Flood Insurance Reform and Modernization Act of 2007 - Continued
Floor Speech
FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2007--Continued -- (Senate - May 07, 2008)
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Mr. DODD. Mr. President, first of all, let me thank my colleague from Louisiana for offering these amendments and handling them as efficiently as he said he would. I appreciate that very much. We are trying to move legislation here, so I am grateful to him.
As to this idea, this last point that was made--like the first amendment he offered--there is value and merit in what he is suggesting. But, as Senator Shelby has pointed out, we are trying to strike balances. We have an obligation, one, to get this program up and running again. There is $17 billion on which we owe a debt, which is going to raise the cost of premiums if we do not forgive that debt, which is the major thrust of this legislation, as well as trying to deal with some other related issues--but to try to keep this within prudent fiscal conditions.
What we do in this bill--and the point the Senator from Louisiana raises is a valid one. Certainly, we do not want this to occur in 1 year. So what Senator Shelby and I did with our committee members is to do a 2-year phase-in of this program. It is not 5 but it is 2 years, to try to exactly accommodate the legitimate concerns raised by the Senator from Louisiana. Obviously, it all occurring at once would probably be more than some people could tolerate. If the property is newly mapped in a flood plain, the rates are phased in over a 2-year period to ensure that a home or business can plan for flood insurance costs, obviously. It is not as long as 5 but we think 2 helps.
The bill and this provision are part of our overall effort to balance the need to reform and strengthen the flood program with the need to ensure people can afford to purchase needed flood insurance. Striking that balance is what we are trying to achieve. It is hard not to make a case--we could make it 6 years, 7 years. That would be easier. But the problem is, at the same time we would not be getting the revenue coming in to accommodate covering the additional properties we want to cover with the new mapping. So how do we do that? We thought 2 years would be an adequate amount of time to give people a chance to phase that in and simultaneously meet our obligation of seeing to it that this program would be there to cover the 5.5 million homes we are talking about. I think we struck that right balance.
As to the other members of the Banking Committee, again, we unanimously adopted these provisions, and not without debate and consideration of the very point being raised by the Senator from Louisiana.
I wish to remind my colleagues, again, this bill results in significant savings in the flood program. The bill forgives $17 billion in debt. We are paying interest payments on that $17 billion. That is part of that premium cost. That is a huge cost. Without this debt forgiveness, which is a part of this legislation, policyholders would see rates increase many times over. In fact, rates would have to almost double just to pay the interest on the debt FEMA owes. So that is a major thrust of what we are trying to achieve. So we are saving all policyholders and all homeowners at risk from being priced out of this program with the debt-relief provision.
In exchange, however, the bill contains provisions to move the program to actuarially sound rates to ensure the long-term viability of the flood program, which is also our responsibility with this legislation--to make sure that actuarially this program will have the revenues coming in to support and sustain the risks it tries to cover against.
These reforms stabilize the flood program to make sure that when the next flood hits, homeowners will have flood insurance to be able to rebuild their homes and their lives.
I am concerned that further subsidies in the program undermine our efforts to put this program on sound financial footing. Those are the reasons I would oppose the second Vitter amendment as well. I say that with respect. Again, these are a lot of ideas that neither Senator Shelby nor I would say lack merit. It is a question of what we can afford to do, where the balance is, where the actuarial soundness is. That is more the thrust of our argument than whether we agree or disagree with the goals stated by the proponents of these amendments.
I make the same point I made earlier as to the amendment offered by Senator Wicker from Mississippi. I would be hard pressed to make a case that we should not try to do something about wind damage. It is a legitimate issue. I will point out in this morning's papers, if you read about that incredible devastation created in Myanmar: 25,000 people lost, 120-mile-an-hour winds ripping through that country, clearly flood damage, clearly water damage, clearly wind damage.
The problem Senator Shelby and I have is, I could not answer the question. My friend from New Mexico asked me: How much is that going to cost, Senator? I cannot answer you. You have a right to know the answer to that question, so we are trying to find that out. We have asked for a study to look at the wind issue. The Acting President pro tempore comes from a coastal State as well. He knows what can happen with these issues. I think wind is a legitimate issue for us to sort out. But I cannot honestly answer the question actuarially. We are told it is five times the cost. If you take in the four hurricanes in 2005, the $17 billion in flood damage, wind damage would have been five times that cost. Of course, we have a flood insurance program here that puts $2.5 billion into that account on an annual basis.
So we are talking about something we are really not capable of managing under the present circumstances--a legitimate issue. The Senator from Mississippi is absolutely correct in raising it. I pointed out earlier that Senator Schumer of New York talked about this passionately. Senator Martinez from Florida talked about this as well. Anybody from a coastal State will tell you what this can mean. But I have to be able to answer--as Senator Shelby and I do--the question of whether you can actuarially account for this, whether we can have a program that is sustainable, and we cannot answer those questions. In the absence of doing that, we reluctantly oppose these amendments, and because of the importance of getting this program accomplished, in place.
In 3 weeks, or less than 3 weeks, the hurricane season starts. Any of us who live in these eastern coastal areas, the Gulf State areas, Florida, coming up that coast all the way up to New England, know that at any given point over that period of time, we could be hit. We need to have this program in place to begin to take care of these costs. That is why we are here today to try to get this done.
I am going to respectfully say and urge colleagues to come over with their amendments so we can get this work done--to listen to what they have to offer and say, to consider where we can, but we need to complete this bill, and we are going to be most reluctant to be supportive of ideas that violate the actuarial soundness of what Senator Shelby and I and the other 18 members of our committee endorsed last year when we adopted this bill.
Mr. President, I see my colleague from Alabama on the floor.
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Mr. DODD. Madam President, I do not have a question for my colleague. I wish to thank him. For those who want to understand this, I think he is rather eloquent and knowledgeable. As a former insurance commissioner of the State of Florida, he has more than a passing familiarity with these issues. He has described it, made the case more eloquently than I did about the difficulty we have with the wind amendment; not on the substance of whether we ought to do something about it but whether we can and what the effects of this amendment could be.
I commend him as someone who understands that, for laying it out and the problems inherent with it. As he and my colleagues know, the ability to then alter that kind of amendment then becomes almost impossible in this process.
As I said earlier in the presence of my friend from Mississippi, we, Senator Shelby and I, are deeply involved in the foreclosure issues, as we have been over the last number of months. As our colleagues are aware, this subject matter of catastrophic insurance would have been the major subject matter of the Banking Committee. I regret we were caught up in the foreclosure situation, for obvious reasons.
But that does not minimize at all the situation my colleague from Florida faces--or that other States do. It is not only a Florida issue, this is an issue that affects all of us in this country, and we need to have a far better plan in place on how we deal with it.
I mentioned earlier: Pick up this morning's newspaper. You read the headline in the local newspaper and every newspaper, I presume, across not only this country but around the world on what happened in Myanmar; 120 mile-an-hour winds, devastation, loss of life. These problems are occurring around the globe. We would be naive at best to think it cannot happen here. In fact, it has happened and could happen even worse in this country. So we need to get to those points. I thank him very much for his eloquence and his understanding of these issues.
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