(The editorials referred to follow :)

[Portland (Maine) Press Herald, October 26, 1955]

CONGRESS SHOULD CREATE FEDERAL FLOOD INSURANCE

The question of federally backed insurance against natural catastrophes, specifically floods, ought to receive quick and bipartisan attention from Congress. The kind of tragedy which has twice hit large parts of the Northeast in recent weeks cannot be compensated by any agency short of one with the resources of the whole country, which means the Federal Government.

Commercial insurers are incapable of accepting high risks for a relatively small number of people and private businesses. And yet the risk is there and a New England feeling a real competitive pinch from other areas ought not to be obliged to add uncompensable flood damage to the cost of living or doing business.

Evidence that the matter will not become a political football in an election year is at hand in the joint authoriship by Senators Kennedy and Saltonstall of Massachusetts of the draft of a bill to establish a flood-insurance reserve amounting to $12 billion. Other proposals also are springing up and the Senate Banking and Currency Committee is soon to begin hearings on the various ideas.

This is an example of an area of service into which Government must venture because private capital cannot. No time should be lost in doing so wisely.

[The New York Times, October 26, 1955]

CONTROLLING THE FLOODS

The disastrous Northeastern floods this summer and fall demand an integrated program to minimize the damage from any such occurrence in the future. There is no single or easy preventive for floods of this type; but there is serious danger that in the shock of the recent catastrophe public opinion may be misled into believing that the cure-all lies merely in building bigger and better dams and dikes to hold back or to channel the rushing waters.

Flood control is a complex and difficult question, the answer to which is not found in simply voting more money for the Army Corps of Engineers to spend on higher dams and larger reservoirs. Yet we can expect the pressures to begin at once on behalf of innumerable such projects that have a superficial appeal and a strong political attraction. Reasonably sized dams, reservoirs, floodwalls, and the like obviously do have a part to play in any serious flood-control program for the Northeast. But they alone are not enough, nor do they have to be planned on such a huge scale as to take care of the once-in-a-century kind of flood that has just been experienced in this section of the country. It would make no sense, economically or socially, to flood out permanently behind big dams the best agricultural land in New England's little river valleys in order to give doubtful protection downstream against damage that might not occur again for generations. The fact that the cost of such structures would be met by the Federal Government makes the prospect no more palatable.

Does this mean that we must sit supinely by and do nothing to protect ourselves against the big floods, even though they may come but rarely? Not at all. Dean Thorndike Saville, of the College of Engineering of New York University, is one among many experts on flood control who proffers some sensible suggestions. In addition to the normal kind of engineering structures designed to meet the normal flood Dean Saville proposes two other methods of attack. One is a system of Federal flood insurance, on an actuarial basis, to relieve the staggering economic damage floods can and do inflict on the individual property owner.

The other is a program of flood rezoning, which means the relocation of factories and homes away from river-edge areas that are likely to be washed out in monster floods of the kind we have just experienced. The use of such areas for roads and especially for parks would be an infinitely wiser and in the long run less expensive proposition than rebuilding on the same old sites, although the proposed relocation would necessarily involve some form of governmental assistance to present property owners.

One does not have to accept all of Dean Saville's conclusions in order to see that a sensible and effective flood-control program has many facets, involving long-range social planning as well as short-range dikes and dams.

Mr. Chairman, I thank you very much for the courtesy extended to me in appearing first in this hearing this morning. I shall be very happy, if there are any questions, to endeavor to answer the questions to the best of my ability.

Senator LEHMAN. Senator Payne, I am very glad that you were able to be here. I know how busy you have been.

Senator PAYNE. You and I, Senator, seem to have been appearing at several hearings lately.

Senator LEHMAN. They were very interesting hearings, and I am quite sure something constructive will come out of them.

You were not here yesterday, of course. I just want to say that we are going to have the insurance companies testify before us, their representatives, at an early date.

Also I want to point out that there are several proposals before this committee-not bills but proposals. One, to which you have already referred, was submitted by Senator Kennedy and Senator Saltonstall and yourself. One was submitted by Senator Carlson. There is one that I have drafted and one that was prepared under the, direction of Senator Bush. They all, of course, will receive careful consideration. We want the best advice of all the interested parties in this matter. Thank you very much.

Senator PAYNE. Thank you, sir.

Senator BUSH. Mr. Chairman, I would like the courtesy of making a brief statement at this moment.

Senator LEHMAN. I would be glad if you would.

Senator BUSH. The acting chairman was somewhat critical of the administration yesterday for not submitting a detailed blueprint for a disaster-insurance plan. I wish it had been possible for the administration to have done so, but I would like to remind the acting chairman that the legislative history of past efforts to create a floodinsurance program reveals the difficulties involved in drafting sound legislation.

In the first session of the 82d Congress, following a flood disaster in the Midwest, a former administration proposed a flood-insurance plan. Bills subsequently were referred to this committee, the Banking and Currency Committee, and to the House Committee on Banking and Currency.

Perfunctory hearings were held by the House committee. This committee held no hearings at all. No action was taken by either committee to report a bill to the floor.

The Appropriations Committees of the House and Senate considered the question of flood insurance in connection with budget requests for relief and rehabilitation in Midwest disaster areas. No action was taken on the flood-insurance proposal.

Four years have passed since the need for flood insurance was presented to the Congress. Less than 3 months have elapsed since the first flood disaster this year in the Northeast. So I think it is somewhat unfair to criticize the present administration for not preparing in less than 3 months a detailed flood-insurance program when the Congress itself and this committee have failed to do so with 4 years to consider the problem.

I think we will make more progress if, instead of seeking to cast blame, we accept the fact that both the administration and the Con

gress acting through this committee have the responsibility of doing everything humanly possible to draft a sound, workable program. I am confident that the present administration will cooperate fully with this committee. I am confident that more detailed proposals will be presented to us when sufficient time has been given to work out the many difficult problems involved.

I am sure that the present hearings will result in clarifying many of these problems and provide the basic information needed to draft legislation which will work. In the meantime I feel that we should focus our attention on flood insurance and not flood politics.

I thank the chairman.

Senator LEHMAN. May I say to my distinguished colleague that such criticism as I made of the delay in obtaining the recommendations and suggestions of the administration was based primarily on a statement made by the President or under his direction on October 17, I believe, in which he said that he had directed the various agencies of Government to prepare a plan and that plan would be ready for submission to this committee when it met yesterday.

I cannot help but express my disappointment that there was no plan or that there were no suggestions save a vague series of so-called criteria that came before us yesterday.

I realize perfectly well that this is a most complex problem. I so stated at the opening of the hearing yesterday. But I am very desirous, as I think other members of this committee are and as I believe the public generally is and as I believe the President is, of getting this program underway at the earliest possible moment.

Here we are in recess, in a period of adjournment, holding these hearings in various parts of the country. This is the time really to prepare for the development of facts and data and suggestions which will permit this committee to take early action at the opening of the Congress.

It is perfectly true that this subject has been before this committee in previous years. One date to which you refer, of course, came at a time when we were preoccupied by defense production matters. But, aside from that, the urgency of this situation had not at that time or at any time in the recent past been brought home so vividly, so urgently to Congress and to the American people and to the people who have been sufferers or are potential sufferers. The floods that occurred in the Northeastern States did highlight the situation, did highlight the importance of developing a plan which would safeguard the various people who have suffered or will suffer damages.

There is no denying the fact that thousands of homes have been destroyed or seriously damaged. There is no doubt whatsoever that the earnings, savings, and the property of many thousands of people have been wiped out. As I said yesterday, all that is left to them is a mortgage for which they are still responsible. No home, no personal property in many cases. The mortgage has been left.

So, Senator Bush, I feel that I am justified, as the man who was given the assignment to conduct these hearings, to bring every possible pressure to bear upon the administration, as promised by President Eisenhower, to develop their thinking, to develop their recommendations, to develop their suggestions.

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I shall continue to do that at this hearing and at all other hearings which are being held.

I think it is of major importance that we get to work on this thing seriously and with hope of early success without loss of time.

Senator BUSH. Well, Mr. Chairman, it is very difficult for me to debate this question with one of your well-known humanitarian views and positions on all matters affecting the people and their lives. As I say, it is difficult to contest with you any matter of that kind because of your respect for you.

But may I say this: That the President I think has done what he said he was going to do in connection with the statement which you read yesterday. He has submitted not a detailed plan but some suggestions.

If you wanted him to submit a bill, a definitive bill, then I think that you were expecting too much. I certainly did not expect the administration to present a bill at this particular time. As a matter of fact, I think if they are wise they had better wait a little while and take advantage of the testimony that is delivered before this Banking and Currency Committee both here and in New York and in New England.

The purpose of these hearings is to gather testimony which will be useful in the preparation of legislation.

The President has submitted some suggestions as he said he would, and I have no doubt that in due course we will have a suggested bill from the administration. But, realizing that there can be no action on this until the Congress reconvenes, I hope that the administration will take sufficient time to give this drafting of a bill the very closest study and take advantage of all the evidence that comes before this committee in its hearings.

I thank the chairman for his courtesy.

Senator LEHMAN. I merely wanted to add one word. I read the President's statement, and it is now in the record. I think you will find that he led us to believe that there would be specific proposals ready for consideration by this committee during the hearings. Senator BUSH. Well, I have no doubt————

Senator LEHMAN. I realize the President's unfortunate physical mishap, and like you and like every other American, like a great part of the world may I say, we all pray for his early and complete recovery. But we want this thing to proceed. We think it is of the greatest importance. And I know that you yourself feel that way.

Senator BUSH. I think under the Senator's able chairmanship we will proceed and make headway.

Senator LEHMAN. Now Mr. Barnes.

Mr. Barnes, do you have a prepared statement?

STATEMENT OF WENDELL B. BARNES, ADMINISTRATOR,
SMALL BUSINESS ADMINISTRATION

Mr. BARNES. I have a prepared statement, Mr. Chairman, and I think copies have been placed at each of your seats.

Senator LEHMAN. Will you read that, or do you want to speakMr. BARNES. Yes, I would like to read that and then interpolate certain remarks as I go along and perhaps use some charts to assist in understanding some of the things that I say.

Senator LEHMAN. Will you proceed in the manner that seems most desirable to you?

Mr. BARNES. All right, sir.

My name is Wendell B. Barnes. I am Administrator of the Small

Business Administration.

We in our agency have been intimately connected with the recent disaster in New England. I myself interrupted a vacation and returned and flew to each of the States, met with State authorities and congressional leaders, some of the gentlemen present on this committee, and examined at first hand all of the areas that were affected or else flew over them.

On the basis of that study, I made plans that our agency should adopt in helping to alleviate some of the suffering up there.

I intend my statement this morning to be as far as possible factual on what has happened in the past in disasters in order to give the committee a factual basis for its study of this overall program.

When the Small Business Administration was established in 1953, Congress had two purposes in mind. First, to aid and protect the interest of small business in the interest of maintaining and strengthening the overall economy of the Nation; and second, to aid and assist victims of floods and other catastrophes.

Section 202 of Public Law 163, the Small Business Act of 1953, provides:

It is the declared policy of Congress that the Government should aid and assist the victims of floods or other catastrophes.

So Congress has already spoken its general policy certainly in our law on the subject of assisting victims of floods and other natural catastrophes.

Pursuant to this latter purpose, this agency, the Small Business Administration, was assigned by Congress the function formerly residing in the Reconstruction Finance Corporation of making disaster loans to help in the rehabilitation of homes and businesses damaged by natural disasters.

The law provides that these loans are to be made from our revolving fund, and that no more than $25 million in disaster loans may be outstanding at any time a provision, incidentally, that is now causing us some difficulty. The interest rate is set at 3 percent, and the maturity of a disaster loan may not exceed 10 years, except where the loan is to be used for the acquisition or construction of housing for the personal occupancy of the borrower, in which case the loan may run for 20 years.

In the slightly more than 2 years of its existence, the Small Business Administration has made about 45 declarations of disaster areas. The law provides that we make the finding and the declaration ourselves. These have been in many parts of the country, as the result of disasters of many kinds-forest fires, landslides, sudden freezes, floods, earthquakes, and windstorms, including hurricanes and tornadoes.

Many of these 45 disasters were, fortunately, confined to small areas, but they caused much local distress. In one instance an entire community, Udall, Kans., was practically wiped from the face of the earth. Other disasters have been very wide in extent and have caused very heavy devastation.