Bush Administration Shuns Proposed Katrina Agency.(environmental aspects in mortgages)

Washington -- The Bush administration will not support the creation of a new government corporation to finance and oversee the reconstruction of New Orleans and other parts of Louisiana hit hard by Hurricane Katrina.

The decision came as a major blow to Rep. Richard Baker, R-La., who pushed his bill to create a Louisiana Recovery Corp. through the House Financial Services Committee in December.

It also is a blow to lenders who expected to get some relief from the Baker plan, which is designed to prevent a wave of defaults and foreclosures. However, the Louisiana congressman pledged to continue to fight for the bill until the White House comes up with a better way to deal with the devastation Katrina caused in his state.

"While I respectfully disagree with their decision, we owe it to Louisiana to push forward," Rep. Baker said last week.

As an alterative, the Bush administration said last week that $11.5 billion in Community Development Block Grant funds is available to help homeowners rebuild their homes in the Gulf Coast states.

"It is critically important to focus on those homeowners who lived outside the flood plain who did not have flood insurance," said Donald Powell, the president's coordinator for Gulf Coast rebuilding. Louisiana is slated to receive $6.21 billion in CDBG funds and Mississippi $5.06 billion.

White House officials objected to the Baker bill (H.R. 4100) because it would create another federal agency with the power to issue tens of billions of dollars of U.S. guaranteed bonds.