05:11 PM CST on Thursday, January 26, 2006

Melinda Deslatte / Associated Press Writer

BATON ROUGE, La. -- President Bush's assertion Thursday that Louisiana has yet to develop a specific strategy for spending federal hurricane aid drew an angry rebuke from Gov. Kathleen Blanco, who said the White House rejected the key element of the Louisiana plan.

At a news conference in Washington, Bush told reporters that Louisiana and New Orleans hadn't mapped out their recovery plans and suggested more federal aid would hinge on the development of such plans.

"I was aware that folks in Congress will want to spend money based upon a specific strategy. We've got to get comfortable with how to proceed. Those plans haven't -- the plan for Louisiana hasn't come forward yet, and I urge the officials, both state and city, to work together so we can get a sense for how they're going to proceed," Bush said.

But, Blanco noted, the Bush administration this week rejected a federal home buyout proposal from U.S. Rep. Richard Baker, R-Baton Rouge, that Louisiana officials consider crucial for recovery from hurricanes Katrina and Rita. Blanco said Baker's measure would help homeowners avoid mortgage defaults and blighted, sparsely resettled neighborhoods.

"Administration officials do not understand the suffering of the people of Louisiana. If they did, the president could not reject a bipartisan plan that enjoys widespread support in Louisiana and in Congress," the governor said in a statement.

Baker's plan was the lynchpin to many of the housing assistance plans being developed by the state and New Orleans. It was backed by a litany of officials and leaders including Blanco, New Orleans Mayor Ray Nagin and the state's Republican-dominated congressional delegation.

The proposal would create a federal corporation, called the Louisiana Recovery Corp. It would borrow up to $30 billion through U.S. Treasury bonds to buy large tracts of homes damaged by the hurricanes, negotiating with banks to pay off mortgages and giving homeowners and lenders a minimum of 60 percent of the home's value.

The LRC would repair the homes and resell them -- either to developers or to the original homeowners -- and would use the proceeds to at least partially pay off the bonds. The bill also would offer some buyouts of commercial property.

Backers said the proposal would bail out homeowners and lenders while creating organized redevelopment and avoiding the "jack-o-lantern" effect where one repaired house exists in blocks of abandoned, flooded-out homes.

White House officials say Baker's legislation would create another level of bureaucracy and would put the federal government in the undesirable position of being in the real estate business.

The Bush administration is pushing for Louisiana to use its $6.2 billion in flexible federal block grant recovery aid for a grant program for homeowners who lived outside the recognized flood plain and didn't have flood insurance.

Blanco, Baker and other Louisiana officials say that would help 20,000 homeowners -- and leave out 180,000 homeowners who believed they were protected by the New Orleans area levee system, including many poor people who don't have the means to rebuild. They are continuing to push for Baker's bill and hope to get the legislation passed without the president's backing.

"It would enable Louisiana homeowners to avoid foreclosure and will prevent widespread suffering and financial ruin by Louisiana homeowners who simply put their faith in the integrity of levees built by the U.S. Government," Blanco said. "The White House approach emphasizes helping only one out of ten families in Louisiana whose homes were destroyed or severely damaged."

Bush said Congress has made a "significant commitment" to the Gulf Coast by setting aside $85 billion for hurricane recovery.

"We'll continue to work with the folks down there. But I want to remind the people in that part of the world, $85 billion is a lot," Bush said.

(Copyright 2006 by The Associated Press. All Rights Reserved.)