Why New Orleans’s Black Residents Are Still Underwater After Katrina
By: GARY RIVLIN | The New York Times | 8/18/2015
Bring a map of New Orleans.’’ That was all that Alden J. McDonald Jr., president and chief executive of Liberty Bank and Trust Company, said when I first asked to meet him. It was the summer of 2005, less than two weeks after the city’s flood-protection system failed to keep out the storm surge created by Hurricane Katrina, and I was reporting in Louisiana for this newspaper. The Gulf of Mexico was sitting in the lobby of his New Orleans headquarters. The flood had destroyed Liberty’s mainframe computer; a good many of the bank’s most essential documents — deeds for houses, titles for cars — were ruined as well. Six of Liberty’s eight branches were flooded and a seventh had been battered by looters. The bank’s central operations had to be moved to a branch office in Baton Rouge, 70 miles away.
McDonald started Liberty, one of the Deep South’s first black-owned banks, 33 years earlier. He was 29 then and a college dropout, but by the time of the flooding, the bank ranked as the country’s sixth-largest black-owned bank, with more than $350 million in assets, and he was chairman of the city’s Chamber of Commerce. Yet as we sat in a windowless conference room in Baton Rouge, he said that he wasn’t certain Liberty would survive long enough to celebrate its 34th anniversary. That’s when he asked me to take out the map I had brought.
McDonald picked up a black marker and drew a line down its middle. He pointed to the western half. ‘‘That’s the New Orleans you know,’’ he told me: the French Quarter, the Superdome, the Warehouse District, the Garden District, St. Charles Avenue. Those areas had largely remained dry. Then he pointed to the eastern half of the map. ‘‘Where you saw water up to the rooftops?’’ he said. ‘‘That’s where most of the city’s black people lived. That’s where my customer base lived. My employees lived out there.’’ McDonald, who was only a couple of weeks from turning 62, shook his head and gave a rueful laugh. ‘‘Hell, that’s where I lived.’’
What McDonald saw on the map scared him, and over the next five years, many of his fears were borne out. New Orleans would become home to a greater concentration of neglected properties than any city in the United States, Detroit included. One in every four residential properties across the city, more than 50,000 addresses, was categorized as blighted or vacant. The city had a population of 455,000 before the storm, two-thirds of whom were black; by 2010 there were 24,000 fewer whites and 118,000 fewer blacks. That year, the city elected its first white mayor in 32 years. A 5-2 white supermajority controlled the City Council, which had been majority black before the storm. Orleans Parish had a white district attorney; its Police Department, a white chief. White-majority boards ran most of the city’s schools and the housing authority. ‘‘The perception among most African-Americans,’’ Lance Hill, executive director of Tulane University’s Southern Institute for Education and Research, said in 2012, ‘‘is that they are living politically as a defeated group in their own city.’’
Today, however, the city’s official mood is triumphant. The current mayor, Mitch Landrieu, declared during his annual State of the City address in May that New Orleans was ‘‘no longer recovering, no longer rebuilding.’’ Indeed, according to him and others, the city is in far better shape now than it was before the storm. ‘‘One of the greatest urban revivals of our lifetime,’’ in the words of Michael Hecht, who heads the economic-development nonprofit Greater New Orleans, Inc. The city’s three-month toast to itself — a pageant of conferences and ceremonies called Katrina 10: Resilient New Orleans — does include a somber moment of remembrance on Aug. 29 to mark the beginning of the flood and the roughly 1,800 people who died over the next few days. But for City Hall, Katrina 10 is a celebration of the New Orleans miracle and the lessons it can teach the rest of the country.
To Landrieu, Katrina is also about commemorating racial harmony. To make his point, the mayor likes to mention a picture he remembers seeing from that week when nearly 50,000 people were trapped in the city: a black girl holding hands with a white woman in a wheelchair. In this version of the Katrina story, nature’s wrath was an equal-opportunity storm. It didn’t matter whether you were rich or poor, black or white: If you lived in a low-lying part of the city, including Lakeview, a prosperous white community — one of the very few low-lying neighborhoods in the western half of the city — when Katrina struck, your neighborhood and your house flooded. Small groups of dedicated souls were heroes. ‘‘We decided we were not going to wait for government,’’ says Jeb Bruneau, who was president of the Lakeview Civic Improvement Association at the time. ‘‘We weren’t waiting for a handout like other communities.’’
You could say Alden McDonald triumphed over adversity, too. Today he runs the country’s third-largest black-owned bank, according to the Federal Reserve. But despite his personal success, McDonald is still focused on the eastern half of that map that he marked up at our first meeting. There, the recovery is far from complete — and in some areas things are worse than before the storm. In this frustration, he represents what might be called the black Katrina narrative, a counterpoint to the jubilant accounts of Landrieu and other New Orleans boosters. This version of the story begins by noting that an African-American homeowner was more than three times more likely than a white one to live in a flooded part of town. Where Landrieu sees black and white coming together, many African-Americans recollect a different New Orleans: rifle-carrying sheriffs and police officers barricading a bridge out of an overwhelmed city because they didn’t want the largely black crowds walking through their predominantly white suburbs; a white congressman overheard saying that God had finally accomplished what others couldn’t by clearing out public housing; a prominent resident from the Uptown part of the city telling a Wall Street Journal reporter that in rebuilding, things would be ‘‘done in a completely different way, demographically, geographically and politically’’ — or he and his friends weren’t moving back.
Now there are still 100,000 fewer black residents living in New Orleans than at the time of Katrina. McDonald estimates that one-third of his friends have not returned, because their homes were destroyed. ‘‘I still have family members stuck in Houston, some cousins,’’ McDonald says. ‘‘They’re terribly homesick.’’ Only about 80 percent of the residents of New Orleans East, where a good portion of the city’s African-American middle class as well as a large share of the city’s black elite lived, have returned. In the Seventh Ward, he says, where he grew up, only about half of the homes are restored a decade after Katrina. ‘‘There was never a plan to bring people back home,’’ he says. ‘‘There was never a plan of any kind.’’
The Seventh Ward, for most of McDonald’s life, has been a working-class enclave filled with the city’s barbers, waiters and factory workers. McDonald grew up in a two-bedroom shotgun house that needed to accommodate a family of seven, and at times McDonald’s grandparents, who lived with the family on and off throughout much of his childhood, or the stray friend one of his sisters occasionally brought home.
McDonald’s parents slept in the front bedroom. The back bedroom had a pair of bunk beds for McDonald, the oldest of five siblings, and his two brothers. There was also a pullout couch for the grandparents. His two sisters slept on another sofa bed in the living room. When the whole family was there, nine people shared a single bathroom. ‘‘We came up hard,’’ the family’s middle son, Byron, says.
McDonald’s father worked at the Boston Club, an exclusive whites-only redoubt at the time, whose sole identifying sign outside was a B etched on its frosted-glass door on Canal Street. During a 52-year career, Alden McDonald Sr. rose to the position of headwaiter. He worked lunch, the cocktail hour and dinner and often stayed late for the private parties, including for Rex, the secretive Mardi Gras krewe made up of members of the city’s white upper class. His father was highly regarded, McDonald said, but he never made more than $15,000 a year including tips, and the job had neither health insurance nor retirement benefits. Anyone in the family who fell sick saw a doctor at Charity Hospital.
McDonald’s mother, Celestine, devised any number of ways to bring extra money into the house. She sold burial insurance to neighbors and hired herself out as a kind of community taxi service in the family station wagon and later in a van she bought to accommodate her growing business, carting old people around on their errands; she added extra pickups in the morning when taking her own children to school. She made and sold pickles and candy and, in the warmer months, sold a frozen sugary concoction the kids called huckabuck.
A couple of McDonald’s uncles were bricklayers with their own company. By the time they were 10 or 11, the McDonald boys worked ‘‘the pile,’’ as Byron put it, cleaning and sorting bricks, mixing mortar, dragging cinder blocks. All three of them also helped their father when he worked weekend parties at the houses of wealthy whites. But the eldest son, Alden, stood apart as an entrepreneur. One Christmas, he persuaded his younger siblings to agree to accept a movie projector as their sole gift that year. He draped a white sheet over a clothesline in the empty lot next door, charged kids a nickel to enter and sold popcorn and lemonade at a concession stand he set up. He split the take with his siblings, who, as co-owners of the projector, were his business partners. ‘‘He always took care of us that way,’’ Byron says. ‘‘He was a good older brother.’’
McDonald assumed he would be a bricklayer after high school. His uncles had done well for themselves in that line of work; another bricklayer was among the first in the neighborhood to have a television. At his parents’ behest, though, he gave college a try, matriculating first at Xavier University, a historically black college near the center of town, and then Loyola, across the street from Tulane in Uptown New Orleans. But he and a childhood friend worked as exterminators right after graduating from high school, and that consumed ever more of his time. ‘‘I was always more interested in making money than books,’’ McDonald says. After only a few semesters, he dropped out of Loyola and signed up to study accounting and other more practical skills at a local trade school.
His father’s Boston Club connections led to his big break. Working at a private party Uptown, the senior McDonald was approached by a guest who was starting a new bank in town. The man sought to hire several industrious young black men or women, which is how the 23-year-old McDonald became, in 1966, one of the first black bankers in New Orleans history. By 28, he was a vice president, sent by his bosses to help right underperforming departments. He was a black man working in a pedigreed, almost all-white industry, but the bank’s president, McDonald says, made sure he never had a problem. ‘‘He’d call a department head into his office and say: ‘Alden is being brought in to clean up. So whatever he tells you to do, you’ll do.’ ’’
When McDonald was 29, shortly after he started dating Rhesa Ortique, a public-school teacher who would soon become his wife, a group of white and black investors put up $2 million to start the city’s first minority-owned bank. Norman Francis, the president of Xavier University and the chairman of the group, asked McDonald to run the start-up. He said no. ‘‘I think Alden was genuinely scared that he wasn’t ready,’’ says Rhesa, whose mother also taught in the New Orleans schools and whose father was Louisiana’s first black State Supreme Court justice. Francis tried again. ‘‘You can be part of history, Alden,’’ he told him. Again McDonald said no. He said yes the third time only because Francis practically made it sound as if the future of black New Orleans depended on him. Thirty days before opening its doors, in 1972, Liberty named Alden J. McDonald Jr. its president.
Its first branch was a trailer set up on an empty lot in a run-down part of town a few minutes from the central business district. ‘‘This bank represents freedom of our community,’’ McDonald said when it was his turn to talk at the bank’s opening ceremony. ‘‘A light shining the way for a better New Orleans.’’ They would accelerate black homeownership, McDonald and other speakers said, and provide the essential seed funding to would-be shopkeepers, restaurant owners and other entrepreneurs in the black community. Two thousand people opened accounts at Liberty that first day. ‘‘Liberty would become this test of black consciousness in the community,’’ says Jacques Morial, the son of Ernest Morial, an original Liberty investor and the city’s first black mayor, and the brother of Marc Morial, the city’s third black mayor.
But mortgages and commercial loans would have to wait at a bank with only $2 million in cash. Instead, McDonald started where he knew the need was great: fairly priced consumer loans for things like refrigerators, bedroom sets and home repairs. Because there were so few banks in black neighborhoods, so-called hard moneylenders like Household Finance and Beneficial could charge annual interest rates around 18 percent on loans. McDonald said he believed that he could offer cheaper loans and still be profitable by creating a loan process that depended on more than just credit scores. ‘‘We want to hear that person’s story and judge eye to eye if we think they’re going to pay us back,’’ McDonald says. He offered consumer loans at around 6 percent to the same working-class families who had been going to Household Finance and Beneficial.
Once a week, the staff stayed late to work on delinquent accounts. ‘‘Even if someone is willing to pay you just $10 or $20 a month, that shows a commitment,’’ McDonald told his staff. That’s not to say McDonald was a soft touch. One evening a customer told McDonald on the phone that he had no intention of paying his car loan and then hung up. McDonald had one of his employees call the New Orleans police officer they kept on retainer for repossessions and then rode with him and an employee, Ronnie Burns, in search of the car. ‘‘It’s like midnight when we find it,’’ recalls Burns, who today sits on Liberty’s board of directors. The off-duty cop jumped out brandishing a shotgun while another Liberty employee jimmied his way into the customer’s car and drove it back to Liberty. ‘‘I’d go along just to make sure no one does something stupid,’’ McDonald says, but Burns says he thinks McDonald was, perhaps, also out for a bit of justice. ‘‘Alden worked hard each and every day,’’ Burns says, ‘‘and he expected the people we did business with to do the same.’’
Most of Liberty’s customers lived in New Orleans East. The area had been swampland before developers realized its moneymaking potential in the 1960s and started draining it to make room for tracts of homes. Its first residents were mainly white, but McDonald was among those African-Americans who began moving to the area at the start of the 1970s. New Orleans East flourished. A reporter for The New Orleans States-Item, the city’s now-defunct afternoon paper, wrote in 1979 about a ‘‘unique, racially integrated enclave of middle-class homes … almost unnoticed by the rest of the city.’’
Eventually, other banks opened in the eastern half of the city. But Liberty still played a vital role for customers who did not feel welcomed by a mainstream lender. ‘‘Before Alden McDonald, it was hard to even get a conversation with a banker,’’ says Leah Chase, the chef and co-owner of Dooky Chase’s. In 1982, she says, she borrowed around $120,000 from Liberty to expand; her restaurant has since hosted Presidents George W. Bush and Barack Obama.
When oil prices crashed in the mid-1980s, many of those who worked on the oil rigs off the Louisiana coast were affected. People lost jobs, homes were taken through foreclosure and banks around the state went out of business. Liberty posted its first-ever loss in 1987, and then its second and third in 1988 and 1989. Yet McDonald also saw opportunity in hard economic times. The steep fall in home prices made it possible for a wider range of people who still had jobs to afford the monthly payment on a home loan. But many of them did not make enough to be able save up for a down payment, so Liberty offered to make loans for down payments at as low as 3 percent. ‘‘Alden would scare me sometimes, but he understood the need for us to take risks more than I did,’’ Francis says. ‘‘Not willy-nilly risks, but the risks that would let the bank serve its core function helping the black community grow.’’ Liberty’s program proved so effective at increasing black homeownership that officials from Fannie Mae, the government-backed mortgage company, brought McDonald to Washington so they could learn from his experience.
Over the next decade, New Orleans East started to change. When the ratio of black-to-white households in a subdivision hit roughly 50-50, McDonald and others say, the white residents started to move away. There still remained black lawyers and accountants and junior executives commuting each morning to downtown office towers, but by the late 1990s, the East was a black community, and a prosperous African-American community is not always perceived the same way as a prosperous white one. The Plaza, the area’s upscale mall, became a dumping ground for clothes and other merchandise department stores couldn’t sell at their other outlets. Landlords started renting units to federally subsidized, low-income Section 8 tenants. Check cashers, payday lenders and dollar stores followed. The nice wine shop shut its doors. Eventually, an area with nearly 100,000 residents was without a single white-tablecloth restaurant. ‘‘No one would invest out here,’’ McDonald says.
On Wednesday nights in the early 2000s, local residents gathered in a Liberty Bank conference room to talk about fighting back against the decline. McDonald thought his role would be that of host, but he often ended up playing ambassador. He would meet with businesses to try to attract them to the East, armed with a study funded by the bank showing that there was more discretionary income in the East than any place outside Uptown. (Another Liberty-funded study revealed the challenge he faced: The area was home to 40 percent of the city’s Section 8 housing.) ‘‘We were very close to getting some national restaurants out there,’’ McDonald says. ‘‘Then Katrina hit.’’
McDonald escaped to Atlanta ahead of Hurricane Katrina. It was there, at the home of family friends, that he saw the first images of New Orleans after the levees failed — people stranded on rooftops and elevated highways, entire neighborhoods under water. The news didn’t mention New Orleans East, but the longer McDonald watched, the more he felt his business was doomed. Liberty had lent tens of millions of dollars to homeowners and entrepreneurs in the East, and now their properties were probably sitting in four to six feet of water, if not more.