On Wednesday, the Senate Appropriations Committee’s Subcommittee on Homeland Security, chaired by Sen. Mary Landrieu, D-La., held a hearing designed to lay the groundwork for an administration proposal to ask for a supplemental appropriation for between $45 billion to $55 billion to provide a broad range of assistance programs to states affected by Superstorm Sandy.
A parade of senators began the hearing by testifying as to the damage that was done to their states, the value of mitigation efforts that had been taken in some areas and recommendations of policies they would like to see included in the emergency supplemental. Senators who testified were Chuck Schumer, D-N.Y., Kirsten Gillibrand, D-N.Y., Tom Carper, D-Del., Ben Cardin, D-Md., Barbara Mikulski, D-Md., Jack Reed, D-R.I., and Richard Blumenthal, D-Conn.
There followed a panel of the two federal officials who will be playing the largest roles in the recovery efforts, Housing and Urban Development Secretary Shaun Donovan and Federal Emergency Management Agency (FEMA) Administrator Craig Fugate.
In questions of the panel, senators sought to get more clarity as to how the administration plans to proceed and to jawbone the officials to meet the needs of their states.
In his testimony, Schumer was very specific regarding the fact that just one subway station had incurred $5 billion worth of damage. He criticized the Long Island Power Authority (LIPA) utility for having taken inadequate measures to prepare for the storm. Pointing to $800 million LIPA is expected to receive in assistance, Schumer called for rate adjustments for customers as a means of spreading the burden. He suggested that the federal government might fund a mitigation project to place inflatable seals at subway tunnels, but even those could fail if the storm is powerful enough. He spoke of taking steps to “harden the system,” but Fugate pointed out that some of the hospital systems that failed had been placed underground yet still sustained damage.
There were passing references to some anomalies that have appeared in the administration of Hurricanes Katrina and Rita relief seven years out. For example, after Landrieu referred to the need to remove marine debris from rivers and coastal areas, Sen. Thad Cochran, R-Miss., gently needled Landrieu for being able to obtain reimbursement for Louisiana, whereas Mississippi has been turned down for a similar request.
Mikulski chimed in that it is necessary to accept that public money would be spent for the benefit of private-property owners.
Another potential anomaly is that under one program, apparently some applicants for assistance based on cost estimates will get to keep unspent money on the ground that they have saved the government money by meeting the estimate. The relief program could offer numerous opportunities to game the system.
Senators also argued that money should be spent on mitigation, because surveys of damage show that it was largely prevented in areas where measures had been taken in advance.
There were also calls to provide assistance to small businesses so that the economies of the stricken areas can be restored in time for the next working and tourist season in the spring and summer.
In response to senators’ questions, Donovan stressed his determination to override regulations where he has the authority, and this includes the administration of the Community Development Block Grant program, where he plans to broaden the purposes for which money can be used.
Fugate said that his agency learned a lot from the Katrina experience and would be able to work effectively with governors to meet the most pressing needs before colder weather imposes greater hardships on families whose homes were destroyed, some of whom have recovered only limited amounts from flood and homeowner’s insurance.
A question that was not addressed concerns the hard decisions that may have to be made as to how much investment to make in vulnerable areas based on what is known about their vulnerability to future storms.
Donovan told the subcommittee that the figure of $82 billion that has been mentioned as the amount that might be requested is actually a total of funds anticipated from a combination of a federal supplemental appropriation, flood insurance and private insurance. When Landrieu asked what would happen if no supplemental appropriation were enacted, Donovan responded that it would hamper the ability of FEMA to provide assistance.
Landrieu and ranking Republican Sen. Dan Coats, R-Ind., both stated that the federal funding would not be intended as a bailout but to provide a foundation for leveraging local and private funds.
Robert Feinberg served on the staff of the House Banking Committee for the 10 years that encompassed the savings-and-loan debacle and the beginning of its migration to the banking sector. Subsequently, he has consulted on issues related to the crisis for law firms, accounting firms, securities firms and trade associations.
Feinberg holds a BS.E. from the Wharton School and a J.D. from the Law School of the University of Pennsylvania. He has drafted dissenting views on landmark banking legislation, contributed to a financial blog and written hundreds of reports for clients to document the course of the financial crisis as it has unfolded over the past three decades.
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