Ellen
is right on this. In fact it is always better to localize
governmental functionality and decision making as much as possible
and disaster management in particular.
Once
again we are suffering from the curse of the King. Central power
deludes itself into thinking that only one person is able to make
decisions and naturally dis-empowers everyone else with bureaucratic
arteriosclerosis.
It
took me a long time to understand that central banking itself is now
stuck the same way. Its power needs to be handed down just as deep
as is possible and even beyond. Surprise me and the people will
surprise you.
Political Football
Over Disaster Relief: Another Argument for Public Banking
Friday, 04 January
2013 09:17
By Ellen Brown
Post-Sandy and
post-Katrina "disaster relief" has been characterized by
more profit-taking by big business than relief to families and small
businesses. The Bank of North Dakota demonstrated it doesn't have to
be that way after flooding devastated Grand Forks in 1997.
In a shameless display
of putting politics before human needs, Congress began 2013 still
scrapping over a $60 billion Hurricane Sandy relief bill fully nine
weeks after the disaster hit. And if the Katrina
experience is any indication, the bill may not bring adequate relief
to struggling and displaced homeowners even when it is finally
passed.
The damage wrought by
Sandy to New York and New Jersey coastal areas wassimilar in
scale to that to New Orleans from Hurricane Katrina in
2005. Just two weeks after Katrina hit, Congress approved $62.3
billion in emergency appropriations, along with numerous subsequent
emergency funding requests to cover the damages, which topped $100
billion. Yet as noted on the Occupy Sandy Facebook page, federal
relief funds post-Katrina were gutted in favor of "privatizing
and outsourcing relief, making room for predatory lenders, disaster
capitalists, and gentrification developers."
According to a
report by Strike Debt, the vast majority of FEMA's resources and
efforts are spent on public assistance programs that provide
infrastructure restoration. Individual victims of disaster are for
the most part just offered personal loans - loans that have many
features of predatory subprime lending.
Disaster victims are
now being expected to shoulder relief expenses that used to be shared
publicly. Most people believe they are covered by their insurance
policies or by the Federal Emergency Management Agency (FEMA), but
many disaster victims have found that their insurance policies
include obscure provisions that exclude coverage, and the only aid
that FEMA gives to individuals is the opportunity to take on more
debt.
It is a failing of our
austerity-strapped federal disaster relief system that it can offer
little real help to individuals; and it is a failing of our private,
for-profit insurance system that the legal duty of management is to
extort as much money as possible from customers while returning as
little as possible to them, in order to maximize shareholder profits.
Most Sandy Victims Are
Left Stranded
The report by Strike
Debt was based on observations made at a community meeting in Midland
Beach, Staten Island, on November 18, 2012, as well as on interviews
with FEMA and Small Business Association (SBA) representatives,
volunteer workers, local business owners, and residents throughout
New York City. According to the report, there are three main sources
of financial support being offered to Sandy victims: insurance,
grants, and loans. Federal support is available only once private
insurance has been exhausted.
In many cases,
residents who believed they had insurance that would cover the Sandy
disaster are finding that, for a variety of reasons involving the
fine print in the policies, their claims are being denied.
Difficult-to-understand clauses allow insurers to deny coverage
depending on such things as whether the storm was officially
classified as a hurricane or a tropical storm.
For federal aid
programs, according to the report:
* Victims are required
to first apply for loans before qualifying to apply for FEMA aid,
placing the economic cost of the disaster on the individual victim.
* Aid programs favor
those who can take on debt, further exacerbating pre-existing
inequalities among residents.
* Federal programs are
inflexible and fail to meet even basic individual and community
needs.
* Relief options are
not clearly communicated or well understood. Policies are so complex
that even lawyers are confused.
Except for temporary
living costs, FEMA grants are accessible only after the homeowner,
renter or business applies for an SBA loan. If the applicant
qualifies for a loan, he or she is not likely to be provided further
FEMA aid. Disaster loans are made through FEMA on the basis of credit
history, and favorable interest rates are available only if the
applicant cannot get credit elsewhere. That means favorable interest
rates are offered only if an applicant cannot qualify for credit
through a commercial bank. When the banks got in trouble themselves,
the Fed dropped the Fed funds rate (the rate at which they borrow
from each other) to nearly zero. But no such relief is extended to
disaster victims.
There is no FEMA money
for small businesses other than loans, and businesses have difficulty
taking on debt when they don't know when they will be able to reopen.
The small business application is reported to be at least 30 pages
long, and is often difficult to complete because flooding has
destroyed much of the required paperwork.
Many homeowners were
strained by mortgages that were underwater prior to the storm, and
their properties have now depreciated to the point of having no
market value at all. They have no choice but to try to rebuild,
but how can they take on more debt? The focus on lending, says
the report, moves money from the victims of disaster into the hands
of loan servicers, who make enormous profits off these loans.
A Better Model:
Disaster Relief in North Dakota
That is the state of
disaster relief in most parts of the country, but one state has
developed a different model – North Dakota. North Dakota is the
only state in the union to have its own state-owned bank. The Bank of
North Dakota (BND) has a mandate to serve the public interest, and it
has no shareholders other than the state itself. That gives it
wide-reaching flexibility in emergencies, allowing it to act quickly
to catalyze and coordinate resources.
The BND's emergency
capabilities were demonstrated in 1997, when record flooding and
fires devastated Grand Forks, North Dakota. The town and its sister
city, East Grand Forks on the Minnesota side of the river, lay in
ruins. Floodwaters covered virtually the entire city and took weeks
to fully recede. Property losses topped $3.5 billion.
The response of the
state-owned bank was immediate and comprehensive, demonstrating a
financial flexibility and public generosity that no privately-owned
bank could match. Soon after the floodwaters swept through Grand
Forks, the BND was helping families and businesses recover. Led by
then-president and CEO John Hoeven (future North Dakota governor and
US senator), the bank quickly established nearly $70 million in
credit lines – to the city, the state National Guard, the state
Division of Emergency Management, the University of North Dakota in
Grand Forks, and for individuals, businesses and farms. It also
launched a Grand Forks disaster relief loan program and allocated $5
million to help other areas affected by the spring floods. Local
financial institutions matched these funds, making a total of more
than $70 million available.
Besides property damage, flooding swept away many jobs, leaving families without livelihoods. The BND coordinated with the US Department of Education to ensure forbearance on student loans; worked closely with the Federal Housing Administration and Veterans Administration to gain forbearance on federally-backed home loans; established a center where people could apply for federal/state housing assistance; and worked with the North Dakota Community Foundation to coordinate a disaster relief fund, for which the bank served as the deposit base. The bank also reduced interest rates on existing Family Farm and Farm Operating programs. Families used these low-interest loans to restructure debt and cover operating losses caused by wet conditions in their fields.
To help finance the disaster recovery, the BND obtained funds at reduced rates from the Federal Home Loan Bank. These savings were then passed on to flood-affected borrowers in the form of lower interest rates.
The city was quickly rebuilt and restored. As a result, Grand Forks lost only 3% of its population between the 1997 floods and 2000, while East Grand Forks, right across the river in Minnesota, lost 17% of its population.
Bringing Real Security
to Communities
Just as we can rely on
our local public fire department to be there for emergencies, so a
public bank can be relied on to lend a true helping hand when private
banks, insurers, and FEMA may not. Unlike private insurers that are
prone to withdrawing coverage on obscure technicalities, a
publicly-owned bank is not beholden to shareholder profit-seeking;
and unlike federal disaster relief agencies, a public bank is not
dependent on a penny-pinching Congress for funds. Like private banks,
it has the ability to create money in the form of bank credit on its
books, and it has access to very low interest rates. But private
banks have a business model that requires them to take advantage of
these low rates to extract as much debt service as the market will
bear. A public bank can pass these low rates on to disaster
victims and local governments.
When the biggest
private banks needed an emergency bailout, trillions of dollars in
nearly-interest-free money came flooding their way. Why? As Sen. Dick
Durbin said of Congress in 2009, "Wall Street owns the place.”
The private banking industry also owns all twelve branches of the
Federal Reserve. If we the people want the sort of security in
emergencies that is available to Wall Street banks, we need to own
some banks ourselves.
Just as Occupy Sandy
has pre-empted the official rescue agencies through community
organizing, so a Public Bank of New York or New Jersey could pre-empt
the vulture Wall Street banks and finance the state's own rebuilding.
Twenty states have now introduced bills of various sorts to establish
their own banks. For more information on the campaign in your
state, see here.
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