Congress puts tight rules on Katrina loans

WASHINGTON – Congress on Friday attached unprecedented strings to legislation that would provide $750 million in federal loans for hurricane-damaged cities, reflecting a sharp change in the mood on Capitol Hill about the reconstruction effort.

The action by the House and Senate came just weeks after President Bush pledged to spend whatever it takes to rebuild the Gulf Coast. The fight underscored growing concerns about the costs of rebuilding.

Louisiana lawmakers were seeking direct financial aid to cities, such as New Orleans, to pay their municipal workers. But they ran into a wall of resistance.

Eventually, the delegation was forced to accept a measure that, for the first time, explicitly forbids the federal government from forgiving loans if state or municipal governments fail to repay them. In the past, the federal government often has forgiven all or part of such disaster relief, offered under the 1974 Stafford Act.

Louisiana Gov. Kathleen Babineaux Blanco called the passage of the $750 million loan package “a bittersweet action.”

Referring to the repayment requirement, Blanco said, “In our time of greatest need, the Congress has added discriminatory language, singling out the victims of Hurricanes Katrina and Rita, for unfair treatment. Unfortunately, I do not believe enough members of Congress fully understand the desperate situation Louisiana governments face.”

After initially acting quickly in the hurricane’s aftermath to provide about $71 billion in relief through a combination of money to various federal agencies and tax breaks to businesses and individuals, the Republican congressional leadership wants to clamp down on costs. It intends to offset spending with budget cuts and by requiring the Gulf Coast states to contribute to the rebuilding effort.

Republicans said they meant for the restrictions in the loan bill to send a message to the Louisiana congressional delegation and Blanco, who have asked the federal government to spend $250 billion over the next 10 to 20 years in rebuilding efforts.

“We need to say: What are you doing to help?” said one senior House GOP leadership aide, speaking on condition of anonymity. “There’s a sense that we need to have a very well thought out process for how to spend this money. We need to look very closely at requests.”

But one Louisiana lawmaker made it clear that he does not expect his state, or local governments, to pay back whatever money they borrow.

“I will go back home, look my local leaders in the eyes and tell them to take the money and run,” said Rep. Charlie Melancon, D-La.

One casualty of the political fight was the united front Louisiana’s delegation had presented in the wake of the disaster.

Sen. Mary Landrieu, D-La., and Sen. David Vitter, R-La., publicly sparred on the Senate floor over whether to accept the requirement that the loans be repaid. Vitter urged Landrieu to accept the provision, and Landrieu urged him to fight it.

Later in the day, the House also passed the measure by a voice vote; President Bush was expected to sign it quickly into law.