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 was similar 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."
Most people believe they are protected from disaster by their insurance policies or by the Federal Emergency Management Agency (FEMA). But many Sandy victims have found that their insurance policies included obscure provisions that excluded coverage, depending on such things as whether the disaster was officially classified as a "hurricane" or a "tropical storm," and whether the damage was from "wind" or "flood." And the only aid they have been offered by FEMA, working in partnership with Small Business Administrative Disaster Assistance , is the opportunity to take on more debt. According to a report by Strike Debt :
[T]he vast majority of FEMA's resources and efforts are spent on public assistance grant programs that provide infrastructure restoration. Individual victims of disaster are mostly offered personal loans to help them "get back on their feet." Although these loans might seem good on the surface, they have many features of predatory subprime lending techniques and ultimately make long-term financial burden the precondition for "recovery."
Disaster victims are now being expected to shoulder relief expenses that used to be shared publicly. It is a failing of our austerity-strapped federal disaster relief system that it offers 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.
For federal aid programs, according to the report:
* Victims are required to first apply for SBA 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 offered further FEMA aid. Disaster loans are made on the basis of credit history, and favorable interest rates are available only if the applicant does not have "credit available elsewhere." That means favorable interest rates are offered only if an applicant cannot qualify for credit through a commercial bank.
There is no FEMA money for small businesses other than SBA loans, and businesses have difficulty taking on debt when they don't know when they will be able to reopen. The SBA 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 Strike Debt report, moves money from the victims of disaster into the hands of loan servicers, who make enormous profits off these loans.