Senate Proceeding on May 6th, 2008 :: 5:32:27 to 5:41:07
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5:17:59 to 5:32:27( Edit History Discussion )
Speech By: Christopher Dodd

5:32:10 to 5:32:27( Edit History Discussion )

Christopher Dodd: act of 2008 that senator dodd has just outlined. mr. president, senator dodd and i worked very closely to develop this important legislation on the banking committee, which the senate banking committee,

5:32:27 to 5:32:41( Edit History Discussion )

Richard Shelby: by the way, unanimously passed last year. the legislation, mr. president, places the national flood insurance program on a stronger financial footing because it requires thoseiving and working in areas vulnerable

5:32:27 to 5:41:07( Edit History Discussion )
Speech By: Richard Shelby

5:32:41 to 5:32:57( Edit History Discussion )

Richard Shelby: to flooding to assume more of the financial risk, as it should be. the bill also addresses many other structural and fiscal weaknesses in the program itself. mr. president, in addition, the managers'

5:32:57 to 5:33:10( Edit History Discussion )

Richard Shelby: amendment creates a commission to study the current market for catastrophic insurance. the results of this commission should provide congress with a ctual basis for future legislative action if we deem it necessary.

5:33:10 to 5:33:26( Edit History Discussion )

Richard Shelby: mr. president, to fully appreciate the need for significant reform of the national flood insurance program, i think we must first consider the program's history. the flood insurance program was established

5:33:26 to 5:33:42( Edit History Discussion )

Richard Shelby: here in the congress in 1968 to provide policy holders with some insurance for flood-related damage. the intent of the program was to generate enough revenue through premium dollars to permit taxpayers

5:33:42 to 5:33:56( Edit History Discussion )

Richard Shelby: from paying for flood-related losses in an average flood-loss year. at the interception of this program, mr. president -- at the inception this have program, mr. president, congress included explicit substance

5:33:56 to 5:34:12( Edit History Discussion )

Richard Shelby: for homes known as pre-farm structures. it was determined then that it was not fair for the owners of such structures immediately to pay actrial prices because they received no notice regarding the

5:34:12 to 5:34:27( Edit History Discussion )

Richard Shelby: new mandatory purchase rules. that said, it was also believed that many, if not all, of the prefirm structures would quickly become ineligible for the subsidies. for this reason, congress never included

5:34:27 to 5:34:41( Edit History Discussion )

Richard Shelby: a subsidy-elimination mechanism. this oversight, mr. president, has had significant financial consequences for the current flood insurance program. more than 40 years later, a large number of these

5:34:41 to 5:34:55( Edit History Discussion )

Richard Shelby: properties still receive explicit subsidies. many of these properties have made the greatest claims on the program after suffering repetitive losses. in fact, the congressional budget office has valued the

5:34:55 to 5:35:14( Edit History Discussion )

Richard Shelby: explicit subsidy for grandfathered homes at $1.3 billion per year, mr. president. there are other key factors beyond the poorly-designed financial structure of the program that need to be addressed here

5:35:14 to 5:35:29( Edit History Discussion )

Richard Shelby: today. for example, the size of the program is is expanded exponentially since its inception. in 1978, ten years after the program started, the program had 1.4 million policy holders and $50 billion in risk

5:35:29 to 5:35:47( Edit History Discussion )

Richard Shelby: exposure. today there are more than 5 million policy holders and over $1 trillion in risk exposure. finally, mr. president, the amounts used to determine the rates for the program are largely out of date

5:35:47 to 5:35:58( Edit History Discussion )

Richard Shelby: just about everywhere. antiquated maps do not represent accurately the risk that covered structures face. without up-to-date maps and accurate risk assessment, pricing is simply reduced to guesswork.

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Richard Shelby: often these guesses have been too low and the taxpayers have been forced to make up the difference, oftentimes to very wealthy people in this country. mr. president, this program currently generates

5:36:15 to 5:36:29( Edit History Discussion )

Richard Shelby: $3 billion in premiums. it spends roughly $1 billion on administration and has a liability exposure of more than $1 trillion. let me repeat that, mr. president. the program has a liability exposure of more

5:36:29 to 5:36:42( Edit History Discussion )

Richard Shelby: than $1 trillion. in fact, the financial deficiencies of the program are so great that the general accounting office placed it on a list of high-risk programs because it does not, mr. president, generate

5:36:42 to 5:36:58( Edit History Discussion )

Richard Shelby: enough money to cover its liabilities. furthermore, robert hunter was recognized as one of the key individuals in getting the program started, has stated -- and i quote -- "the integrity of the program

5:36:58 to 5:37:10( Edit History Discussion )

Richard Shelby: must be restored or consideration must be given to ending this hopelessly administered program." mr. hunter was with the consumer federation of america for many years. mr. hunter's prescription for restoring

5:37:10 to 5:37:24( Edit History Discussion )

Richard Shelby: the program's integrity is requiring greater mitigation efforts and moving toward actuarial soundness. this is what we have attempted to do here today. mr. president, i recognize that reforming the

5:37:24 to 5:37:38( Edit History Discussion )

Richard Shelby: flood insurance program presents the congress with difficult choices. we could end the program. we could dramatically increase fees on program beneficiaries, or we could do nothing. each of those choices

5:37:38 to 5:37:52( Edit History Discussion )

Richard Shelby: would be unacceptable. that's why senator dodd and i have crafted a bill that addresses what we believe of the most significant financial weaknesses of the program without dismantling its core features.

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Richard Shelby: we struck a realistic balance between the needs of the program's beneficiaries and the taxpayers who are on the hook for the program's shortfalls. the legislation before us strengthens the program by

5:38:05 to 5:38:19( Edit History Discussion )

Richard Shelby: immediately eliminating subsidies on vacation homes, businesses, and severe repetitive loss properties. it then paves the way for eliminating all subsidies in the future. it proceeds in such a way,

5:38:19 to 5:38:30( Edit History Discussion )

Richard Shelby: however, that recognizes immediate elimination of all subsidies is not prudent because flood maps will not be updated for some time. to address the mapping deficiencies, the bill creates stringent

5:38:30 to 5:38:48( Edit History Discussion )

Richard Shelby: standards that the program must use to complete, mr. president, the map modernization process. once we have the most accurate and up-to-date flood mapping possible, homeowners will better understand

5:38:48 to 5:39:01( Edit History Discussion )

and mitigate their risks. the program will also transition to more accurate pricing. in addition to eliminating subsidies, the bill requires state charter lending institutions to maintain flood insurance

5:39:01 to 5:39:14( Edit History Discussion )

Richard Shelby: coverages for all mortgages within the 100 flood year plain. it increases enforcement tools available to bank regulators at both the federal and state levels by requiring escrow of flood insurance

5:39:14 to 5:39:31( Edit History Discussion )

Richard Shelby: premiums throughout the life of the mortgage. the civil monetary penalties that regulators may levy against lenders for failure to comply are also increased. the bill creates a mandatory reserve

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Richard Shelby: fund to cover the cost of unusual events. this provision is intended to limit future reliance on the american taxpayer: the bill requires a rulemaking to ensure that the right your -- write your own carriers

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Richard Shelby: are being reimbursed. finally, mr. president, the legislation creates a commission that senator dodd outlined earlier to study the effects of natural disasters on our insurance system. the commission must

5:39:57 to 5:40:15( Edit History Discussion )

Richard Shelby: report its finding within nine months. some have suggested here that we should add wind coverage -- wind insurance coverage to the already bankrupt federal flood insurance program. but i would remind

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Richard Shelby: you of certain facts. the insurance information institute, mr. president, estimates that by adding wind, the program will take on an additional $14 trillion to $19 trillion worth of risk exposure. $14 trillion

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Richard Shelby: to $19 trillion exposure. in addition, the report indicates that adding wind coverage to the flood program could lead to an additional annual program deficit as high as $1 billion. both of these studies

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Richard Shelby: point out exactly why we should have a complete understanding of all of the facts before we even contemplate expanding the federal government's role as an insurance provider. mr. president, before

5:40:57 to 5:41:07( Edit History Discussion )

Richard Shelby: i conclude, i would like to take a moment to recognize senator bunning for all of his efforts to reform this program for the past several years. and as senator dodd did, i would also like to recognize senator

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jack reed of rhode island and his staff for their efforts to create accurate and up-to-date flood maps which are essential for this program in the future. lastly, i would like to thank my colleague,