The suspicious ModelBreaker thinks that this is the reason the state didn't want the feds to take over the recovery effort. There's too much corruption in NO and Blanco and Nagin were scared that if the feds got control, they might just look into the corruption more closely. There were records to shred, hard drives to erase and so on before the feds could be allowed in.
It's hard to explain Blanco's actions any other way (except of course the incompetant deer caught in headlights explanation, which, in less suspicious moments, is my preferred explanation).
Makes sense.