No More Money - Flood Check Bounces

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By bankingintern
November 18, 2005

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Read this USA Today story

Do you really know what it means?

This is what I'm seeing because of this on the ground. Today I discovered that one of the advance checks for my flood insurance policies bounced. Not a "FEMA" helicopter from the sky free government money check, but a check for the flood insurance coverage that I paid premiums for on my house. I called my company and they told me that they were out of money and would be issuing no more checks until congress passed a resolution giving FEMA more money. The check that bounced will not be replaced until this happens, nor will I receive any more payments.

I've got a whole scheduled timeline of contractors who sit on a critical path between my flooded house and a comfortable fully livable home. Thankfully, I have the financial resources to make payments to get the work done. I am going to have to take some unwanted short-term gains on some investments and make some sales I would rather not make.

Most people I know don't have the personal funds to rebuild without insurance. Cutting off the insurance money is the fastest, surest way to choke New Orleans to death. Without insurance funds, rebuilding is going to grind to a halt, and the longer rebuilding takes the weaker the city will become. Right now the city is crawling with contractors working non-stop to restore things. If they stop getting paid they will go home and the rebuilding will stop.

The whole local economy has been making a cold start from zero activity. Many of the restaurants and stores that are open right now are doing a lot of trade with contractors and people rebuilding, which creates jobs and tax revenues and is priming the pump for a more normal economy. People are moving back because there ARE jobs right now. Burger king pays a $6k signing bonus because business is booming, but it is with contractors. Take away the insurance money and watch business dry up; then there will be no jobs on top of no housing.

At that point New Orleans will be dead and government will have killed it. FEMA tried. Congress has their crack right now. Before they even started, there was the Corps. Half the flooding in the city is because the 17th Street canal failed; my house is flooded because the canal failed. The latest word from is that two factors caused it to fail. First, forensic engineering says the sheet piling under the section that failed was only driven to 10 feet, not the 17 feet that the Army Corp of Engineers had put in the blueprints. The rest of the canal has 17 feet of pilings. Secondly, the 17 feet the corps put in the design wasn't enough to do what they said it would do, when it is analyzed today. However, that was just enough everywhere else to hold; we'll never know if without factor 1 things would have held.

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