From the August 28 edition of CNBC's Squawk Box:
KELLY EVANS (CO-HOST): I just want to be clear, and make sure everybody heard what you just said. Hurricane Katrina was a $50 billion storm, and you're saying you think this one could be much, much worse. We already know that a lot of this damage is from flood, which goes to the National Flood Insurance Program, which is $25 billion in debt already and has basically maxed out its borrowing limit. So, I mean, how big a number are we talking and where is that money going to come from?
MIKE BROWN: Well, here's the -- number one, we have no idea what the number is going to be. But I think it's going to be much higher than Katrina because Tropical Storm Allison that hit Houston in 2001 when I was the deputy director of [the Federal Emergency Management Agency] was, I think, the fifth largest, most expensive disaster in American history. But those waters were pretty quick, that storm moved in and moved out. You and I are talking about a storm that is still sitting over South Texas, that is still dumping water. So, I think those numbers are going to be even greater.
But to your point about where does the money come from, this is where we have to have an honest and frank discussion. That money comes from you and me.
BROWN: That money comes from the taxpayers, and I don't think most people realize that. So, Brock Long --
EVANS: And, as I understand, they have been trying actually to say to the cities and municipalities, “You have to contribute more before.” They've been trying, actually, to fix up the finances.
EVANS: But, this is not the time and if anything it shows that the need is greater than ever. Should we just do away with this whole middle man and just embrace the idea that we're on the hook for this when it happens to a place like Houston?
BROWN: BROWN: No, no. And here's why; because the more that we become reliant on the federal government to respond, the slower the response will be, the more difficult the response will be. Back to [FEMA administrator] Brock Long's point in his press conference this morning, all disasters begin and end with local government. When you dial 911, you're calling your local fire department. And if we weaken those, or we somehow put this gigantic federal bureaucracy on top of them and say the federal government is going to manage these state and local first responders, that is a huge mistake. That destroys federalism. That empowers the federal government much more than it should. It's much more ineffective in terms of dollars, it's more ineffective in terms of management. We should not do that.
But what we should do is, and I think Brock Long -- I've heard him in his confirmation hearings. Brock wants to look at true reform for the National Flood Insurance Program, and we have to do that. We can't, for example, continue to subsidize homes that build in flood zones. You know what? I think that if there is an insurance company, for example, that wants to take on that risk, and is willing to build a pool to do that risk, we ought to look at privatizing part of this.
It was the insurance companies originally that said, “we don't want to cover floods.” So they lobbied and got Congress to create the NFIP, and I think we've seen the disaster that that can be. So, let's kind of look back now -- more at the free market, and see if we can do some free market reforms for the flood insurance program. So the people that take those risks actually have to pay for those risks.