by Gary Rivlin
THE LAYOFFS POST-KATRINA WEREN’T as wrenching as McDonald had feared. People were in Atlanta or Houston or Chicago, and their children were already attending a school. Others felt incapable of getting themselves back to the region. They were in Tampa or Memphis or Oakland, California, because that’s where they had people, and they were too traumatized to face all that they had lost. Some employees apologized to him that they weren’t available to pitch in when the bank needed them. As of the one-month anniversary of Katrina, Liberty had 41 of its 150 employees back on staff. Of the rest, just under 40 percent said they wanted to return to work but couldn’t through at least the end of the school year. Twenty-eight people—nearly one in five employees—still hadn’t checked in.
McDonald seemed to have little trouble settling into his new Baton Rouge life. He replaced his rent-a-car with a silver minivan, and he started looking for a house. He figured it would be at least a year before he and Rhesa were living back in New Orleans. The drive down to the city from the state capital was usually a two-hour trek with so many people using Baton Rouge as a temporary base. Home in New Orleans became the RV he bought so at least he had a bed in town. It sat in the Liberty employee parking lot for three years.
On Mondays, McDonald was in New Orleans for the Bring Back New Orleans meetings. Often he stayed the night to take care of other business he had in the city, but the pull of Baton Rouge was still strong: That’s where his staff was housed and for the moment the bank examiners felt more comfortable meeting someplace other than New Orleans. It wasn’t uncommon for him to make a second trip to New Orleans each week as the center of gravity shifted back to the city. Every other weekend he tried to make it to Atlanta to spend time with Rhesa.
IN MID-OCTOBER, SIX WEEKS after Katrina, McDonald snuck away to Europe to join Rhesa and a group of their friends on a cruise of the Greek islands. The launch point for the cruise, which had been organized before Katrina, was Rome, a city Rhesa had always wanted to see. The original plan had them spending a week there before joining their friends. McDonald begged off that part of the trip, so rather than enjoying a second honeymoon, Rhesa hung out with two girlfriends in the $700-a-night suite that McDonald had booked months earlier as a gift to his wife—another empty-nest splurge by a couple accustomed to far more modest accommodations. McDonald nearly didn’t make the second half of the trip, either. Arriving in Atlanta a few hours early for his connecting flight to Rome, he headed to the plane’s slated departure gate and fell asleep. A last-minute gate change meant that a groggy McDonald was pleading his case to a gate agent ten minutes before the flight, by which time the airline had given away his seat. His break came when he looked down at her ID badge and saw that her name was Katrina. “You’re not going to believe this,” he began. This kinder, gentler Katrina secured McDonald a seat. From the airport in Rome he headed straight to the ship—then fell asleep in the wrong cabin.
McDonald appeared rested and calmer after his return. He even dressed differently, dropping the polos and short-sleeved cabana shirts that had been his attire since the storm. After Rome, casual might be a pair of gray slacks and a white dress shirt stamped with the green Liberty Bank logo that someone had found lying around the Baton Rouge branch. Dressing up meant wearing the blue blazer he had bought for himself after the storm and choosing from among the three new ties he now owned.
The bank reopened its first branch in New Orleans in early October, six weeks after Katrina. Lines formed every morning outside the doors of this Liberty outpost on Magazine Street in the Garden District—its sole property inside the city limits that escaped Katrina relatively unscathed. The wind had caused a bit of cosmetic damage to the facade of this white-columned building, but nothing—neither water nor looters—–had harmed the marble floors or dark-wood decor. “We have people arriving in from all over,” said Anderson Williams, the lobby guard. One day it was a couple who had driven from Atlanta and another who had flown in from Los Angeles. People arrived to fill out change-of-address cards and to order new checks, but mainly they were eager to learn what was expected of them now that they had lost everything, including a weekly paycheck.
Barbara and Robert Emelle, the couple who had flown in from L.A., were retired after careers in the Orleans Parish schools. He had worked as a gym teacher, she as an administrator. These lifelong residents of New Orleans had been with Liberty since its days in a trailer on Tulane Avenue, but after visiting their home in New Orleans East, they were on Magazine Street to close their account. “Totaled,” Robert said. “We concluded we’d be taking too big a chance rebuilding,” Barbara said. Instead they would look to buy something in Atlanta.
The manager of the Magazine Street branch, Sheila Howard, had been with Liberty for nine years. On the Thursday after Katrina she had shown up at the Baton Rouge branch ready to work. She was living with family in Gramercy, a small town fifty miles west of New Orleans. Donna Walker, a thirteen-year Liberty veteran who had worked in New Orleans East prior to the storm, was staying with family in the West Bank. A pair of tellers fortunate enough to live in a dry part of the city handled deposits and withdrawals while Howard and Walker cared for customers arriving with more complicated issues. A sitting area that could accommodate a half dozen wasn’t nearly big enough, so they brought in extra folding chairs and set them up wherever space was free. A meeting with either Howard or Walker meant waiting an hour or more.
“We’d bring on more employees, but housing is an issue,” Howard said. Eventually, two more employees were dispatched to Magazine Street, but only temporarily. They would be needed across the river once repairs were completed on the West Bank branch, which opened at the end of October. McDonald then hired a marketing company. “I want to get out the word that we’re alive and well,” McDonald said.
The lines at Liberty’s two New Orleans branches were welcome news, but more people in the city meant they were short-staffed in Baton Rouge. McDonald also had no idea when he might reopen a branch in a flooded part of the city. “Where will the jobs come from?” McDonald asked. “And if there’s jobs, where will people live and where will their kids go to school?” Even McDonald himself couldn’t say for certain he would rebuild. In November, he closed on a three-bedroom house he had found near Southern University in Baton Rouge for $150,000. Rhesa and her parents moved in with him during Thanksgiving week. Rhesa searched for doctors for her parents while shopping for the furniture and other items they needed to make Baton Rouge home.
Cash flow was a big worry. People needed capital if they were going to rebuild, and the bank needed to start lending again to make money. McDonald unveiled what he dubbed Katrina Investment Deposits, or KIDs. These were nothing but certificates of deposit, or CDs, offering a below-market interest rate wrapped in a feel-good package. The going rate for a CD then was 5 percent, but McDonald was offering interest rates of between 2 and 2.5 percent. “If I can get a hundred friends and banks and corporations from around the country to send me one hundred thousand dollars, that’s ten million dollars,” McDonald said. “If I get two hundred, that’s twenty million dollars.” By October 31, a friend of McDonald’s who ran a big investment fund in Boston had secured roughly $5 million in commitments, primarily from other banks willing to help one of their own. That money would be used to jump-start home lending, Liberty’s primary profit source.
Friends in high places could prove critical in the coming months. McDonald had met with Bill Clinton when the former president visited New Orleans a few weeks after Katrina. McDonald had spoken about his decimated bank with the Reverend Jesse Jackson and also with Andrew Young, the former Martin Luther King aide who served two terms as Atlanta mayor. His two most important allies, however, might prove to be a pair of white men who ranked as two of Washington’s more successful lobbyists, Robert Livingston and John Breaux.
Former US senator John Breaux, a Democrat, had represented Louisiana in Congress for thirty-two years before retiring the year prior to Katrina and taking a position at
lobbying giant Patton Boggs. Robert Livingston, a Republican, had represented New Orleans in Congress for twenty-two years. He was several days from taking over as Speaker of the House in 1998—until Larry Flynt, the publisher of Hustler, responded to the impeachment of Bill Clinton by offering $1 million to anyone digging up sexual dirt on a Republican member of Congress. Exposed as an adulterer, Livingston resigned from Congress in 1999 and opened his own lobbying shop called the Livingston Group.
Breaux and McDonald, who had known one another for at least twenty-five years, spoke after Katrina. McDonald followed up their conversation with a list of items he wanted to see in any recovery package, including a provision dictating that a minimum share of federal aid must be funneled through smaller banks in the region. Breaux assembled a team inside Patton Boggs to work on what he dubbed a Financial Industries Working Group and offered comments that negated the happy talk dreamed up by the marketing firm McDonald had hired. “What we’re trying to do,” Breaux said, “is figure out how the federal government can help keep them open.”
McDonald didn’t know Livingston as well as Breaux, but the former Republican lawmaker offered to help. If ever McDonald doubted Livingston’s influence, any disbelief was dispelled when a couple of weeks after Katrina, McDonald complained of some problem he was facing—and by day’s end he was talking with someone inside the White House. Asked why he was offering his services at no charge to someone he didn’t know well, Livingston responded, “This is a particularly acute situation given this is the largest African-American bank in New Orleans.” He would push both the White House and Congress to require that at least $6 billion in federal aid flow through Liberty and the other community banks. “Without that,” Livingston said, “I don’t see how Liberty survives.”
11
BLUE SKY
Boysie Bollinger settled into a conference room on the second floor of the Sheraton Hotel on the last day of September. Bollinger, the CEO of Bollinger Shipyards, had spent much of the past month overseeing the cleanup of a pair of wrecked facilities his company operated in the area. He arrived at the Sheraton for this first meeting of the mayor’s Bring New Orleans Back Commission thinking he already knew how dire the city’s situation was. Then he sat through the PowerPoint presentation the mayor’s team had prepared. “The scope of the devastation was hard to comprehend,” Bollinger said.I More than one hundred thousand homes in the city had been damaged, and most every business was shuttered. Even the weight of the water on the streets for all those weeks meant broken roads all over the city—and an untold number of cracks in the sixteen hundred miles of waste- and drinking-water pipes beneath them.
“That was the meeting where we scared everybody so bad,” Nagin said, “I felt obliged to tell them it was okay if they didn’t want to come back for meeting number two.”
The most daunting moment for Bollinger came when fellow commissioner Dan Packer, the CEO of Entergy New Orleans, rose to talk about the city’s electric and gas systems. Packer told them about the ruined substations, switchyards, and power plants and confessed that the utility had no idea when they might be able to restore power in much of the rest of the city. He also said it was too early to tell how many tens of miles of cracked gas lines they would need to replace. First they needed to flush out the salt water corroding a system that was more than a century old.
Marcia St. Martin gave a similarly dire presentation. Her agency may have pulled off a miracle when it dewatered the city in three weeks, but that was only step one in fixing a devastated water and sewer system. Just prior to the storm, St. Martin had instructed her people to open the valves and dump raw sewage into the Mississippi. The decision, while controversial, was smart given the flooding, but one month later, sixty-six of the pump-and-lift stations her agency used to move wastewater were still not operational. Her people were installing temporary pumps and generators around the city, but meanwhile, whatever people flushed down the toilet—“untreated product,” St. Martin called it—was still being dumped in the river. The agency’s two waste-treatment plants had been badly damaged, and one of the agency’s two giant water-purification plants was incapacitated. Even the water they were drinking that day at the Sheraton had been trucked from the West Bank.
One-quarter of the city’s police cars had been destroyed in the flooding. More than half its fire engines were lost along with a large percentage of its ambulances. More than 200 of its 272 buses had been destroyed. Each bus would cost around $300,000 to replace unless the city upgraded to hybrids; then the cost would be closer to $500,000. The RTA didn’t lose any of its St. Charles streetcars, but falling tree limbs had destroyed the overhead wiring that powered them. But the two dozen pristine streetcars used on the old Canal Street line the agency had revived only sixteen months before Katrina were damaged. All twenty-four would need to be refurbished at a cost of nearly $1 million apiece.
The city could count on FEMA to cover a large share of the damage. But the federal law that spells out the rules of disaster assistance, called the Stafford Act, stipulated that the federal government would only reimburse for overtime pay, not base salaries, and capped at $5 million the amount a municipality could borrow to cover its operating expenses. The city had an annual budget of around $500 million and six thousand people on its payroll. The city normally collected an average of $13 million in sales taxes each month, “but we expect that number to be closer to zero for the foreseeable future,” Reggie Zeno, the city’s finance director, told the group. The city’s second-largest source of revenue, property taxes, was also unreliable. The tax was based on the assessed value of a property, but what was a person’s home or business worth in New Orleans East or Lakeview? The parking tickets people wouldn’t be paying in a near-empty city; the taxes New Orleans imposed on the utilities, which were largely out of commission—these and other fees added up to millions more in missing revenues. The city owed payments on more than $300 million in bonds. Yet its only reliable source of funds, Zeno told them, was the $1.5 million Harrah’s was required to pay the city every month even as its casino doors remained closed. Widespread municipal layoffs seemed inevitable.
The bad news kept coming. More than 100 of the public school system’s 128 buildings had seen flooding, including the district’s headquarters. The commissioners also learned that the city was without a criminal justice system. The local courts were closed indefinitely and the evidence room flooded. The parish prison took on four feet of water at its main complex, rendering it unusable. Inmates awaiting trial had been dispatched to prisons around the state, where they remained in a holding pattern.II The city aquarium, one of New Orleans’s leading tourist attractions, had lost five thousand fish and other creatures in Katrina, and City Park, at thirteen hundred acres one of the country’s largest urban greenspaces, had lost a thousand trees during the storm; another thousand were on the critical list. All trade shows and annual meetings scheduled for New Orleans had been canceled through at least March 31, 2006, in a city third only to Las Vegas and Orlando in convention business.
The city’s damaged flood-control system barely earned a mention that day, but that didn’t make it any less pressing a problem. “As far as I’m concerned, the levee system is the number one issue,” Boysie Bollinger said. “Because if you can’t protect what you’re talking about rebuilding, what’s the use of doing anything?” But Bollinger, a generous donor to the Republican Party, was nothing if not a realist. “In the last hundred years, we’ve had less than five Category Fives hit America,” he said. Could the city reasonably expect the US government to pay for a system strong enough to withstand a Category 5 storm when the city’s list of needs was so long?
Another question no doubt preoccupied many in the room that day: Should the city permit people to rebuild wherever they wanted, even if that meant they were putting themselves in harm’s way again, or should the city ban rebuilding in the lowest-lying parts of the city? Even if they allowed people to rebuild wherever they wanted, would they
have the money to promise police, fire, and other city services to the whole city? Once a city of 625,000, New Orleans was down below 500,000 people by Katrina—and who knew if and when the population would get back to even 300,000? “It will be a smaller New Orleans,” Alden McDonald said. “Except no one has decided which part.”
A KIND OF BLUE-SKY syndrome infected New Orleans after Katrina. To many, a flooded New Orleans meant a blank slate on which to create a new and better city. “Build up, not out” was a familiar mantra voiced in the weeks after Katrina. Entire neighborhoods were being reimagined as parklands, while other parts of the city would be transformed into mini-metropolises thick with condo developments. The mayor used the Bring New Orleans Back Commission to avoid voicing any opinion on the city’s future. “We’ve put a process in place,” he repeated. “Now let that process work.”
For residents, though, the mayor’s commission seemed one more irritant to endure. People’s displeasure was a constant on WWL, which was still the only radio station operating in New Orleans. Ann Marie was on the line from Gentilly, carping to talk-show host Garland Robinette about the mayor’s putting their lives on collective hold for at least three more months. One heard the frustration when the Wall sisters and their neighbors gathered on Monday evenings at True Light Baptist. “We’re not pieces on a chessboard for people to play with,” boomed a speaker at one early meeting at True Light Baptist.
Would Lakeview be included on a citywide “do not resuscitate” list? And even if not, what would the neighborhood be like if only half its residents chose to rebuild? Two people not waiting to find out were Artie Folse and Tonja Osborne. Every day, Folse and his eighty-year-old father showed up at their house in Lakeview. Working eight- and ten-hour days, they cleared out the ruined furniture and other debris before turning to the mold. “You scrubbed, bleached, and let everything dry out—and then did it again,” Folse said.