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knows, and we need your help, and I am delighted you are the chairman of the committee.

We have had frequent tornadoes and hurricanes and floods, as you know. In my own city of Lowell the other day part of Lowell had a terrific deluge of rain, great damage. The lights were all out. I think my house was the last one affected. The other part of Lowell was not affected. That is how the rains are coming.

I am particularly anxious to have personal property insured, Senator. I know families whose possessions are completely wiped out and I do not see how they are going to start again. They cannot get enough money from the Red Cross. Business cannot get enough money to get going from Small Business. And it is very difficult to secure the help that we feel we ought to have.

Perhaps I may file a statement later on if that is satisfactory with you.

Senator LEHMAN. Surely.

Mrs. ROGERS. I may introduce a bill myself, but I do like Congressman Philbin's bill very much because it is so extensive and all-embracing, and I hope you will consider something of that sort.

Senator LEHMAN. Thank you very much for coming.

Mr. PHILBIN. Now I should like to present Congressman Torbert Macdonald, our very distinguished and able colleague.

Senator LEHMAN. We will be delighted to hear from you, Congressman.

Mr. MACDONALD. Thank you very much, Mr. Senator.

I certainly appreciate the opportunity to come here before you this morning, and I certainly appreciate Congressman Philbin's courtesy in having me here.

I will not take up more time of the committee than necessary inasmuch as I know, as Mrs. Rogers has said, that you have other and perhaps more informed witnesses from whom you must hear. I would like to say I join wholeheartedly in the plans that have been presented here by Congressman Philbin and also by Senator Kennedy, and I say, and I think I echo the thoughts of many people in New England, that they are long overdue.

We are in double jeopardy here in having inadequate flood-control system, and certainly we have no insurance of any nature, that of reinsurance of the Federal Government or insurance by private companies.

So I certainly want to say to you it is heart warming indeed, as Mrs. Rogers said. There were many people who felt the Federal Government perhaps should have taken quicker action, and it is heart warming indeed, Senator Lehman and members of the committee, to have such expeditious action on the part of this committee of the Senate. It gives the people of New England a feeling that even though the Congress is not in session that the Congress is thinking and acting in dealing with their problems.

I would just like at this point to ask permission to insert into the record a statement on that subject.

Senator LEHMAN. There being no objection, it will be received. Thank you again very much indeed.

(The prepared statement of Representative Macdonald follows:) STATEMENT OF TORBERT H. MACDONALD, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MASSACHUSETTS Mr. Chairman and members of the committee, I deeply appreciate the opportunity of appearing before this subcommittee of the Senate Banking and Currency Committee to present my views on flood insurance because in my opinion flood insurance deserves to rank high on the list of priority legislation before the Congress when it reconvenes in January.

Since I have just returned from a 6-week far-eastern trip as chairman of the subcommittee of the House Interstate and Foreign Commerce Committee, and obviously have not as yet been able to explore fully all of the many vexing ramifications of legislation in this highly complex and technical field, it may seem somewhat presumptious of me to offer this committee my views on legislation in this area. Yet, as you distinguished gentlemen know so well from your work in these hearings to date, any proposals which are advanced must necessarily be highly flexible and tentative in nature. While the ultimate scope and magnitude of the problem with which we are dealing is enormous, the information and data which we presently possess is grossly inadequate to serve as authoritative guidelines for the enactment of Federal flood-insurance legislation.

In this respect, I wish to commend highly the excellent work of your subcommittee. As an inevitable result of the hearings in which you are currently engaged, an impressive and invaluable record is being compiled which will furnish the Congress and the American people with the facts needed to enact an intelligent, workable Federal flood-insurance program. A program which, while providing adequate protection against the economic rigors of flood loss, will nevertheless be completely consistent with the principles of our American free enterprise system. I, for one, await with great interest the opportunity to examine the full record of your hearings, together with whatever recommendations your committee may see fit to make as a result of your investigation.

The recent unprecedented flooding of cities and towns in the northeastern area of our country caused great personal suffering and enormous property losses. While damages have been estimated to run as high as $2 billion, only between 5 and 10 percent of the losses caused by these floods were covered by flood insur

Obviously, the absence of flood-insurance coverage inevitably hinders the ability of a stricken area to recover. People cannot easily rebuild their ravaged homes Businesses and factories are not speedily put back into full production. Economic activity is slowed down and the natural growth and progress of the economy is seriously impeded. And, let us never forget, when the productive capacity and economic well-being of one section of the Nation is thus dislocated, all of us ultimately suffer.

It is my belief that recent events have only served to highlight and dramatize the self-evident fact that a Federal flood-insurance program is sorely needed throughout the length and breadth of the United States. Under present conditions, the insurance industry is apparently unable to provide adequate flood insurance at reasonable rates. I am not criticizing the insurance industry. There are excellent reasons why the prudent management of existing insurance funds and reserves militates against the development of flood insurance by private industry. Risks of loss by flood are in many respects far more difficult to estimate than risks of loss by fire. The absence of sound actuarial data and experience records, the primary difficulty of providing adequate initial reserves, the relattively heavy expense of engineering surveys with reference to flood risks, the lack of prospect of early profit-these, and many more sound business reasons, have been advanced, and justifiably so, by insurance companies to explain their inability to operate in the flood-insurance field. But the outstanding and undeniable fact of cardinal significance to all of us is that at the present time indemnification for flood losses is either highly inadequate or totally nonexistent. The American people are not now sufficiently protected from the catastrophic consequences of food losses. Here, obviously, is a situation which we cannot continue to tolerate without great damage to the welfare of our people. Here is an aren in which the Federal Government must assume its proper responsibilities in promoting the general welfare.

I am not prepared to offer a detailed legislative proposal for your consideration at this time. Yet I should like to outline for your consideration five general principles which I believe should guide all Federal activity in the flood-insurance field :

ance.

We have also not been able as yet to hear testimony from the insurance companies. There again we had hoped that we would hear from the representative of the insurance association, Mr. Herd, in New York a week or 10 days ago, but he too asked to be permitted to testify at a later date. We, of course, were glad to accommodate him.

We are, however, going to hear from Mr. H. W. Yount, of the American Mutual Alliance, accompanied by Mr. Chase Smith.

The next witnes is Professor Harris. Professor Harris, you have testified before many congressional committees, including the Banking and Currency Committee. I am very glad to welcome you as an old friend. We are anxious to hear from you. We are glad that you are testifying before this committee again as you have on previous occasions.

STATEMENT OF SEYMOUR E. HARRIS, CHAIRMAN, NEW ENGLAND

GOVERNORS' TEXTILE COMMITTEE, AND CHAIRMAN, ECONOMICS DEPARTMENT, HARVARD UNIVERSITY

Mr. Harris. Senator Lehman, I am very glad to be here. I might say I am speaking for the New England Governors' Textile Committee, of which committee I am chairman, but I am also chairman of the economies department of Harvard, and I am speaking as an economist as well.

I agree with most of the things said here this morning by Senator Kennedy, Governor Herter, and my 3 distinguished Congressmen, 2 of whom, I may say, are fellow Harvard people and were distinguished football players when they were at Harvard.

I shall not read this statement and bore you, but I should like to underline a certain number of points here and expand 1 or 2 points.

I need not tell you the great advantage of flood insurance in terms of distributing the cost and reducing the sacrifices for those especially vulnerable.

The problem of the cost of insurance, as has been so eloquently said, depends in part upon how much we spend for flood control and to what extent, as Senator Bush indicated, we have rezoning and more. ment of industry, and so forth, away from vulnerable areas.

I think myself that private insurance in this field is not practical. At least the private insurance companies have not shown any great interest so far. And I think it is quite clear why they find it very difficult. It is very difficult to measure the vulnerability of different properties.

It is also true that the amount of cost varies greatly from one year to another. For example, in one year the cost was $3 million and in another year it was $1,050,000,000, in the last 25 years a difference of close to 400 times.

In this kind of situation it is very difficult to have private insurance, because the private insurance company must balance its accounts over a reasonable period, and if you have differences between $3 million and $1,050 million as possible costs of insurance, obviously this is a very difficult business for private insurance companies. They just simply cannot build up that kind of reserves.

The case for Government insurance rests largely on this sort of problem. We know that over the last 25 years the costs of floods have

as uncontrolled floods and their resultant catastrophic losses. On issues of such great national importance, where the welfare and future happiness of the American people is so vitally at stake, it seems to me incumbent upon all of us, Democrats and Republicans alike to submerge our State and sectional differences within the larger, more all-embracing unity of the national interest.

I sincerely hope that the Congress will see fit to give early consideration to whatever flood-insurance legislation eventually emerges as a result of your penetrating hearings, and I thank you for this opportunity of appearing before you.

Senator LEHMAN. Before asking the next witness to testify, I want to insert into the record telegrams which I have received. The first comes from Mr. Thomas M. Sullivan, president, Local 369, UWUACIO:

Boston, Mass., November 9, 1955. Local 369 UWUA-CIO wish to be placed on record as wholeheartedly in support of the Federal flood-insurance program. Our more than 2,000 members feel that such a program is vital to the industrial progress of New England. Fraternally yours,

THOMAS M. SULLIVAN, President. The next one is from Congressman Donald W. Nicholson:

WAREHAM, Mass., November 9, 1955. Regret it is impossible for me to attend meeting this morning. May I assure you of my wholehearted support for a flood-insurance program for New England area.

Donald W. NICHOLSON, Member of Congre88. I have another one just handed to me from Congresman William H. Bates:

SALEM, Mass., November 9, 1955. Vitally interested in study of possible Federal flood-insurance program by your committee as a means of assisting victims of flood disasters in New England area, including Merrimack River Valley which has been hard hit in past,

WILLIAM H. BATES,

Member of Congre88. Finally, I have one from Congressman John W. Heselton, First District, Massachusetts:

DEERFIELD, Mass., November 7, 1955. Have just received your advice that Senate Committee on Banking and Currency bas now scheduled hearing at Boston on Wednesday, November 9, with reference to proposals for disaster insurance. I regret that scheduled office hours in Holyoke will prevent my personal appearance before committee. I wish to be recorded as favoring early and careful consideration of proposals to be filed upon convening of Congress by Senators Saltonstall and Kennedy. I understand that the administration is developing possible alternative proposals which should also receive most careful consideration by congressional committees and Congress. I shall appreciate the insertion of this telegram in the record of the committee hearing at Boston.

John W. HESELTON,

First District, Massachusetts. I do want to point out-and I say this because Congressman Heselton has made reference to administration proposals—that we had hoped we would have those in our hands 2 or 3 weeks ago. We received assurance at the time this committee went into session and commenced hearings we would have proposals from the administration. We have not been favored with them yet, although we have had before us representatives of most of the agencies which would be interested in this proposal. They have promised us that they are working on them now as vigorously as possible and that they would be in our hands very promptly.

We have also not been able as yet to hear testimony from the insurance companies. There again we had hoped that we would hear from the representative of the insurance association, Mr. Herd, in New York a week or 10 days ago, but he too asked to be permitted to testify at a later date. We, of course, were glad to accommodate him.

We are, however, going to hear from Mr. H. W. Yount, of the American Mutual Alliance, accompanied by Mr. Chase Smith.

The next witnes is Professor Harris. Professor Harris, you have testified before many congressional committees, including the Banking and Currency Committee. I am very glad to welcome you as an old friend. We are anxious to hear from you. We are glad that you are testifying before this committee again as you have on previous occasions.

STATEMENT OF SEYMOUR E. HARRIS, CHAIRMAN, NEW ENGLAND

GOVERNORS' TEXTILE COMMITTEE, AND CHAIRMAN, ECONOMICS DEPARTMENT, HARVARD UNIVERSITY

Mr. HARRIS. Senator Lehman, I am very glad to be here. I might say I am speaking for the New England Governors' Textile Committee, of which committee I am chairman, but I am also chairman of the economics department of Harvard, and I am speaking as an economist as well.

I agree with most of the things said here this morning by Senator Kennedy, Governor Herter, and my 3 distinguished Congressmen, 2 of whom, I may say, are fellow Harvard people and were distinguished football players when they were at Harvard.

I shall not read this statement and bore you, but I should like to underline a certain number of points here and expand 1 or 2 points.

I need not tell you the great advantage of flood insurance in terms of distributing the cost and reducing the sacrifices for those especially vulnerable.

The problem of the cost of insurance, as has been so eloquently said. depends in part upon how much we spend for flood control and to what extent, as Senator Bush indicated, we have rezoning and movement of industry, and so forth, away from vulnerable areas.

I think myself that private insurance in this field is not practical. At least the private insurance companies have not shown any great interest so far. And I think it is quite clear why they find it very difficult. It is very difficult to measure the vulnerability of different properties.

It is also true that the amount of cost varies greatly from one year to another. For example, in one year the cost was $3 million and in another year it was $1,050,000,000, in the last 25 years a difference of close to 400 times.

In this kind of situation it is very difficult to have private insurance, because the private insurance company must balance its accounts over a reasonable period, and if you have differences between $3 million and $1,050 million as possible costs of insurance, obviously this is a very difficult business for private insurance companies. They just simply cannot build up that kind of reserves.

The case for Government insurance rests largely on this sort of problem. We know that over the last 25 years the costs of floods have

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