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come before the Senate committee and will have an opportunity in Washington to appear both before your committee and the House committee, to urge what I will then have made firm suggestions and recommendations on.

I am agreed that our fellow legislators in Washington will be tremendously impressed with the photos which have been mentioned here. Some time ago I mentioned to our Governor that I would like to have photos taken of the various areas which were so seriously affected during the past floods, and to have them available for presentation in Washington, and even put them in the lobby, as I recall we did on the hoof-and-mouth disease, which made so dramatic an impression on all of us. We took care of that situation. I am convinced if we do not have recommendations earlier, that we certainly will have recommendations by the administration by the President either in person or by his sending over to the Congress the state of the Union message. I am further convinced this next session of Congress, which will meet January 3, will not conclude until about August 10. In that interim there ought to be sufficient time to take care of a bill of this nature, because there is a mutuality of interest, which I want to stress, among all of the Members of Congress, to do something about these unusual and unprecedented storms.

I am concerned about writing a proper definition for floods. I have in the back of my mind the question, having followed insurance history, whether if we had here in Connecticut another disaster 2 months from now, would that be covered by the first insurance policy if it were expired? Can we be recovering from floods as a result of hurricanes, or the bursting of a dam, or other reasons?

I am thoroughly cognizant with the fact that the chairman wants to include in an overall bill atomic disasters and atomic attacks. Would subsequent attacks, if something was still left after the first one, be covered? Would a second or third be covered?

I think there are many ramifications and questions involved. I know the committee is groping for some of the answers. I hope when the committee is ready with its bill in January that I will be able to come before it with some suggestions as a result of the inquiries I have made and the research I have instigated through my committee in the interim; that is, in these few weeks that remain here of our so-called vacation.

I have one further thing to say. Of course, we do not want to put the Red Cross out of business. If Mr. Bunker had that concern I do not think he need worry. I am convinced we must dovetail all of these agencies to deal with this great disaster.

My particular work thus far has been along the line of drafting a bill to bring relief by virtue of taxation, either taxation refunds, or to permit the rapid amortization of capital investments made as a result of flood damage. As you know, I am a member of the Ways and Means Committee, where such legislation must originate. In your particular case you in the Senate can originate bills to deal with this particular disaster and we can carry it on over there in the House, but on tax measures they must originate in our body.

I hope you have that particular bill ready by January 3, so that we might, by virtue of tax refunds or tax amortizations, bring relief. Again I want to stress, gentlemen, that must be something which

must be dovetailed in relation to the particular problem on which we are meeting today.

Senator LEHMAN. May I ask you a question, Mr. Sadlak?

Mr. SADLAK. Yes.

Senator LEHMAN. I can see how through tax relief or rapid amortization you would help the larger concerns, but how would you help the little fellow who has a small income and who lost his house and has nothing left except a mortgage on which he still has to pay? He cannot write it off.

As I understand it, he would not be in any position to get any tax benefit.

Mr. SADLAK. I am exploring that now, Senator, trying to bring in not only the large man, but the small and intermediate man, and make it more comprehensive, since the flood does not discriminate between them.

Senator LEHMAN. I am sure you are familiar with this, but let us take a large concern with a very substantial earning power which is suffering a loss of $500,000 or $1 million. They can write off at least the major part of that in debt forgiveness out of the 52 percent, but a little fellow who has an income and probably has very little, if any, income tax would get nothing out of it.

Mr. SADLAK. I am endeavoring, Senator, in the bill which my committee and my staff of the Ways and Means Committee and the Joint Committee on Taxation is working on-I am endeavoring to look into all phases of it. I am very glad to have your comments on that, but I want to assure you that we are looking into all phases of that problem, which has many ramifications, and we will make provision for some of those things where we do not have them at the present time. Senator BUSH. Mr. Chairman, I have had some contact with Congressman Sadlak on this matter. I think one of the things we have discussed for the benefit of all, and even the smallest person who might have lost everything, was the question of an immediate refund on prepaid taxes, so that he would immediately be able to get that back. I think the Congressman agreed that would be very much worth his consideration in the bill he is drafting concerning the tax features.

Mr. SADLAK. I might say this, Senators: I have made a request, and I know Senator Bush made the request, and perhaps Senator Lehman, that there be an augmentation of the staff of the Internal Revenue Service immediately after the first of the year, so that when the returns are made, especially from those who have been hard hit by the floods, where refunds are to be made that they might be made at the very earliest opportunity.

Senator LEHMAN. Thank you very much indeed, Congressman. Mr. SADLAK. Thank you.

Senator LEHMAN. Will you call the next witness, please?

Mr. EDELSTEIN. Congressman Dodd of the First District of Connecticut.


Mr. DODD. Senator Lehman and Senator Bush, first of all I want to express my appreciation for this opportunity to appear before your

committee, and also to say that we, that is, all the members of my own office staff, have received a great deal of advice and help and technical assistance from members of your staff, and we are grateful for all of that help. We have also received a great deal of assistance from the members of your own staff, Senator Lehman.

Next I want to commend Senator Lehman for his promptness in getting into this whole problem. I know how many other things you are concerned with, but I think it is a great credit to you that you got these hearings underway as rapidly as you did. We are certainly all benefiting from them.

My own interest in this problem of insurance goes back to a little more than a year ago. You will remember, in this State and beyond it we suffered severe damage, particularly along the coast, from the hurricanes. Through conversations with some small-business people on our coast in Connecticut I learned what I had not known before, that is, that these people suffered damage from great waves, sometimes called tidal waves. I found that they had suffered this damage more than once and were not able to buy insurance against a repetition of this loss or damage.

That caused me to look into the whole business and I came across the Bowles bill and others. Then came the dreadful disaster in August, which accentuated the whole problem.

I want to make clear at this time that all I am trying to do is to make some contribution, and I am sure it will be small, toward the general solution of the great problem. I do not have any panacea or any new suggestions except perhaps one small one, but I am hopeful out of all our efforts and thinking we can come up with a bill which will answer the problems that confront us more acutely now than perhaps they have at any other time.

Also, I have tried to think in terms, to some extent, of traditional insurance. I recognize the fact that that is not completely possible to do, because the nature of this problem is larger and greater than problems which ordinarily confront the insurance industry; but it would seem to me, as I have tried to understand the problem, that we either have to consider or think about it in terms of insurance, or else think about it in terms of outright subsidy or grant. Maybe there is a middle way of compromising the two.

At times it has seemed to me that is perhaps the way we will ultimately resolve this whole problem. As you well know, I think it is an accurate statement to say a larger number of people throughout the United States want to buy protection against damage from floods or natural disasters. It is just not available, I am convinced, from private insurance sources. However, it seems to me it is not too difficult to move to the next step, that if it is not available certainly it is the responsibility of Government under the general welfare clause of the Constitution to make available to people some kind of protection.

I hasten to say I doubt very much we can do everything we would like to do for everybody. That is not as attractive as to say perhaps that we will do everything for everybody, but it would seem to me, as in other efforts of this kind, we will have to begin somewhere on as wide a base as we can and try this thing out, with the advice of experts, and perhaps have it grow rather than start out at full growth.

As I say this I am reminded of the conversation here a little. earlier today about how much should be the face value of a policy. Well, in the proposal which I have tried to draft I have used what I think is an arbitrary figure of $250,000, but I do not have any particular concern about that as far as I am concerned, because I am not an insurance expert. I do not know whether it should be $250,000 or $300,000 or $1 million, but it does seem to me from the little bit I have devoted in time and study to it, that there must be some relationship between the amount of insurance available and the limit on the face value of any one policy, or else, it seems to me, a few people conceivably might buy up all of the insurance and their losses might be enormous, and the thing would be in terrible shape, from a financial standpoint.

However, I speak of it as a layman and not an expert and I do not know all about it, so I wish you would understand that my figure is more or less arbitrary and I think this question would best be answered by those who know much more than I do about the whole insurance problem.

In the proposal I have drawn up I want to point out it seems to me it is not in the nature of Americans to be content with the mere hope that in the event of disaster the Government will furnish relief. I think it is rather their nature to sustain their economic position by insuring against loss by paying what has been described as a fair and reasonable premium rate for insurance protection.

There are two suggestions made in this proposal. One is that the Government directly write insurance where it is not available from private insurance sources, but that it be sold and that the administration of the insurance program, as sold by the Government, be handled by private insurance companies.

Secondly, private insurance companies sell this type of insurance on the basis of a backup by the Federal Government, or on a reinsurance basis.

Both of those proposals are contained

Senator LEHMAN. Do you mind being interrupted?
Mr. DODD. Not at all, Senator.

Senator LEHMAN. Do you include in your bill provision that not only should the insurance be sold by the private companies, but that they should be used and employed in the settling of claims?

Mr. DODD. Yes.

Senator LEHMAN. And appraisal of damage?

Mr. DODD. Yes, sir; I do, Senator. That is included. But those two suggestions are made and then I make a third one, which I offer for your consideration. You may reject it, as it is just an idea and I have no particular pride of authorship in it.

It provides what I call something of a new or novel solution to the dilemma of finding some sort of insurance against these disasters, such as floods and other natural disasters, which can be offered to the public at a low premium rate without large Federal subsidies, because it seems to me in both of these other situations we will have to make large Federal grants.

Briefly, the plan that offers this solution provides that a party can purchase a policy at a low premium rate in which the Government would give the policyholder an absolute promise of a long-term, noninterest-bearing loan, in the event of loss through natural disaster.

The absolute right to obtain such a loan would give the person holding such a policy the means by which the destroyed property could be promptly restored. The primary loss would ultimately lie on the person whose property was destroyed, but through the loan plan the loss could be spread out over a long period of time.

In order that the Government will not unduly enter into the banking business, the bill provides that the money shall be borrowed from private lending agencies, with the Government acting as guarantor and paying all interest. If the loan, for some unforeseen reason-and I cannot think of one cannot be had through a private lending agency, then the Government will make the loan directly under this proposal and, of course, charge no interest.

Thus, under this plan, a nian owning a small factory or business concern which was destroyed by a flood, and left with only goodwill and know-how, would be provided as a matter of contractual right with the means promptly to put these two remaining assets back into operation.

The repayment of the loan could be made over an extended period of time and the burden could be spread out in the same way as deprecia


The only risk that the Government would be taking under such a plan would be the obligation to pay the interest on loans that would be made under the contracts, and its capacity as guarantor to make good on any defaulting loans.

I think it is anticipated that these expenses will be paid from the premiums taken in under the plan.

Also I have suggested under the provisions of this bill

Senator LEHMAN. May I interrupt you to make an observation? Mr. DODD. Yes.

Senator LEHMAN. I think this third proposal is a very novel one and a very interesting one. I do not believe it is in any of the other


Mr. DODD. Not to my knowledge.

Senator LEHMAN. Thank you.

Mr. DODD. As I say, it is just an idea and it was intended to meet that middle group who would seem to me would have difficulty in buying any insurance which we think of in traditional insurance terms.

Under the provisions of this bill, combinations of the usual insurance plan could be offered where reimbursement is made in cash in the traditional type of policy and loan plan as suggested. For example, a man could take out a policy, it occurred to me, on the traditional insurance basis, for 30 percent of what he contemplates his risk to be, and 70 percent on a loan basis. This would make the premium very much lower and I think it would be attractive to a lot of people, particularly the smaller people.

I am not only thinking of business people, but I am thinking of homeowners also, of course.

I include in this proposal coverage for personal property as well as real property. I have suggested that a Federal corporation be set up a special one. I know many feel this operation should be carried on by already existing agencies, but I am inclined to lean toward the special corporation, because I think there are problems here which require a very special type of knowledge in the insurance and financial world. But I am not too much concerned about that.

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