Video: Louisiana bailout plan rejected

By David Gregory Chief White House correspondent
NBC News
updated 1/25/2006 8:03:50 PM ET 2006-01-26T01:03:50

Will Washington pay to transform New Orleans from ruin to rebirth?

Despite lofty promises, the White House has rejected Louisiana’s homeowner bailout plan, which local officials consider crucial for recovery.

“To leave us in that state of disrepair without the hope of recovery is very troubling,” says Rep. Richard Baker, R-La.

The state plan was to create a new federal agency that would buy out owners of the estimated 200,000 homes Katrina destroyed, giving them 60 percent of the pre-storm value while also paying off their mortgages. But the White House considers the plan too expensive and bureaucratic, suggesting instead the state settle for the more than $6 billion in federal grants released to bail out just those homeowners who didn’t have insurance because they lived outside the floodplain.

“It leaves out people who lived in the lower grounds, people who are African-Americans, people who are poor, or people who lived in the bowl of the city of New Orleans,” says Walter Isaacson of the Louisiana Recovery Authority.

White House officials say more federal dollars may come later but acknowledge that conservatives in Congress are worried about spiraling costs.

Congress also wants answers from the White House about the poor federal response to Katrina. Wednesday, members of both parties complained the president is “holding back important information about who knew what and when.”

“They haven’t given us the documents we’ve asked for,” says Sen. Joe Lieberman, D-Conn. “They haven’t let us interview the people in the White House who were involved in the decision-making regarding Hurricane Katrina.”

The White House cites executive privilege. “The president believes that Senator Lieberman ought to have the right to confidential conversations with his advisers, just like all presidents have asserted they ought to have that same right,” said White House Spokesman Scott McClellan.

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