Katrina: After the Flood (24 page)

Liberty was able to start offering mortgages shortly before its tenth year. It helped that the competition was guilty of redlining—the practice of withholding loans to minority communities—in a robust economy. Oil prices spiked from under $10 a barrel in 1974 to more than $40 a barrel in 1980, and the same gushers that made the city of Dallas a perfect locale for a nighttime soap opera about avarice and lust had a big impact on New Orleans as well. The area’s refineries and the offshore oil rigs meant opportunities for the ambitious Uptown blue blood looking to extend the family fortune (Jimmy Reiss, for instance, who made tens of millions of dollars selling them supplies and technology), but it also meant good-paying blue-collar jobs. Liberty also started offering college loans. Again credit score would prove only a small factor when evaluating someone’s risk portfolio.

Liberty also started making business loans. The city’s main newspaper, the
Times-Picayune
, dubbed chef Leah Chase, the co-owner of Dooky Chase’s, “the Queen of Creole.” Since first opening its doors in the 1940s, Dooky’s was the only white-tablecloth establishment that served black customers. When it needed money in the 1980s to expand, Liberty loaned Chase and her husband, Dooky Jr., $120,000. “Before Alden McDonald, it was hard to even get a conversation with a banker,”
Leah Chase said. Liberty bankrolled other promising restaurateurs and also a former Pizza Hut executive who grew a chain of forty franchises in the area, creating hundreds of jobs.

Oil prices crashed in the mid-1980s. Crude had dropped to $14 a barrel in 1986, and remained in the teens or low twenties for a decade. People lost jobs, hours were slashed, the price of real estate plummeted. Liberty posted its first loss in 1987, then its second and third in 1988 and 1989. No local bank turned a profit during those three years, but unlike several others, Liberty stayed open. To save money, the bank organized systems to make sure the paper clip used at the front end of a process would be reclaimed in a box at the end. The bank went more than a year without spending a dime on rubber bands courtesy of a retired postal worker who told McDonald he could get as many as the bank needed from his old place of work. Liberty didn’t lay off a single employee. “We were well seasoned in survival by the time Katrina hit,” McDonald said.

The downturn caused heartache but also opportunity. Liberty had helped plenty of young professionals buy homes for $150,000 or $200,000 in burgeoning middle-class black neighborhoods, but McDonald thought of people like his parents who’d worked hard their whole lives but never had a chance at homeownership. The drop in oil prices meant that a wider range of the population could afford the monthly payment on a house. Liberty created a loan that could be had for a down payment as low as 3 percent. That way McDonald could underwrite plenty of mortgages for homes costing $50,000 to $70,000 in working-class enclaves such as the Seventh Ward. The program proved successful enough that Fannie Mae, the government-backed mortgage giant, flew McDonald to Washington so its people could learn more.

In the 1990s, the bank opened a branch in Uptown, on Magazine Street, and another across the river on the West Bank. It expanded to Baton Rouge and Jackson, Mississippi, and moved its operations to a larger space in New Orleans East. Liberty put up the money when a group of African-American doctors proposed a multistory professional building in New Orleans East. It funded small shopping centers and other sizable projects. The bank’s original $2 million investment turned
into $20 million, turned into $200 million. Liberty had $350 million in assets by the time of Katrina.

THE LAYOFFS POST-KATRINA WEREN’T
as wrenching as McDonald had feared. People were in Atlanta or Houston or Chicago, and their children were already attending a school. Others felt incapable of getting themselves back to the region. They were in Tampa or Memphis or Oakland, California, because that’s where they had people, and they were too traumatized to face all that they had lost. Some employees apologized to him that they weren’t available to pitch in when the bank needed them. As of the one-month anniversary of Katrina, Liberty had 41 of its 150 employees back on staff. Of the rest, just under 40 percent said they wanted to return to work but couldn’t through at least the end of the school year. Twenty-eight people—nearly one in five employees—still hadn’t checked in.

McDonald seemed to have little trouble settling into his new Baton Rouge life. He replaced his rent-a-car with a silver minivan, and he started looking for a house. He figured it would be at least a year before he and Rhesa were living back in New Orleans. The drive down to the city from the state capital was usually a two-hour trek with so many people using Baton Rouge as a temporary base. Home in New Orleans became the RV he bought so at least he had a bed in town. It sat in the Liberty employee parking lot for three years.

On Mondays, McDonald was in New Orleans for the Bring Back New Orleans meetings. Often he stayed the night to take care of other business he had in the city, but the pull of Baton Rouge was still strong: That’s where his staff was housed and for the moment the bank examiners felt more comfortable meeting someplace other than New Orleans. It wasn’t uncommon for him to make a second trip to New Orleans each week as the center of gravity shifted back to the city. Every other weekend he tried to make it to Atlanta to spend time with Rhesa.

IN MID-OCTOBER, SIX WEEKS
after Katrina, McDonald snuck away to Europe to join Rhesa and a group of their friends on a cruise of the
Greek islands. The launch point for the cruise, which had been organized before Katrina, was Rome, a city Rhesa had always wanted to see. The original plan had them spending a week there before joining their friends. McDonald begged off that part of the trip, so rather than enjoying a second honeymoon, Rhesa hung out with two girlfriends in the $700-a-night suite that McDonald had booked months earlier as a gift to his wife—another empty-nest splurge by a couple accustomed to far more modest accommodations. McDonald nearly didn’t make the second half of the trip, either. Arriving in Atlanta a few hours early for his connecting flight to Rome, he headed to the plane’s slated departure gate and fell asleep. A last-minute gate change meant that a groggy McDonald was pleading his case to a gate agent ten minutes before the flight, by which time the airline had given away his seat. His break came when he looked down at her ID badge and saw that her name was Katrina. “You’re not going to believe this,” he began. This kinder, gentler Katrina secured McDonald a seat. From the airport in Rome he headed straight to the ship—then fell asleep in the wrong cabin.

McDonald appeared rested and calmer after his return. He even dressed differently, dropping the polos and short-sleeved cabana shirts that had been his attire since the storm. After Rome, casual might be a pair of gray slacks and a white dress shirt stamped with the green Liberty Bank logo that someone had found lying around the Baton Rouge branch. Dressing up meant wearing the blue blazer he had bought for himself after the storm and choosing from among the three new ties he now owned.

The bank reopened its first branch in New Orleans in early October, six weeks after Katrina. Lines formed every morning outside the doors of this Liberty outpost on Magazine Street in the Garden District—its sole property inside the city limits that escaped Katrina relatively unscathed. The wind had caused a bit of cosmetic damage to the facade of this white-columned building, but nothing—neither water nor looters—–had harmed the marble floors or dark-wood decor. “We have people arriving in from all over,” said Anderson Williams, the lobby guard. One day it was a couple who had driven from Atlanta and another who had flown in from Los Angeles. People arrived to fill out change-of-address cards and to order new checks, but mainly they were
eager to learn what was expected of them now that they had lost everything, including a weekly paycheck.

Barbara and Robert Emelle, the couple who had flown in from L.A., were retired after careers in the Orleans Parish schools. He had worked as a gym teacher, she as an administrator. These lifelong residents of New Orleans had been with Liberty since its days in a trailer on Tulane Avenue, but after visiting their home in New Orleans East, they were on Magazine Street to close their account. “Totaled,” Robert said. “We concluded we’d be taking too big a chance rebuilding,” Barbara said. Instead they would look to buy something in Atlanta.

The manager of the Magazine Street branch, Sheila Howard, had been with Liberty for nine years. On the Thursday after Katrina she had shown up at the Baton Rouge branch ready to work. She was living with family in Gramercy, a small town fifty miles west of New Orleans. Donna Walker, a thirteen-year Liberty veteran who had worked in New Orleans East prior to the storm, was staying with family in the West Bank. A pair of tellers fortunate enough to live in a dry part of the city handled deposits and withdrawals while Howard and Walker cared for customers arriving with more complicated issues. A sitting area that could accommodate a half dozen wasn’t nearly big enough, so they brought in extra folding chairs and set them up wherever space was free. A meeting with either Howard or Walker meant waiting an hour or more.

“We’d bring on more employees, but housing is an issue,” Howard said. Eventually, two more employees were dispatched to Magazine Street, but only temporarily. They would be needed across the river once repairs were completed on the West Bank branch, which opened at the end of October. McDonald then hired a marketing company. “I want to get out the word that we’re alive and well,” McDonald said.

The lines at Liberty’s two New Orleans branches were welcome news, but more people in the city meant they were short-staffed in Baton Rouge. McDonald also had no idea when he might reopen a branch in a flooded part of the city. “Where will the jobs come from?” McDonald asked. “And if there’s jobs, where will people live and where will their kids go to school?” Even McDonald himself couldn’t say for certain he would rebuild. In November, he closed on a three-bedroom house he had found near Southern University in Baton Rouge for $150,000. Rhesa and her
parents moved in with him during Thanksgiving week. Rhesa searched for doctors for her parents while shopping for the furniture and other items they needed to make Baton Rouge home.

Cash flow was a big worry. People needed capital if they were going to rebuild, and the bank needed to start lending again to make money. McDonald unveiled what he dubbed Katrina Investment Deposits, or KIDs. These were nothing but certificates of deposit, or CDs, offering a below-market interest rate wrapped in a feel-good package. The going rate for a CD then was 5 percent, but McDonald was offering interest rates of between 2 and 2.5 percent. “If I can get a hundred friends and banks and corporations from around the country to send me one hundred thousand dollars, that’s ten million dollars,” McDonald said. “If I get two hundred, that’s twenty million dollars.” By October 31, a friend of McDonald’s who ran a big investment fund in Boston had secured roughly $5 million in commitments, primarily from other banks willing to help one of their own. That money would be used to jump-start home lending, Liberty’s primary profit source.

Friends in high places could prove critical in the coming months. McDonald had met with Bill Clinton when the former president visited New Orleans a few weeks after Katrina. McDonald had spoken about his decimated bank with the Reverend Jesse Jackson and also with Andrew Young, the former Martin Luther King aide who served two terms as Atlanta mayor. His two most important allies, however, might prove to be a pair of white men who ranked as two of Washington’s more successful lobbyists, Robert Livingston and John Breaux.

Former US senator John Breaux, a Democrat, had represented Louisiana in Congress for thirty-two years before retiring the year prior to Katrina and taking a position at lobbying giant Patton Boggs. Robert Livingston, a Republican, had represented New Orleans in Congress for twenty-two years. He was several days from taking over as Speaker of the House in 1998—until Larry Flynt, the publisher of
Hustler
, responded to the impeachment of Bill Clinton by offering $1 million to anyone digging up sexual dirt on a Republican member of Congress. Exposed as an adulterer, Livingston resigned from Congress in 1999 and opened his own lobbying shop called the Livingston Group.

Breaux and McDonald, who had known one another for at least
twenty-five years, spoke after Katrina. McDonald followed up their conversation with a list of items he wanted to see in any recovery package, including a provision dictating that a minimum share of federal aid must be funneled through smaller banks in the region. Breaux assembled a team inside Patton Boggs to work on what he dubbed a Financial Industries Working Group and offered comments that negated the happy talk dreamed up by the marketing firm McDonald had hired. “What we’re trying to do,” Breaux said, “is figure out how the federal government can help keep them open.”

McDonald didn’t know Livingston as well as Breaux, but the former Republican lawmaker offered to help. If ever McDonald doubted Livingston’s influence, any disbelief was dispelled when a couple of weeks after Katrina, McDonald complained of some problem he was facing—and by day’s end he was talking with someone inside the White House. Asked why he was offering his services at no charge to someone he didn’t know well, Livingston responded, “This is a particularly acute situation given this is the largest African-American bank in New Orleans.” He would push both the White House and Congress to require that at least $6 billion in federal aid flow through Liberty and the other community banks. “Without that,” Livingston said, “I don’t see how Liberty survives.”

11

BLUE SKY

Boysie Bollinger settled into a conference room on the second floor of the Sheraton Hotel on the last day of September. Bollinger, the CEO of Bollinger Shipyards, had spent much of the past month overseeing the cleanup of a pair of wrecked facilities his company operated in the area. He arrived at the Sheraton for this first meeting of the mayor’s Bring New Orleans Back Commission thinking he already knew how dire the city’s situation was. Then he sat through the PowerPoint presentation the mayor’s team had prepared. “The scope of the devastation was hard to comprehend,” Bollinger said.
^I
More than one hundred thousand homes in the city had been damaged, and most every business was shuttered.
Even the weight of the water on the streets for all those weeks meant broken roads all over the city—and an untold number of cracks in the sixteen hundred miles of waste- and drinking-water pipes beneath them.