not the governors. >> when you say we recommended this, -- >> the idea is that money went to state governments. we think that if you are going to target, if you are going to get money into local communities, they ought to go to city governments are community- based organizations together. here is the point, the stimulus is what the stimulus is. we needs a jobs bill that all is a different model than the stimulus. that is what the urban league's six point plan is. the governors have held up money. i am talking about across the nation. new york may be a different situation. in most communities, it is the state governments and the

governors that are not sensitive to the days of the communities. >> i am going to a web content. >> do you believe the high rate of foreclosure and school closings in the black community are plots to get poor blacks and hispanics to move out so that wealthy white people can buy up the property and price it out of reach? how can we keep that from happening? that is from pasha in little rock. >> what we are looking for our specifics. things we need to do over the next 12 months. we will deal with that when we come back. >> welcome back to this special.

before we went to the break we had a question from the web. the what you address that? >> when someone hits you you have got to hit back. the reality is that we have been hit by bankers. we are suing banks now saying that you have to change the way you treat our people. your one home can have the same bankruptcy protection that john mccain's six homes have. the reality is that your 1 home should be protected by the courts. we have got to hit back. >> are those names on your web

site? >> it is naacp.org. >> you are moving people to deposit money in community banks. >> we keep talking about the government. the government is not our father. if we target our money to black america, they will be targeting us. i am asking for a commitment from everybody in radio and television, we have $150,000. in two weeks -- let me say something else, as a bankruptcy attorney, they put us in sub- prime loans. we need to educate the consumers

that they have been taken advantage of. we need to make these politicians put money in our black banks. they have taken everything from our community and have not put anything back in it. [applause] >> i want to hear this issue from a small business standpoint. what must we be doing from an individual perspective to help small businesses? >> economic distribution was clearly not equal. if we only got 1% of the stimulus money, the money did not come down. it must be executed correctly and distributed correctly. all politics is local. most of the state of illinois is

in a deficit. to give it to them is like, what did you do with that? it did not come. we need the money to come. it needs to go local. it needs to go to the mayors. take it to the aldermen, ticket to the calcimine, ticket to the community organizations. -- take it to the councilmen, take it to the community organizations. >> from a small business standpoint, what a small business do? is it lines of credit? is it access to capital? >> 23 years ago when we started, it was our home because we bought home foreclosures.

if you take that away, where you build the wealth? small businesses are the backbone of the country for jobs. we can hire and train and sent people out to the gun business people if they so choose. but if they do not have the access to capital, it is over. >> we talk about economic power, what specifics do you have to get people to save? spending for the government is great in terms of getting access to capital. if you cannot save, you do not have a shot at owning a house. >> some of the comments that have come in today, we do not have any concrete things that

people can do today. we should be talking about economic politics. you have to dot -- fine people and develop them to go into the community and be politicians. that is how our problems will be solved. >> the one thing we heard -- you make the point on opening checking accounts. >> we pay city, state, and federal taxes. we need to make the city, state, and federal government put some of our tax dollars in the black banks. why do they not have our money deposited in our banks? [applause]

>> that will allow our community to open businesses and have employment. >> we by 25% of general motor's cars. they do not give us 25% of our budget back. the are not picking 25% side of our people on the board of directors. we have a billion dollar budget, but we do not get 25% of it. >> hold on. we are going to a break. keep it tight because i will cut you. [applause] will have your audience comments

when we come back. people want to note who is in charge of making these decisions about where the money is going from the stimulus programs? who do we hold accountable? here is the person in charge of this money? this -- >> what changes to public policy must be made to help improve our financial condition? >> we will combat with specifics about what commitments we should make. what are the folks here going to do to make it a reality? >> welcome back to the national action network for on. we are at the baptist church in harlem. >> shanna from chicago, i filled

out by census form and mail it back. i am wondering how long it will be before i see some benefits in my neighborhood. we have a park with no lights. when will i see the benefits of the 2010 census? >> you have to organize and fight. that is why people joined the naacp. not on cissus they are voting day, that change happens every day. >> my parents formed a city's club in our neighborhood. it is not what they are going to do, it is what you are going to do in your neighborhood. >> everybody makes a commitment.

what think you have to remember, this president was a community organizer. he knows the difference between fraud, talking loud and black is not going to do anything. you have to organize. half the people criticizing him have never organized. they are sitting high and looking at low. [applause] >> we talked about economic specifics. warren, i want to go to you. >> we are specifically calling on investment in black owned at banks. every corporation, every type of industry would be begging to be the target of our money.

we would have the control to purchase homes, we can be our own stimulus package. [applause] >> we have got to get stimulated. it is stimulus, not stimuthem. disproportionate numbers of black and brown people live in cities. most of the stimulus money has gone to nine diverse states. disproportionate numbers of black and poor people have not been benefited by the stimulus. we have got to get out and vote for the mayors and the state senators and the state representatives because when you talk about the distribution of economic capital, unless you go to the polls, you cannot get the

money redistributed to the banks. if you cannot get to the senators and state representatives -- you and i have to recognize that we will that be power. we want to hold the president, the congress people and the senate responsible. we also have to hold ourselves responsible by voting with our bank accounts. we have got to get to black businesses, we have got to go to black banks, we have got to go to black churches because we still think that the white way is better. then we have a better future. >> the specifics out of all that is by black. -- buy black.

one second. we talked about health care and what is happening. we'll talk about economics. what would your association be doing when it comes to economics? >> those people who have health insurance now is low. we are committed to ensuring that there is a quality, high- class work force. that means people who look like us. we represent only 4.5%. >> the number of black nurses that you want to bring into the field in the next 12 months -- >> in the next 12 months i want to bring in 10,000. we are talking about mentoring and coaching because our

students have a difficult time. everybody in here -- >> the york black world coalition has 70,000 members nationwide. we have a financial literacy program we created to challenge people to add one at revenue stream to their income. you do not have job security if you just have one job. we are ao program to include formerly incarcerated individuals. >> we need some new formulas. i want to pick up on something that reverend sharpton said. we spend the taxes. we paid the taxes. proportionately what we get back from the taxes is not correct. we need some new formulas in place for contracts, in the

white house -- i do not know if this is commerce or the president -- we need an overseer to look at what is going on in black businesses. something is wrong when we only get 1%. >> we are pushing for city, state, and federal funds. we can heal some of our own issues if we are empowered. >> what are you going to be pushing for? >> we are going to be pushing for the new jobs bill. that is the bill that we think we can pass in a few weeks. it is a big jobs bill. healthcare is a big creator of jobs. i want everyone to understand that we put in $11 billion for additional community health centers. we put money in for new training.

i want everybody to understand that when we talk about this new pell grant that is going up to $5,900 per person, that is the kind of money that can get us into these training programs for nurses and everything else. $2 billion in the health care bill is for community colleges. we believe that if you are a lawyer you need a plumber. if you are a plumber you need a doctor. if you are a doctor you need an electrician. we need to focus on where these fields or. >> 15 seconds. >> if a gay and lesbian people yesterday argued that they should be able to visit their

people who are in the hospital, if we do not know the money is there, the people who need to get the money that do not know the money is targeted towards them -- we have to target black communities so that the of bird -- upward mobility can be catalyzed. >> you cannot separate education and economics. our people are miss educated. specifically, we have to stop the achievement gap. we have got to put our history -- we have started the rising network. we'll start them in the church

and the communities on the grass roots level. -- let me say this, if you want to talk about economic power, if our people do not graduate you can forget all of this. we have got to make sure they stay in school. [applause] when we come back -- we have talked about politics and economics, we will talk about reestablishing the black family. we'll tackle that with specifics up next. >> welcome back to the national action network forum. this form is designed to bring about change in the african american community. sell them. we are back on tv.

settle down. the bible says the harvest is principle but the laborers are few. >> i am sorry. i was busy going through the blogs on the web. the irs is dragging their feet with my home buyers' credit refund check. >> what is next? [laughter] >> come back to me. >> for so many years, many

thought we would never see an african-american president. president barack obama proved them wrong. he often speaks about raising expectations in our communities. the president has dealt with the issue of father would, of family -- father did, family, and values. -- fatherhood, family, and values. we just talked about political economics. when you look at the statistics, the reality is you have a greater chance of owning a home, building wealth, voting, not going to prison when you are operating from a two-parent household. what are the 100 black men

doing to deal with this whole issue? black men being responsible fathers and husbands that contribute to that political and economic power. >> 100 black men of america recognizes an epidemic in our nation. when you do not have the pipeline being created, we will step up to provide mentors for our young people. we are in the schools and mentoring them. this is not a one-off discussion. this is not a project we are involved in. we are committed long term. >> we have 116 chapters around the world. >> people to -- this is a critical issue. how do we bring the black family

back together? what should we specifically be doing from an organizational standpoint, a policy standpoint, or an individual standpoint? take your pick. >> i think the black family is suffering at the same level of the broader community. i think that the church needs to increase its effectiveness in how it deals with -- we spent more time talking about if marriage is supposed to be between a man and a woman. i think there needs to be a fundamental process by which we are understanding what marriage means as it relates to commitment, as it relates to childhood, as it relates to finance. it the family does not work, the rest of the community does not work. if we do not have -- we have forgotten how to be families. we have young mothers that

believe that nobody is supposed to help them raise a child. when we came up in multigenerational families -- it was not just women, it was man in a multigenerational framework that understood that without this framework -- >> on that point, we are talking about specifics. are there any ministers in the room? stand up. i wrote about this on a block.

i said that no pastor should -- if there is a specific, a pastor should get to the heart of it. you are at the point of building a family. you are part of the problem. >> i think two things on that. i think you are absolutely right. i think we also have some with mentoring programs.

a lot of people who are criticizing the church have not been to church in 20 years. they do not understand that there are some churches to arguing that. the other thing is that there are other obligations where we can mentor people. i came from a single-parent home. reverend william jones and others made a difference for me. you cannot tell a kid because a daddy left it is over. we all have to be somebody's daddy. >> i want to go to leslie. average graduation rate at fisk is 28% of young black men.

all this whole issue of black families, what are some of these universities are doing to reach out and get them earlier and earlier to pull them into the process? >> we recognize the challenge. one of the things we are doing is partnering with 100 black men, but also the children's defense fund, a dream academy -- we are starting pre-k and recognizing that we will not have enough children to fill our seats. on our campuses, we are not just academic institutions. we reinforce the social, the cultural, the mores that you should be getting at home. we are also starting rales for strong black families.

>> when you talked about reception the other day, you talked about being a single- mother. what do you think organization leaders should be doing when it comes to black families whether it is dealing with black women are black men. >> we challenge media conglomerates to stop allowing ourselves to be denigrated and this respected. that is one major area we have to challenge. we cannot allow our men to wear their pants hanging down. once we deal with that, it is not part of culture. once we respect ourselves, other folks will respect us and our

families. >> when my 10 and 11-year-old children watch television in prime time, they see black people portrayed as a buffoons on comedy shows. we need to do something about that. >> i say this to the mother, you pay the cable bill. you tell your kids what to watch. that is selling those in my family. >> black man tell each other you love each other and that you are proud of each other and that you support each other. sometimes just talking to these kids -- i went to chicago and sell a boy with a gun on the side of his hip.

he told me that he listens to me all the time. i told him he had to put the gun down if he wanted to talk to me. it was a teachable moment. he asked me about president obama as health care reform plan. i asked him why he wants to know this. he said he was 19-year old and had just had a baby. i had an event to go to. he gave me his gun and made a commitment to be there for his child. >> you took the time at the very moment to mentor. >> [inaudible] or communicate with black people every week. get your black newspaper. subscribe to those newspapers. we are committed to changing

the images that you see. when you read those newspapers, use the positive things about black people. we are not to stigmatize. we have a lot of black men who are standing up and are taking care of their families. those are the stories that we have to tell. >> i think we have got to stop criminalizing black men over this black father issue. we have to stop criminalizing our brothers. there has to be safe daddy houses where they can be trained and get the education to raise their children. we have to understand the root cause of the separation of the black families. all of these things we are saying we should be doing are not going to happen until we deal with it.

church by church, school by school, it is a systemic problem. there is a problem -- until we raise our greatness, our men, women, and children will continue to act this way. >> where you start if you lay down with somebody, you've got to wait for something else. we will be back in a moment. >> welcome back to the national action network for on live from the first correct the and baptist church in harlem. >> the comments from the web are hot. we will continue to have these talks unless we address the black family. values are in stilled by a parent. that is from blackamericaweb.com

my nephew has been in prison from -- for eight years. he will come home to a neighborhood of gang members and drug dealers. there are no jobs or services out year. i almost think he is better off in prison. i have denise right here. >> my question is i would like to know what type of programs we are going to put in place for young men when they come home after being incarcerated. >> like the lady says, she thinks she picked -- he is better off in prison. >> jobs are essential to all of this.

families cannot stay together. when the unemployment rate goes up, the marriage rate as down. . .

>> what kind of incentives? >> tax credits, which will allow a second chance. >> what at this point, if we don't know what? that is why people who go to these companies were turned down, because of these groups. we have to press these companies. there are a lot of things that we want without taking a advantage of it because we don't know it. if people don't know it, they will not be able to ask for it. >> first of all, they are stigmatized. when returning prisoners come back to society, if we don't have an organization to receive them with open arms, don't just visit people in prison, but a program where you remove the

stigma and reappoint. secondly, we talk about fighting stereotypes with statistics. nonresident black father spend more time with their children -- a study came out from boston to years ago -- then any group in america. third, we cannot criminalize black masculinity. black people are used for our prowess on the gridiron and basketball court, but demonized in the communities. in terms of pop culture, but we have learned, i am just saying, if "booty call" comes out, people go see it, but you vote with their pocketbooks. go see the stuff that you want to see represent. >> that is not the ultimate solution, but the kind of things we have to hold our legacies accountable for, i believe, to be against the law to refuse

somebody a job because they have a felony. >> one second. >> all of this talking about churches and organizations, what needs to happen, nonviolent felons it should not have a felony on their record for the rest of their lives. that is what needs to be happening! so when these guys and girls get out of jail, if they were a non violent felon, within two years of getting out of jail, it is never on the record. i[applause] >> i want to go to public enemy chuck d. >> what stop the momentum of the corporate is asian of these prisons? companies start to invest in these prisons, and all the sub the job market becomes almost like slave labor inside of the prison -- and all of a sudden the job market becomes almost like slave labor inside of the prison.

>> if you have been convicted of a crime, they can make you a slave. it what we say, this is modern- day slavery. that is the truth. >> the systemic racism in education is a pipeline to those jails. it will not go away until we deal with those problems. >> before i go to break, we have been having extensive conversations about felons getting jobs, removing from the record, but the greater conversation has to be how not to become of felon. we want to see you talk about that. he could talk about the industrial complex, but the key is not getting into that complex. if you drop out of school, you have a greater chance, if you don't love your kids, a greater

chance of going into gangs. don't look at the present system, look at your household. -- don't look at the prison system, look at your household. welcome back to the first baptist church in harlem, where we continue on an action plan to advance the black agenda. first, some comments on the web? >> investing in black-owned banks is a must. they are called community banks for a reason. that is one. here is another, do you see a trend in hollywood for celebrating black man -- men who are feminized? where are the strong black male models in the media? >> on this panel, one second, quiet down. on this panel, i did not hear as

pacific commitment from you. -- i did not hear a specific commitment from you. >> as i have said, without going into the banking situation, talking about banks, part of it, i agree, we must have our communities do that, including our churches. but we, the national action network, address state, federal agencies to put our taxpayer dollars there. second, we work with black farmers. we need to deal with the whole farming issue, to develop our farms, developing those that were ripped off. that is an economic part of our community. we will deal with black banks in terms of municipal, state, federal government, and black farms. >> they have come to an

agreement on the settlement. when will congress approve the money, billion dollars-plus, for the black farmers? >> we need to decide it today. >> you need people to call the white house, congress? >> absolutely. it is not just the black farmers but the native american farmers. we think all of that will be wrapped into this next jobs bill, and we will pay for it all together. >> specifics may be when it comes to families? >> we are committed to ending the cradle to present pipeline and helping the -- the cradle to prison pipeline by establishing academies. the academies will target african-american boys, get them into a 10th grade, take them through 12th grade. something happens between the

classroom and getting home. >> how many over the next 12 months? >> in the next 12 months, we're trying to have a pilot. we need everybody in the sound of my voice to call or e-mail and help me to talk to chairman miller in the united states congress, in the elementary and secondary education act, to pass opportunity academies, residential opportunity academies on all around the center. >> the national urban league will expand its efforts to provide job training for formerly incarcerated african- american men. we will take an initiative called the urban youth empowerment program and add 10- 15 sites within the next 12 months. part of reunifying the family is giving men dignity through

work, and then they can do a better job to support their obligations. >> let me sound two warnings. we are losing our kids right around seventh grade, before they ever get to an hbcu. we talk about elementary and secondary. elementary, 1-6, secondary 9-12. but in seventh and eighth grade is where we are losing them, and we have to zero in on that. that is what we're trying to do. >> real quick, ages 8-18 is our focus. we will work with you and others. our focus is getting 1 million at mentors into our communities. >> how many now? >> we are working with susan taylor and other organizations

-- >> 100,000 more? >> we want to double it. secondary, we have schools, charter schools, five more with the eagle academy. >> ok, that is his specifics. you have yours. jeff johnson? use the microphone. >> number 1, the first thing you have to do is use a better job of raising my kids -- i have to do a better job of raising my kids. second, i am working on my own to do things. the first thing i want to do is partner with churches to open the doors. on the day you don't have anything at your church, how can we help you identify something to keep the lights on and partner with nonprofit organizations for tutoring, mentoring on the days they are closed.

second, i want to work with people with green for all and brothers of chicago to take those who are in gangs and prepare them to do green jobs and understand greek economy. last but not least, we want to do a project to work of the next three years to increase the number of black male teachers at the secondary level by 10%. we have to work to recruit them, train them, and support them. those are three tangible things. >> report. >-- real quick. >> this has led to women having problems finding marriageable mates. first, we want to keep them out of prison. second, hbcu should also stand for helping black children up. if you help them in the fifth, sixth, seventh grade, that will help. secondly, we are working on the

mentoring movement. finally, if you help with the aspirations of young black kids, you don't have to worry, their paths will follow. but the dreams first, the path will follow. -- lift the dreams of first, the path will follow. >> we need to put these boys to work at an early age. i have created a lawn service in my neighborhood that employs 22 boys, ages 11-14. >> talking about the mentoring process. we're going to break. when we come back, we will close this out. also, you have a commitment to yourself. we will get to that any moment. welcome back to our last segment. >> this is the last segment? that when fast. >> we are grateful to them, but

they cannot do it alone. here in the church, we have passed out commitment cards. hold them up. don't be trying to sit on them, hold them out. ok, if you don't have a card, you'll get one. fill these out with your name and contact information, and the one issue you want to work on. so they will call on you for help on your issue. for those that have you at home, do the same. send your emails to commitment @tv1online.com. let us know the one commitment that you want to work on it over the next 365 days. the organizations will contact you with regard to your commitment. again, commitment@tvonline.com. >> the most dominating question

i have gotten over the internet, who will hold these panelists accountable? >> the number one question >> we came with answers. first, my show on tv one, tom is on a morning show, black america.com. we have recorded these commitments. every 90 days, we will check in with each individual to see where they are with when it comes to their commitment. if you say, i don't hear it, that is your problem. you need to watch the show. that is how we are going to hold them accountable as relates to honoring their commitments. they came here, made a public commitment, we hold them accountable. but also you and the audience and the folks at home. >> we will also be conducting follow-ups, and, folks, it has been a great day. i think lots has been accomplished.

but there is a lot more to do. i want to thank our guests, panelists, studio audience, and all of you out there who watched and participated by e-mail and tweeting. thank you so much. rahman will close us out with a staple of his work on tv won. -- tv 1. >> when you read the bible, he had a vision to reveal the wall of jerusalem that provided security to those living inside. after surveying the wall, he went to the people and told him -- told them his vision. they said, let us rebuild. and they did. there were those who were haters and they said it would never happen, and i am confident when these folks look at this forum, they may say this was a waste of time and nothing will get done. like they told the people then, keep building. the most appalling aspect of the scripture is when you read about a particular group rebuilding the portion of the wall right in

front of their homes. -- the most appealing aspect of the scripture. no one person, no one president can solve all of the issues. but if every person rebuilds the wall in front of them, whether it is education, crime, economic empowerment, voting power, you name it, progress will be made. where there is progress, others to doubt it, will join in. if you want change, you must work for it. if you want to see a thriving black community, you must lead the effort. and of talking, not complaining. it is time for us -- enough talking, and of complaining. it is time for us to put on our hard hats. we have to ask ourselves, what are you prepared to do? i cannot answer the question for you, but i can guarantee that if you get off the sidelines and get off your butt and off the couch, and joined the fight, you

will change and your house will change. when your house changes, you will be the folks on your street to change. when the streets are stronger, the blocks are stronger. when the blocks are stronger, the neighborhoods are stronger. whenever the stronger, the cities are stronger and then states. when the states are stronger, america is stronger. when america is stronger, the world is stronger. it all begins with you. so what are you prepared to do? thank you for taking part in the national commitment form. -- forum. >> thank you for being here today, especially reverend sharpton and the action network for making this possible. good bye from the first baptist church of harlem. [captions copyright national cable satellite corp. 2010]

>> thank you very much. mr. green for five minutes. >> thank you, madam chair. our colleague, mr. fugate has arrived and i will yield my time to him. >> i thank mr. costello. >> the chair thanks the chairwoman for recognizing me. let me apologize.

i was supposed to be with the member panel but i was chairing an aviation subcommittee down the hall and i ask unanimous consent to place my full statement into the record. >> yes, certainly. without objection. >> madam chair i've been working closely with a bipartisan working group of forty members and worked on the levy caucus with rodney alexander to discuss issues related to the fema map modification process. the common theme that ran through every one of our meetings. was one's the local jurisdictions need my time and more accurate information is to address the flood maps and the communities will have too much to beer. the bill addressed by chairman waters addresses both of those concerns and builds on legislation that i introduced last year. the solution crafted in this

legislation will help a broad range of member congressional districts. new rate maps will go on schedule so homeowners will have information about their risk. however, the mandatory flood insurance requirements will not take affect for five years in newly mapped areas and mandatory insurance rates will be phased in. i strongly support these provisions as it will provide an incentive for communities to take quick action to fix levies to complete work prior to and during the delay and phased-in of rates homeowners will be encouraged to voluntarily buy flood insurance and provide information about the flood risk, the availability of flood insurance and the potential consequences to purchase insurance. local communities must develop a communication and evacuation plan to educate the community

about flood risk, which are the two provisions i included in our legislation, my bill, h.r. 3415. allowing the flood insurance maps will take effect will have fema's goal of communicating with the community. with the delay and onset of mandatory insurance homeowners will be able to prepare for the high cost of insurance when the new flood maps will take in effect i'm the orn cosponsor of chairman waters bill and it will achieve the bills all along and provide location communities incentives to rebuild their levies, protect homeowners from the high cost of mandatory insurance and effectively communicate the risk associated with living in a floodplain. i thank chairwoman waters, chairman frank, chairman capito and ranking member bachus for working with me on these important issues. and i look forward to seeing the legislation marked up and brought to the floor for passage. i thank the chair for giving me this time and i look forward

forward to continuing to work with you on these important issues. >> are there any other opening statements from this side of the aisle, ms. capito? if not, we will move toward having our second panel. who will make their presentations. the honorable craig fugate, administrator, federal emergency management administration, miss williams brown director financial markets and community investment, u.s. government accountability office. i'm pleased to welcome our second panel and our -- without objection, your written statement will be made part of the record. you will now be recognized for a five-minute summary of your testimony. mr. fugait? -- fugate? >> thank you. i'm pleased to be here today to discuss reauthorization of the national flood insurance program. since i've been at fema since the last 11 months i think one

of our great challenges as you pointed out is the short-term reauthorizations and the gaps that you are in the impacts as people try to buy homes and buy insurance for their purchases. it's important we understand what the original tenet of the insurance flood program was. it's to protect communities against flood. it's to provide affordable flood insurance and take the burden off the federal government in providing that. that program is pretty straightforward but the implementation is quite difficult. and as the discussion goes, in many of my conversations about the members here as well as the colleagues in the senate, we did not have a lot of flexibility. we appreciate the work being done and working on what kind of flexibility could be provided to fema and trying to address some of these needs. but it comes with a cost. as it pointed out we have an existing debt over $18 billion. but i also think it's important to talk about what the potential exposure is.

the "miami herald" ran an article what would happen if a major hurricane hit south florida. and what kind of exposure would occur just from a storm surge. and a major 5 hurricane it would be in the $60 billion range. but what was really disturbing was even in a category 1 hurricane, over $20 billion worth of damage would be flood-related. there is not $20 billion of policies in effect in florida. the population loss does not match up but does this illustrate the exposure of the program against these events. this also goes to the mandatory purchasing in that the only people that are required to buy flood insurance are those at the highest risk. yet we know that over 40% of the flood damages occur out there.

less than 1% of those homeowners have flood insurance. so you're trying to maintain a program to protect homeowners and provide at a reasonable cost for this program. yet, the only requirement to purchase is of at the highest risk. it would be as again a preexisting condition is the only people that are required to be in this program. yet, we're trying to be acuarially sound. it creates a lot of challenges as we go forward. the steps to ease this burden as we do new maps and change rate designations. i think it's important to look at existing homeowners who provide graduated scale for increases. i very much support giving us the flexibility to recognize that when levies are being approved but do not require or involve federal dollars that we give them the same recognition as we do those with federal dollars. and recognize that work should defer and provide extended periods for implementing any changes. there shouldn't be a distinction

between federal and local dollars if the work is being done to protect a community and we very much support that. we know that there will be many challenges as we go forward and we continue to pledge to work with the community. but our challenges was daunting. about 25% of the policies in effect are below acuarially sound rates. which means we are not collecting enough money to cover that exposure. we have the existing balance of the -- about $18.8 billion we owe which we do not have any real ability to pay down. we currently pay about $100 million in interest back to the treasury. so we have that debt plus the exposure plus the fact that we have policies that are acuarially below what the cost would be to service those policies. and again, we're reminded that this program is necessary to protect homeowners and protect their mortgages and when there's lapses in the perhaps that are not offered we literally stop home sales in these areas.

we again support a longer extension. we continue to work on this. americans depend upon this program. where we have good flood insurance and people do participate it does reduce the cost of the taxpayer. we will look forward to working with the subcommittee in congress as we go and i'll be happy to answer any questions that the committee may have, madam chair? >> thank you very much, mr. brown. >> good afternoon, madam chairwoman, ranking member capito and members of the subcommittee, i appreciate the opportunity to participate in today's conversation concerning the condition of the national flood insurance program and options to reform it. as you know, gao placed nfip on its high risk after the 2005 hurricane season exposed the potential magnitude of long-standing structural issues on the financial solvency on the program and brought to the forefront a variety of

operational and management challenges. fema continues to owe the treasury $18.8 billion in losses and interest expenses which is unlikely to be able to pay under the program's current design. my statement today is based on gao's past and ongoing work and focusing on nfip's financial condition, its operational and indigent challenges and possible actions that could be taken to address them. while the structural issues were well-known, the management challenges have become more evident in the past several years. we have made recommendations addressing virtually every aspect of the program. for example, we have recommended that fema take action to improve nfip's management of data quality, the rate-setting process, oversite of the insurers that sell flood insurance, the expensed reimbursement process, its contractor oversight and its claims processes. while preliminary results of our

ongoing review of fema's management reveal that many of these problems ongoing, for the first time we are encouraged by fema's new tone beginning with its acknowledged that it faces a number of challenges. and a new will to engaging a new dialog. we are currently engaged in a comprehensive review of nfip that builds on our past work and plan to issue a report later this year. we hope that this report will provide a roadmap for identifying root causes and addressing many of these outstanding issues. however, we also recognize that many of the challenges facing the program will require congressional action. moreover, we understand that this is no small issue given the complexities of the program and the often competing public

policy goals including having rates accurately reflect risk, counseloring participation and limiting cost to the taxpayer. for example, many premium rates for properties are subsidized by law. and rate increases are capped for a number of reasons including offsetting the cost of catastrophe relief. these decisions involve tradeoffs that have to be balanced with the goals of nfip. specifically, while mitigation is viewed as vital to limiting the government's exposure, charging rates that do not reflect risk may hamper mitigation efforts by encouraging property owners to build in harm's way and not adequately mitigating. moreover, the current nfip structure increases the likelihood that the program will have to borrow from the treasury.

in 90% of the cases include flooding. the other part includes with who should pay for the losses. that is congress must decide how much of the cost associated with flooding the government should pay versus the property owners. in closing i would like to note that while the $18.8 billion that nfip owes treasury may not seem large by today's standards, it is significant compared to nfip's annual premium revenue which was $3.2 billion as of february. this debt may also continue to grow unless congress and fema take action to begin to address some of the programs operational and structural issues. finally, one option to maintain subsidies but improve the financial stability of nfip would be to rate all policies at the full risk rate and to

appropriate the subsidized amount to the program. believe structural change would remove the financial burden on nfip by making the subsidy explicit. and make the actual flood risk more transparent to the property owner. thank you. and i'm prepared to answer any questions that you may have. >> thank you very much. i'll recognize myself for five minutes. the map modernization process has caused a lot of concerns for members and the communities they represent. what kinds of outreach is fema doing to communities to make them aware of this process and to alert them to the possibility of mandatory purchase of flood insurance? >> madam chair, the process is when we go to begin map modernization, we work with the community and begin to work of preliminary data, preliminary map findings. there's an appeal process.

but as one of the things that's been pointed out to me by various members and times is communication with the public has not always been as strong. particularly, when we're looking at what we would consider for members in the public is adverse finding is we increase the area in the high risk which requires mandatory processing. as we go through this process there are numerous steps to go through for communities to appeal. but we know we have to continue to work on the outreach and communicate to the public what these potential changes may mean as far as mandatory requirements. as you pointed out about 60% of the mapping is done. about 80% of the total maps are at a point where we will be accomplishing that in the next fiscal year. and about 20% remains to be done. just off the top border boxes 7% of the new maps increase the risk of designation for high risk. about 1% drop out. and so again it's that communication where 7% of the

findings made increase to risk that communication early and explain to people why it's important to have flood insurance particularly as those changes occur. >> can you explain to me the role the cities and counties play in this remapping? when we had the problem in los angeles we discovered that there had been some notification to the city. they had done nothing. and that there was some old mapping that had been done in cooperation with the county that you were still using as the basis for your information. how does that all work? >> it works based upon each city, each county is individual as we try to work and identify who is the authority within that community responsible for mapping. sometimes it's in public works. sometimes it's in community planning and again as you found out in that situation we had overlapping mapping being done but not necessarily by the jurisdiction we initially talked to. again what we have found we have done multiple outreach and try to understand how mapping is being done. how it's going to be implemented in the jurisdiction that will

have authority whether it be a city, a county or in some cases a water management district or other flood control ports such as levy board that has some piece of that that we have to work with. >> thank you very much, mr. brown. in your testimony, you note that severe repetitive loss properties make up of 1% all flood insurance policies but are responsible up to 30% all claims. what actions should fema take to reduce the claim rates of these properties? >> gao has looked at this issue over the years. and we believe that many of the current actions need to be ongoing. and there's also some structural changes that need to be made around definition. there are many challenges in terms of forcing these particular homeowners to mitigate the properties. and there's also a dialog that needs to take place between the program and local officials. and we believe this is an area

where a common definition would be helpful in terms of defining what a significant event is and when the particular issue of a repetitive loss is triggered and what actions homeowners would have to take. we found examples where homeowners were able to ignore letters from fema. and the nfip involving losses on their property. and by not responding to an offer involving mitigation, they were able to avoid being forced to take any type of action. >> i see. thank you very much. ms. capito? >> thank you. i'd like to ask the administrator, in your comments and also in ms. brown's comments, you both said that the rates that are being charged to nfip do not reflect the risk and they're underpriced. what kind of action items do you have to solve this issue?

at the present time? >> not many. part of our challenge with flood insurance program is how it's structured and how we're required to provide insurance and the rates we're allowed to charn. -- charned. -- charged. >> that's statutory and rule. >> oh, rule. >> what we have found ourselves facing is in trying to phase in or do some of the things that's actually being recommended we would continue to subsidize that risk and that risk may grow. i think it's the intention of how do we minimize impact of homes and phase in improvements and buyouts but deal with new construction. and so this is kind of a bind for us in trying to minimize the fiscal impact to homeowners to have to buy flood insurance but charge a rate that is sound enough to be able to keep the program whole. when you bring in basically $3.2 billion a year, as long as you don't have any floods you're doing well. but one or two large scale flood events far exceed the capacity of that program.

so again with those that are subsidized and that may be a good decision to be subsidized but it's being subsidized at the rate pay not at the overall program level. one of the recommendations of the general accounting office is to have that specifically authorized by congress and to pay that differential so that we can at least maintain where we're at with our current exposure and begin to start paying down -- >> so would that require a further appropriations to be able to subsidize? >> it would. but it would then to start paying back down some of our debt. we're structured right now, we really cannot pay down the $18.8 billion. we have no real prospects of paying it down. as was pointed out, anytime we have flood disasters that exceed our intake for the annual premiums that number gross and our interest payments then back to the treasuries because we can't adjust our rates to take that into account. >> the reason you can price for

risk statutorily and through rule you don't have the ability to do that. is it a combination of the policy purchaser can afford that? is it all of the above? >> i believe it's all of the above. i would ask staff and i would get you a detailed report back on why these are subsidized and how it's done. but again, if you listen to the questions that we get asked a lot of time, if we find that the risk is increased we'll challenge the map and then what is the impact to homeowners who now have as pointed out escrow bill of up to $100 a month, $1200 a year they weren't expecting and how will they phase that in. they will subsidize that risk until some point we either have a rate being charged that is actually based and we phase it in over five years. but under the phase it's under the exposure that risk is being paid for. >> well, if we're going to --

let me get the -- the multiperil, thank you, the multiperil bill which would add wind as a peril under the nfip, do you anticipate that you would be able to adequately price that for the risk? and can this program sustain another large -- what i would anticipate could be large added burden without appropriation? >> it is a key concern with us. meeting with congressman taylor we discussed this issue. i coming from florida recognize some of the challenges we have when we have perils written separately and how to figure out how to adjudicate who pays. but how do we maintain and be able to run this program and make it acuarially sound is a

question we're not -- we don't have a comfort with. >> well, one of the concerns you just mentioned it would take further appropriations to reach the proper subsidies to be able to get the rates to match the risk or for you to poor down -- to pay down the debt that you had for the treasury. but basically you'd just be taking from the treasury to pay down the debt to the treasury. that has kind of a false ring to it, i think, in my mind. and i guess to me adding another peril while i understand the -- we kind of went back and forth in the house with mr. taylor and i when this was on the floor the other day -- or last year. i understand this but i have concerns of the long-term viability of the nfip to take on this added burden at a time when you're really falling behind daily if what i'm hearing from both of you is the correct analysis. and with that i'll yield back

the time that i do not have any longer. [laughter] >> thank you very much. mr. breene? -- green. >> thank you, madam chair. mr. fugate, i trust that you took it as a compliment when i elevated you to the level of a congress person. i didn't mean to insult you. in any way. a few questions for the record. first question is, is it true that when we have flood damage, we also sometimes will have wind daniel. i know the answer's yes but -- >> absolutely. >> and is it true an insurance company will send out an agent to assess the damages. is this true? >> that is true. >> and is it true that this agent will literally be employed by the insurance company not the federal government? >> that is true. >> and employed by the insurance company for edification purposes i know everybody knows this.

but it means that this person receives an emollment something we call a paycheck, true? >> that is true. >> and receiving this paycheck from the insurance company in no way influences the judgment of this person that comes out to assess the damages, is this true? >> that is the intention of the program. >> i understand the intention of the program. and believe me, i understand that was a difficult question. i understand. but the point that i'd like to get to is this. we have something known as de facto subsidies. de facto subsidies with reference to this circumstance occur when the insurance company is in the unique position of deciding whether it should pay or deciding whether the government should pay. and in so doing every time the

insurance company can roll the dice and get the government to pay, it gets a subsidy. not a subsidy in law. but a subsidy in fact. so there is really an inducement for insurance companies to want to have wind coverage in areas where you're going to have flood daniels. where you're going to have high clouds. because when they can get that coverage -- if the system remains as it is, there's a possibility that they'll have a chance to roll the dice and make a decision as to whether it is going to be flood or it's going to be wind. you don't to have agree with that. but my point is to you is this. if we do not change that system, is it possible that the federal government is subsidizing some insurance companies by way of

allowing the agent to determine the damages, not in every case, not in any percentage of cases, but in some cases the insurance companies do win in the sense that they are in a position to deny liability, to deny coverage. and at some point if you don't get a court involves, that decision stands, is this true? >> i could not affirm that at all. >> well, let me ask you -- excuse me, let me ask this question quickly. if the insurance company denies liability and if the owner does nothing more, does the insurance company's judgment stand? >> the adjuster's decision would stand unless it was appealed. >> let's assume that it is not appealed. the adjuster makes a decision in favor of the insurance company, true? that does happen, right? >> it would determine whether it was a flood or a wind impact --

>> the adjuster decides that it is, in fact, flood not wind. and you have the possibility of it being both. at that point the insurance company does not have to pay any claim on that property with that decision; true? >> it would depend on the policy. >> the policy will allow a payment when the adjuster says that it was water? >> i don't know if you can state -- and i would not have this experience to state categorically that an adjuster found it was only flood and not wind. they may find it is partial wind -- >> no, no. take as a fact we have an adjuster who says it's flood not wind. what then happens. >> the flood insurance policy if they had one would then pay. >> all right. and the person then goes to court and wins the lawsuit, that means that the adjuster was wrong; correct? if you go to court and wind. this is not difficult now.

>> it means the judge has made a ruling. >> take it as a fact that it was wind and not water. does not the claimant win then? the person who filed the lawsuit? >> hopefully they'll receive additional insurance dollars from their wind to help rebuild their home. >> exactly.ghe and that happens; doesn't it? >> it has happened in my state where lawsuits were filed against both -- >> and the point is this. if those persons don't have the resources to go to court, to do legal combat with the insurance company, they are just out of luck. my point is, we can't allow that kind of de facto subsidy to continue and i'll yield back, madam chair. >> thank you very much. >> thank you, madam chairman. if the bill as drafted is passed

and becomes law, will the homeowner have wind coverage with his homeowners insurance as well as wind coverage with the new program? >> i would not know. >> it would depend on the homeowner's policy. gao did a review a couple of years ago looking at this issue. and one of the issues we raised is, one, would the private insurance market continue to offer wind? and if they do, you may have a situation that it would be covered in the private market as part of the homeowner's policy as well as a combination of wind, flood policy. >> which would present a whole different set of problems? >> possibly. >> and that would be -- of deciding which party was then going to actually pay.

but if the federal flood program covers the wind damage, then theoretically if it's mandatory, then the homeowners should be able to drop the wind damage on their residence. >> that would be a choice. >> and only in theory will the premium then go down? for the homeowner. >> correct. >> yeah, i mean, it could do that. so the question of whether these -- these properties will be double-covered or whether the private market will completely withdraw wind coverage from its coverage we had a similar thing happen in texas on foundation coverage. where at some point the insurance companies just said we're not going to cover foundations anymore. >> well, the other that we

raised in looking at this -- if this structure were in place and we maintained the wy0 structure with the private sector sell the combined wind/flood coverage it presents an opportunity for adverse selection. in that the insurance companies could choose to continue to offer wind to their lower risk customers, not offer wind coverage for higher risk customers which means that the highest risk homeowners would migrate to the combined program. >> but if you had a situation where homeowners policy actually went down in cost, then the addition -- the savings could be absorbed on the higher premium on the flood insurance. thus, i mean, then the program would not have to run in the hole as much. you could recoup some of the

actual cost of the flood insurance. is it your opinion the bill is drafted that way? or is this still a question mark? >> i think part of this really will depend on how the private insurance market reacts to -- if this were to become law, would they continue to offer the coverage in particular areas. so it really -- it depends. >> for the administrator, you testified that in the new mapping approximately 7% -- there will be approximately 7% of area added to what would be the mandatory area? >> that's been our findings so far, sir. >> and 1% deducted. so you're going to have a net 6% added. with that increase 6% you're

going to have -- you're going to have a huge increase in properties that will have to have mandatory flood insurance when they go to closing on their house? and in this case, is a higher number of mandatory policies -- does that translate into a program that becomes more solvent and is able to pay its debt off or does it -- does it make for a program that is going to create even more losses and even more debt? >> the simple math would suggest absent floods will have more revenue coming in. the reality is, you're basing upon a 1% per annum risk which means most people are more likely to flood. and you're trying to be acuarially sound that they be insured at the highest risk. the long-term exposure is actually greater. what the maps are doing in many cases is just more accurately

depicting what that risk was. but again because you're only requiring people to purchase flood insurance at the highest risk, that pool -- even if it grows does not offset the exposure. the exposure increases even though without floods it would give the appearance of increased revenue streams that may give opportunity to pay down debt. >> thank you. >> mr. taylor? >> i thank the gentlewoman and to the gentleman's point the administrator said that the flood insurance lost $18.8 billion the year of katrina. what he didn't tell you the nation lost an additional $34.5 billion because the private sector didn't pay their claims. now, that was $4.2 billion in fema housing assistant payments. 7.1 billion in fema manufactured housing. hud, cdbg housing grants to the tune of $15.4 billion. and disaster loans for $7.6 billion.

again they keep looking what the flood insurance lost. but because the private sector did not pay their fair share, the same reason the insurance industry had $44 billion of net profits, '05 our nation lost $53 billion to katrina. we're trying to keep that from happening again. we're trying to get those people who live in the risk area to purchase a policy that will cover all these costs so that we don't have to pay it again. to that point, mr. fugate and i'm sure you've had some time to look into this. you know that our agreement with the insurance industry, number one, let's them sell the policy. they get a commission for that. we also pay them to adjust the claim. they get a paycheck for adjusting the claim. our contract with the insurance industry says that they will do a fair adjustment of the claim. if it's 60% water and 40% wind, they pay 40%. the nation pays 60% through the flood. unfortunately, testimony before the mississippi supreme court by

a nationwide attorney, attorney for the nationwide insurance company and i'm they hired before the insurance company, this is a quote, i'm giving you the example. it is 95% of a home is destroyed. the flood by wind -- the flood comes in and gets the other 5%. and you know that. does your interpretation of the word sequence -- he's talking to the attorney for nationwide insurance company mean that you pay zero? mr. landeau said yes, they pay zero. now, going back to your job you run the federal flood insurance program. you have testimony before the mississippi supreme court with nationwide insurance companies, a paid representative cessna circumstance where they should have been paying 95% of that

bill, they pay zero and tuck the federal taxpayer 100% of the bill, what have you done to look into this? because the contract with america says they have to have a fair adjustment of the claim. and to the gentleman's point, i am not an advocate of bigger government except at times government can do better than what it's doing now. and this is one of those times. so to that point, how many fraudulent claims has the national flood insurance program looked into? because i can't think of another single instance and you correct me where someone can send a bill to the federal government for $350,000 an unlimited of bills for up to $350,000 and no one takes the time to see if it's a valid claim? and you have on record where their company admitted if 95% of their burden is theirs they pay nothing if the last 5% has done by flood. what have you done about this?

i'm tell you i'm amazed of this administration's reluctance to do nothing -- reluctance to do nothing. because doing nothing is to repeat this $53 billion mistake. >> to be specific, a lot of this is from general accounting office recommendations we're implementing but to the very point of what you're articulating which is how do you reconcile dual peril written by two different individuals who has a conflict of interest yet we're accounting with the insurance company to adjudicate? i actually have insurance companies come to us asking to withdraw from the program. and we're currently looking at how would we provide claims adjusters on the federal dollar to do what we currently pay insurance companies. so not only is this an issue we know internally that we have to face, there are large insurance companies that are questioning why they want to continue this for this very reason that it puts them in a untenable situation where they're trying to reconcile how much was flood and how much was wind. >> mr. fugate, again, what

changes are you recommending so this conflict of interest doesn't happen? and by the way, how many cases have you looked into where there obviously was fraud that they're liable for 95% of the bill but if there's 5% of daniel caused by flooding they're not paying anything which means the federal flood policy and fema picked up the bill for all believe additional expenses. have you looked into one case? >> personally i have not, sir. >> has your agency looked into case. ? >> i will need to respond on the record. >> can you give me an guesstimate as to how many cases you have looked into. >> no congressman, i could not give you an guesstimate? >> you couldn't say 1, 15, 20. >> a $53 billion bill and nobody is looking to see if we should have paid it? >> again, to be accurate -- >> thank you, madam chairwoman. >> thank you very much. we have 10 minutes left.

we have to go up and take three votes. we're going to hear from mr mr. skalise. >> i thank you, madam chairman and administrator fugate we have worked on different hurricane issues. we still have to work on the sdl rules. but regarding believe and kind of follow up on congressman taylor and other members questions, regarding the acuarial soundness of the program, i agree that the $18.8 billion is a problem that's got to be addressed. but it's a problem that was not caused and has no relation to the issue that congressman taylor and i's bill addresses and that is bringing the wind into the flood insurance program. and, in fact, what i want to talk to you about, it's my feel that the bill that we have would

actually help solve the acuarial soundness. it confirms it would be acuarial sound. and it would address the heart of believe problem that we're having right now and that so many homeowners had. and that is the debate between wind versus flood. and it was such a frustration for so many of my constituents who bought a policy for their homeowners policy. it covered fire and theft but it covered wind. and then they also paid for their flood insurance policy. and so they paid both and then they got both, they got wind and flood damage. and yet neither policy was going to pay because each was point the finger at somebody else. in many cases you had somebody who lost their whole roof so clearly there was going to be some wind daniel. but the homeowners policy was saying we're just pointing to the flood insurance program. make them pay. and so what happens is your program, nfip, can only charge premiums right now based on the

flood risk. and so you by law can only charge premiums for flood but, in fact, you are paying claims for flood and for wind. you're paying for both but you're only charging premiums for one. so you can't be acuarially and our bill would fix that problem because you eliminate the debate. no longer do you have two different people with -- as the general accounting -- the government accountability office has suggested, two different people who have conflicts of interest because it's in the best interest of the insurance company to say, hey, if we can get nfip to pay it, that's money we save. well, if you combine them into a multiperil policy now you're risking -- you're basing your premium on the combined risk and you don't have this concurrent causation question anymore because if it's caused by wind or by flood it's all under one roof. it's all one policy and they're

paying you that premium and then when you pay the claim you're paying the claim. it doesn't matter whether it was wind or flood at that point. you're paying the claim because you charged the premium based on an acuarially sound matter to cover both. but right now under the current rules, you're paying claims for both but you're only charging premiums for one. i can see why you're in an acuarially unsound basis because for various reasons and i hope you look into -- you know, the conversation between you and congressman taylor and a lot of this happened before you got here -- but clearly nfip was paying claims for things they had no business paying for because just through gao gets into this and they point out there were those conflicts and how the various insurance companies who chose to do this for everything we can dump onto the flood program, we'll make them pay because they will. and, you know, unfortunately, y'all held up your end of the bargain and you paid claims but

there were so many people who were waiting and had to go to court and take their insurance company to court to make them pay for the wind damage that was done even though they paid on the policy. the other thing this policy has it has loss of use the policy of our bill. the loss of use program so what it also does it addresses the problem for those fema trailers who had to wait for those two years and they got paid for their insurance claims but they had to wait for two years and they were living in a fema trailer because they had no place to live. now, that will also be paid for not through your separate program that the fema trailers dealt with but also through their acuarially sound multiperil claim. so i know wanted to talk about all that because i think as you're looking at how it affects your program i think it helps the acuarticle soundness of the claim so you don't have to pay for somebody else's damages.

>> that has a lot of interesting points. however, the reason i'm 25% below the acuarial rate, i cannot say. i can only goes up a certain amount and that allows me not to be acuarial sound. i'm capped -- >> this is on flood. the wind program is a totally separate program and requires acuarial soundness and i know i'm out of time. i apologize. thank you. >> thank you very much. and our bill will move that up from 10% to 20% so you will have a little bit more flexibility. the chair notes the members may have additional questions for this panel which they may wish to submit in record. the hearing will remain open for members to submit written questions to these witnesses and place their residences in the record. this panel will stand in recess

until after the votes. we'll be back. [inaudible conversations] >> our first witness will be mr. david r. conrad, senior water resources specialist national wildlife federation. our second witness will be mr. mark davy, president and chief executive officer fidelity national financial specialty

insurance group on behalf of the write your own coalition. our third witness will be mr. larry larson, executive director association of state floodplain managers. our fourth witness will be mr. john rolands, president rolands political company and our fifth witness will be barry routenberg chairman of the association of home builders and our final witness will be mr. maurice vici of vici & associates. first vice president national association of realtors. without objection your written statement will be made part of the record. you will be recognized for a 5-minute summary of your testimony. so let us start with mr. conrad. >> good afternoon, chairman waters and ranking member capito and members of the subcommittee. my name is david conrad. and i serve as senior water

resources specialist for the national wildlife federation. the nation's largest conservation education and advocacy organization. we greatly appreciate the subcommittee holding this hearing today and your continuing interest in the reform and reauthorization of the national flood insurance program. i want to underscore three mainly points from my written testimony. first, while the national flood insurance program is broken, essentially bankrupt, with a debt of $18.7 billion to the u.s. treasury, many of its fundamental problems can be corrected. believe committee has an opportunity to pass meaningful reforms that will get the program on better fiscal footing. and most importantly, better -- provide better protection for people and the environment. unfortunately, the discussion draft -- or the flood insurance

reform bill falls far short of what is needed. and may even make things worse. second, these are not normal times. the nation's scientists are telling us that climate change is already causing heavier rainfall, changing patterns of snowfall, bringing more severe thunderstorms and likely exacerbate already increasing flood and damage. third, tomorrow is earth day. and it's important to recognize that the nfip as it is functioning is damaging to habitat, wetlands and other environmental forces. -- sourced. -- sources we need to fix these environmentally sensitive high risk areas. unfortunately, the committee is considering adding windstorm coverage to the nfip and establishing a federal backstop for state natural catastrophe

funds. in our view these are antienvironmental proposals that would exacerbate these problems. let me comment directly on the national flood insurance reform priorities act, the discussion draft that we received. first what we like we support the five year phase-out of subs disfor two major classes of people, nonresidential properties and nonprimary residences. we also support increasing from 10 to 20% the amount that fema can annually raise premiums to reduce subsidies and improve the nfip's soundness. what we think need to be fixed or eliminated in the discussion draft. the bill should be amended to phase out subsidies for severe repetitive loss properties and properties that have already cost the flood insurance program more than the value of cumulative claims.

we would strongly object to section 6 and 10 that would delay or waive requirements for mandatory purchase where residents remain vulnerable and inadequately protected from flooding. as we saw in hurricane katrina, it's a dangerous mistake to assume no flood insurance is necessary because there are corps of engineers and other levies especially decertified levies. we also believe the nfip should be reauthorized for three years and not five. director fugate has initiated a major two-year effort to review the nfip with the intent to make comprehensive administrative and legislative recommendations to guide the course of the program in the future. the future reauthorization should dovetail closely with the administration's efforts. now, another overriding concern, given the committee's decision to limit the authorization to insurance -- to this

reauthorization to insurance and finance aspects, we believe many of the most critical and necessary reforms are not being made in this bill. including needed measures that can better target assistance to low-incomed americans to improve land use codes and make environmental protection the heart of nfip's risk reduction strategy. regarding h.r. 1264, we do not believe the federal government should not get into the area of responsibility for wind cover. -- coverage. not only would it hurt the long-term health, it will fuel development in many more high risk in environmentally sensitive areas. in conclusion, once again, the national wildlife federation greatly appreciates the opportunity to provide our views on legislation to reform the nfip. many of the views we have expressed are shared by smarter

safer a broad coalition working to protect the environments in the community and i look forward to respond to any questions any members may have. thank you. >> thank you. our next witness will be mr. mark davy. >> madam chairwoman, ranking member capito and subsequent members i'm mark davey. fidelity is write your own flood insurance with the nfip and the larger writer flood insurance in the nation. we're also members of the write your own coalition which is made up of 85 private insurer whose collectively and administer the nfip policy base. thank you for the opportunity to testify today. on behalf of the fidelity national and write your own coalition and to share our views on flood insurance reform legislation. first and foremost we would like to compliment and voice our support for the legislation

authored by representative waters. we feel the bill provides much-needed refinement. you requested we share our views of the status of the nfip and any improvements the program may need. all things is considered the program is working well except for the expiration and delays in reauthorization. while the program remains heavily in debt the nfip retired $500 million of debt from katrina, rita and wilma. not only has it retired $500 million of debt it shouldered the additional burden of hurricane ike during the same time frame. the flood program and the stakeholders would greatly benefit from streamlining the flood application process. streamline policy application and underwriting process would enable more agencies to understand a market flood insurance. purchasing a traditional homeowners insurance policy

takes annual agent five months to complete the transaction. by contrast, most circumstances it will invest several hours before successfully placing a flood policy. there needs to be a continued push for adequate rates at all program levels. our goal should be to create a program which could be financially self-sufficient. it could not provide and meet its fonts if its existence comes from question the nfip has to ask congress for more money. not in the bill but something i propose the inclusion of additional living expense coverage. adding this coverage will -- adding this coverage will provide a valuable coverage which will allow policyholders to get back on their feet much faster following a flood event. this coverage will provide the ability for the insured to keep their lives on track as opposed to being thrown out on the streets. i advocate we add this additional coverage and charn an appropriate premium to properly under write this new proposed coverage.

you asked me what ways to bring stability to the housing market when a buyer is confronted with the unavailability of flood insurance it derails to the transaction relating to the purchase. in some circumstances purchase transactions have been abandoned based on buyer's well-founded steers of their ability to steer flood insurance for their ownership. the lack of immediate flood has extremely negative effects on housing sales. you asked me how short-term reauthorizations have impacted our company and our companies. we epdid he ever to run our operations as efficiently as possible. our computer mail-in and form systems are part of our workloads from a standpoint and a computer systems standpoint. digging out of a backlog accumulated by program lapses is extremely difficult and we cannot provide the level of service to our customers to which they are accustomed.

with the recently lapse we were confronted with issuing approximately 5% of our annual policies and renewal notices on statement. when our production platforms normally run 8 to 10 hours a day seven days a week, it's doubling and tripling which is extremely costly. lapses cause undue stress, confusion and frustration. because we we're always hopeful appropriate action will have lapses in every circumstance we have to scramble and notify the general population and all those involved in the flood program of lapse and current changes in procedures. when, in fact, we do fall into a lapse environment. the nonquantifiable and most cost benefit is the loss in renewable policies not in flood hazard areas but also areas flood insurance is not manner.

-- policy. they are far less to renew if they feel the program is in jeopardy. as we do everything as possible to include program participation the message we can convey is the continuation is in question. you asked me to discuss what impact the map modernization effort has had on write your own companies continued and refined map modernization for the nfip. it's imperative we have the most accurate information available. >> thank you very much. a third witness will be mr. larson. >> thank you, madam chair and committee. the association of state managers is 1300 members implement the national flood insurance program at the state and local level. and i represent their thoughts. the nfip really is no different than it has been for the last 42 years. it's essentially the same program that was authorized in 1968.

the congress has tweaked the agency here and there over time. but we're essentially operating on that same model. believe program again tweaks around the edges, this bill. we're concerned about the significant reform of the bill and we're pleased fema is undertaking an effort to come back to you with some broad recommendations on options in which that needs to happen. ..

>> we're not going to be able to control it under the current process. we are seeing some more intense storms, people in des moines have said we've had five, we've had three, 500 year floods in the last 15 years. we are seeing more intense rainfall. we are seeing these things that will increase our risk. so significant changes are necessary. these issues we're dealing with, the struggle with mapping and insurance. mapping is not the issue. mapping really identifies the risk. we need to know that. levies are not the issue. we know that all levies will fail at some point. it's not just me saying that.

that's every expert in the world saying that. insurance, insurance is the only security some of those people have for what they own, which typically is the only thing they own is that house. without insurance they are left naked. so delaying the map, without insurance, puts people in a situation such as representative taylor were in were as now there is no way to regain that lost that they had. other options in the build such as saving, those sorts of things seem to make a lot more sense. the prt, professional policy that fema has talked about, some of those options. you know, in the nation, about 1% of the people are at risk of flooding. 7% of the land area of the nation are floodplains but a 1% of the people are at risk of flooding. about half of those people carry insurance. and as mr. fugate talked about,

trying to figure out to run and actuarially sound program, there's only very few of those 11 million structures that are required to have insurance is problematic. so broadening that risk, are broadening that fee, spreading that risk is how you're going to have to get an actuarial program. we would agree with the gao concern that part of this issue is who benefits and who pays. striking that balance. those who live at risk pay their own program risk. that's a challenge that you face in this committee and the congress races in trying to actually reform the program. respond to other questions that you have no. thank you very much. >> thank you very much. mr. rollins? >> good afternoon, ms. chairwoman waters and ranking member capito. capito. minus john rollins.

i'm an actuary holding qualifications and american academy of actuator i have worked in for property insurance in the last 11 years serving as chief actuary of private insurance companies, as well as director of the state run win pool of citizens property insurance corporation. testified two lawmakers on issues of government-backed property insurance systems in disaster prone areas and have research papers on the subject. after many years of observing public policy decisions and the impact on property insurance markets as well as public finances, my message to you today is simply this. in designing rates for any property interest program supported by taxpayer capital, great care should be taken that the legislative definition in a practical definition are actually sound conforms to the prince was of the u.s. casualty profession itself. background is in or. we know insurance policy is really just a promise to pay for predefined type of possible lost in exchange for some up front premium. by law, insurance contracts must be backed by capital sufficient

to pay the claim, even when many claims occur at the same time and the costs are well in excess of the premiums charged. disasters by definition are infrequent, unpredictable and severe. for these events the required capital can be catastrophic as well. 20 or more times the average annual loss, for example, contemplacontemplated a premium. the job of actuaries is to determine that their premium but the job becomes more difficult when the loss of a catastrophic and yet more difficult when the supporting capital for the insurance is provide in other in some kind of economic transaction such as through government support. the relevant actuarial principle states a rate is reasonable when not excessive inadequate or discriminatory if it is a sound has been of the of all future cost associate with an individual risk transfer. each word or phrase in the statement has implications for pricing decisions for these government-backed insurance programs. first, the phrase not excessive and inadequate, you may recognize the definition of a

lawful rate under both state insurance laws. so actuarial soundness is a struggle a sufficient condition for a lottery. or said another what it's hard to imagine a rate which be actuarially sound get unlawful. those rates must expect costs. so it's not sound for the favor outcome or the most unbearable outcome or whatever is convenient. rates that reflect the probability average over all the outcomes. what that means incontestably rate making is scientific models and simulation models are very useful since any recent snapshot of activity may show bad disasters or may show no disasters. third such which have to thought all costs not just those we prefer to reflect or those we can easily quantify. fourth, such rates are to reflect future cost. rates may not be made to recoup past losses to pass the data may or may not be predicted of

future losses the past expense that some kind of an account to be square by raising or lowering future primus. finally, actuarially sound rates must reflect the cost of risk transfer. what that means if they have to include provision for the cost of the capital required on e-mail to pay claims after catastrophic events. private insurers transfer risk their we insurance and reinsurance arrangements and they pay those costs in the. government programs can borrow from future taxpayers to fund today's risk the cost of the capital may be arguable but actuarial and economists agree should not be zero. therefore, the key isn't actually sound rates for a government backed insurance program must be greater than simply the expected loss to the program plus provisions for the known expenses. failure to implement actuarially sound rates and flood programs as such a state and federal levels has had unwelcome consequences as testified by many of my colleagues here at the table. including over the goblet of environmentally sensitive areas as these low interest rates offered by government backed

insurance and subsidized by future taxpayers encourage consumers and developers to underestimate the risk and build in harm's way. expansion of the risk of government backed insurance pools as the private insurers may retreat from areas in which they cannot or will not compete with the subsidized rates. and crowding out of that capital which otherwise would be at risk in the the taxpayer capital would put at risk that if the treasured, as you heard over the course of the hearing with the national flood insurance program, i potential generations of taxpayers. violet wealth transfer from all taxpayers to an often high income subset of residents that choose to risk and risky but naturist areas because all taxpayers pay proportionally to service the debt incurred to these underfunded programs. despite the fact that enabling legislation utilizes, the rate for the program may not measure up. so i urge lawmakers to carefully define the concept of actuary sound rates during the

legislation develop and and continuing implementation of these programs. i think you for the opportunity to appear before you. >> thank you much. mr. rutenberg? >> chairman watt is, ranking member capito, members of the subcommittee, thank you for the opportunity testified today. my name is barry ruttenberg and i'm the chief -- 2010 of the director of national association of home builders but i'm also a build and develop her for gainesville, florida. nhb commence the subcommittee for dressing reform of the nfip program and releasing a draft what insurance bill that includes a much-needed long-term extension and reauthorization program. for the last several years the nfip has had to undergo a sense of short-term extensions that have created a high level of uncertainty in the program. the nfip recently experienced several short-term authorization lapse is causing severe problems for our nations already troubled housing market.

unfortunately, during this latest delay many homebuyers faced delayed or canceled closings due to the inability to obtain nfip insurance for a mortgage. in other instances, builders themselves were forced to delay or to stop or delay construction on a new home due to the lack of flood insurance approval. nhb supports his long-term extension to enter the nation's real estate markets operate smoothly and without delay. deimos flood insurance programs played a critical role in directing the use of flood prone areas and managing the risk of flooding residential properties. the availability and affordability of flood insurance to local governments the ability to plan and zone its entirety many including floodplains. in addition, if the local government deems an area fit, flood insurance allows homebuyers and homeowners the opportunity to live in a home of their choice. the home building industry depends upon the nfip to be annually predictable,

universally available, and fiscally viable. unfortunately, the losses suffered in the 2004 and 2005 hurricane seasons got about like hurricanes katrina, rita and wilma that had severely attacked us on the of the nfip. according to fema, through 2004 a total of $15 billion have been needed to cover more than 1.3 billion losses. however, the combine claims for 2004 and 2005 exceeded the total amount paid during the entire 37 year existence of the nfip program. while these losses are severe, we are currently unprecedented in the history of the support program and in our opinion they are not a reflection of fundamentally broken program. nevertheless, nhb recognizes the need to ensure the long-term financial stability of the nfip and look sure to working with this committee to implement needed reforms.

while my testimony goes, into more detail it's absolutely critical that congress approaches legislation. the nfip is not simply about flood insurance premiums and payouts. rather, it is a comprehensive program that guide future development and mitigates against future losses. while a financially stable nfip isn't all of our interests, the steps that congress takes to ensure a national stability have the potential to greatly impact housing affordability and the ability of local communities to exercise control over their growth and development options. while nhb supports a number of reforms designed to allow the nfip to better adapt to changes in the marketplace, we have strongly advocated against expansion of the regulate floodplain for changes of the numbers, locations or types of structured required to be covered by flood insurance. including those cited and flood instructors without a probably

study first. before any such changes can be implemented, fema should first demonstrate that the resulting impacts on property owners, local communities, and local land use are more than offset by the increased premiums generated and the steps taken. nhb is therefore pleased that the subcommittee's draft bill requires that in the conduct a study on the feasibility and implications of the change that nfip mandatory requirements within 100 year floodplain. finally, nhb is pleased to support h.r. 1264, the multiple peril insurance act of 2009 offered by representative gene taylor your coverage for when insurance would offer high hazard areas. nhb is pleased that h.r. 1264 references the mitigation requirements and consensus as a measure to lessen the potential damage caused by natural disaster.

again, thank you for the opportunity to testify today. >> thank you very much for our panel of witnesses. >> chairwoman waters, ranking member capito and members of this committee i want to thank you for inviting me to testify today regarding legislation to reform the national flood insurance program. my name is maurice veissi. i'm currently the vice president of the national so she's of realtors i've been a realtor for more than 40 years. i am the broker owner of d.c. associates. i am here to represent the views of the national association of realtors and foliage 1.2 money members who are engaged all the aspects of residential and commercial real estate in the 50 states and four territories of the united states. throughout its existence the national flood insurance program has effectively reduced the costs, the taxpayers of flood damage.

it does that by requiring communities and wish to participate in his viable program to implement floodplain management. it's important to note that according to fema those requirements reduce flood damaged by about a billion dollars a year. in other words, participation in this program ensures that a billion dollars in savings is passed onto the taxpayers, do not have to shoulder the enormous expense of underinsured property owners after a natural disaster, like hurricane katrina. it is estimated a third of the $88 billion of her needle efforts the government spent on disaster was due to underinsured property. and while the national flood program has been effective at reducing societal cost, flooding and damages since 2005, highlight the need to reform the program so that we can better protect our people and put this program on a stronger financially but just look at the recent floods in rhode island. we all saw the images of the

river crossing at about 12 and a half feet above flood great that the residential experience huge dams and flood characterized as one event in the last 200 years. nar president ron expand water about 21 feet of mean level, imagine the horror of having to fill a 30-yard dumpster with parts of your families memories in history. that must have been devastating. extending the flood program month-to-month, some might say putting from what deadline to another is an ineffective way to operate a major federal program. and this great financial and real estate market uncertainties for millions of ensures who won't operate under these uncertainties. national association of realtors support a minimum five year authorization of the flood program. second extension surprise much-needed certainty to recovering real estate market and to millions of taxpayers who

depend on this important program. nar also supports reforms that strengthen the program's financial flooding, increasing participation that leads to increased funds for the program, help property owners recover from flood losses and decrease future federal assistance with underinsured properties, flood owners expense losses such as happened before. we support reforms that would eliminate discount insurance rates for older properties with a history of repeated payouts with the owner has refused to mitigate against future insured losses. yet we have those changes to rates charged greed properties nonprimary residential or primary residential homes. pre-flood map properties facing identical risk should have the same rate. the race should not be based directly aren't directed on the cycle or the income or assets of the owner. that way to properties can be located next to each other but the commercial property can get a bill that is about four times

more than the one right next door. that's not right. h.r. 1264 insurance act sponsored by representative ted would ensure access to affordable insurance and wind related hurricane damage, and, therefore, reduce the amount of post-disaster federal assistance, saving taxpayers will money. covering both wind and flood would eliminate the insurance pushback on what causes the damage it as we learn in the past, in rhode island, florida, oregon, north carolina, louisiana and the other states, it's far less costly to prepare ahead of time than it is to find recovery efforts. in conclusion, think again for the opportunity to share the realtor team energy's views on the national insurance program, the national association of realtors stands ready to work with members of the committee to develop meaningful reforms for this program that will help protect the country's property

owners, its renters, and prepare for future losses resulting from flood. thank you so very much. >> thank you very much. and i will now recognize myself for five minutes for questions. let me turn to mr. davey. you mention in your oral testimony the need for the program to offer additional living expense coverage. i'm interested in this concept, since you talk about helping low-income americans. can you tell further into how this would work? >> additional living expense was referred to as kla, is an essential part of a churchill homeowners policy. whether your house is damaged by flood or whether it is damaged by fire, the first thing have to do when you're found that home is you have to relocate. and your first immediate need is cash. you have to go rent a hotel, you have to start purchasing your initial meals at restaurants. you need money.

when your house is flooded you have lost everything. in most circumstances you don't have access to anything in your household that you have to go purchase clothing, start being yourself, find suitable shelter. if there is one thing that happens after flooding event that is most crucial, the first calls we receive are people looking for this additional living expense. >> would that increase the price of the premium? >> it would increase the price of the printed. it could be made optional or be made mandatory. i don't advocate getting the coverage away. i advocate charging the actuary with sound premium for the coverage. it is an absolute need, the policyholder after the properties have been flooded. >> you heard earlier this morning the administrators say that by law they are only able to increase premiums by 10%, or the amount that they are able to charge. we said we would increase by 20%

that do you think this is enough to incorporate into it additional coverage for those who would want to have this transport? >> additional living expense, i don't think it falls into category of increased premium. it is a newly introduced coverage so any premium associate with that coverage would not be construed as increase of our, of the nfip's rage that it's in your coverage of which it is made optional, it's at the purchasers election whether they choose to purchase that coverage or not choose that. >> i'm sorry. ale, that's additional living expense to. >> correct. >> could your company offer that? >> does art company offered outside of the flood policy? there are companies that have written that coverage outside of the flood policy. and fortune the areas in which they offered are not always the areas of highest need. that may be available through

companies do what they call a companion policy that's written in conjunction with the nfip. >> all right. let me just ask mr. veissi, i've heard reports doing this month, laps and flood insurance program each it up to 1400 homebuyers were unable to close on their homes. how did this laps impact the real estate market and homebuyers? >> at a time when the real estate home market is getting to now fire up from an economic standpoint, it could be devastating that the reality is that most lenders will not loan on a home that's not sufficiently injured. and so if you can't come if you can't get flood or when, for that matter, then those would stop letter, stopped the sale in many other calls areas. remember, about one of every two

americans live within 50 miles of the coast to the effect of that could be absolutely devastating. >> thank you very much, and i know that he will talk a lot more about wind insurance, but mr. veissi, can you discuss the importance of this legislation and out it is needed to protect homeowners in areas prone to win the damage? that's for mr. gruenberg or mr. veissi. >> i would be more than happy to the reality is especially in coastal areas, where there are two types of flood, one type is when driven flood and the other is flood as we would imagine in rhode island, somebody other areas. the balance back between insurance companies and the insured can get very dramatic. one case the when driven flood maybe, the ensure they want compensation fund that, and the

insurance company will say no, that's flood. in from the flood standpoint, that ensured, go back to the flood and say i need to be compensated for this. and that in sure would say no, no. that's thank you driven damage. the impact of that is absolutely enormous. you have to insurance companies battling against one another, not wanting to pay. i can understand that, but understanding that something happened to that one homeowner. that one homeowner needs to be compensated. combined those two together would be absolutely the case. >> thank you. ms. capito? >> thank you. mr. davey, i have a question. if some is getting an fha mortgage and they happen to fall within the theme of flood plain, are they required to get flood insurance for that? >> yes, they are. >> how is that price? mr. rollins has said, raising

questions about whether rates are accurately sounded how do you, i assume you do this in your regular line of business. how do you calculate that and what kind of concessions do you have to find it will be subsidized or otherwise? do you do income ratios, or what? >> i'm not sure i understand the question. >> when you are writing a flood plain -- a flood policy, nfip policy, you do that, greg? how to determine what what the rate is on the. >> the nfip has set guidelines that we follow. >> so you can go away from that? >> no note. we adhere strictly to the rates that are set by the nfip. >> okay, thank you. mr. polis, you really raise the question on whether the rates are actuarially sound in with the program, and $18 million in debt, i think that's a logical question. what improvements would you make

to make, to set this on the right course, actuary or with ratesetting. >> thank you, ranking member capito. each program house to stand on its own from the standpoint of being actuarially sound, so a actuarially sound for a car insurance or wind insurance is not the same and not necessary going to be based on the same factors as one is flood insurance. but with that said, all actuarially sound programs share one characteristic which is the properly account for the present value of all expected future costs associated with the risk. and that includes not only the sort of run-of-the-mill average annual losses, but they have to include some kind of loading or provision to request the fact that severe years may occur, particularly in the program subject to catastrophe whether that be wind, a liquefied. and that loading can be significant.

now, my experience admittedly is more with coastal property and wind than it is with the nfip's rating structure, but that loading, what troubles me is an actual, that loading is rarely recognized as a matter of legislative definition or as a matter of practical definition within the rating plan. so what you end up with is a program that apparently is actuarially sound or perhaps a number of years that end and a loss many times the annual premium can overwhelm that, and it's easy for them to go back as if we were to distribute this cost over the past 10 or 20 years we could've had the the right loading. but is one major insurance company, they lost 50 years of premiums in five hours in hurricane andrew. that would be evidence the program is not actuarially sou sound. >> mr. conrad, i understand you are a proponent of flood insurance reform and a concern the program continues to be weighted down by repetitive loss of properties that a cordray

recent report by the congressional budget office in a study sample, about 40% of subsidized coastal nfip properties were worth at least half a million dollars but i would imagine some of these might be repetitive loss properties but how would adding when coverage in your opinion to the troubled nfip exacerbate these problems? >> well, unless and until i think we addressed the repetitive loss problem in the flood insurance program, we have a program that is always in a downward spiral with repetitive losses. i believe that if you were to, and there have been some estimates about how much that's costing a year, and i'm not sure that we have actually plumbed that completely to the depth,

even at fema. but to add wind in this area, fema has no experience with wind at this point. so at least in the first decade, they would be shooting in the dark and terms of how to do wind. i think what the effect would be to just increase the uncertainty and the risk in the flood insurance program there's already sort of there because a number of different factors in the way the repetitive loss problems are plaguing the program. >> thank you. >> thank you very much that i'm going to hold each person to five minutes. >> i yield back my time, madam chair. >> thank you. mr. green for five minutes. >> i will yield my time to mr. taylor. thank you much. >> thank you very much. mr. taylor.

>> i would like to address this question to you, mr. davey, as a representative of national flood insurance program. your contract with america calls for a fair adjustment of by your personal, your pages of policy, your pay to adjust the claim. are you aware that within two weeks of hurricane katrina, state farm sent internal company memo, that it instructed their adjusters, and this is a quote, where wind asked concurrently with flooding to cause damage to the insurance property, coverage for the loss exists only under flood coverage. now, that's an instruction to their adjusters. does that sound you like a fair adjustment on the claim? . .

does your interpretation of the word "sequence" mean you pay zero? the lawyer for nationwide insurance company said yes, your honor. they pay zero. does that sound like a fair adjustment of the claim? you've got to have an opinion, sir? >> i can't comment on the fashion in which they adjusted

their claims. i can tell you how we adjusted our claims. where there was 60% of the responsibility coming from wind and 40 coming from water. we paid our 60. the water paid 40. we did not invoke the anticoncurrent clause in any katrina, rita or wilma claims. furthermore, for any loss and we were a substantial player. we represented roughly -- probably 35% of the market share in the louisiana area. we employed a separate adjuster specifically to adjust flood losses. and the insurance companies that had the property had their own adjuster to adjust the wind side. so where we were the write your own carrier providing the flood coverage, there was a separate adjuster specifically assigned to appraise the damages arising from flood and flood only. >> going back to my question to mr. fugate, how many -- given

the two things that i just told you which was the practice of nationwide insurance company and state farm insurance company, which i think contributed to the $53.3 billion bill that our nation paid after hurricane katrina, how many investigations for fraud were there that you are aware of instances where the nation feels like it was billed unjustly by the insurance industry? >> i will tell you again, i cannot speak on behalf of other carriers -- >> do you know of one, sir? >> i don't know of one. i'm not aware of any. >> a $53 billion bill to our nation. internal company memos that are completely contrary to the contract of these two companies have with our nation and you don't know of a single investigation for fraud? >> the only company that i'm responsible and should have knowledge of is our -- the companies in which i'm responsible for the -- >> just for further clarification, mr. davey, is it accurate to say that your

adjusters were empowered to send the federal government a $350,000 bill and no one from the nation to double-checked to see that was a fair billing to our nation? 250 -- >> we did -- the nfip did -- they came in and audit our katrina, wilma and rita claims. they went through -- i don't know what the sample size but in every and each claim in which they examined there was no evidence found where nfip monies were spent on wind coverage. every dollar we paid out through our organization went to actual flood damage. >> okay, lastly are any of -- and i'm glad to hear that for those companies that you represent. i'm curious how many of those companies are offering wind coverage in coastal america right now? and if you'd like to name them, i'd like to hear their names.

>> fidelity -- the fidelity national group were operational from maine to the gulf of mexico. >> and have their rates increased substantially since hurricane katrina, by substantially i mean, by hundreds of percent? >> no, they have not. >> how much have they increased, sir? >> it varies state-by-state. >> would you like to venture a guess? >> no. >> you want to give me a for instance? how about in my state of mississippi? how much do you think the rates have gone up? >> i don't know. >> would it be fair to say they've more than doubled, tripled, quadrupled. do they may for more wind insurance than they do for their mortgage? would you agree -- >> wind insurance is a covered peril under the homeowners policy. and depending on how susceptible

the property is to wind plays a substantial role in what portion of the overall premium that covered peril -- >> lastly -- last question, as far as wind coverage, what percentage of the reinsurance purchased by the companies you represent is actually coming from companies offshore in places like bermuda? is it a half? is it a third? is it a quarter? because the question being if homeowners can't get payment on chinese drywall and if homeowners couldn't get folks in springfield, illinois, or hartford, connecticut, to play claims, how do you really expect a reinsurance company out of the bahamas or bermuda to pay their fair share when the time comes? >> well, let me first of all say that the contract of insurance that you hold with your insurance company, whether it be fidelity national, allstate,

state farm is assurance company and the responsibility of the full settlement of your claim lies only with that carrier. if that carrier chooses to purchase reinsurance from a highly rated entity, whether it be a u.s. reinsurer which our business -- the reinsurance we split between domestic reinsurers and reinsurers around the world all who meet our internal guideline of financial stability. believe me we send them millions of dollars every year. we've yet to collect any meaningful sum from those same carriers. when, in fact, we make our claim after sending them millions of dollars each and every year, they will pay us. they've been collecting our premiums. we've been paying our premiums. and when the time comes, for reimbursement under that contract of insurance where we purchase insurance from those insurers, they will pay.

>> go ahead, you have the last word. >> mr. davey, again there were some good players after katrina. but there were a heck of a lot of bad players. i hope you are right when it comes to reinsurance. based on what happened after hurricane katrina, i believe you are wrong. thank you very much, chairman. >> the chair notes the members may have additional questions for the panel which they may submit for hearing. will remain open for members to submit written questions to these witnesses and to place their responses in the record. this panel is dismissed. before we adjourn, the written statements of the following organizations will be made a part of the record of this hearing. the honorable charlie, foulston & associates, the national department of association property/casualty association of america,

independent insurance agents and brokers of america the honorable travis childers, the honorable dave loebsack and the honorable putn. this meeting is adjourned. thank you. [inaudible conversations] [inaudible conversations]

>> british prime minister gordon brown unveiled the labour party environmental agenda to a speech at students in westminster academy. after the event we talked with the bbc's representative about the campaign and the students at school in their interest at the british election.

this is 30 minutes. ♪ >> yesterday, it was elvis. today it's blur. i want to thank dave raintree what is not an only great speech and challenging and i wish him well as i wish karen who's done a magnificent job as a member of parliament for this area. and you can see the difference in the academies. you can see the difference in centers. you can see the difference in the increased provision in this area and a huge amount of that is due to the personal work of karen. and i applaud her for everything that she did. [applause] >> as you know it's one of the great myths perpetrated by the media. that young people do not care about politics. but my experience is that young people care more about the world around them than any other group

of people. and the world around you is what politics is about. which is why so many people support children in need. so many people support comic relief. so many of these people supported the haiti fund and when they see the despair people feel no matter how distantly the pain of others and people feel that they believe in something bigger than themselves. and as this story is told which sums it all up about a meeting between ronald reagan when he was president of the united states of america and the swedish president who was assassinated in the 1980s and he talked to ronald reagan to persuade him more money should be spent on money and international development. and when he arrived at the white house reagan turned to his advisers and say isn't this man a communist. and his advisor said, no

mr. president, he's an anticommunist. and president reagan says i don't care what kind of communist he is. [laughter] >> he was asked by president reagan, what did he believe in? what were his views? what did he stand for. he said i stand for fairness. i stand for everyone have the chance to realize the potential in every part of the world and that i believe that is the great instinct of most decent people in our world. the other myth about this election campaign there is no differences between the parties. i believe the differences are huge. and today i want to set out not just some of the reasons why i care so much that we should keep britain moving forward with a majority labour government and we should fear so much for britain if we go back to a conservative government. and i want to do it in the context of fairness. i want to show that our policies are rooted in fairness. and that those of our opponents

are not just wrong, but wrong because they are unfair. how many of you sometimes hear what's happening in the world whether poverty at home environments or degradation at home and abroad and contrast the excesses of some like the bankers against the misery of others? and they claim it's not -- it's just not fair. now, all parents are used to hearing their children say, it's just not fair. and you know i think the cry for fairness -- it's not a wedge. it's something deep in our dna. and we are the people we are as the country and what our moral sense is defined by what we mean by fairness. and all the policies i want to put forward for the future is for that fairness. it's what we call a future fair for all. we chose it as our election because it speaks to who we are in the country and i believe it speaks to the decent instincts as to who we are in the people. and so today i want to talk to you about the different future

with labour. about the three big questions about our future that are relevant to the fairer britain that we will have at the he said of the century. -- end of the century. of a bold global campaign to address one of the greatest unfairnesses, climate change. the dominant issue humanity has to face together this century and today we are launching labour's green manifesto including new commitments to fight this year for a worldwide climate change agreement. to make sure that more than 100 countries will not only sign up to national emission targets but will agree of a framework with which we can all move forward together. to ensure that some of the poorest countries of the financial health they need to deal with climate change migrants and climate change refugees and evacuees. to have the money to legislate for consumer rights. to create 5,000 low carbon

apprentices and low carbon area in every region. and to show our commitment to fairness to help those on low incomes with their energy bills. and i can say today as ed has been saying today that to ensure fairness to the elderly of our country, we would offer for all pensioners over 75 of the pension credit in addition to the winter allowance they receive an extra 100 pounds of off their energy bills. that's fairness in action. [applause] >> and the second fairness that i want to see is about fairness in a new politics. that doesn't only inspire you. a politics that doesn't just inspire you with big causes like making public history, of beating cancer in this generation or making the banks serve the public and not themselves.

but i want a politics that also gives you the chance to get more involved in changing britain. so we're proposing at this election a referendum. a referendum on a new type of house of commons and a new electoral type of system for it and a new type of house of lourdes and a new type of accountable system in the house of lourdes, new petitions that you can put to the house of commons and the right for recall for your m.p. if he misbeheat waves -- misbehaves and a vote for people under 16. [applaus [applause] >> and let's be honest conservatives are not part of the change. if they are the party of change they said they would abolish hereditary peers in the house of lourdes something that has lasted for years but in no

democratic company it would not be justifiable and they would change the policy on fox hunting and accepted the ban on fox hunting receive trying to repeal it. [applause] >> if the conservative party can't change on these things, they can't change for the people of britain. now, the third issue of fairness that i want to raise today is fairness to young people in education and employment. and i'm incredibly proud that we now have a record number of students and for the first time the majority of women and the majority are going to university are women. and even in the recent budget despite the difficulties we had, we still prioritize creating extra university places, 20,000 more and the student financing to go with them. that's because we don't believe in limited room at the top. but that all young people have something to offer if given the right support to do so. and i'm sure you know about the

young people's guarantee. we are already offering. but i think if we stay on the road to recovery we can increase the young people's guarantee and create 1 million new skilled jobs in this country. and give all of you not only the chance to get by in life but the chance to get on. so what we are trying to do is to prevent youth unemployment rising in this country and make sure every young people have the chance at a job. but what did we read in the newspapers this morning? well, i feel i should bring it to your attention. that the newspapers have got hold of a secret policy memo of the conservative party. that reveals they will end labour's guarantee of free nurseries and charge parents of 3, 4 years old millions of pounds in supplementary fees. just think about that. top-off fees for the under 5. the very reason we created sure start, the very reason we backed

free nursery places, the very reason we have fought so hard to let hundreds of thousands of children out of poverty is because it is unfair for a child's birth to be its destiny. unfair that the wealth of your parents should determine the end of your story. unfair that only some of the people can have some of the chance to realize some of the potential, we believe that everyone should have all of the chance to realize all of their potential. [applause] >> and i say -- and i say we should apply to every policy at this election a fairness test. is it right? will it work? above all, is it fair? so let me set five fairness test that go to the heart of our modern welfare society. and the test whether the conservative policies can begin to match the fairness we offer. policies where i believe we can show that the tories are hurting

not just modest incomed families but middle incomed families. policies are intent on kicking away so many of the levers of opportunity for thousands of young people for social mobility. for once you go beyond the gloss and the posters and the p.r. and the style and the presentation, you find that policy by policy, detail by detail the tories are planning an assault on all the pillars of the welfare state. our commitments to education, our commitments to employment opportunity, our commitments to tackling policy and our commitments to decent life chances for your children. meeting the first fairness test is ensuring that nursery school children should receive their education free of charge without drop-off fees. we're raising the number of hours the child can be at nursery school to 15 hours a week because getting your first chance that nursery school is

key for the development of your future. but the tories will not match our commitment to raise the real terms budgets for nursery schools. they already made clear they will not match the cash for the sure start schools for under 5 that we've made available for 3.5,000 children around our country. and worse than that, the fees for children which would create a two-tiered and divided system for 3 and 4 years old in our country. they have walked away from nursery schools with what the head of the daycare industry calls an attack on free entitlement. but do you know what makes me angriest? it's that they're mounting this attack on children's rights, not just nursery schools but sure start centers at exactly the same time as they're proposing a massive tax cut to the 3,000 richest families worth 200,000 pounds each across the country. i say in the year 2010 to give

the richest estates money while demanding money to parents for nursery schooling is simply not fair. [applause] >> the fairness means decent education for all nursery children. and not 200,000 tax cuts for a wealthy few. the second fairness testy apply is on child tax credits. we asked the tories to ensure as we would that every child and every parent entitled to continue to receive the child tax credit that are worth tens of pounds a week to many families on top of child benefit and often more that they receive for child care tax credits for middle class families would still be available. but when we press them to continue child tax credits for middle class families, they have

walked by from the other side. they have failed the fairness test again. they are prepared to see thousands of families lose child tax credits while they are prepared to see the richest few given 200,000 pounds each. 1.5 billion pounds would be given to the richest estates in the country. while middle class families would permanently lose their tax credits on which they depend. fairness today surely means giving children the tax credits they need and not 200,000 pounds inheritance tax cuts for the very few. now, the third fairness test is child trust funds. remember what we've done. we made a child trust fund available for every child in this country. and a payment interchild trust fund is made as the child is born, 250 pounds. an essential element of building up the savings culture among the younger generation. and why have we done this?

because we want not just a few of the sons and daughters of wealthy families to have private trust funds, but we want to give everyone the chance as a child to build up a trust fund for themselves. now, the tories have announced they would take them away from families on incomes of 16,000 pounds or more. and the liberals have announced that they would take them away all together. i say it's not fair to cut child trust funds that should be available for all children. at the same time that you're cutting inheritance tax for the richest few. even young people need to build up savings of their own, they would rather add to the savings. that's the tories would rather add to the savings of the richest families in this country by a cut in inheritance tax. now, the next test of fairness is school budgets themselves. and we're at a great academy here that has made so much of a difference.

we asked the conservatives in joining us in maintaining school budgets so that in the future years families could rely on improving schools for the children. we wanted to make sure that every child who needed the chance of personal tuition should be able to get it. and we wanted to make sure that every child in secondary schools could have a director of studies that will follow them through right through the course of their education and give them the advice that is needed. but the conservatives have said they will not support rising budgets for our schools. they have voted against the free tuition we wish to give to our primary school pupil. i know some can afford to pay privately for tuition. but it is right in my view that we make available for those who need tuition all the help that we can. when we asked the tories to support our children by funding our schools they walked by on the other side. and again i have to say they

preferred the inheritance tax cuts for a very few to guaranteeing investment in the rising education of the many. i believe it's not fair. and i believe that people will see it's not fair. you know, on the fifth thing which is a fairness test we asked the tories to support education to 18 so that people can stay on an education part time or full time in college through their work. they wanted a guarantee a school lever had an opportunity and even the unemployed will have a chance of a job with a future jobs fund that we have now created. and we're able to give a guarantee to every young person who's been unemployed for six months or more that they will get a job or they will get training or work experience. now, i do not know why the conservatives have refused to support the future jobs fund. the future jobs fund is the best guarantee of avoiding a return to the desperate situation of

the 1980s and the 1990s when too many young people unemployed became part of a lost and wasted generation. but when we asked the conservatives to support our measures for education to 18 and for the future jobs fund, they walked away on the other side. and let me say the importance of believe. better early learning taken together with more nursery education, better help with tuition at school, better help in advice and support to stay on at school, and a job that will give you qualifications and support once you've left school, not only help families today but these are the main roots for social mobility in our country. by bringing them together, we double the chances of someone from a low-incomed background getting a middle incomed and a middle class job in the future. so what the conservatives are

doing by their unfairness is pulling away the ladders of social mobility in our country. they are pulling away the opportunities that should be available for people to advance in our country into middle class jobs. tax credits cuts for thousands of middle class families. child trust removed for most families in the country. school budget cuts because they won't match our pledges on schools. tuition ruled out in the schools for young people who do need one-to-one tuition and can't afford to pay. and now we find nursery funding would be part of the tory years. day by day the tory cuts are being revealed and they are promising an inheritance tax cut for the wealthiest. their motto is not god help those who help themselves. their motto is god helps those whom he has already helped.