and 
plans for rebuilding the Gulf Coast should come from the local and 
State leadership, not from Washington, DC. Rebuilding should not become 
an exercise in centralized planning. If Federal bureaucrats determine 
the path of rebuilding, local insight and initiative will be overrun 
and local needs overlooked. In addition, if the heavy hand of Federal 
Government impedes the private sector's proven ability to speed the 
recovery, it will take longer and be more expensive to rebuild.
    President Bush made a commitment that the Federal Government would 
be a full partner in the recovery and rebuilding of the areas 
devastated by Hurricanes Katrina and Rita, and he is keeping that 
promise. The Federal Government has already committed more than $87 
billion for the recovery effort, and the President's 2007 budget 
estimates that an additional $18 billion will be included in an 
upcoming 2006 supplemental package, which would bring the total to well 
over $100 billion. That figure does not include the tax relief of the 
GO Zone legislation, which will be approximately $8 billion. Markets 
must be encouraged and allowed to work properly without interference 
from government. Money spent should not compete with or hinder private 
sector involvement but, rather, serve as a catalyst to encourage 
growth. We also understand the importance of being good stewards of the 
substantial amounts of money that have been, and will continue to be, 
spent on this effort. The Administration has put into place financial 
management practices and has enhanced audit and investigative resources 
for the Inspectors General to safeguard Federal spending. We also call 
on the Congressional oversight and accountability mechanisms in place 
to assist in the fiduciary protection of the American 
taxpayer. If Americans see their tax dollars being ill-spent, their 
support--which is critical--will wane. It is my duty to ensure that any 
plans or strategies are conducive to the prudent, effective, and 
appropriate investment of taxpayer dollars.
Recovery Assistance
    Hurricanes Katrina and Rita left many of our fellow citizens 
stunned and uprooted The Federal Government has and will continue to 
support evacuees through direct financial assistance and temporary 
housing. This Administration believes in the government's duty to 
provide resources and support on behalf of the American people, and to 
rally this Nation's armies of compassion
    As of February 2, 2006, FEMA had provided the following direct 
financial and housing assistance:

 136,502 mobile homes and travel trailers have been purchased 
    for a total cost of $2.5 billion (as of February 2).
 74,189 mobile homes and travel trailers are occupied (as of 
    February 2).
 6,292 mobile homes and travel trailers are ready for occupancy 
    but are vacant (as of February 2).
 $5.1 billion in assistance to 1,044,916 applicants under the 
    Individual Housing Program (IHP) for Katrina in all states (as of 
    February 7).
 1,704,006 FEMA registrations from Hurricane Katrina declared 
    disasters--LA, MS, AL (as of February 7).

    In addition to housing assistance, FEMA has also assisted in the 
disposal of over 62 million yards of debris, or over 60 percent of the 
total amount to be removed from the affected area.
Levees
    When I made my first trip to the Southeast Louisiana region I asked 
everyone I visited with, ``what are the three most important issues?'' 
The answer, time and again, was ``Levees, levees, levees.'' The 
President agrees that public safety is the most critical part of long-
term rebuilding in that area. People must feel safe and secure in their 
decision to come back--whether as a resident or a business owner.
    The President responded quickly by asking Congress to authorize his 
$3.1 billion commitment to make the levees that surround the New 
Orleans area stronger and better than they had ever been before. In 
addition to returning the levee system to pre-Katrina levels before 
next hurricane season, the President's request to Congress also 
included the addition of flood gates and pumping stations to interior 
canals, selective armoring of levees, the initiation of wetlands 
restoration projects, and additional storm-proof pumping stations. I 
receive routine briefings from the Army Corps of Engineers and they are 
on track to meet their deadline for pre-Katrina strength before the 
beginning of the next hurricane season.
Housing
    After the Administration made its commitment to rebuild the levees 
stronger and better, the next issue on the minds of the people of the 
Gulf Coast was housing. As a part of the DOD reallocation, Congress set 
aside $11.5 billion in Community Development Block Grant (CDBG) funds 
for the Gulf Coast. The CDBG program is a well-tested mechanism that 
provides States with great flexibility in how funds may be spent. The 
$11.5 billion given by the Department of Housing and Urban Development 
(HUD) is the full amount appropriated by Congress for CDBG in the 
disaster supplemental, enacted December 30, 2005. These funds will be 
available once each State submits a detailed plan to the Federal 
Government outlining its use of the funds. The greatest attribute of 
the CDBG funds is that they are flexible and allow the State leaders--
those closest to the local issues--to make the decisions on where best 
to use the money.
    The housing issue is of paramount importance. Many have spoken 
about H.R. 4100, the Louisiana Recovery Commission (LRC). The 
Administration shares the goal of rebuilding Louisiana and the Gulf 
Region and we are grateful to Congressman Baker's leadership on this 
important issue; however, we support CDBG monies as the most efficient 
funding instrument in recovery funding. In fact, the Louisiana 
legislature is currently reviewing a proposal that would use CDBG 
monies and other Federal assistance to create a similar housing 
corporation on the State level. I look forward to working with the 
State on that plan. However, if after spending all the allocated 
Federal funds there are remaining unmet needs, we will continue to work 
with Congress to help ensure that additional resources are available 
and needs are met.
Economy
    The President, along with Congress, has also been mindful about the 
renewal of the region's economy. At the end of 2005, the President 
signed into law the Gulf Opportunity Zones Act (or GO Zones). This 
legislation, providing approximately $8 billion in tax relief over 5 
years, will help revitalize the region's economy by encouraging 
businesses to create new jobs and restore old ones. Some of the 
principal provisions within the Gulf Opportunity Zone Act of 2005 
include tax-exempt bond financing for both residential and 
nonresidential property, changes to the low income housing credit, 
bonus depreciation, expensing for certain demolition and clean-up 
costs, just to name a few. Simply put, this law renews businesses, 
rebuilds homes, and restores hope.
    In the affected area, the Small Business Administration (SBA) has 
adapted and ramped up its capacity in order to provide loans and 
working capital to small businesses and families. Small Business 
Administration disaster loans provide vital low-cost funds to 
homeowners, renters, and businesses to cover uninsured disaster 
recovery costs as well as loans for the working capital needs of 
businesses affected by disasters. Since last year's hurricanes, SBA's 
Disaster Loan Program has approved over $4.3 billion in disaster loans 
to over 60,000 homeowners, renters, and businesses along the Gulf 
Coast. Given SBA's ongoing commitment to small business owners in this 
region, it is imperative that Congress approve any monies to SBA in the 
upcoming 2006 supplemental package.
    Workforce development will also be critical to long-term economic 
security. Secretary of Labor Elaine L. Chao and I attended a meeting in 
December 2005 with the President, labor leaders, civil rights groups, 
and business associations to discuss workforce initiatives and overall 
employment issues facing the region. We tasked those leaders with 
devising a plan to prepare the workers of the region for the future of 
the Gulf Coast economy. We recently completed that plan and look 
forward to implementing the program in May 1, 2006 in New Orleans. We 
want to help create as many jobs as possible in the Gulf Coast and 
prepare its residents to fill those jobs. To do this, we have set an 
ambitious goal that we are committed to achieving--this public/private 
initiative will train 20,000 new workers for careers in construction 
and skilled trades by the end of 2009. We will continue to work to help 
make the Gulf Coast a great place to invest, do business, and live.
Conclusion
    President Bush is committed to rebuilding the Gulf Coast. The 
Federal Government will continue to facilitate and help strengthen, but 
not replace, State and local government or private initiatives and we 
will help our fellow citizens meet the challenges of reconstruction and 
rebuild their lives and communities for the years to come. The 
residents of this area and the President can agree on this: Failure is 
not an option.
    There is no doubt that a tremendous amount of work is still ahead 
of us but we are heartened and encouraged by the progress made. We are 
proud of the work that has been accomplished to date on both the State 
and Federal level. We look forward to working with leaders in Alabama, 
Florida, Louisiana, Mississippi, and Texas in the days, weeks and 
months ahead to assist in the implementation of their respective 
visions while also serving as a good steward of taxpayer dollars, which 
the distinguished members of this panel, along with your colleagues, 
have helped secure.
    Mr. Chairman, this concludes my testimony. Again, I appreciate this 
opportunity to appear before you as the Federal Coordinator for the 
Gulf Coast Rebuilding. I am prepared to respond to any questions that 
you may have.
    Thank you.
                               ----------
                  PREPARED STATEMENT OF DAVID GARRATT
    Acting Director of Recovery, Federal Emergency Management Agency
                  U.S. Department of Homeland Security
                           February 15, 2006

    Good morning Chairman Shelby, Ranking Member Sarbanes, and 
Committee Members. I am David Garratt, the Acting Director of Recovery 
at FEMA, and am representing Secretary Chertoff and Acting FEMA 
Director Paulson. It is an honor to appear before this Committee to 
summarize and discuss our emergency sheltering and housing efforts in 
support of Hurricane Katrina and Rita victims, as well as our overall 
efforts to contribute to the rebuilding of the Gulf Coast.
    We at the Department of Homeland Security and FEMA appreciate your 
interest in the housing challenges presented by the scope and scale of 
these unprecedented disasters. I think we all recognize that these 
hurricanes, and Katrina in particular, have thoroughly tested the 
capabilities of impacted State and local governments, FEMA, the 
Department, and the Nation, including the many States and communities 
nationwide who are hosting displaced evacuees from the affected Gulf 
Region. And yet, while these events have tested our plans and processes 
as never before, FEMA's sheltering and housing assistance programs have 
provided or facilitated the means for hundreds of thousands of evacuees 
to quickly secure interim accommodations, even as we continue to fund 
and facilitate an aggressive strategy to transition those individuals 
and families into longer-term, and more stable, housing solutions.
    It has been a challenging time--nearly 6 months since Hurricane 
Katrina made landfall--for victims, communities, States, voluntary 
agencies, and the Federal Government alike. And, while we have made 
significant strides in addressing the pressing housing needs of victims 
across the country, many challenges and difficult decisions remain.
    Nevertheless, we have been, and remain, committed to helping 
households recover and re-establish themselves. I would like to outline 
the assistance programs--under the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act--that FEMA continues to provide in support 
of both sheltering and housing needs.
    Under our public assistance program, authorized by Section 403 of 
the Stafford Act, FEMA is authorized to reimburse States for emergency 
protective measures, including emergency sheltering. Typically, these 
costs are reimbursed only for those States directly affected by the 
disaster. However, the scale of the evacuation prompted by Hurricane 
Katrina required a more expansive approach. To encourage States outside 
of the hurricane-affected area to accept and assist the hundreds of 
thousands of evacuees from the Gulf Region, the President responded to 
gubernatorial requests by declaring emergencies for 44 States and the 
District of Columbia. These emergency declarations had the effect of 
reassuring those States that their sheltering costs would be 
reimbursed, as well as provided the means for States to transition 
these evacuees out of shelters and into longer-term temporary housing. 
This latter capability has provided an invaluable bridge to our longer-
term housing strategy, as it allows jurisdictions--on a reimbursable 
basis--to arrange short-term lease apartments for evacuees, allowing 
them to move out of transitional shelter environments, such as hotels, 
and into more stable temporary housing.
    Another form of sheltering assistance that, traditionally, is 
rarely, and then only briefly implemented in disasters, is hotel/motel 
subsidies. However, in response to Hurricane's Katrina and Rita, this 
assistance mechanism has been center stage.
    Recognizing that the road to recovery required that we remove 
families from congregate shelter environments as quickly as possible, 
FEMA authorized States, within days of Hurricane Katrina's landfall, to 
relocate families to hotel/motel rooms. At the same time, the American 
Red Cross initiated a similar hotel/motel subsidy program, as 
authorized by a statement of understanding with FEMA. Together, FEMA, 
the States, and the American Red Cross facilitated the relocation of 
thousands of families to more private, and humane, living conditions. 
In late October 2005, FEMA agreed to assume responsibility for funding 
the hotel/motel subsidies of those households placed by the American 
Red Cross, which has been, and remains, a stalwart and dependable 
partner of FEMA and the Federal Government in disaster response and 
recovery operations.
    Throughout the intervening months, we have worked with more than 
7,500 hotels and funded over 3 million room nights. However, nearly 6 
months removed from Katrina landfall, the time has come to end the 
sheltering phase of the recovery, and complete the transition of 
Katrina and Rita evacuees to more stable temporary housing, and where 
feasible, permanent housing. For many, this will be a difficult 
transition, as not every household will be eligible for Federal 
assistance, nor will every household be able to immediately return to 
their pre-disaster homes, or hometowns. Nevertheless, during this 
period, we have diligently and ceaselessly, using community relations 
and voluntary outreach teams, made repeated efforts to contact every 
victim registered and subsidized in every single hotel or motel room 
across the United States, to make sure every hotel and motel occupant 
household has every opportunity to avail themselves of all available 
transition assistance.
    First, and most importantly, every household must register with 
FEMA to receive FEMA housing assistance. Registration can be 
accomplished either on-line, or through our 1-800 numbers. FEMA's 
ability to process registrations in a timely manner is second to none. 
Following Hurricane Katrina, FEMA processed over 100,000 registrations 
across a single 24-hour period, more than doubling any previous 
disaster single-day registration record. The Individuals and Households 
program (IHP) provides financial help or direct services to U.S. 
citizens, non-citizen national, or qualified aliens whose primary 
residence was damaged as a direct result of a presidentially declared 
disaster when they are unable to meet these needs through other means. 
Even if a registered individual or household is ultimately determined 
to be ineligible for FEMA assistance, we can refer them to other 
sources of potential assistance, such as voluntary agencies or the 
Department of Housing and Urban Development's Katrina Disaster Housing 
Assistance program, or KDHAP. Under the supplemental budget, KDHAP is 
succeeded by the Disaster Voucher program (DVP) under which public 
housing authorities will assist individuals or households who were 
displaced residents of a HUD program or homeless at the time of the 
disaster.
    While Section 403 of the Stafford Act, as I have described, 
supports sheltering activities, FEMA's Housing Assistance Authorities 
are covered under Section 408 of the Stafford Act. I would like to 
briefly describe the components that make up our housing assistance 
programs.
    Under Section 408 of the Stafford Act, FEMA is authorized to 
provide: Rental assistance; home repair assistance; home replacement 
assistance; direct housing; and other needs assistance, the latter is 
designed to assist with necessary expenses and serious needs, including 
personal property losses. I will discuss each briefly.
    Under the Transitional Housing Assistance program, FEMA has 
provided, as of February 10, rental payments to more than 675,000 
applicants, totaling more than $1.6 billion. In providing this rental 
assistance, we are aware that many displaced households received their 
checks, or deposits to their bank accounts, before receiving mailed 
guidance and instructions detailing the intended use of the funding, 
and procedures for receiving subsequent rental assistance. Accordingly, 
FEMA will recertify year and continue to provide rental assistance in 
3-month increments--for as long as households qualify year for such 
assistance. This accommodation applies only to the initial 
recertification of rental assistance. Subsequent recertifications will 
require necessary rent receipt documentation. I think it is important 
to note that FEMA is prohibited by law from duplicating assistance. 
Therefore, if a disaster victim has an insurance policy that provides 
alternate living expenses, we will not duplicate that aid unless their 
settlement is delayed. In such cases, applicants are advised they will 
be required to return the duplicated assistance to FEMA following 
settlement. Similarly, if victims are receiving other forms of housing 
support that obviate the need for our assistance, we will not knowingly 
duplicate that aid. We will also, as a standard part of our 
recertification process, validate that the applicant is pursuing a 
permanent housing strategy, to include economic self-sufficiency.
    FEMA is authorized to pay up to $5,200 in home repair assistance to 
eligible victims of Hurricanes Katrina and Rita. Repairing a home to 
make it livable, where that option exists, is a preferred remedy, as it 
keeps people in their homes, in their communities, and is cost-
effective. To date, we have provided more than $335 million in home 
repair payments to victims of Hurricanes Katrina and Rita, helping make 
nearly 175,000 homes habitable across the Gulf Region. In addition, 
under the public assistance program, we have provided or installed 
plastic sheeting or tarps on nearly 150,000 roofs in the Gulf Region, 
enabling those residents to continue living in their homes even as they 
pursue permanent repairs.
    FEMA is also authorized to pay up to $10,500 in home replacement 
assistance to eligible applicants. Thus far, in Alabama, Louisiana, 
Mississippi, and Texas combined, we have provided more than $270 
million to over 27,000 households to help them replace their destroyed 
housing. Note that neither of these forms of assistance is designed to 
take the place of, or substitute for insurance, nor are they designed 
to cover all disaster-related losses. Consequently, the assistance we 
provide is not as comprehensive as an insurance policy.
    As I noted earlier, the scope and scale of devastation from these 
two hurricanes eliminated the home repair option for many households. 
In addition, home repair does not apply to renters, who nevertheless 
have the same need for temporary housing assistance. For both these 
types of households, FEMA offers two forms of interim housing 
assistance: Rental assistance--in the form of financial assistance paid 
directly to an eligible applicant, and direct housing assistance--in 
the form of a dwelling provided by FEMA to an eligible applicant.
    Direct housing assistance can be provided--for up to 18 months from 
the date of the declaration--either in the form of direct leases (such 
as apartments), or through the provision of manufactured housing. The 
latter option is available only in the impacted States, where existing 
housing stock has been destroyed or rendered uninhabitable. This lack 
of fixed housing stock is particularly acute in the States of Louisiana 
and Mississippi, where manufactured housing is the only currently 
available temporary housing solution for disaster victims who wish to 
be close to home, close to their jobs, close to their families, or 
close to their childrens' schools.
    While manufactured housing can provide a timely and effective 
temporary solution for critical and immediate housing problems, we also 
recognize that large group sites can create social challenges and 
logistical problems. Accordingly, we strongly encourage, wherever 
possible, that manufactured units be placed on private property--such 
as a family driveway--so that disaster victims can remain in their 
communities as they begin the long process of rebuilding their homes 
and their lives.
    However, when it becomes necessary to develop group manufactured 
housing sites--and it is absolutely necessary for many communities 
across the Gulf Region--our preference is to place such units on 
previously developed commercial sites, since they already have the 
infrastructure necessary to support timely installation and occupancy. 
However, in those areas where the lack of infrastructure and/or 
capacity prevents use of private or commercial sites, we are actively 
building sites--with the necessary infrastructure--to support 
manufactured housing communities. Again, recognizing that manufactured 
housing communities can, over time, present social challenges, the size 
of such developments is limited if a larger concentration of 
manufactured housing units is proposed, this siting must be 
specifically approved by DHS, and the State and local governments.
    As of February 10, 2006, we have more than 75,000 manufactured 
units occupied in the Katrina and Rita impacted States. The 
overwhelming majority of these units are travel trailers. Trailers are 
utilized with far greater frequency because they are movable, and thus 
can be employed in low-lying areas where installation of a mobile home 
is prohibited due to the risk of further flooding. In addition, they 
are smaller and can be parked on property owned by a homeowner, while 
that household works to repair their damaged structure.
    One of the biggest challenges facing the recovery effort is finding 
and securing sufficient rental assets to meet the huge demands created 
by the mass exodus of evacuees. Fortunately, numerous dwellings have 
been made available by other Federal agencies. To date, over 11,000 
evacuee households have been placed in Federal housing resources across 
the Katrina-Rita impact areas. For example, the U.S. Department of 
Agriculture has made thousands of such dwellings available. In 
Louisiana alone, 1,100 families have been placed in USDA houses. We 
have also entered into an interagency agreement with the Department of 
Veterans Affairs to make their unsold housing units available for 
evacuee rental, and are actively pursuing a similar arrangement with 
Fannie Mae.
    In addition, the U.S. Department of Health and Human Services 
recently announced $550 million in funding to the 50 States and the 
District of Columbia for additional hurricane relief. These funds will 
come from the social services block grant (SSBG) program, administered 
by HHS' Administration for Children and Families (ACF). They will be 
given to States to provide health care, mental health, and social 
services, as well as for the repair, renovation, and construction of 
facilities providing those services to victims of Hurricanes Katrina, 
Rita, and Wilma.
    We have been collaborating closely with HUD from the outset of this 
event, working together to reconcile and apply our respective 
authorities and capabilities to provide maximum benefit to those most 
in need of housing assistance. In addition to partnering with the 
Department of Homeland Security and FEMA through their KDHAP program, 
HUD has made repossessed houses available to FEMA-eligible disaster 
households, and has placed hundreds of disaster victims in houses in 
the 4-State area, including 207 families in Texas alone. Today, both 
here and in the field, HUD teams and personnel continue to work closely 
with FEMA to identify year and assist eligible disaster victims, 
wherever they may be.
    HUD also recently announced HUD's plan to allocate $11.5 billion in 
disaster funding among 5 Gulf Coast States impacted by Hurricanes 
Katrina, Rita, and Wilma. The emergency funding is provided through 
HUD's Community Development Block Grant (CDBG) program to specifically 
assist Louisiana, Mississippi, Florida, Alabama, and Texas in their 
long-term recovery efforts. This along with HUD's Disaster Voucher 
program (DVP), created through a $390 million supplemental 
appropriation in the Department of Defense Appropriations Act of 2006, 
will provide ongoing temporary rental assistance for people displaced 
by Hurricanes Katrina and Rita who at the time lived in public housing, 
had a voucher, or who were homeless. KDHAP rental assistance, funded by 
FEMA and operated by HUD.
    While transitioning so many displaced households into temporary 
housing has been--and will continue to be--a challenge, FEMA and its 
partners at every level of government and within the private sector are 
committed to work together to find timely and equitable solutions.
    Our voluntary partners are an invaluable part of meeting the 
challenge of housing applicants. One example of the critical role of 
the voluntary agency community is our continued partnership with the 
National Voluntary Organizations Active in Disaster (NVOAD) and our 
work with one of their member agencies: UMCOR--the United Methodist 
Committee on Relief. UMCOR, through a $66 million dollar grant provided 
from international donations, is helping FEMA and the States identify 
and provide intensive case management assistance to those evacuees 
facing the toughest of circumstances in re-establishing their lives and 
livelihoods, including those evacuees who are not eligible for FEMA 
financial assistance or have exhausted that assistance. As our casework 
partner, UMCOR is helping such families find housing, find jobs, and 
learn to handle their finances, as well as cope with the many 
challenges of integrating into a new--or devastated--community. To 
accomplish this mission, UMCOR is fielding 600 case managers, as well 
as leveraging 2,400 volunteer case managers, to provide comprehensive 
assistance to over 100,000 households in need.
    Recognizing the immense scale and complexity of the long-term 
recovery challenges and considerations facing the Gulf Coast, the 
President established the Office of the Federal Coordinator for Gulf 
Coast Rebuilding, and appointed Chairman Powell to lead that 
organization's efforts. To help ensure that the Department of Homeland 
Security and FEMA are coordinating fully with Chairman Powell, and that 
maximum collaboration takes place between, FEMA recently appointed Mr. 
Gil Jamieson as the Deputy FEMA Director for Gulf Coast recovery. In 
this role, Mr. Jamieson will oversee FEMA recovery operations across 
the Gulf States, and will be coordinating closely, and routinely, with 
Chairman Powell and his staff.
    In summary, as of early February, FEMA has spent over $6.1 billion 
on assistance for over 1.4 million disaster victims. As this difficult 
recovery phase continues, so too does our relentless commitment to the 
victims of these disasters, and to the States and cities who are 
helping to house and care for them. At the same time, we continue to 
seek alternative housing solutions in the impacted areas, to afford as 
many displaced victims as possible the opportunity to return home, as 
quickly as possible.
    We all realize that this road to recovery will be a long one, and 
fraught with challenges and frustrations along the way. Nevertheless, 
this Agency, this Department, and this Administration remain committed 
to the mission: The successful restoration of a socially and 
economically vibrant Gulf Coast.
    Thank you. I am prepared to answer any questions you may have.

                               ----------
               PREPARED STATEMENT OF MARTIN J. GRUENBERG
         Acting Chairman, Federal Deposit Insurance Corporation
                           February 15, 2006

    Chairman Shelby, Senator Sarbanes, and Members of the Committee, I 
appreciate the opportunity to testify on the efforts of the Federal 
Deposit Insurance Corporation (FDIC) and the other Federal regulatory 
agencies to respond to the impact of last year's devastating hurricanes 
on federally insured financial institutions and their customers in the 
Gulf Coast region.
    In December, I traveled with FDIC staff to New Orleans and 
Mississippi. We met with local financial institutions, the State 
banking commissioners, and local community group leaders. As many have 
observed, it is difficult to appreciate the challenge confronting the 
Gulf Coast region until visiting the area and seeing first hand the 
scale of the damage. It is also impossible to visit the area and 
witness the determination of the local financial institutions and 
community leaders to rebuild their communities without feeling a 
renewed sense of the obligation of the FDIC and the other Federal 
financial institution regulatory agencies (Federal regulatory agencies) 
to do all we can to assist them in that effort.
    My testimony will review the actions taken by the FDIC and the 
other Federal regulatory agencies immediately following the storms to 
maintain confidence in the region's financial institutions, as well as 
interagency actions during the past 6 months to assist institutions and 
individuals affected by the hurricanes. I also will provide the FDIC's 
current assessment of the impact of the hurricanes on the condition of 
the federally insured financial institutions (financial institutions) 
in the region, and discuss outreach efforts planned in the near-term.
    At the outset, I want to point out that much of the work of the 
FDIC that I will describe today took place under former FDIC Chairman 
Donald Powell. He deserves great credit for his leadership of the FDIC, 
as well as for his current leadership as Federal Coordinator of Gulf 
Coast recovery efforts.
Federal Regulatory Agency Actions Following the Storm
    When Hurricanes Katrina and Rita hit the Gulf Coast, they impacted 
the operations of at least 280 financial institutions, with 120 of 
these institutions headquartered in the 49 counties and parishes in 
Alabama, Louisiana, and Mississippi designated by the Federal Emergency 
Management Agency (FEMA) as eligible for individual and public 
assistance. Similar to other sectors of the Gulf Coast economy, 
financial institution facilities were destroyed, communication and data 
processing capabilities were disrupted, and financial institution 
employees saw their homes destroyed or inundated with flood waters.
    In the aftermath of the storms, the FDIC along with the other State 
and Federal regulatory agencies \1\ were committed to doing everything 
possible to preserve public confidence in the financial system and 
restore essential financial services. The agencies immediately began 
working with financial institutions to help them resume operations and 
with customers to communicate accurate information about their 
institutions and how they could get needed cash. The agencies' 
communication initiatives included contacting financial institutions, 
connecting customers to their institutions and coordinating supervisory 
oversight programs. To facilitate communication, the FDIC and the other 
Federal regulatory agencies issued a number of press releases related 
to the Gulf Coast hurricane recovery. A list of these press releases is 
attached as Appendix A.*
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    \1\ Federal regulatory agencies included the Board of Governors of 
the Federal Reserve System, Office of the Comptroller of the Currency, 
Office of Thrift Supervision and National Credit Union Administration. 
State regulatory agencies include supervisory authorities in Alabama, 
Louisiana, and Mississippi, as well as the Conference of State Bank 
Supervisors.
    * Held in Committee files.
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    One of the first steps the FDIC took following Katrina's landfall 
was to create an internal FDIC Hurricane Task Force (Task Force) to 
coordinate the efforts of the units of the Corporation around the 
country and ensure prompt sharing of accurate information among staff, 
other regulators and consumers. The Task Force oversaw efforts to 
identify insured institutions experiencing service interruptions and 
assist those institutions to resume operations. The FDIC and other 
regulatory agencies immediately contacted management officials from the 
affected institutions to assess their operational status. The agencies 
quickly determined that some institutions were finding it difficult to 
operate branch offices and process electronic transactions, including 
automated teller machine (ATM) transactions. Fortunately, due to 
disaster preparedness procedures that all insured institutions are 
required to have in place, most institutions resumed operations within 
hours or a few days, using facilities that were not severely damaged, 
establishing temporary locations, or sharing facilities and even 
employees in order to provide services to areas where facilities were 
heavily damaged. For example, one institution shared a branch in the 
Jefferson Parish of New Orleans with five competitors to minimize 
disruptions to local customers.
    The FDIC also worked to connect customers with their financial 
institutions while at the same time maintain public confidence in the 
financial industry. We immediately established a 24-hour consumer 
hotline to answer questions about contacting financial institutions, 
including questions about accessing accounts, replacing lost records, 
obtaining replacement ATM cards, and processing direct deposit 
payments. The FDIC also updated its website with information about 
financial institutions operating in the affected areas along with 
customer service and branch contact information. The FDIC consistently 
emphasized that deposit insurance remained in force, financial 
institution customers' money was safe, cash was available, and 
consumers should be vigilant about the potential for theft and scams.
    From the outset, the Federal regulatory agencies recognized that we 
were dealing with extraordinary circumstances that required flexibility 
in the application of financial institution rules and regulations. 
Immediately after Katrina made landfall, the agencies urged financial 
institutions to be flexible with borrowers and others experiencing 
disruptions due to the storm. This was followed by a series of 
advisories providing guidance and information to financial institutions 
and their customers. During the past 6 months, the Federal regulatory 
agencies have encouraged financial institutions to work with borrowers 
by deferring loan payments, extending repayment terms, restructuring 
existing loans, easing terms for new loans (including the ability to 
skip some payments), and providing short-term loans for living expenses 
until insurance proceeds are received. The agencies sponsored several 
public service announcements encouraging individuals affected by the 
storms to contact their lenders. Only through keeping the lines of 
communication open will financial institutions determine how they can 
help individuals recover from this natural disaster without impairing 
the individuals' credit ratings or weakening the financial viability of 
the institutions. A list of all FDIC Financial Institution Letters 
providing advisory guidance regarding the Gulf Coast hurricanes is 
attached as Appendix B.*
---------------------------------------------------------------------------
    * Held in Committee files.
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    In addition, on September 19, 2005, the Federal Financial 
Institutions Examination Council (FFIEC) formed the Katrina Working 
Group (Working Group). Made up of senior supervisory staff from all 
FFIEC member agencies \2\ and the Mississippi Banking Commissioner,\3\ 
the Working Group continues to address supervisory policy issues 
emerging from the disaster. The Working Group established a frequently 
asked questions board on the FFIEC website and directed the publication 
of examiner guidance to ensure consistent treatment of affected 
institutions, regardless of charter. The Working Group continues to 
meet with key financial institution organizations and consumer groups 
to strengthen communication among all affected parties. This group also 
is identifying and assessing the flexibilities available to the FDIC 
and other Federal regulatory agencies to assist financial institutions 
affected by the disaster. Where possible, the Federal regulatory 
agencies have modified regulatory requirements and procedures to 
facilitate the recovery of institutions affected by the storms. For 
example, the agencies simplified several application and filing 
requirements including branch closings and relocations.
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    \2\ Board of Governors of the Federal Reserve Board, Comptroller of 
the Currency, FDIC, National Credit Union Administration, and Office of 
the Thrift Supervision.
    \3\ The Mississippi Commissioner is representing the FFIEC's State 
Liaison Committee.
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Impact of the Hurricanes on Financial Institutions
    The economic toll of Hurricanes Katrina and Rita is unprecedented 
in U.S. history and the recovery will take an extended time. Much of 
the damage was caused by flood or storm surge, and the greatest 
economic losses are centered in Louisiana and Mississippi.
    Historically, no financial institutions are known to have failed as 
a result of past natural disasters. In fact, community financial 
institutions traditionally have played a critical role serving the 
areas most severely affected by the hurricanes. However, due to the 
scale of destruction left by these storms, it remains difficult to 
determine the applicability of experiences from previous disasters to 
the current situation.
    The 120 insured institutions headquartered in the 49 designated 
disaster counties and parishes are relatively small community financial 
institutions. According to financial data for these institutions, about 
three-fourths of them hold less than $250 million in assets, and only 
five have assets greater than $1 billion. Eighty seven of these 120 
institutions obtain 100 percent of their deposits within the disaster 
counties, and only 5 receive more than half their deposits outside the 
area. These institutions have a long history of lending in their local 
communities and are heavily invested in local real estate with 
residential and commercial real estate loans representing more than 60 
percent of their combined loan portfolios. As a result, not only does 
the local population rely heavily on these institutions, but the 
prospects of these 120 institutions, 94 located in Louisiana, 17 in 
Mississippi, and 9 in Alabama, are closely linked to the health and 
vitality of the local economies.\4\
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    \4\ For further information, see the Winter 2005 issue of FDIC 
Outlook, ``In Focus This Quarter: A Preliminary Assessment of the 
Effects of Recent Hurricanes on FDIC-Insured Institutions,'' and in 
particular ``Financial Characteristics of Banks Affected by Katrina.''
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    Although most of these 120 institutions were financially strong 
before the hurricanes, financial results to date do not yet provide a 
clear picture of the full effects of the storms since many of the 
institutions in the area continue to extend loan deferrals and are 
still communicating with customers to develop long-term rebuilding 
plans. Nevertheless, recent financial results provide some indications 
of how the institutions may be reacting and adjusting to the effects of 
the hurricanes. Post-hurricane data reveal that a number of 
institutions operating in areas hit hard by Katrina are moving fairly 
aggressively to build loan loss allowances and experienced a pick-up in 
charge-off rates. Consistent with this, 20 institutions reported net 
operating losses for the fourth quarter. Despite these losses, all 
institutions remained ``well-capitalized'' or ``adequately 
capitalized,'' reflecting the strong capital positions of most 
institutions prior to the hurricanes. Liquidity for most of the 
institutions also remains strong.
    Looking ahead, there is considerable uncertainty regarding the 
prospects for the financial institutions that are most directly 
affected by the hurricanes. Over the medium-term horizon, the greatest 
source of uncertainty and concern is the effect of the hurricanes on 
credit quality. Over the longer-term horizon, the prospects for these 
financial institutions will be determined largely by the economic 
prospects of the communities they serve.
    With respect to credit quality, the outlook for each institution 
will depend on a variety of currently unknown factors, including 
reimbursement amounts and timing of insurance proceeds, borrowers' 
repayment capability, collateral protection, and the availability of 
financial assistance programs. The FDIC is utilizing both supervisory 
outreach and data analysis to assess the extent to which insured 
institutions in the region may experience medium- to long-term credit 
quality and profitability issues.
    Our supervisory outreach started immediately after Hurricane 
Katrina. The FDIC and other agencies contacted all 120 insured 
institutions previously mentioned. Among the subjects we discussed with 
the institutions' management were the degree to which there was a 
significant decline in population in the institutions' trade area; 
notable personnel shortages caused by employee relocations; extensive 
commercial or residential lending activities within designated disaster 
areas; and substantial structural or contamination damage to financial 
institution facilities. This helped us gain some basic information to 
identify which financial institutions should receive the most 
supervisory attention.
    During December 2005, examiners from the FDIC and the other 
agencies visited many of these insured institutions. At these meetings, 
the agencies asked bank management more detailed questions related to 
the degree to which borrowers in the affected area had been contacted, 
to what extent they were covered by insurance, and to what extent they 
knew if their customers were capable of repaying their loans. Beginning 
in January, the agencies resumed their comprehensive examination 
programs that were suspended at the time of the storms.
    In addition to this type of supervisory analysis, the FDIC is 
conducting off-site research utilizing mapping tools and data from a 
variety of sources to provide us with additional information. This 
analysis involves using data from FEMA on damage assessments and flood 
insurance coverage, along with data on financial institution loan 
levels and deposits. We are working with other government entities and 
organizations to research sources of information that will help 
identify institutions with significant loan exposures in areas of the 
Gulf Coast most severely damaged by the hurricanes. We then use off-
site stress testing tools to determine how vulnerable these 
institutions may be to medium- to longer-term credit weakness under 
various scenarios. Our analysis is ongoing, and we plan to share the 
analysis with the insured institutions.
    As a result of these efforts we have narrowed our focus from the 
initial group of 120 institutions to a small group of institutions, 
which we will continue to monitor the most closely. As suggested 
earlier, the prospects for the financial institutions most affected 
will depend in large measure on the efforts underway to rebuild and 
revitalize the communities these institutions serve.
Next Steps
    In addition to their regular supervisory activities, the Federal 
regulatory agencies are hosting a forum in New Orleans on March 2 and 
3. The Future of Banking on the Gulf Coast: Helping Banks and Thrifts 
to Rebuild Communities will focus on short- and long-term challenges 
facing banks and thrifts operating in areas affected by hurricanes and 
ways to help these institutions rebuild their communities. The agencies 
are inviting to this forum executives from all the community financial 
institutions in the region, the larger regional financial institutions, 
as well as a number of large institutions from around the country with 
operations that are national in scope. State banking supervisors and 
other Federal Government agencies will also participate in the forum.
    The forum will promote an exchange among Gulf Coast community 
financial institutions, national and regional institutions, and Federal 
agencies involved in the 
rebuilding effort. Executives from community financial institutions 
will have an opportunity to discuss their experiences, the challenges 
they face, and the ways that banking and governmental organizations can 
collaborate to address these challenges. Executive officers of larger 
financial institutions from across the region and the country will 
discuss ways they may be able to help local financial institutions meet 
the needs of consumers and businesses. Possible support that large 
institutions may be able to provide community institutions include 
operational assistance such as accounting or computer programming, loan 
participations and purchases, and noncontrolling capital investments. 
They will have the opportunity to explore with the community financial 
institutions potential partnerships to revitalize and stabilize damaged 
communities through the financing of housing and business development, 
infrastructure improvements, and community services.
    To ensure that these initiatives continue, one outcome of the forum 
will be to establish a task force or working group comprised of 
representatives of local community financial institutions and larger 
regional and national financial institutions to facilitate ongoing 
working partnerships.
Conclusion
    Since the hurricanes first struck the Gulf Coast area last summer, 
the resiliency of the local community financial institutions most 
impacted by the storms has been impressive. The Federal regulatory 
agencies are fully engaged with financial institutions in the region to 
ensure that the adverse impact on the industry and their customers is 
minimized to the extent possible. However, additional challenges for 
community financial institutions in the disaster area may lie ahead. 
Given the many uncertainties at this time, it is too early to determine 
what impact the disaster will have on the long-term condition of these 
institutions. We will continue to monitor closely the condition of the 
affected financial institutions and will work closely with their 
management so that we can appropriately address the challenges that 
will likely arise in the future as this region recovers.

                               ----------
                 PREPARED STATEMENT OF HERBERT MITCHELL
         Associate Administrator, Office of Disaster Assistance
                     Small Business Administration
                           February 15, 2006

    Good Morning Chairman Shelby, Ranking Member Sarbanes and 
distinguished Members of this Committee. Thank you for inviting me to 
discuss the continuing efforts of the Small Business Administration's 
Office of Disaster Assistance to provide relief to the victims of 
Hurricane Katrina. My name is Herb Mitchell, I am the Associate 
Administrator for Disaster Assistance at the SBA.
    The SBA Disaster Assistance Program, administered by the Office of 
Disaster Assistance, is the primary federally funded, disaster-
assistance loan program for funding long-term recovery for renters, 
homeowners, and nonagricultural businesses.
    Hurricanes Katrina and Rita unleashed an unprecedented tragedy on 
the Gulf Coast, demanding an unprecedented response from the Federal 
Government, including the SBA. The numbers are staggering. In just the 
first 70 days after Katrina hit, SBA received over 220,000 disaster 
loan applications; and as of this week, the SBA has received over 
375,000 applications, from victims in the Gulf Coast.
    To put this in perspective--after the four hurricanes in 2004, SBA 
received a total of 202,000 applications. That number is approximately 
one-half of what we ultimately expect to receive as a result of 
Hurricane Katrina.
    The disaster affected an area of more than 90,000 square miles and 
five States; we have mailed out millions of applications to home and 
business owners in the Gulf Coast. Previously, the largest disaster SBA 
has dealt with, the Northridge Earthquake, where 250,000 applications 
were received over an 18 month period. That is a huge number and we 
have easily surpassed that in this disaster. We very well may double 
that number as we continue to receive new applications every day.
    To date, of the total applications received, nearly 90 percent are 
from homeowners. The remainder of applications are from businesses of 
all sizes in the Gulf Area. This is a monumental change from previous 
disasters. Typically, we see 3 in 4 applications being placed by 
homeowners, but during this disaster that number has increased 
dramatically to 8 in 9.
    Despite the massive disaster and unprecedented volume of 
applications, the SBA has responded. In 88 days, the SBA approved its 
first billion dollars in disaster loans; since then it took the SBA 
only 28 days to approve the second billion dollars, and just 17 days to 
approve the third billion dollars. And as of today we have approved 
over $4.3 billion dollars in disaster loans to over 60,000 homeowners, 
renters, and businesses along the Gulf Coast. I credit this incredible 
volume of loans being approved with the increased manpower, efficiency, 
and capacity building of our processing systems, and the ability to now 
reach parts of the region that were previously inaccessible.
    We have gone from 880 to over 4,000 employees. Our approval systems 
and processes have been ramped up to accommodate the extremely large 
volume of loan applications.
    Due to the improvements in loan processing capabilities, the SBA is 
prepared to handle the next disaster. Prior to Hurricane Katrina, the 
SBA used Northridge Earthquake as the worst-case-scenario in which to 
base its models to prepare for future disasters. The disaster and 
response triggered by Hurricane Katrina will replace the Northridge 
earthquake as the basis for future preparations.
    Chairman Shelby, I appreciate the opportunity to testify before you 
today. I look forward to answering any questions that you or your 
fellow Committee Members might have.

General Comment about the Data Used to Respond to Questions by 
                      Alphonso R. Jackson

    As you know, many of the questions from the Committee 
relate to the extent of damage to assisted housing units and 
HUD's estimated demand for disaster voucher program (DVP) 
assistance as a result of Hurricanes Katrina and Rita.
    To place the answers into context, we want to make clear 
that several different sources of data are used to answer the 
questions and the differences in the data sources will explain 
differences in unit counts. The data sources are:

(1) FEMA Individual Assistance registrant information, 
    including unit inspection data, matched to the Social 
    Security Numbers of tenants of assisted housing (Vouchers, 
    Public Housing, Project-Based Section 8, Section 236, 
    Section 202, Section 811). These data allow for a direct 
    comparison of damage to occupied housing units across all 
    of HUD's programs. These data are also comparable to 
    previously released data on the extent of damage to all 
    housing units affected by the disaster 
    (http://www.dhs.gov/interweb/assetlibrary/
    GulfCoast_HousingDamageEstimates_02l206.pdf).
  The FEMA data are useful for measuring likely demand relative 
    to current take-up for the DVP program and an overall 
    discussion of how the disasters affect the affordable 
    housing stock overall, including units occupied by voucher 
    households.
  They are not as useful for determining the exact impact of 
    the storms on public and assisted housing units because (1) 
    they only reflect occupied units and (2) they lump units 
    into only three broad categories of minor, major, and 
    severe damage. More detailed and comprehensive inspections 
    are required to assess the full extent of damage incurred 
    by individual public and assisted housing developments.
(2) Housing Authority of New Orleans (HANO) direct inspections 
    and cost estimates. HANO was the largest housing authority 
    to be substantially affected by Hurricane Katrina. At the 
    time Katrina struck, only 5,167 of the 7,100 HANO public 
    housing units were occupied. The FEMA data above only 
    report on occupied units. HUD's direct inspection reflects 
    development-level inspections for all 7,100 units plus a 
    substantial number of units under development at the time 
    of the storm. The data on extent and type of damage to each 
    development includes the estimated cost to repair.*
---------------------------------------------------------------------------
    *Held in Committee files.
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(3) Other affected PHA's in Mississippi and Louisiana. HUD 
    conducted phone surveys of all housing authorities in the 
    affected areas to determine the extent of damage. Housing 
    authorities provided preliminary assessments of their 
    damage based on either visual inspections or more thorough 
    inspections. Specific estimates from insurance adjusters 
    and contractor bids are just now being developed and are 
    not available yet for this analysis.
(4) Privately Owned Multifamily Insured and Assisted Housing 
    Units. After Hurricanes Katrina and Rita struck, the 
    Department immediately initiated its damage assessment 
    protocol and process for all HUD-assisted properties 
    (including the senior and disabled housing) in the affected 
    areas. The process included initial telephone assessments 
    (both of the physical plant as well as the status of the 
    residents) within the first week of the disaster, followed 
    by physical site visits to the properties receiving 
    moderate to severe damage and subsequent individual 
    meetings with each owner to discuss the repairs, 
    rehabilitation, or rebuilding of the property. The 
    Department has completed all site visits and has commenced 
    meetings with the property owners. As with the public 
    housing assessments, these estimates are based on damage to 
    the developments in total and do not categorize individual 
    units in the development as having minor, major, or severe 
    damage.

       RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 
                    FROM ALPHONSO R. JACKSON

Q.1. It was mentioned that 10,000 public housing units were 
destroyed and 3,000 needed substantial repair, but how many 
public housing units have mold and water damage?

A.1. See response to question 1 of Senator Reed concerning the 
assessment of damage to public housing, including conditions 
related to mold and water damage.

Q.2. Please make available the plan for rebuilding the public 
housing units.

A.2. See response to question 2 of Senator Reed concerning the 
plan for rebuilding public housing units.

       RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES 
                    FROM ALPHONSO R. JACKSON

Q.1.a. HUD initially estimated that 65,000 families would be 
eligible for the Katrina Disaster Housing Assistance Program 
(KDHAP), based on the number of families who were in HUD-
assisted housing prior to Hurricane Katrina. At the hearing we 
held on February 15, 2006, you indicated that somewhere between 
24,000 and 32,000 families were eligible for KDHAP assistance.
    How many families in the affected areas were in HUD-
assisted housing or had HUD assistance prior to Hurricane 
Katrina? Please provide the numbers by program.

A.1.a. HUD has been making data available to the Committee on 
likely demand for KDHAP/DVP assistance based on the best 
available information at the time. Immediately after the 
Hurricane Katrina struck, HUD lacked information on individual 
household needs. As such, HUD's initial estimate of 103,000 
affected assisted households was based on the number of HUD-
assisted households in the counties within the FEMA designated 
areas for individual assistance. Not every assisted household 
in those counties were actually affected or displaced by the 
disaster.
    When HUD was able to match its records on household 
receiving assistance to the total number of FEMA registrant 
households, it resulted in a more refined estimate of 65,000 
eligible families. At the time, the registrant data did not 
have information on the extent of unit damage for individual 
households.
    As of February 12, FEMA had conducted housing unit 
inspections for most registrant households. In addition, DVP 
funds will be made available to assist predisaster voucher 
families that have returned to the most heavily impacted areas 
of Louisiana and Mississippi, thereby freeing-up voucher 
funding for combination with public housing funding, pursuant 
to the Section 901 of the Department of Defense Appropriations 
Act 2006. HUD's current low-end assessment of demand for the 
DVP, by assisted housing program is based on the following:



    As PHA's are permitted to substitute DVP assistance for 
regular voucher assistance to facilitate reconstruction of 
their public housing, the number of eligible recipients will 
increase, possibly to as many as 32,000 units.
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    \1\ HUD assumes that households that registered and had minor or no 
damage and have not yet applied for KDHAP assistance have returned to 
their unit. Analysis of the FEMA registrant data tends to confirm this. 
Most households in housing units with primarily minor damage have the 
same ``current address'' as ``damaged address.'' For those with minor 
damage and a different current address, we assume they have returned 
home as well and have had no reason to contact FEMA that would result 
in their current address being updated.

Q.1.b. HUD staff have indicated that just over 15,000 families 
are receiving KDHAP/DVP assistance, and less than 8,000 have 
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leased apartments. Is this correct?

A.1.b. This number changes daily. As of March 8, 17,260 
families had been referred to PHA's for admission. Just 10 days 
later, as of March 18, 2006, approximately 20,600 families had 
been referred to PHA's for admission to the DVP, and more than 
12,350 of those families had leased units.

Q.1.c. Has HUD cross-referenced its list of families who were 
receiving HUD assistance prior to Katrina with FEMA's database 
of registered families to ensure that they are all receiving 
some form of housing assistance? If not, how does HUD know that 
all families are in stable housing situations? If HUD has 
cross-referenced HUD data and FEMA data, please provide 
information on how many formerly HUD-assisted households are 
being assisted by FEMA, and how many were not found in FEMA's 
database.

A.1.c. Yes, HUD did match FEMA-registered families against the 
HUD databases for assisted families, rent roll data, and other 
information sources to verify that the families received HUD 
assistance prior to Hurricane Katrina. That matching allows us 
to determine, as shown on the table for question 1a, that as of 
March 8, nearly 9,400 households were likely eligible for 
KDHAP/DVP assistance and have not yet been referred. It should 
be noted that some households may not have registered with FEMA 
while others may not have had their unit inspected by FEMA. In 
those cases, HUD's 9,400 estimate on unmet demand would likely 
be low.
    HUD interpretation of FEMA rental assistance data is that 
among those that have registered and have a unit inspection 
showing damage that is major or severe, 40 percent appear to 
have received FEMA rental assistance since November 2005. HUD 
continues to do outreach to locate other households who are 
eligible. In just 10 days between March 8 and March 18, more 
than 3,000 additional households were referred to PHA's for 
admission to DVP.

Q.2. Please provide for each public housing development in New 
Orleans, the most up-to-date estimate of damage, and when HUD 
or housing authority staff began, or will begin, clean-up and 
recovery. How much money is available to pay for the necessary 
repairs for each: Public housing capital, operating and Section 
8 funds?

A.2. Estimate of Damage. The estimated cost to repair the 
damage to each of HAND's public housing developments are as 
follows:


    More detailed descriptions on development damage can be 
found in Attachment 1: Housing Authority of New Orleans (HANO) 
Modernization, Development, and Maintenance Status Report.*
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    *Held in Committee files.
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    Clean up and Recovery. Clean up and recovery efforts for 
HANO have begun. While this will be a long, tenuous process, 
the following highlights some recovery efforts.

 Initial Assessments are complete. HANO has completed 
    the initial assessment of each HANO property. Families are 
    returning to the Guste, Fischer, and St. Thomas 
    communities.
 Procurement process to obtain vendors is underway at 
    BW Cooper. HANO staff and contractors are preparing a 
    statement of work and bids proposals for a quadrant of BW 
    Cooper.
 Initial damage assessment and cost estimates for 
    repair of units are complete for St. Bernard, Lafitte, and 
    Desire. HANO staff have drafted preliminary damage 
    assessments and cost estimates.
 Efforts in progress to reoccupy units at Iberville. 
    The HANO modernization staff is making advancement in 
    preparing units for reoccupancy. Currently,

     387 units cleaned and repaired, and
     384 units currently under contract for cleaning or 
        unit restoration.

 Work requests are prepared for CJ Peete. HANO staff 
    and contractors have prepared work orders to mitigate 
    damages at CJ Peete. HANO staff is poised to mobilize and 
    complete repairs to units.

    Available Funds for Repairs. Finally, HANO has $45,8096,613 
in public housing capital funds and $6,538,210 in public 
housing operating funds for use in repairing pubic housing. 
HANO's voucher renewal funding for calendar year 2006 is 
$67,588,571.

Q.3. Please provide details on what HUD is doing to assess 
damage to senior and disabled housing developments, and what 
actions HUD is taking to ensure these populations have housing 
to return to in the affected areas.

A.3. HUD is working with affected housing authorities and 
private owners to assess the damage to all of the assisted 
developments, including those serving senior and disabled 
residents. The introduction to these questions discusses the 
different approaches HUD is using to assess damage.
    For privately owned multifamily assisted developments, the 
Department has encouraged owners to maintain contact with their 
residents (especially with the senior and disabled). Based on 
our meetings with the owners held to date, the owners are aware 
of the locations of the senior and disabled residents as many 
were relocated by the owners to other projects or are living 
with relatives.
    The Department conducted a group meeting with owners and 
managers of damaged properties on January 27 in New Orleans. 
Owners learned about loans, grants, and other programs 
available to assist in their rebuilding from HUD, SBA, FEMA, 
and State agencies. The Department anticipates conducting more 
meetings of this nature in the future and continues to meet 
with the property owners to determine next steps in repairing, 
rehabilitating, or rebuilding the projects.
    The goal is to preserve these affordable housing units to 
the greatest extent possible. The Department has encouraged the 
lenders to provide the flexibility and give forbearance on 
mortgage payments. For HUD-held projects, the Department is 
providing the necessary flexibility, approving mortgage 
forbearances and a moratorium on foreclosures when necessary to 
ensure the owners have the time to develop a plan and procure 
the required financing to complete the work. The Department 
also has been encouraging and working with the State agencies 
to provide funding to multifamily rental projects that are in 
need of repair or rehabilitation. The residents have a right of 
first refusal to return to the project. In meetings with the 
owners of the senior and disabled housing to discuss the next 
steps to address the physical needs of the project, the 
Department is also addressing the status of the necessary 
supportive services that are provided through the community 
(hospitals, pharmacies, availability of personnel, etc.) to 
ensure that those services will be available when the project 
is ready for occupancy.

Q.4. Many HUD grants are based on population and need in the 
community. I am concerned that funding in the affected areas 
will be reduced as a result of population loss at the very time 
that many residents are trying to return to their homes and 
communities. What is HUD doing to ensure that funding for 
hurricane impacted areas does not decrease?

A.4. HUD does look at the ``need in the community,'' and will 
use all available resources to support the redevelopment plans 
of the Gulf Coast communities. While population changes need to 
be considered, the HUD is focused on restoring the housing 
resources that existed prior to the hurricane, allowing 
families to return.

Q.5. Please provide the most recent data on FHA-insured 
multifamily housing. How many units existed in LA and MS, how 
much damage was sustained, and what is the estimated cost of 
clean-up and repair? Please provide the same information for 
Section 8 developments.

A.5. Prior to Hurricanes Katrina and Rita, Louisiana had 407 
properties with either multifamily mortgage insurance, project-
based assistance, or both. Those properties had 35,943 units. 
Mississippi had 422 properties with 31,024 units.
    As noted above, the Department made an initial 
determination of developments with minor, moderate, or severe 
damage by surveying property owners over the telephone. On-site 
visits were then made to all of the developments with severe 
damage and some of the developments with moderate damage. Those 
on-site visits allowed for developing estimates of total cost 
to repair for the developments with severe damage.
    The table below shows the result of the telephone survey 
and cost to repair information for properties with FHA 
insurance and properties with assisted units. Since there is 
overlap between these sets of properties, the table also 
provides a total properties count. These inspection data 
currently do not indicate what proportion of the units in a 
property that received damage. However, by dividing the 
estimated cost to repair by the total units in a property, it 
can provide some information on the extent of damage. The per 
unit cost of repair for Louisiana severely damaged developments 
is more than three times that of Mississippi severely damaged 
properties.
    To date, the Department's focus has been on the properties 
with severe damage and dealing with the owners to rebuild the 
projects as soon as possible.


Q.6. I have heard reports that in Katrina affected areas, 
decreased housing supply and other factors have resulted in 
increased rents. Has HUD analyzed this and made changes to its 
Fair Market Rents? If so, please provide us with details on 
when FMR's were changed, for what areas, etc. If not, please 
explain why no analysis and/or change in FMR's has occurred and 
whether HUD will do such a review of current rents.

A.6. Both the Baton Rouge and New Orleans rental housing 
markets experienced enormous impacts from Hurricanes Katrina 
and Rita. In New Orleans, the impacts were a combination of 
damage that made over half of the inventory uninhabitable and a 
massive increase in demand for the remaining units. The Baton 
Rouge rental inventory also had some damage, but the influx of 
New Orleans evacuees had a far greater impact and virtually 
eliminated vacancies.
    Surveys of both rental markets show effectively no 
vacancies. Operating and repair costs have increased and 
insurance costs, which were already very high, are expected to 
further increase this year. Apartment complex survey data 
indicate that rents have increased 25-30 percent in New Orleans 
and 15-20 percent in Baton Rouge. These results are supported 
by extensive field work by HUD economists who have been 
researching local market conditions. In a Federal Register 
Notice published March 6, 2006, HUD increased Baton Rouge FMR's 
by 25 percent and New Orleans FMR's by 35 percent. The FMR 
increases provided are believed adequate to reflect current 
market circumstances and should cover at least part of the 
expected additional increases anticipated this year. The 
Department will continue to monitor this situation and modify 
FMR's if significant further rent increases occur. The 
increased FMR's for Baton Rouge and New Orleans are displayed 
below:


    HUD is currently conducting rent surveys in Beaumont-Port 
Arthur, Dallas, Jackson, Houston, Little Rock, San Antonio and 
Shreveport, all of which are housing significant numbers of 
Katrina evacuees. The objective is to determine if disaster 
evacuees have reduced pre-Katrina vacancies enough to result in 
measurable rent increases. FMR increases will be issued if 
justified by the survey results for any of these areas.

         RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED 
                    FROM ALPHONSO R. JACKSON

Q.1. How many public housing and privately owned multifamily 
assisted units were damaged, and of these, how many received 
major or severe damage? How many were destroyed? How many units 
are currently occupied? (In your answer, please provide 
separate data for the public housing stock and the privately 
owned stock.)

A.1. Using data from surveys of public housing authorities, 
23,206 units sustained damage. Housing authorities report 716 
units were destroyed. In the properties sustaining damage, 
12,249 of the units were occupied as of March 10, 2006. It 
should be noted that the term ``damaged'' has varied meaning, 
ranging from minor damage (missing shingles, broken windows) to 
severe damage (uninhabitable, complete gutting of unit needed). 
Unit assessments of damaged/destroyed units in the Katrina-
impacted areas are continuing and the numbers reported to date 
will change.
    Using the data from a telephone survey of multifamily 
property owners and on-site inspections of the developments 
with severe damage, 7,487 units were in properties with modest 
damage and 14,349 units were in properties with major/severe 
damage or destroyed. Owners report 9,019 residents are 
relocated as a result of damage.

Q.2. What is HUD's step-by-step plan to rebuild the public 
housing and multifamily assisted housing stock in the 
hurricane-affected areas (in your answer, please separate plans 
for public versus private housing stock)? What is your timeline 
for doing so? What steps will you take to avoid geographic 
isolation and concentration of low-income households? Do you 
anticipate changes in the number of units in this stock 
compared to the pre-hurricane stock? If so, what types of units 
will be increased or decreased in number? To what extent are 
you coordinating with other agencies with regard to 
environmental and infrastructure rebuilding?

A.2. Public Housing: Plans to rebuild pubic housing are locally 
driven. PHA's will evaluate damage and make a determination on 
the viability of the damaged units. PHA's are also filing 
claims with their insurance carriers. Insurance reimbursements 
will be the primary source of funding for repairs and 
replacement of public housing damaged by Hurricane Katrina. To 
assist the PHA's in their recovery efforts, the Department has 
taken the following steps.
    Awarded $29.7 million from the Capital Fund Reserve for 
Emergencies and Natural Disasters to PHA's in the Gulf Coast 
region during fiscal year 2005. These awards exhausted the 
fiscal year 2005 Capital Fund Reserve and were made to PHA's in 
the Gulf Region within several weeks of the disasters. As 
mandated by Congress, HUD may only provide funding for 
emergencies and natural disasters if there are appropriated 
funds available from the Federal fiscal year in which the event 
occurred. Currently, no other Capital Fund disaster assistance 
is available for PHA's affected by Hurricane Katrina.
    Provided technical assistance to PHA's in the impacted 
area. HUD and contractor staff are working with housing 
agencies to conduct physical needs assessments, complete 
insurance applications, procure services to repair units, and 
submit applications for various public and private resources.
    Will permit combining voucher funding with public housing 
funding. HUD will soon authorize certain PHA's in the most 
heavily 
impacted areas of Louisiana and Mississippi to combine voucher 
funding and public housing for calendar year 2006 funding to 
assist families who were receiving housing assistance under the 
United States Housing Act of 1937 immediately prior to 
Hurricane Katrina or Rita and were displaced from their housing 
by Hurricanes Katrina or Rita. This combining of funds was 
authorized by Section 901 of the Department of Defense 
Appropriations Act 2006, (Public Law No. 109-148).
    Multifamily Assisted: For the multifamily assisted housing 
stock, the Department immediately initiated its damage 
assessment protocol and process for all HUD-assisted properties 
(including the senior and disabled housing) in the affected 
areas. The process includes initial telephone assessments (both 
of the physical plant as well as the status of the residents) 
within the first week of the disaster, followed by physical 
site visits to the properties receiving moderate to severe 
damage and subsequent individual meetings with each owner to 
discuss the repairs, rehabilitation, or rebuilding of the 
property. The Department has completed all site visits and has 
commenced meetings with the property owners.
    The Department continues to meet with the property owners 
to determine next steps in repairing, rehabilitation, or 
rebuilding the projects. In addition, the Department conducted 
a group meeting with owners and managers of damaged properties 
on January 27 in New Orleans. Owners learned about loans, 
grants, and other programs available to assist in their 
rebuilding from HUD, SBA, FEMA, and State agencies. The 
Department anticipates conducting more meetings of this nature 
in the future.
    The owner is responsible for developing a plan that 
includes a work write-up, cost estimate, and identification of 
sources of funds to pay for the work to be completed. HUD is 
requiring that those plans be reviewed and approved by the 
Department.
    There is no definitive time frame for repairing the 
properties. The Department is working with each individual 
owner to develop the plan. The Department's goal is to repair, 
rehabilitate, or rebuild these units as soon as possible but 
owners are experiencing difficulties with insurance companies 
regarding damage assessments and the amount of insurance 
proceeds that is delaying these efforts. We are requesting 
owners develop a secondary plan in the event insurance proceeds 
are not forthcoming in a timely manner.

Q.3. Under Section 504 regulations, at least 5 percent of new 
HUD housing must be accessible to persons with mobility 
disabilities and another 2 percent must be accessible to 
persons with sensory disabilities. However, according to census 
data, many areas in the Gulf region have disability rates of 
over 20 percent. Reports suggest that a large portion of the 
accessible housing stock was destroyed or severely damaged 
during the disaster, making it likely that the accessible, 
affordable housing supply is inadequate to meet demand in the 
region. What steps will HUD take to remedy shortages in 
disabled and elderly housing? What is the timeline for 
implementing these steps? What specific steps will HUD undergo 
to require housing authorities to match persons with 
disabilities and elderly with accessible units consistent with 
individual needs? Will HUD enforce the Section 504 regulations 
in the unfortunate event that housing authorities and local 
jurisdictions in the Gulf region fail to honor their 
obligations in terms of rebuilding accessible housing?

A.3. As housing in the Gulf Coast area is rebuilt following the 
destruction caused by the hurricanes, one of the Department's 
key concerns will be ensuring that such housing is rebuilt in 
accordance with the accessibility requirements of Federal law. 
All ground floor units of multifamily housing in nonelevator 
buildings with four or more units must be built in compliance 
with the accessibility requirements of the Federal Fair Housing 
Act. In elevator buildings with four or more units of 
multifamily housing, all units must meet the Fair Housing Act 
accessibility requirements. Units subject to these 
accessibility requirements, which apply to both public and 
private housing, must be accessible to or adaptable for use by 
individuals with disabilities.
    In addition to the Fair Housing Act requirements, housing 
built with Federal financial assistance and housing built by 
State and local governments must comply with the accessibility 
provisions of Section 504 of the Rehabilitation Act of 1973 
(Section 504) and Title II of the Americans with Disabilities 
Act (ADA). The regulations implementing those two statutes 
require at least 5 percent of the units to be accessible to 
persons with physical disabilities, including people who use 
wheelchairs, and at least 2 percent of the units to be 
accessible to persons with vision and hearing impairments, in 
accordance with the Uniform Federal Accessibility Standards. 
The Department has the authority to require greater percentages 
of units to be accessible to persons with disabilities pursuant 
to 24 CFR Sec. Sec. 8.22(c) and 8.23(c) if census or other 
available data indicate a greater need for accessible housing.
    The Assistant Secretary for Fair Housing and Equal 
Opportunity will be working with the Assistant Secretary for 
Public and Indian Housing and the FHA Commissioner to ensure 
that plans for newly constructed and substantially renovated 
public housing incorporates an appropriate number of accessible 
units given the needs of persons with disabilities in the areas 
served.

Q.4. Last week, HUD issued instructions to public housing 
authorities on how to administer its voucher program for people 
who were homeless prior to Katrina. Since 6 months have elapsed 
since the hurricanes, how does HUD intend to reach those who 
are eligible for assistance, but are now scattered across the 
Nation?

A.4. The Office of Special Needs Assistance Programs (SNAP's) 
used the Continuum of Care planning structure to inform 
homeless service providers and other interested parties of the 
availability of the Katrina Disaster Housing Assistance Program 
(KDHAP) and the Disaster Voucher Program (DVP). CoC's both in 
the affected areas as well as in areas where eligible 
households relocated identified a single agency to act as the 
gatekeeper or central administering agency for KDHAP. These 
agencies used their CoC 
networks to inform all stakeholders of the availability of 
KDHAP and DVP and the respective application processes. SNAP's 
and the Office of Housing Opportunities for Persons with AIDS 
(HOPWA) used listserv postings and direct email contact to 
alert service providers and other stakeholders of enhancements 
and changes to KDHAP and DVP. Additionally, persons calling the 
RCC numbers who were screened as homeless or in HUD special 
needs housing prior to Katrina were transferred to a contractor 
trained to collect additional information from the households 
and submit their information directly to HUD for inclusion in 
the DVP database.

Q.5. How many households in the hurricane-affected areas in 
Louisiana, Mississippi, and Alabama were receiving assistance 
from the following programs prior to Hurricanes Katrina and 
Rita: Section 8 vouchers; Section 8 project-based; Section 202; 
Section 811; Public Housing; and other types of assisted or 
insured units (please specify number of households by program 
type).

A.5. 



Q.6. How many of the households you listed in each category in 
Question 11 were displaced by the hurricanes? What source(s) of 
data are you using to determine your answers to the previous 
questions?

A.6. The number of households displaced changes on a daily 
basis. According to FEMA inspection data, over 41,000 
households receiving HUD assistance had some damage to their 
housing unit. Most of these households, and households with no 
damage at all, were likely displaced at some time prior and 
shortly after the storm. Over time, many households have moved 
back to their units, even if those units had minor damage. 
Households most likely to 
experience long-term displacement are those households in units 
that experienced major or severe damage. These homes require 
substantial repairs just to make them habitable. Matching the 
FEMA inspection data to HUD's data shows approximately 15,199 
previously occupied units in this category. In addition, as 
property owners make repairs to units with minor damage, some 
occupants are likely to be temporarily relocated when work is 
underway. The table below provides FEMA Individual Assistance 
damage inspection data by program.



Q.7. Regarding HUD's interim assistance for those displaced by 
the hurricanes, how many households are receiving assistance 
under the Katrina Disaster Housing Assistance Plan (KDHAP) or 
its successor, the Disaster Voucher Program (DVP)? Of the 
people receiving assistance under DVP (or KDHAP), what type of 
housing 
assistance did they previously receive? Of the people receiving 
assistance under DVP, how many people were homeless? Initial 
statistics suggest that the number of households eligible for 
KDHAP and DVP is substantially greater than the number actually 
receiving them. Eligible households that do not receive 
assistance under these programs may have difficulty 
reestablishing their housing assistance status in the future, 
so it is particularly important that they be identified and 
offered DVP assistance. What steps are you taking to locate 
these households?

A.7. As of March 14, 2006, approximately 8,500 families were 
receiving DVP assistance. The predisaster HUD assistance for 
these families was primarily vouchers (6,450 families), public 
housing (1,200 families), and multifamily housing programs (600 
families). Twenty of the DVP participants were homeless prior 
to the hurricanes. With respect to identifying families 
eligible for the DVP and offering DVP assistance, HUD has 
aggressively tried to locate these individuals through 
postcards, phone calls, and placing key HUD staff in various 
locations and Disaster Resource Centers. We are continually 
trying to update invalid addresses and phone numbers to ensure 
that we have the most current information on the 
affected families for further contact. We are also working with 
specific PHA's in the federally declared disaster areas to 
identify families that have returned home to their predisaster 
assisted housing. HUD' s response to question 1 of Senator 
Sarbanes provides a detailed analysis of the likely unmet 
demand for DVP assistance.

Q.8. In other disasters, the government has established a 
centralized mechanism for families to receive information and 
assistance regarding available safe rental units for voucher 
holders and for those with FEMA rental assistance. Evacuees 
have reported minimal mechanisms for receiving this type of 
information. Aside from HUD's toll-free number for families 
receiving HUD assistance, what other coordination is HUD 
undertaking to provide support for locating decent housing? How 
are displaced households tracked and informed of available 
options?

A.8. HUD has facilitated housing vacancy information and 
leasing assistance for the families eligible to participate in 
the KDHAP and the DVP through several actions. For example, 
eligible families advise a Referral Call Center (RCC) counselor 
where they wish to receive housing assistance. The RCC 
counselor calls the PHA in the area to which the family wants 
to move to inquire whether there are vacancies in the unit size 
the family needs. If suitable housing is not available, the RCC 
counselor asks the family to select an alternate location. 
After the family is referred to a KDHAP or DVP PHA, that PHA 
provides extensive housing search assistance and landlord 
outreach for the family.
    HUD has also hired a contractor to conduct research and 
post a listing of housing vacancies. The contractor is working 
with apartment associations, owners, PHA's, HUD field offices 
and others to identify vacancies in the locations where the DVP 
families want to live. This vacancy information is posted on a 
website accessible to the RCC and PHA's for use in assisting 
families. Unfortunately, in the areas where many families want 
to live such as New Orleans and Baton Rouge, there are little 
to no rental housing vacancies. See also the response to 
question 6 of Senator Sarbanes.
    In addition, the Office of Housing has been contacting 
owners of HUD-assisted housing throughout the country to 
identify vacant units that could house evacuees. We have and 
will continue to provide this listing to FEMA and other State 
and local agencies that are placing evacuees in housing units. 
We initially identified over 13,000 units in surrounding States 
and approximately 42,000 units nationwide.
    The Department is also in the process of establishing a 
National Housing Locator that will assist in identifying vacant 
units and will provide this service to individuals/families 
looking for housing year around.
    Immediately after Hurricane Katrina struck, the Department 
worked with PHA's throughout the country to identify vacant 
public housing units and available vouchers that could be 
utilized for evacuees. As you know, PHA's are also 
administering the KDHAP and DVP programs to provide temporary 
housing assistance for the HUD-assisted families immediately 
prior to Hurricanes Katrina and Rita.
    The Department also placed several thousand families in 
single-family HUD-owned homes in the surrounding States. The 
Department assisted in getting the necessary income waivers for 
the Low Income Housing Tax Credit projects so that evacuees 
were able to relocate into units in those projects.
    In addition, HUD established a Disaster Recovery Assistance 
website, following the events of September 11, 2001, that 
provides information on how HUD can provide critical housing 
and community development resources to aid disaster recovery. 
(See Overview of HUD Assistance for Disaster Recovery at 
www.hud.gov/disarelf.cfm.) HUD's Disaster Recovery Teams are 
located in offices throughout the country and the HUD Regional 
Directors have the authority for coordinating HUD's disaster 
relief efforts.
    In September 2005, HUD worked with other organizations to 
set up ``one-stop'' centers in major shelters across the 
Nation--from the Reunion Arena in Dallas to the DC Armory here 
in Washington. These centers allowed HUD officials to meet one-
on-one with evacuees and determine how the Department could 
assist them in finding housing in their host city. In the first 
few weeks after Katrina hit, we placed nearly 10,000 families 
in subsidized units. To date, HUD employees in 20 cities across 
the country continue to serve evacuees. FEMA's Disaster 
Recovery Centers are readily accessible facilities or mobile 
offices where applicants may go for information about FEMA or 
other disaster assistance programs. DRC's played a significant 
role in helping victims understand temporary housing options 
and in the support of the overall housing mission. HUD worked 
with FEMA in the affected areas to ensure that either HUD staff 
or literature regarding HUD programs was available at both the 
Disaster Recovery Centers and Joint Field Offices.
    Through our multifamily assisted housing owners, the 
Disaster Recovery Centers, the website mentioned above and the 
PHA's, residents are being advised of the options available to 
them regarding both temporary and permanent relocation.

Q.9. Many low-income renter households who met the eligibility 
criteria for housing subsidies did not receive such subsidies 
prior to Katrina. The hurricanes destroyed or damaged much of 
the relatively cheap rental stock. Rental units constructed 
post-Katrina (including tax credit units) are likely to have 
higher rents that would be unaffordable to many of these low-
income households. Based on the Department's data on incomes in 
renter households prior to Katrina and on the Department's data 
for construction costs for standard quality units, what is your 
best estimate on the likely increase in the severity of 
affordability difficulties in rebuilt Katrina-affected areas? 
What are your recommendations on addressing these affordability 
issues?

A.9. Significant damage to the housing of low-income renters. 
As the tables below show, Hurricanes Katrina and Rita caused 
major or severe damage in Louisiana and Mississippi to over 
265,000 housing units. Forty-four percent of the damaged 
housing units were occupied by households with incomes less 
than 50 percent of the area median income.\2\ Of the over 
88,000 unassisted rental housing units to have major or severe 
damage, approximately 61 percent were occupied by households 
with incomes less than 50 percent of area median.
---------------------------------------------------------------------------
    \2\ The determination of very low-income is based on both household 
income and household size. For example, in the New Orleans Metropolitan 
Area, a family of 3 with an income less than $22,950 is considered very 
low-income (less than 50 percent of area median). A single person 
household would have to have an income less than $17,850 to be 
considered very low-income. The comparable poverty threshold for a 
family of 3 is approximately $15,200 and for a single-person household, 
$9,800.
---------------------------------------------------------------------------
    Low rents but also low-incomes. The 2004 American Community 
Survey shows that the median gross rent paid nationally was 
$694. In Louisiana, it was $540 and in Mississippi it was $529, 
more than 20 percent lower than the Nation. Incomes, however, 
were similarly low. The 2004 median income nationally was 
$44,684. In Louisiana, it was $35,110 and in Mississippi it was 
$31,642, also more than 20 percent lower than the Nation.
    What this means is that although rents were low, similarly 
low-incomes left many households paying a high proportion of 
their income for rent prior to Katrina. Special tabulations of 
Census 2000 data found 47 and 44 percent of the very low-income 
households in Louisiana and Mississippi overcrowded or paying 
more than 50 percent of their income for rent. This rate of 
overcrowding and cost burden for very low-income households was 
somewhat lower than the national rate of 50 percent.
    Low rents also means inadequate housing. Many households 
also had inadequate housing. One function of low rents is that 
houses are not maintained. The 2004 American Housing Survey for 
the metropolitan areas of New Orleans, for example, found that 
20 percent of renter households with incomes less than 150 
percent of poverty \3\ had moderately or severely inadequate 
housing.
---------------------------------------------------------------------------
    \3\ One hundred fifty percent of poverty is roughly equivalent to 
50 percent of median income in the New Orleans metropolitan area.




    An opportunity to build better. While the disaster has had 
a terrible impact on these communities and their residents, the 
rebuilt housing can and should be better built than the pre-
Katrina housing it is replacing. It will be built to higher 
codes and it will be built to better survive future flooding. 
Data from the Small Business Administration on estimated costs 
to repair the seriously damaged properties provides an average 
repair cost of approximately $95,000. If mitigation expenses 
add an average of $20,000 per unit, the average cost per 
damaged unit is approximately $115,000. If all 88,000 
unassisted pre-Katrina rental units that had serious damage 
were repaired or replaced, the cost is estimated at $10.1 
billion.
    Many of the sources of funds for this rebuilding are 
already in place. Insurance proceeds, FEMA mitigation funds, 
Small Business Administration low-interest loans, Low Income 
Housing Tax Credits, and Community Development Block Grant 
funds are already available to begin this rebuilding effort. 
The challenge ahead is to facilitate the efficient use of these 
resources to ensure that the rebuilt homes are reasonably 
affordable.
    Predicting affordability needs post-Katrina. It is 
difficult to predict affordability post-Katrina. Constrained 
housing supply is likely to push the rents of unassisted 
housing units up in the short to medium-term. At the same time, 
constrained labor supply, due to the limited housing, is also 
likely to push up incomes for households willing and able to 
work. For employed households, this may result in a balance.
    For households on a fixed income, however, any increase in 
rent will impact them very hard. While decisions on how to 
expend their Community Development Block Grant and Low Income 
Housing Tax Credit funds are at the discretion of the State, we 
will continue a dialogue with the States on what their plans 
are to develop affordable housing for their low-income elderly 
and disabled residents who wish to return.

       RESPONSE TO WRITTEN QUESTIONS OF SENATOR SARBANES 
                     FROM DONALD E. POWELL

Q.1.a. The Banking Committee has heard a great deal of 
testimony in prior hearings about the important role public 
transit plays in communities both as a provider of mobility and 
as a catalyst for economic growth. This testimony suggests that 
as the rebuilding of the Gulf Coast goes forward, those with a 
role in the process should make sure that adequate transit is 
included in the rebuilding plans. It does not matter which 
areas are rebuilt if they are inaccessible. As Coordinator of 
the rebuilding process, what are you doing to ensure that 
transit is being fully integrated into the recovery plans?

A.1.a. In order to leverage fully and effectively the expertise 
and resources of the Federal Government we have established a 
system of Working Groups through the Office of the Federal 
Coordinator for Gulf Coast Rebuilding (OFC). These Working 
Groups are staffed by policy and programmatic experts drawn 
from across the agencies and departments of the Federal 
Government and tasked against eight subject areas essential to 
Security, Community, and Economy. These eight groups are 
Environmental Management, Public Safety, Housing, Healthcare, 
Education, Critical Infrastructure, Community and Faith-Based 
Organizations, and Economic Development.
    We have been working with the U.S. Department of 
Transportation (DOT) as a part of our Infrastructure Working 
Group. This Working Group has articulated the guiding 
principles that inform the Federal response in this area and 
its members are working closely with local leaders and 
decisionmakers to recognize the greatest challenges and highest 
priority needs of the affected region.
    From the immediate aftermath of Hurricane Katrina, the 
Administration has utilized transit as a crucial part of the 
recovery and rebuilding effort. In coordination with DOT and 
the Federal Transit Administration (FTA), we have successfully 
helped to reinitiate transit service and helped to plan the 
future transit needs of the region.
    FTA is administering a $47 million FEMA mission assignment 
for emergency transportation services in Baton Rouge and New 
Orleans which began on October 1, 2005, and extends through 
June 30, 2006. FTA is also administering a $19 million mission 
assignment with LADOT for rural transit services that was 
awarded on January 19, 2006, and runs through June 30, 2006. 
These mission assignments pay for passenger service, 
operations, and maintenance of the transit system. The Federal 
Aviation Administration is administering a mission assignment 
that provides commuter bus service between Baton Rouge and New 
Orleans.
    In addition, FTA also implemented two FEMA mission 
assignments for Mississippi worth a total of $2.4 million for 
bus services. The assignments expired and the Mississippi 
Emergency Management Agency did not ask FEMA for an extension. 
As with Louisiana, these mission assignments paid for passenger 
service, operations, and maintenance of the transit system.
    With the FTA providing technical support, the New Orleans 
Regional Transit Authority (NORTA) has restored limited service 
on 28 (54 percent) of the 52 pre-Katrina bus routes and a part 
of the streetcar lines within the City of New Orleans. NORTA is 
also 
operating in Baton Rouge to address the increased population's 
transit needs due to the population relocation from the 
hurricanes. Currently, NORTA carries approximately 17,000 daily 
riders to jobs and services in Baton Rouge and New Orleans, as 
well as supports New Orleans' reemerging tourist industry.
    To assist the local authorities in expediting transit 
projects, DOT deferred NORTA's local match requirement for 
Federal transit funds for 5 years, allowing the agency to begin 
buying supplies, repairing buses and equipment, and rebuilding 
damaged streetcar lines using Federal transit money without 
having to first secure local matching funds. DOT took a similar 
action for Mississippi transit.
    The FTA continues to work with the local authorities to 
develop financing and construction plans for the rebuilding of 
the local transit infrastructure. This includes the repair of 
the New Orleans streetcar system and the repair and replacement 
of transit buses.
    The FTA also provides ongoing technical support to 
stakeholders in the region to develop short- and long-term 
transit plans for the Baton Rouge and New Orleans metropolitan 
areas and the Gulfport Biloxi area. These discussions include 
the feasibility of commuter rail operations between Baton Rouge 
and New Orleans, streetcar extensions within the city of New 
Orleans, and growth and development patterns arising from the 
relocation of New Orleans residents after Hurricane Katrina. 
The FTA has invested $1 million so far in transit planning for 
these areas.

Q.1.b. Who are you working with from the transit sector in 
planning for the rebuilding of the affected areas?

A.1.b. FTA is working with the transit systems in the affected 
areas (NORTA in New Orleans and Coast Transit in the Biloxi/
Gulfport area), the State transportation agencies for rural 
transit systems, and the metropolitan planning organizations 
for regional transportation issues. Additionally, FTA has 
brought in consultants to help support this work.

         RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED 
                     FROM DONALD E. POWELL

Q.1.a. Before redevelopment of a viable economy may take place 
in Katrina-affected areas on a large scale, a number of issues 
must be addressed, such as long-term levee strength, flood 
plain designations, debris clearance, job development, physical 
infrastructure 
improvement, housing, and social infrastructure enhancement 
(including educational institutions, libraries, etc.). What 
actions is the Gulf Coast Rebuilding Council taking to ensure 
the serious health and safety concerns are resolved?

A.1.a. In order to leverage fully and effectively the expertise 
and resources of the Federal Government we have established a 
system of Working Groups through the Office of the Federal 
Coordinator for Gulf Coast Rebuilding (OFC). These Working 
Groups are staffed by policy and programmatic experts drawn 
from across the agencies and departments of the Federal 
Government and tasked against eight subject areas essential to 
Security, Community, and Economy. These eight groups are 
Environmental Management, Public Safety, Housing, Healthcare, 
Education, Critical Infrastructure, Community and Faith-Based 
Organizations, and Economic Development.
    As a part of our Environmental Management Working Group we 
have been working across the Federal Government and with State 
and local officials to address the health and safety concerns 
in the affected region. This Working Group's members are 
working closely with local leaders and decisionmakers to 
recognize the greatest challenges and highest priority needs of 
the affected region.
    The U.S. Environmental Protection Agency (EPA) has been 
working extensively in the affected region since immediately 
after Katrina. To date, EPA has completed, for areas under FEMA 
Mission Assignments, over 50 percent of the household hazardous 
waste collection in Louisiana and over 75 percent household 
hazardous waste collection in Mississippi. Total obligations 
from FEMA Mission Assignments by the EPA to meet the health and 
safety concerns in the Gulf Coast region exceed $450 million.
    The U.S. Department of Labor's (DOL) Occupational Safety 
and Health Administration (OSHA) has provided technical 
assistance at almost 16,000 worksites engaged in electrical 
work, repair of power lines, tree trimming operations, roofing, 
debris removal, demolition, and other response activities, and 
has intervened directly to remove over 55,000 workers from 
serious hazards. Under the Worker Safety and Health Annex to 
the National Response Plan, OSHA is coordinating safety and 
health assistance to Federal Agencies responding to the 
hurricanes, including FEMA, U.S. Army Corps of Engineers, HHS, 
and EPA. OSHA has collected and reported on more than 7,500 
personal samples of workers' potential exposure to hazardous 
materials during response and recovery operations. Through the 
Annex, OSHA is working with the National Institute of 
Environmental Health Science (NIEHS) to provide worker safety 
and health training to the Federal assets involved in the 
response. Together with the U.S. Department of Health and Human 
Services' Substance Abuse and Mental Health Administration, 
OSHA is coordinating psychological first aid for responders.

Q.1.b. Ensure the investment of private market actors, such as 
lenders and developers?

A.1.b. While OFC cannot ensure the investment of private market 
actors, we have been assisting the affected States as they 
formulate their plans for the economic development of the 
region. The role of the Federal Government in the return of 
previous employers to the Gulf Coast, and in the attraction of 
new industries and investment, is to rebuild stronger hurricane 
protection; assist in the renewal of housing stock; create 
strong incentives for the private market to participate in the 
renewal of the region wherever appropriate; and support the 
State in restoring basic services to its communities to attract 
new workers and returning residents. At the end of 2005, the 
President signed into law the Gulf Opportunity Zones Act (or GO 
Zones). This legislation, providing approximately $8 billion in 
tax relief over 5 years, will help revitalize the region's 
economy by encouraging businesses to create new jobs and 
restore old ones. Some of the principal provisions within the 
GO Zone include tax-exempt bond financing for both residential 
and nonresidential property, provision of 18 times the usual 
amount of low-income housing tax credits, bonus depreciation, 
and expensing for certain demolition and clean-up costs, just 
to name a few.
    In addition, to assist the States in their efforts to 
rebuild and improve the economic framework the region, OFC has 
been actively engaged in promoting the economic development of 
the region. Chairman Powell has hosted several sessions with 
potential invest mentors in the region. An additional meeting 
to focusing on mortgage funding and investment in Louisiana is 
planned for March 2006. Examples of specific meetings include:

 Federal National Mortgage Association Meeting--January 
    3, 2006--To discuss housing and mortgage issues; and Fannie 
    Mae's efforts in the region since Hurricane Katrina.
 Mississippi Lenders Meeting--February 17, 2006, 
    Jackson, MS--To discuss the administration of the $4.5 
    billion Community Development Block Grant housing funds. 
    Agenda items include: Grant Process, Application Process, 
    and the Mortgage Holder Process and involvement. The MDA 
    will present their plans and seek advice from attendees in 
    preparation for rebuilding some 35,000+ houses in 
    Mississippi. This meeting will include Governor Haley 
    Barbour and representatives from the Mississippi 
    Development Authority, Fannie Mae, MS Community Business 
    Center, Wells Fargo Home Mortgage, JPM Chase, Citigroup 
    Mortgage, Washington Mutual, Greentree Servicing, Trustmark 
    National Bank (Jackson), Peoples Bank of Biloxi, Hancock 
    Bank (Gulfport), Bancorp South (Tupelo), American General 
    Financial Services, and HUD.
 Numerous meetings and detailed conversations on 
    related issues with other national lenders, including: 
    Countrywide Funding of Los Angeles, JPM Chase, Citibank, 
    and others.
 The OFC staff has met with contractors, developers, 
    and community interest groups throughout the region, 
    including: ACORN, Habitat for Humanity, National Low-Income 
    Housing Coalition, Business Roundtable, KB Homes, Shaw 
    Group, Bechtel, Portland Cement Association, International 
    Union of Operating Engineers, Laborers' International Union 
    of North America, Iron Workers Union, International Union 
    of Painters and Allied Trades, U.S. Chamber of Commerce, 
    U.S. Black Chamber of Commerce and others.
 Last, OFC is working with the U.S. Department of 
    Commerce on the upcoming ``Gulf Coast Business Investment 
    Mission,'' May 4-5, 2006, to highlight investment 
    opportunities in the Gulf Coast, including Federal GO Zone 
    tax incentives as part of an effort to promote economic 
    growth and job creation in the region following hurricanes 
    Katrina and Rita. The tour will target businesses looking 
    to make investments greater than $5 million in the region. 
    Initial reaction has been positive. Several outreach/
    recruitment sessions are planned.

Q.1.c. Ensure employers return to the affected areas?

A.1.c. The role of the Federal Government in the return of 
previous employers to the Gulf Coast, and in the attraction of 
new industries and investment, is to rebuild stronger hurricane 
protection; assist in the renewal of housing stock; create 
strong incentives for the private market to participate in the 
renewal of the region wherever appropriate; and support the 
State in restoring basic services to its communities to attract 
new workers and returning residents. At the end of 2005, the 
President signed into law the Gulf Opportunity Zones Act (or GO 
Zones). This legislation, providing approximately $8 billion in 
tax relief over 5 years, will help revitalize the region's 
economy by encouraging businesses to create new jobs and 
restore old ones. Some of the principal provisions within the 
GO Zone include tax-exempt bond financing for both residential 
and nonresidential property, provision of 18 times the usual 
amount of low-income housing tax credits, bonus depreciation, 
and expensing for certain demolition and clean-up costs, just 
to name a few.
    As previously mentioned, in order to leverage fully and 
effectively the expertise and resources of the Federal 
Government we have established a system of Working Groups 
through the Office of the Federal Coordinator for Gulf Coast 
Rebuilding (OFC). The Economic Development Working Group has 
articulated the guiding principles that inform the Federal 
response, taken inventory of existing Federal programs and 
funds available to the affected regions, and its members are 
working closely with local leaders and decisionmakers to 
recognize the greatest challenges and highest priority needs of 
the affected region.
    To help provide businesses with the skilled workers they 
need when returning to the affected areas, the Department of 
Labor's Employment and Training Administration (ETA) has 
provided a total of $12 million to the States of Texas, 
Alabama, and Louisiana to enhance their capacity to provide 
training in industries such as construction, energy, 
healthcare, transportation, and safety/security which are 
critical to the economic recovery in the Gulf region.
    ETA has also provided an additional $10 million to the 
States of Louisiana and Mississippi through the Pathways to 
Construction Employment Initiative that will help provide 
employers with skilled workers in the residential, commercial, 
industrial, heavy highway construction sectors, as well as the 
heavy marine construction and shipbuilding sectors. As part of 
these Pathways to Construction grants, industry partners will 
conduct basic outreach in their local communities to increase 
employer awareness of these programs.
    In addition, DOL has provided assistance to the directly 
affected Gulf States to (a) hire workers in temporary disaster 
relief employment in coordination with FEMA in the disaster 
area to assist in the clean-up, demolition, repair, renovation, 
and reconstruction of damaged and destroyed public sector 
structures, facilities, and lands within the disaster; (b) hire 
workers to work on projects that provide food, clothing, 
shelter, and other humanitarian assistance or other public 
sector jobs; and (c) train those workers who do not have jobs 
to return to in high demand occupations in order to provide a 
skilled workforce for jobs with the returning employers. The 
presence of a skilled workforce is an incentive for employers 
to return to the affected areas.
    Using National Emergency Grants (NEG) under the Workforce 
Investment Act NEG Disaster Relief Employment Assistance 
Program and the Flexibility for Displaced Workers Act (P.L. 
109-72), more than $191.1 million was provided to States 
directly impacted by the hurricanes including Alabama ($4 
million), Louisiana ($62.1 million), Mississippi ($50 million), 
and Texas ($75 million) for temporary disaster relief jobs to 
assist in clean up activities and to train the affected workers 
in high-growth demand occupations in order to create a more 
skilled labor force. These funds are projected to assist 
approximately 63,000 individuals. In addition, DOL awarded $16 
million to evacuee States to assist more than 20,000 evacuees 
by placing evacuees in temporary public sector employment, 
working on projects that provide humanitarian assistance to 
other evacuees, and providing training in high-demand 
occupations. Since the recovery efforts in the Gulf Coast 
region began, more than 48,200 individuals have been provided 
either temporary jobs or other workforce services under the 
National Emergency Grants, with almost 5,800 individuals 
currently enrolled in temporary jobs. As of the last week in 
March, over 3,800 hurricane affected workers were enrolled in 
training programs in 9 States, with another State set to launch 
a large retraining effort in the next few weeks.

Q.1.d. Ensure that housing will be sufficient for employees to 
return to the affected areas?

A.1.d. In the short-term, the Federal Government through FEMA 
is actively working to provide temporary housing relief to the 
affected regions:

 89,379 mobile homes and travel trailers are occupied 
    (as of March 10).
 5,998 mobile homes and travel trailers are ready for 
    occupancy but are vacant (as of March 10).
 $4.65 billion to 1,734,148 approved Individual 
    Assistance applicants for temporary housing (includes 
    rental assistance), expedited assistance, and personal 
    property, including $5.38 billion in assistance to 
    1,054,732 approved applicants under the Individual Housing 
    Program (IHP) for Katrina in all States (as of March 10).

    For the longer-term rebuilding effort, a main principle 
that guides our Office is that rebuilding should not become an 
exercise in centralized planning. If Federal bureaucrats 
determine the path of rebuilding, local insight and initiative 
will be overrun and local needs overlooked. In that spirit, 
each affected State has brought together their best and 
brightest minds to create a plan that meets their respective 
needs. Louisiana has formed the Louisiana Recovery Authority 
and Mississippi has formed the Mississippi Development 
Authority to formulate both a policy and a strategy for moving 
forward. Each State organization has submitted a housing plan 
for public comment, and Mississippi has already received a 
``green light'' approval from HUD indicating that their plan is 
heading in the right direction. Once both plans complete the 
public comment period the final plan will be resubmitted to 
HUD.
    The $11.5 billion in Community Development Block Grant 
(CDBG) funds which Congress set aside as a part of the Defense 
Reallocation package in December 2005 is critical to the 
support of those plans. In Louisiana, as we build the hurricane 
protection system structurally stronger and better, we must 
also allow the State to rebuild their housing stock in a safer 
and smarter manner, protecting the lives and assets of their 
residents. In order to meet the unique flood vulnerability 
needs of Louisiana, the President has requested $4.2 billion in 
additional Community Development Block Grant funds for 
Louisiana, as a part of the recent Supplemental, to address its 
plans for future flood mitigation measures to protect 
residents, housing, and critical infrastructure.

Q.1.e. Ensure the improvement of physical infrastructure in the 
area?

A.1.e. For the immediate term recovery of physical 
infrastructure in the area, FEMA's Public Assistance Program 
has been working to meet the needs of the affected area.

Overview of FEMA's Public Assistance Program

    FEMA's Public Assistance Program provides supplemental 
Federal disaster grant assistance for the repair, replacement, 
or restoration of disaster-damaged, publicly owned facilities 
and the facilities of certain Private Non-Profit (PNP) 
organizations. Eligible PNP facilities must be open to the 
public and perform essential services of a governmental nature. 
Eligible PNP facilities generally include the following:

 Medical facilities, such as hospitals, outpatient, and 
    rehabilitation facilities.
 Custodial care facilities that provide institutional 
    care for persons who require close supervision and some 
    physical constraints in their daily activities.
 Educational facilities, such as primary and secondary 
    schools, colleges, and universities.
 Emergency facilities, such as fire departments, rescue 
    squads, and ambulance services.
 Public utilities, such as water, sewer, and electrical 
    power systems.
 Museums, zoos, community centers, libraries, homeless 
    shelters, senior citizen centers, shelter workshops, and 
    facilities which provide health and safety services of a 
    governmental nature.

Eligible Work

 To be eligible, the work must be required as the 
    result of the disaster, be located within the designated 
    disaster area, and be the legal responsibility of an 
    eligible applicant. Eligible work is classified as either 
    emergency work or permanent work. Permanent work is work to 
    restore an eligible damaged facility to its predisaster 
    design. Work ranges from minor repairs to replacement.
 Categories of permanent work include:

     Roads, bridges and associated features, such as 
        shoulders, ditches, culverts, lighting, and signs.
     Water Control Facilities including drainage 
        channels, pumping facilities, and the emergency repair 
        of levees. Permanent repair of Flood Control Works is 
        the responsibility of the U.S. Army Corps of Engineers 
        and the Natural Resources Conservation Service.
     Public buildings including their contents and 
        systems.
     Utility Distribution Systems, such as water 
        treatment and delivery systems; power generation 
        facilities and distribution lines; and sewage 
        collection and treatment facilities.
     Public Parks, Recreational Facilities, and Other 
        Facilities, including playgrounds, swimming pools, and 
        cemeteries.

Administration of Funding

    FEMA Public Assistance is provided in the form of project 
grants which are awarded to the State. The State is responsible 
for distributing funds to subgrantees. FEMA is working with 
each of the impacted States and their local jurisdictions to 
identify and submit applications for public assistance 
projects.

Long-Term Rebuilding

    OFC is focused on the long-term rebuilding of the region, 
including infrastructure. The States plan to leverage CDBG 
monies in addition to FEMA's Public Assistance Program to 
ensure a safer and smarter rebuilding of the infrastructure 
system. To date, $11.5 billion in CDBG funding has been 
allocated to the Gulf States, and there is another $4.2 billion 
which has been requested for Louisiana to address the unique 
future flood mitigation needs of that State. We look forward to 
working with the Department of Housing and Urban Development 
and the affected region as they submit their plans for the use 
of CDBG funding for housing and infrastructure.

Q.1.f. Ensure the enhancement of social infrastructure in the 
area?

A.1.f. In our Office, we talk about the triangle of recovery: 
Safety, Community, and Economy. Safety is the foundation, the 
fundamental knowledge that a resident is physically secure from 
the dangers of future storms and floods; and Community and 
Economy on either side, the homes, schools, hospitals and 
clinics, emergency services, community organizations, and 
businesses that make up the critical underpinnings of a healthy 
and vibrant society. Several of our Working Groups including 
Healthcare, Education, and Community and Faith-Based 
Organizations are specifically focused on the revival of the 
social infrastructure of the region. Several of the components 
of the overall Federal response to the social needs of the area 
are outlined below:

Social Services

    To respond to the human services and mental health needs of 
individuals affected by the hurricane, the U.S. Department of 
Health and Human Services (HHS) has awarded $550 million in 
Social Service Block Grants. The funding will also provide 
support to those lacking health insurance or adequate access to 
care, and to health care safety net providers. Funding was 
provided in varying amounts to all 50 States, with the majority 
going to Louisiana (40 percent), Mississippi (23 percent), 
Texas (16 percent), and Florida (10 percent).

Crisis Counseling

    As part of an ongoing crisis counseling effort, FEMA has 
provided $29 million to 29 States for the Immediate Services 
Crisis Counseling Program. To date, Regular Services Crisis 
Counseling grants have been approved for 18 States totaling 
$23.3 million. The Crisis Counseling Programs hire and train 
people locally to provide outreach to survivors of the 
hurricanes who need mental health services. This outreach will 
include mobile services in which trained workers go to the 
places where disaster survivors are congregating, such as 
shelters, disaster recovery centers, or temporary hotels, and 
provide supportive contacts, educational materials, and brief 
counseling services.

Temporary Assistance for Needy Families (TANF)

    Over 30,000 families are being helped through HHS's 
Administration on Children and Families (ACF) Temporary 
Assistance for Needy Families (TANF) program by the provision 
of short-term, nonrecurrent cash benefits to families who 
traveled to another State from the disaster designated States. 
The hurricane-damaged States of Mississippi, Louisiana, and 
Alabama also received additional funding for the TANF program 
to provide assistance and work opportunities to needy families 
($69 million for loan forgiveness and $25 million in 
contingency funds for State Welfare Programs).

Health Care Delivery and Hospitals

    On September 1, 2005, Secretary Michael Leavitt of the 
Department of Health and Human Services exercised his waiver 
authority under Section 1135 of the Social Security Act. Under 
this provision, the Secretary can waive or modify certain 
Medicare, Medicaid, or State Children's Health Insurance 
Program (SCHIP) requirements during certain emergencies to 
ensure that sufficient health care items and services are 
available to meet the needs of Medicare, Medicaid, and SCHIP 
beneficiaries and that health care providers that furnish such 
items and services in good faith may be reimbursed for them. On 
Wednesday August 31, 2005, Secretary Leavitt notified the 
Congress that he was invoking this authority, as a consequence 
of Hurricane Katrina, in order to protect the health and 
welfare of the public in areas impacted by this crisis.
    To ensure that Medicaid and SCHIP beneficiaries would 
receive necessary services, the Centers for Medicare and 
Medicaid Services (CMS) took action under Section 1115 waiver 
authority to provide flexibility and to effectuate the Section 
1135 waivers through demonstration programs. Specifically, on 
September 16, 2005, CMS released a State Medicaid Director's 
letter and a Multi-State Section 1115 Demonstration Application 
Template to provide Medicaid and SCHIP for evacuees of 
Hurricane Katrina. Under these demonstrations, eligible 
evacuees displaced from their homes were able to enroll to 
receive services under the Medicaid or SCHIP programs in the 
State where they are located.
    The Deficit Reduction Act of 2005 (P.L. 109-171) (DRA) 
signed into law by President Bush on February 8, 2006 provided 
$2 billion for payments by the HHS Secretary to eligible States 
for health care needs of areas affected by Hurricane Katrina. 
Consistent with the authority in the DRA, on March 24, 2006, 
Secretary Leavitt released $1.5 billion to the 32 States with 
approved Katrina 1115 Demonstrations to help offset the medical 
costs of caring for evacuees. The 32 States with approved 
Katrina relief funds include: Texas, Alabama, Mississippi, 
Florida, Idaho, Arkansas, District of Columbia, Georgia, 
Tennessee, Puerto Rico, South Carolina, Indiana, Maryland, 
Louisiana, Nevada, California, Ohio, Rhode Island, North 
Carolina, Wyoming, Arizona, Massachusetts, North Dakota, 
Delaware, Pennsylvania, Oregon, Iowa, Virginia, Minnesota, 
Montana, Utah, and Wisconsin. The remaining balance of the 
funds ($500 million) from the DRA will be used to cover future 
costs for the States.
    Within a week after Hurricane Katrina forced the closure of 
the U.S. Department of Veterans Affairs (VA) Medical Center in 
New Orleans, mobile health-care clinics from across the VA 
system were deployed to the surrounding communities of Hammond, 
LaPlace, and Slidell Louisiana. By December 2005, a floor of 
the VA nursing home adjacent to the New Orleans Medical Center 
was opened as a primary care clinic. Another floor is slated to 
open with limited specialty care in late March. The mobile 
clinics in the three surrounding communities are being replaced 
with permanent community-based outpatient clinics (CBOC's). 
Over 11,000 nonveterans 
received humanitarian care in VA clinics as a result of the 
quick deployment of CBOC's.
    During the period of October 2005 through January 2006, new 
and existing outpatient clinics in New Orleans, LaPlace, 
Hammond, Slidell, and other locations in the New Orleans area 
have treated approximately two-thirds of the number of veteran 
patients treated during the same period last fiscal year, which 
exceeded expectations. The VA is accelerating construction at 
Biloxi to move all clinical and administrative functions from 
the Gulfport Site to the Biloxi Campus. They are also 
considering construction of a small CBOC on the Gulfport Campus 
as well as interim projects for modular buildings on the Biloxi 
Campus to meet space needs.

Education

Child Development and School Readiness (Head Start)

    The Head Start program, which provides comprehensive child 
development and school-readiness programs for low-income 
children from birth to age 5, as well as pregnant women and 
their families, received $90 million to cover the costs of 
replacing or repairing facilities that were damaged or 
destroyed by Hurricanes Katrina or Rita that are not covered by 
insurance or FEMA. Another $15 million in funds also covered 
the costs of serving approximately 4,800 evacuee children from 
January 1, 2006, to the end of each grantee's current school 
year (that is late May or early June).

K-12

 Progress has been made on the 1,100 schools (public 
    and private) that were closed following the storms, leaving 
    372,000 students initially unable to attend school.
 In Mississippi, 93 percent of schools have fully or 
    partially reopened.
 In Louisiana, 79 percent of schools initially closed 
    have reopened.
 In New Orleans, all 183 public and private schools in 
    New Orleans were initially closed after the hurricanes.
 Now, 17 public schools (including 14 that now operate 
    as charter schools) have reopened. About 14 percent of the 
    pre-Katrina enrollment, or 8,303 students, are now 
    attending public schools in the city.
 In the private sector, 37 of 54 schools operated by 
    the Archdiocese of New Orleans have now reopened in the 
    city and its environs.
 Total public and private enrollment in the city equals 
    about 30 percent of the pre-hurricane level.
 The U.S. Department of Education (ED) obtained a $1.4 
    billion special appropriation from Congress to meet K-12 
    hurricane-related needs, including $750 million to help 
    public and private schools along the Gulf Coast reopen, 
    $645 million to reimburse public and private schools that 
    enrolled students displaced by Katrina and Rita, and $5 
    million for the education of students made homeless by the 
    storms.
 ED provided more than $20 million through a special 
    charter school grant to Louisiana to assist in opening or 
    reopening charter schools in order to serve children 
    affected by the hurricanes. This has helped public schools 
    in New Orleans expedite their reopening process by 
    reopening as charter schools.
 ED launched a website, Hurricane Help for Schools 
    (www.hurricanehelpforschools.gov), to serve as a nationwide 
    clearinghouse resource for schools to post their needs so 
    Americans can help meet them. To date, more than 650 
    matches between needs and contributions have been made 
    through the site.

Higher Education

 Post-secondary institutions on the Gulf Coast are also 
    recovering.

     Twenty four of 30 institutions of higher education 
        in Louisiana have now reopened.
     This figure includes 10 of the 15 that were closed 
        in New Orleans.
     Two-thirds of post-secondary students in New 
        Orleans have returned to class.
     Both of Mississippi's closed post-secondary 
        institutions have reopened.
     ED received $200 million to help post-secondary 
        institutions in Mississippi and Louisiana recover from 
        the hurricanes to compensate colleges that took in 
        displaced students. In addition, the Department has 
        distributed $18 million of unused Federal campus-based 
        student aid funds distributed to severely affected 
        colleges.

Department of Labor

    In October 2005, the Employment and Training Administration 
awarded $125 million to 70 community colleges competing for the 
President's Community-Based Job Training Grants. As part of the 
national response to Hurricane Katrina, the department gave 
preference to competitive applications from Gulf Coast and 
Southeast colleges whose programs will be critical to 
rebuilding the regional economy.

        Also, how would the failure to resolve these issues 
        affect the timing of reconstruction? In particular, 
        will the need to resolve such issues affect whether it 
        will be possible for affected States to use their extra 
        tax credit allocations in the time required to do so?

    We are working within the Federal Government and with the 
affected States on addressing rebuilding issues in the most 
effective, appropriate, responsible, and timely manner 
possible. However, a rebuilding of this magnitude has to be 
measured in terms of years, not days. Should there be 
additional needs which are the result of the time needed to 
rebuild, or other issues, we will continue to work with the 
States on addressing those needs.

Q.2. The Administration's approach to recovery has stressed the 
role of State and local governments. CDBG allocations will be 
critical to the recovery process. To what extent will States 
make decisions about CDBG allocations and to what extent will 
localities make these decisions? How will the localities' plans 
be coordinated to avoid a fractured approach to regional 
rebuilding?

A.2. As previously stated, one of the main principles which 
guide our office is that rebuilding should not become an 
exercise in centralized planning. The affected Gulf Coast 
States share our view that recovery must be led by a locally 
driven community planning process. The goal of all involved 
States is to empower local communities to develop strategies 
for their bold long-term community recovery plans and to ensure 
that they are coordinated into regional plans. Recovery 
planning starts from the local level and is coordinated into an 
overall State plan.

Q.3. Long-term levee strength can be expected to be a 
particularly important factor in determining the nature of 
long-term redevelopment, as you said in your statement. What 
differences would you anticipate in the nature of 
reconstruction and in population return if the levees are 
rebuilt to withstand a Category 3 hurricane versus being 
rebuilt to withstand a Category 5 hurricane?

A.3. The President has stated emphatically that public safety 
is the most critical part of long-term rebuilding in the area. 
People must feel that there is adequate commitment and planning 
for hurricane protection before they can make their decision to 
return--whether as a resident, a business owner, or both. The 
meteorological term ``category'' has many components, and is 
not technically applicable to the engineering design of levees 
or other hurricane protection elements. Our goal is to ensure a 
safer hurricane protection system, which will protect the city 
and the region from any future catastrophic disaster.
    To accomplish this goal, the President responded quickly by 
asking Congress to authorize his $3.1 billion commitment to 
make the hurricane protection system that surrounds the New 
Orleans area structurally stronger and better. In his recent 
supplemental request to Congress, the President has included a 
request for $1.46 billion for the addition of flood gates and 
pumping stations to interior canals, selective armoring of 
levees, the initiation of wetlands restoration projects, and 
additional storm-proof pumping stations. I have personally 
visited the levees with General Strock and I also receive 
regular updates from the Army Corps on their progress.
    The structural restoration progress of the Army Corps of 
Engineers is impressive to date. All contracts for restoration 
work have been awarded and the work is 45 percent complete. 
Approximately 100 miles of levees have been repaired/completed 
and the Army Corps of Engineers is on track to meet the 
Administration's commitment of repairing the damaged levees to 
pre-Katrina levels by June 1. This work, including the 
improvements included in the supplemental and an on-going study 
about the long-term goals of levee construction, will make the 
levee system structurally stronger than it was before the 
storm.

Q.4. Many households in hurricane-affected areas were poor. 
Even if these properties were insured, the owners may lack the 
necessary resources to rebuild should they desire to do so. How 
many low-income and very low-income people sustained severe 
damage to their homes? For these people, how many had 
insurance? Do you or any other Federal, State, or local 
agencies have plans to provide such households with financial 
assistance for repair or rebuilding? If so, what are these 
plans?

A.4. Using self-reported data from FEMA registrants, we have 
categorized the impacted households by income. A high number of 
low-income households were impacted by the disaster. The table 
below provides a summary by the categories you requested. Among 
owner-occupants with major or severe damage, approximately 
54,745 are very low-income, 60 percent of whom are uninsured. 
An additional 34,666 homeowners were between 50 and 80 percent 
of median income and 44 percent of those were uninsured. 
Approximately 66,422 of the renters whose homes were seriously 
damaged were very low-income.


    It is important to note, however, that comparing these data 
to Census 2000 data suggests the income reported to FEMA by 
registrants may understate the true total household income of 
FEMA registrants prior to the hurricanes.
    As previously stated, one of the main principles which 
guide our office is that plans for rebuilding should be created 
by the local people in the affected States, not in Washington, 
DC. Louisiana has formed the Louisiana Recovery Authority and 
Mississippi has formed the Mississippi Development Authority to 
formulate both a policy and a strategy for moving forward. Each 
State organization has submitted a housing plan for public 
comment, and Mississippi has already received a ``green light'' 
approval indicating comfort from HUD that their plan is heading 
in the right direction. Both of these plans provide 
compensation to address the housing needs of homeowners of 
every income level in the affected region.
    The Louisiana Recovery Authority (LRA) is creating a plan 
for reviving the city's rental market to provide needed homes 
using Federal Community Development Block Grant funding. LRA 
officials have also indicated they plan to use $1.75 billion 
from expected Federal community development block grants to 
help landlords renovate or rebuild properties damaged by 
hurricanes Katrina and Rita, with a mix of low-interest loans 
and low-income housing tax credits likely to be used. We expect 
plans for other States to address these needs are forthcoming.

Q.5. What are your current plans for assisting households who 
were living in a 100-year floodplain but did not have flood 
insurance? What are the policy justifications for these plans?

A.5. Any decision to assist such households would be a State 
determination, based on State policy justifications. As 
previously stated, one of the main principles that guide our 
office is that plans for rebuilding should be created by the 
local people in the affected States, not in Washington, DC. 
Each State organization has submitted a housing plan for public 
comment, and Mississippi has already received a ``green light'' 
approval indicating comfort from HUD that their plan is heading 
in the right direction.

Q.6. To date, what steps have been taken to ensure that persons 
with disabilities and seniors, as well as disability and senior 
advocacy communities, are represented on State and local 
planning and rebuilding commissions, as well as in the 
development of consolidated plans?

A.6. As previously stated, one of the main principles which 
guide our office is that rebuilding plans should be created by 
the local residents of the Gulf Coast. The affected States have 
reached out to all communities, including seniors and people 
with disabilities, for participation on rebuilding commissions 
and for input in construction of State plans.

Q.7. The Urban Institute has stated, ``With the city's plans 
for long-term housing construction still up in the air and no 
agency helping evacuees find jobs that will provide steady 
incomes, 18 months of housing assistance may not be enough for 
many families.'' What planning has occurred (either by your 
office, by other Federal agencies, or by local and State 
agencies) to address the issues expressed in the Urban 
Institute's statement?

A.7. We are working with closely with State and local leaders 
to support them in developing comprehensive solutions to the 
most critical issues facing the recovery of the Gulf Coast, 
including housing, job training and economic development. We 
are also working within the Federal Government on addressing 
rebuilding issues in the most effective, appropriate, 
responsible, and timely manner possible. We recognize the 
complex and challenging situation that the devastation of 
housing stock has created in the affected region, and we 
continue to work with the States on addressing any additional 
needs.

Department of Labor

    The Department of Labor has provided National Emergency 
Grants (NEG) under the Workforce Investment Act NEG Disaster 
Relief Employment Assistance Program and the Flexibility for 
Displaced Workers Act (P.L. 109-72). More than $191.1 million 
was provided to States directly impacted by the hurricanes 
including Alabama ($4 million), Louisiana ($62.1 million), 
Mississippi ($50 million), and Texas ($75 million) for 
temporary disaster relief jobs to assist in clean up activities 
and to train the affected workers in high-growth demand 
occupations in order to create a more skilled labor force. 
These funds are projected to assist approximately 63,000 
individuals. In addition, DOL awarded $16 million to evacuee 
states to assist more than 20,000 evacuees by placing evacuees 
in temporary public sector employment, working on projects that 
provide humanitarian assistance to other evacuees, and 
providing training in high-demand occupations. Since the 
recovery efforts in the Gulf Coast region began, more than 
48,200 individuals have been provided either temporary jobs or 
other workforce services under the National Emergency Grants, 
with almost 5,800 individuals currently enrolled in temporary 
jobs. As of the last week in March, over 3,800 hurricane 
affected workers were enrolled in training programs in 9 
States, with another State set to launch a large retraining 
effort in the next few weeks.
    To help provide workers training in skills required by 
employers returning to the hurricane impacted areas, the 
Department of Labor's Employment and Training Administration 
has provided a total of $12 million to the States of Texas, 
Alabama, and Louisiana to enhance their capacity to provide 
training in industries such as construction, energy, 
healthcare, transportation, and safety/security which are 
critical to the economic recovery in the Gulf region. The 
majority of funds will be focused on actual training for 
hurricane impacted individuals. The training is designed to be 
short-term and flexible, and to link to opportunities for 
additional training and/or career pathways in these critical 
industries.
    ETA has also provided an additional $10 million to the 
States of Louisiana and Mississippi through the Pathways to 
Construction Employment Initiative that will help provide 
employers with skilled workers in the residential, commercial, 
industrial, heavy highway construction sectors, as well as the 
heavy marine construction and shipbuilding sectors. In each 
State, the Pathways to Construction Employment Initiative will 
have four primary components: establishment of Reconstruction 
Centers of Excellence, career awareness and outreach 
activities, assessment and access to basic skills training, and 
pathways to employment. These funds are in addition to the 
formula funds awarded to States annually to provide employment-
related services for adults, dislocated workers, and youth 
under the Workforce Investment Act (WIA).
    Additionally, in the State of Mississippi, ETA has expanded 
a partnership with Manpower, Inc., to help Mississippi workers 
displaced by Hurricane Katrina find new jobs. The initiative 
will leverage the resources and reach of One-Stop Career 
Centers and Manpower, Inc. to deliver employment and training 
services that meet evacuees' long-term career needs.

Q.8. In a Washington Post editorial, you stated that low-income 
tax credits would assist the reconstruction of multifamily 
housing. However, these tax credits promise to help rebuild 
less than 15 percent of the affordable housing units that 
Katrina and Rita destroyed and they will presumably take years 
to implement. How will you address the housing needs of renters 
after FEMA's 18-month assistance has ended? How will you 
address the housing needs of renters in the long-term?

A.8. As previously stated, one of the main principles which 
guide our office is that plans for rebuilding should be created 
by the local people in the affected States, not in Washington, 
DC. The Louisiana Recovery Authority (LRA) is creating a plan 
for reviving the city's rental market to provide needed homes. 
LRA officials have also indicated they plan to use $1.75 
billion from expected Federal Community Development Block 
Grants to help landlords renovate or rebuild properties damaged 
by hurricanes Katrina and Rita, with a mix of low-interest 
loans and low-income housing tax credits likely to be used. We 
expect plans for other States to address these needs are 
forthcoming.
    To assist State and local officials as they implement plans 
to address the needs of residents, HUD and the U.S. Department 
of Agriculture have taken the following actions:

 15,000 HUD-assisted or homeless families are receiving 
    up to 18 months of housing assistance through the Katrina 
    Disaster Housing Assistance Program (KDHAP), administered 
    by the HUD and the U.S. Department of Homeland Security 
    (DHS).
 More than 6,000 single-family homes within a 500-mile 
    radius of the declared disaster areas have been identified 
    and HUD has either repaired these homes or is currently in 
    the process of repairing them; more than 1,000 families 
    have been able to move back in, with another 800 in 
    process. Once repaired, the remainder of these homes will 
    be offered to evacuees either as temporary housing or for 
    purchase through a discounted sale program.
 HUD has placed a moratorium on foreclosures of FHA-
    insured homes until June 30, 2006. The extended foreclosure 
    relief will provide mortgagees additional time to confirm 
    the mortgagee's intention and ability to repair the home, 
    help them resume regular mortgage payments and retain their 
    homeownership.
 HUD's Mortgage Assistance Initiative is assisting 
    homeowners with FHA-insured mortgages who are unable to 
    maintain their payment obligations due to hurricane-related 
    property damage by advancing their mortgage payments for up 
    to 12 months. This unprecedented mortgage relief is 
    expected to help several thousand families remain 
    homeowners while concentrating on repairing their homes, 
    finding jobs, and putting the pieces of their lives back 
    together.
 HUD's Section 203(k) loan program is enabling 
    homebuyers and homeowners with damaged or destroyed homes 
    to finance, through a single mortgage, both the purchase 
    and/or refinancing of their house and the cost of its 
    rehabilitation. It also allows homeowners with damage to 
    finance the rehabilitation of their existing single-family 
    home. This program encourages lenders to make mortgages 
    available to residents of disadvantaged neighborhoods and 
    to borrowers who would not otherwise qualify for 
    conventional loans on affordable terms.
 HUD's special mortgage insurance program, designed to 
    assist disaster victims (under Section 203(h) of the 
    National Housing Act), is allowing 100 percent financing 
    for individuals or families whose residences were destroyed 
    or damaged to such an extent that reconstruction or 
    replacement is necessary.
 HUD has been issuing a series of waivers to streamline 
    existing grant programs so grantees can reprogram existing 
    HUD funds for disaster relief. The City of Houston, which 
    received thousands of evacuees from New Orleans, was the 
    first to ask for a waiver of CDBG's 15 percent cap on 
    public services. This request was granted for the states in 
    the Gulf region, providing communities more flexibility to 
    help their citizens.
 HUD launched the Universities Rebuilding America 
    Partnership (URAP) program in an effort to empower college 
    and university students to utilize their talents to help 
    rebuild the impacted communities. In partnership with the 
    Corporation for National and Community Service, HUD 
    announced these two grant programs totaling $5 million.
 In order to ensure access to affordable housing free 
    from discrimination, HUD's Office of Fair Housing and Equal 
    Opportunity deployed staff to assist evacuees reporting 
    housing discrimination.
 As previously discussed, HUD will administer $11.5 
    billion in supplemental funding for the disaster areas 
    through HUD's Community Development Block Grant (CDBG) 
    program. In addition, the President has asked for another 
    $4.2 billion in CDBG funds for Louisiana's unique 
    mitigation needs.
 USDA is assisting rural families with funds to rebuild 
    and repair their damaged homes. Approximately $20 million 
    is being made available for grants, $210 million for direct 
    loans, and $1.3 billion for guaranteed loans.

Q.9. Much of the attention on housing recovery has focused on 
homeowners. However, a high percentage of rental units also 
sustained serious damage and renter households have less 
influence over the process that leads to unit repair and 
replacement. How do you expect the timeline for rental housing 
recovery to compare to that for owner recovery? How do you 
expect the timeline for affordable housing recovery to compare 
to that for other rental housing? What mechanisms will be put 
in place to track rental households and inform them of their 
options as repair and rebuilding of rental units proceeds? Will 
there be a means by which displaced renter households can 
provide input into the redevelopment of their units and 
communities?

A.9. As previously stated, one of the main principles which 
guide our office is that rebuilding plans should come from the 
local people in the affected areas of the Gulf Coast. The 
Louisiana Recovery Authority (LRA) is creating a plan for 
reviving the city's rental market to provide needed homes. LRA 
has also indicated they plan to use $1.75 billion from expected 
Federal Community Development Block Grants to help landlords 
renovate or rebuild properties damaged by hurricanes Katrina 
and Rita, with a mix of low-interest loans and low-income 
housing tax credits likely to be used. We expect plans allowing 
other States to address these needs are forthcoming.

Q.10. Financial institutions and the Mortgage Bankers 
Association have recommended financial counseling for the 
evacuated families. Does the Administration plan on providing 
financial counseling to those Katrina and Rita affected?

A.10. The Administration is actively engaged in an effort to 
provide financial counseling to those in the affected region. 
Several of these initiatives are described below:

IRS

    As a part of these efforts, the Internal Revenue Service 
recently announced an agreement with two tax professional 
associations to assist taxpayers impacted by Hurricanes 
Katrina, Rita, and Wilma. Volunteers at IRS' Volunteer Income 
Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) 
sites are now able to refer hurricane-affected taxpayers 
needing help with relatively complex tax issues to 
participating members of the American Institute of Certified 
Public Accountants (AICPA) or the American Association of 
Attorney-Certified Public Accountants (AAA-CPA) for free return 
preparation assistance.

SBA

Louisiana

    SCORE, Small Business Development Center (SBDC), and SBA 
District Office personnel have been very active in the 
financial counseling area. The SBA District has conducted 
financial workshops in the cities of Kenner (New Orleans 
airport area) and New Orleans' civic center with over 500 
attendees. In the cities of Baton Rouge and Lafayette, the SBA 
has conducted lending workshops in partnership with the 
Louisiana Economic Development Department. The SBA has also 
conducted ``Back-To-Business'' workshops in Lake Charles and 
Alexandria and a faith-based business workshop in the city of 
Hammond. SBA Government Contracting programs include financial 
components to each of its training programs. This has included 
one-on-one counseling to 100 businesses and contractors and a 
seminar in New Orleans with approximately 500 small businesses 
in attendance.
    SBDC's have provided one-on-one counseling to 649 
individuals and have conducted 64 training events with over 
1,424 attendees.
    SBA is a founding partner of the Urban Entrepreneur 
Partnership (UEP), which will be providing the full spectrum of 
training and counseling services to all 8(a) companies located 
in the affected areas of the Gulf. The Partnership was 
announced by President Bush at the July 2004 National Urban 
League annual conference in Detroit, Michigan and launched at 
the National Press Club in October 2004. The UEP is a 
partnership between the White House through the Small Business 
Administration and Minority Business Development Agency, the 
National Urban League, the Ewing Marion Kauffman Foundation, 
and the Business Roundtable. The UEP combines private and 
public sector resources to foster minority entrepreneurship, 
business development, and job creation in historically 
neglected and economically underserved urban areas nationwide.

Mississippi

    Soon after Katrina hit on August 29, counseling was 
provided throughout Mississippi to disaster (business) victims 
by the Mississippi Network of Small Business Development 
Centers at shelters and in bank branch offices offered by SBA 
lender Hancock Bank, who provided office space to help disaster 
victims with loan applications. The bank branch offices were 
set up as Business Assistance Centers and they opened in early 
September and closed in early December.

Alabama

    The SBA conducted a week long financial counseling seminar 
in Mobile in November right after the storm as part of its 
business disaster assistance event with the Mobile Chamber of 
Commerce. Also, the SBA conducted a 2-day seminar in Birmingham 
in early December, where financial counseling was part of the 
program. The SBA had a 2-day event in Huntsville, sponsored by 
the Huntsville Times, Huntsville Chamber, TVA, and NEAR. 
Commercial Financial counseling, run by SBA resource partners 
was part of the program as well.
    The SBA has small business lending clinic, where financial 
counseling will be available March 16 in Mobile. There will be 
financial counseling seminars at the Mitchell College of 
Business, in Mobile May 9, July 11, September 12, and November 
11.
    In the Birmingham SBA District office, financial counseling 
clinics are held the second Tuesday of each month.
    By request any business in the disaster affected region can 
request one-on-one counseling from the Baldwin County SCORE, 
Mobile City SCORE, South Alabama Women's Business Center, and 
USA SBDC. The Women's Business Center conducts business 
accounting and capital management counseling every month in 
partnership with the Business Innovation Center in Mobile (the 
city business Incubator).
    The SBA has not done any personal financial counseling to 
any individuals in Alabama unless they are small business 
owners.

Houston, Texas

    The Houston District Office and members of the Houston 
Association of Government Guaranty Lenders (HAGGL) provided 
business consulting as active participants in two Katrina 
Business Owners Resource Fairs held in September, the City of 
Houston Mayor's Disaster Relief Job Fair held at the George R. 
Brown Convention Center in October, and two events for the 
Southeast Texas Hurricane Recovery Conference held in Groves 
and Sabine Pass in February. The Houston SBA District Office 
has also provided business consulting while participating in 
contracting opportunity conferences with Exxon-Mobil and the 
SBA NASA/JSC-based procurement center representative, and 
Katrina/Rita recovery job fairs held by the University of 
Houston-Small Business Development Center and Houston Community 
College. In addition, members of HAGGL participated in disaster 
recovery meetings held by Lamar State College-Orange in 
October. The Houston SBA District Office has incorporated 
disaster recovery consulting into its ongoing 8(a) business 
matchmaking and 7(a) guaranty lending events. The SBA also 
provided disaster recovery information to HAGGL members in 
addition to continuous encouragement for them to promote the 
Gulf Opportunity pilot loan program. In addition, the City of 
Houston Mayor's Katrina/Rita Working Group meeting is to be 
Monday morning, March 20.

DOL

    The Employment and Training Administration funded the 
Hurricane Reintegration Counselor Initiative, which currently 
is funding 155 highly trained social worker/counselors in the 
Nation's One-Stop Career Center delivery system. The counselors 
provide intensive career counseling directly to Hurricane 
evacuees in One-Stop Career Centers, evacuee centers, or other 
facilities with high concentrations of evacuees.
    Evacuees in need of financial services are referred to 
resources available within the community. These services could 
be those funded through FDIC or the Internal Revenue Service, 
which have on-going training opportunities through the One-Stop 
Career Center system.
    Twelve States (Arkansas, Alabama, Florida, Georgia, 
Kentucky, Louisiana, Missouri, Mississippi, Oklahoma, 
Tennessee, Texas, and Virginia) were selected to participate in 
the Initiative due to their concentration of individuals 
displaced by the hurricanes.
    In addition, on the Hurricane Recovery Website, 
www.servicelocator.org/hurricaneservices, counselors are 
provided with resources related to personal financial 
management. This tool contains an array of information to 
assist evacuees with their financial needs.
    A fact sheet is also available at http://www.dol.gov/opa/
hurricane-fs2.htm.
    In addition, the Department of Labor has also provided 
National Emergency Grants (NEG) under the Workforce Investment 
Act NEG Disaster Relief Employment Assistance Program and the 
Flexibility for Displaced Workers Act (P.L. 109-72). More than 
$191.1 million was provided to States directly impacted by the 
hurricanes including Alabama ($4 million), Louisiana ($62.1 
million), Mississippi ($50 million), and Texas ($75 million) 
for temporary disaster relief jobs to assist in clean up 
activities and to train the affected workers in high-demand 
occupations in order to create a more skilled labor force. 
These funds are projected to assist approximately 63,000 
individuals. In addition, DOL awarded $16 million to evacuee 
States to assist more than 20,000 evacuees by placing evacuees 
in temporary public sector employment, working on projects that 
provide humanitarian assistance to other evacuees, and 
providing training in high-growth demand occupations. Since the 
recovery efforts in the Gulf Coast region began, more than 
48,200 individuals have been provided either temporary jobs or 
other workforce services under the National Emergency Grants, 
with almost 5,800 individuals currently enrolled in temporary 
jobs. As of the last week in March, over 3,800 hurricane-
affected workers were enrolled in training programs in 9 
States, with another State set to launch a large retraining 
effort in the next few weeks.

FEMA/HOPE Coalition America

    In coordination with the U.S. Department of Homeland 
Security's Federal Emergency Management Agency (FEMA), Project 
Restore HOPE is offering free financial counseling and 
resources, economic assistance and budgeting advice to 
hurricane victims. These services are being delivered through 
one-on-one counseling in disaster-affected communities, at FEMA 
Disaster Recovery Centers, online and by phone from new call 
centers in Poway, California, and Dallas, Texas. The 
initiative, created by HOPE's economic emergency response 
division HOPE Coalition America (HCA--a partner of FEMA), 
provides disaster survivors with free financial counseling and 
advice through one-on-one counsel, financial help lines and 
online case management, facilitating their return to normalcy. 
Volunteers include professionals from the banking and financial 
services, insurance, and other industries.

         RESPONSE TO WRITTEN QUESTIONS OF SENATOR REED 
                    FROM MARTIN J. GRUENBERG

Q.1. Foreclosures in the hurricane-affected areas significantly 
increased in the third quarter of 2005. What is the likely 
scale of foreclosure over the next 2 years and how will large 
scale foreclosure affect rebuilding efforts?

A.1. It is difficult to estimate the likely scale of 
foreclosures over the next 2 years and the impact of 
foreclosures on rebuilding efforts. While foreclosures have 
risen in the hurricane-affected States, we do not have specific 
information from the affected areas showing a clear relation 
between the rise in third quarter 2005 foreclosure rates and 
the hurricane. Some of the increase may actually relate to the 
recent change in the bankruptcy laws. Our previous experience 
with natural disasters suggests that bankruptcy filings in the 
affected areas did not significantly rise until 2 to 3 years 
after the disaster. In addition, insured institutions have been 
actively working with their customers by deferring loan 
payments, extending repayment terms, and restructuring existing 
loans, where appropriate. The Federal banking agencies will 
continue to encourage financial institutions to work with 
borrowers affected by the hurricanes. Area rebuilding efforts 
will most likely be impacted by general business conditions, 
Federal Government assistance, the availability of jobs, 
potential changes in building codes, and any environmental 
problems that need to be resolved.

Q.2. Financial institutions and the Mortgage Bankers 
Association have recommended financial counseling for the 
evacuated families. What is the most effective means for 
providing such counseling to Katrina- and Rita-affected areas?

A.2. Effective means for providing financial counseling include 
one-on-one financial counseling and family based counseling. 
Personal interaction is often the most effective way to convey 
information and bring about a change in behavior. The FDIC is 
currently partnering with community organizations, such as 
Neighborhood Housing Services, Neighborhood Development 
Foundation, Southern Mutual Self Help Association, New Hope 
Community Development Corporation, and other community groups 
and financial institutions to deliver Money Smart \1\ and 
related group instruction, as well as individual counseling 
assistance, to consumers in areas damaged by Hurricane Katrina 
and the areas to which evacuees were relocated. Through these 
collaborations partnership staff members provide financial 
counseling, guidance, and assistance in local offices 
throughout the Gulf Coast States, in disaster recovery centers, 
and by phone to those affected by the storms.
---------------------------------------------------------------------------
    \1\ In 2001, the FDIC created Money Smart, a training program to 
help adults outside the financial mainstream enhance their money skills 
and create positive banking relationships. The Money Smart curriculum 
helps individuals build financial knowledge, develop financial 
confidence, and use banking services effectively.

Q.3. In the best case scenario, what percentage of small 
financial institutions do you expect to go out of business 
because of the hurricanes? What percentage do you expect in the 
worst-case scenario? How would each scenario affect rebuilding 
---------------------------------------------------------------------------
efforts and the Gulf economy?

A.3. It is very difficult to make any kind of predictions about 
the future prospects of financial institutions affected by the 
hurricanes because of the large number of variables involved in 
rebuilding and revitalizing the communities they serve. As 
stated in my written testimony, over the medium-term horizon, 
the greatest source of uncertainty and concern is the effect of 
the hurricanes on credit quality. Over the long-term horizon, 
the prospects for these financial institutions will be 
determined largely by the economic prospects of the communities 
they serve. The headquarters of 120 institutions are in the 
designated disaster counties and parishes. Through the 
supervisory efforts of Federal and State regulatory agencies, 
we have narrowed our focus from the initial group of 120 
institutions to a small group of institutions, which we will 
continue to monitor more closely. The FDIC is committed to 
doing everything possible to assist these institutions to meet 
the challenges ahead and contribute to the recovery of the Gulf 
Coast region.
