[Congressional Record Volume 140, Number 30 (Thursday, March 17, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: March 17, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS ACT OF 1993
The PRESIDING OFFICER. Under the previous order the clerk will now
report Calendar No. 259.
The legislative clerk read as follows:
A bill (S. 1275) to facilitate the establishment of
community development financial institutions.
The Senate resumed consideration of the bill.
Pending:
Riegle-D'Amato amendment No. 1525, to provide for fair
trade in financial services.
The PRESIDING OFFICER. The Chair, in his capacity as a Senator from
Colorado, suggests the absence of a quorum.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. RIEGLE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
amendment no. 1525
Mr. RIEGLE. Mr. President, we are continuing now on the bill from the
Banking Committee that we brought to the floor yesterday. Several of us
had to be at Senate Budget Committee this morning for a sequence of
votes beginning shortly after 10 a.m., which we have now completed.
Other votes will occur later in the day in the Budget Committee. But
that has required us to start a little later on the floor this morning
than we otherwise had intended.
Pending before the Senate now is an amendment dealing with fair trade
and financial services. This is an amendment that was a bill recently
reported favorably out of the Senate Banking Committee. Our bill on
fair trade and financial services now has passed the Senate three
previous times. The amendment we are considering this morning was
introduced on October 7 of last year on a bipartisan basis by a
majority of the members of the Senate Banking Committee. It is designed
to give U.S. negotiators new leverage to obtain the same quality of
competitive opportunity for financial firms in the United States
operating in foreign markets that we extend to foreign firms operating
here in our own U.S. market.
On October 26 of last year, the committee held a hearing in which
this bill I am now referring to, and which is now pending in amendment
form, received united Clinton administration support, as well as
support from the financial services industry. And then on February 10
of this year, the committee reported this bill out favorably by a vote
of 17 to 2, which shows the strong bipartisan support that it enjoys.
The act builds on provisions of the 1988 Omnibus Trade and
Competitiveness Act that require the Treasury Department to identify
countries that deny U.S. financial firms de facto national treatment,
meaning equality of competitive opportunity and effective market
access. If negotiations to obtain national treatment fail to succeed,
the act allows but does not require the Secretary of the Treasury, the
U.S. negotiator on trade and financial services, to publish in the
Federal Register a determination that a given country is discriminating
against U.S. financial institutions.
Following any such publication the Treasury Secretary may, after
consultation with the U.S. Trade Representative and the Secretaries of
State and Commerce, recommend to the appropriate Federal financial
services regulator that it deny applications filed by banking or
securities firms from the discriminating country. Such denials would
only affect opportunities for future expansion in the U.S. market and
would not force foreign financial firms to have to actually shrink
their existing operations here in the United States. So it would be a
prohibition against future growth, but it would not shut down their
existing operations.
So the bill, I think, is fair and balanced in that respect. It is
designed to give our U.S. negotiators new leverage to force open
foreign financial markets that are now closed to our firms when the
firms from that very country have open access here in the United
States.
President Clinton has spoken out on this issue forcefully, and I
appreciate the fact that he has given new leadership to this question
of fighting for fairness in the international markets with respect to
those people from the United States who provide financial services.
On January 26 of this year, Senator D'Amato and I received a joint
letter from Secretary Bentsen and Trade Ambassador Kantor urging swift
enactment of the Fair Trade and Financial Services Act because, they
wrote, it is ``an essential component of our strategy'' to open foreign
financial markets to U.S. institutions. The legislation is critical to
the success of United States negotiators in both the ongoing
negotiations under the auspices of the General Agreement on Tariffs and
Trade, as well as the stalled United States-Japan Framework for New
Economic Partnership discussions.
Under GATT, financial services are included within the General
Agreement on Trade in Services, which establishes a multilateral
framework of principles and rules for trade in financial services.
However, the commitments made by many countries to open their markets
to U.S. financial institutions under that framework were far less than
the United States had hoped for. The United States has, therefore,
taken the most-favored-nation trade exemption for banking and other
financial services, including insurance, but will suspend it for 6
months after the GATT agreement goes into effect. Until that time,
negotiations will continue within the GATS framework outlined above.
In their January 26 letter, Ambassador Kantor and Secretary Bentsen
explained why the passage of the Fair Trade in Financial Services Act
is needed to help complete a successful GATT agreement on financial
services.
In that letter they stated, and I want to read one key paragraph:
We agreed on a framework for trade in financial services
but did not obtain the full commitments on market access we
had sought. However, the financial services agreement
provides for continuing negotiations within the GATT context
to seek improved commitments. In the event we are not able to
achieve sufficient progress in these negotiations, this
legislation [Fair Trade in Financial Services] will help
ensure that we will have incentives to encourage other
countries to liberalize in the future. The success of this
effort will provide increased competitive opportunities for
U.S. financial services and enhance their ability to
facilitate U.S. exports.
Of course, I should add that means U.S. jobs. We are talking here
about strengthening the U.S. economy, broadening our own job base,
being able to compete fairly in foreign markets where we are now being
blocked out.
So I urge my colleagues to heed this strong call for swift enactment
of this legislation now incorporated in the pending amendment.
Mr. President, I ask unanimous consent that the letter that I just
quoted from be printed in the Record following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. RIEGLE. Finally, the fair trade in financial services is
absolutely critical to be accomplished at this time. We have been at
this now for years. The negotiations that I have just cited illustrate
the fact that we are not going to get the progress we need until we
have this in place as a constructive lever to force open arbitrarily
closed foreign markets.
So the time to do this is now. It is good for America. It is good for
our economy. It will help our financial services sector as they fight
for competitive equity in these foreign settings. And this is an
opportunity for us to accomplish a piece of work that will well serve
the American people.
Exhibit 1
Department of the Treasury,
Washington, DC, January 26, 1994.
Hon. Donald W. Riegle, Jr.,
Chairman, Committee on Banking, Housing, and Urban Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: We are writing to urge swift enactment
of the Fair Trade in Financial Services legislation. The
Administration supports the objectives of the legislation as
introduced and will continue to work closely with Congress to
complete the final details. We believe that the original
intent of S. 1527 and HR 3248 provides an effective
foundation for legislation.
The passage of this important legislation is a priority
matter for the Administration, and an essential component of
our strategy to continue multilateral negotiations to open
foreign financial markets to U.S. financial institutions.
The Administration is very pleased with the results of the
recently completed Uruguay Round of multilateral negotiations
conducted under the auspices of the General Agreement on
Tariffs and Trade (GATT). The lowering of trade barriers
achieved there will help ensure a continued and equitable
expansion of world trade and contribute to the prosperity of
American industry and workers in the years ahead.
In financial services the outcome was more modest. We
agreed on a framework for trade in financial services but did
not obtain the full commitments on market access that we had
sought. However, the financial services agreement provides
for continuing negotiations within the GATT context to seek
improved commitments. In the event that we are not able to
achieve sufficient progress in these negotiations, this
legislation will help ensure that we will have incentives to
encourage other countries to liberalize in the future.
The success of this effort will provide increased
competitive opportunities for U.S. financial services and
enhance their ability to facilitate U.S. exports.
This Administration has clearly stated its objective to
open foreign financial markets. Fair Trade in Financial
Services legislation will complement our multilateral,
bilateral and regional efforts to gain access to foreign
markets on the basis of national treatment and equality of
competitive opportunity. The proposal would give the
authority to act to the Treasury Department, after
appropriate interagency consultation and subject to the
specific direction of the President.
It is our view that enactment of the Fair Trade in
Financial Services legislation is needed at the earliest
possible time to safeguard the progress we achieved in the
Uruguay Round and to support additional market opening talks,
both within the GATT framework and on a bilateral basis.
Thank you for your attention to this matter which is so
important to America's financial firms. We look forward to
working with you to achieve early enactment of this critical
legislation.
Sincerely,
Lloyd Bentsen,
Secretary of the Treasury.
Michael Kantor,
U.S. Trade Representative.
Mr. RIEGLE. Mr. President, I see no one else seeking recognition at
this time. So I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. ROTH. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Shelby). Without objection, it is so
ordered.
The Senator from Delaware is recognized.
Mr. ROTH. Mr. President, I send an amendment to the desk----
The PRESIDING OFFICER. The Chair will inform the Senator from
Delaware that there is a pending amendment, the Riegle-D'Amato
amendment.
Mr. ROTH. I ask unanimous consent that we lay aside that particular
amendment.
The PRESIDING OFFICER. Is there any objection? Without objection, it
is so ordered.
Mr. ROTH. I am sorry, I am sending this amendment as an amendment to
the Riegle amendment.
Mr. KERRY. Mr. President, reserving the right to object, and I do not
intend to necessarily.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KERRY. It is my understanding that under a unanimous consent
agreement, the Senator from Texas was to bring an amendment; is that
correct?
The PRESIDING OFFICER. That was the order.
Mr. KERRY. So now we would proceed to the amendment of the Senator
from Delaware instead. I ask unanimous consent that I be permitted to
proceed to an amendment following the Senator from Delaware.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. KERRY. I thank the Chair.
The PRESIDING OFFICER. The Senator from Delaware is recognized.
Amendment No. 1533 to Amendment No. 1525
Mr. ROTH. Mr. President, I send an amendment in the second degree to
the desk.
The PRESIDING OFFICER. The clerk will report the amendment by number.
The bill clerk read as follows:
The Senator from Delaware [Mr. Roth] proposes an amendment
numbered 1533 to amendment No. 1525.
Mr. ROTH. Mr. President, I ask unanimous consent that the reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
After section 403 of the Reigle amendment insert the
following new section:
SEC. 404. EFFECTUATING THE PRINCIPLE OF NATIONAL TREATMENT
FOR INSURERS AND REINSURERS.
(a) Purpose.--The purpose of this section is to encourage
foreign countries to accord national treatment to United
States insurers and reinsurers that operate or seek to
operate in those countries.
(b) Identifying Countries That Deny National Treatment to
United States Insurers or Reinsurers.--The President or the
President's designee shall identify whether and to what
extent foreign countries deny national treatment to United
States insurers or reinsurers--
(1) according to the most recent report under section 3602
of the Omnibus Trade and Competitiveness Act of 1988 (or
update thereof); or
(2) based on more recent information that the President
deems appropriate.
(c) Determining Whether Denial of National Treatment Has
Significant Adverse Effect.--
(1) In general.--The President shall determine whether the
denial of national treatment to United States insurers or
reinsurers by a foreign country identified under subsection
(b) has a significant adverse effect on such organizations.
(2) Factors to be considered.--In determining whether and
to what extent a foreign country denies national treatment to
United States insurers or reinsurers, and in determining the
effect of any such denial on such insurers or reinsurers, the
President shall consider appropriate factors, including--
(A) the size of the foreign country's markets for the
financial services involved, and the extent to which United
States insurers or reinsurers operate or seek to operate in
those markets;
(B) the extent to which United States insurers or
reinsurers may participate in developing regulations,
guidelines, or other policies regarding new products,
services, and markets in the foreign country;
(C) the extent to which the foreign country issues written
regulations, guidelines, or other policies applicable to
United States insurers or reinsurers operating or seeking to
operate in the foreign country that are--
(i) prescribed after adequate notice and opportunity for
comment;
(ii) readily available to the public; and
(iii) prescribed in accordance with objective standards
that effectively prevent arbitrary and capricious
determinations;
(D) the effects of the regulatory policies of the foreign
country on--
(i) the licensing policies of the insurance regulator of
that country;
(ii) capital requirements applicable in that country;
(iii) restrictions on acquisitions or joint ventures and
operations thereof by insurers or reinsurers in that country;
and
(iv) restrictions on the operation and establishment of
branches in that country.
(d) Publication of Determination.--
(1) In general.--If the President determines under
subsection (c) that the denial of national treatment to
United States insurers or reinsurers by a foreign country has
a significant adverse effect on such organizations, the
President--
(A) may, after initiating negotiations in accordance with
subsection (f) publish that determination in the Federal
Register;
(B) shall, not less frequently than annually, in
consultation with any department or agency that the President
deems appropriate, review each such determination to
determine whether it should be rescinded; and
(C) shall inform State insurance commissioners of the
publication of that determination.
(2) Exception for countries that are parties to certain
agreements governing financial services.--Paragrah (1) shall
not apply to a foreign country to the extent that any
authority under that paragraph would permit action to be
taken that would be inconsistent with a bilateral
or multilateral agreement including any dispute resolution
procedures contained in such agreement that governs
financial services, including insurance, that--
(A) the President entered into with that country; and
(B) the Senate and the House of Representatives approved;
before the date of enactment of this section.
(e) Sanctions.--
(1) Actions by the president.--
(A) In general.--The President may recommend to the state
insurance commissioners that they deny a foreign insurer's or
reinsurer's request for authorization which is filed after
the date of publication of a determination under subsection
(d)(1) by a person of a foreign country listed in such
publication if the President determines that--
(i) such action would assist the United States in
negotiations to eliminate discrimination against United
States insurers or reinsurers;
(ii) negotiations undertaken pursuant to subsection (f) are
not likely to result in an agreement that eliminates the
denial of national treatment; or
(iii) the country has not adequately adhered to an
agreement reached as a result of negotiations undertaken
pursuant to subsection (f).
(B) Exercise of authority.--If the President delegates his
authority under Sec. 4(b), the designee's authority under
subparagraph (A) shall be exercised according to the specific
direction (if any) of the President.
(C) Compliance exceptions.--If the state insurance
commissioners do not act within 90 days on the President's
recommendations in subsection (A), or if the President
determines that the procedure outlined in subsection (A) is
either inappropriate or impractical to achieve the purpose of
this section, the President may take such action as he or she
considers necessary and appropriate to encourage foreign
countries to accord national treatment to United States
insurers and reinsurers that operate or seek to operate in
those countries.
(2) Standards for exercise of discretion.--In exercising
any discretion under subsection (e), the President shall
consider, with respect to an insurer or reinsurer, branch, or
other affiliated entity that is a person of a foreign country
and is operating in the United States--
(A) the extent to which the foreign country is progressing
toward according national treatment to United States insurers
or reinsurers; and
(B) whether the foreign country permits United States
insurers or reinsurers to expand their activities in that
country, even if that country determined that the United
States did not accord national treatment to the insurers or
reinsurers of that country.
(f) Negotiations.--
(1) In general.--The President--
(A) shall initiate negotiations with any foreign country
with respect to which a determination made under subsection
(c)(1) is in effect; and
(B) may initiate negotiations with any foreign country
which denies national treatment to United States insurers or
reinsurers to ensure that the foreign country accords
national treatment to such insurers or reinsurers.
(2) Exceptions.--Paragraphs (1) does not require the
President to initiate negotiations with a foreign country if
the President--
(A) determines that the negotiations--
(i) would be so unlikely to result in progress toward
according national treatment to United States insurers and
reinsurers as to be a waste of effort; or
(ii) would impair the economic interests of the United
States; and
(B) gives written notice of that determination to the
chairperson and the ranking minority member of the
appropriate Senate and House committees.
(g) Report.--
(1) Contents of report.--Not later than December 1, 1994,
and biennially thereafter, the President shall submit to the
Congress a report that--
(A) specifies the foreign countries identified under
subsection (b);
(B) if a determination is published under subsection (d)(1)
with respect to the foreign country, provides the reasons
therefor;
(C) if the President has not made or has rescinded such a
determination with respect to the foreign country, provides
the reasons therefor;
(D) describes the results of any negotiations conducted
under subsection (g)(1) with the foreign country; and
(E) discusses the effectiveness of this section in
achieving the purpose of this section.
(2) Submission of report.--The report required by paragraph
(1) may be submitted as part of a report or update submitted
under section 3602 of the Omnibus Trade and Competitiveness
Act of 1988.
(h) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Insurer.--The term ``insurer'' means a party to a
contract of insurance who assumes the risk and undertakes to
indemnify the insured, or pay a certain sum on the happening
of a specified contingency.
(2) National treatment.--A foreign country accords
``national treatment'' to United States insurers and
reinsurers if it offers them the same competitive
opportunities (including effective market access) as are
available to its domestic insurers or reinsurers.
(3) Person of a foreign country.--The term ``person of a
foreign country'' means--
(A) a person organized under the laws of the foreign
country;
(B) a person that has its principal place of business in
the foreign country;
(C) an individual who is--
(i) a citizen of the foreign country, or
(ii) domiciled in the foreign country; and
(D) a person that is directly or indirectly controlled by a
person or persons described in subparagraph (A) or (B), or by
an individual or individuals described in subparagraph (C).
(4) President.--The term ``President'' means the President
of the United States or the President's designee.
(5) Reinsurer.--The term ``reinsurer'' means an insurer
which contracts to indemnify a ceding insurer for all or part
of a risk originally undertaken by the ceding insurer.
(6) Request for authorization.--The term ``request for
authorization'' means--
(A) an application, registration, notice, or other request
to commence engaging in the business of insurance in a state;
or
(B) an application, registration, notice, or other request
for renewal of authorization to engage in the business of
insurance in a state.
Mr. ROTH. Mr. President, I rise to offer an amendment to the fair
trade in financial services legislation to include one vital component
of our financial services sector that is currently not covered under
the legislation--insurance.
On two previous occasions the Senate has passed fair trade in
financial services legislation and it is now being offered again to the
bill now before us--S. 1275--by our distinguished chairman of the
Banking Committee.
This important legislation would give the Secretary of the Treasury
the authority to negotiate and, if necessary, recommend retaliation
against countries which deny our banks and securities organizations
access to foreign markets.
The Banking Committee has long believed that this kind of market
access and market penetration is critical to these financial services
companies' efforts to increase exports in this sector. The House has
refused to accept this legislation and the Reagan and Bush
administrations opposed it until just before the end of the Bush
Presidency.
In contrast, this legislation is strongly endorsed by the Clinton
administration.
This legislation has become a key element in the Uruguay round
agreement to continue negotiations in financial services beyond the
December 15, 1993 concluding date.
These negotiations, which are considered to be at the core of the
attempt by the world's trading nations to bring for the first time
services under GATT rules, include insurance as well as banking and
securities. Unfortunately, S. 1527, as reported by the Banking
Committee, does not cover insurance. My amendment would add this vital
sector to the legislation. I believe it is critical that insurance be
on an equal basis in these negotiations with the banking and
securities.
I would like to elaborate briefly on some of the reasons why I am
offering this amendment.
The first is that the continued Uruguay round negotiations include
insurance but American negotiators' effort to obtain market opening
concessions in insurance will not be viewed as credible unless the fair
trade in financial services bill covers insurance as well as banking
and securities. Lack of coverage for insurance will send the wrong
message at the wrong time.
A second important reason for this amendment is that insurance was
one of the few sectors involved in the failed framework talks with
Japan and the absence of insurance in the fair trade in services bill
will be taken as another bad signal that the American Government has
given up on attempting to open the Japanese insurance market.
The Japanese insurance market is the second largest in the world
after the United States, with a premium volume of $308 billion. After
almost 50 years, the foreign share of the Japanese market is only 2.9
percent. This contrasts with foreign penetration in the United States
which is almost 10 percent. The breakdown in the framework talks makes
the inclusion of insurance in this legislation all the more critical.
A final point in support of this amendment is that the insurance
industry is one of the most significant service industries in the
world. Worldwide insurance premium income today is approximately $1.4
trillion. The insurance sector is critical to the U.S. economy and its
expansion into other markets is essential to the growth of jobs and
expansion here at home.
Mr. President, the insurance industry simply seeks equity with its
sister financial services. The amendment I have offered mirrors the
banking and securities provisions in S. 1527 with one major exception.
Unlike those provisions under which a federal regulator could take
retaliatory action against a foreign bank or securities firm, since
insurance is regulate at the State level, my amendment provides only
that the President or his designee, which I assume would be the U.S.
Trade Representative, may recommend to the State insurance
commissioners that they deny a foreign insurers' request for
authorization.
The State commissioners may ignore the request or respond to it. In
either event, there is no attempt to affect in anyway the exclusive
right of the State to regulate insurance.
Mr. President, this amendment is supported by the insurance companies
which either are or desire to do business in foreign markets and the
trade associations representing those companies. Included are the
American International Group [AIG], the Chubb Co., the American
Insurance Association representing over 250 large property and casualty
insurers, the Council of Insurance Agents and Brokers, and the National
Association of Insurance Brokers.
For all of the reasons mentioned above, it is absolutely critical
that we include insurance as part of the fair trade in financial
services legislation, and I urge the support of my colleagues for this
amendment.
I yield the floor.
Mr. D'AMATO addressed the Chair.
The PRESIDING OFFICER. The Senator from New York.
Mr. D'AMATO. Mr. President, I ask unanimous consent that I be added
as a cosponsor to the amendment of the Senator from Delaware.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. D'AMATO. Mr. President, I commend the Senator from Delaware. I
think it is absolutely an excellent amendment. This is an important
financial industry. It employs hundreds of thousands of people. It is
important in the capital markets. It is important they be permitted to
compete abroad, and I think that this will have an effect of sending a
very clear message that we are serious about seeing to it that free
trade is fair; that financial services, and certainly the insurance
industry is one of those, is an area that we are not going to permit to
be abused, abused by those who would compete freely in our marketplace
and yet deny us the same access.
So I commend the Senator from Delaware for this thoughtful
legislation.
Mr. RIEGLE addressed the Chair.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. RIEGLE. Mr. President, I, too, want to join the Senator from New
York in commending the Senator from Delaware for offering this
amendment. I think this strengthens fair trade in financial services
and should include insurance. We have a number of very fine American
companies that should be able to compete abroad that are now being
prevented from doing so by arbitrary barriers to their entry.
This is an important addition to our amendment and it is one I
support. It now has been offered and at the desk as an amendment to our
fair trade in financial services.
If no one wishes to speak on it, I urge the adoption of the
amendment.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment.
The amendment (No. 1533) was agreed to.
Mr. RIEGLE. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. RIEGLE. Mr. President, I have three other amendments, technical
in nature, that have been cleared on both sides. I would like to just
move through those at this time.
I ask unanimous consent to proceed to these three. I know Senator
Kerry is locked in with his request to go next. These will only take 2
or 3 minutes. I would like to do that and still preserve his rights.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. RIEGLE. Mr. President, I am offering a technical amendment on
behalf of Senator Dodd, Senator Nunn, and Senator Coverdell to a
previously agreed to amendment No. 1527, offered yesterday by Senator
Dodd. This is technical in nature and has been cleared on both sides.
Let me send it to the desk and ask it be reported.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. RIEGLE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Akaka). Without objection, it is so
ordered.
Mr. RIEGLE. Mr. President, let me now ask unanimous consent that the
amendment I have just sent to the desk also momentarily be set aside so
that I might offer a replacement amendment for the moment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. RIEGLE. Now, we have been working on this fair trade and
financial services issue. We had a disagreement with Senator Gramm of
Texas. That has now been resolved. We have a modification that we want
to make to our package which will enable us to incorporate his
suggestion and thereby be able to move this matter at this time.
So let me yield to Senator D'Amato so that he might present it to the
Senate.
Amendment No. 1534
Mr. D'AMATO. Mr. President, I send an amendment to the desk on behalf
of Senator Gramm from Texas and ask for its immediate consideration as
an amendment to the fair trade provisions.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from New York [Mr. D'Amato], for Mr. Gramm,
proposes an amendment numbered 1534.
Mr. D'AMATO. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
Beginning on page 5, line 17 of the amendment, strike all
after ``SERVICES.'' through page 6, line 2, and insert in
lieu thereof the following: ``--Paragraph (1) shall not apply
to a foreign country to the extent that any authority under
that paragraph would permit action to be taken that would be
inconsistent with a bilateral or multilateral agreement
(including any dispute resolution procedures contained in
such agreement) that governs financial services that--
(A) the President entered into with that country; and
(B) the Senate and House of Representatives approved;
before the date of enactment of this section.''.
Beginning on page 16, line 23, strike all after
``SERVICES.'' through page 17, line 7, and insert in lieu
thereof the following: ``--Paragraph (2) shall not apply to a
foreign country to the extent that any authority under that
paragraph would permit action to be taken that would be
inconsistent with a bilateral or multilateral agreement
(including any dispute resolution procedures contained in
such agreement) that governs financial services that--
(A) the President entered into with that country; and
(B) the Senate and House of Representatives approved;
before the date of this section.''.
Mr. D'AMATO. Mr. President, this amendment deals with Canada, Mexico,
and Israel. What the amendment says in essence is that notwithstanding
our attempt to see to it that the financial interests of our country
are protected as it relates to the financial services area, this
amendment will preclude and does not include Canada, Israel, or Mexico,
and that it does not in any way disrupt those treaties that we have
with these countries; that since those treaties do have their own
enforcement and bilateral agreements with us, we want to make it clear
that this effort in no way affects Canada, Israel, or Mexico.
Mr. RIEGLE. Mr. President, I appreciate the effort that has been made
on both sides to resolve this issue in a proper manner. It has now been
done.
The amendment is at the desk and I now urge its adoption.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, without objection, the amendment is agreed to.
So the amendment (No. 1534) was agreed to.
Mr. RIEGLE. Mr. President, I move to reconsider the vote.
Mr. D'AMATO. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1527, as Modified
Mr. RIEGLE. Mr. President, having settled the fair trade and
financial services issue, let me now move back to the matter which I
had proposed just before that, and let me restate my request.
I ask unanimous consent that amendment No. 1527 be modified with the
language that I have now sent to the desk.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered. The amendment will be so modified.
So the amendment (No. 1527), as modified, was agreed to, as follows:
Strikes Sec. 334. (d)(3) Commencement of Issuance and Sec.
334. (d)(4) Sunset Provision and replace with:
Sec. 334. (d)(3) Period for Issuance.--The Secretary shall
issue coins minted under this Act during the period beginning
on January 15, 1995, and ending on December 31, 1995.
Mr. D'AMATO. Mr. President, I move to reconsider the vote.
Mr. RIEGLE. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1535 to Amendment No. 1525
Mr. RIEGLE. Mr. President, on behalf of Senator Mack, on page 31,
line 7 of amendment No. 1525, we wish to add the following as a new
section, section 405, the heading of which is ``Federal Reserve Report
on the Foreign Bank Supervision Enhancement Act of 1991.''
I will not read the remaining text, but instead send it to the desk
and ask that it be stated at this time.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Michigan [Mr. Riegle], for Mr. Mack,
proposes an amendment numbered 1535 to amendment No. 1525.
Mr. RIEGLE. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 31, line 7, of amendment No. 1525 add the following
as a new Section 405:
SEC. 405. FEDERAL RESERVE REPORT ON THE FOREIGN BANK
SUPERVISION ENHANCEMENT ACT OF 1991.
The Federal Reserve shall submit to the House and Senate
Banking Committees within 60 days of enactment of this
legislation a report on the Foreign Bank Supervision
Enhancement Act of 1991 including:
(a) the number of applicants received and from what
countries;
(b) the number of applications approved and from what
countries;
(c) the amount of time taken on each application between
receipt and approval or rejection of the application;
(d) other agencies involved in the approval process, how
much time is taken by those agencies, and any problems
encountered with these agencies;
(e) coordination of processing applications and length of
time for processing between the regional bank's and the
Federal Reserve Board's staffs;
(f) efforts to define consolidated home country supervision
on an international basis, and;
(g) suggestions for streamlining the process.
Mr. RIEGLE. Mr. President, this has been cleared on both sides. I now
urge its adoption.
The PRESIDING OFFICER. Is there further debate on this amendment? If
not, without objection, the amendment is agreed to.
So the amendment (No. 1535) was agreed to.
Mr. RIEGLE. I thank the Chair. Mr. President, I move to reconsider
the vote.
Mr. D'AMATO. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1536
(Purpose: To make a clarifying amendment relating to the Comptroller of
the Currency and the Office of Thrift Supervision)
Mr. RIEGLE. Mr. President, I now offer the remaining amendment and
will be sending that to the desk. Its purpose is to make a clarifying
amendment relating to the Comptroller of the Currency and the Office of
Thrift Supervision.
I am going to send it to the desk now, and before it is reported by
the clerk I will just add this commentary.
I am offering this amendment, together with Senator D'Amato, to
supplement a previously agreed-to amendment clarifying the authority of
the OCC and the OTS and giving them equivalent authority.
This amendment clarifies that the autonomy of the Director of the OTS
and the Comptroller of the Currency extends to agency rulemaking
proceedings and enforcement actions, a very important point.
Mr. D'AMATO. Mr. President, I am pleased to join in this effort. I
wish to commend Senator Riegle for this amendment. We need this
legislation regardless of who is in the White House, Republican or
Democrat. Independent agencies must be protected, their integrity to do
the job as they see fit, and that is what this legislation does.
So I commend Senator Riegle.
Mr. RIEGLE. I thank the Senator from New York. I now urge adoption of
that amendment.
The PRESIDING OFFICER. Without objection, the pending amendment will
be set aside and the clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Michigan [Mr. Riegle], for himself and Mr.
D'Amato, proposes an amendment numbered 1536.
Mr. RIEGLE. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place in title III of the bill, insert
the following:
SEC. . CLARIFICATION OF PROVISION RELATING TO
ADMINISTRATIVE AUTONOMY.
Section 3(b)(3) of the Home Owners' Loan Act (12 U.S.C.
1462a) is amended by striking everything after ``Director''
and inserting in lieu thereof ``(including agency rulemaking
proceedings and enforcement actions) unless otherwise
specifically provided by law.''.
The PRESIDING OFFICER. Is there further debate? If not, without
objection, the amendment is agreed to.
So the amendment (No. 1536) was agreed to.
Mr. RIEGLE. I thank the Chair. Mr. President, I move to reconsider
the vote.
Mr. D'AMATO. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. RIEGLE. Mr. President, let me also say, if I may, if I can have
the attention of the Senator from Texas, Mr. Gramm, who is in the
Chamber, I just want to indicate that I appreciate the cooperative
effort with respect to resolving that last matter on fair trade and
financial services. We just incorporated that amendment prior to the
Senator's arrival in the Chamber.
But I appreciate the effort to work it out, and I think we have a
package here that can help us a great deal with respect to opening up
the game for American companies overseas.
I appreciate the cooperation of the Senator.
Mr. GRAMM. Mr. President, if the chairman will yield, I want to thank
him for his cooperation. I think, basically, what I wanted to be sure
of is in trying to open up markets for American financial companies
that we did not in any way interfere with NAFTA. I think we have
achieved that goal. I appreciate the chairman's help.
Mr. RIEGLE. I thank the Senator.
Amendment No. 1525
Let me now say to the Chair, I would like to move the adoption of
amendment number 1525, which is the fair trade and financial services
amendment.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment.
The amendment (No. 1525), as amended, was agreed to.
Mr. RIEGLE. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. D'AMATO. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. RIEGLE. I thank everyone who has been involved in that. That is a
very major hurdle, jump, and I think very much in the interest of our
country.
Mr. President, I have now sent to the desk all technical amendments
of which I am aware. So I know Senator Kerry has kindly deferred so
that we could handle this matter prior to his bringing forward the
issue that he now wants to present.
I thank him for his courtesy in doing so.
Mr. KERRY addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from
Massachusetts [Mr. Kerry].
Mr. KERRY. Mr. President, I thank the Chair, and I thank the
distinguished manager of the bill. Also I thank the Senator from New
York for his forbearance and for his counsel on this.
Mr. President, I am not yet about to send to the desk the amendment
that I am contemplating in the hopes that a meeting that we have
scheduled shortly with a couple of the principals dealing with this
issue will bear fruit.
It is my hope that we will be able to reach some kind of
accommodation. But I want to try to share with my colleagues a little
bit of the background as to why I am considering an amendment at this
moment, and what the stakes are for the Senate and for all of us as
representatives of taxpayers.
The amendment that I am contemplating sending to the desk is an
amendment with respect to flood insurance reform. As every Member
knows, over the course of the last years we have seen increased amounts
of damage being done by earthquakes, storms, flooding, hurricanes, and
so forth.
In 1968, in recognition of the very large sums of money that the U.S.
Government was paying on an annual basis to make up for bad choices
people were making about where they would live, Congress created in
1968 the flood insurance program, the National Flood Insurance Program.
This program was created with the view to trying to minimize the amount
of damage that was being done to the flood plain areas and to homes in
those areas.
Now we have reached a point where we are recognizing the number of
studies that have been done--the Office of Technology Assessment, the
National Academy of Sciences and others--and all of them have
concluded, without any dissent, that we need to do a better job of
mapping these hazards, of understanding the risks, and of making the
flood insurance program sound. The fact is that we have only about a
19- or 20-percent compliance with this program of the millions of
homes, some 11-plus million homes that are within what we call the
flood plain. Only about 2.6 million actually carry flood insurance.
They are all supposed to carry it. But enforcement has been
nonexistent, and the result is that people let their flood insurance
lapse. They do not pay into the fund.
Very recently, the fund borrowed $100 million from the Treasury. We
have paid out something like $4 billion of disaster assistance in the
last years for flood-related damages. Nevertheless, we continue to
ensure people in a way that makes it easier for them, attractive for
them, to go build in a place where we know a disaster is going to take
place. The result is not just the cost in terms of the loss to the
flood program itself, which is self-sustaining for the moment.
Within the flood plain zones there are enough people still paying in
that they have been able to cover the damage. I am not asserting that
that is not happening. But what is happening is we are exposing
ourselves to larger and larger numbers of homes which are increasing
the overall liability of the U.S. Government, and there are costs that
are not up-front costs of the loss of a home.
For instance, the insurance fund may pay for the actual structure
that was lost. But the community has to pay for the clean up. The
community has to pay for all of the incidental costs of infrastructure,
telephones, sewer, roads, and all of the other things that go with that
development. The community has to pay for the time of its public
officials that are caught up dealing with these problems as a
consequence. Ultimately, the taxpayers, broadly speaking, are at risk
and paying.
The $100 million that is currently paying the deficiency of flood
insurance for people living in areas where we know that there is going
to be a disaster is being paid by people from the central part of
Oklahoma, from western Massachusetts, from Nebraska, and a whole bunch
of States that do not benefit or have nothing to do with it.
I am not going to go into all of the details of this flood insurance
program. But I do want to point out a couple of things that I hope my
colleagues will take note of as we think about this debate.
First of all, I would like to share with my colleagues what the
National Taxpayers Union says in supporting my amendment. They say
that:
The 250,000-member National Taxpayers Union strongly
urges--
my colleagues--
to support this amendment which would stop the fiscally
irresponsible practice of subsidizing development on land
prone to flooding. The National Flood Insurance Program is
now $100 million in debt. This debt could increase since the
bulk of the program's policies, roughly 80 percent, insure
development in areas prone to expensive losses from erosion,
flooding, and storms, the Nation's coasts. In just the past 4
years, the flood insurance program last paid more than three-
quarters of a billion dollars in claims from just 4 coastal
storms: Hurricanes Hugo, Andrew, Iniki, and the December 1992
northeaster that hit the mid-Atlantic. It is folly to
continue to subsidize new development in areas that have been
hit and will be hit by destructive storms. We strongly
support the rights of property owners to develop their own
land. There is no right, however, to taxpayer subsidies for
private development.
So what we are talking about here is whether or not we ought to
engage in a broad encouragement, incentive, if you will, a subsidy, for
people to be able to build in areas that create disasters.
Let me share with my colleagues what James Witt, the Director of
FEMA, says about this.
He says:
I want to reiterate my strong support for the goals of
Senate 1405. It furthers our goals--
skipping a couple of parts--
our goals to strengthen mitigation in disaster-prone areas
while enforcing compliance. Both the Northridge earthquake
and the Midwest floods have reinforced our shared concern
that mitigation is underutilized throughout the country. The
State and community mitigation assistance program and the
mitigation insurance benefits will lower the number of
structures vulnerable to flooding and reduce expenditures
from the fund. In addition, it enables victims to overcome
personal hardships by supporting efforts to elevate or
relocate out of harm's way.
Director Witt goes on to say:
The increased lender compliance provisions will expand the
number of structures protected by flood insurance. Fewer
flood victims will turn to Government grants and low-interest
loans for assistance through the insurance mechanism. They
will pre-firm their own recovery.
Director Witt met with us the other day and reinforced a study called
Managing Coastal Erosion. This is a study that was done by the National
Academy of Sciences and the National Academy of Sciences says point
blank:
FEMA has not identified erosion hazards zones in
implementing the National Flood Insurance Program. An
accurate delineation of coastlines subject to erosion is
essential to effective erosion and flood loss reduction and
to an actuarially sound program.
Mr. President, the reason I read that about erosion is that erosion
is the one hangup right now, the one fundamental hangup. There are a
couple of smaller ones, in preventing us from proceeding forward to
perform the flood insurance program. We have reached a fundamental
agreement on how we deal with compliance, with getting more people to
take part in this program. And we have established a structure which
will invite people--will require people, not invite--to escrow money
through the home purchase plans. Wherever the Federal Government or
Federal insured institution is involved, that will require their
compliance.
The second component is what I just talked about with Director Witt--
that is, the issue of mitigation. Mitigation, Mr. President, is the
means by which we prevent these disasters from happening in the first
place. We have learned a great deal about our ability to mitigate. For
instance, we are currently engaged in many programs around the coasts
of America in beach replenishment. We are currently engaged in programs
to build jetties, or breakwaters, or other forms of preventing erosion
damage or storm damage. We are engaged in a whole new set of standards
for home building that resists the storm damage. Indeed, we know that
those structures that have been built according to the standards,
called post-firm standards, have far less damage as a consequence than
those built before those standards were put in place.
So we have agreement, I believe, on the fundamentals of approaching
the two significant issues: How do we make the fund more solvent? How
are we more fiscally responsible, and how do we deal with the question
of mitigation? How do we encourage people to undertake efforts to
reduce the amount of damage they may be exposed to? But we are finding
people who are resisting the notion that we ought to broadly examine
precisely what the National Academy of Sciences has told us we should
understand. It is called erosion.
Erosion is taking place on a constant basis. We know how to measure
it. We have highly accurate means of measuring it. In fact, 15 States
have already undertaken efforts to measure it and have standards with
respect to erosion. But we are learning that erosion is not factored
into the overall costs attendant to the flood insurance program. So, in
effect, we are, all of us, subsidizing the damages that occur when
people go and build in a place that they know is going to erode.
Mr. President, it seems to me the smallest amount of common sense
that the Federal Government should not be going out and insuring people
at an unaffordable private sector cost. We should not be insuring
people to build somewhere that is not going to be there in 30 years.
What is the public policy that says we want to insure a home in a place
that we know we are going to have to pay the damage and it is going to
disappear in 30 years? In the private sector, you could not possibly
afford that kind of insurance. You simply could not afford it.
If the insurer looked at the risk of a particular spit of land
disappearing, they would say: You are crazy. Do not build your home
there. We are not going to insure that. It is going to cost you $10,000
a year to insure that for the next 20 years for the cost of the home
you are building.
We in the Federal Government are willing to insure them by creating a
pool of people within the flood zone, and we are willing to come in and
say that the Federal Government is going to stand behind all of this
liability. So we expose ourselves to increasing amounts of risk. The
amount of risk we are now exposed to in the Federal Government is $250
billion. The fund is $100 million out of money; that is where we are.
It is fiscally irresponsible. That is why the National Taxpayers' Union
is supporting this effort to create a fiscally sensible approach to
this.
Let me share with my colleagues an example of precisely what this
means. Here are some photographs of some homes on a beach. They are all
up on pylons. You can see these homes sitting nicely on their pylons,
and they all have flood insurance. It is a great place to live for a
while, until what is indicated in this other photograph happens. This
white home right here is now this white home here on this photograph.
That is the erosion that has taken place as a consequence of storms. We
should not be allowing people to build in this kind of situation, with
Federal flood insurance supporting it.
My bill does not do anything to take their insurance away. For
anybody who has a home, you are grandfathered in. We do not even raise
your rate. We are not even saying you cannot build. We are simply
asking people to map the erosion areas, so people can know, and the
Federal emergency assistance people can know, whether or not we ought
to be engaged in promoting people living in these conditions. This is
the example of what happens afterwards: People living out in the water.
These are homes that we are covering. This is the same picture of the
earlier shot, a before and after. This home here with a white roof is
``before''--this is an example of homes on the beach--and this is
``after.'' Here is the home with the white roof, and here are the homes
out here.
This is an example of a clear situation where you run into this
happening. There are not a lot of places like this. It is not something
we ought to be frightened of doing. We ought to understand what the
National Academy of Sciences has said, and I will read it one more
time.
The National Academy says:
FEMA has not identified erosion hazard zones. An accurate
delineation of coastlines subject to erosion is essential to
effective erosion and flood loss reduction and to an
actuarially sound program.
Let me share with colleagues from the Office of Technology Assessment
study on ``Preparing for Uncertain Climate.'' This is the history of
the program, and this is what the Office of Technology Assessment is
telling us today:
Congress made Federal flood insurance available in 1968
through the creation of the Flood Insurance Program. It was
enacted to limit increased flood control and disaster relief,
meet expenditures, and to provide a pre-funded mechanism to
more fully indemnify victims of flood-related disasters. It
was also intended to limit unwise development in flood
plains, while at the same time providing affordable Federal
insurance for structures located there.
So we had two purposes. We wanted to prevent people from locating
there, and we wanted to provide affordable insurance to people who were
stuck there.
Between 1978 and 1992, 430,000 flood insurance claims were
made, and total payments, including claims from Hurricanes
Hugo, Andrew, Iniki, have been nearly $4 billion.
We have paid out $4 billion, and all we are asking for in this bill
is the right to spend $25 million to map erosion, so we can have true
risk assessment in managing this program. We are not restricting
anybody; we are not telling anybody you cannot build. We have not even
restricted people at this point by saying: You cannot get the
insurance. We are just saying: Map it so that you know what the risk
is.
Here is what Technology Assessment says to us:
The National Flood Insurance Program has been only
partially successful. It has reduced somewhat the need for
taxpayer-funded disaster assistance and has been a factor
motivating local government mitigation efforts. Homes built
in compliance with their regulations are 70 percent less
likely to be damaged than those built before it.
So here we are knowing that a home built by the standards afterward
is 70 percent less likely to be damaged. Yet for some reason we are
unwilling to make a measurement of where that risk may exist so we can
get more homes 70 percent less likely to be damaged so we do not have
to come back to the U.S. Senate and ask for billions of dollars of
bailout in the future.
This is a very important statement that the Office of Technology
Assessment found--
The program has also contributed to coastal development and
has been criticized frequently for not adequately fostering
prudent land use in hazardous areas.
That was one of the original goals of this program.
Mr. President, every scientific agency and all scientists who were
involved in the study of erosion or the study of coastal management
have agreed. There is not a dissenter. They agreed that we ought to
proceed forward and have some means of understanding what the risk is
from erosion.
The Office of Technology Assessment has told us that. The National
Research Council/National Academy of Science have told us that. The
Federal interagency floodplain management task force has told us that.
The Natural Hazards Research and Applications Information Center has
told us that. FEMA, the Federal Emergency Management Agency, has told
us that. The Association of State Floodplain Managers tells us that.
Here are the experts, working on a regular basis to implement this
program, saying to Congress, folks, if you want to save the taxpayers'
money, if you want to act responsibly, then you have to begin the
process of understanding what erosion is doing. If you do not, there is
no way we can tell what the risk is. We cannot even arrive at actuarial
rates that you are telling us we ought to charge.
So, we have a question here as to whether or not we can allow this
process adequately to begin.
Mr. President, we have been working over the months--this has been 3
years in the working--and on several other occasions. The committee has
held off from attaching this particular effort in an effort to try to
work out the differences between us. But it is our sense that unless we
can get some capacity to begin the process of mapping erosion, we are
at loggerheads. Then we are going to have to ask colleagues in the
Senate to help us decide whether this is indeed something that we ought
to do as prudent fiscal managers of the Nation's financing, whether or
not we should allow more disasters like the ones in the photographs I
have showed, homes in North Carolina that just drop off a cliff. You
can tell it is going to happen. We have them in Nantucket, MA. It is
going to happen. You can see the cliff disappearing on an annual basis.
The question is whether we ought to be encouraging people to live in
these kinds of conditions at the expense of taxpayers who are already
hard enough pressed and who do not get to live on the beach to boot.
We are not changing any of the existing policies. I want to emphasize
that. There are no existing policy changes. We grandfather in all
existing homes. Nobody's rate is going to go up, according to this. We
are just asking people to make the assessment, report back to Congress,
and tell us whether or not this is something we ought to have in the
future.
I think it is being prudent, and I think it is what we ought to do.
There is a lot more I can say and may say about this. I ask unanimous
consent that whatever remarks I make on this at subsequent times be
considered as one speech, not as separate speeches.
The PRESIDING OFFICER [Mrs. Feinstein). Without objection, it is so
ordered.
Mr. KERRY. I thank the Chair.
Madam President, it is my hope to sit down with key colleagues on
this and, hopefully, arrive at an agreement as to where we are going to
proceed forward. This is an important measure.
We should not, I think, want to continue with a situation where we
know that there is an enormous risk to the Federal Treasury. We are
unwilling even to take the steps to try to measure it better. Every one
of our weather agencies, whether it is NOAA or the National Weather
Service, et cetera, are all telling us that over the course of the last
10 or 15 years we have lived through a very blessed period of reduced
storms.
If you look at the 100-year norm, or the 50-year or 25-year norm, you
will see very significant storms like the 1992 northeaster or Hurricane
Hugo, et cetera, that hit us regularly. We have actually seen a
diminishment of that.
But for all of us who lived through one of the toughest winters in
modern history, I think we ought to be warned that there is something
changing in weather cycles. We saw very tough storms last year as the
weather maps indicate, and they are an indication of the difference.
You can see, in the last 18 years, 1970 to 1987, very few storms, very
few black lines here. But from 1957 to 1969, a period of 13 years,
there was an enormous number of storms coming into the east coast and
to Texas, and so forth.
The far greater likelihood is that we are going to witness not a
storm of the century once a century but we are going to have five or
six storms of the century each year just as we did in the last couple
of years.
The point is no private insurance company would sit there engaged in
this behavior. They could not afford to because they would be asked to
hold reserves in order to cover the difference. But we are sitting here
with $250 billion of exposed property with erosion playing away, and
the fund $100 million in debt.
It seems prudent, therefore, that while not penalizing anyone who
lives where they live--they are there today, they got there for a whole
lot of reasons--we do not want to penalize people and change land
values. We do not want to do any injury, but we do want to try to look
down the future and be fiscally responsible for whatever potential
disasters may come down the road.
The fact is where you have beach mitigation the prices of homes go
up, the appraisals go up. Where you have good conservation measures,
you, in fact, raise the property values of a community and you,
therefore, raise the assessments to the community, and so forth.
This is not just good environmental policy or something. This is
good, sound fiscal policy with respect to a fund that is exposed to
enormous damage.
Madam President, it is my hope that we can reach agreement.
Amendment No. 1547
(Purpose: To strengthen the National Flood Insurance Program and to
reduce risk to the national flood insurance fund by increasing
compliance, providing incentives for community floodplain management,
providing for mitigation assistance, and for other purposes)
Mr. KERRY. Madam President, I am going to send this amendment to the
desk at this point in time and ask that it be pending.
The PRESIDING OFFICER. The clerk will read the amendment.
The legislative clerk read as follows:
The Senator from Massachusetts [Mr. Kerry] (for himself and
Mr. Daschle, Mrs. Murray, Ms. Moseley-Braun, Mr. Kohl, and
Mr. Metzenbaum) proposes an amendment numbered 1547.
Mr. KERRY. Madam President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. KERRY. Madam President, so the Record is very clear, I want to
make certain that there is no ambiguity and I do not want to
misrepresent any facts here in the course of this process.
A number of Senators and I have sat with FEMA over the course of the
last days, and we have asked some good questions of FEMA to try to
narrow down differences between us.
There clearly is an ability of areas that are in the floodplain now
to provide enough cash today to support the current rate of damage that
is being done today in most of those areas.
The $100 million that the fund is underneath today comes primarily as
a consequence of what has taken place in the Midwest. But because of
the effective erosion over a long period of time, absent mitigation,
you could look to a future where obviously some of that could change. I
cannot tell you that absolutely. I can tell you it will change in many
places. I cannot tell you where. I cannot tell you when. I cannot tell
you how much. And yet we continue to have a program out there that,
notwithstanding that lack of knowledge, encourages people or helps them
and assists them to be able to make these choices.
No one can tell me, if the Federal Government is prepared to insure a
home up to $185,000, that does not facilitate the community getting the
bank involved, making the decision, and proceeding forward. Of course
it does.
So it is my sense that we ought to try to guarantee that we at least
understand it.
A good analogy is the following: if you are a smoker, smoking is
taken into account by insurance companies. Now, if you are a smoker,
you may smoke a pack a day, you may have just started last week, or
something. Well, you are not going to drop dead tomorrow, probably, at
least from smoking. But we all know that over a period of time the
likelihood is greater that you will, and you will at some point, under
certain odds, come up with some disease related to that smoking.
It is the same thing here. Erosion works over a period of time. Sure,
you can have a home sitting there or a bunch of homes in an erosion
zone that are OK today, and the fund may be OK today to support them
within that context. But we are saying, if we do not adopt this, that
we are unwilling to find out whether the fund is going to be OK in 5
years or 10 years. And more and more homes are coming under the fund
and the exposure is getting greater and greater.
Just a kind of classic example of this process taking place is a
cartoon that appeared in the National Review in February of this year.
The sign says, ``Welcome to Nevada,'' on the coastline.
See? * * * I told you if we hung onto this chicken ranch
long enough, we'd be retiring to a nice spot on the ocean.
Now, that is an exaggeration, but I will tell you something: In
places in my home State this is happening. I could take you tomorrow to
a home that is now 20 yards from the cliff, when only a few years ago
it was 50 yards from the cliff. That house is going to drop off the
cliff. Everybody knows it.
And there are places in other parts of the country where that is also
true. We should understand where those places are.
The National Academy of Sciences tells us, ``Understand it.'' FEMA
tells us we want to understand it. All of the responsible groups
involved with this who make the studies tell us, ``Understand it.''
Madam President, I suggest we ought to understand it, or we cannot
have a fiscally sound fund. It is hard to go back to people who live
way, way from the coast and say, ``Hey, you are paying for the
privilege of these people to put their home there. You are paying for
them to rebuild their roads every other year. You are paying for them
to re-setup the sewers, to adjust all the damages. You are paying for
them to move their homes, because we allowed them to get there in the
first place.''
And in a time when we are cutting education and cutting a lot of
other plans, it is hard to explain to people why they ought to be
paying for stupid development policies.
Now, if they are not stupid, the mapping will come back and tell us
that. If they are not stupid, the mapping will come back and say,
``Senator, you are a `Chicken Little' crier. You are worried about
something that is really a minimal problem. You should not be so
worried about it. All of these scientists are wrong, and all of these
academies and all of these groups we have set up to make a lifetime out
of understanding this are somehow wrong. Let them do that.''
But they will not, because the scientific underlying data is very
clear as to what this process is doing, and it ought to be factored
into a Federal program.
So, Madam President, my hope is that we are going to be able to get
an agreement here. But I wanted to explain to colleagues what it is
that is holding this up and why we are dealing with this now.
We have been at this for 3 years. We have known this fund is in
jeopardy. We know there are serious problems with it; fifteen States
have already mapped; fifteen States have already undertaken to put in
place erosion policies. We have very strict ones in certain States;
less so in others.
But the Federal disaster fund that is making it up to those States
that do not participate or do not want to should not continue as some
great gravy train from a Federal Government that has endless amounts of
money to throw around for these kinds of things.
Director Witt has made it very clear: Mitigation makes a difference.
If we can get people to participate in this program more, we will have
more money in the flood insurance plan for mitigation grants, we will
be able to do a better job of resisting, and ultimately we will not
only be paying out less in the flood program itself, we will be paying
out less in terms of the related disaster assistance and all the other
losses that are caught up in it.
Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The absence of a quorum has been suggested.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BOND. Madam President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BOND. Madam President, I would say to my colleagues and my good
friend from Massachusetts, I apologize for not having been here for the
discussion. I was advised we were meeting in his office at noon to talk
about the compromise, so we did not have a chance to hear all of the
discussions that went on about the flood insurance program.
Let me say, and I believe I heard my friend from Massachusetts say,
that we have been engaged in fruitful discussions about how we reform
the flood insurance program, because the flood insurance program is
vitally important in terms of those people who live and work in the
flood-prone areas or the coastal areas which are subject to flooding
and other devastation from water and wind.
I believe that there are three main problems:
No. 1, the fund does not have enough participants in it.
No. 2, because, when the fund was established in 1975, there was a
grandfather clause to protect those structures which existed prior to
the passage of the law in 1975. The premiums paid into the flood fund
for those homes was not adequate to carry the risk that those homes
incurred. Thus, the fund has been put into a difficult condition
because of the structures in place prior to 1975.
The third problem is that there has not been enough focus on
mitigation to assist communities and to assist home owners and owners
of other structures to bring their structures up to standards which
would resist the flood.
I have only in the last few months begun to work on this matter. I
know our colleague from Massachusetts has taken a leadership role, for
which I commend him.
We asked about a month ago for answers to some very difficult
questions from the Federal Emergency Management Agency that is
responsible for administering the fund. There is a great deal of
confusion among ourselves, our staffs, and others as to what really is
the significance of the condition of the flood insurance fund.
I understand that FEMA had complemented the answers last week. By the
time I left to go back to Missouri on Friday, those answers were not
available to us. I returned to Washington, DC, at 11 p.m. on Monday
night and got a long list of answers. We started off at 9 o'clock the
next morning meeting with the Director, James Lee Witt, in the office
of the Senator from Massachusetts, and we made progress.
I really believe we are making progress towards meeting the needs
that FEMA has identified. But we found that there were still major
questions which had arisen as a result of their answers in the
discussion.
At this point, we have--and I say ``we'' speaking primarily for my
colleague from Florida, Mr. Mack, and myself, and with a number of
other Senators who have been very much interested in it--suggested that
we are getting closer to agreement. We found some of the problems with
the flood insurance were actually not what we thought they were.
So we thought we were moving forward toward agreement. We had asked
the Senator from Massachusetts not to offer this amendment because we
believe we are close to achieving a workable compromise that could
generate very significant support from at least the vast majority if
not all Members of this body.
There are a number of comments which I overheard earlier in the
discussions that I do not believe are accurate. Just let me set the
stage so I can give my colleagues the framework in which we are
operating.
The only problems, according to FEMA, that we have with the Flood
Insurance Program are not, as has been suggested, the Midwest floods.
It is the problem of the structures grandfathered in, called the pre-
FIRM, prior to the 1975 enactment of the law. They are the ones that
are causing the losses that are putting the fund in jeopardy. So we
have proposed, and we are working towards a system, to use some of the
funds from the flood to bring those structures up to flood standard so
they will be less likely to be damaged. Any homes or structures that
are damaged have to be repaired and brought up to code. In addition, we
have urged there be a special loan fund for communities that want to
take measures to protect against flooding because we think this can
further reduce the loss to the fund and put it on an actuarially sound
basis.
According to what I understand FEMA has said, those structures built
after 1975, and on coastal areas after 1981, when tougher standards
were enacted for coastal areas, have not been part of the problem. They
are paying actuarially sound insurance premiums.
There is a question of cross-subsidization, because a home or a
business or a structure right on the ocean front is much more apt to be
damaged by waves and by erosion than, maybe, a store or home two or
three or four blocks away. Thus, ocean-front structures are greater
risks than those structures several blocks away. However, when you take
the entire community, the rates paid by all of those structures in that
community to the flood insurance fund are actuarially sufficient to
cover the likely damage resulting to any or all of those structures in
the floodplain.
So to the extent that there is cross-subsidization, it is cross-
subsidization within the particular zone where different homes, maybe a
block or two apart, or different structures, may have different levels
of risk. There is not, as I understand the answers from FEMA, cross-
subsidization from one section of the country to another.
What we need to do is come to agreement on a bill that will encourage
more structure owners in the flood-prone areas to get insurance for
their buildings, to provide assistance for mitigation in bringing up to
flood-code standards those pre-FIRM structures now in place, and also
to encourage communities to take flood protection or other protective
measures to prevent against the dangers of erosion or flooding.
One of the proposals in the measure originally proposed by my friend
from Massachusetts would set aside $25 million for mapping of erosion
dangers. Some 13 or 15 States which are in danger of erosion have
already undertaken erosion-mapping efforts. The flood insurance fund,
because of the pre-FIRM structures, is now in significant difficulty,
and they have had to take out a $100 million credit line to cover the
damages because the pre-FIRM structures are not paying actuarially
sound damages.
The problem comes with the fund in a deficit. I want to know and
several of my colleagues want to know if there is going to be a benefit
to the fund that would warrant the fund--and through the fund the
people who are paying the flood insurance premiums--spending $25
million out of that fund for erosion mapping. I happen to think there
are enough flood-prone structures that if we were going to dip into the
fund, we ought to be using that money for mitigation efforts directly.
As you can see, I believe we are close to agreement on this. There
are others, however, who say we ought to add a separate environmental
purpose to the floodplain law so people who are paying flood insurance
would be providing for non-insurance-related benefits. I do not
believe, with the insurance fund in the precarious position which it
is, that you can put further burdens on the premium payers,
particularly those premium payers who have met the State and local
codes and guidelines and who have structures that conform to the
guidelines.
There are a number of ways we can work on this problem and I believe
we can do that work in compromise, in good faith, off the floor. But I
urge my colleagues, if this amendment is not withdrawn, and I do not
know whether it will be withdrawn, to support a tabling motion to
enable us to complete the work on the compromise and carry on the
discussions that were to have begun 26 minutes ago.
I assure the Chair and my colleagues I look forward to continuing the
work with the Senator from Massachusetts as we seek to solve the very
real problems of making the flood insurance fund sound, getting more
structures involved in the Flood Insurance Program, and ensuring that
appropriate mitigation efforts are taken to reduce the damage of
floods.
I thank the Chair and I yield the floor.
The PRESIDING OFFICER. Who seeks recognition? The Senator from
Florida.
Mr. MACK. Madam President, I think, rather than to address myself to
the specifics and the issues within the bill, and I am really
addressing my comments to the Senator from Massachusetts, there is the
potential for an impasse to develop here. It was my hope we were going
to work our way towards a compromise. There is disagreement on both
sides as to whether people are acting in good faith or whether they are
not.
I was under the impression we were going to meet at noon, the three
principals--the Senator from Massachusetts, Senator Bond, and myself--
to see if we could find a way to come together. I was under the
impression the amendment would not be offered until after the three
principals got together, in essence to try to find out whether there
really was room to compromise or whether there was not.
I must say, from our perspective, this seemed like a preemptive
strike, that the message was: I am going to move forward. The amendment
offered is not the amendment on which we have been talking about
compromise. It goes back to the position of denial of insurance and
increasing premiums. And I must say to the Senator from Massachusetts,
if that is the amendment he wants to go forward with, we are prepared
to debate it, and debate it to the full extent necessary. I feel
confident it will be defeated.
In our discussions, I think both of us have agreed the two areas we
know must be dealt with are the issues of mitigation and increasing
participation. So, I guess my question is, to the Senator from
Massachusetts: Where does he want to go?
The PRESIDING OFFICER. Does the Senator yield?
Mr. MACK. Yes; I do.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KERRY. First, I thank both Senators for their efforts on this. I
said in my opening comments I was anticipating a meeting. I said to the
manager of the bill overall, the Senator from New York, I would
possibly lay the amendment down with an understanding that I was not
going to try to close it out, I was not going to fill any trees, I was
not going to do anything--not even ask for the yeas and nays. I was
simply going to put it at the desk so we reserved our rights, depending
on where we proceeded.
Then I discussed some of the parameters of this bill in order to try
to hopefully stimulate a good dialog here. The problem is that we have
been dialoging this bill for 3 years.
I have held back from putting it on to one or two other bills on
three or four occasions in markups in the Banking Committee. This is
the last train this year. This is it for this opportunity problem. So I
want to make sure where we are.
We met yesterday. Sure, we did. I do not want to go into great
details now. I really think we ought to have the benefit of sitting
down and trying to proceed forward, which is what we anticipated.
What we were presented with yesterday, as a consequence of the
discussions, in my mind, did not represent where I thought we were
moving in terms of the proximity the Senator from Florida just
described. In fact, it stripped out whole portions of the bill that we
have never talked about stripping out. So to me it was a step backwards
from where we had been. As a consequence, I began to question really
whether or not we are on the same track. I hope we are. I take the good
faith of my friend from Florida who has worked closely on this and has
consistently been available and tried to do it. I would like to see if
we can get an agreement now and let us sit and talk.
Mr. MACK addressed the Chair.
The PRESIDING OFFICER. The Senator from Florida is recognized.
Mr. MACK. Madam President, just a couple of responses and then I
think we should.
As far as this being, in essence, the last legislative vehicle to
attach this legislation to, I disagree with that. I think there is, in
fact, interest on our part to see that a flood insurance bill can be
passed and clearly addressing the areas I have mentioned.
Second, again I want to say every opportunity you hinted at that you
wanted to get together, I have made myself available.
Mr. KERRY. Madam President, I think the----
The PRESIDING OFFICER. The Senator from Florida has the floor.
Mr. MACK. Let me make a last point, then I will yield.
The PRESIDING OFFICER. Is the Senator yielding for a question or
yielding the floor?
Mr. MACK. I have one last comment to make and then I will yield the
floor.
The last comment is with respect to stripping out. We mentioned
yesterday some of our concerns about the purposes clause in the
legislation. So I do not think that should be a surprise that we came
back with a suggestion that that was what we were intending to do. That
was mentioned yesterday afternoon in the meeting in my office.
But, again, we could end up talking all day about whether people
really are serious about compromising. Let us meet and see if we can
move forward.
I yield the floor.
Mr. KERRY addressed the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KERRY. Madam President, there is a difference, I think, with all
due respect, from pointing out a concern about the way something is
phrased versus stripping it out completely in a way that, in effect,
takes out of the bill the very essence of the 1968 creation of this
bill in the first place.
I would like to sit down with you. I think it would be good.
Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DOLE. Madam President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DOLE. Madam President, is leader time reserved?
The PRESIDING OFFICER. Yes.
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