Governor HARRIMAN. I also point out that the insurance should be available for those who already have their properties in an exposed area. So if I have not made it clear, I wish to say that I agree with you that insurance ought to be available for those who already have their homes and businesses in exposed areas. They should work with the communities.

At the same time, if there is a flood, and if there is an obvious danger in a certain area and a business or homeowner recklessly goes in and in spite of the advice that they may get insists on going there, the insuring agency should not be compelled to take on that risk.

I intended this to mean that those people who go right in, in the face of floods that have taken place, and in spite of the advice they get if thye are told this is a dangerous area, and build their homes or businesses up there, they should not necessarily qualify for insurance. I do not think there is a disagreement between us as you described it. Senator BUSH. I believe you have clarified your position in such a way so that there is no disagreement. But I certainly agree with Governor Harriman that a very substantial responsibility has been revealed by our experience that should be accepted by our local communities in preventing situations to exist which invite disaster. This business of sort of flirting with disaster has got to be stopped. Most of our troubles came from that.

Senator LEHMAN. I would just like to clarify the situation a little bit, because I think what the Governor has recommended and suggested and pointed out is in close alinement with the provision in the bill which I had drafted which is now before the committee. That bill recognizes that there is a variation in the risk involved, and in section 102:

The Administrator is authorized to fix premium rates by type of insurance or reinsurance, and to fix other terms and conditions in areas covered-rates based on risks to strike a balance between a self-supporting program and rates attractive to prospective buyers.

So that there is a very definite provision made which does give wide authority to the Administrator to fix rates based on variation in conditions.

In the bill submitted by Senators Kennedy and Saltonstall, they provide for a fixed, rigid rate covering everybody and all properties. I doubt very much whether that would be of practical use.

And then also, section 103 of the bill which I have drafted, reads: The Administrator is authorized to provide for the determination of types and location of property with respect to which insurance or reinsurance shall be made available; the nature and limits of loss or damage in any area, including subdivisions thereof which may be covered by such insurance or reinsurance, and such other matters as may be necessary to carry out the purposes of the Act. Have you finished your questioning, Senator Bush?

Senator BUSH. Yes. I just want to observe, though, that in the bill which we have had prepared, which I do not know whether we will introduce we may get behind yours, Senator, yet we point out that no indemnity or reinsurance is to be issued under the act for risk covered, and so forth

for property used in conflict with local flood zoning laws.

That is the point that I think should be emphasized. I believe the Senator's bill has a similar provision.

Senator LEHMAN. Governor, I am very grateful to you for coming here, as are my colleagues. There are just a few questions I want to ask.

Have you received any considerable number of sound complaints against any of the major activities of the Federal agencies in the recent flood disasters in New York?

Governor HARRIMAN. None. My comments are my own in terms of the manner in which the machinery develops. I mentioned these oniongrowers in Orange County where they had a problem of getting all this work done before the frost came so they could do their plowing. It is a very complicated situation. I hope, as I indicated in my testimony, that the Soil Conservation Act might be amended so there would be greater speed possible under the flood emergency than now exists. And therefore, I have not indicated a complaint against the administration of these laws, but an indication that possibly the Congress might review some of the provisions of the laws so that more expeditious action can be taken.

Senator LEHMAN. I was very much interested in your reference to flood damage to crops. Last week we heard testimony in Washington that the Department of Agriculture has some crop-insurance programs in some areas not by any means in all-including insurance against floods. Do you know how these programs have worked out in New York State?

Governor HARRIMAN. There are only a few counties that are eligible, Senator, in this State. I think about a third of the farmers eligible in this area have taken out the insurance. But this was in the central part of the State, that was not affected by the flood. May I just make it plain that the counties approved for the experiment were not in the area of the flood.

Senator LEHMAN. Those counties did not include the oniongrowers. Governor HARRIMAN. No, these were up in the Finger Lake area, near where Senator Ives lives.

Senator LEHMAN. You testified as to the value of flood-control projects. I think that we are all in agreement with regard to the value and necessity of them. I believe on the whole, while we have not by any means eliminated the chance of disaster, flood disaster, I believe in many areas they have certainly reduced the risk.

The Chief of the Corps of Engineers, General Sturgis, testifying, stated that at the rate appropriations had been made, and were being made, by the Congress, it would take 22 years to cover all the important projects which have already been surveyed and reports made to the Congress. That is an awfully long time to wait for the man who seeks protection and compensation for the loss of his home. If you tell a man that in 20 years we are probably going to have flood control of some value in his area, that is not going to console him very much for the immediate loss of his home or business or crops.

I also noted with a great deal of interest, Governor, your statement with regard to the assistance given by the Red Cross in New York State. We had similar testimony from other witnesses in Washington.

I share your great admiration for the Red Cross. I think as an emergency body, bringing emergency relief, they are doing a fan

tastically good job. I certainly approve of what they are doing. But in your testimony, you state, in discussing the work of the Red Cross: Following the emergency period, the Red Cross received 439 applications from New York families for rehabilitation grants to replace homes, furniture, household goods and clothing, and to assist small-business men in getting back into business. As of last week, 429 of these applications had been approved and grants averaging nearly $500 apiece had been made for these purposes.

When a man has lost his home, which cost possibly $10,000 or $12,000 or $15,000, and is subject to a mortgage of $7,000, $8,000, or $10,000, which still remains a liability of that man, you cannot do much replacing of homes with $500. I have no doubt that in many cases the grants may have been larger.

So it seems to me that you have pointed out that this is only a palliative, even though a very valuable palliative. But a great need remains for insurance against the loss of homes or other property which cannot possibly be taken care of by an emergency organization, no matter how good it is, like the Red Cross.

I want to point out, too, that while we all realize the importance of protecting and developing business, without which no community can be prosperous, I am a little concerned that such a small amount of money that has been granted by the Small Business Administration-and that seems to have been the source of the greatest financial assistance so small a percentage has been granted to the homeowners. From this statement which we received from Mr. Barnes, who is the Administrator of the Small Business Administration as of October 25, out of the applications and grants the home-loan applications amounted to only 4.6 percent of the total applications which had been considered and granted by the Small Business Administration. Out of a total of $37,290,000, the applications for home loans amounted to only $1,729,000, whereas the applications for business loans were $35,561,000.

I do not in any way criticize or minimize the importance of business loans. I think that the industry of Connecticut and the industry of other parts of the country which have been so sorely affected by these floods cannot be overlooked. But I am deeply concerned with the little fellow whose home was wiped out and his mortgage remains. We have had testimony from the Housing and Home Finance Agency, from the Small Business Administration, and from 2 or 3 of the other agencies to the effect that they would grant loans to homeowners or to business concerns which merited the credit, but they would be loans which would have to be repaid. In other words, the little fellow who had a $10,000 house which has been wiped out, or so badly damaged that it is not habitable, is left with a $7,000 mortgage. And if he wants to build another house, he can get another $7,000 mortgage, possibly. But he will be liable for it. So that on this little house, costing originally $10,000, there will actually be an indebtedness or liability of $14,000. Unless a man has a very substantal income, he just cannot carry that; he just cannot carry the load. A lot of these men are going to be left with nothing but their mortgages, for which they are not forgiven.

I believe in the case of other disasters, such as a hurricane, they can be insured, and when the man is wiped out, he is compensated by the insurance company. In the case of flood damage there is nothing of that sort.

Governor HARRIMAN. Senator, may I comment on the first subject you raised? I do not in this statement express my views on this question of appropriations by the Congress for flood control. But since that has been raised, I would like to, if I may, indicate that I think the appropriations have been utterly inadequate. There should be a very large increase in the appropriations of the Congress for approved projects and, as indicated by Senator Bush's resolution, the Engineers should expedite the surveys which have been requested so that further projects can be authorized by the Congress and appropriations made.

It is a tragic situation, where you have these projects approved, and yet no funds for them, and the people are exposed as a result of the inaction in providing funds for this absolutely essential act.

Senator BUSH. Mr. Chairman, I wish to applaud that statement. That is very, very essential.

Senator LEHMAN. I am very glad, indeed, you put yourself on record on that, because it is so vitally important, and I hope we will get more generous appropriations.

Governor HARRIMAN. It is an investment, Senator; it is not an out go. It is an investment that any prudent businessman would make if he was able to pay his own share of it himself. The history all over the United States shows that these flood-control measures save an infinite amount of damage, and in many instances, as you well know, one flood does more damage than the whole cost of the floodcontrol measure.

Senator BUSH. I want to express the hope that the Bureau of the Budget will include items to implement these authorizations which are already on the books for this big protective network which is absolutely vital to our situation. You can talk about insurance and indemnity and everything else. But what we want is prevention. And the only way we can get it quick is by this system of dams. While the chairman correctly quoted General Sturgis as to the 22 years, it is not going to take anywhere near that long to get these prospective dams that are already authorized by the Congress into being. That includes a lot of recommendations of the Engineer Corps which have not been actually authorized by the Congress.

May I speak off the record?

(Off the record.)

Senator LEHMAN. I am very glad to say for the record that I very much hope that the Budget Director will recommend substantially larger appropriations.

I want to expand a little bit on Governor Harriman's statement, made off the record. If anyone has any influence with the Budget Director, Governor Harriman hopes those views will be expressed. I think Senators Ives and Bush have some influence. I want to add to that request that whoever has influence with the Budget Director should use that influence to persuade him to bring in the suggestions and recommendations in connection with this legislation just as promptly as possible. It would be very helpful to the committee.

Senator Bush. If the chairman would permit me to make one observation-it seems from my experience in the last few weeks that Congressman Cannon, chairman of the House Appropriations Committee, has a great deal of influence in this matter. While the Director of

the Budget has some, and I am quite confident he will not disappoint I feel that Chairman Cannon is a keyman in this thing, and I think we all ought to exercise whatever influence we can with him.

us,

Senator IVES. Mr. Chairman, I would like to point out in that connection, I certainly would be very glad to use all the influence I possess with the Budget Director, which I endeavored to do and still am doing. But in the final analysis, Congress can pass appropriations whether or not they are approved by the Budget Director. We have done that time and time again, going right over his head. If there is demand for these things in the Congress, we will get them, and there is no way of having it vetoed, either, unless you veto the whole appropriation bill.

Senator LEHMAN. Well, Governor, I want to thank you on behalf of the committee, on behalf of the Congress, for your very interesting and informative testimony here today. We will certainly give it the most careful consideration. Thank you again very much.

Governor HARRIMAN. Thank you very much. And thank, you, Senator Ives and Senator Bush.

(The maps accompanying Governor Harriman's statement appear opposite.)

Senator LEHMAN. Mr. Crystal, will you resume, please.

Senator BUSH. Mr. Chairman, may I proceed?

Senator LEHMAN. Yes; please do.

Senator BUSH. In your statement, Mr. Crystal, you exclude personal property from this indemnity plan of yours, is that right?

FRANK CRYSTAL, NEW YORK, N. Y.-Resumed

Mr. CRYSTAL. Yes; I do, sir.

Senator BUSH. Would you tell us why you think that is appropriate. Mr. CRYSTAL. Well, because a great many of the insurance contracts that can be purchased today would cover such damage.

Senator BUSH. But would they include water damage?

Mr. CRYSTAL. A great number of the policies would, sir.

Senator BUSH. Well, now, Mr. Crystal, I do not know, but I wonder if that is right. We feel up in our State that you cannot buy flood insurance. I do not know of any that is available.

Mr. CRYSTAL. Well, if you have a personal property floater or any inland marine policy or an automobile policy you would be covered for those damages. If you had some of these new highfalutin policies they would also cover it, sir. I think the insurance companies could furnish you a list of those contracts which do provide some protection. Senator BUSH. We have automobile dealers who lost substantial stocks of automobiles without recovery, and the reason they did is because they did not have insurance. I will give you an example. I cannot give it too closely, but this is one example.

In the Naugatuck Valley I know 1 automobile dealer that had a loss of about $200,000. He actually recovered $35,000, and that was on a shipment of new automobiles which were destroyed. I do not know why there was the difference between all the rest of his business, including a lot of old automobiles, and his garage and so forth, which went down the river, and this new stock. But his claim was honored on the new stock. Can you explain that.