Austerity Disaster: Hurricane Sandy Victims Thrown to Lending Sharks and Privatized "Relief"
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.”
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 Sany Victim 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:
* 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.