This just seems amazingly misguided. And I don't understand why more is not being made of it.
Even if FEMA were still a model government agency, as it was by most accounts in the 1990s, this would still be a really, really bad decision. As the title says, FEMA is an emergency management agency, not a reconstruction agency. It doesn't have the organizational structure or competence to run the economy of a significant chunk of the United States for the foreseeable future, which is what this amounts to.