Bankers Race to Assist Fellow Employees The Response to Hurricanes Katrina and Rita

As the enormity of Hurricanes Katrina and Rita became evident, U.S. bankers from the largest financial institution to the smallest stepped forward quickly and decisively to help our counterparts in stricken areas. The FDIC identified 270 financial institutions based in areas classified as disaster areas - almost all in Mississippi, Louisiana, Alabama and Texas. Operations at about 70 banks were down, either in whole or in part. Many banks and branches were flooded or destroyed by hurricane-force winds - some completely destroyed, while others have sustained extensive damage. Many of our fellow bank employees lost their homes, vehicles, and all they possessed. Some lost family members.

The response from bankers across America has been overwhelming and deeply gratifying. Almost every branch, bank and credit union has set up a disaster relief donation fund, and millions of dollars are flowing in to help with relief efforts. Many bankers simply loaded up trucks and trailers with supplies and headed south to help. Bankers in the affected areas are going to extraordinary measures to restore operations and open offices to meet the needs of customers desperate for cash. Sometimes this means working out of temporary buildings and warehouses without access to computers.

The bankers in surrounding areas outside those places hardest hit are pitching in by sharing facilities, personnel and computer capacity. Trained personnel have traveled into the area, providing technical and computer support.

Washington Reacts
The financial industry, with the encouragement and support of Congress and all the regulators, have taken steps to assist customers and members who are victims of the onslaught. Efforts include:

Cashing Social Security and other government-issued checks for non customers with no fee
Deferring payments (including automatic payments) on loans until January, 2006
Waiving late fees
Providing emergency banking services
Opening small business recovery centers
Waiving overdraft charges
Providing ATM use with no service charges

Congress also introduced bills such as the Small Business, Homeowners and Renters Disaster Relief Act of 2005 that will help businesses to recover, and the Hurricane Katrina Tax Relief Act of 2005 that includes a provision to grant employers a 40% tax credit for the first $6,000 in a worker's wages, thereby assisting community banks and small business customers ability to retain and hire employees for business continuity.

ATMs a Big Problem
Thousands of ATMs have been severely damaged by Hurricane Katrina in the Gulf states and the possibility of the successful recovery of the cash looks bleak. Once cash has been underwater for any length of time it becomes mushy and unusable. Of course this also applies to cash left in cash registers, non-waterproof vaults and in people's homes. Once employees can reach the ATMs or flooded cash vaults, or receive wet cash from their customers or members, they should send the waterlogged currency to the Federal Reserve for disposal.* The Treasury Dept. has issued instructions for redeeming mutilated and/or contaminated currency or coins damaged as a result of Hurricanes Katrina and Rita. Check the US Treasury website for instructions or contact them at lorraine.robinson@bep.treas.gov

Funds for Rebuilding
Supplying the funds and mortgages for rebuilding after the hurricanes is starting to move uppermost on many bankers' agendas. Experts vary in predictions on just how many homes were lost to Hurricane Katrina alone. One factor is clear - the storm destroyed more homes than any natural disaster before it. All four hurricanes that struck Florida in 2004 destroyed a total of about 27,500 homes. Hurricane Andrew, in 1992, destroyed about 28,000. The Enterprise Foundation estimates that about 455,000 homes were destroyed by Katrina, and another 475,000 homes would need repairs.

Liability Temporarily Eased for Cashing Government Checks
In the meantime, bankers are starting to move back to "business as usual", while trying to deal with increased security and vulnerability problems. Identification of individuals who fled the hurricanes and have no means of proof of identity is an ever increasing worry. The Treasury's Financial Management Service (FMS) has issued an interim policy that will relieve financial institutions of reclamation liability for cashing and accepting for deposit forged and unauthorized U.S. Treasury checks for FEMA Disaster Assistance and federal benefit checks. As a general practice, banks request standard identification - driver's license, military identification, and passports - to confirm identity. However, Hurricane Katrina has made it difficult for financial institutions to confirm the identity of evacuees as many displaced are without documentation.

To obtain reclamation relief, financial institutions must adhere to the interim policy's procedure of verifying the identity of the person cashing the check by either calling the telephone number of the issuing agency, or other prudent efforts. Prudent efforts include inspecting utility bills, leases or revolving charge bills, or comparing information from the individual to information obtained from consumer reporting agencies, public databases or other sources. All attempts to verify the identity of individuals should be documented. The interim policy is now in effect through November 14, 2005. After that time financial institutions will again be liable to Treasury for cashing checks over a forged or unauthorized endorsement under 31CFR part 240.

Emergency Financial First Aid Kit
Individual victims hurt by Katrina may soon need copies of critical documents, in some cases necessary for them to receive financial aide from FEMA and other agencies. Bankers can help these customers and members by informing them of the existence of the Emergency Financial First Aid Kit (EFFAK) a document which allows individuals to create detailed listings of their important personal contact, financial and legal information. It is available to the public online at www.hopecoalitionamerica.org

It is also listed as FEMA publication #532 and is obtainable through the FEMA Publication Distribution Center. It is available in both English and Spanish. The First Aid Kit is referred to as a planned multi-staged emergency financial reconstruction and economic recovery initiative in accordance with Department of Homeland Security/Federal Emergency Management Agency as a response to the recent storm crisis.

*Editor's Note: See editorial on page 6 for the precautions to take if handling this currency.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 9, 9/05