Disaster Capitalism ‘Reaches New Heights’ as Wall Street Profiteers Cash in on Salvage Loans

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Critics of post-crisis profiteers responded with disgust to the news report that private financial institutions in the United States take advantage of the federal government’s failure to respond quickly to disasters by providing loans – to be repaid, with interest, by taxpayers – to homeowners affected by floods, wildfires and d ‘other disasters that are increasing in frequency and intensity due to the climate emergency caused by fossil fuels.

“Some profits and the rest of us pay.”

The New York Times reported Tuesday that “disaster victims often wait years for help to return to their homes because the money for repairs is advancing so slowly.”

The clawback process often exacerbates class and racial inequalities, as renters – who are more likely to have low incomes and are disproportionately people of color – typically wait longer than homeowners for help. A new initiative aims to reduce tenants’ wait times, but instead of speeding up public aid, it’s creating a lucrative opportunity for Wall Street.

According to Times“The program, funded in part by financial giant Morgan Stanley, will pay apartment building owners to rebuild faster, so they don’t have to wait for federal funds.”

The newspaper explains:

Enterprise and Morgan Stanley have said they will begin loaning money to owners of multi-family rental properties to repair damage to these complexes, which will speed up the return of tenants to their homes.

The loans are to be repaid with interest using disaster money from the US Department of Housing and Urban Development, according to Enterprise. The department provides the bulk of federal disaster recovery money through its Community Development Disaster Recovery Class Grant. [CDBG-DR] program.

Morgan Stanley declined an interview request. Joan Tally, general manager of community development finance at Morgan Stanley, said in a statement that the program “will accelerate the flow of capital for affordable rental housing in communities affected by natural disasters.”

Natalie Bennett, a British Green Party MP, criticized the program – which begins in Iowa, Louisiana and Oregon – for privatizing federal disaster relief.

With a nod to author Naomi Klein, who coined the term in her 2007 book, The Shock Doctrine—Bennet said, “Disaster capitalism is reaching new heights.

According to Urban Institute research, HUD’s CDBG-DR program begins distributing funds 20 months after a disaster, on average, and typically still allocates money two years after that.

“The amount of damage inflicted by disasters is a choice. If Congress wanted to make reconstruction easier and faster, it could do it.”

“The delay in distributing the money reflects the ad hoc nature of HUD disaster recovery spending,” he added. Times reported. “Congress has never given the department permission to establish a permanent program for disasters. Instead, lawmakers must decide after each disaster whether to donate money to HUD to help victims. “

While noting that investment banks treat “administrative burdens as rent-seeking opportunities,” Donald Moynihan, a professor of public policy at Georgetown University, argued that congressional lawmakers deserve the greater part. blame for the slow disbursement of post-disaster recovery funds.

Quoting a line from Times‘article which has since been cut – in which an anonymous HUD official said the agency “could cut the time it takes to provide disaster money by up to 90% if Congress renders the take-back program after permanent disaster “- Moynihan noted that” It seems much easier and cheaper to make an emergency fund permanent rather than paying the fees of a private lender. “

“With no fixes to the disaster recovery program, climate experts said the new Enterprise and Morgan Stanley loan deal was helpful,” the Times reported. “This program” responds to a real need, “said Liz Koslov, a professor in the planning department at the University of California at Los Angeles.

Christophe Flavelle, the Times journalist who wrote the story, tweeted Wednesday: “I’ve been covering climate adaptation for a while, and what I think most people don’t realize is that the amount of damage inflicted by disasters is a choice. If Congress wanted to make reconstruction easier and faster, it could do it. “



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