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Providing for Consideration of H.R. 2761, Terrorism Risk Insurance Revision and Extension Act of 2007

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Location: Washington, DC


PROVIDING FOR CONSIDERATION OF H.R. 2761, TERRORISM RISK INSURANCE REVISION AND EXTENSION ACT OF 2007 -- (House of Representatives - September 19, 2007)

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Mr. FRANK of Massachusetts. Mr. Speaker, there are several aspects of this. One is, of course, whether or not we should go forward with a renewal of terrorism risk insurance.

There are, in our midst, people who believe in the free market so firmly that they believe in it the way other people believe in unicorns. They believe in it even when it does not exist. There are people who oppose terrorism risk insurance from the outset and continue to because they say it should be up to the market. No one involved in the market thinks that makes sense. Indeed, we received a letter from the head of Goldman Sachs in 2005 saying there is no evidence that this can become a market item. His name was Henry Paulson, and he quite clearly said at the time the market wouldn't do it. We then proceeded with a bill that took that into account.

By the way, if the market could do it, it shouldn't because here is what the market would do, and we are talking about the insurance market: If you left this to the market or if you try to phase this out so the market would take it over, the principle of insurance says it should be more expensive to do business in those parts of the country which are likeliest to be hit by terrorists than not because that's the insurance principle. If there is a higher risk, you charge people more. We should not allow murderous fanatics who seek to damage this country to dictate what the cost of doing business is in different regions. That's not a market decision; that's a national security decision. I don't want it to be more expensive because of the murderers who would try to undermine this country to do business here or there.

It is also the case that one of the principles of insurance is that you give it and you give incentives to the insured to reduce the risk and you price in a way that gives those incentives. People can't avoid the risk. There is nothing you can do to stop the terrorists as private citizens from attacking you.

So we were going ahead with the bill. Now, we had a set of markups in subcommittee and committee in which there were some disagreements but some agreements. A number of amendments offered by Republican Members were adopted and the bill had a very large vote coming out of committee.

We then ran into a surprising obstacle. The Congressional Budget Office issued what seems to me an intellectually quite weak opinion. They said this is going to cost $10 billion over the next 5 years. Now, a $10 billion terrorism attack is not within our contemplation. I could see their saying it is not going to cost anything for this period or that it is going to cost hundreds of billions. Apparently they calculated the probability of a terrorist attack and imputed that cost. There will, in fact, be no costs until there is an attack.

My own view, frankly, was that this would have justified an emergency waiver under PAYGO. If being attacked by terrorists, if September 11, 2001, was not an emergency, then I don't understand what the word means.

We have been forced now to try to deal with this in other ways, and I understand that. It has been forced on us by CBO. The notion that we can say something now and leave it to future Congresses, the gentleman from Texas said it was unconstitutional. I am aware of no Supreme Court decision that would invalidate what we have

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proposed here. And it couldn't be binding. Nothing is binding of one on a future one. I think that would be a very high degree of probability.

So we do have this approach which came up suddenly. It came up suddenly. It wasn't debated in our committee because the issue of the CBO estimate hadn't come before us in the committee. So we now have Members on the other side complaining that the rule was too restrictive.

Mr. Speaker, when I hear Members of the Republican Party who ran this House in the most blatantly undemocrat fashion for so many years now complain about a lack of democracy, I feel like I am in a motion picture theater and I'm watching an Ingmar Bergman dark movie which features the Three Stooges. The incongruity of these masters of authoritarian legislative procedure now complaining because there isn't enough democracy is one of the great conversions of all time. And I would have to say to my born-again believers in an open process that in this case at the committee level, we had a hearing, we had a subcommittee markup and a committee markup, and we dealt very much with those issues.

My own preference would have been to allow a few more amendments, but the fundamental issues have been debated, and the key issue is, unfortunately, the one that has troubled them, is how do you deal with the CBO. Now, either you do a waiver of PAYGO or you make cuts now of $10 billion in programs on the possibility of there being a terrorist attack. It seems to me that is a great favor to terrorists. Let them cut programs now by just threatening to blow us up. Or you try to come up with some set of procedures that say we really intend to do this but we can't make it absolutely binding.

I do not think the set of procedures we have here will be the final say. It was a difficult situation that we found with that, I thought, CBO estimate. And the CBO estimate basically says here is what we say but it's probably not going to be this way. And I hope, as we go forward, there will be meetings with industry. And, by the way, industry is not just the insurance industry. It's the commercial building industry. They are the ones who are at risk here. The insurance industry can walk away, but if they walk away, we won't get commercial buildings built, particularly in our big cities, which is why the mayors of the big cities are so concerned and others are concerned about economic development.

So we need further work to see how we can deal with this CBO issue, and I think we have a reasonable first cut. It is one where, it is true, we did not deal with it in our committee. What we dealt with in the committee in great detail with a number of amendments and a lot of compromise were all the other factors. And we now get this new issue. This is a good-faith effort to deal with the new issue but not in a way that is final. So I hope we can go forward.

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