experienced insurance personnel, with a minimum of paperwork and expense on its part. Above all, the Nation would be protected against economic disaster.

Senator LEHMAN. Thank you very much. Senator Ives, do you have any questions?

Senator IVES. Mr. Chairman, in the first place, I would like to inquire as to whether you expect to have any representatives of the insurance companies testify today. I do not see any on the list given us.

Senator LEHMAN. Mr. Herd was scheduled to represent the insurance companies. I read his telegram. He is chairman of the committee to study floods and flood damage of the American Insurance Association, representing the industry.

Senator IVES. I think it is very essential, Mr. Chairman, that we do have the insurance companies in on this, because even under this plan the insurance companies and their agents are going to be the ones that are going to have to carry it out. I think we ought to get their reaction on anything we do along this line.

Senator LEHMAN. Let me make it clear that we had every expectation that Mr. Herd would appear here. As I read in the telegram, it was at his request that his appearance was postponed. We will hear from him and from other representatives of the insurance industry.

Senator IVES. Mr. Crystal, have you talked with any of the insurance people about your proposal?

Mr. CRYSTAL. No, sir. I have spoken to some of my friends in the industry, and they know the outline of this plan. But I am not representing any insurance interest.

Senator Ives. I understand you are not representing anybody. I do not know whether you discussed this with anybody in the insurance business.

Mr. CRYSTAL. This is just an extension of some thinking provided at the time of Korea when I suggested that the Government have some type of indemnification for war damage.

Senator IVES. I assume your knowledge of the insurance field is quite broad, and one of the questions I would like to raise with you is as to whether you are acquainted with the amount of coverage now supplied by the insurance companies.

Mr. CRYSTAL. For flood insurance?

Senator IVES. No-for all kinds of catastrophe insurance. They have wind insurance, we all know that.

Mr. CRYSTAL. Oh, yes. But there is no drought insurance available, to my knowledge; certainly no war damage insurance, and no flood insurance, except that bought in excess markets.

Senator Ives. Your plan, then, would cover all that area which is not now being covered by insurance and which we understand that the insurance people themselves, the insurance companies, feel that they cannot cover because of the cost, is that right?

Mr. CRYSTAL. That is correct, sir.

Senator Ives. In other words, in your statement you have not limited it anywhere, have you? You are referring particularly to flood, but your category includes drought and everything else.

Mr. CRYSTAL. Flood, drought, nuclear explosion, war damage-any major catastrophe for which insurance now is unobtainable.

Senator IVES. You would not have it limited to any particular thing at all.

Mr. CRYSTAL. No, sir.

Senator IVES. Have you any idea what the cost would be the amount of tax you are proposing to raise here?

Mr. CRYSTAL. Well, if my memory serves me correctly, our Federal income tax runs approximately $50 billion. If you take the losses as reported in the press, the amount of taxation that would have to be added to that per individual or per corporation would be negligible. Senator IVES. I thought perhaps you had figured it out.

Mr. CRYSTAL. I did not want to be too exact, sir.

Senator IVES. That would be interesting.

Mr. CRYSTAL. For a small man, his tax might be less than his contribution to the Red Cross-that is, if everybody contributed throughout the country.

Senator IVES. Well, now, that is what I am coming to. You are going to levy a tax here, an additional income tax, I assume. Mr. CRYSTAL. That is correct, sir.

Senator IVES. Is it going to be a flat rate for everybody, regardless of the amount of his income?

Mr. CRYSTAL. It would be a percentage of the tax previously prescribed by the law. And it would be a prorated loading charge.

Senator IVES. I see. That would make it eminently more fair. Mr. CRYSTAL. Yes, sir, that is the purpose of the thinking. It is something like a tithe in the old biblical days.

Senator IVES. The question has been submitted to me should the program be one of insurance or reinsurance, or a combination of both. I take it your plan is entirely outside of insurance itself. It has nothing to do with reinsurance at all, is that right?

Mr. CRYSTAL. That is correct, sir.

Senator Ives. I think you have a very interesting proposal here. I am just curious to know what the reaction of the insurance companies would be to it.

Mr. CRYSTAL. I would be, too, sir.

Senator IVES. Should both real and personal property be covered? Mr. CRYSTAL. I don't believe so. I don't think personal property has a bearing in the rehabilitation of the country. If real property is rehabilitated, the people, in their ability to gain work and employment for rebuilding in the areas of the damage, would earn the funds to buy personal property.

Senator IVES. The only thing I am thinking of in that connection is that you can have very substantial losses in personal property which might be rather devastating in certain instances.

Mr. CRYSTAL. Yes, sir. But I think most important is a home and the ability to work in the area in which the damage took place.

Senator IVES. Should privately owned and State and local government-owned property be covered?

Mr. CRYSTAL. They don't buy insurance on Federal Government property now, unless the property is held in a corporate name.

Senator IVES. Would you limit it to those properties which can now be covered by insurance and are being covered by insurance? Mr. CRYSTAL. That is right.

Senator IVES. Of course, in many instances the Government is setting up funds of its own to meet these conditions. You have no idea, I take it, what the total aggregate liability of the program would be. Mr. CRYSTAL. I could not know the extent of the catastrophe. Senator IVES. Well, of course, that would vary.

Mr. CRYSTAL. I don't think it makes too much difference. Based upon the catastrophes that we have now had, the size of them is certainly not very important in relation to the whole public-tax program. Senator IVES. I assume this would be something like unemployment insurance. Your rate would be based on experience from year to year.

Mr. CRYSTAL. You might not have a catastrophe for 5 or 10 years, and you would not have to make a charge in those years you had no catastrophe.

Senator Ives. If there were not the requirements, you would not have any tax.

Mr. CRYSTAL. That is right. I do not believe the Government should build up a reserve or surplus for future catastrophes.

Senator IVES. One more question. I do not want to monopolize all the time here. I would like to ask you whether you think this should be established initially on a temporary basis, over a period of a few years, or whether this should be established at its inception on a permanent basis.

Mr. CRYSTAL. Well, speaking for myselfSenator IVES. We know nothing about it. and error.

This is subject to trial

Mr. CRYSTAL. Yes. But if you plan on a time basis, you might not have a catastrophe during that time, and you would gain no experience. I think, therefore, you would have to have a more regular advance program on a permanent basis.

Senator IVES. One more question on that. You still would be collecting the tax, would you not?

Mr. CRYSTAL. No; there would be no tax collection until after the catastrophe occurred.

Senator IVES. In the meantime you are going to finance this by Government borrowing?

Mr. CRYSTAL. Tax-anticipation bonds.

Senator IVES. Thank you. That is all I want to know.

Senator BUSH. Mr. Chairman, I have quite a few questions I would like to ask Mr. Crystal, but the Governor of New York has arrived, and I wonder if Mr. Crystal would not wait and let us call him after we have heard from Governor Harriman.

Senator LEHMAN. I did promise the Governor of New York to put him on as the first witness-and if you would show him that courtesy. Mr. CRYSTAL. Certainly.

Senator BUSH. The testimony was very good, and I do have some questions.

Senator LEHMAN. The next witness is the Governor of New York. I want to welcome you on behalf of this committee, which has two representatives from the State of New York, to this hearing. I am very appreciative of your taking a sufficient amount of time from what I know is a very busy schedule to appear before us. We will listen to your testimony with a great deal of interest.

I want to make it clear that it is quite agreeable to this committee for you to have such of your advisers and State officials as you wish to select to sit with you in order to answer any questions that the committee may wish to ask which you would prefer to have handled by members of your staff.

Again, I want to welcome you very heartily..

STATEMENT OF AVERELL HARRIMAN, GOVERNOR, STATE OF NEW YORK

Governor HARRIMAN. Thank you very much, Senator Lehman, Senator Ives, and Senator Bush. I am grateful to you for the opportunity of being able to appear before you, because I believe this subject which you are considering is of vital importance, as unhappily events have shown, to the people of New York State, and, I believe, to adjoining States.

I have asked Mr. Bingham, who is my secretary, and also Mr. Holz, who is superintendent of insurance, to come just in case their presence here could be of any value to you.

Senator LEHMAN. I believe that Mr. Holz is going to appear before this committee tomorrow at Goshen.

Governor HARRIMAN. Yes, he is. It was just in case of some questions he could readily answer, which could save your time.

Senator Lehman, you and your able colleagues are to be congratulated for holding these hearings on a subject of such vital importance to our State and the Nation. The natural disasters of August and October have brought home to us once again that our citizens-businessmen, farmers, householders have no way to protect themselves against the sudden and catastrophic effects of nature's wrath.

I earnestly hope that out of these hearings and the deliberations of this committee will come recommendations leading to effective congressional action to protect people all over the country from possible disaster to which they are now exposed. All too often, the public interest that a flood arouses abates almost as quickly as the floodwaters themselves. Over this past weekend in the Albany area, however, we had enough heavy rains to worry us, and to remind us that our efforts to find solutions must be strenuous and persistent.

I need not recall to you the proposals for a Federal flood-insurance program made by President Truman in 1951 on which no action was taken by the Congress. I trust that this time the result will be different. I feel confident that this committee, with your leadership, Senator Lehman, will carry through to a constructive end what it has so wisely begun in these hearings.

For my part, I believe that some form of nationwide Federal insurance system is needed to provide protection against natural disasters. Obviously the Federal Government should not engage in activities which can be adequately carried on by the insurance companies, but those companies have not so far been able to provide the needed protection.

Of course, the first concern of our State government during the floods caused by Hurricane Diane and the cyclonic storm of October was to keep damage and loss of life to a minimum, and to maintain or quickly restore interrupted public services. In this emergency stage, I think we can take pride in the way Federal, State, and local govern

ment agencies and private organizations, notably the Red Cross, all cooperated. Several of our State departments were on the job around the clock, keeping me informed of their activities from hour to hour. Our public works department sent equipment from all parts of the State to clear debris from highways and to make emergency repairs to bridges, roads, dikes, and other public facilities. Splendid work was done by many of our volunteer fire companies, operating under our fire mobilization and mutual-aid plan. The New York State National Guard moved men and equipment into the flood areas, not only of New York, but in Connecticut, and assisted in emergency evacuations. Our civil defense organization provided blankets and emergency supplies to those evacuated from their homes, and served as a nerve center for all kinds of rescue and emergency relief operations. The Salvation Army, churches, and other private organizations, as always, provided humane services.

After both floods, the restoration of essential public services proceeded rapidly. The United States Corps of Engineers was authorized by the Federal Civil Defense Administration to undertake immediately the restoration of highways and bridges on a temporary basis, and especially in Ulster County and other Hudson River Basin areas they did an outstanding job with a minimum of red tape. One colonel expressed a philosophy which should stand as a model for all government workers in a time of emergency, when he said, "I'd rather be hung for what I do, than for what I don't do."

Curiously enough, the emergency repair work of the Engineers Corps was hampered with respect to those highways which are part of the Federal-aid system. For us to get help on the Federal-aid highways we had to go through a cumbersome process. First I had to issue a special emergency proclamation, in spite of the fact that the President had already declared southeastern New York a disaster area, and this proclamation had to go through channels to Washington for concurrence by the Commissioner of Public Roads. Detailed plans for work to be done had then to be submitted for approval, again through channels, and costly weeks of delay are the result.

Surely this arrangement is backward. Those highways which are so essential as to be eligible for Federal aid should be eligible for emergency repair with the least redtape, not the most.

Moreover, Federal assistance to such roads is limited to 50 percent of the cost-the normal rate for Federal aid. Where a State was as hard hit as Connecticut in both recent floods, consideration might be given to whether this 50-percent limitation is reasonable or whether the State should be given an opportunity to insure itself against its share of the rehabilitation costs.

As to those community projects which have not qualified for Federal assistance, I am now having an inspection made in the areas of damage in order to determine what additional assistance the State should provide. Although we have no specific legislative authority to spend State funds for such purposes, I have the assurance of the leaders of the legislature that they will cooperate with me in making some emergency funds available.

There is no doubt that the repairing and restoring of public facilities alone is an undue burden on the capacity of many of our communities. It seems logical that any system of insurance that is set up against the risks of natural disasters should make provision for