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HURRICANE KATRINA:

THE FINANCIAL INSTITUTIONS’ RESPONSE

HEARING

BEFORE THE

SUBCOMMITTEE ON 

FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 14, 2005

Printed for the use of the Committee on Financial Services

Serial No. 109–53

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SPENCER BACHUS, Alabama, Chairman

WALTER B. JONES, JR., North Carolina, 

Vice Chairman 

RICHARD H. BAKER, Louisiana 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SUE W. KELLY, New York 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

JUDY BIGGERT, Illinois 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

RICK RENZI, Arizona 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

BERNARD SANDERS, Vermont 

CAROLYN B. MALONEY, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

LUIS V. GUTIERREZ, Illinois 

DENNIS MOORE, Kansas 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

AL GREEN, Texas 

GWEN MOORE, Wisconsin 

WM. LACY CLAY, Missouri 

JIM MATHESON, Utah 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

September 14, 2005 .......................................................................................... 1

Appendix: 

September 14, 2005 .......................................................................................... 53

WITNESSES 

WEDNESDAY, SEPTEMBER 14, 2005

Bordelon, Ken, President and CEO, E Federal Credit Union (LA), representing National Association of Federal Credit Unions ................................ 16

Cloutier, C. R., President and CEO, MidSouth Bank, N.A. (LA), representing 

Independent Community Bankers of America ................................................... 18

Deaver, McKinley W., Executive Director, Mississippi Bankers Association, 

representing American Bankers Association ..................................................... 14

Elliott, Charles, President and CEO, Mississippi Credit Union Association, 

representing Credit Union National Association ............................................... 20

Gibbons, David, Senior Executive Vice President and Chief Risk Officer, 

HSBC North America (IL), representing American Financial Services Association .................................................................................................................... 26

Casey-Landry, Diane, President and CEO, America’s Community Bankers ...... 24

Shelton, Hilary O., Director, Washington Bureau, NAACP ................................. 28

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 54

Bachus, Hon. Spencer ...................................................................................... 55

Biggert, Hon. Judy ........................................................................................... 59

Carson, Hon. Julia ............................................................................................ 61

Clay, Hon. Wm. Lacy ....................................................................................... 62

Bordelon, Ken ................................................................................................... 63

Cloutier, C. R. ................................................................................................... 74

Deaver, McKinley W. ........................................................................................ 85

Elliott, Charles .................................................................................................. 94

Gibbons, David .................................................................................................. 111

Casey-Landry, Diane ........................................................................................ 122

Shelton, Hilary O. ............................................................................................. 131

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Bachus, Hon. Spencer: 

The Financial Services Roundtable & Housing Policy Member Company 

Hurricane Katrina Relief Efforts, September 13, 2005 ............................. 135

Biggert, Hon. Judy: 

Letter to Treasurey Secretary John Snow, September 8, 2005 .................... 162

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HURRICANE KATRINA: 

THE FINANCIAL INSTITUTIONS’ RESPONSE 

Wednesday, September 14, 2005

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 10:10 a.m., in Room 

2128, Rayburn House Office Building, Hon. Spencer Bachus [chairman of the subcommittee] presiding. 

Present: Representatives Bachus, Jones, Baker, Castle, Kelly, 

Ryun, Biggert, Tiberi, Feeney, Hensarling, Pearce, Neugebauer, 

Price, McHenry, Sanders, Maloney, Moore of Kansas, Frank, Waters, Hooley, Carson, Hinojosa, McCarthy, Green, Moore of Wisconsin, Clay, and Matheson. 

Chairman BACHUS. [Presiding.] Good morning. The Financial Institutions Committee will come to order. 

I want to welcome our witnesses to the hearing today. 

Last week we had a hearing at which time we talked with the 

regulators about their efforts to work with consumers and customers and victims of Hurricane Katrina; also, relief workers who 

were in the area and are sometimes having trouble getting their 

checks cashed. 

And I want to commend all the associations and the institutions 

you represent. You have done a marvelous job on assisting the victims in cashing of their checks, a lot of times without a lot of identification. 

Already we have heard many reports of waiving ATM fees, of giving extensions on payment of loans without penalties, so I want to 

commend the industry. I think that you have done a stellar job of 

at least cushioning some of the financial hardship that your customers and the citizens of those three States have incurred. 

At this time, I am going to yield—and I am going to hand out 

a statement that I made last week at last week’s hearings about 

the different things that the regulators and the banks are doing to 

ease the burden on the victims and their customers, and I am just 

going to hand that out. 

But at this time I want to turn the mike over to Chairman Baker 

and recognize all his fine work in this issue. He has worked tirelessly on a broad package of relief measures for financial institutions and their customers. Really the victims of Katrina is what we 

are focusing on. 

2

I strongly support his efforts and look forward to working with 

him as this process moves forward. We will probably move some 

legislation, break it out and move it, quicker than the entire package. 

But at this time, I yield the balance of my time and am pleased 

to recognize the gentleman from Louisiana, Mr. Baker, for the rest 

of my time. 

And at the end of his statement, then the ranking member, Mr. 

Sanders, I will yield to him for an opening statement. 

Mr. BAKER. Mr. Chairman, I thank you for your willingness to 

convene the hearing, your attention to this subject matter, and 

your leadership on a broad array of issues that confront us as a result of Hurricane Katrina. 

Before I proceed, I just want to acknowledge that you have a particularly influential panel this morning. 

And I want to acknowledge Mr. Ken Bordelon, the chief executive 

of E Federal Credit Union, who is here to speak to credit union 

needs in the face of this disaster, as well as Mr. Rusty Cloutier—

and I am helping committee members out with Cloutier, so in case 

you were wondering how that is said. Not only is he an ICBA member, he is the director of the Federal Reserve Bank of Atlanta. 

Both these gentlemen come with particular expertise and perspectives that I think will be of value to the committee this morning. 

Secondly, the assistance needed at the moment is encouragement 

to financial institutions within the affected area to make available 

debit cards, ATM cards, some portable method for victims to take 

previously authorized benefits, whether Social Security, veterans 

benefits, unemployment comp, workmen’s comp, a whole array of 

regularly issued Government benefits, and convert them into some 

sort of account. 

There has been hesitancy only because of regulatory constraints 

on these financial institutions. To put a scale on this problem, with 

regard to Social Security checks issued in the disaster area only, 

not those direct deposited, only those checks issued which are put 

into the mail, there were 800,000 issued on September 1 for the affected area. 

Not only are there not mailboxes, there are not postboxes. So the 

ability to connect that individual who is living month to month 

with that benefit is now significantly adversely impacted. 

In speaking with financial institution representatives, whether 

credit union, bank, savings and loan, whatever, there is concern 

that if they engage in a check cashing activity without the standard regulatory process in place that there will be a regulatory consequence to them going forward if they cash a check and later 

found to have done so inappropriately. 

At this juncture, whether it is a $500 check or a $1,000 check, 

it almost does not matter. People are having difficulty in acquiring 

the basic goods and services they need in order to, one, be mobile, 

but secondly, take care of their families. 

As is stated in the media on repeated times, the million or so 

people that lived in the Orleans area are now disbursed across the 

country. But the principal area in which many have landed is withVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
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in my congressional district, and this is of extreme importance to 

get expedient resolution of this matter. 

I think the chairman has indicated that the provision relative to 

the check cashing issue may be one which he would consider moving in an expeditious manner, and I certainly would encourage that 

consideration of the committee. 

Finally, I think it is important today to have regulators’ recognition that this is a problem we have never faced before. The scope 

and breadth is far beyond anything one could have imagined. We 

have financial institutions which for the first time when we say underwater, it is not a figurative slogan. 

They are literally underwater, with an inability to go recover the 

records of their depositors, making it physically impossible for 

them to conduct business. This requires a regulatory view that we 

have not had, ever, in our country’s history. 

It requires a regulator’s understanding that if there is adverse 

impact on the institutions’ capital standing that we should not follow the regular order in pursuing these institutions into financial 

distress. 

We should recognize that at least until the water recedes, there 

should be very generous grant of operating authority to give all affected the chance to recover in an appropriate manner. 

Mr. Chairman, I cannot express deeply enough my appreciation 

to you and to members for their generous courtesies extended and 

for your kind assistance throughout this entire matter. Thank you. 

Chairman BACHUS. I thank you. 

Now I recognize the ranking member, Mr. Sanders. 

And I want to compliment this entire committee in a bipartisan 

way. We have had members on both sides that have assisted. 

I know Ms. Hooley has worked very hard on the check cashing 

part of the thing with Mr. Baker. And I would like to particularly 

express my thanks to her. 

Mr. SANDERS. Thank you very much, Mr. Chairman, for holding 

this important hearing. 

And I want to thank all of our panelists for being here today, and 

especially those who came up from the affected areas. Thank you 

very much. 

Clearly, it is urgent that we address the extremely challenging 

financial circumstances under which people have to function in the 

wake of Hurricane Katrina. And I look forward to hearing from our 

witnesses today about what can be done as to how we respond in 

lightening the blow of this tragedy. 

By all accounts, Hurricane Katrina was a staggering catastrophe 

from which all sectors of the New Orleans and Gulf Coast society 

and economy will be recovering for a very long time. 

While the toll in human lives is not yet fully counted, and the 

damage to the regional and national psyche is immeasurable, we 

already have some estimates of the financial impacts of the storm, 

and they are astounding. We have heard numbers from $125 billion to $300 billion as estimates of the cost to recover and an estimate that the insurance industry will pay nearly $60 billion in damage claims. 

The disruption to people’s personal financial lives has also been 

terrible. People have been cut off not only from their homes and 

4

possessions but from their cash, their Social Security checks, their 

paychecks, and other financial resources. 

Vast numbers are very stressed over their credit rating because 

they may not pay their bills on time for a whole host of different 

hurricane-related reasons. Many people have lost their I.D.s and 

most, if not all, of their financial records. The list goes on. 

These are concerns that nearly every person hit by the hurricane 

and subsequent flooding will face, and I hope we come out with 

some very clear direction today about how to best deal with these 

day-to-day conundrums. 

There are also some concerns that are particular to only some of 

the population impacted by Katrina. As we have been reminded all 

too well by this tragedy, there is an enormous, usually-out-of-sight, 

out-of-mind portion of our population that is terribly poor. 

These people, disproportionately African-American, have special 

financial troubles and vulnerabilities that we and you and our financial institutions must be sure to address. 

As Mr. Shelton of the NAACP points out in his written testimony, many of the tens of thousands of displaced persons now scattered throughout the South, Southwest, and elsewhere live their 

lives paycheck to paycheck, and sometimes here in Washington, 

D.C. we forget about that reality. 

If and when they were able to flee the city before the hurricane, 

many had to take out payday loans to be sure to have a little bit 

of cash in their pockets for the uncertain future. 

Many, having no access to financial services in their communities 

before the hurricane, may have kept their life savings in cash in 

their homes, and they have lost most or all of it in the flooding. 

And the problems simply go on and on. 

I would like to hear today what our financial institutions are 

doing to address the needs of everyone, including the large population of poor people, in the affected area and particularly what 

they are doing to address the special needs of those with the very 

least resources. 

I think many of the ideas put forward so far have merit. Ideas 

like a moratorium on foreclosures, collections, and deficiency judgments, for example, seem appropriate. At a time when a person’s 

credit score is an asset as or more important than the balance of 

their bank account, preventing negative credit reporting due to late 

or non-payment as a result of Hurricane Katrina should be the 

least, in my view, that creditors can do. 

Similarly, banks and other financial institutions must revisit 

their policy on late fees and interest and extend some period of amnesty to these victims. 

In short, at this time of inconceivable trauma in the lives of so 

many, I hope to come away from this hearing confident that our 

Nation’s banks, credit unions, and other financial institutions will 

do everything they possibly can to minimize the repercussions Hurricane Katrina will have on its victims, especially those who have 

not been particularly well served by these institutions in the past. 

Thank you very much, Mr. Chairman. 

Chairman BACHUS. Thank you. 

And at this time, I am going to yield to the gentleman from Louisiana, Mr. Baker, on his own time. 

5

And, Mr. Baker, I think you might want to mention some of the 

things that the banks are doing and the regulators, and I know you 

have discussed with me business continuity loans and others. But 

I yield at this time. 

Mr. BAKER. Thank you, Mr. Chairman. I will direct my remarks 

to the pending proposal that is before the committee. And I know 

the witnesses will address their concerns to the legislation. 

There are really five basic areas that have been brought to our 

attention by bankers or financial service providers in the affected 

area. 

Number one is the anonymous check-cashing issue that requires 

individual institutions to take a Government-issued check and convert that into some negotiable product, either cash, debit or ATM 

card, and to provide some relief to the financial institution for potential liabilities that accrue as a result of engaging in that activity. 

The anonymous check cashing and the Government check cashing are related, but the same issue applies to both. 

Loan payment deferrals with fresh start programs—under current circumstance, interest accrual cannot be deferred, although 

the principal may. 

A new regulatory environment to basically construct a fresh start 

loan would enable the individual who has a home that currently is 

underwater, for example, and is not likely to be accessible for the 

next 60 days to 90 days, to defer principal and interest payments 

for the 60-day to 90-day period. 

This would not avert the individual’s obligation to pay their 

agreed-upon financial responsibilities but merely postpone the repayment or extend the repayment based on the construct of a new 

loan agreement. 

Business continuity loans—this is an area where there is, I 

think, an extraordinary deficit in the emergency response system. 

The only measure now available to a business would be previously 

agreed-upon, privately arranged insurance coverage because FEMA 

assistance is non-existent, and the only SBA assistance is a lowinterest loan. 

For businesses that have been relocated from New Orleans to 

Baton Rouge, there is no assistance provided nor tax benefit granted to the business entity that pays for employees’ relocation, pays 

for their housing, or any of those expenses. 

That means to the business owner an extraordinary amount of 

business expense which is not recoverable, directly or indirectly, 

through tax benefits. And the continuity loans provision, I think, 

is extremely important. 

And finally, with respect to Federal Reserve assistance, this 

makes statutory the ability to waive wire transfer fees and reducing charges for cash shipment. In that first 10-day period after the 

storm, we were basically reduced to a cash economy. There was no 

ability to take a credit card and pay for your gasoline because the 

systems were down. 

If you did not have cash in your pocket, you were without resources. Many of the local lending institutions found themselves 

under extreme duress because of the demands for cash by indiVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
6

vidual victims of the storm. These provisions would help, to a great 

extent, assuage those problems going forward. 

Mr. Chairman, I appreciate the construct of the bill. I appreciate 

your courtesy in enabling this hearing and believe that the elements of the bill now pending are, indeed, very responsive to the 

problems we face, and I deem it advisable for the committee to 

move forward. 

I thank the chairman. 

Chairman BACHUS. I thank the gentleman for your statement. 

Mr. Frank? 

Mr. FRANK. Thank you, Mr. Chairman. 

The importance of our working together on this and with the 

banking industry is critical, and I have to say I think it ought to 

be nice for everybody. This is one where almost everybody’s—I 

think everybody’s interest is together. 

This is not a case—I mean, we do not often have the head of the 

NAACP sitting side by side with all the bankers in complete agreement, I think, on what needs to be done. And this is a reminder 

to people of our financial institutions at their best, which is frequently where they are, to serve the constituency. 

Our function here is not, as a committee or as a Congress, to—

I was about to say bail out. I am struck by how many of our metaphors have become somewhat inappropriate now because they were 

so water-based. It is not our job to worry about the health of the 

institutions. It is our job to worry about how the institutions serve 

the basic functions in the economy of the consumers. 

And there is an agreement here. I think this is something we 

start with, that keeping banks in business, having them function, 

is not just important to the banks; it is important for the citizens. 

It is important for the economy. And I believe this is why we have 

been able to work so closely together. 

There are two levels, obviously. One is the immediate question 

of having things function, and people have been addressing that. 

The gentleman from Louisiana talked about it. The chairman took 

the lead in terms of indemnification for check cashing. We are not 

sure exactly how it works out. 

I hope the regulators understand by now there is, I think, unanimity on this committee that they should experiment. They should 

be flexible. They should do everything reasonable to get money into 

people’s hands, both because people need money to eat and to live 

and because that is the way we are going to bring the economy 

back. 

And in general we have safeguards. No one is asking in this crisis for there to be a total relaxation of safeguards. But I think it 

is—you know, let’s be explicit. If a few people get some money that 

they were not supposed to get, that is far less of a problem than 

a lot of people not getting the money that they are supposed to get. 

This is a time when you calibrate, I think, less on the safeguards. And, you know, we need to be clear. When you are talking 

about human systems, you are talking about a balance. It is impossible, particularly in the chaos, disruption, and emotional torment 

of physical destruction that we are facing—it is impossible to design a system that is going to be 100 percent accurate. 

7

So let’s also in advance say if and when the journalistic horror 

stories start coming that this or that individual got money he or 

she should not have gotten and this or that person ripped them off, 

that is a risk I want to take because if we do not take the risk of 

some abuse, we will not have a system sufficiently flexible to get 

the money out there. 

Now that is not an invitation for people to ignore safeguards, but 

it is a sense that in this crisis it is more important to get the 

money out, understanding that inevitably there will be some problems, and that is where we want to go. 

I also am strongly inclined in this situation to be deferential to 

the regulators. It is not something that I think we want to or 

should try to micro-manage. I think we understand here there is 

a common interest in liquidity—again, with the metaphors. There 

is a common interest in the money getting out there. And we will 

be supportive. 

And to the extent, obviously, that short-term legislative fixes are 

needed, I would think if we are talking about a legislative fix that 

is limited both in geography and in time, it is hard for me to find 

something I would not be for. 

If we are talking about something that is for 6 months or a year 

in the affected area—and sometimes people will say to us well, you 

are giving people special treatment. 

I do not think there is anybody anywhere in the country who will 

be envying the people in this region if we give some more flexibility 

to banking. This is not a time when we have to worry about that. 

I think the country, in fact, will be very supportive. 

Then we get to the next question, and I know some of the testimony—I have looked through it—touches on this, and those are the 

longer-term issues. And I will repeat what I have said before. I am 

particularly concerned about a potential negative impact on smaller 

financial institutions, community banks, independent banks, and 

credit unions. 

It is obviously less of a problem if you are the Bank of America, 

or Chase Bank One, or Wachovia, if you are spread out. But there 

are important institutions who are focused in that area. 

We had a meeting yesterday of the Democratic Caucus on the important question of the Federal Government’s role with minorityowned banks. And I noticed in the sheet that we had that there 

are three African-American-owned banks in New Orleans, and 

clearly, given what is—they are at risk. And it is not just they that 

are at risk. 

So I also invite the witnesses and the regulators—and some of 

the witnesses have done this. Yes, we will meet the short-term 

needs, but longer term, again, I am prepared to take some extraordinary steps, particularly to keep smaller institutions in business. 

If you are the best run institution, the most prudent financial institution, and you did a good job of bringing deposits, and you did 

a good job of meeting the needs of the community—and you were 

careful with your borrowers, then I think you could still be in trouble because much of your base was concentrated in this area. 

Finally, I noticed an interesting letter from the National Community Reinvestment Coalition to the regulators about the importance 

8

of giving full CRA credit for those financial institutions that pay 

particular attention here. This is relevant. 

Clearly, we have a situation where poor people, and AfricanAmericans in particular, have been disproportionately hit by this 

and, you know, we get a lot of argument about let’s be fair, et 

cetera. 

Well, I do not think anybody should argue—if people have been 

disproportionately hurt, no one should object if we are disproportionately trying to help them deal with the hurt. You can not ignore reality and get there. 

So I hope that the regulators—and I believe they will be keeping 

all of those things in mind, and they will find a great supportive 

responsive here. 

Chairman BACHUS. I thank the ranking member. 

And again, I want to express to you and Mr. Sanders the cooperation of your staffs, Mr. Moore’s staff and other members’ 

staffs have shown in this thing, working with Chairman Baker—

and I and the other members on our side of the aisle—I know Mr. 

Green, for instance, met with FEMA. He and I were in a meeting 

with FEMA about some of these problems as well as some members from Texas on our side. So I appreciate that. 

At this time, I am going to recognize the gentlelady from Illinois, 

Ms. Biggert, to make an introduction. 

Mrs. BIGGERT. Thank you very much, Mr. Chairman. I want to 

thank you for your leadership in holding this hearing. 

And I also want to express my deepest sympathies to those individuals and businesses affected by Hurricane Katrina. 

In addition, I would like to express my appreciation to the Federal and private-sector financial services community for responding 

to this catastrophe in such a resilient fashion. The expedited flow 

of resources, the funds, and other emergency assistance, the financial and regulatory waivers granted, and cooperation among the 

community I think have been exemplary. 

And I hope that this compassionate and cooperative activity will 

continue in the days, months, and years to come. 

FEMA and our private sector charitable organizations are continuing to meet the basic needs of Katrina victims, including shelter, food, and an initial $2,000 stipend. However, what these victims will need in the coming days, weeks and months—will need 

more than just a cash handout. 

Many have lost everything, and they will need to understand 

their financial rights and develop skills or retain assistance to 

navigate through another disaster, one that is financial. Some will 

need to learn how to budget their $2,000 stipend, while others may 

need to know their options for financial assistance, for rental housing, or building or rebuilding their homes. 

Our Federal agencies and financial institutions have done a 

great job at getting the funds to and providing some financial guidance to the victims, but more can and must be done, many of us 

who sit on this committee and are members of the Financial and 

Economic Literacy Caucus agreed. 

Last Friday, Congressman Hinojosa and I joined 28 other members of the Caucus and sent a letter to Treasury Secretary Snow. 

9

And, Mr. Chairman, I would request that the letter be inserted in 

the record at this time. 

Chairman BACHUS. Thank you. Additional time, you were asking? 

Mrs. BIGGERT. No, I want to insert this letter to—

Chairman BACHUS. Yes. 

Mrs. BIGGERT. —Secretary Snow in the record. 

Chairman BACHUS. Without objection. 

Mrs. BIGGERT. Thank you. 

The letter requests that Secretary Snow convene an emergency 

meeting of the Financial Literacy and Education Commission to coordinate Federal agency efforts to provide financial guidance to the 

victims of Hurricane Katrina and act as a clearinghouse for Federal and private sector financial-related information. 

In the Fair and Accurate Credit Transaction Act, we created this 

commission, and I hope that they will hold a meeting in the very 

near future. I believe that the financial guidance that they will be 

able to provide is a critical element that hurricane victims need on 

the road to recovery. 

As Americans have proven time and time again, we can and will 

emerge from tragedy. But we must focus our activity and move forward together. 

And on that note, I would like to take this opportunity to say a 

word about one of today’s witnesses who is not from my district but 

from one of my favorite towns in Illinois, Lake Forest. 

Mr. David Gibbons, who is the senior executive vice president 

and chief risk officer of HSBC North America Holdings, is testifying today on behalf to the American Financial Services Association. He is a leader and 25-year veteran of the financial services 

world. 

His leadership experience in the oversight of financial institutions includes banking examinations and credit risk policy making, 

and he is a former deputy controller for special supervision for the 

Office of the Comptroller of the Currency. 

Mr. Gibbons led the OCC’s problem bank supervision program. 

In that capacity, he designed and implemented rehabilitation strategies and resolutions for the country’s largest and most complex 

problem institutions. I would like to welcome him to the committee 

today. 

And finally, I would like to note that HSBC and the AFSA Foundation are two financial organizations that have made great 

progress in this area of financial literacy. It is my hope that organizations like these can partner with the Financial Literacy and Education Commission to work to provide financial guidance to the 

hurricane victims. 

Again, I would like to welcome Mr. Gibbons. 

And thank you, Mr. Chairman, for the time. 

Chairman BACHUS. I thank the lady. 

At this time, I am going to recognize the gentlelady from California, Ms. Waters, for her opening statement. 

Ms. WATERS. Thank you very much, Mr. Chairman. I am very 

appreciative for this hearing, and I would like to thank you and the 

other members of the committee. 

10

I think a lot has been said about, number one, our concern that 

our financial institutions are sound, that those who were harmed 

by the hurricane are up and working in some fashion. 

And I had an opportunity to glance briefly through some of the 

testimony, and I can see some of the creative ways by which some 

of the banks are continuing their operations. And I am extremely 

appreciative for those banks who have shown special concern for 

their customers, and they are reaching out in all kinds of ways to 

make sure that they provide services. 

I have something that I would like to—two things I would like 

to pay attention to. Number one, I have been paying attention to 

FEMA’s effort to distribute $2,000 debit cards. They were not able 

to manage it. They put it out there basically at the Houston dome. 

And they had to pull it back. It was just almost impossible to do. 

And the alternative to that is to deposit money in the victims’ accounts or have them go online, I believe, and make out applications, get registration of them, et cetera. I want to call your attention to our efforts, and my effort in particular, to do lifeline banking. 

Lifeline banking was that banking that would allow poor people 

to have accounts in all of our financial institutions without the 

kind of charges, et cetera, that are normally visited upon bank accounts. 

Now, many of the people of New Orleans can not have their 

money deposited in any bank because they do not have any accounts. And even though we have some legislation, I think, in the 

hopper that would do that, should the legislation pass, I would like 

to ask the financial institutions to pay particular attention to this 

because I think not only does it serve poor people and people who 

do not normally have accounts, but it seems to me the millions of 

dollars—billions—that will flow through the banks—somehow the 

banks should get some advantage from that if you hold the money 

for 24 hours or so. I do not know. 

But this is a time that I should point out that lifeline banking 

is extremely important that we get everybody in America who 

wishes to have an account the ability to do that. 

The second point I would like to make is this. There is going to 

be a lot of reconstruction and rebuilding of not only the infrastructure, the business sector and, of course, homes and residences. 

And we know that some of the no-bid contracts have been let already and the big guys, you know, whether it is Halliburton or the 

Shaw Group or Fluor Corporation, they have theirs. 

But what you are going to see and what I am encouraging and 

a lot of us are encouraging—we are encouraging not only the employment of people who were victims, and we are encouraging that 

the transitional housing be placed in areas adjacent to New Orleans, like in Baton Rouge and Alexandria and Lafayette and all of 

these places so that people have an opportunity to return, have 

some jobs with the rebuilding of this infrastructure. 

We want job training. We want jobs. But this is an opportunity 

for everybody to play—minority contractors. As you know, we have 

always talked about community reinvestment. That is very important to us, not imply mortgages, but also on the commercial side. 

11

We believe that you can do a number of things. Number one, for 

many of the minority contractors and women-owned businesses 

that have not had an opportunity to have access to contracting opportunities with cities, States, what have you, they are going to be 

there. They are going to be at your doors. 

See what you can do to pay attention to how you can create or 

shore up or redesign programs, not giving anybody anything, but 

this is business. This is the banks being able to make a profit, but 

it is also an opportunity for the banks to spread its wings and open 

up some opportunities for those who have been kind of excluded in 

this contracting business. 

So I would like to ask you to pay particular attention to that. I 

think that we have done everything that we could possibly do with 

CRA and the encouragement of minority participation. And we 

know that there are no laws that say you have to do anything, but 

I would think that in the interest of building of good relations, expanding all of that, that this would be taken into consideration. 

Thank you, Mr. Chairman. 

Mr. FRANK. Would the gentlewoman yield for 10 seconds? 

Ms. WATERS. Yes. I yield to the gentleman. 

Mr. FRANK. I just want to reinforce particularly what she said 

about lifeline banking. It does seem to me we are talking about 

how to get money. If everybody there had had a bank account 

through lifeline banking, how much easier it would be to try and 

help alleviate this, so I just want to reemphasize she has taken the 

lead on this legislatively. 

That is why on our side in particular—and we appreciate the cooperation—we fought so hard for it. I think at a time like this we 

really see its value. 

Chairman BACHUS. I thank you. 

Dr. Price, do you have an opening statement? 

Mr. PRICE. Thank you, Mr. Chairman. I want to thank you for 

holding this hearing as well. 

And I want to thank each of you for coming and especially to 

commend each of you and your association and your employees for 

what you have done so far. I have been so incredibly heartened by 

the response of Americans to what is the largest natural disaster 

in our history and the largest response, in a private way, by Americans. So I want to thank each of you and your employees and your 

association for what you are doing. 

I truly appreciate also the comments of my colleagues, but I look 

forward to the information that you are going to give us in your 

testimony. Thank you. 

Chairman BACHUS. Thank you, and I appreciate your efforts, Mr. 

Renzi’s efforts, and others, as we all worked on this bill. 

Ms. Maloney? Okay. 

Mr. Green? 

Mr. GREEN. Thank you, Mr. Chairman—

Chairman BACHUS. Thank you. 

Mr. GREEN. —and ranking member. I, too, would like to thank 

you for convening this hearing. I think it is exceedingly important. 

I represent the Ninth Congressional District in Houston, Texas, 

and within the Ninth Congressional District we have the Astrodome. I have had an opportunity to view firsthand what many have 

12

seen from afar, and I assure you, I am proud of the way 

Houstonians have responded. But still, there is great work to be 

done. 

And I am honored today, Mr. Chairman, that the NAACP is a 

part of this august panel. I think it is exceedingly important that 

the views of organizations like the NAACP be heard and be respected. 

The NAACP new president and CEO, Mr. Bruce Gordon, has 

done an outstanding job with the organization and has marshaled 

the forces of the organization behind what I believe is an unprecedented effort to assist the persons who have been devastated by 

this disaster. So I thank you for what you have done. 

I do want to also say, just for edification purposes, that there are 

still some persons referring to the persons who survived—there are 

persons referring to them as refugees. And I am going to beg that 

we please reconsider our language. 

Sometimes our diction can be less than superb, but I have talked 

to the victims, the survivors, and they do not like the term refugee. 

They really do not. They really are not. They are taxpaying Americans. The same Constitution that applies to us applies to them. 

And they are offended by this term. 

And so I beg that we reconsider those verbiage, and a term that 

seems to be acceptable is survivors, evacuees, but please, not refugees, not for Americans. Let’s let Americans be Americans regardless of their status after a hurricane. 

I would like to let you know that my concerns will involve much 

of what the NAACP has outlined—a moratorium on foreclosures. I 

would hope that we can find a means by which we can give people 

additional time. 

A prohibition against negative credit reporting—I think that it is 

exceedingly important that we understand that this situation is 

going to take time for people to get themselves back on their feet, 

and we do not want to damage their credit. In America, credit is 

everything. 

Sometimes it is better to have credit than to have money. In fact, 

it is almost un-American not to have credit, so we want to make 

sure that we protect credit. 

Late fees mounting up—I would hope that we can find ways and 

means to deal with these late fees that will be staggering. 

And of course, we want to make sure that we do all that we can 

to deal with the invidious predatory lending practices that we 

sometimes find manifesting themselves when persons are weak and 

vulnerable. These are some of our concerns. Coupled with the CRA 

points for loans, I think that is important. 

And finally, I, too, would like to join my colleagues in encouraging thinking out of the box, realizing that this can happen to any 

of us. And I can say that with a degree of certainty because Houston, Texas, was but a few degrees away from that same hurricane. 

And while I am not an overly pious person, I do believe that but 

for the grace of God it could have been me. 

But I thank you, Mr. Chairman, and I look forward to hearing 

from this outstanding group of panelists that we have assembled. 

Chairman BACHUS. I thank you, Mr. Green. 

13

My understanding—there are no more opening statements on the 

Republican side. 

So at this time, Ms. Carson, I recognize you for your opening 

statement. 

Ms. CARSON. Thank you very much, Mr. Chairman and ranking 

member and members of the committee. 

Thank all of you who assembled here today to provide information about the dilemma in which the victims of Hurricane Katrina 

faces. 

My concern is based on calls that I have received from my constituents in Indianapolis, Indiana, in that how does one guarantee 

the safety of the resources that they already have on deposit. Secondly, how does the institution verify without any identification 

that that money belong to them and that they can have access to 

it, notwithstanding the absence of identification per se? 

If you do not have online banking where you can put in a code 

and get your money, then it is very problematic in terms of being 

able to access your resources. 

I have families in Indianapolis, Indiana, who have family in Mississippi and in New Orleans. And while I respect the fact that financial institutions have to be on guard against some ambivalence 

of taking somebody’s money out of the account or not giving the 

money—to anybody, if someone could explain how one would facilitate legitimate transfer of money, that would be probably the only 

question that I have at the moment. 

Thank you very much, and I yield back, Mr. Chairman. 

Chairman BACHUS. Thank you. 

At this time, we are going to go to our panelists, but I would like 

unanimous consent before we do so to introduce from the Financial 

Services Roundtable and the House Policy Council member companies a—this is a comprehensive, fairly up-to-date list, as of 5 p.m. 

yesterday, of what our larger—and these are our larger financial 

institutions—what they have done, donations they have made and 

different accommodations they have made for their customers. 

And it is obviously pretty extensive, and I would introduce that, 

without objection. 

And at this time, we will hear from our panelists. Our panelists 

are—I will introduce them, the ones that had not been introduced. 

Mr. Mac Deaver, executive director of the Mississippi Bankers 

Association, and you are actually representing the American Banking Association as their representative. 

Mr. Bordelon has previously been introduced by Mr. Baker. 

And Rusty—I think you said Cloutier, is that right? Cloutier? 

Mr. CLOUTIER. Cloutier, that is right. 

Chairman BACHUS. Cloutier. That is close. I know Rusty, but I 

call him Rusty. That avoids all that. Mr. Baker’s already introduced you. 

Mr. Charles Elliott is CEO of the Mississippi Credit Union Association, and you are representing the CUNA, Credit Union National Association, and I welcome you to the committee. 

Ms. Diane Casey-Landry, president and CEO of America Community Bankers. Appreciate your attendance. 

Mr. Gibbons, you have already been introduced by Ms. Biggert. 

14

And finally, Mr. Hilary Shelton, director of the Washington Bureau of the NAACP, and we welcome you and look forward to your 

testimony. 

And at this time, we will just go from my left to my right and 

start with Mr. Deaver for an opening statement. 

STATEMENT OF MCKINLEY W. DEAVER, EXECUTIVE DIRECTOR, MISSISSIPPI BANKERS ASSOCIATION, REPRESENTING 

AMERICAN BANKERS ASSOCIATION 

Mr. DEAVER. Thank you, Mr. Chairman and members of the committee. As has been stated, my name is Mac Deaver. I am executive director of the Mississippi Bankers Association. Our organization includes 106 commercial banks and savings institutions that 

operate in the State of Mississippi. 

Approximately 1,000 locations for those banks and savings institutions operate in our State. We represent about 99 percent of the 

banking deposits in Mississippi. 

I am pleased today to be here to speak on behalf of the American 

Bankers Association to discuss the industry response to Hurricane 

Katrina. 

Significant progress, certainly, has been made in the banking industry and is ongoing. I am proud to report that the banking industry is doing extraordinary things to respond to this crisis. Of 

course, first and foremost, this is a human disaster. 

This hurricane has brought personal tragedy into the lives of 

tens of thousands of Americans. Of course, a lot of those folks can 

not be here today to speak to you, but a lot of the bankers were 

also affected by this. And in the middle of this tragedy, they have 

had personal losses as well as business interruption. 

I would like to share a story with you that was told to me by 

Peter Gwaltney, who is the chief executive officer of the Louisiana 

Bankers Association. Peter told me the story of Mr. Guy Williams, 

who is with Gulf Coast Bank & Trust in New Orleans. 

He and his bank were evacuated to Baton Rouge, but Mr. Williams continued on a nightly basis getting in his boat and going 

from Covington, Louisiana, across Lake Pontchartrain to New Orleans rescuing people and taking them to shelters. 

Now if you look at a map of Louisiana, that is a pretty good boat 

ride. But he continued to do this and, of course, during the day he 

was trying to get his bank organized and operating in Baton 

Rouge. And that is just one of many stories that continued to occur. 

As far as the business of banking, just 1 day after the storm hit, 

there were a number of banks that were able to be up and running 

even in some of the hart-hit areas. This was certainly easier in my 

State because we did not have the long-term flooding issues that 

came up in the New Orleans and South Louisiana areas. 

Only 4 days after the hurricane, every bank in the State of Mississippi was operating, I will say, on some basis in some locations. 

I am proud to say that this was accomplished in large part because 

bankers stepped forward to help bankers and to help others in 

their community. 

In numerous situations, banks provided facilities, expertise, 

equipment to the banks that were in the hardest-hit areas. In one 

15

case, a bank processed checks for a competitor bank because that 

competitor bank’s processing center was disabled. 

As of this week, it has been reported that several New Orleans 

area banks are sharing a dozen branches in Jefferson Parish, 

which I understand is adjacent to New Orleans. 

Banks in the coastal areas have gone to extra lengths to be of 

service to their customers. They have done this with mobile ATMs, 

temporary facilities, shared facilities, as I have mentioned. Some 

banks have opened without any power at all. A bank in Richland, 

Mississippi, operated for several days in the dark with pen and 

paper, but they were up and running. 

Peoples Bank Biloxi, one of the hardest hit banks—their senior 

management spent the night in the bank several nights for various 

reasons, but so they could get their bank up and running, and they 

did get up and running within 4 days. 

Of course, banks have been called to serve the thousands of misplaced persons, evacuees from the storm. Banks are serving these 

in many different ways, through, as I have mentioned, the mobile 

ATMs, shared facilities. 

Banks have stayed open on weekends. Both weekends since the 

storm banks have stayed open to provide services in their areas 

and to accommodate the vast number of evacuees. 

One town in my State, Brookhaven, Mississippi, reports they 

have 2,000 evacuees in a town of 10,000, and that is not the Astrodome, but that is a big impact in that community, and the bankers 

are working hard to serve those persons. 

The industry has worked closely with bank regulators on a daily 

basis. We have been on conference call meetings with regulators 

discussing how we can best accommodate customers and non-customers who are in our markets. 

We are working with Government and charitable organizations 

to make sure that these persons get access to their benefits. This 

is extremely important, and I would have to say that it is probably 

the one topic of conversation in all our talks that has taken the 

most time, has been delivering those benefits, and how we can do 

it, and how we can identify customers and non-customers. 

I want to share quickly a story from Texas. There were two unaffiliated banks. Both used the name Omni Bank. One was from New 

Orleans and one was operating in Texas. Some evacuees from New 

Orleans were in Texas, and they called on the Texas bank thinking 

it was their bank. They did not know. 

I am proud to say that the bankers in Texas at Omni Bank of 

Texas took the initiative to help those people contact their bank, 

access their funds, and get the financial services that they desired. 

My time is running out here or has run out, but typical industrywide acts include a lot of waiver of fees, suspension of interest, extension of grace periods, and increases of credit lines. 

In Mississippi, I know that a number of banks have assigned employees for the specific purpose of dealing with persons affected by 

the storm, both evacuees and others. Many have established 800 

numbers for folks to call to directly access those services. 

Finally, I would just like to say that serving non-customers continues to be a very serious issue. The banks are having to balance 

16

their need to serve, their desire to serve, their need to do the right 

thing with regulatory and institutional concerns. 

We hate to talk about liabilities and losses at this time, but that 

is reality. And I can tell you the bankers in Mississippi are working 

to do the right thing, and we appreciate the support of others in 

helping us do that. 

I am pleased to be here, and the ABA stands ready to work with 

the committee as we work toward solutions and success in this 

area. Thank you. 

[The prepared statement of McKinley W. Deaver can be found on 

page 85 in the appendix.] 

Chairman BACHUS. Thank you, Mr. Deaver. 

I would say that the American Banking Association has been invaluable to the committee over the last week or so, supplying technical expertise as we have drafted legislation and as we have 

worked with the regulators, and they have done a tremendous job 

on keeping us posted as to the situation along the Gulf Coast and 

in New Orleans. They have done a phenomenal job. 

Thank you. 

At this time, Mr. Bordelon. 

STATEMENT OF KEN BORDELON, PRESIDENT AND CEO, E FEDERAL CREDIT UNION (LA), REPRESENTING NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS; 

Mr. BORDELON. Good morning, Chairman Bachus, Ranking Member Sanders, and members of the subcommittee. My name is Ken 

Bordelon, and I am the president and CEO of E Federal Credit 

Union, headquartered in Baton Rouge, Louisiana. I am here on behalf of the National Association of Federal Credit Unions, NAFCU. 

Thank you, Chairman Bachus, for your leadership on this important issue and for convening this hearing to examine what has 

been happening to financial institutions in the aftermath of Hurricane Katrina. All of our thoughts, prayers, and sympathies are 

with the victims of this terrible disaster. 

I am pleased to report to the subcommittee that NAFCU has 

been working with the National Credit Union Administration, 

NCUA, and other credit union groups since the beginning stages of 

this disaster to provide help to impacted credit unions in any way 

that we can. 

Our members are following the agency’s lead for where they need 

additional equipment and resources sent. Coming up here yesterday from Baton Rouge and having seen much of the devastation 

firsthand, I can say that credit unions that survived are working 

together to support those that did not. 

Many credit unions in the impacted area are trying to be as flexible as possible, within safety and soundness limits, to accommodate 

those in need of financial assistance. The losses to credit unions in 

the impacted area are expected to be great. 

E Federal was fortunate to have suffered no loss other than a 

day and a half of limited service to our members due to power outages. This has allowed me to be here today in Washington to tell 

the story for many of my colleagues who are too busy on the front 

lines to join us. 

17

One of the biggest challenges for credit unions in the aftermath 

of Hurricane Katrina is to have the regulatory flexibility to deal 

with the challenges in serving the needs of the hurricane victims. 

Any action that Congress can take to signal this message to the 

regulators would be important. 

Some of the main concerns that credit unions would like to bring 

to your attention include the following. 

One, telecommunications problems continue. ATM and debit card 

authorizations are sporadic, which causes everyone to continue to 

want cash. The outages are affecting our shared credit union network and causing difficulty for those out of the immediate area 

who are trying to contact Louisiana credit unions. 

Several credit unions cannot get their lines rerouted out of the 

New Orleans substations, which is causing a great deal of distress 

on behalf of members who cannot get their data through normal 

methods such as automated voice response machines and through 

the Web. 

Two, the desire for cash raises currency issues. Institutions have 

been taking steps to make sure that they have the cash available 

to meet their needs. I am happy to report that we have experienced 

excellent cooperation from the Federal Reserve, our corporate credit union system, and our depository banking partners. 

Three, not all members brought their identification with them 

when they evacuated, and this makes check cashing extremely difficult and will make reissuance of formal documents difficult as 

well. Members wanting to set up new accounts are having trouble 

due to the requirements of the Patriot Act. 

We at E Federal are providing loan extensions, skip payments 

and a special needs team to assess the borrowing needs of those 

with impaired credit. In addition, we have provided space at two 

of our branches to affected credit unions to set up emergency operations. Many credit unions in the area have taken similar measures. 

One unique aspect of the credit union community is our shared 

branching network. E Federal is a member of the network. Consequently, we were able to serve members from credit unions in the 

New Orleans area with immediate cash needs in the wake of the 

storm. 

This process of sharing service centers, which is widespread in 

the Gulf Coast region, has been a godsend, as surviving institutions 

have been able to help many of the ones that suffered damage. 

Finally, I would like to bring to your attention two legislative 

proposals that would aid credit unions in the long-term recovery 

from this disaster. The first would give NCUA the authority to 

allow credit unions to continue to serve and add members from 

their select employee groups after a credit union converts to a community charter. 

The second proposal would give NCUA greater flexibility with 

prompt corrective action, or PCA, reform. This proposal would give 

NCUA the flexibility that the other banking regulators currently 

have in dealing with PCA levels. 

In closing, I would note that the challenge for credit unions in 

the wake of Hurricane Katrina has been great. It is with this in 

18

mind that NAFCU stands ready to work with the NCUA and Congress to meet the needs of the hurricane victims. 

We support efforts that help secure the safety and soundness of 

credit unions while helping financial institutions meet the needs of 

hurricane victims. We thank you for this opportunity to appear before you today and would welcome any questions. 

[The prepared statement of Ken Bordelon can be found on page 

63 in the appendix.] 

Chairman BACHUS. Thank you very much. 

At this time, Mr. Cloutier? 

STATEMENT OF C.R. CLOUTIER, PRESIDENT AND CEO, 

MIDSOUTH BANK, N.A. (LA), REPRESENTING INDEPENDENT 

COMMUNITY BANKERS OF AMERICA 

Mr. CLOUTIER. Mr. Chairman, Ranking Member Sanders, my 

name is Rusty Cloutier. I am a Louisiana banker. I run a bank 

called MidSouth Bank, which covers all the coast of Louisiana besides the coast that was destroyed. I run from Baton Rouge-Homer, 

Louisiana, to the line in Vinton, Louisiana, which is right next to 

the Texas border. 

I also have a bank in Texas, located in Beaumont, Texas, that 

is also in the Conroe market, College Station, and I agree with Mr. 

Green’s statement. So be it but me, this could have destroyed 

Houston, Lake Charles, Lafayette. 

Let me first of all tell you that I was born and raised in hurricane country. My father was civil defense director for the city of 

Morgan City. Any of you all who know anything about hurricanes 

know that when they advertise hurricanes it is from Apalachicola 

to Morgan City, Morgan City to Corpus Christie. 

I lived through Betsy. I lived through Hilda. I lived through 

Camille. I lived through Audrey. Katrina was the big one of them 

all. They were like high school football games compared to the 

NFL. This was a terrible hurricane. 

The bankers of Louisiana responded beyond their wildest 

dreams, from rescuing and helping people individually to trying to 

get to their customers and dealing business. Let me tell you what 

we have done in Louisiana and what we continue to try to do. 

Even before this hurricane came, I had a sharing agreement with 

the banks in New Orleans called Community Cash. In the first 8 

hours of the evacuation, in a small town called Opelousas, we gave 

out over $60,000 through ATMs that were immediately accessed 

from our system. 

We today still have two banks operating within our bank, Parish 

National from the Covington area, and Mississippi River Bank, hit 

so hard in Belle Chasse. We continue to work very closely with 

them. We continue to fund ATMs and cash checks and work with 

them on an ongoing basis. 

You must remember, we are on their Web sites as the bank to 

go to if they have problems in the New Orleans area, because of 

our community sharing network. 

But I want to also talk to you about the work we have done within the shelters. The Cajun Dome in Lafayette, which Congresslady 

Waters visited last week, was one of the first refuge sites between 

19

Baton Rouge and Lafayette that people were sent before they were 

moved on to Houston and other areas. 

And I have spent a lot of time visiting with them. Their financial 

considerations are great. And I will tell you it has had a great bit 

of difficulty for those people getting checks cashed without identification and working with them. 

I almost chuckled a little bit when FEMA talked about handing out $2,000 debit cards to many of these who were totally unbanked 

and would not have the slightest idea how to use a debit card or 

understand what they were doing. 

We need immediate relief for check cashing. I applaud the chairman and our great Congressman from the State of Louisiana, Mr. 

Baker, for taking leadership and guaranteeing checks for people 

with Social Security. 

Let me tell you just a story that came up the other day. I got 

a call from Mr. Greg Davis, who runs the Cajun Dome, a very fine 

man in Lafayette, who called me up and asked me if I could come 

over. And he had a group of people in his office who had no identification with checks from FEMA and asked me if we could cash 

them. 

We worked through that. But I will tell you, my compliance officers were not very happy. They reminded me that I was violating 

the law, that they did not have the ability to have identification. 

I will tell you, a lot of laws have been violated in Louisiana to 

make things happen. 

Don Powell, who has been great in being responsive, called me 

within 72 hours of the hurricane hitting and said Rusty, what do 

you need, what help do you need. I said Don, the biggest problem 

is going to be people down here trying to make things work. He 

said believe me, Rusty, hold me responsible; I will make it work. 

And I said well, you know, Don, we are all concerned about violating some of these rules. He said well, call me if it ever comes 

to be a problem. 

So I will tell you, things are coming together in Louisiana. I am 

very proud to announce today that as we sit here today, in exactly 

50 minutes, Don Powell will hold a press conference in Gretna, 

Louisiana, announcing that a number of banks are going to be open 

under shared facilities. 

Mayor Nagin announced today that the downtown New Orleans 

may be open as soon as next week in the French Quarter, where 

some of these banks will be able to get up and running. And it has 

been a great experience. 

I am very proud that the phone numbers of every bank in Louisiana—there was a place to reach them within 5 days of the hurricane. It was amazing to me, with some of the problems they had, 

that they were able to get it together. 

Not only problems of destroying their banks—because one person 

told me I have lost 30 percent of my staff that have left, that were 

moved to Houston with Shell Oil or moved other places, that are 

never coming back, and I have to rebuild my bank with new people. 

That is very difficult to do in a destroyed situation. 

I would just call on a couple of other things you must remember, 

and I will give you a little quick story on this. There is a lot of people in trouble in New Orleans. I spoke to a banker yesterday who 

20

has a bulk fuel distributor who deals in gasoline. He has a $5 million line of credit to him. 

His receivables are at the gas stations in New Orleans, the bulk 

plant in Venice, Louisiana, which Congressman Baker will tell you 

is totally destroyed, and also he has credit out to the City of New 

Orleans, which—Mayor Nagin said today they can not pay their 

bills. 

And without flexibility for the banks to continue to deal with 

these people, we are going to have big problems. We need the flexibility of this committee to allow that to happen. 

We also need a continual situation in the future—and I call on 

this committee to study hard that the next time this happens we 

have relief available for the regulators to act quickly. You know, we 

need to have such things as the recision law not on the books. 

I had a lady in my bank the other day who wanted to get somebody to repair her roof, and I explained to her she had a 3-day 

right of recision. And she says I do not want a right of recision. I 

want the contractor to finish my roof and pay him because he 

wants cash up front. 

So we need a lot of these considered, a lot of things to look at, 

and I know this committee will do a fine job. And I compliment you 

on the work you have done. 

On behalf of the people from the State of Louisiana, on behalf 

of the bankers from the State of Louisiana, we thank you for what 

you are doing. We never wanted this catastrophe. We never wanted 

it to happen. And certainly, we are very glad to work with you. 

I will be happy to answer any questions not only today, but 

please feel free to call me at any time at my bank, and I will be 

happy to work with any member of this committee. Thank you so 

much for the opportunity to testify today. 

[The prepared statement of C. R. Cloutier can be found on page 

74 in the appendix.] 

Chairman BACHUS. I appreciate that. I appreciate your remarks 

about Chairman Powell. As you know, he was an acting member 

of the Independent Bankers Association, ICBA, and was very concerned about our smaller credit unions and independent banks in 

the aftermath of Katrina, and we are very happy to know that they 

are all financially stable. 

And he issued a statement that the Federal Government would 

stand behind our banks and our credit unions, the full faith and 

credit of the Government and the FDIC, of the Federal Deposit Insurance Corporation. 

Mr. Elliott, welcome your testimony. 

STATEMENT OF CHARLES ELLIOTT, PRESIDENT AND CEO, 

MISSISSIPPI CREDIT UNION ASSOCIATION, REPRESENTING 

CREDIT UNION NATIONAL ASSOCIATION 

Mr. ELLIOTT. Members of the subcommittee, on behalf of the 

Credit Union National Association, I am Charles Elliott, president 

and CEO of the Mississippi Credit Union Association. 

I am here today to share with you the devastation that has impacted our credit unions, to share the remarkable relief efforts underway through credit unions across the country, and also to ask 

for your help. 

21

Hurricane Katrina took away our homes, our schools, our places 

of worship, our jobs and, in some cases, our lives. She altered our 

plans, postponed our dreams, and temporarily took control of our 

lives. However, we are working very hard to make sure that she 

does not take away the will and the hope of the American people 

living on the Gulf Coast. 

After the disaster, the Mississippi Credit Union Association, with 

the leadership of CUNA and generous assistance from credit 

unions around the country, took a variety of immediate actions to 

help our credit unions with their needs. 

But our most important role is to deliver hope to our credit 

unions and credit union employees so that they, in turn, can deliver hope to their credit union members, hope in knowing that 

they are not alone, that someone else is out there looking out for 

them, hope in believing that they can regain control of their lives, 

and hope that life again someday would be normal, albeit a different definition of normal. 

Our credit unions have shown a great commitment to serve. Only 

1 day after the hurricane made landfall, in spite of the fact that 

three-fourths of our State was without electricity, many credit 

unions opened their doors for service. They operated offline, taking 

pencil and paper transactions, doing whatever they could to meet 

the needs of their members. 

Today, some of our credit unions along the Gulf Coast are still 

without data lines and phone services that they need to provide 

lifeline financial services. Our credit unions put the credit union 

philosophy of people helping people into action. They took steps 

that were neither asked nor required of them in order to ease financial burdens. 

They have deferred payments on member loans, increased lines 

of credit on credit cards, increased overdraft limits on checking accounts and, it goes without saying, waived fees. 

Regardless of the credit union commitment to serve members 

and help each other, it soon became clear to us that the effects of 

Hurricane Katrina would be devastating. 

I want to give you an example of one credit union. I think it encompasses all that is taking place down in Mississippi and the 

movement. Jackson County Federal Credit Union in Pascagoula is 

a $3.1 million credit union. They only have one office. Two of the 

credit union’s employees do not have a home. 

The building that they were in was totally destroyed by a storm 

surge. This credit union was not in a designated flood zone. They 

did not have flood insurance. The insurance company deemed all 

of the loss for this small credit union as from water, and they are 

going to get an insurance check, but it is going to be for the cost 

of two computers and a phone line. 

This credit union went to work very quickly. They set up operations in the back end of a pickup truck. One of the credit union’s 

employees served as the security person because he had a gun that 

he could bring down there and sit and guard them with. 

This makeshift credit union did everything they could to respond 

to the needs of their members. They soon moved into the office of 

another credit union, and after hours the credit union manager left 

her cell phone number on the door of that office. 

22

On her way home one evening, she got a phone call from a credit 

union member, Doug DeSilvey. He was requesting that she come 

back and give him $6,000 for burial expenses. Mr. DeSilvey had actually survived the storm, but he watched helplessly as his daughter, his ex-wife whom he was taking care of, and her parents—all 

three perished in the flood waters that breached their home. Mr. 

DeSilvey not only lost everything in this storm, he lost everyone in 

his life. His family was together because 2 days before Katrina 

they held memorial services for his father. 

The issue of flood insurance and housing is tremendous. Countless individuals and businesses across the Gulf Coast thought that 

they were fully secured and fully insured. Their property was not 

in a flood plain, had never flooded, even during Camille. Now they 

have lost everything, and they are facing payments on a home or 

business that no longer exists. 

We have 14 credit unions in Mississippi on the Gulf Coast that 

were in the direct path of the storm. Eight of them received major 

water damage to 11 of their facilities. Only one had flood insurance 

and only on some property. 

Now, those credit unions which were not located in the flood zone 

not only are struggling to reestablish financial services to their 

members, they are also facing significant losses which must also ultimately be borne by their member owners. 

But the tragedy of so many left homeless is also compelling. You 

take these same 14 credit unions—129 of their employees are 

homeless. Most of them had houses that were completely destroyed. 

They no longer have a place to live due to the storm, and the vast 

majority of those employees are also facing a lack of flood insurance themselves because their residences also were not in the flood 

zone. 

Unfortunately, Katrina chose to ignore the designated flood 

areas, and now these employees, the key to reestablishing lifeline 

financial services to some 200,000 credit union members, have no 

relief when the workday ends for them. 

They have no lawn to mow. They have no recliner to sit in. They 

have no rocker on the front porch. And there is also no insurance 

check on the way to help them rebuild their lives. There is no escaping the constant reminders that they are homeless and without 

recourse. 

Whether through temporary or permanent measures, Congress 

can play a role in assisting credit unions in meeting the needs of 

the victims of Hurricane Katrina who may still be in the affected 

area or scattered across the country. 

Providing housing must be a priority. In addition, the flood insurance problem must be addressed. Both of these barriers are significant contributors to storm victims’ feelings of hopelessness and 

despair. 

The immediate removal of these barriers will provide the renewed will and hope so that the American people living on the Gulf 

Coast can start rebuilding their lives. 

From a unique credit union perspective, perhaps one of the most 

meaningful things that Congress can do is to address the problems 

associated with capital that will be facing our member credit 

unions. We have serious concerns that the recovery efforts will be 

23

significantly limited by constraints and restraints imposed on credit unions under prompt corrective action. 

PCA not only forces credit unions to restrict growth that results 

from deposit of new funds, but also requires the NCUA regulators 

to impose significant sanctions on credit unions that face declining 

net worth. 

Considerable PCA concerns may be faced by a number of credit 

unions in the path of Hurricane Katrina due, in part, to the relocation of their membership as well as to the uncertain future of their 

communities. We have major issues such as non-performing loans, 

and these will also exacerbate this situation. 

Many credit unions themselves were destroyed, as were the assets of virtually all of their members. Also, we have growth concerns that are going to come in the future when people that do get 

insurance monies deposit those insurance monies in their credit 

union account. 

But we believe that the PCA changes embodied in H.R. 2317, the 

Credit Union Regulatory Improvement Act, should be made permanent. We also are asking Congress, at a minimum, to provide 

NCUA with temporary authority to waive certain PCA requirements. This authority should be applicable for credit unions in the 

affected areas as well as those serving relocated members. 

We are committed to working in the aftermath of Hurricane 

Katrina to help our staff, our volunteers, and our members rebuild 

their lives, their communities, and perhaps, most importantly, 

their financial well being. 

It will be a long and difficult road for the victims whose homes 

and communities were devastated beyond repair, but the credit 

union movement is ready to help them regain their financial independence and a secure future. 

Mr. Chairman, I do want to tell you that people get hope from 

a lot of different things, and our visits down on the coast prove to 

us that one of the most effective ways that we can deliver hope is 

through a hug. I consider that now my specialty, and we have 

given out a lot of hugs over the last several weeks. 

Thank you very much. 

[The prepared statement of Charles Elliott can be found on page 

94 in the appendix.] 

Chairman BACHUS. I thank you for your statement. 

And I know in your testimony you mention something that we 

are very concerned about, and that is the fact that much of the 

property and many of the homes that were destroyed or damaged 

and businesses by the storm surge and by the flooding was outside 

the designated flood zone. 

And that obviously is something that I will ask you all when we 

have time for questions is what would be your recommendations 

with respect to the Federal insurance payments that will be made 

by the Federal Government. 

Mr. ELLIOTT. Do you want to talk about that now, or—

Chairman BACHUS. And we will do that—

Mr. ELLIOTT. Thank you. 

Chairman BACHUS. Ms. Casey-Landry? 

24

STATEMENT OF DIANE CASEY-LANDRY, PRESIDENT AND CEO, 

AMERICA’S COMMUNITY BANKERS 

Ms. CASEY-LANDRY. Chairman Bachus and members of the subcommittee, I am Diane Casey-Landry, president and CEO of America’s Community Bankers. Thank you so much for holding this important hearing. 

And I also want to thank Chairman Bachus and Chairman Baker 

for their leadership and legislative efforts on behalf of financial institutions in the affected area. Like you, our thoughts and prayers 

are with the victims of Katrina. 

At ACB we have established, like many others, a relief fund that 

our members are contributing generously to, bankers continuing to 

help bankers as well as their customers. 

Let me begin with a brief update from the people on the ground 

in the hurricane-ravaged area. Dan Digby, president of the Community Bankers of Louisiana, and Peter Gwaltney, president of the 

Louisiana Bankers Association, are keeping us current on a daily 

basis. They have reported with pride and enthusiasm the many 

ways that community banks in the area are helping each other 

even while having faced huge personal losses. 

I want to note that Mr. Digby and Mr. Gwaltney, working with 

their bank commissioner, John Ducrest, have done an outstanding 

job in providing assistance and guidance to the banks, just as their 

counterparts have done in Mississippi and Alabama. They deserve 

our thanks. 

Mr. Digby, who was here last week and cannot be here today because he is with FDIC Chairman Powell in Baton Rouge, is still 

warning of a perception gap and has asked me to provide his views. 

He is concerned about what is going on in the hurricane-affected 

areas and what the regulators have been stating is happening. 

Community banks are not fully operational in the worst-hit areas. 

They are making progress, but there are no banks open in Orleans 

Parish. There are limited services at the banks that are open that 

can be offered. 

I spoke to one of my board members last night from the New Orleans area, and he expressed frustration that today he still has 

only one of six branches open, and it is limited operations at that. 

Liquidity still remains a concern. The Federal Reserve must continue to provide the necessary liquidity to the banks in the region 

as long as the cash economy continues to exist, which it seems like 

it will for a while. 

Community banks throughout the Gulf Coast are also extremely 

concerned because they are cashing checks with limited identification, as you have heard, and they fear that in 12 months to 18 

months bank examiners will cite them for violating the check cashing rules during this crisis. 

Mr. Digby has warned that many of the loans will have to be restructured to accommodate customers, and while these debt 

restructurings are occurring, the regulators must relax their historical expectations and limits on loan delinquency reports and loan 

loss reserves and allow the banks to capitalize the interest into the 

restructured loan. Let me emphasize, the leniency will be critical 

for many months to come. 

25

Community banks have been active in reaching out to the victims. Banks in the communities surrounding the most affected 

areas are sharing facilities, computers, and personnel so that the 

damaged community banks can continue to serve their customers. 

Banks in the area that are able to do so are meeting the challenge 

to serve their customers and their communities the best they can. 

The community banks are doing what they can do to ensure that 

their customers have access to money. As you have heard, cash is 

really important now. One bank president drove around to his business customers last week with excess cash, collecting their cash deposits, and providing a handwritten receipt for the business owners 

so they could continue to function. 

Community banks are waiving ATM fees and late fees. They are 

extending grace periods to customers in the affected areas. They 

have suspended mortgage payments for 60 days to 90 days, returning direct debited mortgage payments when they can reach the customer. 

They are developing alternative payment plans and providing 

penalty-free CD withdrawals. They are also working with the small 

businesses to get them up and running. 

Most importantly, Congress, the bank regulators, and the Administration can help more. First, the Federal Government must make 

it absolutely clear that the U.S. banking system and insured institutions are safe and sound. That is particularly true for the community banks whose footprint is limited to the affected area. 

Second, Congress needs to pass the legislation to indemnify community banks in the hurricane region from cashing the bad checks. 

Community banks are being asked to cash Government checks, 

FEMA checks, and other forms of assistance, and they are doing 

that. We just do not want them to be left to foot the bill. 

It is also essential that the bank regulators provide written guidance so that months from now bank examiners will not cite institutions for potential violations of the Bank Secrecy Act, the Patriot 

Act, or other regulations because they provided the necessary check 

cashing services to victims under relaxed standards. 

The challenge is to maintain necessary flexibility in regulatory 

policy and compliance requirements. As Mr. Digby repeatedly said 

last week, those with the boots on the ground have a different view 

than those who view the devastation from afar. Regulatory policy 

will be continuing to evolve during this period, but that policy must 

remain flexible and over an extended period of time. 

Jobs are also an important part of the solution. The Gulf Coast 

is home to thousands of small businesses that have been devastated. We recommend that the SBA offer a much more streamlined approval process to get loans into the hands of these businesses, and time is of the essence. As my bankers have said, people 

need jobs to come home to when they come home. 

Community banks are eager to be engaged throughout the recovery process, and the actions that are being praised today must not 

be exposed to criticisms tomorrow. We thank you for your help and 

your guidance. We look forward to working with you and with our 

members in the region. 

I would be pleased to answer any questions. Thank you. 

26

[The prepared statement of Diane Casey-Landry can be found on 

page 122 in the appendix.] 

Chairman BACHUS. Thanks very much for your testimony. 

Mr. Gibbons, you have previously been introduced by Ms. 

Biggert. 

STATEMENT OF DAVID GIBBONS, SENIOR EXECUTIVE VICE 

PRESIDENT AND CHIEF RISK OFFICER, HSBC NORTH AMERICA (IL), REPRESENTING AMERICAN FINANCIAL SERVICES 

ASSOCIATION 

Mr. GIBBONS. Thanks, Mr. Chairman, members of the subcommittee. My name is David Gibbons. I am senior executive vice 

president and chief risk officer at HSBC North America Holdings. 

Today I am testifying on behalf of the 300 members of the American Financial Services—

Chairman BACHUS. Mr. Gibbons, would you maybe pull that 

mike up a little closer? 

Mr. GIBBONS. Better? 

The American Financial Service Association represents companies that lend to customers and small business. AFSA members 

help individuals and families buy the houses they call home and 

the cars that give them access to work. 

HSBC North America is one of the 10-largest financial services 

firms in the United States, with business units that offer a full 

range of banking and lending products. 

In the United States, we engage in commercial banking and are 

a top mortgage, credit card, and auto lender. Under the brand 

names HFC and Beneficial, we are one of the country’s largest consumer finance companies, with some 1,400 offices located in 46 

States. 

Like scores of organizations, AFSA members moved swiftly in the 

days after Katrina struck to support rescue and recovery efforts. 

AFSA members have contributed more than $45 million to efforts 

so far, and that number will undoubtedly rise. 

Our industry is extending its hand to individuals and families 

who have been directly and indirectly affected by the hurricane. 

AFSA members are working with customers individually and generally to accommodate their needs and to help them get on their 

feet. 

For example, HSBC customers who live in the FEMA-designated 

individual assistance disaster areas may delay their September 

payments by 30 days as they move to handle more immediate 

needs. 

AFSA has heard from a number of lenders that have waived late 

and over limit fees. HSBC has waived cash advance fees for the 

same reason. And as encouraged by our Federal regulators, we are 

suppressing credit bureau reporting for hurricane-affected individuals. 

Members of AFSA are also offering emergency credit line increases for many credit card and mortgage companies to help them 

get over what we hope is a temporary problem, but we probably 

know is going to be a sustained crisis. 

27

Our employees are also tremendously involved in this effort. For 

example, employees at HSBC and other AFSA members across the 

country are conducting fund raisers and collecting donations. 

With just 48 hours’ notice, some 1,000 HSBC volunteers joined 

hundreds more at Capital One and other private companies to accept contributions during a September 2nd concert for the benefit 

of the American Red Cross, and we are prepared to do that again. 

As our Nation moves to the stage of rebuilding, it is of utmost 

importance that we establish a platform upon which hurricane-affected individuals and families can rebuild their homes and their 

lives. 

AFSA is appreciative of the subcommittee’s request for its input 

on several legislative proposals outlined by the committee. AFSA is 

still in the process of gathering input from its members on these 

proposals. But all the committee’s initiatives are worthy of serious 

consideration. 

While AFSA’s in the process of developing its input, we do wish 

to offer some recommendations of our own for your consideration. 

First, consistent with the efforts of the Federal financial regulators, it would be appropriate to pursue administrative changes 

relaxing bank secrecy, know-your-customer and privacy requirements for those individuals and families needing the help of the financial services sector to reestablish their access to cash and credit. 

Second, because it is important to get cash into the hands of consumers, we believe it prudent for the bank regulators to delay implementing supervisory policy that requires lending organizations 

to assess higher minimum payments on their credit cards. 

Longer term, we believe that there will be a number of issues 

that need to be addressed. First, we believe there may be significant environmental issues that will need to be addressed as we 

learn more about what the news media has described as toxic soup 

that covers New Orleans. 

Residential lenders will need Government guidance to ensure 

that rebuilding efforts are safe from biological or chemical contaminants left behind by the flood waters. 

The spirit of interagency cooperation among financial regulators 

will need to be expanded to include the Environmental Protection 

Agency and other appropriate agencies to develop environmental 

cleanup policies to foster a safe environment for businesses and 

residents. 

Second, Hurricane Katrina is expected to require the insurance 

industry to pay out nearly $60 billion in damage claims. While the 

regulation of insurance is primarily a matter of State jurisdiction, 

Congress has wisely provided some limited Federal insurance coverage through the National Flood Insurance Act and Terrorism 

Risk Insurance Act. 

Congress may wish to consider expanding flood insurance for 

those who were underinsured because they were not located in Federal flood zones. 

Third, AFSA members applaud the Federal bank regulators’ efforts to ensure customers’ access to banking facilities, cash, and 

credit, and to provide some supervisory flexibility, but it is important to note that many AFSA members are not banking organizaVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
28

tions and may not be allowed the same flexibility to work with 

their hurricane-affected customers. 

To that end, we would ask you to work with the Securities Exchange Commission and other State regulators to ensure that nonbank lenders who are critical to rebuilding efforts are afforded the 

same flexibilities to work with their hurricane-affected customers 

as banks are. 

Finally, to ensure customers get the best loans at the lowest 

rates, the Government should ensure that financial institutions 

who are sharing in the credit risk of rebuilding are not relegated 

to the back of the line in the case of default. 

Subordinating our lien positions behind those of the Federal Government may ensure the Government is first in line to collect in 

the case of default, but it will assuredly increase the financial risk 

to the private sector lenders which inevitably will lead to higher 

rates and higher payments for all consumers, not just those affected by the hurricane. 

Mr. Chairman and members of the subcommittee, there is much 

that needs to be done. We have taken only the first of what we believe will be many, many steps to rebuild what Hurricane Katrina 

has damaged. 

I thank you for the opportunity to testify before you today and 

will be pleased to answer any questions you have. 

[The prepared statement of David Gibbons can be found on page 

111 in the appendix.] 

Chairman BACHUS. I appreciate that. 

Mr. Shelton? 

STATEMENT OF HILARY O. SHELTON, DIRECTOR, 

WASHINGTON BUREAU, NAACP 

Mr. SHELTON. Thank you very much, Mr. Chairman and Ranking 

Member Sanders. Ladies and gentlemen of the subcommittee, I appreciate the opportunity to come before you today to talk about responses of our Nation’s financial institutions to the Hurricane 

Katrina disaster. 

I am here on behalf of the national NAACP, our Nation’s oldest, 

largest, and most widely recognized grassroots-based civil rights organization. With more than 2,200 units in every State in the Nation, including hundreds of units in the areas that have been most 

devastated by Hurricane Katrina, the NAACP stands ready to provide you with our concerns and suggestions as to how best to help 

the multitude of victims of Hurricane Katrina. 

Once the scope of the damage from Hurricane Katrina became 

apparent, as well as the fact that a disparate number of those most 

severely affected were African Americans and other racial and ethnic minorities and the poor, the NAACP activated our grassroots 

networks and began offering assistance. 

In preparing this testimony, I spoke extensively with the people 

in charge of the Baton Rouge, Louisiana, Biloxi and Jackson, Mississippi, and Houston, Texas, NAACP disaster command centers, 

and much of what I have to say here today comes from them, the 

people in the field. 

I would like to thank them all—Mr. Kwame Asante in Baton 

Rouge, Louisiana; Mr. Derrick Johnson in Jackson, Mississippi; Mr. 

29

James Krowell in Gulfport, Mississippi; and Ms. Yolanda Smith in 

Houston, Texas—for their insight as well as their Herculean efforts 

to help the victims of Katrina. 

At the most basic level, it is the fervent goal and aspiration of 

the NAACP to ensure that when all is said and done the victims 

of Hurricane Katrina, regardless of their race, economic level, or 

the extent to which their lives were disrupted by this disaster, are 

able to come away with all that they had had prior to the tragedy 

in terms of their finances, property, heart, minds, body, and souls. 

Much of this, including homes, cars, businesses, and credit ratings, are a result of an interaction they had prior to the hurricane 

with a financial institution. 

Thus, we are strongly urging the financial institutions that are 

represented here today to continue with all the Hurricane 

Katrina—working with Hurricane Katrina victims and show flexibility and compassion so that all the residents of the Gulf States 

are not further victimized and they can recover from the horrors 

of this disaster. 

I am also here today to say that the NAACP invites the opportunity to work with you, the financial institutions, as well as with 

every Member of Congress, to try to develop policies to help ensure 

that all of the victims of Katrina fully recover. 

Secondly, the NAACP wants us to learn from Katrina. When all 

is said and done, we would like to be able to say that yes, Katrina 

was a devastating nightmare and much was lost; it shined a spotlight on historically troubling racial and economic divides that still 

persist in our Nation, but we can learn from such past tragedies, 

and we have taken the time to try to establish policies and practices to try to stop, or at the very least stem, some of the very serious problems that occurred in September of 2005. 

We cannot stop natural disasters, but we can do more to mitigate 

the damage they cause with greater conviction. In the short term, 

there is much that we can and should be done by our Nation’s financial institutions to help address the losses suffered by tens of 

thousands of people who were affected by Hurricane Katrina. 

According to our command center director from Houston, where 

tens of thousands of victims have been taken, there is a dire need 

to consolidate services and make them readily available to large 

numbers of people. 

Most of the victims who are housed in Houston came in by buses 

and, thus, lack transportation. To expect them to travel to other 

areas of town to obtain even the most basic of financial services is 

impractical and difficult, at best. 

Furthermore, the sheer numbers of people who have been evacuated to Houston and are in dire need of basic services demands innovative responses form all sectors, including the financial services 

sectors here. 

I should add that the NAACP recognizes that many of these people may not have been involved as traditional customers to your 

banks, credit unions, or et cetera. Quite frankly, some of them have 

never used an ATM or applied for a traditional mortgage or small 

business loan in their lives. 

But now is not the time for anyone, including the financial institutions, to turn their backs on whole communities. From a business 

30

perspective, it would also be a terrific opportunity to pursue new 

clients and to prove that your institutions truly care about a diversity of people and about their customers—that could become your 

customers. 

Looking a little further out, we would like all financial institutions to develop a plan to ensure that everyone affected by the devastation, not just the wealthiest, are able to rebuild. We must 

make sure that the finite pool of capital is spread evenly throughout the victims and that the low-and middle-income Katrina victims are not left out of efforts to rebuild. 

To that extent, the NAACP supports the recommendations of the 

Independent Community Bankers of America that a special loan 

bailout fund be created for the Federal Government to purchase 

loans of borrowers affected by the disaster. We would like to be involved in the creation and implementation of that fund, however, 

to ensure that consumers and homeowners are protected as well as 

the financial institutions. 

There are a few steps that can and should be taken by all financial institutions to ensure that the people of Louisiana, Mississippi, 

Alabama, and the other areas affected by Katrina are not further 

victimized and do not suffer further losses. 

Many of these recommendations are especially important to lowand middle-income families, many of whom lived paycheck to paycheck and may have lost their jobs when their places of employment blew away or was last seen under 15 feet of water. 

Specifically, the NAACP is joining other consumers and civil 

rights groups in calling for a series of debtor protections, including 

a moratorium on foreclosures, a prohibition of collections and deficiency judgments on real and personal properties, a prohibition on 

negative credit reportings or omissions of negative events from 

credit scores when the incidents were a result of Katrina, and a 

voluntary waiver of late fees or interest on loans made to people 

in Katrina-affected areas for a period of at least 3 months. 

The NAACP is also very concerned about the predatory lenders, 

who even as we speak must be circling some of the worst hit areas, 

salivating at the potential for abuse. Predatory lenders have historically targeted African Americans and low-income Americans at 

disproportionate rates, so we need to ensure that the few protections we have remain firmly in place. 

Specifically, the fraud protections regarding home improvement 

contractors, including the 3-day right to rescission and the APR 

disclosure must be retained. 

Lastly, financial institutions can stem the inevitable preponderance of predatory loan in low-and middle-income neighborhoods 

and communities of color by establishing a presence of their own 

in these areas. 

If legitimate financial institutions opened branches in low-income 

neighborhoods or in areas predominantly occupied by African 

Americans and offered low-cost loans, then predatory lenders would 

have a harder time re-victimizing the victims of Katrina, which 

brings me to my final point, lessons we can learn from Katrina. 

In my discussions with Kwame Asante, the president of the 

NAACP Baton Rouge branch and the director of our hurricane command center in that city, one thing became clear. With the slow 

31

erosion of the Community Reinvestment Act over the last few 

years, traditional financial services have become, even prior to 

Hurricane Katrina, harder to come by in low-income and predominantly African-American communities in his area. 

As a result, when people were scrambling to find shelter or evacuate prior to the hurricane’s arrival, Mr. Asante himself witnessed 

several mothers dragging their children from bus to bus to try to 

get to a part of town that did offer financial services to get money 

out of their accounts. The other option, which was used by too 

many other people, was high-interest lenders, including payday 

lenders. 

The lack of basic financial services in our communities has also 

led to people storing their savings in their homes, in their mattresses and teapots. So when their houses washed away or became 

engulfed in flood water, people lost more than their homes. They 

often lost their life savings as well. 

In closing, if we learned anything from this disaster and hope to 

avoid the devastation of these proportions in the future, it is that 

financial institutions must do more to serve low-and middle-income 

Americans and that they cannot ignore communities of color. 

Hurricane Katrina is a disaster of tremendous proportions, both 

in economic as well as basic human terms. Yet it also offers us opportunities to do better and to offer more to our society. 

For financial institutions, Hurricane Katrina has provided you 

with the opportunity to offer your services to people from all walks 

of life and all racial and ethnic backgrounds and to show a sense 

of compassion that has been sorely missing from our national history. 

The NAACP stands ready to work with you. Thank you again 

very much for allowing me to testify today and to share with you 

the concerns, challenges, and hopes of the NAACP. 

[The prepared statement of Hilary O. Shelton can be found on 

page 131 in the appendix.] 

Chairman BACHUS. I thank you very much. 

My first question—we have heard reports of people walking into 

banks without a driver’s license or identification trying to either 

open a bank account or become a member of a credit union. And 

the Bank Secrecy Act, you know, prevents a certain amount of that. 

Now it is my understanding that the bank regulators have asked 

you to sort of relax those rules. Is that correct? Are you getting 

that message? 

Mr. CLOUTIER. Mr. Chairman, I will tell you that the message is 

coming loud and clear from Don Powell, but let me give you an instance. We have formed a task force over at ICBA, and we had a 

conference call the other day, and we had some bankers on from 

Homestead, Florida, who went through Andrew, another major 

hurricane that hit Florida and then hit Louisiana. 

And their comments were yeah, they worked with us for 12 

months, and then they came back and they blistered us on what 

we did. And there is still a big fear of that among the bankers. Don 

and I have had long conversations about that. We had long conversations with John Ducrest, the banking commissioner. 

And, I mean, there is a lot of fear that, you know, what is going 

to happen 12 months, 24 months from now. So that is why I enVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
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courage you all act so much. I think it will help. It will help send 

a very clear message from Congress of what your wishes are, and 

hopefully—I know the regulators will pick it up and work with it. 

But there is a fear of that out there. 

Chairman BACHUS. Thank you. 

I will tell you all on the currency transaction reports we have 

been working with just—and I am talking about for regular customers, seasoned customers, Mr. Hensarling’s legislation—does not 

have at this time, but we are very, very close to having a seasoned 

customer component on that. 

And with some assurance I will tell you today that we will probably have legislation with the backing of the regulators where we 

will not have to have as many of the CTRs. 

Mr. DEAVER. Mr. Chairman, if I might add to that on the identification issue, we have heard the same things that Mr. Cloutier—

Mr. CLOUTIER. Correct. 

Mr. DEAVER. —okay, I am from Mississippi, not Louisiana—that 

he has heard, and we have talked directly with Chairman Powell 

about this. And we are really trying to advocate, as is Chairman 

Powell, common sense in this, for still being able to meet the immediate needs and get our hands around those. 

And I guess we certainly are all concerned with the goals of the 

regulations that we are under. We do not put those aside, but we 

are talking about temporary emergency type relief in these situations, and, frankly, the bank secrecy type regulations did not have 

a Plan B, and we are advocating, I guess, a Plan B, a temporary 

limited response to these needs. And we appreciate any help that 

we can get. 

Chairman BACHUS. And I know Chairman Baker said, you know, 

those things that we have got a consensus we feel like we can pass 

immediately. We need to get out—that is why this indemnification 

for check cashing and other—want to try to get that out, even 

though it does not have prompt corrective action in it. 

And I know that something that the credit unions particularly 

have asked for us to get. But those things are more controversial, 

and we want to move immediate relief out. 

Ms. CASEY-LANDRY. Mr. Chairman, could I just add one comment—

Chairman BACHUS. Yes. 

Ms. CASEY-LANDRY. —echoing in terms of what we heard from 

Rusty and Mac—I think it is easier to use their first names, that 

really what we need is written guidance from the regulators. 

And I realize that Chairman Powell has been wonderful in terms 

of his forthcomingness, but the reality is that what is said here in 

Washington and what is communicated in the field to the examiners can be different. 

And we need to make sure the examiners have the written guidance that they can rely upon and the banks can rely upon that. 

Chairman BACHUS. And actually, we are working on a Katrina 

BSA proposal for them, something in writing, and hopefully—and 

I know Chairman Baker—we plan to have something along with 

cooperating—I know Ms. Hooley and Ms. Waters are working on 

some things. 

33

Let me ask this question, and this, I think, is more of a longterm question. We have all talked about the properties destroyed 

by the flood waters and the storm surge outside this designated 

flood plain. 

My question, and I guess I could ask it different ways, but I will 

just say should the Katrina victims outside of the designated flood 

plain be compensated in any way by the National Flood Insurance 

program? How would you recommend this compensation be structured? I know that is a tough question. 

Maybe two parts: Should they be compensated—

Mr. ELLIOTT. Yes. 

Chairman BACHUS. —and how? 

Mr. ELLIOTT. Yes. I mean, we have people down here—and I am 

not trying to place this off on someone else, but—that through their 

process of purchasing homeowner insurance were told by their 

agent look, you are not in the flood plain; you have never been 

flooded before, not even in Camille; this is a waste of money. 

And that is what people have judged—we have credit unions that 

go back 100 years, through all of the flood plain mapping and everything else. In the absence of a 100-year flood plain history, they 

will look at what happened in Camille—

Chairman BACHUS. And I know, you know, CUNA, in their written statement, Mr. Elliott, you did address that. 

Mr. ELLIOTT. Yes. 

Chairman BACHUS. And I guess I am curious about other—is 

there any reaction? 

Mr. GIBBONS. I may comment on this. You ask about flood insurance compensation and extending the National Flood Insurance 

program to those not already covered. They were outside of flood 

plains. 

It may not be a matter of extending flood insurance. It may be 

a matter of finding a way for them, those people, to rebuild, incurring some kind of debt in addition to what they already carry on 

the house that no longer exists. 

But fundamentally, what we are talking about is some kind of 

Government assistance. 

Chairman BACHUS. All right. 

Ms. CASEY-LANDRY. I would say that we would—America’s Community Bankers would support some type of support. I think 

whether it is an extension of the flood insurance or maybe more appropriately, as was just stated, some sort of assistance because otherwise if those borrowers turn around and walk away from the 

bank, the bank is going to be left with a loss, and we do not go 

forward anyway. 

So we need to think creatively about providing up a solution so 

that the bank continues to have a valued asset. If I have got some 

of my members today with 40 percent to 50 percent of their portfolios or higher that are insurance claims, those are the ones that 

are insured. 

Then there is the group that are the no insurance, and so they 

also—they do not know what the value of their assets are. So I do 

think we need to look for some type of a solution, and it could be 

the flood insurance, or it could be another type of fund, to help 

those customers. 

34

Chairman BACHUS. You know, as a policy, what we had were 

people who said flood insurance—there is no Federal flood insurance because you are outside a flood area when, in fact, along the 

coast we should have anticipated storm surges, that they were, in 

fact, within an area which was prone to flood or—which was so 

predictable in New Orleans. 

Mr. GIBBONS. Well, we could say we should have anticipated, but 

rest assured—and be right or wrong about that, but rest assured, 

any lender will anticipate this will happen again. 

Chairman BACHUS. Yes. 

Mr. DEAVER. Mr. Chairman, I might add that the storm surge in 

this storm in Mississippi was over twice the storm surge from Hurricane Camille, and that was our benchmark, so we do not stop 

talking about Camille and start talking about Katrina. 

And like Charlie said, there are many, many areas that got flooded that were out of the flood zone, and there likewise are many, 

many issues related to insurance. And of course, everybody, even 

in the flood zones, you know, I guess if they have Federal related 

mortgages they are required to have the insurance, so there are a 

lot of issues involved in that and, frankly, probably some insurance 

disputes over wind, water—

Chairman BACHUS. Sure. 

Mr. DEAVER. —which came first, this type of thing, so—

Chairman BACHUS. Which obviously we have all been—we have 

all heard about those. 

Mr. DEAVER. But we would appreciate the opportunity to work 

with the other members of—

Chairman BACHUS. Thank you. 

Mr. DEAVER. —the panel and the committee on that. 

Mr. CLOUTIER. Mr. Chairman, on that, I would like—

Chairman BACHUS. And actually, my time has gone over. 

Mr. CLOUTIER. I would just like to add one quick thing to that, 

just 20 seconds. Everybody—

Chairman BACHUS. Oh, I am sorry. 

Mr. CLOUTIER. —in that area played by the rule book. They had 

the rule book. They had the rule book for flood insurance. They had 

the rule book of how to run banks. These were all one and two 

rated banks. They all played by the rule book. 

Now we are only talking about who is going to pay the price because Hurricane Katrina did not play by the rule book. 

Chairman BACHUS. All right. 

Mr. CLOUTIER. And that is the question. 

Chairman BACHUS. All right. And I guess another thing I am 

saying—we are going to spend all this money. You know, that 

ought to be a component of it, at least—or be very much under consideration because there will be money that maybe will not be as 

efficiently spent, but this money obviously would be spent to rebuild homes of people who acted in a prudent way, you know, and 

those that loaned the money acted in a prudent way. 

At this time, I—you are—okay. 

Mrs. MALONEY. I want to thank—

Chairman BACHUS. Ms. Maloney? 

Mrs. MALONEY. —all of the participants for your really heartfelt 

testimony today, and as one who represents New York City—and 

35

many of my constituents suffered; our whole city suffered—along 

with all of my colleagues, we are united and determined to do absolutely everything we can to bring assistance and support to the victims and to the Gulf region that suffered from Katrina. 

To offer one lesson from 9/11, when you have concerns—and you 

have raised many today—it might be helpful if Treasury had one 

point person that could respond to the concerns coming in from the 

field, whether it is the written guidelines that are critical—I hear 

all of you are really rewriting the book in order to respond to the 

people, the credit unions, the banks, the community bankers, especially those of you who have a geographic area—are really doing 

everything you can. 

And I join with my colleagues on the other side of the aisle to 

work to get these considerations in place to help you do your job. 

I would like to ask Diane Casey-Landry from the Community 

Bankers Association—and you certainly are supremely affected because of the geographic concerns of community bankers—in your 

written testimony, you talk about the idea that the Federal Government should develop a mechanism for spreading risk for natural 

disasters. We obviously need to respond to this disaster, but we 

need to think for long term of ways we can better respond to disasters in the future. 

And my question to you, Ms. Landry, is, is there a particular 

model for doing this that you would like to put forward, or what 

features should you have—would you like to see in such a plan? 

Would you elaborate? 

Ms. CASEY-LANDRY. Over the years, as our members from across 

the country have faced various natural disasters, whether they be 

the hurricanes that hit Florida last year, the Red River flooding 

that occurred a few years ago, the Mississippi River flooding—I 

mean, you can go through and find natural disasters that are unexpected, as always. 

We have thought that the development by the Federal Government of a way to spread the risk across all the holders for insured 

properties—in some ways, we did that after 9/11 with the terrorism 

reinsurance. But if you look at what happened in Biloxi, in the 

Gulf Coast region, in New Orleans, you could say that we have a 

disaster there that was to the same effect of a—I guess you would 

say a natural element of a terrorist attack. 

It took away the infrastructure. It is going to expose the insurance carriers, all the holders of commercial real estate property, 

you know, with large, large losses. And it is something that has 

been unprecedented in amount. 

We do not have a conceptual plan in place right now. This is an 

idea that we had circulated literally, oh, probably 3 years or 4 

years ago, and we thought that Katrina gave us an opportunity to 

remind Congress that this is something that we could be looking 

at as a way to spread out the risk in a more reasonable fashion 

so you do not have it localized, whether it be in New Orleans or 

Biloxi or New York or in the Red River region. It would provide a 

way to make sure that the holders or carriers and the Federal Government serve a role. 

36

Mrs. MALONEY. I think that it is an important concept. We are 

one country, and a disaster is a disaster. And it is something we 

could not control, certainly natural or terrorist attack, or whatever. 

And from the perspective of New Yorkers, of all the things that 

the Federal Government did, our colleagues did in Congress, by far 

the most important was the Terrorism Risk Insurance Act. We 

could not put up a popsicle stand after 9/11 until we got the Federal support to spread the risk. 

Incidentally, it has not been reauthorized. We need to get that 

reauthorized. Otherwise, building will not move forward. It cannot 

move forward. And you will face the same challenge in the Gulf region for insurance and for protection against disaster. 

So I, for one, would like to work with you on that proposal. I 

think it is an important one, and I think it is one that could help 

us as we go forward in risk sharing and being prepared for disasters that move forward. 

I would like to ask Rusty Cloutier—and you spoke really very 

movingly about the efforts of yourself and other bankers in the region responding to the needs of the individuals with all their crises. 

I would like to ask you if the State of Louisiana has—they sent my 

office, and I assume many others, a memo from the National Association of Bond Lawyers, calling for several steps. 

One appears to be something that you also recommend and mentioned briefly in your remarks, and that is the creation of a new 

tax-exempt bond. This would be similar to the Liberty bonds that 

helped New York City recover. And have you had a chance to review the proposal that was put out by the NABL? And can you 

comment on this suggestion in more detail? 

Mr. CLOUTIER. I really can not. I have not had a great deal of 

opportunity to review it. But as I said, I have been working very 

closely with the city of Lafayette and the State of Louisiana on our 

relief actions for the community and working with the people that 

are affected in New Orleans. 

And I will tell you, we will have to really think out of the box. 

I mean, Mayor Nagin’s statement this morning—just realizing 

what he said. He cannot pay his police or firemen at the end of this 

2-week period that is coming up. 

He is hoping to work with banks to get some funding. We have 

been working with the city of Lafayette and the Cajun Dome to 

fund their operations, and they are awaiting money from FEMA as 

we speak. 

So it is going to have to come—a lot of creative solutions. The 

State of Louisiana has lost one-third of its economy, one-third. It 

has been destroyed. Now, it is going to take time to build this back, 

and then, hopefully, a lot of people will come back to the community. 

And, you know, we walked a very careful line of helping people 

who have evacuated New Orleans but not, at the same time, trying 

to settle them into our towns too quickly because we want to help 

rebuild the city of New Orleans. 

But to answer your question, I am not totally familiar with the 

bonds. I know a lot of people are working on it. The State of Louisiana—the State of Mississippi also—I think I can speak for 

37

them—have had huge financial losses. The numbers I heard in my 

last Federal Reserve meeting concern me a great deal. 

And so I think both of them are going to have to be very creative 

on how they finance those States and those areas. 

Mrs. MALONEY. My time is up, and my colleagues and I are 

united and determined to help in any way possible. Thank you all 

for your testimony. 

Mr. BAKER. [Presiding.] I thank the gentlelady. 

Mr. Cloutier, I want to engage you in trying to help committee 

members understand the nature of the potential losses associated 

with the disaster. 

If you were a commercial lender in Venice financing a grocery 

store operation and the loan was based upon 3 years’ prior income 

tax returns demonstrating cash profitability collateralized by the 

commercial building structure and the structure’s gone, the customers are done, the store owner’s gone, obviously you would hope 

that there is some private insurance to help pay for the structure, 

but there is no business operations loss coverage and no prospect 

for recovery of the structure and initiating commercial activities 

again. 

Let’s just assume this is a $1 million package for operations and 

collateral for the building collateralizing the loan. What do you do 

with that on your books? 

Mr. CLOUTIER. Well, Congressman, that is a big, big question. 

And a lot of banks are asking. I have $25 million worth of participations in the city of New Orleans that we do business with, and 

we are looking at each loan individually. 

You look at what other business operations those people may 

have had, were they outside of the area, because maybe we were 

fortunate in this instance they had an operation in Venice, and 

maybe they had another one over in Homer and they can pay us 

back. 

But let me give you just some of the horror stories I am hearing 

from New Orleans. People who had parking lots financed—those 

things are shut down for a year—how do they pay their notes? 

Cleaners, doctors, you know, people who have lost their whole practice—and you know yourself the number of attorneys that have 

moved to Baton Rouge and Lafayette—they have had to reestablish 

themselves. 

The other day when I was at the shelter I talked to a few people 

who had, you know, very small businesses in New Orleans, and 

they said I have lost my business; I have lost my home; I have lost 

everything. You know, they do not know where to turn. 

And I think, Congressman, just to be very honest with this committee, it is going to take 6 months to 12 months just for us to get 

a hold on some of those questions in the banking industry. And certainly, we would hope the regulators would give those banks a 

great deal of time to try to be able to consider what is going to be 

done. 

Can that person get an SBA loan to reestablish his business? 

Can we restart it? Can we work with him? Today, Congressman, 

I have got to be honest, and I want to be honest with the committee, there is no answers today on the Gulf Coast of Mississippi. 

38

Mr. BAKER. Well, let me go on a little further. Let’s take the case 

where someone knew they were in a flood zone. They have acquired 

flood insurance. And it is a $500,000 house. 

Mr. CLOUTIER. Right. 

Mr. BAKER. The maximum payable for structures under the flood insurance program is capped at $250,000, $100,000 for contents, so 

for a $500,000 loan there is no payment from the private insurance 

because it was a flood event. 

The flood event is total capped at $350,000, so the bank has an exposure of $150,000, and the person may not be there, and the 

house is not there, so the collateral is no longer there. That is also 

a problem, is it not? 

Mr. CLOUTIER. That is correct, Chairman. I will tell you that 

many of my colleagues in New Orleans have given me figures anywhere from 30 percent to 60 percent of their loans are in a great 

deal of question today. 

Mr. BAKER. Let me—

Mr. CLOUTIER. They do not know the answer to exactly the 

points you are making, that they may had limited flood insurance, 

no flood insurance. 

Mr. BAKER. Or even if they had the maximum, the maximum—

Mr. CLOUTIER. The maximum—

Mr. BAKER. —the maximum flood insurance—

Mr. CLOUTIER. Correct. 

Mr. BAKER. —that would be paid is $250,000, period—

Mr. CLOUTIER. Right. 

Mr. BAKER. —business, residence, otherwise, $100,000 on contents. Now, let’s jump to the situation where the structure’s lost by 

fire, and it is a $500,000 policy and replacement value is $400,000. 

It is my understanding that you get the face value of the policy paid of $500,000 even if the loss is only $400,000 because that is 

what you paid for. So as contrasting fire coverage with flood coverage, you can not buy more than $250,000 under flood. If you buy 

$500,000 on fire, you get the $500,000 even if the loss is only 

$400,000. 

Now, something does not make sense with this. I do not know 

how to—in the face of the catastrophe, I am becoming a lot more 

conversant with claims paid and claims not being paid. 

And then we jump to Mr. Deaver’s concerns. How do you establish that it was the wind that took you down when you had a storm 

surge that came in some hours into the storm, and did the surge 

take you out, which mysteriously to me is called a flooding event, 

although it is wind-driven, and not covered? 

So you could have someone in good faith insured to the limits, 

$1 million policy on a $1 million house; it is gone; oops, that is the 

storm surge, no coverage. 

Is that correct, Mr. Deaver? 

Mr. DEAVER. That is what is being cited in many cases, but I 

would echo what Mr. Cloutier—

Mr. BAKER. Cloutier, Cloutier. 

Mr. DEAVER. —Cloutier, I am sorry. 

Mr. BAKER. That is all right. We are working on you. 

Mr. DEAVER. Thank you, Mr. Chairman. 

Mr. BAKER. We are becoming bilingual here. 

39

Mr. DEAVER. There are a lot of issues, and this is one of them—

and of course, this is not just going to happen one time, either. But 

my chairman of my association said we have not got that far, or 

we have not got our hands around it, whatever words they used, 

and that is similar to what Mr. Cloutier has said. 

But, you know, we do not know what is going to happen here. 

And there are going to be disputes, and there is going to be, unfortunately, I am sure, some litigation. There needs to be some relief 

for these people. 

Mr. BAKER. Well, even beyond—if we finally determine that 

storm surge is a wind-driven event and not a flood, then there is 

going to be solvency questions for the insurers, who have never 

previously priced that into their premium structure. 

So we are going to drive people out of business by changing jurisprudence on the issue of wind versus water. This is dangerous territory. 

But at the same time, if we do not acknowledge the difference 

between storm surge, fire, and flood coverage, and we leave banks 

out there to hang who have no collateral, who are going to get written up by regulators, whose customer base has been dissipated because they have moved to other places in the country, the economic 

rollout of this is devastating. 

If we just look past the energy question, we look past the grains 

in the Midwest who can not get exported because 60 percent of that 

goes through the Port of New Orleans, we add on top of that the 

banking crisis, this thing goes on for decades, I am afraid. 

Mr. DEAVER. Mr. Chairman, the amazing thing about this situation is the issues just in the last 2.5 weeks have changed. They 

change every day. And when we think about something like what 

you are describing, it is out there, and it has got to be dealt with. 

But there is a lot of other issues between here and there, and 

there is a whole lot more to work on, so—

Mr. BAKER. It is incredible for people, for example, in St. Bernard that is today still under 6 feet of water—a person files a claim 

to get their emergency assistance, and they are told we can not 

give you that assistance until we verify the loss. Well, the whole 

parish is under six feet of water. It ought to be pretty simple, but 

apparently it is more complicated than I understand it. 

Mr. Hinojosa? 

And let me point out, Ms. Waters has waived her time. Mr. 

Hinojosa has a schedule limitation. 

Mr. HINOJOSA. I want to thank the Honorable Maxine Waters for 

giving me this opportunity so that I can go on to the event where 

I am going to be the keynote speaker. 

I want to express my sincere appreciation for you, Mr. Chairman, 

for holding this hearing today. I think it is imperative that we provide any and all financial assistance to the victims of Hurricane 

Katrina as soon as possible. 

Listening to each and every one of the presenters on the panel 

has been very, very informative. And you are right; we do not understand it as you do, but thank you for coming to Washington to 

educate us on this issue. 

And I want to talk about one possibility that would certainly 

make your work a little easier, and that is talking a little bit about 

40

the work that is being done and can be done with regard to financial education literacy. 

I have been working with Texas State Banking Commissioner 

Randall James and Steve Scurlock with the Independent Bankers 

Association of Texas on the Katrina relief efforts. 

We have worked to ensure that all the banks in Texas are provided with as much regulatory relief and liquidity as necessary to 

accommodate the increased demand for funds caused by the $2,000 

debit cards and now the checks being cashed by each household impacted by the hurricane. 

I also worked with Commissioner James and with J.P. Morgan 

Chase on ensuring that households that were supposed to receive 

the debit cards last week or EFIs and checks this week would know 

how to use them, why not to trade them, how to protect them, and 

possibly suggest what to buy with them. However, as we all know, the issuance of those $2000 debit cards 

by FEMA last week was a fiasco. As co-founder and as the co-chair 

of the Financial and Economic Literacy Caucus, I have tried to ensure that the individuals and households that receive these checks 

receive some sort of guidance on how to use the funds without 

interfering with their personal liberties. 

It is imperative that we provide the victims of Katrina with some 

form of financial planning now, as opposed to later. Timing is everything, and one door has closed on us already. The victims should 

have been provided with some explanation on how to use the debit 

cards. 

To ensure that another door opens, I have co-authored and cosigned a letter dated September the 8th, 2005, which I have in my 

hands here, and it was co-signed by my co-chair, Congresswoman 

Judy Biggert and several members of the Financial and Economic 

Literacy Caucus. We sent it to the Financial Literacy Education 

Commission housed at Treasury. I am glad that Congresswoman 

Biggert inserted the letter earlier today into the record. 

And, Mr. Chairman, I want to inform you that we have yet to 

receive a response from the Treasury. And I would urge them to 

respond as soon as possible, and we need your help. Someone needs 

to coordinate, at least on this issue, because FEMA has failed to 

do so. 

I believe that providing financial education using the Financial 

and Economic Literacy Caucus, private sector, and nonprofit group 

could be one way in which we could answer lots of questions for 

these people that you are telling us about, be they small business, 

medium-sized business, or just individuals, professionals like you 

pointed out, doctors, and lawyers, and folks who give services to 

folks in Louisiana, Alabama, and Mississippi. 

We want to use all the available literature and information to 

provide hurrican victims with financial planning assistance, but 

without the commission responding to us and giving us some Federal assistance, I do not see how we can be of help to disseminate 

that information. 

Mr. BAKER. Would you yield on that point? 

Mr. HINOJOSA. Yes, I yield. 

Mr. BAKER. I just want to note for the record that I have signed 

on to the gentleman’s letter and also will be meeting with the SecVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
41

retary of the Treasury this afternoon and intend to bring that to 

his attention. 

Mr. HINOJOSA. Well, know that Congresswoman Biggert and I 

look forward to seeing the results, and we have about 67 members 

of Congress as part of our caucus. They have staffs, and we are 

willing—Texas opened up its heart and its State to help 250,000 

people, and they are asking for information. 

They are asking for answers to their questions. So know that we 

have staff in Texas and the other States impacted, Alabama and 

Mississippi and Louisiana, who also want to help. But we need to 

have some coordination among the Federal agencies to make it 

happen. 

With that, Mr. Chairman, I yield back the remainder of my time. 

Mr. BAKER. I thank the gentleman for his comments. 

Mr. Price? 

Mr. PRICE. Thank you, Mr. Chairman. I appreciate that. 

I want to, once again, thank each of you for coming. I also want 

to commend you again on the work that you have done. Those of 

you in the area, you have been through a nightmare most of us can 

hardly imagine, and I want to commend you for the work that you 

have done. And for those who represented the associations, I want 

to thank you so much for the work that you have done and your 

employees and your members are doing. 

As we have watched this play out over the past 2.5 weeks, it has 

been very discomforting at times to see the images that we see 

across our televisions. But I am heartened by the enthusiasm and 

the optimism with which Americans all across our country have responded in a way that literally is unprecedented. And I know each 

of you have played a great part in that. 

I am always trying to look forward to how we—I am a surgeon 

by education and profession, so if I can not fix it, then I have got 

to find a way to fix it. So how do we move forward at this point, 

and how do we make it easier? 

And I would ask each of you if you would not mind giving me 

one or two little pearls about whether or not Federal banking laws 

are currently getting in the way of a solution and what we in Congress might be able to do to specifically assist in moving us forward 

as a Nation and as a region that has been harmed so much. 

Mr. DEAVER. I will go first on that. Frankly, as I said earlier, we 

have been focusing on the immediate needs. I have lists of issues—

a lot of them are long-term issues—that we really and our members have really not had time to really look at. As far as the immediate needs; it has been cash needs, it has been getting the benefits 

to the people that have them coming. 

And as far as Government getting in the way, we have had 

issues with BSA, CTRs, all the things that go with that that have 

been discussed, I think, a good bit here today. That is an immediate concern. As Ms. Casey-Landry said earlier, we would like to 

get that in writing because—and Chairman Powell said you all 

probably want this in writing. We said yes, we do, because that is 

just an immediate need. 

So I have added to my list, sitting here today listening to everyone discuss it, environmental things. I was taking some notes earlier. Those are things that in Mississippi, because we do not have 

42

water standing everywhere, we have not maybe focused on those 

as much, but they are there as well. 

Mr. PRICE. And we hear that. This committee, though, can address—

Mr. DEAVER. Right. Right. 

Mr. PRICE. —specific banking law, and I wondered if anybody 

had any comments about Federal banking laws that are currently 

in place that might need specific attention by us. 

Mr. DEAVER. If I could add one more thing real quickly, concern 

that some folks in my association, in the ABA, have that some of 

the immediate—the most stricken areas—you know, they are not 

here today, and we do not want this to go—to be dealt with with 

folks like me sitting here talking to you when the folks that really 

need to be dealt with are not here. 

And of course, I know Chairman Powell and others have been 

down, Congressmen in his district, but we just want to make sure 

that we get those needs assembled, and we get our hands around 

them, and that we work with the Congress on a long-term basis to 

prepare for anything—

Mr. PRICE. Thank you. 

Anybody have any comments about specific law? Please. 

Mr. ELLIOTT. Yes, we have a bill, H.R. 2317, the Credit Union 

Regulatory Improvements Act. Inside of there is encompassed PCA 

that we need relief on long term from that standpoint, and then 

short-term authority for the regulators to waive certain requirements in PCA over the short term. 

Mr. PRICE. Thank you. 

Ms. CASEY-LANDRY. I will jump in and say that echoing on the 

BSA and the Patriot Act issues, but let’s go over to the job side. 

I think we need to get SBA and we need to get some prompt action 

and some creative funding out of the Small Business Administration so that the banks can begin lending to the small businesses. 

If people do not have jobs to come back to, they will not come 

home. And there have been an awful lot of small businesses that 

were destroyed, too. And I think the paperwork and the dotting of 

the I’s and the crossing of the T’s that is required through the SBA 

and how they do their lending today will actually stall the process, 

and we need to get that moving faster. 

Mr. PRICE. Thank you. 

Mr. CLOUTIER. I think the one thing—and, hopefully, I heard 

today that we are working on a long-term national disaster policy 

for financial institutions. I mean, we needed the Government guarantee on checks 17 days ago. We needed it badly. And, you know, 

a lot of people got nervous without having it. 

We need the power either given to the FDIC board or to the Federal Reserve board that when a national disaster happens, they can 

impose powers to do away with Government regulations in the 

short term to give that breathing room that becomes so important. 

Because the thing I worry about every day is not Katrina. I still 

worry about it a lot, but what if we had another hurricane? What 

if we had a number five that hit Houston? What do we do next? 

What do we do if one hits the East Coast? You know, we have got 

to have a long-term policy. 

43

And I will speak for the bankers in my area. They not only want 

to know what we are going to do today, but if we rebuild New Orleans, what rules will they know going forward? And I think that is 

very critical. 

Mr. PRICE. Thank you. 

Anybody else? My time is short. 

Mr. GIBBONS. If I could, I think, from my perspective, having 

been in Federal policy making for a number of years in crisis situations, crises that occurred not because of natural disasters but occurred because of greed and hubris in some cases, the Federal Government’s really got to establish its role here. 

It is very difficult to trim back on safety and soundness and compliance with laws and push bank regulators to do that when normal circumstances exist. But the Federal Government has to realize that this is not a normal circumstance. This is worse than 9/

11 ever thought of being from an economic damage standpoint. 

And there will need to be some kind of consideration or forbearance of Federal funding on many fronts, whether it is forbearance 

in the short term for Bank Secrecy Act laws or for the accounting. 

Going to the gentleman’s question, how will you account for that, 

it is a loss today. That is how the accountants expect it to be accounted for. 

So the agencies are making some strides at answering some of 

these questions, but there is a lot of other questions that have to 

be answered and then a unified approach taken by all of them. 

Mr. PRICE. Thank you. My time has expired. 

Mr. Chairman? 

Mr. BAKER. Ms. Waters? 

Ms. WATERS. Thank you very much, Mr. Chairman and members. 

I would like to try and have a frank conversation with you bankers about the situation that we are involved in. I think this may 

be a time when we can use this as an opportunity to build some 

new relationships and to get rid of some of the problems that have 

plagued the banking community as it relates to minorities and poor 

people for a long time. 

The HMDA data is out, and you know what that HMDA data is 

saying, that African Americans are the victims, basically, of predatory lending and that we pay more despite like income. This kind 

of information keeps us focused on fighting with you all the time. 

I would like to see if we can not use this emergency situation as 

a way to demonstrate goodwill. Number one, I am certainly prepared to do things that I never thought I would do, like relax the 

bank secrecy laws, the Know Your Customer laws. 

I think in this case, where we have people without identification 

and other kinds of things, that, you know, we should support something that would make life easier for the customers and for you. 

I am also concerned about the reserve requirements. You talk 

about, you know, all of this cash that you are trying to make available. You are talking about the loss that you are confronted with, 

with people whose homes are gone, who had no flood insurance 

and, you know, you have no collateral now. 

I am worried about, you know, how we can make things a little 

bit easier and relax whatever laws make good sense in order to 

44

keep you operating. But you are going to be a part of rebuilding 

New Orleans. 

And I am so worried about the conversations that I hear about 

not wanting poor people back in New Orleans, not wanting the 

same crowds back in New Orleans, hoping some people that were 

sent to Utah do not get back to New Orleans. 

And you are going to be important players in this. And what you 

do is going to help determine whether or not some of those people 

who did not have flood insurance can get back and can get home. 

Now some of this property has been handed down, and some of 

those homes are paid for. Others there are mortgages on. But they 

were not required to have flood insurance. 

As I understand it from some of the staff people that I have been 

talking to, if you were protected, so-called, by a levee, that you 

were not required to have flood insurance. So we know a lot of 

them do not have it. They were not required to have it. And if you 

have outstanding mortgages, I do not think you should bear the 

brunt of that loss. And I think there are some things that we can 

do. 

As you know, in the reform legislation that we dealt with for the 

GSA, we came up with a creative idea by which we would have 5 

percent of profits monies used for low-income and moderate-income 

housing developments. 

And there is no reason why some of that money can not be considered for this area that we are talking about in helping to relieve 

you of the awesome debt that you may be left with. 

So I guess what I am saying is I think that a lot of possibility 

for coalitions on both sides of the aisle coming together to try and 

do everything that we can not only to help our constituents but to 

help the financial services community. 

And my question is whether or not you see your role as helping 

poor people and working people reestablish where they want to be 

and not be a part of any kind of plan that would exclude them from 

coming back and getting these jobs and getting contracts and being 

back where they want to be. Anybody can answer this who wants 

to. 

Mr. CLOUTIER. Ms. Waters, I will be very happy—and first of all, 

thank you very much for coming to Lafayette. I know you were 

there, and we truly appreciated your visit. 

Let me tell you that the community banks that service the New 

Orleans area—they are there to service that community. We have 

three African-American banks that are very much affected, and I 

am very proud of my working relationship with the NAACP. I was 

honored last year by the NAACP, Dr. Ernest Johnson, in Baton 

Rouge for the relationship that we have in working with them. 

It is going to be a challenge. It is going to be a big challenge. 

But, you know, the one thing this did show the United States of 

America—there is a lot of poverty in the State of Louisiana. 

Ms. WATERS. Yes. 

Mr. CLOUTIER. And I will tell you, there is a lot of very significant financial institutions that have no interest at all in the State 

of Louisiana. The community bankers in there that we are talking 

about today have been there trying to build the State, trying to 

make jobs, and trying to make things happen. 

45

The same thing with my two friends from the credit unions here, 

and it is not usually we are always in agreement, but we are on 

the ground making things happen. And I promise you that the 

banks in those areas are trying to rebuild their communities, and 

they understand the problem. 

But it is hard for people in this room, I think, sometimes to understand the problems when—I mentioned about the debit cards. 

I went to the Cajun Dome where I know you visited, and they were 

handing out debit cards to people who never even had an idea what 

a business relationship was. 

Ms. WATERS. Yes. 

Mr. CLOUTIER. They lived in a cash society, in a total cash society. And their lives have been destroyed, and now they are trying 

to change their lives again by how they do things. So it is a long, 

hard road. 

You pointed out a lot of problems we have in the State of Louisiana, but I promise you that the bankers in the State, the community bankers, are going to work as hard as they can to make it 

happen. 

And you are right; a lot of people played by the rules, and I bring 

that up again, and the rule book just was not right. Katrina did 

not play by the rules. And we certainly hope that Congress remembers that when it looks at—as all of you all talk about flood insurance and other things. 

But I agree with a lot of your comments. We need to work hard 

to make those—

Ms. WATERS. If I may, Mr. Chairman, just one more on the reserve requirements. 

I think I am thinking about this right. Are there some questions 

that you may have about what can be done in that area, or is that 

significant in looking at how we can help to relieve you of some of 

the regulations and the laws that govern you as you go through 

this crisis? 

Mr. CLOUTIER. Well, Ms. Waters, I will tell you, you know, one 

example is I serve Louisiana, and I am not opposed to the Community Reinvestment Act because I do a lot of work in my area, and 

I do not do it for the Community Reinvestment Act. I do it because 

I was growing up as a poor boy from Morgan City, Louisiana. And 

I have been very fortunate in life. 

But I can tell you there is a lot of, as I mentioned before, large 

financial institutions that I do not know how visible they are going 

to be in the city of New Orleans in building it. I promise you the 

community banks that are there are going to rebuild that city. 

They are going to do the work they have to do. 

And I just want you to remember those in your deliberations, 

that these people are going to need some help, because they did not 

have offices all over the United States. They only had offices in this 

area. And they are working very hard to get back operational. 

Ms. WATERS. Don’t you have to show a prudent reserve on your 

books of some kind in order to do certain volumes of business? 

Mr. CLOUTIER. I think, you know, a reserve would help. Of 

course, the question is, as Congressman Baker raised very well, are 

there going to be some relief from the flood. That is the big problem. 

46

If the Government said today look, you know, those that did not 

have flood insurance we are going to take care of if they played by 

the rules, I think the banks would be in pretty good shape pretty 

fast. That is the big question. They played by the rules, and the 

rules have now changed. 

Mr. BAKER. If the gentlelady would yield on that—

Ms. WATERS. Yes. I would like to yield. 

Mr. BAKER. —I am trying to help the gentlelady with focusing on 

her question. Going to my illustration of losses—

Mr. CLOUTIER. Right. 

Mr. BAKER. —and you write those off, it leads to a decrease in 

capitalization. And under the prompt corrective action requirements facing the regulators, they have no leniency. They have to 

do what the law now says. 

Ms. WATERS. That is right. 

Mr. BAKER. And I think the gentlelady is trying to make the 

point that unless the Congress acts specifically in a geographic way 

to say because you are now underwater or environmentally hampered, or whatever, because of particular reasons, the regulators 

shall not pursue the obligations under the prompt corrective action 

statute. 

Ms. WATERS. Absolutely. Thank you very much. 

Mr. BAKER. And that is what the gentlelady is trying to drive 

home. 

Mr. CLOUTIER. And, Congressman, that is exactly what we would 

need. We need the floor to be taken off for a period of time. I do 

not know what that period of time is, but there is a floor, and—

Mr. BAKER. Well, I am going to abuse the lady’s time one more 

time. 

Mr. CLOUTIER. Yes. 

Mr. BAKER. Let me ask this question. If I am the regulator and 

I am given authority to take reasonable action in that world, is 

that okay for you? In other words, rather than us specifically set 

a time line—St. Bernard is still underwater. Jefferson is not. 

Ought to be different rules depending on on-the-ground conditions. 

Is that something that you are comfortable with, if we give the 

regulators that type of discretion to—

Mr. CLOUTIER. I think you have to give that discretion to someone that they have a period of time to do away with the floor so 

that they can work through it. As you well know, Congressman, in 

our district every area is a little different. St. Bernard is much different than the West Bank of New Orleans, and so you have to 

work through that. 

But yes, I think that is something that could work. We have to 

think out of the box here a whole lot. 

Ms. CASEY-LANDRY. Mr. Chairman and Congresswoman, let me 

just add, I think if the regulators were directed to provide some 

guidance—I think they already have sufficient flexibility today. 

One of the first issues, before we get to the PCA issues, will be 

as the insurance claims begin to come into the banks and they get 

the cash, we have been told that the banks will be able to hold that 

off balance sheet so they will not have to hold capital against it. 

That will be—that the regulators—

Ms. WATERS. That would be good. 

47

Ms. CASEY-LANDRY. —have already indicated they are willing to 

do that. As we go through this crisis, as we go down the many 

months and find out the outcome of these loans, we may then have 

to start to deal with the PCA issue. 

But all the banks in the New Orleans area—I can not speak for 

Mississippi—but were very highly rated banks, one or two rated institutions, extremely well capitalized institutions. So they have a 

good cushion. And I think that is going to allow the regulators 

some flexibility. 

But what we do not want to see is a bank that has been a well 

capitalized institution under PCA suddenly becomes an adequately 

capitalized institution. You have dropped two categories, and you 

are not looking to be criticized by the regulators for falling from 

category one to, you know, moving down. 

So there, again, Congress could be encouraging the regulators to 

provide the flexibility there so that they do not harm the institutions as they work through this. 

Ms. WATERS. That is precisely, if I may, Mr. Chairman, what I 

am talking about. And I think you said it very well. Banks with 

good reputations, you know, who have been around, who have been 

well capitalized—if all of a sudden they are confronted with a situation where they have to record, you know, these losses, we do not 

want them to all of a sudden be viewed or regulated in certain 

ways that make them appear as if they have not been operating 

properly. 

We want to be able to do something that would relieve you of 

that in this crisis. I do not know how that is to be designed. I 

would think that you guys would be the ones to help formulate how 

that is to be done and get it back to us so that we can give support 

to it. Thank you. 

Mr. BORDELON. Mr. Chairman, could I respond to that? For credit unions, it is true as far as for the banks and thrifts. The regulators do have flexibility to adjust our PCA levels, but for the credit 

unions we are on the statutory requirement, and the regulators do 

not currently have that flexibility. 

So in our written testimony from NAFCU and, I think, from my 

friends at CUNA, we have requested that Congress take a look at 

PCA authority levels for NCUA and adjusting those levels as may 

be needed. 

And to get back to your first point on as far as opportunities to 

rebuild New Orleans, our credit unions stand with you, definitely, 

with that issue of rebuilding the lives of our citizens in New Orleans. 

And I think I heard you say on T.V. maybe down in Lafayette 

that this storm hit on the absolute worst day, on the 29th, and not 

only did it affect the really poor people who are depending on their 

Social Security checks and so forth, but we had traffic in our lobbies of individuals who are employed, who are working good jobs, 

and are living paycheck to paycheck. 

And that payday was not until Wednesday or Thursday—

Ms. WATERS. That is right. 

Mr. BORDELON. —and they were in dire need of cash. And I think 

all of us speak here that we would be willing to work—as trade associations and as financial institutions, to work with the committee 

48

for short-term needs that need to be addressed immediately and 

the longer-term solutions, including financial literacy. 

Ms. WATERS. Thank you very much. And we certainly—in this 

conversation I certainly want you to know we include credit unions 

in the considerations for protecting you from regulatory or statutory demands on you. 

And let me just say that the Cajun Dome had a hell of an operation going there. It was fantastic. The doctors, all of the medicine 

that had been given by the pharmaceutical guys there—it was a 

real big operation, one of the best that I saw. And you guys are to 

be commended. 

Mr. PRICE. [Presiding.] Thank you, Ms. Waters. 

Appreciate the members’ patience and the succinct answers. 

Mr. Green? 

Mr. GREEN. Thank you, Mr. Chairman. 

And I would like to thank Congresswoman Waters for the comments that she just made. And I would endorse all that she said. 

Dr. King reminded us that life is an inescapable network of mutuality tied to a single garment of destiny. What impacts one directly impacts all indirectly. And I think we are seeing evidence of 

that here today. 

We have come to realize now that this really is a small world 

and that we really do need each other. And I am very proud to see 

the way we are bonding together to confront what may be one of 

the greatest crises of my lifetime. 

I am going to say that, again, the NAACP I think is indispensable. I would hope that this is not just a temporary relationship. 

We really out to have a marriage, and we ought to consider the fact 

that under these circumstances the NAACP’s stamp of approval 

may be comparable to the Good Housekeeping seal of approval. 

The NAACP’s credibility can add a lot to what we want to accomplish. I want to pledge my support to help the banking industry, 

the credit unions, because I think we all get it now. I think we all 

understand how important it is to be accessible and available and 

that credit is important for all persons in this country. 

I do want to ask a question about the moratorium on loan payments. I have read 3 months voluntarily being—that is a number 

that some of the banks are using, lending institutions are using. 

Is that enough time? 

That is my question because 3 months—many people will not 

have had an opportunity to assess the damages, to get the appraisals, to get the insurance company to actively engage them in the 

process. So my first question is do you think 3 months is enough? 

And I will ask the NAACP representative to give an initial response. 

Mr. SHELTON. First, thank you very much. As you know, we have 

members in each and every one of the affected areas. And of 

course, our members in other places are working with those in the 

affected areas, so we are hearing the stories and hearing the 

plights of those that are experiencing this awful travesty right now. 

The short answer to the question is no. I think 3 months is just 

the beginning of really being able to assess what is going on. Even 

in our country we talk about how long it takes under normal circumstances to transition from one job to another. Experts tell you 

49

you need at least 6 months to be able to make those kinds of transitions. 

And in this case, the entire infrastructure that provides opportunities along those lines have been eviscerated in many cases as 

well. So certainly, as we talk about 3 months, we are grateful that 

that is the beginning of a conversation as we assess the needs 

across the country. 

But indeed, I think as we look at what is happening in places 

not just in Louisiana, but even as we have talked to many of our 

friends in the Gulf Coast area of Mississippi and other places, 

much more time would be required. 

Mr. GREEN. Thank you. I feel a kind of kinship with all of you. 

I am from Louisiana, by the way. I was born in Charity Hospital. 

So I relate quite well. 

And, Rusty, you remind me of a lot of the folk that I grew up 

with and that I know. Would you give your opinion about the 3 

months, please? 

Mr. CLOUTIER. Well, Mr. Green, first of all, thank you very much 

for your comments, and congratulations on being born in Louisiana. But I would tell you that in our bank, in most community 

banks I know, they are handling everything on a one-on-one basis. 

I have four people full-time. Their job right now is to talk to people who are in the devastated area. We do not have a policy of 3 

months, 4 months, 6 months. You know, each case stands on its 

own. You know, it depends upon, you know, what happened, how 

soon they can get back to work, when they can get their business 

back up and running. 

And I think you will find that pretty much standard in community banks, and I am sure it is the same thing in credit unions. 

They are very flexible. They are able to be flexible. 

I think the standard you hear of 3 months, 6 months are some 

large financial institutions that are just saying from a headquarters somewhere far off, this is what we are going to do. 

But I can tell you in Louisiana we have many that we do not 

have any idea when they may be able to pay us again. I am very 

honest when I say that. We do not know when they may be able 

to make another payment. And, you know, we are working with 

those very closely and trying to help them figure that out. 

Mr. DEAVER. Congressman Green, if I might just say something. 

I first of all would like to compliment Congresswoman Waters, who 

I do not think is in the room now, and yourself. I do think long 

term this is a great opportunity, certainly, for us to come together 

and to come up with some long-term solutions. 

As I said earlier today, we are trying to get our hands around 

immediate needs, and that is not the easiest thing to do, as you can 

respect. And like Mr. Cloutier said, each institution is dealing with 

this on a one-on-one basis. We do not kid ourselves and think that 

30 days is enough in hardly any cases, but that we are going to 

have to work with the lenders—with the borrowers, excuse me, on 

these issues. 

And again, I think it is a great opportunity for us to—when we 

get past these immediate issues to work with you and others in 

making some long-term plans so that we will be better prepared 

next time to deal with these issues. 

50

Mr. GREEN. Thank you. 

Ms. CASEY-LANDRY. Can I just add one real quick comment on 

that? I think it is all size institutions, large and small, our community banks, our larger members—one of the largest lenders in that 

whole region is Washington Mutual, and we know they have made 

significant accommodations for all of their borrowers. And I think 

you will see it across the board. 

But this does bring to light that 90 days may not be sufficient. 

It may be 6 months. But if the loan is going to continue to exist, 

the institution must be allowed to restructure the loan and capitalize the interest. Today you cannot. 

The majority of most people’s loan payments, particularly on a 

mortgage, is interest. So 6 months from now, 3 months from now, 

the bank rings you up, and you start to pay again, you owe all that 

interest. So they must be able to capitalize the interest, which is 

not currently permitted under the rules. 

So the length of time is one issue, but the capitalization of the 

interest is another issue because that is what the restructuring of 

the loan’s all about. 

Mr. ELLIOTT. Yes. Also from the credit union standpoint, the 

PCA reform is absolutely essential. We are doing things definitely 

on a 30-day, 60-day, 90-day basis for our credit union members, but 

these things are not going to be known for a long time. 

Working with people on individual extension agreements—and 

lord knows, it could be 12 months, 18 months before something 

could be worked out on some of our members. 

Mr. GREEN. Well, I thank you. The safety and soundness of the 

lending institutions is of paramount importance, equally as important, of course, as the safety and soundness of the lives of all of 

the people who have been devastated. 

Just for edification purposes, the NAACP is hosting an event 

over at Howard University as we speak and is very much involved 

in this. And I do not want to be overly pushy, but the president 

is a person that I think, once you have an opportunity to meet him, 

you will understand that he understands not only the problems of 

the least, the last, and the lost, but also the problems of lending 

institutions, the world of high finance. He is very well educated in 

these areas. 

Mr. PRICE. Thank you, Mr. Green. 

Mr. GREEN. And thank you, Mr. Chairman. 

Mr. PRICE. Thank you. 

Ms. Moore, your patience is rewarded. 

Ms. MOORE OF WISCONSIN. And thank you so much, Mr. Chairman. 

I have a very kind of practical, what to do kind of question directed at—the example I am going to give is the credit unions that 

were in Louisiana, but anybody from the banking community can 

respond to this question. 

I had the privilege, I think, of talking with a number of the evacuees that made their way to Milwaukee, Wisconsin, about as far 

away as you can get from Louisiana and still be in the United 

States. My daughter promptly told them about the 50 below wind 

shield factors that they would be facing this winter. 

51

But all jokes aside, the face of the victims were, in fact, people 

who found themselves stranded there on the 29th of August and 

did not have a payday, the face of those who were infirm and could 

not navigate themselves out of New Orleans, those folk who did not 

have transportation. 

I ran into a very interesting evacuee in Milwaukee who, in fact, 

had the resources to get out of New Orleans, went to her credit 

union, and because there was a run on the banks and credit unions 

they would only give her $200 of her money. So how does one evacuate themselves, much less their entire family, with $200? 

For the going forward—I am not saying this to assign blame to 

anyone. It is a really practical problem. For the going forward—you 

know, it can happen to any of us. For the going forward, what 

should we in Congress—what should you in the financial industry—be doing to address this problem? 

This was not a poor person who could not buy an airline ticket. 

They were a person who could not get their money. 

Mr. ELLIOTT. I will speak for Mississippi. Yes, the $200—I think 

that was applied at least in our State not on each and every member, but as a whole those members that could deal with that 

amount of money was—that was appropriate for them, then that 

worked for us. 

But there were many members who got significantly more than 

that. All of it had to do with the availability of funds and the cash 

getting in there. We went through every means possible to get 

money in there. I do not think that we had a problem in Mississippi. 

We carried funds in a garbage bag in the back of a pickup truck, 

took it into credit unions. We did everything that we could. But 

that is a significant issue that we need to be prepared for in the 

future, because it was nip and tuck for us. 

And I can not imagine not even being able to get, you know, 

Brinks and the other delivery firms down into the city to get cash 

to the credit unions and those right outside of the city. It would 

be a major problem. 

Ms. MOORE OF WISCONSIN. And, you know, it just sort of reminds 

me—and I—you know, about our having less the sort of gold standard and—or having a bit or something. I mean, what—we do need 

some practical recommendations about doing that because it is not 

practical, I guess, to keep larger sums of money on hand everywhere. 

Some practical electronic way to do this—I guess I do not know 

what I would have done had I been—

Mr. BORDELON. Could I, Congresswoman, try to answer that? 

Ms. MOORE OF WISCONSIN. Yes, please do. 

Mr. BORDELON. Because we are part of the network, the CUCB 

network, that does have a $200 daily cash limit. And the problem 

probably was no matter what the member’s balance was at her 

credit union where she does business, those phone lines, data lines, 

and so forth were non-existent. There was no way to verify that account. 

So as an offline, basically a paper and pencil, transaction the $200 limit is established in the network. Is that sufficient in a time 

of an emergency? We have never faced it, and honestly, as a netVerDate 0ct 09 2002 14:30 Mar 22, 2006 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 G:\DOCS\109.53 RODNEY
52

work, it is something we may have to—we definitely are going to 

have to readdress. 

But there was such a run on cash, the $200 limit was also 

deemed to be fair so everyone could have at least some cash at the 

time, and especially in the Baton Rouge area where you needed 

cash to even get gasoline because the debit cards and so forth 

would not work at the pumps. 

We are all learning a lot from this disaster. A lot of things could 

have been done better, for even those of us who were prepared and 

even those of us who were not severely adversely affected. 

Ms. MOORE OF WISCONSIN. I just wanted to—Mr. Chairman, I 

just wanted to put that on the list as kind of an abstract, obscure 

thing, and I did not want that to get lost because, you know, there 

was a lot of sort of blaming the victims themselves about not leaving. But you can not go with $200. 

Mr. CLOUTIER. Ms. Moore, just for the committee’s knowledge, 

the Federal Reserve Bank in New Orleans had to close due to the 

hurricane. Having cash coming out of the Fed was a problem. But 

as of yesterday, we were working with Congressman Baker’s office, 

the Federal Reserve in New Orleans, to try to get back electricity. 

They are turning on electricity to other units in New Orleans but 

it is still not turned on at the Fed, which is critical to get cash out 

to the locations. There was a very strong run on cash. 

I mean, we become a cash society very fast after hurricanes. 

Every one I have ever been through, you become a cash society. I 

do not think that maybe even FEMA followed their own rule 

book—supposed to be hospitals and then banks, to get the cash out. 

And we needed to get them out much faster. We at our bank 

shared cash with a lot of different people to try to get it out there 

as much as we could because we run our own cash shop. And so 

it was a problem. 

It is something that needs to be studied, I agree with you, because there was a lot of people who tried to evacuate who had difficulty coming up with money even though they had it in their 

banks, as we have talked about. 

Mr. PRICE. Thank you so much. 

Thank you, Ms. Moore. 

We thank each of you. We have heard about a lot of challenges 

and a lot of poverty on the Gulf Coast, but we also know there is 

a lot of heart. And our desire is to put in place that process that 

will allow the greatest number of folks to have the opportunity to 

recover. 

The chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. And 

without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

Thank you all very much. This hearing is adjourned. 

[Whereupon, at 12:52 p.m., the subcommittee was adjourned.] 

(53)

A P P E N D I X

September 14, 2005

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