Congressman Pushes For 'Louisiana Recovery Corporation Act'

"New Orleans faces two chicken-and-egg problems that private markets don't know how to remedy. The first is how to get people to live in places where there are no jobs because there are no people living there. The second is how to get capital to rebuild damaged buildings in neighborhoods that are worthless because so many buildings are so badly damaged.

There's no private market renewing New Orleans because nobody has an incentive to move back or reopen a business or invest, because no one can be sure there will be enough other people moving back, reopening, and investing to make it worthwhile.

This is why an idea now being pushed by Republican Congressman Richard Baker, who represents Baton Rouge to the north of New Orleans, is so sensible. Baker wants to create something called the Louisiana Recovery Corporation. Essentially, it would buy property and mortgages at 60 percent of their pre-Katrina values, package them together in parcels that might be attractive to private developers, and then auction off the packages. The resulting revenues from developers would then replenish the fund."