[Congressional Record Volume 148, Number 81 (Tuesday, June 18, 2002)]
[Senate]
[Pages S5643-S5650]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE ACT OF 2002
The ACTING PRESIDENT pro tempore. Under the previous order, the
Senate will now resume consideration of S. 2600, which the clerk will
report.
The legislative clerk read as follows:
A bill (S. 2600) to ensure the continued financial capacity
of insurers to provide coverage for risks from terrorism.
Pending:
Brownback amendment No. 3843, to prohibit the patentability
of human organisms.
Ensign amendment No. 3844 (to amendment No. 3843), to
prohibit the patentability of human organisms.
The ACTING PRESIDENT pro tempore. Under the previous order, the time
until 9:45 a.m. shall be equally divided between the two managers.
The Senator from Nevada.
Mr. REID. Mr. President, I ask unanimous consent that the vote occur
at 9:50 a.m. rather than 9:45 a.m., and that the time be equally
divided.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The Senator from Connecticut.
Mr. DODD. Mr. President, I yield 2 minutes to my colleague from
Nevada.
Mr. REID. Mr. President, this is a banking bill. This is a bill that
came from the Banking Committee. It deals with a very important issue
to the business community of this country. The Chamber of Commerce, for
example, is going to score this. Their 3 million members believe this
is important, as do the members of the Business Roundtable.
We have the support of organizations that are as diverse as the
Taxicab, Limousine & Paratransit Association to the American Banking
Association. This legislation is important to the financial well-being
of this country. We have construction projects that are being stopped.
We have construction projects that can't start.
I say to my friends, no matter how strongly their beliefs may be
relating to cloning and therapeutic stem cell research, whatever we
want to term it, it has nothing to do with this legislation. If the
amendment becomes part of this legislation, the bill will be gone by
the time it hits that backdoor. It has nothing to do with the
underlying legislation, terrorism insurance, which is so badly needed.
I express my appreciation to those who have worked so hard to get to
this point. Senator Dodd has made statements on the floor time and time
again indicating how important this legislation is. When he speaks, he
speaks for the business community. Remember, the business community
employs working men and women. This is important to the country. It is
some of the most important legislation that has come before the Senate
all year. We should invoke cloture, and we should do it when the vote
starts at 9:50 today.
Mr. DODD. Mr. President, I suggest the absence of a quorum.
Mr. REID. Mr. President, I ask unanimous consent that the time run
equally against both sides.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DODD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
[[Page S5644]]
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. DODD. Mr. President, let me thank my colleague from Nevada, the
distinguished majority whip, for his assistance and support on this
matter, the terrorism insurance legislation.
In a few minutes we will be voting on cloture on this bill. I can't
speak for the leadership, obviously, but I do know that as of last
Friday at least, my sense was there was a consensus between the two
leaders, based on the comments made on the floor, that even though the
distinguished minority leader might under other circumstances be
somewhat reluctant to support a cloture motion, I certainly interpreted
his remarks to indicate that he understood why the majority leader was
filing a cloture motion and asking for such a vote.
Last week we started debating the terrorism insurance bill on
Thursday morning. By Friday, we had dealt with two amendments dealing
with the substance of the bill. I was dealing with every other issue
but terrorism insurance.
Now we have a cloning proposal before us. I have tried all weekend to
draw some nexus between cloning and terrorism insurance, and my
imagination fails me here. I don't see the linkage at all. My hope is,
while there are certainly a lot of strong views on cloning, the issue
of terrorism insurance requires the attention of this body, it requires
this body to respond to this particular need and vote up or down on the
matter. If they want to vote against it, vote against it.
My fear is, if we don't invoke cloture, we will then move to the
Department of Defense authorization bill. After all the work that has
been put into this effort over the last months, we may see the last of
the terrorism insurance proposal.
For those out there who believe this issue deserves to be considered
and resolved one way or the other, I strongly urge them to vote to
invoke cloture.
I ask unanimous consent that an article in this morning's Washington
Post, ``Firms Warned on Terrorism Insurance,'' be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, June 18, 2002]
Firms Warned on Terrorism Insurance
(By Jackie Spinner)
GMAC Commercial Mortgage Corp., one of the nation's largest
lenders, is notifying its borrowers that they must have
terrorism insurance or risk defaulting on their loans, the
latest example of how a shortage of such coverage is hurting
commercial real estate financing.
David E. Creamer, chairman and chief executive of GMAC
Commercial Holding Corp., the mortgage company's corporate
parent, said 85 percent to 90 percent of the loan agreements
the company has reviewed this year are not in compliance
because the property owners are not insured against terrorism
when they renew their policies, putting the agreements in
technical default.
``Almost every policy coming in doesn't have terrorism
coverage,'' Creamer said. He declined to specify how many of
GMAC's 40,000 mortgages have been reviewed so far as part of
a routine check of their insurance policies.
Creamer said GMAC does not plan to foreclose on the
properties that lack the coverage. But he said the company
will work with the borrowers to get terrorism insurance, a
course that some borrowers have avoided because of the high
price and difficulty of obtaining the coverage after the
Sept. 11 terrorist attacks.
In March, Simon Property Group Inc. sued GMAC for trying to
force the mall owner to obtain terrorism coverage for its
portfolio of shopping centers, including the Mall of America
near Minneapolis. The suit was settled after Simon purchased
two policies with $100 million limits.
According to the Bond Market Association, $7 billion worth
of commercial real estate loan activity has been suspended or
canceled because of a shortage of coverage.
Creamer said GMAC has turned down requests for more than $1
billion in new loans this year because the projects were not
insured against terrorism.
``The real problem is not your bread-and-butter
properties,'' Creamer said. ``It's your trophy properties in
metropolitan U.S.A.''
The difficulty in obtaining insurance has prompted a call
for federal action from insurers and business interests.
The Senate resumed debate yesterday on a bill that would
create a one-year federal backup to help pay the insurance
costs of a future terrorist attack. Under the terms of the
bill, insurance companies would have to pay a portion of
claims resulting from a terrorist attack. The amount would
vary according to each insurer's market share. The government
would then pay 80 percent of the remaining claims if the
attack cost less than $10 billion and 90 percent if claims
totaled more than $10 billion.
Senate Majority Leader Thomas A. Daschle (D-S.D.) plans to
force a vote today on a procedural issue that would end
debate on the bill. If he gets 60 votes, a final vote on the
bill could come later in the day or tomorrow.
The House passed a competing measure last year that would
require insurers to cover the first $1 billion in losses
arising from a terrorist attack. The government would pay 90
percent of additional claims. The insurers and policyholders
eventually would have to repay the money.
``There's a lot of lifting to be done yet,'' said Julie
Rochman, senior vice president for the American Insurance
Association, a trade group that supports a federal backup.
In the meantime, a growing number of lenders such as GMAC
are trying to assess their risks in lending money to
uninsured properties.
``I'd be surprised if there was a lender in this country
that wasn't doing this,'' said Darrell Wheeler, a commercial
mortgage backed securities analyst at Salomon Smith Barney
Inc.
As lenders, ``it is their responsibility to make sure their
borrowers are in compliance with their loan documents,''
Wheeler said. ``At the same time, if I'm a borrower, I'm
facing very expensive insurance premiums. Most borrowers are
trying to avoid that additional expense.''
Mr. DODD. This article makes the case that GMAC, the commercial
mortgage corporation, one of the largest lenders, is notifying
borrowers that they must have terrorism insurance or risk defaulting on
their loans; again, making the point we made over and over that this
issue of terrorism insurance is real.
I have talked about the problems occurring in the commercial
mortgage-backed securities. We have had comments from the President,
Governors from across the country, and others who are involved in this
issue. There is a list in the newspaper this morning of organizations
as wide ranging as real estate and chambers of commerce to labor groups
calling on this body to vote this bill out and get to conference so we
can resolve the differences with the other body.
There is a list this morning: Vote for S. 2600, Terrorism Risk
Insurance Act of 2000. I will not bother at this point to read the
names, but there is a long list of groups and organizations that
represent thousands and thousands of workers who, if we do not deal
with this bill, run the risk of losing their jobs.
The Chamber of Commerce has said that ``it is vital to pass this
important legislation expeditiously,'' talking about the cloture vote.
From insurance agents and brokers:
Support cloture and oppose Gramm amendment to remove per
company retentions.
From the Real Estate Roundtable:
We are writing to urge you to vote affirmatively on cloture
and for final passage of the Terrorism Risk Insurance Act of
2002. These two votes will be scored as key votes for our
organization.
The American Insurance Association: The same message.
The National Association of Realtors. This is a ``key'' vote for
cloture on S. 2600.
Mr. President, we made the case over and over for many months as we
have gone back and forth on this bill that each day that goes by, the
case grows more serious and demands our attention.
I have had letters from 30 of our colleagues, from 18 Governors
across the country, repeated letters and comments from the President of
the United States and the Secretary of the Treasury, and others who
urge us to step to the plate and bring up amendments, which we were
willing to do last week without cloture. Now we have no other choice
because we have received proposals, with all due respect to our
colleague from Kansas and others, to bring up matters that the Senate
may or may not grapple with in this Congress. To hurl these matters at
this bill as we are trying to wrap up business we think is a huge
mistake.
This is probably the last chance. For those who think there is going
to be another day in this Congress on terrorism insurance, I fear there
will not be. This is it. So in about 10 minutes, my colleagues will
have a chance to decide whether we give final consideration to this
bill or move on to other matters.
For those who vote against cloture, understand if things do happen,
then the finger of culpability clearly gets pointed in the direction of
those who
[[Page S5645]]
denied us an opportunity to vote on this bill.
I urge support of the cloture motion, and I yield the floor.
The ACTING PRESIDENT pro tempore. Who yields time? The Senator from
Texas.
Mr. GRAMM. Mr. President, I intend to vote against cloture. I urge my
colleagues to also vote against cloture.
This boils down now to two issues, and they are very real issues. No.
1, the President has said he will not sign a bill that will make
victims of terrorism subject to attacks by plaintiff's attorneys and
subject to punitive damages. We think it is vitally important that we
have an opportunity to deal with this issue and to have at least one
more vote on it.
Secondly, we are in a situation now where this bill has evolved to
the point that the taxpayer is virtually the payor of first resort, not
last resort. When this bill was initially put together in a bipartisan
compromise, supported by the administration, we had in a terrorist
attack $10 billion of costs that the insurance industry had to bear
before the Federal Government came in to pick up the tab.
This was critical for two reasons. No. 1, it provided incentives for
insurance companies to syndicate, so no one insurance company insures
the Empire State Building. There may be a lead company and then they
syndicate to other companies to spread the risk.
No. 2, it was vitally important in terms of protecting the taxpayer.
What has happened now, by going to a retention level by individual
companies, is that we have reached a point where the taxpayer is put at
exposure very early in the process. I think it circumvents what we are
trying to do.
My biggest concern is, if we adopt this bill in its current form,
that we are setting up sort of a hot-house plant that cannot exist and
grow and work without permanent Government involvement.
I remind my colleagues, our objective was to have a 2- or 3-year
program to bridge this gap to create a situation where the reinsurance
market would emerge, where syndication would become the norm in high
profile projects so that the Federal Government could get out of this
industry and so that the cost of terrorism in terms of risk would be
built into the term structure of interest rates.
The problem with this bill--and this bill made sense in December when
we had 3 weeks before 80 percent of the insurance premiums in America
were going to be due and the existing policies were going to expire,
but today much of that insurance has been written, premiums have been
collected, and to adopt a bill with retention rates as low as we have
in this bill is to create economic windfalls and to destroy the
incentive of the industry to do the things that need to be done to get
the Government out of this business.
I remind my colleagues that I have been among the earliest and
strongest supporters of having a bill, but what has happened now is the
nature of this bill does not fit the reality of the world in which we
live, in the world at the end of June when policies have been sold,
premiums have been collected based on no Government backup, and now we
are coming in with retention levels that are so low that in some cases
the Federal Government is going to begin to pay when losses are in the
tens of millions.
When we initially contemplated this bill, when the administration
signed off on a compromise, there was a $10 billion retention. Mr.
President, $10 billion was made by the people who collected the
premiums before the taxpayer paid. That has now been dramatically
changed with retention levels set on a company-by-company basis. I
think this encourages companies to take on full projects, I think it
moves us in exactly the wrong direction, and I think we have an
opportunity to fix this. I believe it will be fixed if we deny cloture,
and I urge my colleagues to vote against cloture and give us an
opportunity to deal with punitive damages being imposed on victims of
terrorism and give us an opportunity to have retention levels that
protect the taxpayer, that do not create windfall gains and retention
levels that encourage the development of reinsurance and syndication,
something that is absolutely essential to get the Federal Government
out of this business within 2 or 3 years. I yield the floor.
The ACTING PRESIDENT pro tempore. The majority leader.
Mr. DASCHLE. Mr. President, I wanted to come to the floor for a
moment to express the hope that we can get cloture, that both
Republican and Democratic Members can vote for cloture this morning and
move on. I remind all of my colleagues that there will be 30 hours of
debate at least potentially available to Senators with germane
amendments. So there is absolutely no reason to vote against cloture.
I might just say for the record, prior to the time we take this vote,
we began negotiations on this matter months and months ago. We have
offered virtually every conceivable proposal I can think of to be able
to bring this bill to the floor under unanimous consent. We asked
unanimous consent on many occasions and were unable to get that
consent. We even offered to bring up the House bill with a limit of
five relevant amendments on either side, and that was not successful.
I am at a loss for how we will proceed under these circumstances if
we are not able to get cloture today. My intention would be to put the
bill back on the calendar and move directly to the Defense
authorization bill if we fail to get cloture today. Only after we would
have in writing the number of Senators required to bring the bill back
would I be able to reschedule this legislation. So this is our chance.
This is our window. This is our opportunity. Colleagues on both sides
of the aisle have made it very clear it is important we take up the
Defense authorization bill. So we are not going to extend the debate on
this legislation. We will either get cloture, deal with germane
amendments, and move on or we won't get cloture, and we will move on in
any case.
So that is our option this morning, and I am very hopeful we can
achieve that. I hope colleagues will understand we have been tolerant,
we have been patient, we have been innovative, and we have been
imaginative. I can't think of anything else we can be in an effort to
get this job done.
I know there is a great deal of interest in it. But the time has come
for us to bring this to closure if, indeed, Senators want a terrorism
insurance bill this work period.
So I urge my colleagues to vote for cloture, and I yield the floor.
The ACTING PRESIDENT pro tempore. The Republican leader.
Mr. LOTT. Mr. President, I yield myself time under leader time. I
know it is time for us to vote, but I will be brief.
First of all, I believe we are close to finishing this bill. I
understand there are very few remaining issues we would actually have
to dispose of even though there were some 41 amendments filed on this
legislation: 14 on the Republican side of the aisle, 27 on the
Democratic side. I am not sure how many of them are germane or how many
would actually have to be offered. I know the manager of the
legislation filed 21 of them, and perhaps some of them have been
accepted. I don't know how many of those have been worked through. But
clearly there were some problems with this legislation that needed to
be addressed.
It is my hope we can complete this important legislation and get it
to conference and then get a bill that we can accept and the President
can sign.
There is a little bit of revisionist history that has been going on
here. You remember last year in December very good work was done by
members of the committee on both sides of the aisle, a bill that could
probably have whizzed right through here. But over a period of time,
the limits on liabilities were taken out, which is a concern of a
number of Members on this side, and also the per-company limits were
changed, or they were put into place in the legislation at a very low
level where Federal funding would actually get to kick in.
Those are two of the major problems that still exist. That could have
been worked out if we had gone to the bill that was originally offered
in committee or over these many months we have been trying to get an
agreement of how to proceed.
We have been unable to debate this measure at much length, although I
said last week that I understood why Senator Daschle filed cloture.
[[Page S5646]]
We have other issues we need to go on to, but I think in this case
cloture may actually delay it a day. If we get cloture, it could take
us sometime into tomorrow. It looks to me as if there is only four,
maybe five amendments that actually would have to be debated and
considered and voted on.
I think we could probably get an agreement on the number of
amendments and get a time limit and actually get votes on those
amendments, perhaps not. But they are certainly relevant even though I
am not sure whether they would be germane postcloture. I know Senator
McConnell has two or three, Senator Gramm has one, Senator Brownback
one; there may be two or three on that side. But I believe we could
work this out and actually get the legislation completed today.
I continue to hope that would be the result, and if cloture is not
invoked, I will try to get a consent that we just take up these three
or four amendments and move to conclusion. So, obviously, we would like
to get this work done, but it still has some problems and some
amendments that really do need to be considered.
With that, I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Texas.
Mr. GRAMM. I have 2 remaining minutes, I believe; is that right?
The ACTING PRESIDENT pro tempore. The Senator is correct.
Mr. GRAMM. I yield those 2 minutes to Senator McConnell.
The ACTING PRESIDENT pro tempore. The Senator from Kentucky.
Mr. McCONNELL. Mr. President, we are very close to completing this
bill. By invoking cloture we are going to be shut out of an opportunity
to offer a few more amendments, just a handful as the Republican leader
has indicated, that need to be considered. On the liability question,
we have a clear letter from the administration indicating that if we
don't deal with that properly, this bill will not become law. I do not
think any of us believe, at this already late stage of the session, we
ought to be clogging up legislative days with exercises in futility. So
there are a couple more amendments on the liability issue that need to
be voted upon.
I strongly urge our colleagues to vote against cloture and then let
the Republican leader and the Democratic leader talk about how we can
wrap this bill up in short order.
The ACTING PRESIDENT pro tempore. Does the Senator yield back his
time?
Mr. GRAMM. How much more time do we have?
The ACTING PRESIDENT pro tempore. One minute.
Mr. GRAMM. Let me address for that 1 minute the whole issue about
retention. When we started this debate, the Federal Government was
going to be the backup insurer. We were going to have substantial
retention by the private companies that have sold policies and
collected premiums. They were going to pay up front, and in big losses
the taxpayer was going to pay. When we got into December and 80 percent
of the insurance policies were expiring, there was a movement toward
individual company retentions to dramatically reduce the amount
companies had to pay before the Government paid.
Now we are at the end of June. Companies have sold insurance
policies. They have collected premiums. To come in now with retention
levels in the tens of millions instead of tens of billions is to create
an unintended, and I believe unwise and unfair wealth transfer but,
more importantly, it discourages the kind of risk sharing that we need
to ultimately get the Government out of this business.
I believe if the bill became law as it is now written, we would end
up with the Government permanently in the terrorism insurance business.
I think that would be a bad thing.
I urge my colleagues to vote no.
The ACTING PRESIDENT pro tempore. The majority leader.
Mr. DASCHLE. I yield 2 minutes of my leader time to the Senator from
Connecticut.
The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
Mr. DODD. Mr. President, very briefly, this is a 2-year bill. In
fact, it is only a 1-year bill with the possibility of an extension of
another 12 months. We are going to have a chance to debate the Gramm
amendment if we get to cloture. If we don't have cloture, then, as the
leader has indicated, we are going to move on to the Department of
Defense authorization bill. So if you want to have a debate about what
my colleague from Texas is proposing or my colleague from Kentucky, the
only way to do this is to invoke cloture.
We have been at this since last fall trying to resolve these matters.
My hope is we can. If we don't invoke cloture, then it is very
difficult to get to these matters. We have the cloning issue and others
that have been added to this debate, and it makes it very difficult to
deal with the underlying issue.
I have indicated earlier that from the AFL-CIO to major groups in the
country that are dealing with commercial lending they tell you this is
an important piece of legislation. Every day we waste is jobs lost and
more economic difficulty. So my hope is we can invoke cloture, debate
the Gramm amendment, debate the amendment of my friend from Kentucky
and others, and resolve this matter. Either vote for this bill or vote
against it, but let's get it completed.
I yield back my time.
Cloture Motion
The ACTING PRESIDENT pro tempore. Under the previous order, the clerk
will report the motion to invoke cloture.
The legislative clerk read as follows:
Cloture Motion
We, the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on Calendar No.
410, S. 2600, the terrorism insurance bill:
Harry Reid, Hillary Rodham Clinton, Jean Carnahan,
Charles Schumer, Kent Conrad, Tom Daschle, Richard
Durbin, Jack Reed, Byron L. Dorgan, Christopher J.
Dodd, Debbie Stabenow, Jay Rockefeller, Maria Cantwell,
Jeff Bingaman, Daniel K. Akaka, Evan Bayh, Joseph
Lieberman.
The ACTING PRESIDENT pro tempore. By unanimous consent the mandatory
quorum call under the rule is waived.
The question is, Is it the sense of the Senate that debate on S.
2600, a bill to insure the continued financial capacity of insurers to
provide coverage for risks from terrorism shall be brought to a close?
The yeas and nays are required under the rule. The clerk will call
the roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from California (Mrs. Boxer)
and the Senator from Massachusetts (Mr. Kerry) are necessarily absent.
Mr. NICKLES. I announce that the Senator from North Carolina (Mr.
Helms) and the Senator from Texas (Mrs. Hutchison) are necessarily
absent.
The ACTING PRESIDENT pro tempore. Are there any other Senators in the
Chamber desiring to vote?
The yeas and nays resulted--yeas 65, nays 31, as follows:
[Rollcall Vote No. 156 Leg.]
YEAS--65
Akaka
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Breaux
Byrd
Cantwell
Carnahan
Carper
Chafee
Cleland
Clinton
Cochran
Collins
Conrad
Corzine
Crapo
Daschle
Dayton
Dodd
Domenici
Dorgan
Durbin
Edwards
Feingold
Feinstein
Fitzgerald
Graham
Harkin
Hatch
Hollings
Inhofe
Inouye
Jeffords
Johnson
Kennedy
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Lugar
McCain
Mikulski
Miller
Murray
Nelson (NE)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Torricelli
Warner
Wellstone
Wyden
NAYS--31
Allard
Bond
Brownback
Bunning
Burns
Campbell
Craig
DeWine
Ensign
Enzi
Frist
Gramm
Grassley
Gregg
Hagel
Hutchinson
Kyl
Lott
McConnell
Murkowski
Nelson (FL)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Thomas
Thompson
Thurmond
Voinovich
NOT VOTING--4
Boxer
Helms
Hutchison
Kerry
The PRESIDING OFFICER (Mr. Nelson of Nebraska). On this vote, the
yeas are 65, the nays are 31. Three-fifths of the Senators duly chosen
and
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sworn having voted in the affirmative, the motion is agreed to.
Mr. DODD. Mr. President, I ask unanimous consent that our two
colleagues from Michigan be recognized to speak as if in morning
business for a period not to exceed 10 minutes on a very important
matter to the State of Michigan.
Mr. REID. Mr. President, reserving the right to object, I ask the
Senator from Connecticut to modify his request so that this time will
count against postcloture time.
Mr. DODD. I so modify the request.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Michigan is recognized.
Mr. LEVIN. I thank the Chair.
(The remarks of Mr. Levin and Ms. Stabenow pertaining to the
submission of S. Res. 287 are located in today's Record under
``Submission of Concurrent and Senate Resolutions.'')
Ms. STABENOW. Mr. President, 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. GRAMM. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRAMM. Mr. President, I have a markup with the members of the
Banking Committee coming up. Given that last vote, it is not my
intention to try to offer an amendment. The amendment I wanted to
offer, which was a 3-year program, would not be germane postcloture
because of the third year.
I want to sum up what I believe to be the chronology of this debate
and express my concerns.
Senator McConnell and I will offer amendments if the House bill is
brought up in an effort to substitute this bill for it, and potentially
on the naming of conferees. But I think, in terms of today and this
bill, it is clear where the votes are.
Let me remind my colleagues that in the wake of 9-11, there was great
skepticism in Congress about the need for terrorism insurance. I think
any checking of the Record will show that I was one of the early
supporters of an effort to have terrorism insurance. I believed then
and I believe now that we need a bridge from our current situation
where terrorism insurance is hard to get for high-profile projects,
where it is expensive as we go through this process of rational
investors determining what the real risks are.
I thought it was important we have a bridge program to give a Federal
backup for a fairly short period of time until the market could adjust
to this new reality and the threat of terrorism could be built into the
structure of insurance premiums. I have to say, in the entire debate
over the bill, the role of the Federal Government has been a role of a
backup, where the Federal Government paid only in cataclysmic kinds of
circumstances.
In the fall of last year, we reached a bipartisan compromise that was
worked out among the leaders of the Banking Committee, the committee
with jurisdiction. That bill had a $10 billion retention the first year
for the insurance companies, $10 billion the second year, and then, if
the Secretary of the Treasury decided a third year was needed, we had a
$20 billion retention.
What ``retention'' means is that the insurance companies would pay
the first $10 billion, and then the Federal Government would pay 90
percent of the $90 billion that might follow.
The argument that was made, from the very beginning really, boiled
down to two points: One, that the people who were collecting the
insurance premiums should have first liability and the Federal
Government should be in a backup role.
The second argument was--and I think it was the more dominant
argument; the more important argument, in my opinion--that our
objective here is not simply to insert the Federal Government
permanently into the insurance industry.
I note to my colleagues that, unlike World War II, where, when the
Japanese bombed Pearl Harbor, we knew that war would end someday, and
we knew we would prevail, and we knew there would be a formal ceremony
ending that war--and, in fact, there was on the deck of the Missouri--
this war, when it ends, will end with the dying gasp of some terrorist
somewhere, and we will not be sure that he is the last one, and there
will not be any formal agreement ending the hostilities.
So our objective here is to build a bridge to private coverage. That
bill was agreed to in the fall by the Secretary of the Treasury on
behalf of the President and by the leadership of the Banking Committee.
We agreed in that to ban punitive damages against the victims of
terrorism. We had a press conference. It looked as if we had come up
with a bipartisan consensus. Then there was objection to the ban on
punitive damages against the victims of terrorism, and the bill did not
go forward.
Then in December, in a last ditch effort, in which I am proud to say
I participated, we tried to write a bill that would deal with a
situation where, we were already halfway through December; 80 percent
of the insurance policies in America--at least we were told at the
time--were expiring on January 1, and so there would not be time for
reinsurance to develop. There would not be time for extensive
syndication, a basic procedure whereby an insurance company would
insure the Empire State Building but then perhaps would lay off the
risk to 20 other companies.
In December, a bill was worked on that had individual company
retentions. For the largest companies in the industry, that retention
is pretty substantial, over $1 billion. For small companies, that
retention is quite small, in the tens of millions of dollars.
There are two problems with the bill before us which is based on the
December draft. The first problem is, the situation is very different
today than it was in December. Those policies did expire, and many were
renegotiated at substantially higher premiums. It is now 7 months
later. Insurance has been sold. Premiums have been collected. Those
premiums are based on substantially higher risk with no government
backup. Now we are being asked to pass a bill that maintains those
retention levels that might have made sense in December, when 80
percent of the policies in the country were expiring and there was no
time for reinsurance or syndication.
But in my opinion, to adopt this bill 7 months later when substantial
numbers of policies have been sold at substantially higher prices, and
those higher prices are part of the solution--I am not complaining
about them because risks are higher--the point is, we are dramatically
changing risk by having the Government pay 90 percent of the claim
above these retention levels.
I have offered a compromise which would split the difference, which
would have individual company retention the first year, for the first
12 months after the bill is signed into law. Then it would go to a $10
billion industry retention; and then if the President extended the
program 1 more year, it would have a $20 billion retention.
Why is that important? It is important for two reasons. One is
equity. These retention levels put the taxpayer at an unjustified risk.
These low retention levels we have in this bill create a situation
where policies were sold; premiums were collected; expectations were
that there would not be a Federal backup. And now the Federal backup is
coming in at individual company retention levels which are
substantially lower than the level we looked at in October of last
year.
This creates an unintended transfer of risk from the insurance
companies to the taxpayer, where the insurance companies have collected
premiums based on bearing that risk themselves.
That is an equity problem. We are putting the taxpayer at a level of
exposure which is unjustified.
The second problem is of greater importance. If we simply are passing
a bill that transfers wealth from the taxpayer to insurance companies,
it is inequitable, in my opinion, at the level we are doing it. But it
is not the end of the world, nor is it the first or last time we would
have ever done any such thing. The problem is, the way the bill is now
written, for the next 2 years, the incentive that insurance companies
have to develop reinsurance--and reinsurance is a system whereby I sell
a policy on a building, but then I share that risk through a
reinsurance system which is developed. I share the profits, but I share
the risk. That way the risks
[[Page S5648]]
end up being dispersed not just among all the insurance companies in
America but literally all the insurance companies in the world.
As that market develops, there is another alternative called
syndication whereby companies insure an asset but then they syndicate
by having other companies take a piece of it. They in essence become
the reinsurer.
Why is all this important? Why would anybody care about all these
things? Why I care about it is because if we don't have substantial
industry retention, we are dramatically reducing the incentive for the
reinsurance market to develop. If we don't have substantial industry
retention, we are creating an incentive for companies to take a larger
share of risk because they are not having to bear the risk.
They have their industry retention, which for smaller companies can
be in the tens of millions of dollars, and then the Federal Government
comes in and pays 90 percent of the cost.
If we don't develop reinsurance, if we don't develop syndication as
the norm, then we simply continue a system where the bulk of the risk
is borne by the taxpayer. Two years from now, if we don't change this
bill, we are going to be back here, and the same people who are saying
today we have to have this bill are going to say: You have to extend
this bill for another 2 years, another 10 years, forever.
The problem with the structure of the bill is that it acts as a
disincentive to do the things the industry has to do in order to get
the Federal Government out of the insurance business.
I am not yelling; I am not complaining about the insurance companies.
I am not trying to put them in a position where I am vilifying them. I
would say when we came out with our bill last October, there was great
joy and celebration in that the insurance industry was going to have to
bare a $10 billion retention, but the Federal Government was going to
pay 90 percent of anything above that.
It was my perception, in talking to people, listening to people, that
people thought that could be made to work. Granted, there were people
who wanted the Government to bear more of the risk. The point is, there
was a perception that this was something that could be made to work.
Now we have a situation where the retention level has been reduced
dramatically. If I were running an insurance company, I would want the
retention level to be zero. If I were running an insurance company, I
would want to sell the insurance, collect the premium, and I would want
the Government to pay the claims. So I never expect people to do what
is not in their interest. If you do that, you are going to be
disappointed.
But what has literally happened here is that we wrote a bill in
December for an emergency situation where it was going to go into
effect in less than 3 weeks. There was no time for reinsurance pools to
develop; 80 percent of the policies in the country were going to expire
on January 1. So in order to try to accommodate that short timeframe,
we agreed, or at least many were willing to agree--the body never
agreed--to retention levels that were dramatically lower.
I know nobody knows what ``retention'' means. It means the Government
pays sooner and more.
That may have made sense in January, but it does not make any sense
at the end of June when insurance policies have been sold and premiums
have been collected based on no Government backup. So the whole reason
for the lower retention levels in December has now passed.
What happened was, quite frankly, the industry saw these lower
retention levels in December and said: That is what we want; we do not
want those higher retention levels we agreed to in October; we want the
lower retention levels.
The problem is they only made sense in January. They do not make
sense in June. My lament--and that is all it is at this point because
it is clear from the last vote that we are going to pass this bill--is
that we are going to put the taxpayer at a much greater risk than is
justified.
It is amazing to me that in October, the very people who thought the
retention level at $10 billion was too low now are supporting retention
levels that are a small fraction of the $10 billion retention we had
agreed to in October. This creates tremendous inequity for the
taxpayer. It creates an unintended wealth transfer. I think it is a
problem, and I believe it should be fixed.
The second problem is much greater, however, and that is we are
reducing, not eliminating, the incentive of the industry to syndicate
and to develop reinsurance, and in the process, I believe we are taking
a step toward having Government permanently in the insurance industry.
I am not going to convince anyone else--I think I have convinced
about 35 Members of that, and I think that is probably the high water
mark. I am not going to try to offer an amendment. I am ready to let
this bill pass. But I will say that I still believe we are making a
mistake. I still believe we need to find something--we should go back
to the October retentions, but at the least we need something between
the two.
We will have an opportunity, if the House bill is brought up to amend
it with this bill, to vote on punitive damages. The President has said
he will not sign a bill unless we deal with punitive damages. We will
have an opportunity at some point to address these issues again. But to
continue to debate it today uses up Senate time.
We should get on with the Defense authorization bill. I have a markup
in 5 minutes on another issue of equal importance. As a result, I do
not intend to try to use up the Senate's time. The Senate spoke on the
cloture motion, and I am ready to pass the bill and address these
issues some other day as we proceed in the process that ultimately
leads toward a bill.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, the Senator from Texas and I, despite our
disagreement at this particular moment, are very good friends. We both
serve on the Banking Committee, and there is, as he points out, a very
important markup occurring.
So I might get an understanding of where we are, are there amendments
that will be offered to this bill, or can we go to third reading?
Mr. GRAMM. I am ready to go to third reading on the bill. I do not
think we are going to achieve anything by offering amendments. I cannot
offer the amendment I would like to because it brings in the third
year, and it would not be germane. At this point to offer an amendment
would be to simply delay something rather than to seek a constructive
change. The thing to do is to go to third reading and pass the bill. I
would be willing to do it on a voice vote. Then we will take it from
there.
Mr. DODD. Mr. President, I will take some time to respond to the
comments of my colleague from Texas, and he raises not illegitimate
concerns.
I say to my colleague from Texas, we have always known we were
sailing in uncharted waters. We have never done anything like this. I
would be the last one to stand before my colleagues and say with
absolute certainty what we proposed is going to work as perfectly as we
would like it to work.
My colleague from Texas raises some legitimate questions, questions I
really cannot answer because we do not absolutely know what is likely
to occur over the next 12 months or 24 months if the bill is extended.
I am not at this moment going to challenge it, in fact, even on these
assertions he has made. At some point, I will respond to it in a way
that raises some concerns if we do not have retention caps, and it is a
complicated matter for most Members to understand what happens in light
of smaller companies that cannot necessarily withstand the kind of hits
that could come with a major terrorist attack. There is an argument on
the other side of retaining what we have in the bill.
I also make the point to my colleague, which I have made repeatedly,
we are going to go to conference with the House. They have a different
bill. These are matters, clearly, that need to be brought up and
thought about more, and we need to bring in people who spend their
lives working in this area who can share with us responses to these
kinds of questions. Senators deal on a matter such as this for a few
hours, and we do not really understand--at least I do not, despite the
fact I represent a State with a large insurance industry. These are
very complicated and arcane insurance matters.
[[Page S5649]]
The Presiding Officer was an insurance commissioner in his State. He
knows the matter, but even he has to say these are complicated matters
in light of what has happened.
I appreciate the spirit in which my friend from Texas has made the
suggestion we get past this bill and go to conference, but he has my
commitment, Mr. President, and my word that I do not consider this to
be the final word; that we have work to do before we come back. My
colleague has made the point, and I have made the point that I do not
want to see this go on. I do not want the Federal Government to be in
the insurance business. I want to make sure we get off this as fast as
we can.
I, like him, am concerned that 2 years may be unrealistic, but I also
understand the tolerance level of my colleagues. That number was chosen
as much for political reasons about how much our institution would be
willing to bear politically as it was over the realities of what the
marketplace is like in trying to cost this kind of a product.
Getting to conference is helpful. We will work on these matters and
hopefully bring back a bill that is even improved from what we have
before us today.
With that, I am going to yield to the distinguished majority whip and
the leadership to determine what they want to do. My colleague from New
York is here as well and may want to make comments, and then we can
figure out whether to have a recorded vote or take a voice vote on the
bill.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, I first ask a question of my friend from
Texas without losing my right to the floor, and that is, the Senator
from Texas would not in any way object to the appointment of conferees?
Mr. GRAMM. We are not ready, Mr. President, to name conferees. I have
to sit down with our people who have been involved in this debate and
talk about how we want to go about it. I would be willing to step aside
today and let the bill be passed, but in terms of bringing up a House
bill or substituting this bill for it or naming conferees, we are going
to have to have some meetings.
Part of our problem this morning--and I understand in trying to run
the railroad that you have to set a time schedule--we did not get an
opportunity to meet this morning--we being Republicans--before we had
this vote. It is just going to be essential that I have an opportunity
to sit down with our people.
My suggestion is we go ahead and pass the bill, and then we will have
an opportunity to go to the Defense authorization bill, and then we
will have an opportunity to sit down and my colleagues on the other
side of the aisle will have an opportunity to sit down and maybe
something can be worked out.
Mr. REID. Mr. President, there are some amendments, technical in
nature, that the Senator from Connecticut will take a little time to
do. I hope during the next few minutes we can work out a unanimous
consent agreement to have a vote on this bill sometime this afternoon,
perhaps allowing the Senator from Connecticut to do the housekeeping
chores he has and to make sure there are no other amendments people
wish to offer.
Amendment No. 3844
Mr. REID. Mr. President, what is the pending business on this bill?
The PRESIDING OFFICER. The pending business is the Ensign second-
degree amendment to the Brownback first-degree amendment.
Mr. REID. Mr. President, I make a point of order that the Brownback
amendment No. 3843 is not germane.
The PRESIDING OFFICER. The point of order is sustained. The amendment
falls.
Mr. REID. And with it falls the Ensign amendment?
The PRESIDING OFFICER. That is correct.
Mr. DODD. Mr. President, I yield whatever time my colleague from New
York may consume.
The PRESIDING OFFICER. The Senator from New York.
Mr. SCHUMER. I thank the Chair.
Mr. President, I first thank the Senator from Texas for at least at
this point--one never knows--seeing the handwriting on the wall.
Sometimes that handwriting seems to become an invisible ink, but at
least at this point we have seen that.
I wish to make a couple of points.
The Senator from Texas sees the bill one way, and I respect that, and
that is the balance between private industry and Government. Obviously,
he has built a whole career on minimizing the Federal Government role
in every walk of life. It is a philosophy he espouses with a great deal
of integrity, intelligence, and fervor, and he has been mighty
successful at it, a little too successful over the last 20 years.
However, there is another way to look at this bill, and that is in
our post 9-11 world. We are so uncertain of what will be happening
next: will there be other terrorist incidents? How will they affect us?
How many lives will be lost? What should we do to protect ourselves now
that we are in a totally brave new world?
The bottom line is a simple one, I say to my colleagues, and that is,
our No. 1 one goal should be keeping the economy on track during this
brave new world. If that means altering the balance between Government
involvement and private involvement, so be it.
I do not want to see the insurance industry make unnecessary or
excessive profit; no question about it. Under the present situation,
their profits are quite large, and how much of that is due to terrorism
insurance and how much of that is due to just the natural ebb and flow
with the investments they make going down, so their rates go up--the
opposite happened in the late nineties--we do not know.
The bottom line for me is this: That under the present situation,
billions of dollars of projects are not going forward, particularly in
large economic concentrations, particularly in large cities, none
suffering more than my own.
The bottom line is this: Further billions of dollars of refinancing
is not occurring, all because the uncertainty means that for an insured
to offer a policy at all, they err on the side of caution and charge
such high rates that there is a huge crimp on economic policy.
If this happened because of some market phenomena, so be it; that is
the market. This is happening because of an untold, if you will,
geopolitical phenomenon: This new world of terrorism in which we live.
Therefore, to look simply from the prism of how much Government
involvement there ought to be, without looking at the larger effects on
the economy that our problems since 9-11 have caused the insurance
industry--and it has ricocheted to the economy as a whole. The fact is
that the insurance industry was not clamoring for this bill at all.
They were sort of happy to let the present situation continue for a
while.
It was really the banking industry and, above all, the real estate
industry which saw so many new projects go by the wayside that put
pressure to make this bill happen. The insurance industry, wisely, is
going along with this, but they were not the impetus post-January 1
when they learned that they could continue to be viable in terms of
their responsibilities to their shareholders but perhaps not be viable
in terms of the broader responsibility to keep our economy going and
not give the terrorists a victory.
Therefore, yes, there is the age-old conflict between government and
the private sector. But something transcends that. That is the fear,
the uncertainty, that we all have. Those are the classic times when
Federal Government involvement is more called for. In wartime,
naturally, the Federal Government has more say over our economy. No one
has ever fought that notion. We are in wartime, whether we have
declared war or not. We all know it. Every time we hear a loud
explosion, even a car backfiring, people turn around and ask, What is
this? We are in a different world. That happens economically speaking,
as well.
I say to my friend from Texas, this is not simply the question,
Should it be the Government at 10 percent and private sector at 90
percent? Certainly under these circumstances, the less Government
involvement, the better, does not apply because there are external
ramifications that go far beyond the insurance industry itself. My
friend from Texas said we knew World War II was over and that is why
the Government would step in. They did not know a week after Pearl
Harbor was bombed that World War II would be over in 1945--the Japanese
were overrunning
[[Page S5650]]
the Pacific, and the Germans controlled the European continent. All
they knew was, for this country to survive in a war setting, the
Government would have to be fully involved.
I urge my colleagues to look at this on the merits, to not let a
predisposition of an ideological notion blur the view of what we have
to do. I hope we will move this bill quickly.
I thank my colleague from Texas, again, for understanding this bill
should move forward, even if he vehemently disagrees with it. I thank
all of my colleagues, including the Senator from Connecticut, who has
worked long and hard, along with the chairman of our committee, Senator
Corzine, as well as my 17 Republican colleagues who made it clear they
were going to put the prosperity of our economy above any ideological
notion or notion of party.
We are finally beginning to see the light at the end of the tunnel.
We have a way to go. The Senator from Texas is one of the most skilled
parliamentarians around, and I guess he will have a few other tricks up
his sleeve. For the moment, I hope the bipartisan coalition we put
together which says if we do not do something and, frankly, if we do
not increase the Federal role, not only will the insurance industry
falter--it may not; it is doing well--but, more importantly, our
economy will stumble. That is something we cannot afford. That will be
a victory for the terrorists themselves.
I look forward to moving this bill, to come to a conference where we
can solve this problem, not just looking at the balance between
Government and the insurance industry but, rather, the broader effects
on the whole wide economy, and get something on the President's desk to
help those who lost their jobs in the construction industry, those in
the projects that are not going forward, with all the uncertainty in
the economy. Money is being sucked out because insurance rates are
going through the roof. So many in my city and other cities need this
bill quickly.
Yes, the Senate has spoken. I hope it will be allowed to speak by
helping move legislation into law quickly. For our economic viability,
we need it.
I yield the floor.
The PRESIDING OFFICER (Mr. Nelson of Florida). The Senator from
Connecticut.
Mr. DODD. Before my colleague from New York leaves--and we are
heading in the same direction to the Banking Committee to deal with
accounting reform which is being marked up today--I express my
gratitude to him and to Senator Corzine, as well.
Obviously, the Senator from New York speaks about this issue of
terrorism insurance with a voice that adds a bit more clarity, if I may
say so, than other Members. I am from a neighboring State. We lost
people in Connecticut, as were lost in the Pentagon and the airline
that went down in Pennsylvania, but particularly for the people of New
York and particularly the people of New York City, the events of
September 11 have a poignancy that the rest of the country understands.
We deal with this issue of terrorism insurance, and there is a
tendency to get lost in the trees, be arguing about whether the
Government will be an insurance company and how this will work. Those
are not insignificant questions. I know my colleagues believe those are
important issues. Sometimes we lose sight of the fact that there is an
economic slowdown occurring and people have a heightened sense of
anxiety because of the events of September that we did not have before.
We may talk about the failure of the intelligence community and the
like, that may or may not be true, but certainly what was true was a
failure almost of imagination that something such as this could happen
on our own shores. What we are trying to do with this bill, and why the
Senator from New York was so critically important in helping to put
this together, is to see if we can get back on our feet to offer our
constituents a sense of confidence that, despite the events of
September 11, we are coming back and trying to do that in so many
different areas.
One critical area is the economy because, in addition to what this
may cost--God forbid our country is attacked again--in terms of lives
lost and hardship suffered, is the cost in terms of the price of
premiums on insurance policies. Our Presiding Officer has raised
legitimate concerns about that. We know that in the absence of this
bill, the prices are apt to go much higher. In fact, I am confident
they would.
One of the goals of this bill is to try to dampen down that demand
for the increased price of these premiums so our consumers, the owners
of these buildings, the people who rent, the people who work in these
buildings, the people who rent to open up shops and the like, are going
to have less of a cost than they might have otherwise.
We have tried to fashion this in a way that will make it possible to
occur without just setting a premium cost that would be outrageous. And
so I am grateful to the Senator from New York and others who have made
at least getting the bill out of the Senate possible, and I second his
concerns about whether or not we can actually finish this up and get a
bill to the President that will allow us to complete this work.
As he has said, and I repeat, this is about a 1-year bill, maybe a 2-
year bill. It is conceivable someone may argue we need a third year, 36
months, and I would not argue too strenuously against that for all the
obvious reasons.
This is a very limited proposal to try to jump-start this critically
important element in our economy. The longer we delay, the harder it is
to do that. So my hope is the Senator from Texas and others would allow
us to go forward, get a conference done, get a bill to the President,
and see if we can't make a difference for this bottleneck that has
occurred in our economy that makes it possible for the flow of commerce
to occur as easily as it should as we try to get back on our feet as a
nation.
So, again, I will respond more directly at another time to the
concerns raised by the Senator from Texas about the retention rates and
the fear I would have that, if we didn't have some individual company
retention rate caps, what that could do to the ability of smaller
companies to actually be in the marketplace. This could end up being
just a bill that is good for four or five insurance companies, and
there are many out there that are not big but would like to be in this
market, need to be in this market that could not afford to be in this
market without having some realistic caps on an individual company-wide
basis. So there is a strong argument for that approach that should not
be lost on our colleagues when that debate occurs.
When that does occur, we will make the case and hopefully finish this
bill. Again, I thank my colleague from New York.
Mr. SCHUMER. If my colleague will briefly yield, again, I thank him,
as I have before, for his leadership, for his steadfastness. This is
not an easy issue. This is not one where you can go home and make a
stem-winder of a speech. It is not a crowd pleaser, but it is
necessary. His leadership on this has been top of the line, and I thank
him for it and hopefully we can work together and get a law.
Mr. DODD. Mr. President, as I understand it, just to inform the
Presiding Officer, there will be a vote on this bill sometime a little
later today. I know there are some technical amendments that are being
worked on right now to resolve those if we can. And then the leadership
will set the time and the circumstances when that vote would occur. But
my guess is it will be a little later in the day. In the meantime, I
know there is some consideration about laying this bill aside
temporarily and moving to another matter, possibly the Department of
Defense authorization bill. But I leave it for the distinguished
majority whip and the majority leader to make the announcements as to
how we will proceed. But at this point I would assume that debate on
this bill, at least for the present, is over and we will have a
recorded vote on the underlying Senate bill sometime later this
afternoon.
With that, I note the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. REID. Madam President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mrs. Carnahan). Without objection, it is so
ordered.
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