the Philadelphia regional office has accounted for the approval of 266 loans for a total of $3,770,246." "Our loans have been made to almost every industry with the largest one of $350,000 and the smallest to a homeowner of $630," said Harman. "We have loaned to a church and a taproom." Harman disclosed that a group of two attorneys are now working on the disbursement of the loans in conjunction with their secretaries and the SBA. "The funds are being paid for disaster relief as promptly as documents can be prepared and the applicants can produce the necessary bills or records to show that the money is being used for the purpose intended," he added. (The following was received with reference to Mr. Monatt's statement :) Hon. J. W. FULBRIGHT, SMALL BUSINESS ADMINISTRATION, OFFICE OF THE ADMINISTRATOR, Washington 25, D. C., November 29, 1955. Chairman, Committee on Banking and Currency, United States Senate, Washington 25, D. C. DEAR SENATOR FULBRIGHT: At a hearing of your committee held in the district courthouse in New York November 3, 1955, Senator Herbert H. Lehman, presiding, on the subject of disaster indemnity, Senator Bush requested that this Administration make observation on certain statements made by a Mr. Samuel M. Monatt of Stroudsburg, Pa. I will refer to the statements of Mr. Monatt as they appear in the transcript and will make comments on each statement. Page 378: "We found that half of the loans which were granted to us we had to refuse because of restrictions imposed upon the man who was accepting the loan." Comment: Of the 81 disaster loans approved in the Stroudsburg area, only 5 had been canceled as of November 3, 1955. The reasons for such cancellations. are as follows: Funds obtained elsewhere___. Too much trouble to obtain release of mechanics' lien_-_ Wanted loan in lump sum rather than progress payments- Elderly man (age 75) couldn't decide whether or not to accept loan____. 2 1 1 1 Page 378: "For example, when we applied we were given an application. We were not given any regulations with it." Comment: In recognition of the necessity for providing expeditious help to alle viate the distress of the disaster victims, the application forms for smaller loans are brief and require only such basic information as can be obtained quickly in order that the loan application can be filed and processed at the earliest possible. moment. For loans in excess of $100,000, a detailed instruction sheet is provided to guide the applicant. In all instances SBA personnel gladly give the applicant whatever help is needed in preparing the application. Office stenographers often. type the application when requested to do so by the applicant. Page 379: "When the Small Business Administration granted these loans, they held us to the category of our original estimates, even though they were estimates." Comment: SBA disaster loans are made solely to restore the disaster victim. to the position he was in before the disaster occurred. SBA must have some reasonably accurate estimate of the losses which were due to the disaster. The applicant is certainly in the best position to ascertain his loss. In the event that restoration of the property exceeds the applicant's estimate, he is certainly free to come back to SBA for an additional disaster loan to cover the overrun. Pages 379-380: "We have found restrictions as to earnings, which are difficult to handle by the small man, the one-man business. We have had restrictions against acquisition of fixed assets." Comment: Such restrictions are imposed only where considered essential to preserve a sound financial condition. Pages 380-381: "I have a company here for your consideration that had a $150,000 loss. I have here for the record that they have insurance coverage of $497,000. They spent $4,900 premiums a year. They have $130,000 worth of business interruption insurance. They spent another $1,000. This is besides their casualty insurance and other compensation insurance and liability in-surances. They had not a penny for flood. They could not collect a cent. These people were absolutely out of business. The Small Business Administra- tion granted us a $120,000 loan. We were called into Stroudsburg and we were asked to reduce that to $100,000. We went on to Philadelphia afterwards and they tried to put restrictions on. And these restrictions were never explained to anyone. These restrictions were put in * * *. *** ** we went to Philadelphia. In Phidalephia they set the restrictions aside. We sat there for a day with their representatives. The following day I got a phone call from Washington that Mr. Engles wants to see us. So we went to see him. He reinstated the restrictions. He said we had to accept them. But, he said 'I will help you with the bank.' The bank insisted on 6 percent interest. 'And I also see that the bank is more lenient on repayments.' Comment: This apparently refers to the $120,000 loan application filed by the This company owed a bank $95,000 repayable as follows: X company. It will be seen that this was a comparatively short maturity loan with a $50,000 balloon payment at maturity on February 1, 1957. Since the company's earnings were not adequate to meet such repayment terms, plus the disaster loan repayments, the situation was discussed with the bank and the final outcome was that a $215,000 loan was approved, of which $95,000 was for the purpose of retiring the bank debt and the bank is participating in such loan to the extent of its previous exposure-$95,000. Since the maturity of the $215,000 disaster loan is 10 years, what SBA has in effect accomplished is the resetting of the $95,000 bank loan on a 10-year basis which, together with the $120,000 SBA portion of the loan can be amortized from earnings. Incidentally, the company's president expressed his deep pleasure and appreciation for the loan and the basis on which it was approved. With respect to restrictions on this loan: (a) Letter dated September 15, 1955, cosigned by the company's president and treasurer, offered the following: 1. "The corporation agrees that it will pay the members of the family now employed by the resort an aggregate base salary of $20,000 per annum and, in the event that their salaries exceed this amount, that 80 percent of the excess over $20,000 will be returned to the corporation either as a continuing loan or as an investment in capital stock." 2. "The corporation and the partnership obligate themselves not to incur any term indebtedness on fixed assets other than as set forth herein and under paragraph 8 below: Paragraph 8, referred to above, states: "It is agreed that the partnership and/or the corporation are to repay as soon as possible all notes payable to other creditors exclusive of amounts presently owing to Mr. A and his wife and to signatories of this agreement, and to refrain during the term of this loan from any borrowings or financing which will exceed a term of 6 months or which will exceed an aggregate amount of $10,000." 3. "Not to spend more than $15,000 per year for 1956 and 1957 and $25,000 per year thereafter on fixed assets, building, equipment, or furnishings without prior written approval from the participating bank." 4. To give personal guaranties of Mr. B and Mr. C. (b) Upon applicant's request, the following modifications were approved on October 4, 1955, subject to the participating bank's approval (all modifications requested were approved): 1. Approved payment from the loan proceeds of legal and accounting fees in connection with the rehabilitation and other costs incidental to the loan. 2. Eliminated the requirement for pledge of the company's capital stock. 3. Extended the loan disbursement period from 6 months to 1 year. The total loan requested by the applicant, in this instance, was $120,000. This amount was approved as a disaster loan. The applicant has never indicated in any way, by letter or otherwise, that this amount would not be adequate to restore the property to preflood condition. In every instance SBA has a local committee composed of representative bankers and businessmen of the community to act in an advisory capacity on disaster-loan applications. At a matter of public record through November 9, 1955, SBA has approved 1.608 loans totaling $23,120,652, of which 81 loans for $1,182,517 were approved in the Stroudsburg area alone as a result of the hurricane and floods which oc curred on August 19, 1955. If any further information is desired, please do not hesitate to call on us. Administrator. Senator LEHMAN. The next witness is Mr. Joseph Cully, president, Staten Island Flood Control Association. Is that an official body? STATEMENT OF JOSEPH CULLY, PRESIDENT, STATEN ISLAND FLOOD CONTROL ASSOCIATION Mr. CULLY. By official, what do you mean, Senator? Senator LEHMAN. Elected or appointed by city authorities or a voluntary organization? Mr. CULLY. It is an organization whose membership is composed of local civic organizations located along the waterfront, beach front, on the east and south shore of Staten Island. The Staten Island Flood Control Association was organized not long after the big flood in November 1950. The various groups along the waterfront there that suffered as a result of that flood sent representatives to our organization in the form of delegates. We decide matters that would be to our mutual interest so far as flood control is concerned. My prime interest is flood control. I consider the preventitive measure more important than the cure after the damage has been done. Although I consider it also very important to have some sort of insurance for those people who have suffered after the floods have hit them. I am not going to make any criticism about the Red Cross, SBA, or any of the organizations that have stepped into the picture to help us when we have been hit. Senator BUSH. May I ask a question. Have you been hit in this August or October flood situation on Staten Island? Mr. CULLY. Fortunately I have not been hit in this one, but I was hit in 1950 to a very serious extent. Senator BUSH. So what you are saying is really not relevant to the 1955 flood situation, but to others. Mr. CULLY. I should not think that should make much difference. Senator BUSH. I did not say it did. I just want to find out what your experience has been. You have no experience with the 1955 flood. Mr. CULLY. No, but probably more so with the 1950 flood. As you gentlemen know, there has been an increasing regularity in floods, particularly along the ocean and waterfront. I have the greatest sympathy for those people inland. When I read the accounts of the people that suffered in your State, I know what they went through. I went through exactly the same thing. I was perched for 12 hours up on the upper story until they came and rescued us in 1950, when the ocean came over to us. Senator BUSH. Was that tidal flooding? Mr. CULLY. Yes, sir; it took a 372-ton house 40 feet down the street and washed away several others. So I think I know what floods are, when I speak of being in sympathy with those in your State and other States. Of course, inland they have a little warning. On the ocean front we do not have warning, especially in 1950 when within a half-hour you could not get out of your house. Senator BUSH. Would you mind refreshing my memory about what month that was in? Mr. CULLY. Yes, sir-November 25, the day after Thanksgiving, on a Friday. Coming at the end of the list of witnesses, many of the other speakers have taken up things that I would mention. I was particularly happy to note that your interest, Senator Lehman, is toward the little fellow also. I think we get scared these days, especially the insurance companies. They see the millions and billions of dollars of losses, but they forget the little fellow who suffered a $500, $600, or $1,000 loss. Speaking from my own experience, it set me back something like $4,800. I said I was not going to criticize the Red Cross. The Red Cross came to me, and after 4 months of deliberation they decided I could take care of my own loss. They were justified, I imagine, because there were others that could not stand it as much as I could, and they were helped. That brings up the point of whether I wanted the Red Cross help. I do not. I would be very happy to buy my own insurance, especially where I live, along the waterfront. I am sure many people down there would be willing to buy their own insurance also. That has been voiced at many of our meetings. We tried to find out where we could get insurance. We made inquiries with the various insurance companies. I was told that Lloyds will insure practically everything. But you cannot afford to get flood insurance from Lloyds. Just the other day, I wanted to be certain before I came here, and I called up one of my friends and said "Are you sure we cannot get flood insurance at what you might call a reasonable rate?" He said "You might just as well forget about it. It is not available." I think it was available prior to 1944, and then there was the big blow down in Florida, when the insurance companies were caught, after most of the property was destroyed. I think after that they said they could not afford it any more. I am not criticizing the insurance companies. I understand you cannot go along and take risks and practically insure the fact that you are going to hand out money as a result of the risks. But I do say that I think there should be some solution-if the various insurance companies got together and perhaps put a limit on the amount of the in surance. I am talking about the small person. Maybe some of the businessmen can afford it. But the fellow that suffers a $400 or $500 losscouldn't the insurance companies limit the extent of their risk to, say, $1,000, and above that let the Government step in and take over what might be a greater risk, or a greater obligation? That is something that has not been explored up to this time. Senator BUSH. I think that is a very interesting suggestion. Mr. CULLY. I think it is, too. There are various obstacles. You have different insurance laws in the different States and various limitations put on the individual insurance companies. But I think there could be a way of getting around that. In the first place, the Government could make some sort of situation where these insurance companies could get together, without violating the monopoly law, or whatever you call it, for this particular purpose only, where they could pool their resources. Every State in the Union is not going to be hit by a flood at the same time. To digress just a moment, you have the 50-percent limitation on extended coverage insurance. Well, now, there could be some similar arrangement in the policies for the small fellow that wants to take insurance for maybe a $1,000 loss. I do not know about over that. If a man loses his house, I think the Government could step in and do something toward it. It could all be included by the insurance companies by a small increase in the rates. But I do not think you would have to make any great fuss over allowing insurance. They are describing it as billion-dollar losses throughout the country. The losses are not that great throughout the country, because you only get it in one section at a time, and you have a chance to recoup some of the losses. Senator Bush. Do you think if we had a flood insurance program, along the lines you would like to see, there would be many applications for it down on Staten Island? Mr. CULLY. I certainly do; yes, sir. I do not say that there would be applications for insurance for $20,000, $30,000, or $40,000. But I would say you would have many applications for insurance for $500, perhaps, and $1,000. Senator BUSH. How did you get off in 1954-the three hurricanes? Mr. CULLY. We did not get off. Senator BUSH. Did you have losses in 1954? Mr. CULLY. Only around the grounds. Senator BUSH. I mean your neighbors. Were there substantial damages? Mr. CULLY. When you say substantial, Senator, they are not substantial in the sense that their houses were washed away, but they suffered losses. Senator BUSH. Wait a minute-don't get excited. I'm with you. When I say substantial, I mean per home. Where $1,000 might be substantial to one man, $10,000 may be to another. But when I say substantial, I mean did it substantially affect the lives of the people in 1954. Mr. CULLY. No, I wouldn't say that it substantially affected their lives, except that we did not know what would happen. Knowing what did happen to us in 1950, we were not taking a chance, and the police evacuated us along with the civil defense. Senator BUSH. What I have in mind is not just what you are thinking about. I introduced a bill which has become a law, Public Law 71, which calls on the Army engineers to survey this whole coastline with the idea of putting in protective works to minimize the damage from high tidal flooding on your coast. What I was wondering was whether your area is one which is susceptible of that kind of treatment, whether it is necessary to have protective works out into the water, dikes or jetties. Mr. CULLY. Senator Bush, I could answer that very easily. I have been in recurrent touch with the Army Engineer Corps in Washington. About 2 or 3 months ago, even before the last big storm we had, I got a very lengthy letter-and it is only a repetition of what they told |