USA Today reported… er… Yesterday that:

FEMA's  National Flood Insurance Program is the nation's main flood insurer,  created by law in 1968 as private companies stopped covering flood  damage. The program insures 5.6 million properties nationwide and aims  to be self-sustaining by paying claims from premiums it collects.<p class="inside-copy">Instead it's running deeply in the red. A major  reason, a USA TODAY review finds, is that the program has paid people to  rebuild over and over in the nation's worst flood zones while also  discounting insurance rates by up to $1 billion a year for flood-prone  properties.

What do they mean that FEMA has paid people to rebuild over and over? I’m so glad you asked.

In Fairhope, Ala., the owner of a $153,000 house has received $2.3 million in claims. A $116,000 Houston home has received $1.6 million.  The payments are for damage to homes and what's inside.

The discount applies on second homes and properties that are rented out to others:

USA TODAY also found that the owners of 370,000 second homes and rental  houses get huge insurance discounts. Wealthy resort areas such as Hilton  Head Island, S.C., and Longboat Key, Naples and Sanibel, Fla., have  some of the largest numbers of second homes and rentals getting the  discounts.

According to the Congressional Budget Office, the annual deficit [this means they spend more than they earn, or steal] could be completely closed by doing away with the discount on second homes and rentals.

The reporter, Thomas Frank, points to an interesting problem:

Flooding is the most costly and lethal type of  natural disaster, causing about $6 billion a year in damage and killing  roughly 140 people annually, federal figures show. Roughly 97% of the  U.S. population lives in a county that has experienced a flood disaster  since 1980, a 2007 congressional report found.<p class="inside-copy">FEMA Administrator Craig Fugate says the debt  results partly from Congress restraining insurance rates to encourage  the purchase of coverage, which is required for property owners with a  federally backed mortgage. Homeowners can buy up to $350,000 of  coverage, more than 10 times FEMA's maximum post-disaster grant.  Insurance reduces the need for disaster aid, paid for by taxpayers.

That is an interesting revelation. I used to live near Hilton Head Island, SC. In the old days, plantation owners knew that the low land on the coast was only good for crops (especially tomatoes), because of the hurricane and flood risks. With these artificial insurance rates, there is no need to follow this conventional wisdom. In fact, if you insure now, you can get more coverage than if your house were flooded a little farther inland. It’s almost safer to live on the coast. Insurance rates are not based on risk.

Aren’t the current advocates of these policies and discounts many of the same lawmakers who have decided that we need a self-sufficient health insurance program? That have pushed through government regulation of insurance rates?

I do not trust their business knowledge. Do you think they will regulate safe boundaries? Read the full USA Today article. There are federal laws that are supposed to prevent some of the problems we are facing anyway.

So now…

Along with the huge losses from Hurricane Katrina, the generous benefits  have forced [FEMA] to seek an unprecedented $19 billion taxpayer  bailout.