paid out through the entire life of the program and that plunged the program deeply into debt. the nfip was designed so that in years where there was excessive claims payments, the nfip could borrow from the federal treasury and repay that with interest, which worked fine when there was losses and in the good years they could repay that. in 2005 they had to borrow billions of dollars, the debt peaked around $19 billion. it's currentry at $17.75 billion. with the current structure, the nfip is going to be unable to repay this debt essentially, so bringing us all back now to the reform, one of the key things in the house and senate bill is phasing out those discounts on a sub-class of property owners, commercial properties, for second homes and vacation homes, for what are referred to as severe repetitive loss properties, essentially the

riskiest of the riskiest of properties, also some of the bills, i think they differ slightly. one of the bills would phase out the discounts every time the property turns over, so if a new person purchases a home or if an owner lets their policy lapse, when they go out to renew it, they'd phase out the discount too. >> there's been pushback, generally, on the program overall, in and of itself. let's listen to a republican of michigan, this is debate from last week on the national flood insurance program. >> this program is not sound, it charges some of the highest risk areas subsidized rates and other areas of no risks, astronomical rates. you can use my home state as an example, our residents have been forced into this program and every year even though we have no risk of flooding, in michigan we look down at the water, not up at the water. we've paid multiple times more

in premiums than benefits. in short, mr. speaker, the people of the great state of michigan are getting fleeced by this program. >> congresswoman miller of michigan. let's get your reaction, carolyn kousky, is this a widely held opinion in the house and then also in the senate and is it really based on your geography? >> yeah, well, certainly it's widely understood tat program is not pricing to be able to cover catastrophic years like 2005 and it wasn't designed to do that and it's now put us in the terrible financial position we're in now. the question then is what to do about it. there seems to be broad bipartisan support for reforming the way we handle the discounts in the program, which would help increase the revenue and bring rates closer to what would be risk-based rates, and that is in the reform bills and seems to be something that would move forward. more radical reforms to the program there's less consensus

on. i know she's one of the individuals that believes we should simply abolish the nfip and privatize it and that's getting more attention by stake holder groups and was considered by fema to evaluate different policies to improve the nfip. there's a little bit less consensus on that. my personal view is that while i certainly understand the questioning of why the federal government is involved in a program that seems to be underpricing risk and has this huge debt that might become a burden to the general taxpayer, there's a lot we still need to investigate and understand before we were to launch completely into privatization or completely eliminate the program, and this gets to one of the concerns about flooding in particular. it's a catastrophic risk, by which i mean there are lots of years when there are very few damages or more small damages, and then you can have a very severe loss year like 2005 where damages are just incredible, and

so that's very different from some other lines of insurance, like say automobile insurance where the claims year-to-year are more or less stable and it's easier to match premiums to those claim payments and pay for them. for a private company to insure a risk like flooding, they need access to a large amount of capital in any year so when an event like 2005 occurs, it doesn't bankrupt them. private insurance companies can do that in a number of ways, they can build up reserve funds and set money aside, they can also purchase reinsurance, insurance for the insurance companies. these are, you know, more broadly diversified, generally more global companies that can help primary insurance companies manage their risk, but both of those strategies are expensive, and those costs are passed on to home owners, so private insurance for these types of disasters can also be expensive, so one concern is if the nfip were to try to privatize all

policies, a lot of home owners might see huge increases in the premiums they face. that might not entirely be the case, but the question then is what happens, do home owners who can't afford these policies simply drop coverage or, you know, do home owners not choose to insure, then we need to ask what the implications are. >> karen from california, democrat's line, good morning. >> caller: good morning. >> go ahead, karen, you're on with carolyn kousky. >> caller: i have a question. my question is why -- i live in visalia, california, which is in the central country, and we are mandated to pay for flood insurance because they say we're in a 100-year flood zone, and we're paying the very same rate they are paying in new orleans, which is a high-risk flood zone, and they are using 1986 and '87

maps and people like my neighbor, for instance, who is on social security, whose house is one and a half foot into her yard is in the flood zone is mandated by bank of america to pay, and they take her social security check, and leave her no money to live on, and this is ridiculous, and we even have a dam that they raised 23 # feet so that we wouldn't be in the 100-year flood zone, and they are still going by the 1986 and '87 maps. >> let's get a response from carolyn kousky. >> yeah, thank you for that call. you raised important issues as we're thinking about trying to improve this program. the first that i want to mention is the outdated maps, and that has been a problem. fema was criticized for years because a lot of the maps around the country are based on

outdated data and outdated methods, so in response to that, fema has launched over the last five, ten years, some programs to update the maps, and those have been rolling out across the country and everywhere has not yet received new maps, so i assume you're one of the communities that's late to receive them, so hopefully when they come they'll incorporate new flood control structures, such as the dam that you mention, but the second point you raise is a little more difficult to deal with, and that is that the rates are set on these very broad classes, so exactly as the caller said, if you are mapped in the floodplain, you are paying the same rate if you have the same home and characteristics of that home, put it in new orleans or anywhere else in the country in a floodplain and you face the same rate, and there are lots of people who, you know, say that's going to create cross subsi

subsidizati subsidizations. >> can you challenge it, go to an office and say, look, you know, like she talked about her neighbor who she believes is only partially in the zone or area. >> yeah, so you can challenge the designation of being in the 100-year floodplain and there's a way for communities to do that. and there's also a way for individual property owners to do that. if you think the map for your community doesn't reflect particular local conditions of your property, maybe you're up on a hill or fill or something, you can appeal that to fema and get marked out of the 100-year floodplain and thus exempted from those requirements, but you can't change the rate if you are mapped in. >> jane writes on twitter and says they just redid the flood maps in my town, i haven't gone to look at them, because i'm sure there's no good news there. our guest, carolyn kousky, is a fellow at resources for the future.

james, republican, good morning. >> caller: good morning, my question, i don't think you've covered the damages. my parents had a flood, and basically only covered half of the two by fours, half of the dry wall, half of the drop ceiling, et cetera, and insurance is insurance. you insure, you know, what you have there, but my brother's a lawyer and he could only get half of what was lost or damaged because of the flood. could you speak to that? >> yeah, sure, it's important with any insurance policy to read the fine print and there are some classes of things that are covered and some that are not covered within the nfip. i'm afraid i don't know the particular details when it comes to structural damage what's included and what's not. i know this is also an issue in areas with basement damage, because some contents are excluded, so it's important to

know that. another thing is that you choose -- and this is not exactly the question raised by the caller, but worth mentioning, you choose the coverage level, you can ensure for $10,000 or $100,000 and if you sustain damage above that level, you'll have to pay that and also the deductible, which for standard policies is $1,000. >> how and where do i buy flood insurance? >> flood insurance is not sold directly by fema, for the most part. for the most part, flood insurance policies are purchased through write your own companies, companies that market and sell claims on behalf of fema, they get a fee in exchange for doing this, but the risk is underwritten by the nfip, so i'd go talk to your home owner insurance company and they might be able to help you out. >> chris is a democrat in portland, oregon, welcome. >> caller: hello, you kind of just answered my question, but

first i wanted to point out that my lender requires me to carry flood insurance because i do not own the house myself, so when that gentleman calls to say some people do and some people don't, well, the people who don't probably own more of their house, but my question to you is, fema considers me to live in a 100-year floodplain, but the city of portland does not. when the city releases their maps, my street is the sand bag route. my house is out of the flood area. how specifically do i ask fema to reconsider this issue? my house on their plan, my house is in it, but on the city's plan, my house is not. what can i do? >> that's a difficult question, and there are many ways of designating the floodplain depending on how much data you use and how much methods.

i recently saw some contention in some places and differences, i can't speak specifically to the differences in what portland is doing versus what fema is doing. i will say for the regulatory requirements of the program, it's the fema map that matters, and so in terms of whether you're going to be subject to that requirement and the rates you're going to face, that has to do with the fema map. again, if you think the fema map is an error, there's a process of submitting a level of appeal, you can google and find the information on that. >> susan writes, when was the last time new york city flooded and mentioned the image we showed on the screen, is this something that happens every 100 years? >> that brings up a good question of what exactly the 100-year flood. that terminology considers -- it means there's a 1 in 100 or 1% chance of that magnitude flood

occurring in any given year. statistically, you could have two in a row or go more than 100 years without seeing the flood. a 1% chance every year is difficult for people to wrap their head around. people say that translates into a 26% chance that your property would be flooded over the life of a 30-year mortgage. i'd also note the 100-year floodplain is often a sort of bright line thing, are you in it, out of it, that changes your rate and the purchase requirement, but actually, of course, the risk varies continuously through the 100-year floodplain and beyond it. there are places that will be flooding much more frequently and have much higher damages and others near the fringe that will be seeing much less, you know, frequent flooding and less damage. >> from bedford, pennsylvania, independent caller, good morning. brent, are you with us? all right, let's move on to sand point, idaho, republican caller,

hi, james. >> caller: hello. >> good morning. >> caller: i'd like to explain a problem that we have where fema is taking control of our property. in 2008, we purchased a property for nearly $900,000. we did not choose to select insurance. in december of that year, the county accepted fema guidelines. now we went from 100-year floodplain to a floodway, and so fema has mandated that the county seize our property and throw us off. they've even said they'll put us in jail or fine us on a daily basis. we seem to have no option but to move off of our property and because the house has been here for 20 years, they've went back 20 years and said that the house was improperly permitted, so

we're in the process of losing our property or either going to jail or fined. this is just a power grab by fema. i would like to hear your comment, please. >> have you heard about this kind of thing before, carolyn kousky? >> no, that's a very troubling thing. i'm sorry for the caller. i do know the guidelines for the development within the floodway are stricter than the 100-year floodplain, so if the property has been mapped into that zone, i believe that they are facing much, much tougher requirements. what has been a bigger concern nationally or perhaps just more common is that when these new maps come out, homes will be mapped from outside the 100-year floodplain to within the 100-year floodplain, and fema had in place policies to help owners deal with that adjustment. if you had a policy at the time that the 100-year floodplain is expanded, you can keep as long as you maintain your policy, you can keep your old, less

expensive rate, as long as you maintain your policy. for policies, there's actually a group of policies for home owners that have low loss histories, minimal flood damages, those are called preferred risk policies and you get a much lower rate for those policies. if you have one of those and get mapped in with a new map, you can keep your policy for two years and then you can move into this grandfathered category of paying the rates as if you were outside of the 100-year floodplain. both pieces of legislation in the house and senate have language that would phase in rates for newly mapped 100-year floodplain properties so there's not such a shock to home owners. >> on twitter, maverick writes, mortgage companies demand you get flood insurance, even if you're not at risk, is that true? >> that will vary by lender. those requirements are outside

of the nfip. >> so separate from the maps? >> similarly how lenders will require home owners insurance. >> jack, independent caller, welcome. >> caller: yes, good morning. >> hi. >> caller: i have comments about myself and i have a sister, my sister lives in ft. lauderdale, florida. she's about five miles in from the beach, and again, flood maps were redrawn. she now pays over $6,000 a year in flood insurance. she's 67 years old, works as a nurse, she'd like to retire, but one of the reasons she can't retire is the $6,000 a year flood insurance bill. here in new jersey, i'm not affected by flood -- flood danger maps yet, but there have been numerous articles the last several years in new jersey, they keep adjusting the flood area inland, and what it comes down to really is, again, i'm an independent, i think both the

tea party movement and the occupy movement would agree on this, it's a case of the wealthy transferring their expenses on to the backs of average people. i'll give you an example, this community south of atlantic city called long port. you cannot buy the smallest cottage in long port for under a million dollars, most of the houses are multimillion houses. they are subsidized for flood insurance. when the beach needs replenishment, everybody has to replenish their beaches, but if you want to go on their beaches, you have to get a beach tag, then they don't provide any facilities, you can't find a place to park, there's no public restrooms. it is just another case of -- that's why i'm so frustrated. this has been become a rip-off nation. everything is transferred on to the middle class. the wealthy get subsidized, the poor get subsidized, and people

like my sister, who's a nurse, and i'm retired, police officer, we pay the bills. thank you. >> the caller raises two important points. the first, more minor point, i just want to make is that as we talked about already, the type of flood risks can vary substantially around the country, so properties at risk from storm surge and hurricane-related flooding can often, if they are mapped into that special class of properties, pay much higher rates, so i believe if the caller's sister is in one of those zones and is purchasing the coverage, she could easily be paying the rate the caller said, and that is a lot of money for people to be paying, especially when that's only the flood insurance, and in hurricane-prone states like florida, you also need your home owners insurance to cover the wind damage, the nfip doesn't cover the wind damage, it only covers the flood damage, so insurance bills in hurricane areas can be steep, but i think a broader and important point that the caller raises is this

question of who should really be paying for disaster damages, and it's something that people disagree about and i think we need more conversation about as a country. should the people who choose to locate in hazardous areas pay most of the cost of disaster is only a disaster when there are people and structures there to be damaged or do we think very extreme events, particularly extreme events like we saw in 2005, should be borne generally by all the taxpayers as a whole and that it's part of our duty as a citizen to help all those victims? we haven't come to a very good agreement yet on how those costs should be apportioned across segments of society. i will say it's my personal opinion that the way the current discounts and the program are structured is in need of serious reform and that we should -- the reasons for having those discounts because people didn't know about the risk, i think, are in most places no longer valid. these maps have been around for quite a long time and we should replace those instead with

discounts based on need or income so that homeowners for whom these insurance premiums are serious burden can get some rebate or discount for that reason and homeowners who can readily afford the high premiums can pay them. >> carolyn kousky previously was at the horton school as a visiting scholar in risk management and decision processing center. she has a ph.d. from harvard university and did undergraduate work on the west coast at stanford university. here is a story from npr, tropical storm alberto weakens off south carolina's coast. this is the first of the season. the piece says it hovered off south carolina and georgia coast sunday canceling tourist cruises and serving as a reminder the 2012 atlantic season is just around the corner. it starts june 1st. >> it does start june 1st. that's why it's impeer tiff congress figures out what they're going to do with the program and don't let it lapse as hurricane season is beginning

and brings us a point i think is worth mentioning that the nfip is a very concentrated program geographically. 40% of all the policies are in the state of florida and another over 20% are in texas and louisiana. so it's a very important part of how we protect ourselves against flooding from hurricanes. >> larry, republican, in beaverton, michigan, go right ahead. >> caller: hi. thanks for taking my call. one of the comments your guest made just a little bit ago saying how we can figure out how to share the burden, i guess, of disaster relief. i live on a small lake in mid michigan, and fema just went through this past year and did a flyover photograph assessment of where we are. the bottom of my home is at least 12 feet off the top of the river that is now a lake caused by a dam, actually two dams creates a small lake. if our water raised two feet it would be spilling over the spillway, over the dam. so we would have to have a

catastrophic flood that would flood out the entire state before my home would be touched by water. but i'm going to be forced into buying flood insurance. my thing is your comment with the previous call er about sharing this is right on the verge. i am paying flood insurance, which i'm never it going to have to use, for people that are not real smart and built a city that has "x" number of people below sea level that we have to every couple of years go down and rebuild the dikes and the berms and so on. that is ridiculous. if it i built my home under the water level here and it flooded, shame on me for being that stupid. >> i think the caller raises a good point and the costs right now are not based on the risks that people face and there are homeowners who have much lower risk paying the same rate as those who have much higher risk. i would say, again, if the caller thinks there's been an error and they are not in the 100-year flood plain they should take that up with fema.

i would say within the 100-year flood plain the rate varies based on where your lowest floor is. if you're up out of it, you will have some lower rates to compensate you for reducing that risk. but it's certainly a question about to date there has been an implicit assumption that doing finer based pricing so that we teased apart the broad c categories of risk would not produce enough benefits to be worth the cost to fema for doing that. this is in need of serious investigation and more research. lorenzo, an independent caller. good morning. >> caller: good morning. i think we're going to go to self-insurance sooner or later. i'm an agent but i'm not going to renew my license. the banks are selling all the insurance for home buying, whenever you buy a home, life insurance, auto insurance. they're in the business, throwing all the agents out. now you don't have an agent at the office. you have a rep.

i don't know what a rep is. but, anyway, in oklahoma city, i lived there for four years and we got hit twice with tornadoes, and they weren't even covering. fema came around and they have good sandwiches. we ate their sandwiches, but as far as insurance, you don't get any help from fema. the only thing they gave there was a $2,000 shelter so everybody now has a shelter, but you don't need one for the whole neighborhood. you can have one or two or three or four. but anyway, we are being driven out of the insurance business and that's thanks to our governor. thank you much. >> thanks for the call. a couple responses. first, the nfip does only cover flood damage and so fema does not offer any insurance for other hazards like tornadoes. that you'd have to talk to, you know, the insurance for your homeowners coverage to see whether that was included. also, it's worth mentioning that

disaster aid and the relief efforts are often managed by fema but are separate program from the nfip and there are interesting interactions between the two we've recently looked at in a program at resources for the future but they are separate programs and you can say a little bit about disaster aid governed by the stafford act and when a disaster occurs that is judged to exceed the capacity of a local government or state government to respond, they must request a declaration from the president. fema advises the president on that. and if such a declaration is issued, then aid through fema and other agencies. say more about that if callers are interested. >> california base, we have lots of roads and cars in california. i want to get a government subsidy for auto insurance and earthquake insurance. the one from michigan talked about why should i have to help carry the load of people who are in higher risk areas, but why

not get the government involved in other kinds of insurance as well? >> it's a good question. pricing and some requirements around different lines of insurance are governed by state insurance commissioners. there's also some state involvement in other lines of insurance. california, for instance, offers earthquake policies. and lots of gulf coast states have state wind pools, state run insurance programs for people who cannot find a policy in the private market. there are other ways the government is involved in it. >> carolyn kousky, part of our your money segment this week looking at the national flood insurance program. thank you so much for coming on and talk iing about this. >> thank you for having me. >> and the national flood insurance program, $17 billion in debt and as carely kousky mentioned up for reauthorization in the senate. we'll be watching that this week to see how that unfolds. right now i want to you take a look around you and think not

about where everyone has been but where they are going. the guy in front of you could win an akcademy award some day. the girl behind you could be a future president of the united states or even better than that the mayor of new york city. the guy sitting to your right may be a nobel laureate. not the one to your right but definitely to your left. >> white house officials and business leaders share their thoughts with the graduating class of 2012 saturday through tuesday at noon and 10:00 p.m. eastern. a small business forum focusing on entrepreneurs. in a little more than an hour a discussion on the federal government's role in the housing market. >> congressman, there are people

who look at what happened with jpmorg jpmorgan, here is a company who made a stupid decision, did something dumb, lost money, didn't collapse, fired the people responsible. this is the market at work. this is how it's supposed to happen. why does government need to play a role? >> to some extent that's true but i take credit for it. it's because government played a role. if this happened five years ago, if jpmorgan lost what appears to be more than $2 billion, i think you would have seen much more panic in the economy, much more concern. what we did in the legislation we passed was to require the financial institution to be much better capitalized. so one of the things that's a result of the government telling them you'd better have more capital, you have to have more capital than you would have had otherwise, that helped give people reassurance. >> this past weekend on c-span's newsmakers, congressman barney frank spoke about the over $ 2 billion loss by jpmorgan chase as well as the u.s. and world economies, the dodd/frank law