Tell me what you found when you came in '93 to FEMA.

In 1993 President Clinton knew that FEMA had to be fixed because of Hurricane Andrew and the response to it. And everybody in Washington and everybody across the country loved to hate FEMA, because it just wasn't performing.

The career employees at FEMA were very dedicated people, and just worked very hard. And what was interesting, I stood at the elevator at 6:30 in the morning after I'd been confirmed and sworn in, and [I was] welcoming all the employees in and introduced myself to them. And they were coming in with their heads down, carrying their briefcases. They looked like they'd lost their best friend or their farm. It was just really, really bad. …

Tell me what went wrong that got them into that position. …

It started with [Hurricane] Hugo in 1989 and they got really beat up pretty bad. President Carter actually created FEMA by an executive order, and so they were very young and just getting started. Then Andrew happened. And what happened, FEMA back then -- the process was that a governor had to request the assistance of FEMA before FEMA could respond with a declaration or a response. It was like four days before FEMA reacted to Hurricane Andrew. … [Dade County's Emergency Management Director] Kate Hale was down in Miami-Dade hollering, "Where in the hell's the cavalry?," and it finally got some attention.

Sounds very familiar.

Yes. They had legislation introduced in Congress to basically abolish FEMA or move it under DoD [Department of Defense] or somewhere else to make it functional. When I went up to Congress and met with Congressman [Tim] Penny [D-Minn.] and Sen. [Barbara] Mikulski [D-Md.], I said: "Look, give me one year. Let me see if we can fix this. And if I can't fix it, then I'll support your legislation."

What did you do?

… We made FEMA a more functional organization, a flatter organization with less bureaucracy, and reorganized it and put in a mitigation/prevention division, put in an IT division, put in a financial management system. We did all this.

They had never even audited the disaster fund -- $18 billion over the years and never audited. … And I said, "Let's audit it." So we went back and reconciled, and we audited $18 billion. We found $3 billion that had been obligated over the years for projects, [for] disasters that had never been closed out. And actually, I set up these "closeout" teams to basically go out there and start closing these old disasters out. Some of the projects were eligible projects; some of them weren't. So we actually put about $800 million back in the treasury the first year. …

What was prompting President Clinton to think that FEMA needed Cabinet-level [status]?

Because of the role that we had. We had the responsibility of coordinating 22 federal agencies as part of the Federal Response Plan. We also had a role in the national security side that we had to fulfill, and we also were dealing with a tremendous amount of money that affected budgets.

Tell me about mitigation, Project Impact -- specifically, the importance of saving a dollar down the road. This is your brainchild.

Mitigation/prevention was the foundation of what we wanted to do at FEMA for the future … with state and local government and at the local community level, because we knew that after the '93 flood on the Mississippi River covered nine states -- … it was unbelievable. And we were in the middle of the reorganization when we responded to that. And we responded well, and it worked well.

As part of that, we said, "We can't let this happen to these people again." So we put in a proposal to the president that we'd do a voluntary buyout relocation program and elevation program. Working with HUD [Department of Housing and Urban Development], through their CDBG [Community Development Block Grant] dollars -- that goes down to the states and FEMA -- we were able to help each of the states in local communities to target those areas that were in the 100-year floodplain that were inundated by that flood. …

Congress asked us to do a cost-benefit analysis on the mitigation part of it, and we did that. And we found that every dollar spent saved anywhere from $3 to $5 in future losses. But it did more than that -- it saved lives. And that was important. In 1995 they had another flood, and guess what? Same area. Not one taxpayer's dollar was spent on responding or rebuilding from that flood in '95.

The reputation of FEMA has always been that it's a turkey farm. Why? Why take what's so essential to the health of our country, the safety of our country, and turn it into a place for patronage?

Sen. Fritz Hollings said it best. … He said FEMA was a political dumping ground, a turkey farm, and the only agency he knew that "could mess up a two-car parade." That was his quote. … [And] that's what I found.

When you briefed Joe Allbaugh [George W. Bush's presidential campaign director in 2000] when he came to take over, what did you tell him?

I told him: "Joe, I'll help you any way I can behind the scene, because if I can help you and you are successful, then I know the people are going to be taken care of, and I know FEMA will be successful. It's extremely important, Joe, that the president maintains that position as a Cabinet-level position."

What did he say?

He said, "He's going to do that."

He didn't.

No. I think his management style was a lot different than mine, because I had an open-door policy. Any employee in the agency or any of the 10 regions could make an appointment to talk to me on Tuesday -- any employee. [Did not] make any difference who you were or what position you had. And it was amazing. On Tuesday, of course, they'd call up and start making appointments.

After Allbaugh comes in, you hear from your friends that are still in the agency that morale started to sink?

… Yes. … It was just a difference in management style. …

Now, you cared enough to go before Congress after the agency was folded into the Department of Homeland Security and publicly complained about what was happening.

I testified that I was very concerned about the fact that FEMA was losing its people, losing its resources to Homeland Security. I was concerned that if it continued, if they did not put FEMA back in and be able to fulfill [its] responsibility, that we would be facing a catastrophic event one of these days and not be able to respond to it.

And what was the response that you got?

None.

Somebody must have said, "We'll look into it." Nothing?

Nothing. … I heard later from people that said, "Well, now FEMA's got even more resources because they're in the Department of Homeland Security."

Well, what about that argument?

It's not that FEMA already had those resources. FEMA had the role and responsibility to coordinate those resources, from DoD to Transportation to HHS [Health and Human Services] to each one of the Emergency Support Functions that was part of the Federal Response Fund. They already had that.

They took the heart out of FEMA, taking preparedness training and exercise out of FEMA. And if you do not plan together, train together and exercise together, you're not going to be able to respond. FEMA's role and responsibility of preparing states and local government to be able to respond to an all-hazard-type capability was minimized. …

What do you attribute that to?

I'm not sure. [During] 9/11, when FEMA responded to it, the agency was still intact, and they responded well and did a good job. After 9/11 they started creating the Department of Homeland Security. And the White House called me and asked me to come over and visit with them. … I sat there for two hours on a Friday afternoon sharing my thoughts with them. I said: "Look, you do not need to reinvent this wheel. You may have to add a spoke or two to it. All you have to do is amend the Federal Response Plan to add that the secretary of homeland security would be the coordinating person for a terrorist-type event."

That would be a spoke you'd add to FEMA? And FEMA could take care of responding to a dirty bomb?

Yes, natural disasters and all hazards. They could do [response to] a terrorist event, but the secretary of homeland security would be responsible for coordinating the federal resources if it was a terrorist event. Then I said, "Look, the president and the country need something that's going to be functional now -- not 10 years from now, but now."

[I told them] what I would do, my advice -- you can do with it what you wish. First of all, I would take INS [U.S. Immigration and Naturalization Service], Border Patrol, Coast Guard and the intelligence gathering and the analysis of that and make it functional the first year. And then I would look at what I needed to add to that to make it even stronger. I would not bring all these federal agencies immediately under Homeland Security, because the bureaucracy and the red tape of doing that, it will be 10 years before it's functional. …

And then you sat and you watched DHS come together. Congress got on board.

I had meetings with different members of Congress [who] asked me to come up and brief them. I shared the same information with them. … I thought it was a good idea. I just disagreed with the way it was being formed, simply because you do not take an agency like FEMA, … take the heart out of it, an agency with that responsibility to the American people, and basically take it apart. And that's what happened. …

… Many of them [FEMA staff] called me and said, "This is not going to work." Many of them that probably would have stayed on took early retirement, left. …

How did it end up that you were coming down to Louisiana after Katrina?

[Louisiana's Deputy Director of Emergency Preparedness] Col. [Jeff] Smith and then the adjutant general [and director, Maj. Gen. Bennett C. Landreneau], who I've known for years, called and said, "James Lee, I think we're going to need some help." And then the next call I got was from the governor's office. …

And they hired you on. What did you find when you got here?

It was on a Friday, 7:30 at night. … And we worked all night Friday night, all day Saturday, and did not go to bed till Sunday morning about 1:00.

What did you find on the ground?

… It was tough. Louisiana's emergency management is in with the National Guard, and their system's a little bit different than what FEMA's system is, and it did not mesh real well in organization with FEMA's Emergency Support Functions [ESF]. I brought some people in to help reorganize it where it would be a seamless process.

The warnings that you made in 2004 … [was that] what played out here? Is it correct to think this is the result of those changes?

I think so. I think those changes have caused FEMA not to be as functional as it used to be.

You were never trusted with a disaster of this proportion, though.

Not of that magnitude, I guess you would say, but probably close. The Northridge earthquake was one of the largest in history. We took something like 1,000 applications for assistance. We spent 20 billion FEMA dollars there, and with insurance it was probably a $50 billion disaster. So it was quite large. The Mississippi River flood was quite large -- nine states -- and we covered it well. And we had a federal coordinating officer in all nine states. Hurricane Floyd [in 1999], which flooded almost all of North Carolina. We had a lot of different ones.

What were they unable to do in this case that FEMA previously would have been able to do?

… I'll give you an example. In the 1993 flood, I personally called every single governor, every single member of Congress in each of those states on a weekend. When we had an approaching storm like Hurricane Floyd that was sitting off of the Florida coast -- huge. I was talking to the National Hurricane Center in Florida. I said: "What is this going to do? What do we need? What do we need to expect? Can you tell me whether this is going to make landfall? And at what category is it going to be?" And they kept telling me it was bigger than Andrew in size. And so I set up video conference capability of all the hurricane-risk states. I was doing video conference calls with every state, sometimes twice a day. I called every single governor. I called a lot of the mayors, … and I said: "You make sure that you're talking to the state. You make sure that whatever resources we need to provide you pre-event of the hurricane that that we had it pre-staged for you." They evacuated 4 million people.

[We've] talked to FEMA down the street. They'll tell you that they pre-positioned all the things that they could pre-position. I talked to the operations manager last night who says, "We were responding."

Well, that's great. I wasn't there with them. I don't know how they did it. I don't know what they did. I don't even know what they pre-positioned. I did hear they pre-positioned ice and water and generators.

Not enough?

With a storm of this magnitude, you would think -- particularly if you had a chance of it hitting New Orleans -- you would have the Corps of Engineers start getting and gathering up the biggest pumps that they could find, on a barge, to make ready to come in. You'd think that DoD would be advised, "We're going to need this, this, this and this."

I know we did that many times. DoD actually worked very close with us. They had a colonel as a liaison at FEMA headquarters with me every single day, and any time we activated that operations center, that colonel and others were there in the operations center with us, and we were tasking them.

Going back to the turkey farm that it once was, they've got a lot of political appointees in top positions --

Most agencies have a lot of political --

… That's something that's happening across the board to Customs, to Border Control, to INS -- to all the agencies that are under Homeland Security.

But you have to think about this, too: They go before Congress to be confirmed, and I think it's important that Congress also looks at how they confirm people for positions, not just FEMA, but across the board -- that they make sure they have the experience; they make sure that they are professionals; that they make sure that they have the leadership to do this, because they are leading federal agencies that's supposed to be responsible to the American people, and it's important that they have experience and talent there to do that. …

What has Katrina taught us?

It's taught us that we can do better and we have to do better. … It's important that emergency management as a whole are capable to respond and meet that need in an event like this, and I don't think we're there right now. I don't think we are ready to do that.

But we were. It's ironic that we were before 9/11. Is that what you're saying? And 9/11 has taken us to a point where we're more vulnerable?

I think the focus has changed, because what happened was Department of Homeland Security was focusing more on the terrorist-type events, which is important -- don't get me wrong. We have to prepare for that.

But also it took on a different life. Every state now has a director of homeland security that emergency management has been put under, at the state level, of homeland security. States now have lost capability as well, because now the money and the focus is on homeland security. …

Sixty-plus billion dollars is now going to come through FEMA to be spent on rebuilding the Gulf Coast. The agency has had a horrible time spending money. Should people be concerned about whether or not this contracting money is going to be spent wisely?

That's one of the reasons why Gov. [Kathleen] Blanco asked us to help her as well, because she is very concerned that she wants to make sure that every dollar that comes into Louisiana is spent for what it's supposed to be for. She wants to make sure that [money for] all the parishes and everything is not only documented but is spent for the rebuilding of Louisiana, so we will have people in these parishes writing their project work orders, making sure the documentation's there, making sure that it's going for the purpose that it's intended.

That's a challenge in a state where corruption has been considered an art.

It is. But she's very concerned about this. And I went up to the Capitol yesterday and met with the Legislative Budget Committee's staff. The president of the Senate and the president of the House, they want to make sure that the money not only comes in, but it's documented and it's spent well. We're meeting with each of the state agencies to do this because it's so critical.

Did you know Michael Brown [FEMA director during Hurricane Katrina]?

Yeah, I did.

You think he got a fair shake in this?

… I think that he was he was dealt a bad hand in the sense of the leadership and the responsibility, and the resources [were] taken out of the agency to the extent that it made [it] difficult to lead.

By whom?

By the Department of Homeland Security, … the organization and how they set it up. I think that minimized his capability.

Did [former Secretary of Homeland Security Tom] Ridge have a blind spot when it came to natural disasters?

No. He was a governor of Pennsylvania.

So how does FEMA get so emasculated by the process if you've got a governor in there, Ridge, who knows what it is to manage a natural disaster?

I think it was the bigger threat they thought was there, a terrorist threat. And after 9/11, I think the focus was on terrorists. … It's sad. It's a good agency, it's good people, and had a very important role and responsibility. And it broke my heart to see it. … One of the emergency managers called me, and he said, "It's like a stake has been driven in the heart of emergency management in this country."