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Homeowners' Defense Act of 2007

Location: Washington, DC

HOMEOWNERS' DEFENSE ACT OF 2007 -- (House of Representatives - November 08, 2007)


Mr. BAKER. Mr. Chairman, I want to make clear my motivations here for the purposes of debate.

I certainly am in support of the Roskam amendment, but with or without its adoption, even the underlying bill, without the manager's amendment, is problematic. However, the manager's amendment presents an additional level of concern above those raised at the committee consideration.

Insurance is in the business of pricing risk, and I can honestly say as a Louisianan we are really adjusting in a significant way to the new risk now identified for our exposure along our coastal area.

Our legislature has responded with the adoption of a building code that really is leading the class in the United States, and to suggest that free markets should not price the risk and provide insurance where they know they will lose money is not a policy that makes a great deal of sense.

Hence, the underlying bill will provide a mechanism for the United States Treasury to provide a security backstop to the consortium that now is issuing insurance to Florida residents at a below-market rate.

I can recall in great detail the criticisms by many in this House by those of us in Louisiana who are the beneficiaries of a flood insurance program that provides coverage at a governmentally subsidized rate. For the record, I'm for raising those premiums on Louisiana citizens to get that program in actuarial soundness because I know without that the program is eventually doomed.

The underlying manager's amendment, although requiring risk-based capital, goes to great steps to avert the requirement, first by exempting companies who now exist from the consortium for the next 5 years. Secondly, there is no full faith and credit of the beneficiary State on the loan that's made by the United States taxpayer and virtually no guarantee of repayment.

Let's call this what it is. It is a way to provide stability in the Florida insurance market by accessing taxpayer money without guarantees of repayment. What can we do to improve this?

Well, the Roskam amendment now pending is at least the most meager step one should take who is concerned about proprietary action in the insurance world. It does not say the Treasury Secretary will establish the building codes. It merely says the Treasury will examine whether there are even codes in place that are reasonable for the risks that are presented to the occupants of low-lying coastal areas before you extend taxpayer assistance.

It's sort of like making sure that you've taken appropriate action to protect your family and that there's not a likelihood of probable loss, and then you're going to sell insurance on the assumption that the risk is low. In this case, rebuilding is taking place in low-lying areas at a rapid pace, and there is an absolute certainty there will be a repeat of significant storms and unquestioned amounts of loss.

At least we should say that those who are building in exposures of great risk should exercise the highest level of construction standards before having access to taxpayer money to pay off the loss.

Think about your constituents. How many times are we going to ask them to pay for the decisions of others to build in low-lying coastal areas when the coastal area residents themselves are not paying actuarial rates for coverage they are provided.

I wish I could say it more clearly, but this is not a balanced approach; and certainly without the Roskam amendment we are opening this Congress and the American taxpayer to enormous financial risk without taking the first meager steps for rational self-protection.

I urge the adoption of the Roskam amendment.

Mr. Chairman, I yield back my time.


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