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Flood Insurance Reform and Modernization Act of 2007

Floor Speech

Location: Washington, DC



Mr. COBURN. First of all, let me compliment the chairman and ranking member on this bill. They have made some tremendous strides in trying to fix this program. The one thing we have not done is we have not asked people in this country, who are in flood-prone areas, to actually be responsible. We are going to get about $17 billion and charge it to our grandkids because we have to get rid of some debt because the insurance program had not done in the past what we intended it to do. I believe you have fairly well fixed that for the future--my hope is that you have. I am not convinced of that yet.

What this amendment does is requires FEMA and the Small Business Administration to withhold any Federal flood disaster payments and assistance to people who have not purchased flood insurance. These are people who reside in a 100-year flood plain zone, meaning that catastrophic flooding is expected to occur once every 100 years. These are known as special flood hazard areas.

Owners of properties in these flood-prone areas are already required by law to have flood insurance. Yet what we have seen is, time and time again, they do not have it. So, in effect, even though there is a requirement for flood insurance to be there, they do not have it, so the cost, in terms of disasters, goes up for the Federal Government.

The whole purpose behind this bill in the first place, when it was first initiated, was to lessen the cost of the American taxpayer in terms of disasters so owners of properties in these flood-prone areas are required by law to purchase flood insurance if they have a federally backed loan. This amendment would simply ensure that the law is enforced.

I know this is a hard amendment because what we think about is what about those bad actors, what about those who do not--what we are doing to them. But actually we ought to think in the positive, that if, in fact, you are supposed to have flood insurance and you do not, how do we ever force everybody to do that unless there is a consequence? The consequence ought to be, if you did not follow the rules of purchasing flood insurance when you lived in a 100-year flood plain zone, a high-risk area, then you are asking the rest of the taxpayers not only to rebuild your home but to also give you the benefit of not paying a premium on flood insurance. Those people in those areas are actually taking advantage of the rest of the American taxpayers if, in fact, they do not follow the law.

So this is simply saying: OK, here is the law. You have a federally backed mortgage. Your mortgagor is supposed to require that--as a matter of fact, it was fixed in 1994, I believe, that if you do not, they would. What we have seen in the last disasters is the owner did not, and the mortgage backer did not. Consequently, we had a large number of people who had no flood insurance.

Now, all this amendment says is, OK, we are putting you on notice right now, if you have a federally backed mortgage and you are in a flood plain zone and you do not have flood insurance, you do not get the disaster relief. You do not get the grant. You do not get what everybody who follows the rules gets.

The problem with not accepting this amendment is we will undermine the rest of the flood insurance program, the very good work that the chairman and ranking member did on this bill, because if there is no consequence to not following the law, not buying insurance, why will anybody buy the insurance? In other words, if we are still going to pony up the money, what is the incentive to get them to do that? I know the chairman and the ranking member are concerned about that.

Some statistics are real important. On the repetitive loss properties, what we know is that 1 percent of the properties in this country over the last 15 years account for about 34 percent of all of the expenditures. In other words, they have been damaged time and time again. And the chairman and the ranking member have done a good job in terms of addressing how we fix that in the outyears. But when one-third of the money goes for 1 percent of the homes, something is very wrong.

All this amendment is designed to do is to bring them forward so we lessen this amount. More than 50,000 of these repetitive loss properties have flood coverage right now but 61,000 do not; 61,000 of the repetitive loss properties have no flood insurance right now.

So how do we make them do it? Where is the teeth to make them do it, other than to know that next time, unless they have flood insurance, they are not going to get the benefit the rest of the American taxpayers get in terms of helping them out of a jam. Ultimately, what this does is it incentivizes us to have people take risks that would not otherwise take risks because they know we have their back. All this amendment says is, be an adult; participate in carrying some of the risk.

So when over 50 percent of the repetitive loss properties have no flood insurance, I would like to know how we are going to get them to get it under this bill if there is no teeth to make them do it.

Now, I have every intention, as I have spoken to the chairman and the ranking member, of withdrawing this amendment. But my hope would be that in conference you would address this incentive issue because I believe right now there is a large incentive not to insure their property because we have their back and there is no hard penalty to do that.

If in fact I have a home and it is one of the repetitive loss properties and I do not buy flood insurance, we have a hurricane or a storm and it is damaged and I know I can still get it fixed, why am I going to buy the flood insurance? Especially, let's say, I do not have a loan on it. Let's say I am down there. I am in a very high risk area. I do not have any loan on it and, to me, I know if I get a flood, no problem; the Government is going to back me up.

So what we are doing is sending a signal to the people basically who have no mortgage: The rest of the American people are going to insure you for your flood. And I do not think that is right.

I will ask unanimous consent to withdraw the amendment. I think the amendment would markedly strengthen what this bill is trying to accomplish. My hope would be that in conference, if you do not like my language, you at least put something into the bill that will have some teeth that forces good behavior and forces those who own the properties to actually have some responsibility for the properties. I am not against us helping to create an insurance market. I am not sure this is the best way to do it. But we have certainly made big strides to improve the bill.


Mr. COBURN. Mr. President, I thank Senator Dodd. I think when you fixed this in 1994 or 1997 is when you required the banks on the mortgage to have a notice and pay it and then add to it. But it obviously was not enough teeth to get us up to where we need to be. So I think we need something stronger than that.

Overall--and this is no reflection on the good work that has been done on this bill but we have to ask ourselves--we are talking about $30 billion with this bill. That is going to actually go against the Treasury. We are going to have $17 billion that we are going to kiss off. We are going to say the people who are living in these flood-prone areas, because their insurance did not truly reflect--we did not have it spread broadly enough, $17 billion of it we cannot pay back, so we are going to forgive that.

Well, what does forgiving that mean? What that means is we are going to take the money from the Treasury, we are not going to charge it to the National Flood Insurance Program, but someone is going to have to pay that off. And who is going to pay that off? It is going to be our kids. And there is almost $9 billion in interest that is going to be not paid off, so we are going to charge that to our kids. Then there is another $3 billion still, I understand, to come from the Katrina-Rita-related storms in terms of payments that are also going out.

So what we are going to have is $30 billion, because the program was not actuarially sound in the past, that now we are saying to our kids and grandkids we are going to make actuarially sound, and they are going to pay.

So what we are doing with this bill--and, again, it is not an indictment. You made a lot of headway, but there has to be another way to fix this rather than charge it to our kids. So when you take this $30 billion, on top of the 10 we have now and the $74 trillion that is coming, we have a significant debt in terms of being fair to the next generation. This bill underlies and forgives all the debt to the Treasury, and it translates into roughly $30.2 billion. That is how poorly the program worked in the past.

Again, I think we have made major improvements to the bill. But I believe it is important enough for us to vote on whether we want to send another $30 billion toward our kids rather than make people who have homes in flood-prone areas who are getting the benefit from it pay for a portion of the cost.

Mr. President, I make a point of order that the substitute amendment violates section 201 of S. Con. Res 21 of the 110th Congress and ask for the yeas and nays associated with that, according to however the chairman would like to schedule votes.

I know he will make a motion to waive the point of order. That is expected. But I would like to have a vote on that, if I could.

Mr. DODD. Mr. President, pursuant to section 904 of the Congressional Budget Act of 1974, I move to waive the applicable sections of that act for the consideration of the pending amendment, and I ask for the yeas and nays.

The PRESIDING OFFICER. Is there a sufficient second?

There appears to be a sufficient second.

The yeas and nays are ordered.

Mr. DODD. I ask unanimous consent that the vote on the motion to waive the Budget Act with respect to the Coburn budget point of order occur at 12 noon today, with 2 minutes of debate prior to the vote equally divided and controlled by myself and Senator Coburn or our designees.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. COBURN. I would like to make one more point. Politics is politics, but in the realm of politics the long term is what is getting ready to happen in this country because we are on an unsustainable course. I believe we have to be guardians for the future. And I believe in waiving the pay-go rules we are not doing that; that we are not a guardian for the future.

If you think about $30 billion, you are asking every person in this country this year to pay an extra $100 because this program was not funded and arranged properly.

What we also ought to consider is making sure we never do this again. And I would hope that when and if this budget point of order is waived the chairman and ranking member will put something in the bill that prohibits us from going back and ever waiving debt for this program again.

He wants it actuarially sound, I know that. I know the ranking member wants it actuarially sound. But it is truly unfair, when we spend $28,500 per household at the Federal Government level and the median income in this country is $42,000 and we are already spending 70 percent of that at the Federal Government level and a third of it we are not paying for, we are borrowing from our children, to add on another $30 billion. What we are talking about is opportunity. We don't want to be tough enough now to not take opportunity away from our kids. So the choice is, can we have what we want now and it not hurt our children. The fact is, we can't. We are hurting our kids when we borrow, when we forgive this money. What we should be charging this money to is to the people who have benefited from the coverage. That is who ought to be paying for it. That is who got the flood insurance at a falsely low rate. My hope is that we think long term, not short term. I know you have done that to a great extent in the bill. But my hope is that somehow when you are in conference, that you might put some type of prohibition of ever waiving the debt again, to force the program to always be actuarially sound. If we could do that, we would not ever get to this point again. I know the chairman doesn't want us to get to where we are waiving this debt again, which will force the flood insurance program to be on the same footing as every other insurance company.

I thank the chairman and ranking member for taking two of my amendments, one a study on reinsurance. The reinsurance we have right now is the American taxpayer. That is who is going to do the reinsurance this time of $30 billion. I am appreciative that they considered this and accepted it.

I yield the floor.


Mr. COBURN. I want the record to show I voted against the last supplemental because it was not paid for. No. 2, it had $27 billion of extraneous spending that was not paid for either that was offered by the Appropriations Committee. It has to start somewhere. I am OK with it starting with me. I don't earmark anything back to Oklahoma. I look at every appropriations bill and see if it is wise. So consequently, I vote for few appropriations bills because they are not wise, with the waste that is in the Federal Government.

One final point. According to GAO, IGs, and the Congressional Research Service, we have $300 billion of waste a year in the Federal Government. The Congress didn't do anything about it. We have plenty of ways to pay for the war, pay for this, and do other things, if we do the hard work of oversight and make the hard choices about prioritizing what is important. But we find that very difficult to do as a body. I am worried that we find that because we are not thinking long term. We are thinking short term.

I yield the floor and suggest the absence of a quorum.


Mr. COBURN. Mr. President, this is a great choice. We can prove to the American people we either really care about the budget or not. This violates pay-go rules. We shouldn't send $30 billion to our grandkids. We ought to take it from some of the excess we have today.

I agree Senator Dodd and Senator Shelby have done a good job on this, but I don't think our grandchildren ought to pay because we designed a program in 1977 and modified it in 1994 and it still doesn't work and then have them pay $40 billion. We ought to enforce the pay-go rules, and we ought to come up with another way to pay for this money.

I thank the Chair.

I yield the floor.


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