Damage estimates are flooding over

Residents look at houses being engulfed by floodwater in the West Junction neighborhood May 8, 2011 in Memphis, Tenn.

Kai Ryssdal: Memphis, Tenn., is bracing for the worst from the surging Mississippi River. The crest is expected to hit sometime tonight, and then roll on downstream toward New Orleans.

By the time all's said and done, flood losses along the river may be the worst since Hurricane Katrina in 2005. All you have to do is look in the mirror if you want to know who's picking up the tab. From Washington, Marketplace's Scott Tong reports.

Scott Tong: Normally in Memphis, the Mississippi River spans half a mile wide. Now, it's three miles.

Virgial Bailey volunteers at am emergency shelter at Cummings Street Baptist Church.

Virgial Bailey: There are some homes that are covered completely, rooftop and everything -- covered. You can't even tell there was a house there.

The worst flooding since the 1920s will cost billions, and many people have no flood insurance. For them, the federal government tends to swoop in and declare emergency disaster zones. Tennessee's Emergency Management Agency is already asking for federal help, says spokesman Dean Flener.

Dean Flener: That declaration will provide assistance for uninsured homeowners who experienced damage who would qualify for that individual assistance. And that would help them repairs on their homes.

Not much help -- grants top out at $30,000, typically what a mere six inches of water does in damage.

Flood insurance pays out a lot more, but only 5 percent of American choose to buy it. And there are problems there, too. Robert Hartwig at the Insurance Information Institute says premiums are vastly underpriced. They don't send a signal that, hey, living by water is risky.

Robert Hartwig: The problem with respect to flooding is that that signal is not strong enough. The signal is deliberately muted by the flood insurance program, on the direction of Congress.

Artificially cheap insurance means premiums don't bring in enough for the payouts. So the difference -- you guessed it -- comes from federal borrowing and a bigger national debtload.

In Washington, I'm Scott Tong for Marketplace.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.
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So, am I to understand that these homeowners who have suffered intentional flooding will NOT receive help? Or it will "top out" at the $30,000 limit? What if they have homeowners insurance, but lived well outside of the flood area under normal conditions and did not have flood insurance - will these people receive any help from the government?

I'm thankful to Mr. Hartwig for stating on a nationally broadcast radio show that it is essentially government interference (providing below-market insurance, and then even bailing out those who choose not to buy it) that has caused this entire mess. I'd say, let's get the government totally out of the game, then one would see proper risk-adjusted insurance rates, and no parasites takikng advantage of the "moral hazard" that government emergency bailouts create.

Just like in the housing market, which ended in the subprime mortgage mess, anyone who charges a fair and accurate price for flood insurance is accused of price gouging. Between this, and the administration's objections to "letting a crisis go to waste," you'd think they *want* this kind of economic disaster to happen every few years ...

I thought these states don't want "big government". Now governors like Texas' can't get enough of Big Government helping them out and keeping their state taxes low, and the rest of us pick up the tab.

Even more angering is that the rest of us pay for private insurance, but when help is needed, FEMA rejects claims; they say, "You have insurance, so we're not gonna help you. Too bad." The federal government generously rewards irresponsibility, and punishes responsibility.

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