Katrina: After the Flood

by Gary Rivlin

  One week after Blanco’s oil-lease threat, Powell summoned Blanco and Nagin to Washington for a hastily arranged press conference. There he announced that the president would seek $4.2 billion in compensation for Louisiana homeowners—on top of the state’s share of the $11.5 billion in block grants Congress had appropriated at the end of 2005. Blanco used the bulk of that money—$7.5 billion—to fund Road Home.

  Twice Blanco had stood up to the president of the United States—and won. Despite pushback from the legislature’s black caucus, she had acted decisively when she slashed nearly half a billion dollars from the state budget two months after Katrina; she had engineered a state takeover of New Orleans’s failing schools. Yet the soft-spoken, sixty-two-year-old Blanco didn’t demand the spotlight like a lot of politicians. She was who she was—a matronly looking grandmother and earnest public servant who would never act like the former mayor of New York after September 11. “I’m not a guy,” she told the New York Times’ James Dao that winter. “I can’t be Rudy, whatever that is.” Instead of praise for strong leadership, New Orleans talk-radio hosts mocked her as weepy and in over her head. Drivers applied DON’T BLAME ME, I VOTED FOR JINDAL bumper stickers to their cars.

  When announcing the launch of Road Home in March, Blanco called it “our ticket to rebuild, recover, and resume our productive place in our nation’s economy.” The ads the state commissioned to advertise the program called it “Gov. Kathleen Blanco’s Road Home.” People around the governor imagined putting all those five- and six-figure checks in the hands of Louisiana voters. To their mind, Road Home would cinch her reelection, but Blanco herself was dubious: “I told my staff, I said, ‘This sounds like a politician’s dream, to hand out cash. Federal money.’ But I told them, ‘It’s going to be miserable. Because there are people who are going to think it wasn’t fairly done. No matter how fairly we structure it.’ ”

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  I. But not Lakeview, given its proximity to City Park and other parklands there.

  II. Those with an assessment above 50 percent qualified for up to $30,000 in federal grants to underwrite the cost of raising a home.

  III. FEMA had its rigid ways, but Meffert was a computer geek before he was a top city official. “We took their formula and burned it into our kiosks,” Meffert said. FEMA carried through on its threat of an audit, but the city had the documentation they needed under FEMA guidelines to modify a number. The city passed its inspection without any problem.

  16

  LIMBO

  Christmas in 2005 for the McDonalds had been low-key. The children flew to Baton Rouge, rather than New Orleans, the family’s home base for the foreseeable future. Christmas was more somber than in years past, but the holiday also took on larger meaning. They had all survived Katrina. “We had a lot to be thankful for,” McDonald said. The kids joked that for once it was easy to pick out gifts for their parents, who pretty much needed everything.

  The McDonalds tried not to think about all they had lost in the flooding, but with everyone taking snapshots, it was hard not to brood over the missing photographs and memorabilia. They’d stored most of their pictures upstairs, but their favorites were in scrapbooks on the ground floor, destroyed with everything else. McDonald had boxes of newspaper clippings and photos, along with other keepsakes. He kept the boxes in a nearby storage facility that also flooded.

  They tried not to think about their house in New Orleans. McDonald’s seat on the mayor’s panel only made him more aware how uncertain the future was for communities such as his. Yet his insurance company was giving him until the middle of January to send them an itemized list of his house’s contents. “They’re asking me to write down everything I had in the house and how much I paid for it,” McDonald said. That’s how he spent his free time during the holiday break.

  McDonald had agreed to serve on the Bring New Orleans Back Commission thinking that he would help prevent the city from devising a plan that treated the hardworking poor different from others. Yet he couldn’t play hero when his fellow commissioners barely even mentioned the city’s hardest-hit neighborhoods. Instead McDonald focused on smaller but critical issues such as the disconnect between the pre-Katrina price of a person’s home and the post-Katrina cost to make it habitable. By McDonald’s calculations, a modest, twelve-hundred-square-foot home in the Lower Ninth Ward was worth maybe $70,000 at the time of the storm. The same home in the Seventh Ward, where he grew up, might be worth $90,000. Yet the price tag for restoring either home would exceed $100,000. The spread in middle-class Gentilly was disturbing, too. There, a twenty-five-hundred-square-foot home worth maybe $200,000 before Katrina would cost roughly $250,000 to fix up. A lot of his neighbors in New Orleans East would be looking at the same problem. An estimated two-thirds of the damaged homes in New Orleans were valued at less than $125,000, but it would take a lot more than that for most to rebuild. “Some of us knew if we used pre-Katrina assessments for compensating people,” McDonald said—as the governor was proposing to do under Road Home—“nobody in the black community was coming out anywhere near whole.”

  His neighbors may have resented members of the ULI as outsiders, but McDonald saw them as a talented team of housing experts and financial wizards who could help him think through his ideas. For most of the week the ULI was in town, McDonald described himself as “holed up in a hotel room with all these brilliant minds,” wrestling over a plan that would let people rebuild regardless of what an assessor or an insurance company had said their home was worth before the storm. The blueprint they concocted after three days and nights sought to reshape New Orleans without needing to impose a ban on anyone.

  Their plan included a land bank funded with federal dollars. This newly formed entity would take ownership of abandoned properties that people couldn’t afford or didn’t want to rebuild. The homeowners wanting to rebuild in, say, a more vulnerable section of the Lower Ninth could do so on their own using their insurance money—or they could choose a refurbished, like-size home through the land bank in a neighborhood the city wanted rebuilt. That would help guard against the jack-o’-lantern effect.

  McDonald went further when he imagined the city focusing its resources on a community such as Pontchartrain Park, the first subdivision in the state of Louisiana to accept black homeowners when it opened in the 1950s. The residents of Pontchartrain Park tended to be older African Americans. Some couldn’t imagine living anywhere else, while others couldn’t fathom starting over. The Lower Ninth Ward also had an older population. What if New Orleans used redevelopment dollars, McDonald asked, to build a senior center in Pontchartrain Park? “Bring in an emergency health care center,” he said. “A dialysis center. A walkable grocery store. You make it nice—a rec center, a movie theater—and come up with a transportation plan.” Two things would happen, McDonald argued. The city would draw back residents of Pontchartrain Park who wanted to return. And officials would mollify some who felt the government was angling to seize their property.

  McDonald’s proposal was included in the Bring Back New Orleans Commission’s final report. So, too, were ideas he contributed to its economic-development and education committees. “My hope at this point is that the leadership finally shows some leadership,” McDonald said in February, one month after the commission’s report had landed on Nagin’s desk. McDonald might even have spent more time feeling frustrated in the coming months if he didn’t have a bank to rebuild.

  IF THE EARLY DAYS of Liberty’s recovery had been about reconnecting with its customers, phase two, as McDonald took to calling it, was about taking stock. The bank’s biggest vulnerability was its home-loan portfolio, so McDonald created a team to track down every last mortgage holder. Once their computer systems were operational again, they could see what insurance companies a homeowner used. They requested copies of the policies, which they would use to coach property owners on what they needed to say to their insurer. If the initial offer from an insurer was too low, someone with the bank would w
alk a loan customer through the appeals process. The bigger the settlement check for the homeowner, the less likely the bank would take a loss on a loan.

  Reconciling the books proved painstaking as McDonald’s finance people sought to account for each check lost during the storm. The physical cleanup was endless. Liberty hired an outside crew to gut and clean its water-damaged properties, but the thankless job of sifting through waterlogged file cabinets, folder by folder, looking for any paperwork that had survived the flooding, fell to bank employees wearing protective gear. Another enormous job had them itemizing every last item damaged in the flood for the bank’s insurance company and accounting for storm-related expenses. McDonald or his people had been meeting with adjusters for months, he said in January, “but so far we haven’t gotten a single check for a single roof on a single building.”

  Phase two was also about finding new business. Every day more longtime customers were closing accounts because they were living nowhere close to a Liberty ATM. McDonald anticipated the bank would be losing thousands more. McDonald initiated conversations with Walmart and other big-box retailers about in-store banking centers (he’d end up opening just two mini-branches in Walmarts) and pursued more business with large corporate depositors, such as Aetna and American Express, which were already Liberty customers. He also looked into the idea of opening strip-mall loan centers—storefronts that would make the kind of small-denomination loans Liberty specialized in earlier in its history. McDonald was thinking about Louisiana, but also Texas and Mississippi.

  Mainly, though, McDonald focused on rebuilding his battered home-mortgage business, the biggest source of bank profits prior to Katrina. He hired someone to start spreading the word among mortgage brokers throughout the area that Liberty was offering 100 percent mortgage financing. His KIDs program—the CDs he sold at below-market interest rates—had brought in an extra $10 million in cash. That’s the money he’d use to fund these no-down-payment home loans. In less than three months, Liberty’s staff approved $10 million in home loans—a fraction of the $10 million a month they averaged prior to Katrina, but at least the bank was generating loan fees again and earning a higher interest rate on its money.

  The Liberty mortgage team completed its assessment of its loan portfolio shortly after Christmas. An astonishing 98 percent of its home-loan customers carried flood insurance. Staffers cheered when the mortgage department announced that very few homeowners had allowed their flood insurance to lapse, but McDonald reminded them that only meant moving on to the next battle: “Now the question will be, did they have enough coverage?” The bank would also have to be patient, McDonald said, as he reminded everyone of the drawn-out battles they were all waging with their own insurance companies. The bank was buying new furniture and computers without being certain their insurance would reimburse them. They were spending tens of thousands more on the cleanup. Three times a week they were refilling the generators that kept the air circulating inside the bank’s headquarters—at $150 a pop.

  They had also gotten bad news from Washington. McDonald’s friends in high places had tried but failed to include language that would have required the feds to rely at least in part on smaller community banks such as McDonald’s when disbursing the billions in recovery funds that would slosh through the Gulf Coast. Liberty would be on its own in its search for new business, as would every other community bank across the region.

  Yet McDonald was feeling optimistic. The new year saw McDonald back in a jacket and tie. The bounce had returned to his step as he worried less about survival and focused more on rebuilding. He opened a branch in Gentilly, a middle-class black neighborhood, and people were starting to make loan payments again now that the four-month moratorium the bank had granted to customers in flooded parts of the city had ended. Not everyone was making regular payments again, but most were, and even most of the delinquents had worked out a payment plan. It felt like the bank’s earliest days: most people up-to-date on a loan, the rest wards of the bank with whom they needed to work one-on-one.

  The best news of the new year was a call in early January from Russell Labbe telling McDonald the lights were again on at the bank’s headquarters. Labbe had installed new circuit breakers in the building over the holidays and arranged for a city inspector to sign off on his work. Entergy was able to power them up only a few days later. “We were the only light out there for miles,” Labbe said. The elevators weren’t working (and wouldn’t until after $350,000 in repairs), but at least they could turn off the generators. They were already working with BellSouth to restore the all-essential T1 line that would allow them to connect to the wider world with the new computer that had for months been sitting idle on the third floor.

  ALONG THE REST OF the Gulf Coast, people stared at piles of sticks that had once been their house, or they were looking skyward to thank the force that had saved them. In a waterlogged New Orleans, everything was ambiguous, starting with the question of whether to rebuild. A flooded home meant endless conversations with insurance adjusters and no clear answers about how much money could be expected. People worried about what their neighbors might do. Would they walk away from the moldering eyesore that once was home? Every decision seemed to depend on at least ten unknowns. Were there schools? Did they still have a job? What might the federal government do about the levees? Would there be the medical facilities for the sick parent they were caring for? For themselves? Could they count on adequate fire and police protection?

  Only 17 of New Orleans’s 122 public schools opened that January. All were charter schools staffed with a mix of seasoned teachers and newcomers to both New Orleans and the profession. More than fifty private schools had reopened by the start of the year, along with a large portion of the city’s network of Catholic schools. (Tulane and the University of New Orleans had reopened, and both Xavier and Southern University’s New Orleans campus—two historically black colleges—were offering classes to any student able to get back to the city.)

  Regular garbage pickup had resumed, but trucks came by once a week, not twice a week as before Katrina. Most of the refrigerators had been removed, but that only meant they were piled high in a landfill somewhere else in the city. The RTA was still running less than half its pre-Katrina routes, and even some of those were only partially restored. The green streetcars weren’t running up St. Charles, and the RTA had limited railcars operating on a small section of Canal Street. The only line they had fully restored was Riverfront—a route used primarily to move tourists between the Quarter, the Aquarium, and the Convention Center. Before the storm the RTA had averaged around 125,000 daily riders, but that number was barely cracking 10,000 in January. “We needed more riders to pay for more drivers,” explained Bill Deville, who had been named the RTA’s “executive director for recovery” after the storm.

  Cassandra Wall’s sister Tangee, who had moved into her Warehouse District condo after Thanksgiving, started to work on her home by early March. She wasn’t waiting on permission from the city or advice from the federal government. Her insurance company would pay what it would pay, and if that didn’t prove enough, there might be a Road Home check. Her niece—Petie’s oldest—was getting married that November. The ceremony would take place in an Uptown church and the reception would be at the Jackson Brewery in the Quarter, but Tangee was intent on hosting the wedding party at her home.

  “You have to remember that we made a commitment before we left Baton Rouge that we were coming back,” Petie said. “We didn’t care how we were going to put it back. Even if it meant living in it half-built and spending whatever money we could save up to pay a guy to put up a wall, and then next month, saving a little more to pay him to put up another.” To help make rebuilding feel like a cause, their group, Eastern New Orleans United and Whole, printed up black, white, and green lawn signs for people to put in front of their vacant homes: I AM COMING HOME! I WILL REBUILD!

  Cassandra, however, wasn’t ready. She was as angry as any of them at the wa
y residents of New Orleans East had been treated. But to her that was a reason for them to stay in Baton Rouge rather than rush into the unknown. FEMA had still not issued the new flood maps that would tell residents and businesses how high they would need to rebuild after Katrina.I The agency had issued the new maps for Mississippi in November, but as January became February became March, New Orleans and the rest of southern Louisiana still waited. Cassandra feared if her family started working on their home, they’d learn they needed to spend another $100,000 they didn’t have lifting it to qualify for flood insurance. They had remodeled shortly before Katrina. Maybe that was part of Cassandra’s hesitation about coming back. On the Sunday before Katrina, they had pulled away from a freshly painted, peach-colored, two-story home with terra-cotta trim, surrounded by a white picket fence. It had then sat in six feet of fetid water in the September heat.

  Cassandra had the FEMA identification number she would need whenever she needed something from that agency. She had her flood-zone number, which would be crucial once FEMA released its revised maps. And of course she had the claim numbers and the various phone numbers for her insurance carriers. Like many in New Orleans, she carried both a homeowner’s and a flood policy, which meant working with two separate entities. The company that carried her flood insurance sent an adjuster to her house “in a timely fashion,” she said, and two months later she and her husband had their check—$30,000, the maximum their policy paid out. She had the opposite experience with her homeowner’s policy. Katrina had ripped off parts of her roof, which meant not just flood damage but extensive water damage on the second floor. She was frustrated by how long it had taken her insurer just to get someone to her house. That first adjuster lost the photos he had taken and then apparently his job. She would need to start over again with a second one, who offered her $30,000 on a $150,000 policy. That was the start of a fight that lasted nearly two years. (Ultimately, their policy paid closer to $100,000.)