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Senator LEHMAN. I suppose you did not even have time to move your furniture?

Mr. ZMUDA. No; we could not. We just had to get-we were fortunate enough-I say we were fortunate enough that the dam below, the Kinneytown Dam below, at that moment when my neighbor's house was picked up and took off and I was the next one to go, at that time the dam below burst and the water receded, so that is what left me there. Otherwise there would have been more damage done.

Senator LEHMAN. Did your neighbors have mortgages on their houses?

Mr ZMUDA. They did. I know one of them in particular who was a widow. Her husband passed away 3 years ago and she converted her 1-family house into a 2-family house. It was a 7-room house, so she had 3 rooms and rented out 4 rooms, and that floated down, too.

Senator LEHMAN. She has no house but she has a mortgage?

Mr. ZMUDA. She has nothing. That is why I say these retaining walls mean so much to us. If we can get them to hold back that river and keep it from coming into our yards and homes, that would help us a lot. For any individual to throw in four or five thousand dollars into a retaining wall which does not increase the value of your property, is just out of the question.

I would say if I had a piece of property there and you can probably buy a lot there for $1,000-it would be foolish to put in a wall when you can go out and buy a good lot up on the hill for that.

Senator BUSH. Had the property where your homes stood ever been flooded before?

Mr. ZMUDA. Not to my knowledge. I talked to some of the oldtimers who had retired, and they never saw that. They say they had heard of it years back, but not that high.

Senator BUSH. You didn't think of yourself as living in a dangerous neighborhood?

Mr. ZMUDA. I would never have moved my family in there if I did. Senator LEHMAN. That question which Senator Bush asked is a very important one: That is, whether you and your neighbors would have taken out insurance if it were available, since this is all based on having a wide base for the insurance.

Mr. ZMUDA. I say now I would have. Yes. But at that time for all of those years that river never came up that high and we were never threatened by the river. Nobody there for miles both ways.

Mr. DRISCOLL. Thank you for your time, Senator.

We suggest the exact formula for reimbursing flood victims of this nature should parallel whatever the formula is your committee works out for future coverage. I do not know what that will be and do not know what it would cost, but think that the cost will be well worth the Government's expenditure of funds for it. We are willing to support the necessary tax legislation to make it possible.

We are very glad that you have given us this time and thank you for your indulgence in letting these two men tell their individual


Senator LEHMAN. Senator Bush and I thank you very much.

Without objection, your formal statement will be inserted in the record at this point.

(The statement of Mr. Driscoll follows:)



On behalf of the Connecticut State CIO Council, whose executive board has unanimously endorsed these proposals, I wish to urge that the Senate Committee on Banking and Currency recommend that Congress adopt, as quickly as possible, a program for disaster insurance which would cover potential victims of such disasters from floods as we have recently experienced in Connecticut, as well as some specific types of direct aid and relief to the victims of these floods.

The State CIO council's executive board has also unanimously endorsed the idea that a special session of Congress is needed to act quickly on these proposals, as well as on the flood-control projects involving the building of dams, dikes, river channel dredging and improvements, etc., for which Federal appropriations are needed.

Turning first to the latter point, we recognize that there will be several problems to be overcome before a special session of Congress can be called. I know that a number of Congressmen from New England have expressed themselves in favor of a special session, including Mrs. Rogers, of Massachusetts, and Mr. Patterson and Mr. Dodd, of Connecticut. No doubt it will be cited as an argument against a special session, by Congressmen from other parts of the country, that the nearness of a regular session coming up in January obviates the necessity of calling an earlier meeting of the Congress. I believe that this committee should impress on the administration, and on the other Members of the Senate and the House, that a very serious delay would result from presenting these proposals to a regular session. Despite the best intentions and the good will of Members of Congress next year, we must recognize that a tremendous amount of other legislation will come up. Much of this other legislation will be highly controversial, particularly since 1956 will be an election year.

I fear that legislation for disaster insurance will have a tough time competing for attention with other matters. Action could be seriously delayed, if not actually blocked. We can't afford to risk delay on critically needed legislation to protect people from tremendous and tragic losses such as they suffered in the August and October floods, and previously, when hurricanes inflicted heavy damage. Simply under the law of averages, the Nation must be prepared for future natural disasters, which may hit anywhere, anytime.

Therefore, we propose a special session of Congress to be held either later this month or in December, so that action on disaster insurance and direct aid can be disposed of in an atmosphere uncomplicated by other questions. The sacrifice of time which Members of Congress might experience by attending a special session would be a small matter compared to the losses suffered by individuals and business people in recent disasters.

Action taken by Congress should cover not only losses from future disasters, but should be retroactive to cover disaster losses of the current year.

I understand that it has been, or will be, urged on this committee that overall disaster insurance to provide against flood, tornado, hurricanes and even nuclear bomb blasts, will be too expensive to provide universal coverage. It will probably be argued even more vigorously that no direct aid should be given to individuals or businesses damaged by the recent floods in the Northeast. It will probably be argued that we cannot afford these direct payments or subsidies.

At the same time, suggestions are being heard in numerous quarters that the country can afford a tax cut next year. If such a tax cut amounted to only 5 percent, it would mean $2,475 million on the basis of the almost $50 billion tax receipts estimated from income and corporate profits taxes for 1956. I feel sure that the people of the United States would be willing to give up part of such a cut, or even do without a tax cut, in order to provide against the hardship and suffering which are the fate of victims of such natural disasters as we have recently experienced.

If we can afford $6 billion for atomic and nuclear energy activities (most of which is undoubtedly for the production of weapons to protect us against manmade disasters in the form of aggressive attacks by enemies from without) surely we can afford a fraction of this amount to subsidize disaster insurance and payments to the victims of natural disasters.

I use the word “subsidize” advisedly, because of course it may be necessary for the Federal Government to subsidize any really adequate program of insurance, in order to make it available to all the people who may be affected.

Surely, in the event of an atomic attack the total resources of the Government would be utilized for reconstruction, all the way from the rebuilding of industrial capacity to aid in the restoration of family units.

If a business or home is demolished or damaged, the blow to the individuals affected differs little whether the destruction has resulted from manmade weapons or the natural elements going berserk.

As the members of this committee are well aware, there were individuals who experienced such terrifying losses in the recent floods that their despair could hardly have been deeper in circumstances of similar loss under conditions of warfare. In war there is at least the lift to morale that comes from the hope of ability to immediately fight back.

When natural disasters hit with the tremendously destructive force and effects of the recent floods and hurricanes, there is a feeling of extreme helplessness. The enemy in this case is nature. We cannot fight back against nature, but we can build protections to greatly cushion the blow. These protections are readily at hand. All of us must feel a sense of amazement at how slow we have been to utilize them.

I believe that the gentlemen of this committee are familiar with the many forms of direct aid and subsidy which the Federal Government has provided over the years for individual citizens, farmers, business and industry, whether or not they were the victims of disaster.

I suggest that we have precedents available in the form of Federal legislation to establish payments for soil conservation, aid to dependent children; and legislation to provide aid to the victims of natural disasters in the 1953 amendments to the 1949 Disaster and Loan Act, which was singed into law by President Eisenhower on July 14, 1953. There are several other types of Federal aid which come to mind, but let us look at the Disaster and Loan Act as it was applied to the sufferers from the 1953 drought in the Southwest.

In that case, Secretary of Agriculture Benson immediately put out regulations restricting the eligibility of drought-stricken ranchers and cattlemen for subsidy by the Federal Government (in the form of feed at reduced prices for cattle), regulations which were based on a policy of individual need, or "ability to remain in business and maintain a heard in relatively satisfactory condition." 1 A barrage of opposition by Members of Congress from the droughtstricken areas forced the administration to reverse its policy. On July 22, 1953, Secretary Benson ruled that cattlemen need not file any financial statement nor take any "pauper's oath" in order to get feed under the program.

I suggest that the Federal Government's requirements for loans to businessmen and industries hit by the recent floods are much too harsh and restrictive under the present policy of the Small Business Administration. I have been told of an example by a small-business man of my acquaintance, which indicates incredibly severe demands for collateral and guaranties by the prospective borrower. Apparently the present SBA regulations are based on a definition of collateral similar to that which was sarcastically placed in the Record by a Member of Congress, Representative Lloyd M. Bentsen, Jr., of Texas on July 20, 1953, when he said "Collateral, it seems, means that in order to borrow money you have to prove that you do not need it."

I have been informed in connection with the recent flood disaster, that the SBA has required a third mortgage to be added where two were in existence prior to application for an SBA loan; and also that signatures of all the directors of a corporation have been demanded as personally guaranteeing the note. Regarding the signature matter, this could mean that refusal to sign by one director among several directors could mean no loan.

I do not know-but probably this committee will want to determine whether these collateral and signature demands are official regulation. If they are not official regulation, then it would appear that representatives of SBA have assumed arbitrary powers or made their own personal regulations.

I have been told of the case of a businessman, who beside being faced with other stiff requirements, was told he must take a salary cut.

My information indicates that the SBA has sometimes taken a tougher attitude than private lending institutions. The SBA attraction, of course, is a lower rate of interest. However, in a small business, the benefit of a lower rate of interest could be canceled by the demand, such as I have mentioned, that the principal owner and operator of the business take a severe cut in salary.

1 See Congressional Record for July 21, 1953, vol. 99, pt. 7, p. 9440, 83d Cong.

Surely the Congress can act now, as it did in the case of the drought-stricken ranchers and cattlemen of 1953, to permit loans to flood-stricken business and industry to be made without regard to proving need, or the lack of financial ability to remain in business without such loans.

I believe that this committee should recommend that the Government go even further that the providing of loans without restrictions as to collateral, or need, but that the Small Business Administration should grant such loans to business and industry hit by the recent floods on the basis of no interest requirements. If it is argued that this is a direct subsidy, how is it different from the direct aid which the Federal Government has been giving to defense contractors under the so-called certificates of necessity? By permitting accelerated depreciation allowances, the purchaser of a big new boring mill for a machine shop or the manufacturer who installs a modern continuous strip mill in his plant may recoup the entire cost of that within the space of 5 years, as I understand the procedure. This is certainly a form of direct aid to industry, and I can see no distinction or necessary difference between that and giving non-interest-hearing loans to business and industry hit by a flood.

If this committee takes kindly to my suggestion, but believes that it would discriminate too much in favor of small business and industry, you might consider tax legislation similar to the certificates of necessity for the replacement of flood-damaged equipment and plants of larger industrial corporations. This would mean, as I see it, that the recipients of such certificates of necessity could pay for the purchase of new equipment and the construction of new plants to replace those lost in the floods, and could take tax deductions over and above those presently permitted under the carry-back and carry-forward provisions as to losses of this type.

Now what about Federal aid to individual homeowners and families who lost houses, garages, and personal property in the past floods? Disaster insurance ought to cover future losses of this nature; and if that is so, why cannot the Federal Government grant direct personal aid to those whose losses were not replaced by Red Cross in these last two floods in the Northeast?

Of course the easiest answer to that question is to say that we've never done it before, with all the floods and tornadoes this country has suffered.

That answer is really not a reason, but an argument from precedent. And is it even a good argument from precedent? How about the ranchers and cattlemen of the Southwest, and the grain and feed they got at reduced prices-isn't that a direct grant to disaster victims, regardless of need?

What about the economic aid our Government has granted to the victims of World Wars I and II? the $100 million voted by Congress to the war sufferers of Europe in 1919, was administered by none other than Herbert Hoover, our former President. No one charges that this money was not well spent—but if we could do it for others, why not for our own citizens?

And after World War II, did we not give direct aid to millions in other countries in the UNRRA programs? The distinguished chairman of this committee, Senator Lehman, was administrator of the UNRRA program, I believe, for some time. I think he would agree with me that the program was a vitally necessary one, and it was based on our best traditions of American aid to the victims of war and catastrophe.

It may be argued that these grants of Federal money were limited to those in need; and in the recent floods, Red Cross has taken care of the needy. We must certainly salute Red Cross for having done an admirable job, within the limits of its funds and the regulations governing its work.

But Red Cross aid has not covered all individuals whose losses could be met from their potential or actual resources, in the judgment of social workers who checked each case.

But for many people who suffered such losses, having to spend their savings to replace homes, cars, garages, and other personal possessions means that they may have to sacrifice the higher education of their children, for example. These are resources which I believe we want to conserve, as much as we want to conserve our topsoil, and so give direct money grants to those landowners who undertake conservation programs.

The exact formula for reimbursing these flood victims is one which I believe should parallel the formula which will finally be worked out by this committee, and later on the Congress, for the disaster-insurance program which I hope will be enacted. The cost of reimbursing the victims of the last two floods would be considerably less than the 5-percent Federal tax cut which I previously discussed, on the basis of the estimates which I have seen.

I thank your committee for this opportunity, and trust that you can reach early and unanimous agreement on recommendations to Congress which will adequately meet the needs of our people, all over the United States, when they are confronted by disaster.

Senator LEHMAN. Unfortunately I have to leave now. I have engagements in New York this evening and very early tomorrow morning. I am driving down to New York. So I am going to ask Senator Bush to take over and I am leaving my administrative assistant, Julius Edelstein, here to represent me.

Senator BUSH. I think I would like to say how much we appreciate Senator Lehman's coming up here. Senator, we are very grateful to


Senator LEHMAN. Thank you.

Mr. EDELSTEIN. The next witness is Mr. Stuart Cleaveland of the Connecticut Retail Merchants Association and the National Retail Dry Goods Association, smaller stores division.


Mr. CLEAVELAND. Honorable Connecticut Senator Prescott Bush, I am Stuart Cleveland, president of the W. W. Mertz Co., a department store located in Torrington, Conn., an incorporated city about 25 miles west by northwest from here, in the upper Naugatuck Valley; vice president of the Connecticut Retail Merchants Association and chairman of the smaller stores division of the National Retail Dry Goods Association. In addition to my neighbor merchants in Litchfield County, I have expressed permission to voice the views of the Connecticut Retail Merchants Association, which is an aggregation of department stores and specialty shops both independently owned and chain operated. I also have a fresh mandate to convey the sentiment of the National Retail Dry Goods Association insofar as the subject matter affects the membership of that organization in disaster areas. Merchants in central Connecticut are bound to be insurance conscious. We are located in the largest concentration of multiple-line insurance underwriting in the Western Hemisphere. We are well aware that retail trade volume in this area traces in substantial measure to the payrolls generated in the home offices of that industry. We would be shortsighted to initiate or support any legislative proposal that would jeopardize that wellspring of trade volume.

My own retail business, being situated in Torrington, which was hard hit in last August's disastrous flood, did not suffer proportionately as heavily as did many, many others of my fellow merchants. Nonetheless, our own loss was between $15,000 and $20,000, and even that amount, in a smaller business, as the boys say, "is not peanuts"especially when there is no adequate recourse to direct financial aid. Thank heavens for what limited aid has been available through the SBA, the Red Cross, et cetera. They have done a grand job insofar as they could.

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