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of comparable maturities as of the last day of the month preceding the issuance of such notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations to be issued here. under and for such purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Funds borrowed under this section shall be deposited, in such proportions as the President or his designee deems advisable, in the Disaster Indemnity Fund and the Disaster Reinsurance Reserve Fund.

(e) Moneys in the Disaster Indemnity Fund and the Disaster Reinsurance Reserve Fund may be used for the following purposes as deemed necessary by the President or his designee:

(1) to enable the President or his designee to carry out all functions under this Act, including the payment of operating and administrative expenses ;

(2) to pay from the Disaster Indemnity Fund approved claims for loss under indemnity coverage issued by the President or his designee under this Act;

(3) to pay from the Disaster Reinsurance Reserve Fund approved claims under reinsurance agreements entered into by the President or his designee under this Act; and

(4) to repay to the Secretary of the Treasury sums borrowed from him in accordance with the provisions of subsection (d) of this section. Sec. 6. No indemnity or reinsurance shall be provided under this Act (1) for risks eligible for insurance under other Federal programs, or to the extent that coverage is available on reasonable terms from other public or private sources, or (2) for property used in conflict with pertinent zoning laws applicable to floods or other natural disasters.

Sec. 7. (a) In recognition of recent catastrophic losses suffered by persons due to natural disasters, the President or his designee, under such regulations as he may prescribe, is hereby authorized to indemnify to the extent of 50 per centum of unreimbursed proven loss all persons who suffered loss of property during the current fiscal year as a result of a natural disaster constituting a major disaster within the meaning of that term as defined in the Act of September 30, 1950, as amended.

(b) There are hereby authorized to be paid out of the Disaster Indemnity Fund established in accordance with this Act such sums as may be necessary to carry out the provisions of this section.

SEC. 8. (a) Any provision of this Act to the contrary notwithstanding, upon a finding by the President that such action is necessary in the public interest, the President or his designee is authorized to provide, through indemnity or reinsurance, reasonable protection against war damage to real and personal property or resulting in personal injury or death of persons.

(b) Such protection shall be made available upon such terms and conditions and upon payment of such charges as the President or his designee may establish, in accordance with the provisions of this Act.

(c) Any provision of this Act to the contrary notwithstanding, the liability of the President or his designee under protection made available under this section shall not exceed $10,000,000,000 at any one time.

(d) Upon the making of the finding required by subsection (a) of this section, the President or his designee shall establish a War Damage Fund and is authorized to transfer to it from the Disaster Indemnity Fund not in excess of $100,000,000. Such transfer shall be deemed to constitute a non-interest-bearing loan repayable at a time or times designated by the President or his designee. The War Damage Fund shall be administered for the purposes of this section in the same manner as the Disaster Indemnity Fund and the Disaster Reinsurance Reserve Fund are administered for the purposes of the other sections of this Act. The authority vested in the President or his designee by section 5 (d) of this det may also be used for the benefit of the War Damage Fund. SEC. 9. As used in this Act

(a) The term "natural disaster" shall mean any flood, tidal wave, hurricane, tornado, blizzard, duststorm, hailstorm or other severe storm, earthquake, explo. sion, landslide, snowslide, severe freeze, drought, smog, radioactive contamination or other air pollution, or volcanic eruption.

(b) The term “war damage" shall mean damage resulting from (A) any hostile or warlike action by (i) any government or sovereign power (de jure or de facto) or any authority maintaining or using military, naval, or air forces, or (ii) an agent of any such government, power, or forces; or (B) any action taken by any Federal, State, or local government agency in hindering, combating, or defending against any such hostile or warlike action (whether actual, impending, or expected); or (C) disorder or other lawlessness accompanying the collapse of civil authority determined by the President to have resulted from any action referred to in clause (A) or (B) or from control by enemy forces.

(c) The term “hostile or warlike action” shall mean any attack or series of attacks by an enemy of the l'nited States in any manner, including, but not limited to, attack by invasion, sabotage, or the use of bombs, shellfire, or nuclear, radiological, chemical, bacteriological or other biological means, or other weapons or processes.

Sec. 10. The President or his designee shall, not later than August 1, 1956, and annually thereafter, submit to the Congress a report on activities under this Act, including therein such recommendations as may be deemed advisable.

SEC. 11. If any provision of this Act or the application of such provision to any person or circumstances shall be held invalid, the remainder of the Act and the application of such provision to any person or circumstance other than those as to which it is held invalid shall not be affected thereby.


Purpose of act to arrange Federal participation in reimbursement of natural disaster and war-damage loss through indemnity or reinsurance, in absence of private enterprise program to do so. Section 3

(a) President to name Small Business Administration or other existing Federal agency to handle program. Authorizes indemnity or reinsurance against natural disaster (as defined in act) loss to real or personal property owned privately or by State or local governments. Program operates only if indemnity or reinsurance isn't reasonably available from private insurance companies.

(b) Indemnity fees and reinsurance rates and other terms and conditions to be fixed by President or designee. Consider risks, public interest and aim to achieve self-supporting program.

(C) Regulation to govern types of property covered, nature and limits of loss covered ; $60,000 limit placed on coverage of 1- to 4-family residence; $250,000 limit on other property under any one policy. On reinsurance, Federal Gorernment may assume first $1,000 loss and all exceeding $50,000 per policy; and up to 80 percent of loss between those limits.

(d) Aggregate Federal liability for indemnity and reinsurance against naturaldisaster loss--$2 billion at any one time.

(e) Terms and conditions of policy reinsured under this act are subject to Federal approval.

(f) Private insurance companies to be used to maximum in this program, particularly as underwriting agents and claim agents. Reasonable compensation to be paid for services.

(g) Federal Government may exchange helpful information with other governmental and private organizations.

(h) Provides for advisory committee of 3 to 25 familiar with insurance problems. Authorizes use of consultant. Compensation up to $50 per day plus travel expense, unless already receiving Federal compensation. Section 4

(a) Arranges prompt payment of approved claims.

(b) Grants judicial review of claim disallowance. Confers jurisdiction on Federal district courts. Section 5

(a) Authorizes disaster indemnity fund (for indemnity agreements) and disaster reinsurance reserve fund (for reinsurance contracts). Indemnity fees deposited in disaster indemnity fund. Reinsurance charges deposited in disaster reinsurance reserve fund.

(b) Moneys in both funds may be invested in United States obligations. (c) Salvage proceeds deposited in appropriate fund of the two.

(d) Administrator of program authorized to borrow up to total of $1 billion from United States Treasury for funds, as needed (or more with President's approval). Interest rate on borrowing fund fixed by Secretary of the Treasury. (c) Disbursements from both funds permitted as follows:

(1) To carry out act (includes operating costs) ; (2) and (3) to pay approved claims (indemnity coverage from disaster indemnity fund; reinsur. ance coverage from disaster reinsurance reserve fund; (4) to repay

borrowings from United States Treasury. Section 6

No indemnity or reinsurance to be issued under act (1) for risks coverable by other Federal programs (e. g. crop insurance) or public or private programs on reasonable terms; or (2) for property used in conflict with local flood zoning laws. Section ay

(a) Authorizes indemnity to persons suffering loss in recent major disasters, to extent of half their unreimbursed proven loss.

(b) Disaster indemnity fund may be used for this purpose. Section 8

(a) Program of war damage indemnity and reinsurance may be begun upon Presidential finding it is necessary in public interest. May cover real and personal property and personal injury and death.

(b) Terms and conditions to be fixed by President or designee, in accordance with this act.

(c) Aggregate Federal liability under war damage program limited to $10 billion at any one time.

(d) For this program provide war damage fund created by up to $100 million loan without interest from disaster indemnity fund. Use this fund comparably to use of disaster indemnity fund and disaster reinsurance reserve fund. Borrowing power from Treasury authorized for benefit of this war damage fund. Section 9

(a) Disaster-flood, tidal wave, hurricane, tornado, blizzard, duststorm, hailstorm or other severe storm, earthquake, explosion, landslide, snowslide, severe freeze, drought, smog, radioactive contamination or other air pollution, or volcanic eruption.

(b) War damage: (A) From hostile or warlike action by Government or authority using armed force, or their agents; (B) from defensive action against such action by Government; (C) from disorder accompanying collapse of civil authority determined by President to have resulted from (A) or (B) above or control by enemy forces.

(c) Hostile or warlike action : Any attack by United States enemy in any manner (expressly includes nuclear weapon and bacteriological attacks). Section 10

President or designee to report to Congress annually. Section 11

Separability clause.

Senator LEHMAN. I also want to emphasize one other thing to correct some possible misapprehension. These hearings are not being conducted by a subcommittee of the Banking and Currency Committee. They are on behalf of the entire committee.

I have been asked to serve as presiding officer of these hearings, but they are really committee hearings. It is the committee as a whole that, of course, will pass on and consider the record as it comes out in the course of these hearings.

I would like to put in the record a letter which I have from the chairman of the Banking and Currency Committee, Senator Fulbright, giving me authority to hold these hearings on behalf of the Banking and Currency Committee.


(The letter referred to follows:)


October 28, 1955.
United States Senate,

Washington, D. C. DEAR SENATOR : This is to confirm our previous understanding that you will couduet hearings, on behalf of the Banking and Currency Committee, on the general subject of disaster risk insurance, during the recess of the Congress.

On the reconvening of Congress it may be desirable to assign such legislation as may be introduced on this subject to one of the standing subcommittees, or to a special subcommittee. However, I appreciate your concern that the committee in the meantime should obtain background information, particularly from officials and citizens of States which recently suffered disaster floods.

I have a heavy schedule of engagements in Arkansas which will not permit ny return to Washington until shortly before the reconvening of Congress. You are therefore authorized to hold such hearings at times and places to be designated by you during the recess of the Senate. Sincerely yours,

J. W. FULBRIGHT. Senator LEHMAN. Senator Bush, who unfortunately has to return this afternoon to Connecticut to meet commitments that he made some time ago, has asked whether representatives of the Federal agencies can be called in a certain order. He suggested that the first witness be the Bureau of the Budget, the second the Federal Civil Defense, the third the Small Business Administration, the fourth the Housing and Home Finance Agency, and fifth the Defense Department. I would be very glad indeed to call them in this order.

Senator Bush. I certainly appreciate the chairman's courtesy in that connection. I think that will help the situation.

Senator LEHMAN. I want to make one further observation before we start the proceedings. We are going to ask questions of the various agencies. We certainly do not, however, want to impinge on any area of national security. If in the course of our questions we address a query to you which in your opinion you cannot or should not answer because of considerations of national security, please do not hesitate to let me know and we shall be very glad indeed to withdraw our question.

I made reference in my opening remarks to the fact that we are going to consult with the insurance companies. We certainly intend to do that. It is not possible because of the schedule we set to have the insurance people at this first series of hearings. It probably will not be possible to hear from all the representatives of the insurance companies who desire to come before us. I can assure the insurance companies, however, that they will have a full, complete, and thorough hearing at which they can express their views.

Now, Mr. Roger W. Jones, of the Bureau of the Budget. Mr. Jones, I know that you and the other representatives of the agencies are not in a position or prepared to give any definitive statement with regard to the attitude of your agency. We would very much like, however, to have your point of view on the whole subject as it comes before us. STATEMENT OF ROGER W. JONES, ASSISTANT DIRECTOR OF THE


The statement that I have here is not really a formal statement. It is more in the nature of an outline, so it has not been duplicated and distributed. I can, however, make copies available to the reporter and to you if you wish to have it to follow.

Senator LEHMAN. We would be very glad to have it.
Will you identify yourself?

Mr. Jones. My name is Roger W. Jones. I am Assistant Director of the Budget for Legislative Reference.

Mr. Chairman, Senator Bush, I have been authorized to appear before you today to make an introductory statement with respect to the subject of flood insurance. As you have indicated in your opening remarks, the subject matter of the committee's concern is considerably broader than just flood insurance, but in view of the emphasis which has been put upon that subject in recent weeks we felt that perhaps it would be helpful to the committee if we could start with a statement about that subject first.

Immediately after the disastrous floods in the northeastern part of the United States in August there was a renewed interest in the subject of Federal disaster insurance. This was reflected in the newspapers, in conversations in Washington, and in conferences which were held in the Northeastern States, including a conference of the New England governors.

Disaster insurance is not a new subject. It is one to which the Federal Government has given attention several times in recent years. Most recently the subject was considered by the House Committee on Banking and Currency in 1952 on a measure which was drafted to carry out the recommendations contained in a special message of President Truman. No easy solution was found at that time, and there is none now.

Two weeks ago, President Eisenhower, in a letter to Governor Roberts, of Rhode Island, responding to resolutions of the New Eng. land Governors' Conference, indicated that legislative suggestions on the subject of disaster insurance would be made available at the opening of these hearings. These suggestions are the result of much careful work on the part of a number of Federal agencies. They represent the conclusions which we have so far been able to reach, but they do not represent a final program of action which the administration is prepared to recommend.

They are offered in an effort to help prepare the ground and to outline to the committee the problems as the Federal agencies see them and some of the considerations which the individual agencies believe must be taken into account in finding answers to these problems.

The technical facilities of the executive branch are at the disposal of the committee. The witnesses who will follow me, I am sure, will be prepared to give you the benefit of the thinking and work which they have done. A final program of proposed action is not yet ready. In our judgment, it would have been unwise to attempt to do this hurriedly when there are still a number of questions that need further investigation and which we believe can be answered in the weeks before the Congress reconvenes. By that time it may well appear feasible

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