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By DEROY MURDOCK
What’s cooking in New Orleans? “Nothing,” celebrity chef Emeril Lagasse recently told the New York Post’s Cindy Adams. “The mayor’s a clunk. The governor is also a clunk. They don’t know their (derrieres) from a hole in the ground. All my three restaurants got hit. I’ve reopened Emeril’s, but only a few locals come. There’re no tourists. No visitors. No spenders. No money. No future. No people. It’s lost. It’ll never come back.”
Congressman Richard Baker believes New Orleans and its environs can come back if it can rebuild its housing stock and thus begin rehabilitating battered communities. The Baton Rouge Republican’s proposed Louisiana Recovery Corporation (LRC) appears to be the only coherent plan for revitalizing the tempest-tossed Bayou State. It deserves the proper hearing it will get before the Senate Banking Committee on Feb. 15.
Baker’s bill, H.R. 4100, would issue Treasury bonds to create a $30 billion revolving loan fund. Owners of Louisiana’s 240,000 damaged or destroyed homes and small businesses voluntarily could sell their property to the LRC. It would pay owners 60 percent of their equity and lenders up to 60 percent of their mortgage receivables. The LRC would consolidate these distressed or demolished properties and auction them off to private developers. Sales revenues would repay bondholders. Original owners could ask for first dibs on revitalized properties. The LRC would expire after 10 years.
Also, Baker’s $30 billion revolving loan fund would collect and repay 60 cents on the dollar. Even if it underwrote 40 cents on the dollar, that would involve a $12 billion outlay, not all $30 billion.
“In this case, there is basically no market. As such, people have little or no options,” Baker told BayouBuzz.com. Baker, who launched a still-operating real-estate agency at age 22 and enjoys a 91 percent lifetime American Conservative Union rating, added: “The situation calls for an unprecedented solution, through a corporation that basically remakes the market, reintroduces market forces, gets property back into commerce in a necessarily more comprehensive approach, and then gradually recedes from the marketplace over time.”
As public programs go, Baker’s proposal is a bit like a live-virus vaccine. A limited amount of government now, followed by better health, rather than illness and, eventually, even more government. Baker’s plan should inoculate against the alternative: an epidemic of mortgage foreclosures, personal bankruptcies, bank failures, and an inevitable bailout by federal regulators at greater expense in outlays and litigation.
“I don’t believe in taxing the good people of Kansas, New Hampshire, and California $30 billion on the grounds that otherwise you’ll tax them more later,” responds David Boaz of the libertarian Cato Institute.
While I usually agree that free markets should solve these things, New Orleans’ markets largely have washed away. Last November, I witnessed moderate to jaw-dropping flood damage from Lake Pontchartrain clear down to Marais Street, just above the French Quarter. Only the roughly 10-block-wide “Sliver by the River” abutting the Mississippi, stood essentially intact.
“The bottom line is this, it is difficult to understand how Louisiana rebuilds if its landscape is littered with the remains of over 200,000 unusable homes and business properties,” former Louisiana governors Mike Foster, Buddy Roemer, and David Treen, all Republicans, wrote President Bush Feb. 1. Without the Baker plan, they fear these deeds will stay “tied up in a legal mess impenetrable to the private market, for years and years to come.”
Despite initial interest, the White House has cooled on the Baker plan, preferring to spend another $18 billion on emergency relief, temporary housing, and other items. Bush’s efforts appear focused on, at most, 20,000 damaged homes, leaving at least 90 percent of the problem unanswered. Since federally built levees collapsed in a Category 3 hurricane, Washington should do better.
Without a mechanism for reconstituting what is, essentially, a property market in smithereens, the city that nurtured jazz, oysters Rockefeller, Mardi Gras, round-the-clock cocktails, and plenty more may be no more.
“I would ask all our fellow Americans if they can accept having within its shores a great American city and a substantial area of a culturally and economically important state lying in ruins for years to come,” Baker said. “Think about that: American ruins.”
(Deroy Murdock is a columnist with Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Fairfax, Va. E-mail him at deroy.murdock(at)gmail.com.)