ments to individuals for their sufferings in the past two floods. A 5-percent tax cut on the basis of the estimated $49 billion tax receipts for 1956 just from an income tax and corporate profits tax, would mean $2,475 million which would be available for either of these purposes. I think that the people of the country would be willing to forego that much of a tax cut in order to get some kind of permanent program established on a sound basis, even if it does mean a direct Federal subsidy.

As far as the problems of business and industry are concerned, I have a few illustrations of the problem and our attitude to it on page 4 of my prepared statement, in the last two paragraphs, where I said that our observations about the Federal Government's requirements for loans to business and industry hit by recent floods are much too harsh and restrictive. I have been told of an example by a smallbusiness man of my acquaintance, which indicates very severe demands for collateral and other guaranties. This man told me that he had lost about $13,000 in the flood. He tried to get a loan from the Small Business Administration and they told him first of all he would have to take out a third mortgage on his property and his building, and would have to take a $4,000 year salary cut. He would have to put his own life insurance up as a guaranty of the note and would have to give his own personal guaranty.

Senator LEHMAN. And then all he would get would be a loan which he would have to repay.

Mr. DRISCOLL. That is right-at 3 percent. He pointed out that out of $4,000 a year-and I am sure he is making less money than the man who acted on his application in the Small Business Administration— would mean in the course of 10 years $40,000 that he would lose just on that particular angle of it.

Our attitude is that the Small Business Administration ought to give loans without interest and without arguing too much about the credit rating of the borrower, as long as there is some good-faith relationship established there with the intention to remain in business and carry on.

Maybe this sounds extreme, but we have a precedent for it which I have mentioned on page 4 of the statement under the action in 1953 by the present administration for the drought sufferers in the Southwest. At that time there were passed by Congress some amendments to Public Law 875 to permit direct relief to drought sufferers. At first the Secretary of Agriculture established regulations which would have required investigation into the need of the borrower, or those who would get feed or grain. He wanted to find out whether they had theability to remain in business and maintain a herd in relatively satisfactory condition.

That is the quotation.

But there was a good deal of opposition to this by Members of Congress from the drought-stricken areas and the administration reversed its policy.

On July 22, 1953, Secretary Benson ruled that cattlemen need not file any financial statements, nor take any pauper's oath in order to get feed under the program.

I raise this not from the point of view of inciting any sectional hostility toward the people of the Southwest. Our organization be

69096-56-pt. 1———51

lieves in supporting programs for soil conservation, multipurpose dams, flood control, and hydroelectric power, and all of the various things that are good for the country as a whole. We do not object to the cattlemen having obtained this kind of relief. But we do say it is a precedent and if, as some people say, we live by precedents, and if it is a precedent you want, I think you have a precedent right in the actions of the present administration for giving direct relief without requiring collateral for a loan the way the Small Business Administration wants it.

There was a quotation by one of the Texas Representatives at that time which I think is illustrative of the way the Small Business Administration acts now about the loan applications. Mr. Bentsen, a Representative in Congress from Texas, said:

Collateral, it seems, means that in order to borrow money you have to prove that you do not need it.

Our organization further thinks on this question of the limit that Senator Lehman has raised on the coverage, we think the Small Business Administration's limitation of $150,000 on loans or individual loans would be one type of limitation for the past floods. As to the future, the limit suggested by Senator Lehman's bill of $300,000 might be in some cases too small, but I sugget that these bigger businesses Governor Ribicoff was talking about have available a considerable amount of relief already under the form of tax writeoffs, that is, carry-forward and carry-back provisions, which enable them to absorb about 50 percent or so of those losses over a period of years.

Possible, Senator Lehman, in addition to your $300,000 limitation on an individual or a corporation, possible the 5-year accelerated amortization principle might be allowed or brought into play for larger industry to permit them to take this tax writeoff on equipment and material and construction of buildings which are needed to replace those lost in disasters.

Senator LEHMAN. It is certainly one of the things which will be considered by the committee. I am sure of that.

Mr. DRISCOLL. Yes; we are concerned especially at this time about the individual who is not eligible for a loan by the Small Business Administration and who lost his home, or parts of his home and personal property, his furniture, and what not. We think that all of the proposals that have been made up to now about insurance for the future overlook the fact that these people have suffered the kind of losses which our Federal Government has in many direct aid and grants-in-aid programs taken care of in other cases.

I would like to have Mr. Racine tell you a little bit of his own personal problems, not because it is his problem alone, but because he represents a very large group, not merely of members of the Textile Workers Union, or the CIO, but of a great many different workers of which he is a type or an example. We are concerned about those who are unorganized as well as those who are organized. We do not want you to think in telling this story he is speaking for himself as an individual.

Mr. RACINE. My name is Fred Racine. I live at 21 Birch Street, Putnam, Conn.

First of all, the flood came along and caused damage, personal damage on personal property, and furniture, and to my home. The per

sonal damage on the furniture was partially taken care of by the Red Cross. The Red Cross' damage estimate to my home is $7,581. They told me I could obtain a loan from the Small Business Administration and our payments over a 20-year period would be $42.15.

Immediately after they told me I would receive no help from them toward repairing my home, I went to the Small Business Administration, and because of my home being a three-family home unit I was termed small business, so they would not allow me a 20-year loan.

The Red Cross figured my budget out very closely. Actually I was spending more money per month than I was taking in, so for 10 years a 10-year loan from the Small Business Administration would be $76.12 per month. This would have been considerably above my budget. So I was returned to the Red Cross and they told me to try to get a loan from a bank.

I went to the Danielson Federal Savings & Loan. They would not consider a first mortgage on my place until after the building had been rebuilt or repaired. The payment to the bank would have been $52.28 a month, $10.13 more than it would have been through the Small Business Administration. This, over a period of 20 years, would be $2,431.20 for interest alone.

I am in a predicament where I would like to be able to borrow money, even for 3 percent, but for a 20-year period.

I could state other damage from the viewpoint of my father and mother. They lived in the same town of Putnam and lived at 25 First Street. My father is 76 and mother is 75. They had income from three houses. One 4-family unit was completely swept away by the flood and the other 2-family unit was so badly damaged it was recommended it be demolished. Now they are living at 47 Chapel Street in a 1-family house, a 14-room affair, which the Red Cross is going to repair. But the only income they have at the present time is their social security, and with this home on their hands, living there alone, the interest and taxes along will pretty nearly consume their income. I think I want to say thank you, gentlemen.

Senator BUSH. Thank you very much.

Mr. DRISCOLL. What we said is not intended to be a criticism of the Red Cross. You understand that. Our organization has contributed heavily to the Red Cross, but we realize its limitations.

Senator BUSH. Did I understand that this gentleman lived in the residence on the first floor?

Mr. RACINE. That is right. My whole family lived on the first floor. I have a wife and two children and I was personally wiped out.. Senator BUSH. Your case did not result in any assistance from the Red Cross for furniture, or anything?

Mr. RACINE. I have received some assistance from the Red Cross for furniture and clothing. I did lose a two-car garage that was completely washed away.

Senator BUSH. Did they make any contribution toward your needs: other than furniture and clothing?

Mr. RACINE. No.

Senator BUSH. None at all?

Mr. RACINE. You see, I had a mortgage on the place of $4,000, but my father held the mortgage. So they spoke to my father and asked him to take a second mortgage, in other words, to forget the first mortgage so that I could go out and get a loan, and that is all they

have done for me. I could have done the same thing myself. I could have spoken to Dad and asked him to take the second mortgage.

Senator BUSH. I would like to say for the record I intended to introduce an amendment to existing legislation which will permit the Small Business Administration to make 20-year loans in connection with disaster cases on small-business loans. In other words, it would take care of the very case that the gentleman mentioned there and would eliminate any difference between the small business and the home loan.

Mr. RACINE. The rent that I received from these 2 other dwellings, the other units in the house, is the same today as it was 20 years ago. There is a rental control in the town and I have not been able to raise the rents. I live at 21 Birch Street but I am located at 3 Whitley Street in Danielson, Conn.

Mr. DRISCOLL. Now we have Mr. Zmuda, who will also tell you his story. He is not even eligible for consideration by the Small Business Administration. He is only in the individual category.

Mr. ZMUDA. Mr. Chairman, I live in Seymour and have been employed by the Seymour Manufacturing Co., which has been flooded twice, the first time to the tune of $1 million and the second time $250,000. They just started into production, incidentally.

I was right in the path of the flood, and live on Derby Avenue. That was right on the river bank. Along these rivers in the years past, certain neighbors of ours have built up retaining walls to keep the river away from the yard and they built them high enough so that we were always dry. During the first flood of August 19, all of these retaining walls had been washed away. Immediately after the flood I went down to the Red Cross and spoke for myself, asking for a little assistance in rebuilding my retaining wall, which was badly needed around there.

The engineers, incidentally, came down and looked the valley over, and they told me it would be useless to put up a retaining wall unless the neighbors put one up also. Well, at the same time they didn't consider that the neighbors' homes have floated away and they have no interest in it to put up a retaining wall.

I asked a contractor and he said, "It would cost in the neighborhood of $4,000 to $5,000 to put it up, and that still does not increase the value of your property," he said. "If the other fellow does not put it in you are just throwing your money down the river." The neighbors will never put up a retaining wall and do not intend to build there

any more.

In the flood of October 15 I lost 15 more feet of land. Incidentally, I lost 10 feet the first time and 15 feet the second.

Senator BUSH. Is your property on a development which was put down there or is that not the case?

Mr. ZMUDA. No, sir. It is right on the main highway, Derby Avenue, Route 8.

Senator BUSH. But it was not part of a development built in the river valley?

Mr. ZMUDA. No. There were homes there for years and years back. That is why I say in years back they built up the retaining walls and kept the river away.

Senator BUSH. Is it on Route 9?

Mr. ZMUDA. Route 8.

So when the engineers came over to level out some of that land there they used the equipment and scraped it down lower than it was before. Then when the October 15 flood came in it brought the river right into our backyards, and most of the homes that did not float away had water in them again, which is something they didn't have before.

For instance, as to myself, my garage and barn floated away. I went down and asked for assistance and they told me, naturally there was a few dollars in the bank, and asked me if I could use that. I said I could. I could use every bit of it if I had to, but that money was put away for my son, who is 15 years old now and graduates in 2 years. I thought maybe I could send him to school. It took me a few years to put it in there and I could not see putting it into a useless project if I did not get the assistance of the neighbors, and so forth.

I did not have a mortgage on the place. They told me how to get a loan and by going out to get a loan I would have to start all over again, and I cannot possibly see how I can start. I'm not an old man yet, but I just cannot see how I can start and still educate my son.

I was partially reimbursed on the furniture. I had lost all my furniture on the first floor. I have a six-room house, and all of my furniture on the first floor was just washed away. The house is mostly repaired by myself.

My mother also had a three-family house on Broad Street, right across from the Seymour Public Library. She is a widow, incidentally. My father passed away this year and left her with the threefamily house, as an income for her. A few months after that it washed away and the only income she has now is the social security, and they have one three-room flat upstairs they rent out. Not only did she lose the building, but also lost the ground it stood on as it is just a riverbed now.

On top of that, I asked the assessor exactly what would be done about that and they tell me she will have to pay 10-percent tax on the riverbed-which I couldn't understand. He said many people made money on riverbeds, and I can't get it through my head how you can make money on a riverbed. I wish someone would enlighten me. But my neighbors are mostly old and retired people and have been washed out of their homes.

Senator BUSH. Incidentally, I know how terribly Seymour was struck. It was just awful. Do you think most of those people would take flood insurance at a reasonable premium if it were made available to them?

Mr. ZMUDA. I would say probably some of them would. Personally I would have.

Senator BUSH. You are in favor of some sort of flood-insurance program?

Mr. ZMUDA. I am very much in favor of it.

Senator LEHMAN. How much higher was the river this year than normal high water?

Mr. ZMUDA. This year I would say in my neighborhood about 8 feet. That is enough to come into our backyard. There was a 15-foot retaining wall and it came over the top of that wall and traveled about 75 feet to come into my backyard and into the cellar and first floor, and up as high as the kitchen table. It was just enough to ruin everything that was there.