With the eyes of the world on the catastrophe in earthquake-stricken Haiti, U.S. Vice President Joe Biden traveled to the site of a domestic disaster last week, unveiling a program offering financial assistance to Gulf Coast communities devastated by hurricanes Katrina and Rita in 2005.

Speaking at New Orleans' St. Bernard Community Center on Friday, Biden announced a plan to allow local governments in Louisiana and Mississippi that received Special Community Disaster Loans (CDLs) following the storms to apply for loan forgiveness.

"This Administration continues to be deeply committed to do everything in our power to help New Orleans and the entire Gulf Coast not only restore their storied past, but build a better future," Biden said. "Today's loan forgiveness announcement is just another example of our common-sense approach to rebuilding in the region -- we're removing unnecessary bureaucratic hurdles and providing faster turnaround on assistance."

In the wake of the 2005 hurricanes, the Federal Emergency Management Agency provided over $1.27 billion in Special CDLs, enabling cash-strapped local governments to continue providing essential services. But in authorizing the program, Congress prohibited FEMA from forgiving any of the loans.

The new regulation strikes that prohibition, allowing municipalities that experienced operating deficits during the three fiscal years following the storms to apply for forgiveness.

U.S. Sen. David Vitter (D-La.), a longtime advocate of loan forgiveness for hurricane-stricken Gulf communities, raised concerns about the three-year deficit requirement, since some local governments aren't allowed to have operating deficits by law. But in his New Orleans speech, the Vice President seemed to downplay the deficit requirement, the Times-Picayune reports:
... Biden, although guided by teleprompters, seemed to brush that aside in a conversational passage in his remarks: "I advise you to apply quickly, because when you apply you going to get the right answer.... You're going to get your money," he said to sustained applause.
The City of New Orleans, where much of the Katrina-related destruction was caused by failed federal levees, borrowed $240 million from the feds in Special CDLs, while other local agencies including the Sewerage & Water Board and the Orleans School Board got another $218 million, according to figures from the office of U.S. Sen. Mary Landrieu (D-La.).

New Orleans used the last $10 million of its federal loan to finance operations this year. The city's director of intergovernmental affairs, Julie Schwam Harris, told the Times-Picayune that "loan forgiveness will mean the city can wipe nearly a quarter of a billion dollars in debt off its books, improving its bond rating and potentially making it easier and cheaper to borrow capital."

Following his trip to Louisiana, which also included a stop in a part of southwestern Louisiana hit hard by Hurricane Rita, Biden headed to Miami's Little Haiti community to meet with Haitian-American leaders about the earthquake recovery effort, which he said would be a "long slog."

The proximity of the Vice President's Gulf Coast announcement to the Haitian disaster was coincidental, as Biden's Louisiana trip was planned before the earthquake hit. But loan forgiveness has long been a pressing issue for the Haitian people, too.

Last year two-thirds of Haiti's international debt -- a total of $1.2 billion -- was canceled after the country agreed to make a number of reforms. But that still left Haiti with about $641 million in debt, with about half owed to the International Monetary Fund and the InterAmerican Development Bank and the rest to lender countries including Taiwan and Venezuela. This year, Haiti owes about $10 million in debt payments to the IMF and IDB alone.

But last week's massive earthquake centered near the Haitian capital of Port-au-Prince has led to calls for the U.S. to use its influence to encourage creditors to cancel Haiti's debt so all of the impoverished nation's limited resources could be directed toward recovery.

Debt-relief advocates also say that earthquake assistance for Haiti should be given in the form of grants -- not additional loans like the $100 million emergency financing that's been offered by the IMF.