Marlyville / Fontainebleau & Broadmoor Preservation
post-Katrina and beyond...









press clipping


A Big Government Fix-It Plan for New Orleans

BATON ROUGE, La. - Into the void of the post-Katrina policy landscape, littered with half-ruined proposals, crumbling prescriptions and washed-out initiatives, an obscure and very conservative congressman has stepped in with the ultimate big government solution.

Representative Richard H. Baker, a Republican from suburban Baton Rouge who derides Democrats for not being sufficiently free-market, is the unlikely champion of a housing recovery plan that would make the federal government the biggest landowner in New Orleans - for a while, at least. Mr. Baker's proposed Louisiana Recovery Corporation would spend as much as $80 billion to pay off lenders, restore public works, buy huge ruined chunks of the city, clean them up and then sell them back to developers.

Desperate for a big-scale fix to the region's huge real estate problem, Louisiana officials and business leaders of all stripes - black and white, Republican and Democrat - have embraced this little-known congressman and his grandiose plan, calling its passage crucial. While the White House has yet to sign on, there are already signs that some Congressional leaders are interested in pursuing it; Mr. Baker said administration officials had not rejected it outright.

The passage of the bill has become increasingly important to Louisiana because the state lost out to the greater political power of Mississippi last month when Congress passed a $29 billion aid package for the Gulf states region. The package gave Mississippi about five times as much per household in housing aid as Louisiana received - a testimony to the clout of Gov. Haley Barbour of Mississippi, a former Republican National Committee chairman, and Senator Thad Cochran, chairman of the Appropriations Committee.

Louisiana officials say they were forced to go along with the appropriation, because they may not have received an aid package at all otherwise. But now they are focused even more intently on Mr. Baker's buyout bill; many economists here say there may be no alternative to buyouts for homeowners who cannot make mortgage payments on ruined properties.

"It's probably one of the few last best hopes out there for people whose homes were flooded, and had no flood insurance," said Loren C. Scott, an emeritus economist at Louisiana State University. "Without this kind of help, there's a very large number of people who are just sunk."

James A. Richardson, director of the university's Public Administration Institute, said, "It's the only game in town, to a certain extent."

Mr. Baker's ideological opposite in the Louisiana Congressional delegation, William J. Jefferson, a New Orleans Democrat, said passage of the bill was important.

"Without it," he said, "homeowners have very little chance of realizing any of the equity they've lost."

Under his plan, the Louisiana Recovery Corporation would step in to prevent defaults, similar in general nature to the Resolution Trust Corporation set up by Congress in 1989 to bail out the savings and loan industry. It would offer to buy out homeowners, at no less than 60 percent of their equity before Hurricane Katrina. Lenders would be offered up to 60 percent of what they are owed.

To finance these expenditures, the government would sell bonds and pay them off in part with the proceeds from the sale of land to developers.

Property owners would not have to sell, but those who did would have an option to buy property back from the corporation. The federal corporation would have nothing to do with the redevelopment of the land; those plans would be drawn up by local authorities and developers.

To succeed, the proposal will eventually require the support of the White House. And the signals, according to this staunch Republican who boasts of near-perfect rankings from conservative groups, have been distinctly mixed.

President Bush, riding in a car with Mr. Baker on a trip here in late September, "got it," Mr. Baker insisted in an interview at his office here, in the city he has unobtrusively represented in Washington for two decades. "He was very open to it. He said, 'Work on it and get back to Hubbard,' " referring to Mr. Bush's top economic adviser, Allan B. Hubbard.

With Congress set to adjourn last month and with the plan hanging in the balance, Mr. Baker received a visit on a Sunday morning from Donald E. Powell, the president's Gulf Coast recovery czar. Mr. Baker said Mr. Powell, was now "more comfortable" with the proposal, but was still not wholly convinced after an hour of discussion. The bill sank, despite a successful scramble to unite the disparate Louisiana delegation behind it and appeals from business leaders. Yet, with promises from senators to take up the bill quickly when Congress reconvenes and signs that the White House has not turned its back, the cautious Mr. Baker figures that his odds are better than even.

Sean Reilly, a member of the Louisiana Recovery Authority, said Mr. Powell had told him the White House was "on board" with the concept, but needed to tweak the idea a bit.

"It came very close," said Walter Isaacson, vice chairman of the Louisiana Recovery Authority, established by the governor to oversee reconstruction. Top White House advisers "basically like the principle," he said. And there were promises from them that "we'll work with you, and we'll get it on the fast track" for hearings in the Senate Banking, Housing and Urban Affairs Committee, Mr. Isaacson said.

Mr. Baker's fellow conservatives, in Congress and out, are worried about the huge scale of his proposed intervention. In the House Financial Services Committee, several members tried unsuccessfully to limit the proposal's spending and duration, or to require that it break even. "It is irresponsible for Congress to write a blank check, drawn on the account of American taxpayers, bound only by the imagination of politicians," said Representative Jeb Hensarling, Republican of Texas. "We need to ensure that taxpayers are not asked again two or three years from now to pay for the same disaster."

Mr. Baker says to his critics: "If not this, what? And the answers are not good."

A sobering early flyover of the ruined neighborhoods in New Orleans convinced him that ordinary solutions would not work. Here was a problem way beyond the capacity of private enterprise. "In this case, everything's gone," Mr. Baker said. "Total elimination. So I have argued that this does require a precedent-setting remedy. And if we don't do this, what do you foresee for the region two years from now?"

Soft-spoken, mild-mannered and with the choirboy demeanor of a minister's son, Mr. Baker has spent years toiling in arcane financial-services regulation. With the calm of a man used to consorting with bankers and poring over balance sheets, he lays it all out: tens of thousands of strapped homeowners, owing millions in mortgage payments on properties of dubious value, to multiple lending institutions.

His effort is filled with paradoxes. Mr. Baker has devoted much of his Congressional career to reining in the quasi-governmental lending giants Fannie Mae and Freddie Mac, saying they have too much power. Now, "as free market as I am," he said, he wants the government to take action in a way it never has before.

Another oddity is that Mr. Baker is so invisible, even in his own district, that "most people in Baton Rouge wouldn't recognize him," said Wayne Parent, a political science professor at L.S.U. In a state that values flash in its politicians, "You don't hear much said about him," Mr. Parent said. Yet, Mr. Baker has suddenly stepped to the forefront of a Louisiana political class that has been notably bereft of ideas.

He was elected from a mostly white, suburban district, one relatively prosperous by Louisiana standards and historically resentful of the once-larger city to the east. Yet, his initiative could wind up largely benefiting African-Americans in New Orleans.

In the House, his idea was embraced by liberals - "I think it's a good idea," said Representative Barney Frank, Democrat of Massachusetts - and shunned by many conservatives. The proposal is about as "good as you get," Mr. Isaacson said. "My feeling is it's a test of how sincere the administration is in saying it wants a careful and smart rebuilding effort."