SCOTT JAGOW: We've heard a few tales of fraud with hurricane relief money, but until now, we didn't know the scale of the problem. A congressional audit says as much as 16 percent — $1.4 billion — of FEMA money was abused.

People used phony addresses, like a cemetery, to get checks. Prison inmates got money. Taxpayer dollars were spent on tropical vacations, football tickets, Girls Gone Wild videos, even a sex change. How is this possible?

Jared Bernstein is with the Economic Policy Institute.

JARED BERNSTEIN: Clearly they did not take seriously the importance of this agency and we saw that chicken come home to roost when the Gulf Coast hurricanes hit initially but we're seeing it again now in terms of the stark inability to be accountable for hundreds of millions of dollars they're dispersing.

SCOTT JAGOW: What is the core problem though that would allow someone to be able to spend 70 nights in a Hawaiian hotel on hurricane relief money?

JARED BERNSTEIN: The problem was that once FEMA learned that this was going on, the checks still went out. Even though the FEMA inspectors clearly identified a case of fraud, that information didn't get to the folks who sent out the checks. I mean it's a classic example of a dysfunctional system. Now I'm not saying that the folks who are committing this fraud are blameless, of course they need to be prosecuted and thankfully some of that's beginning to happen. I'm saying that when you're dispersing hundreds of millions of dollars obviously you need a very strong accountability mechanism or you're going to end up with exactly what you've got here.

SCOTT JAGOW: So would you say that this is a strong argument for privatization of emergency management type things?

JARED BERNSTEIN: No I would say it's a strong argument for oversight. In fact you might argue that if you assigned this function to a private agency that's one more link in the chain that you have to provide oversight of. If you start to read about the fraud that's going on here, it's so egregious that you would imagine even the slightest bit of oversight would have precluded some of this from happening

SCOTT JAGOW: Jared thanks so much.


SCOTT JAGOW: Jared Bernstein with the Economic Policy Institute.