Wounded Warriors Expansion of Care Act of 2007

Mr. Chairman, this is a continuation of a program that the Congress adopted in one of the previous Congresses to provide insurance in case of a terrorist attack. We had, obviously, the terrible murderous attack on America in 2001.

Substantial damage was done. Obviously, the overwhelming cost of that was in the human lives caused by these murderers, but we also had property damage. And I believe that it is unrealistic to think, and in fact inappropriate to urge, that the private insurance market, which functions very well in this country and serves us well, that that ought to be used in response to terrorism. We bring a bill forward that would provide both for life and property insurance from the Federal Government worked out in various ways.

There are two arguments for continuing this on an ongoing basis. Everybody agrees that it needs to be extended for a while. Some have said phase it out, let the private market ultimately take it over. I believe there are two reasons why that is not a good idea.

First, virtually no entities that are in the private insurance market believe that the private market could handle this well. Not only do the insurers believe that, but the customers of the insurance believe it. And primarily, by the way, the customers here are commercial real estate developers. People who are going to build large commercial buildings with tens, hundreds of millions of dollars in construction costs cannot build without a bank loan, and the banks will not lend and would not be allowed to lend by the regulators without fully insuring against all risks, including the risks of the terrorism that we wish were not around but clearly still is.

We do not believe, based on extensive conversations with virtually everyone in the marketplace, that this will work. In fact, I submit for printing in the Record a letter from the head of Goldman Sachs in 2005, that very important financial institution, clearly an entity that knows a great deal about the market. And in 2005, only 2 years ago, after we had TRIA for a while and the question was coming up about whether or not to continue it, he wrote to the gentleman from Louisiana (Mr. Baker), then Chair of the Capital Market Subcommittee, that:

``Current data suggests that reinsurance, and consequently insurance, participation in the terrorism insurance market will decline if the Federal backstop is left to expire.

``Some have suggested that private markets for terrorism can successfully utilize risk transfer mechanisms such as catastrophe bonds.

``There is no evidence to suggest that the rating agencies or capital markets investors will be able to quantify the risk.''

And what he says is that he does not believe the market can do this.

The Goldman Sachs Group, Inc.,

New York, NY, July 26, 2005.

Hon. Richard Baker,

Chairman, Subcommittee on Capital Markets, Insurance and

Government Sponsored Enterprises, House of

Representatives, Cannon House Office Building,

Washington, DC.

Dear Mr. Chairman: On behalf of The Goldman Sachs Group,

lnc., a leading global investment banking, securities and

investment management firm, I am writing to express my

support for maintaining a federal terrorism insurance

backstop.

The federal terrorism insurance program, enacted by the

Terrorism Risk Insurance Act of 2002 (TRIA), has helped

provide the underpinning to a robust economic recovery

despite the ongoing threat of terrorism. Notwithstanding

Treasury's conclusion that TRIA has achieved its original

purpose, we are not aware of any meaningful evidence showing

that private terrorism risk insurance or reinsurance markets

have developed ample capacity to rationally price and insure

against terrorism on a scale that would adequately protect

our nation's economy. In fact, current data suggests that

reinsurance, and consequently insurance, participation in the

terrorism insurance market likely will decline significantly

if the federal terrorism insurance backstop is left to

expire.

Some have suggested that private markets for terrorism risk

can successfully utilize risk transfer mechanisms such as

catastrophe bonds (CAT bonds) that transfer risk from

insurers to capital markets. Such securitization vehicles,

however, represent a minor percentage of the overall

insurance market and have been used mainly for natural

disasters, such as earthquakes and hurricanes. There is no

evidence to suggest that the rating agencies or capital

markets investors will be able to more effectively quantify

the risk of terrorism than insurers or reinsurers. As such,

CAT bonds and other risk transfer mechanisms are unlikely to

offer, at this time, the broad capacity necessary to insure

America's businesses, workers and property owners against the

risk of terrorism.

With less than five months remaining in the current

program, American businesses soon will be forced to compete

for portions of a severely constrained private insurance

market and risk the possibility of being left with inadequate

levels of terrorism insurance. In short, we simply cannot

afford to let the private sector be economically exposed.

I appreciate your attention to this very important matter.

Sincerely,

Henry M. Paulson, Jr.,

Chairman and Chief Executive Officer.

The CEO of Goldman Sachs who signed this is a very distinguished expert, Henry M. Paulson, Jr. He is no longer the chief of Goldman Sachs; he is now the Secretary of the Treasury and has somewhat different views, but this is a letter that he sent in late July 2005.

So we don't think the market can handle it. But I want to argue that even if you thought the market could handle it, we shouldn't ask it to for this reason: If you insure against risk, you ultimately pass the costs along to the people who are at risk. Insurance allows you to spread that risk out among those who are at risk. But the more you are at risk, the more you pay in insurance.

If we were to adopt a purely market solution, that would mean that those parts of the country which were calculated to be likelier targets of terrorism would pay more. That is the insurance principle. If you are more likely to be the victim of terrorism, then you should pay more.

I do not think we should allow vicious fanatics who hate this country and seek to inflict severe physical damage on us to decide where it should be more expensive to do business in our country and where it should not. But if you use the private insurance mechanism, that is what you get.

There is another problem with the private insurance mechanism, not a problem, a good facet, that doesn't apply here. What you can do with private insurance is to say to these entities: You know what, if you lower your risk, we will lower your insurance costs. But people who have large office buildings cannot significantly lower their risk of being attacked by terrorists. If they could, we wouldn't want them to be. We wouldn't want people in

America in the business sector to be told, well, why don't you try to appease the terrorists so they don't blow you up. So it ought to be a public program.

Now, we have had significant debate in the committee. We had in the subcommittee and committee two full markups, an unusual degree of attention. A number of amendments were adopted from both parties. It is a different and, I believe, better bill now than it was when it was introduced. There are still some philosophical differences.

There is one issue, though, that came up after the committee consideration, and to our surprise the Congressional Budget Office said that this is going to cost a certain amount of money. I will get the estimate. I think they said $10 billion over a period of 10 years. That is a very odd thing to say. A terrorist attack will cost hundreds of billions if it happens; it will cost nothing if it doesn't. They apparently used some calculation of probability, which I think is in itself kind of dubious. Nobody, I think, can realistically talk about the probability of a terrorist attack, to give us the number that it will cost $3.5 billion over 5 years and $8.4 billion over 10 years.

One thing we know for sure is that these estimates are wrong. It will either cost a lot more, or nothing. CBO did its job, I don't think very well. Maybe that is because of the constraints they operate under. I don't make a personal criticism of them. But we have this PAYGO rule.

I will say that my own preference as an individual Member would have been to grant an emergency waiver, because if a terrorist attack is an emergency, then we shouldn't have that in there. I do not represent the thinking of the majority as of now on this or the Democratic leadership. That is an open question to evolve. So we did the next best thing, which is to adopt a set of procedures to deal with what will happen if the Federal Government has to make a payout under this.

I will say that I think that was a good effort, given the time frame. And I think it is important, given the potential expiration or the expiration date, that we should move forward, and maybe it will encourage our colleagues across the Capitol to act.

I do not believe that what we have in here will be the final answer. We have one possibility: Maybe a consensus will develop on a waiver. I can't say that I have confidence in that, but I certainly will advocate for it. If we can't get a waiver, we will within the framework of the PAYGO requirement, $3 billion over 5 years, try to work something out. And I know that is what the Democratic leadership has assured the Members from New York in particular, that they will do their best within the context of PAYGO to work this out. And I believe we can improve on where we are. We will reduce the risk that there won't be payment to the minimum amount possible, and then maybe we share that risk.

So I do not believe that what we have in this bill will be the final version. I think it is important to move this process along. I think this is as good an effort to do it as we could now. We will have to be consulting with the various parties in interest, including the cities, including the insurers, including the insured and others, and we will move forward on that. So I do believe it is very important to move forward now.

The only reason to vote against this bill at this point is not because of disagreement on some of the specifics. They will evolve as we go forward, particularly in the PAYGO response. But if you believe this is something that should be left to the market, and I do not believe that the market can or should be asked to handle terrorism. Adam Smith is one of the great intellectual contributors to thought in this world, but I don't think he knew much about terrorism, luckily for him. I do not think that the free market was adopted or is adaptable to murderous attacks of the sort we had on September 11.

So I believe this is the best we can do at this point. It is a very good bill, I believe, not perfect, with regard to the PAYGO fix, but that is something that I believe will evolve. I have every confidence that we will be able to do it better as we go forward, and I hope the bill passes.

I reserve the balance of my time.

Mr. Chairman, I yield myself first 30 seconds to note that I was impressed when the gentleman said he was going to vote against this bill because of this new amendment. But he voted against the bill the last time, so apparently my friend from Alabama intends to vote against this bill twice, because he voted against it in committee. So no one should think that the effort to deal with PAYGO is the reason he's voting against it.

Secondly, no one is asking anybody to accept any blank checks, and that is a misrepresentation of the legislative process. Changes will be made, I hope, in an open way. There will be an open conference, in total contrast to the way in which his party operated. I guarantee Members, as chairman of this committee, that we will have a conference committee, it will be a legitimate conference committee, and everything will be done openly, and votes will be taken. So no one is asking anybody to do anything in secret.

And again, the gentleman, having already voted against the bill, there are only so many bases you can claim on which you vote against the bill. He says he's not going to vote for the bill. We never thought he would. He voted against it the last time.

Mr. Chairman, I yield 5\1/2\ minutes to the gentleman from New York (Mr. Ackerman).

Absolutely.

Let me just say, first of all, having grown up in New Jersey, I'm used to complaints from New Yorkers. But in this particular case I believe they are entirely legitimate and justified, and I can assure the gentleman that we will work together in an open way to resolve it.

Mr. Chairman, I yield 2 minutes now to a senior member of our committee, the Chair of the Subcommittee on Financial Institutions and Consumer Credit, someone who has worked a great deal on this, the gentlewoman from New York (Mrs. Maloney).

Mr. Chairman, I now yield 2 minutes to another member of the committee, whose district in Jersey City is as close to the site of the terrorism attack of 2001 as any, other than the district in which it happened.

Mr. Chairman, I will give myself 15 seconds to say I was waiting for the gentleman to tell me he voted against the war in Iraq. He talked about all these things he voted against. Added together and doubled, they don't add up to the war in Iraq, the continuing indefinite drain. Hundreds of billions of dollars have already gone, and they are committed to spending hundreds of billions more to make us worse off.

Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from North Dakota (Mr. Pomeroy).

I yield 15 seconds to the gentleman from New York to make a response.

I yield 3\3/4\ minutes to the gentleman from

Pennsylvania, the chairman of the subcommittee who guided this bill through a very thoughtful bipartisan markup.

(Mr. KANJORSKI asked and was given permission to revise and extend his remarks.)

I yield 2 minutes to the gentlewoman from Florida (Ms. Wasserman Schultz).

I agree with the gentlewoman on both points. First, there is nothing in this language, and I should say that this issue of preventing unfair denials of life insurance, she was the one who brought it up. She brought it up in the prior Congress. And now that we are in the majority, we are able to accommodate it.

I appreciate the fact that the gentlewoman worked with us as we worked with the life insurance companies. I believe we have an acceptable set of principles. She is right that this language does need a little bit more, I think, refinement on conflict. I think there's a conceptual agreement. I agree with her as to the need for definition.

As a preemption, that is very simple. I am a strong believer we should not be preempting unless we say so explicitly. There has been an excess of subtle preemption. By itself, this bill does not do that. Insurance has been primarily a State issue. This is a Federal statement, but it is not at all meant to be preemptive.

Before I yield to the gentleman from Vermont (Mr. Welch), I would just point out that when we voted on this in committee before we had the PAYGO glitch, the vote on the Republican side was 19 opposed, 14 in favor, so it was hardly a one-sided partisan bill. It partly reflects the work that the gentleman from Pennsylvania (Mr. Kanjorski) did in accommodating a lot of the concerns.

Mr. Chairman, I yield 2 minutes to the gentleman from Vermont.

Yes.

Get to the question.

If the gentleman would yield, he has pointed to a very important issue. We did try to make some accommodation with the small insurers, but I don't think we have finally done that. But I would say, you know, the notion that a bill that comes to the floor is not graven in stone shouldn't come as a surprise to people. We have a Senate. We have a genuine conference. It will be an open conference.

I should say I understand why some of my colleagues on the Republican side were somewhat puzzled at the notion that we might go to conference and, in an open way in conference, further amend the bill. They didn't believe in that. They didn't have any. So for them, that was all done in secret.

We will have an open conference to address these. And this is one of the issues. I do believe that it is legitimate. We will be meeting with, and the staffs will be meeting with, the smaller private insurers. To the extent possible consistent with the purpose of the bill, we will seek to improve on the accommodation.

Mr. Chairman, I yield the balance of my time to the gentleman from Rhode Island (Mr. Langevin).

Mr. Chairman, I offer an amendment.

Mr. Chairman, I recognize myself for 1 minute.

Mr. Chairman, this is an agreed-upon set of amendments. As I said, it was a bipartisan process, to some extent, in drafting. This makes technical revisions and requires Treasury to promulgate rules to clarify the nuclear, biological, chemical and radiation certification process. It provides that there be indexing, which is, I think, in accordance, there are some copayments, et cetera, and these will be indexed. It applies the reset mechanism to the deductible for nuclear, biological, chemical and radiological, and it makes technical and conforming changes. I believe, as I said, this represents a consensus.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I thank the ranking member. We were able to work out a number of these things. I would just want to return to a couple of broader points. I want to make two points. One, I don't think the market will work and neither does any participant in the market either as an insurer, or any significant number, or as the insured. But even if it could, it does not seem to me that it should. If you did this purely in the private market, you would give to the vicious attackers of America the power to decide that it would be more

expensive to do business in some parts of our country than others. You could have another video from the despicable Osama Bin Laden in which he could threaten that he would take action against this area or that area, these facilities or those facilities, and their insurance premiums would go up.

Yes, the private market should govern all those things which it deals with, with fire and with other forms of casualty and even with natural disasters. But to put in the hands of America's enemies this economic power is a grave error. Should the taxpayers pay for it? Yes, because it is a matter of national defense. It is a matter of homeland security. We are not talking about insuring people against the risk if they built a commercial building of liability to injury, of fire, of theft, of improper or inadequate construction. We are saying that, no, if you are in business in America, you should not have to insure against an attack on this country based on hatred of us.

So that is why I believe that we should do this as a public policy matter.

Mr. Chairman, at this point, I yield 2 minutes to the gentleman from North Carolina, a member of the committee who is one of our most thoughtful Members to discuss the general principle of the bill.

I join the gentleman in opposition, and I want to address this charge that we heard from one of the Members that this is a typical liberal Democratic big-spending program.

I will include for the Record a strong endorsement of H.R. 2761 from the Coalition to Insure Against Terrorism. It is composed of such traditional liberal groups as the American Bankers Association, the National Apartment Association, the National Association of Manufacturers, the U.S. Chamber of Commerce, the National Retail Federation, the National Restaurant Association and the National Association of Industrial and Office Property. Virtually every business involved in this, the Financial Services Roundtable, led by that radical, our former colleague, Mr. Bartlett of Texas, every business group from the insuring and insured part says this is not for the market.

I would add also a letter from the National League of Cities strongly urging on behalf of the cities of America passage of this bill as it was reported out of committee.

Finally, from the American Insurance Association, a strong argument. In particular, it thanks us for including nuclear, biological, chemical and radiological.

Those who said the market can do it, it says two separate government studies have concluded what insurers already knew, that outside of State mandates, there is virtually no private insurance market capacity for NBCR. ``For this and other reasons,'' they like the whole bill, ``the American Insurance Association and its more than 350 property casualty insurance companies strongly endorse H.R. 2761 as it was reported out of the committee.'' They have got some concern about the reset, and we will talk about that and we agree with them. But here is this strong endorsement.

Yes, it is true that this is something that some liberal Democrats support. And here is the signer on behalf of the American Insurance Association, Governor Marc Racicot, I believe a former chairman of the Republican National Committee. I want to congratulate my Democratic colleagues. To have insinuated a liberal Democrat into the chairmanship of the Republican National Committee is a degree of flexibility I didn't know we have.

So this notion that this is some liberal invention and that the market can do it is repudiated by everyone who knows anything about the market. I hope the amendment is defeated and the bill is passed.

Vote ``Yes'' on H.R. 2761

The undersigned members of the Coalition to Insure Against

Terrorism (CIAT), a broad based coalition of business

insurance policyholders representing a significant segment of

the nation's GDP, strongly urge you to vote ``yes'' on H.R.

2761 Terrorism Risk Insurance Revision and Extension Act of

2007 (TRIREA).

American Bankers Association; American Bankers Insurance

Association; American Council of Engineering Companies;

American Gas Association; American Hotel and Lodging

Association; American Land Title Association; American Public

Gas Association; American Public Power Association; American

Resort Development Association; American Society of

Association Executives; Associated Builders and Contractors;

Associated General Contractors of America; Association of

American Railroads; Association of Art Museum Directors;

Babson Capital Management LLC; The Bond Market Association;

Building Owners and Managers Association International;

Boston Properties; and CCIM Institute.

Campbell Soup Company; Century 21 Department Stores;

Chemical Producers and Distributors Association; Citigroup

Inc.; Commercial Mortgage Securities Association; Cornerstone

Real Estate Advisers, Inc.; CSX Corporation; Edison Electric

Institute; Electric Power Supply Association; The Financial

Services Roundtable; The Food Marketing Institute; General

Aviation Manufacturers Association; Helicopter Association

International; Hilton Hotels Corporation; Host Hotels and

Resorts; Independent Electrical Contractors; Institute of

Real Estate Management; Intercontinental Hotels; and

International Council of Shopping Centers.

International Franchise Association; International Safety

Equipment Association; The Long Island Import Export

Association; Marriott International; Mortgage Bankers

Association; National Apartment Association; National

Association of Home Builders; National Association of

Industrial and Office Properties; National Association of

Manufacturers; National Association of REALTORS';

National Association of Real Estate Investment Trusts;

National Association of Waterfront Employers; National

Association of Wholesaler-Distributors; National Basketball

Association; National Collegiate Athletic Association;

National Council of Chain Restaurants; National Football

League; National Hockey League; and National Multi Housing

Council.

National Petrochemical & Refiners Association; National

Restaurant Association; National Retail Federation; National

Roofing Contractors Association; National Rural Electric

Cooperative Association; The New England Council; Partnership

for New York City; Office of the Commissioner of Baseball;

Public Utilities Risk Management Association; The Real Estate

Board of New York; The Real Estate Roundtable; Society of

American Florists; Starwood Hotels and Resorts; Taxicab,

Limousine & Paratransit Association; Travel Business

Roundtable; Trizec Properties, Inc.; UJA-Federation of New

York; Union Pacific Corporation; and U.S. Chamber of

Commerce.

I would say yes, the taxpayers do pay. It is a matter of national defense. Where people are building and incurring risks, they should pay for it themselves. I accept that point. We are talking about how we respond to Osama bin Laden or other murderers who would attack this country.

I think it is appropriate that the country as a whole respond, and not allow the terrorists to pick and choose which Americans will have to suffer disproportionately.

Mr. Speaker, I rise in opposition to the motion to recommit.

First of all, of course it says ``promptly.'' Members make a choice. The purpose of this is terrorism risk insurance expires the end of this year. We are on a reasonable timetable but not one that has a lot of water in it.

Yesterday, on an important bill that goes before the Committee on Financial Services, they said ``promptly.'' So the notion is that they can make the Committee on Financial Services a revolving door and then complain when we can't get the work done when we will have to do it two and three times.

Secondly, Members on the other side, and I don't know where the gentleman from California was on this, but in Committee, before the PAYGO problem arose, while we got substantial Republican support, 14, 19 Republicans, including the ranking member, voted ``no.'' So the Republicans had taken an opposing position in the majority. The administration is in the majority against it.

And what are they telling us? That a bill that the Republicans on the whole are against doesn't do enough for the people who want the bill. This is people intervening on behalf of people who don't want their intervention.

It is true that there is some ambiguity that I hope will be resolved; but the American Insurance Association, and that is the group that, despite the Republican's argument that this can be done by the market, says no, the market can't handle it. And, in a letter signed by a former chairman of the Republican National Committee, Governor Marc Racicot, president of the AIA, they say please go ahead with the bill. And they say: We have concerns about this fix. We hope we can go forward and work on it as opposed to delaying it further.

We got a letter today from the Chamber of Commerce and the National Association of Manufacturers, the Bankers, the League of Cities, being aware of the problem and of the first cut at fixing it, that say please go forward.

Now, if the people who were expecting to be the participants in this program said, wait a minute, this can't go forward, they would be, I think, entitled to be listened to. When people who have on the whole been opposed to the whole program and who voted against it before this arose now appear to say, oh, my goodness, this poor program, you are not doing enough justice, when they want to kill it, I don't think have a lot of credibility.

So, yes, this does need some work. There are a variety of suggestions that have been made. We do have a Senate to go forward and we have a conference process.

And I will say to the Republicans, I understand their skepticism about a conference process, because when they were in the power, they didn't have any. They did a lot of backroom, okay, we will do this.

We will have a conference. I am chairman of this committee. I can promise, and I have talked to the leadership, we will have an open conference and there will be debates and discussions.

I am explaining it because the Republicans, some of them, the newer ones don't know what one is. It will be the

House and the Senate, and we will talk about it. And so we will address this particular issue.

And, again, all of those who are in favor of this program as it was drafted, all of them want us to go forward as we continue to make this final fix. Most of those who are saying, oh, no, you can't go forward, it is not perfect, didn't like it in any case.

I yield to the gentleman from California.

I thank the gentleman, but I take back my time. He will vote in favor of the legislation after it is sent back to committee, after it is wide open again to an amendment process, after members of the committee on his side of the aisle will offer a whole lot of new amendments. And so weeks could go by before we are able to get floor time again and do it. There are a lot of things on the floor, and they are complaining that we didn't pass other things.

So the gentleman will vote for it in the sweet by-and-by if we send it back. There is an alternative: We go through the regular process. The Senate votes on this, aware of the CBO. We go to an open conference. We debate it, and we bring that to the floor.

I will yield again to the gentleman.

I know turf is more important to some Members than anything else.

It is rather odd to proclaim yourself an institutionalist while violating the rules.

The fact is that I understand turf makes some people jittery. And I will certainly advocate that the Rules Committee be included in the conference report.

Again, the Republicans have forgotten how conferences work. Conferences can have more than one committee, so the Rules Committee can get representation on the conference.

Again, everybody who is for this bill in the House and the private sector, people on the whole and the cities, the representatives of the public affected, want us to go forward and say, in good faith work, this out.

People who have been on the whole opposed to it, not entirely but on the whole opposed to it, have found this hook to try and hold it up. I don't think they are trying to hold it up to make it better when a majority of them wanted to kill it in the first place.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, as one of the original authors of the first TRIA legislation back in 2002, which passed this House with a strong vote, and also as a supporter of the extension in 2005, which I also cosponsored, I am disappointed that I have to rise today in opposition to the present bill. But I do so sincerely.

The whole idea of TRIA, the 2002 bill, the 2005 extension, was to create a short-term government backstop which would allow the insurance industry, the private market to adjust to the 9/11 reality.

By any objective measure, people on both sides of the aisle have said TRIA has been a success. Secretary Hank Paulson supported a TRIA which was a government backstop as the government continued to process the stepping back.

The terrorist insurance markets have stabilized. We have heard this debate, this word today of the gentleman from New York and the leadership and the Democratic Party and some of their differences. Even in correspondence which I have seen, he said terrorist insurance, the approach we have has been working. It is giving us insurance. The markets have stabilized. Policyholders are requesting and they are receiving coverage. Prices have declined. Reinsurance has become more available. The private marketplace is diversifying, and it is absorbing additional risk exposure every day.

This past July, Secretary Paulson, which, as I said, he supported TRIA, he doesn't support this legislation because it essentially preempts the private market. But he made this statement to me: It is my belief that the most efficient, lowest cost, and most innovative methods of providing terrorist risk insurance will come from the private sector.

I agree, and it is therefore that reason that I must oppose the bill before us today, because it works at cross-purposes with that whole philosophy of allowing a temporary backstop as the private market fills in and meets the need for terrorist risk insurance.

We presently have a TRIA program in place that relies on that private sector first and the government only as a backstop and, as I said, it is working very well. It is effectively creating what is a temporary assistance or a hand up, not a permanent handout. However, this bill replaces what has been a successful and temporary mechanism which has worked so well to allow the insurance marketplace to adopt to the 9/11 realities. It replaces it with legislation that, instead of scaling back the Federal backstop, it expands it greatly. It increases the government growth greatly. It increases taxpayers' exposure tremendously, so much so that we are not going to pay for it here today. We are going to disregard PAYGO. And I understand there is some private deal that may have been agreed to out of the public domain and unknown to Members. That is not how legislation should function. But it is a flawed bill that is, unfortunately, a departure from what has heretofore been a very successful bipartisan consensus effort on behalf of this Congress that we have all come together and adopted in the past.

TRIA should not be a partisan issue. Our division on this legislation reflects a philosophical difference and disagreement over how, how much and for how long middle-class America should subsidize the cost of terrorist insurance for both insurers and for urban developers.

And what is the taxpayer role?

I had hoped that we could consider a number of important amendments today to scale back these new Federal subsidies; i.e., taxpayer- supported guaranteed benefits. I had hoped that we could ask that the insurance companies pay a greater percentage; that they collect an increased amount. Unfortunately, the Democratic leadership has decided not to even allow a fair and free debate on these amendments.

The expanded Federal subsidies provided for in this bill are so expensive that they violate the House's budget rules. But, as I said, instead of admitting this violation, or even waiving it, which would be a more honest approach, or finding a way to pay for the costs to the taxpayers, the majority has turned to what I call a ``fantasy fix'' that mandates various terrorist coverage, but removes any certainty in the Federal payment.

Even the most ardent proponents of TRIA are opposed to this so-called solution to the PAYGO problem. One Democratic colleague that's on the floor today has made this statement which I associate myself with: ``Making the entire program contingent on Congress passing a second piece of legislation completely undermines the intent and desired effect of the legislation.'' He went on to say, and I quote, ``It would render the legislation almost completely useless.'' That's the legislation we have before us. That's it. That's what we're considering today.

We heard as we debated the rule that there have been some assurances given in a letter which none of us have seen from the majority leader to the Member that they're going to fix this, that they're going to fix it in conference. We're just asked to take a leap of faith. To me, that violates not only the promises that the Democratic majority made in this campaign to have an open, honest process with full disclosure, not back-room agreements. We don't even know what we're voting on. We're told, vote for something on blind faith. It'll be fixed. Yes, it's flawed. Yes, it won't work. Yes, we know we're not paying for it, but we'll do that later. Trust us.

You know, it's one thing to ask Members of Congress, it's another thing to ask the American people for their representatives to pass something they have no idea entirely what it is; to act on the assurance of a letter that 433 Members have not seen, surely not the 210 in the minority.

Policyholders are also shortchanged in this legislation. If an insurance company's losses exceed a certain level, the new bill that Members saw for the first time last night says that the consumer gets no more money until a later Congress acts, regardless of what the insurance policy says or what the company agreed to pay. In other words, they're writing a policy, the company is agreeing to pay a certain amount, but all of it is contingent upon Congress then coming in and paying for it. I'm not sure that's even constitutional, that we as a legislative body would say, go out and write insurance policies, tell policyholders this is their coverage, and another legislative body, 5, 10, 15 years down the road, they'll come in and they'll pay for it. How do we know that? What will the policy read? It will be interesting to see what the policy says. All this is contingent upon an act of Congress. How about all of this is contingent upon the ability of the United States to write such a check, or the willingness of the people to do that? What if these policies are extended and then we have a new Congress and that Congress says ``no''? The policyholders have paid for something and they have no assurance they'll ever receive a dime.

While I am a strong supporter of what has to this date been the approach of Congress for short-term extensions of this program that continues down the road of phasing out the government backstop, the taxpayer funding, and phases in greater private sector participation, and by private sector participation, I simply mean that those who are provided the coverage pay for the coverage, not someone in rural Kansas or New Mexico or Georgia, but that who's getting the benefit pays the price, not the American people.

I cannot support this bill. It extends the program for 15 years, in other words, more or less basically permanent. It writes a blank check, asks the taxpayers to pay it, but doesn't pay for it now. It makes no provisions for paying for it, other than a letter from the majority leader to a member of the New York delegation saying, in a month or two, we know this is a flawed bill, it's a no go, but we'll fix it. But vote for it right now. I cannot do that. I cannot ask the Members of the minority to do that.

Mr. Chairman, let me just say in closing that Members on this side of the aisle are prepared and we have been prepared to strongly support an extension of the TRIA program that is fiscally responsible, that does the right thing for taxpayers. But we're not going to vote for something we have no idea what we have, other than an assurance in a letter we have not seen.

While we have complete bipartisan agreement on the merits of the current TRIA program, we know that in the aftermath of 9/11 there was a need to act. We acted. We've been successful. Let's not change something that's proven to work well with a blank check from the taxpayers. This bill is a gimmick. It increases government subsidies without providing greater certainty in the marketplace. I urge my colleagues to oppose this legislation.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I would yield the gentleman from New York 30 seconds to answer an inquiry if he would allow me.

I would ask the gentleman, this letter that we heard of earlier from Mr. Hoyer to yourself, could you share a copy of that letter with the minority?

Could we see it now?

Could we make a copy of it?

So this is a private sort of agreement between the two of you?

Mr. Chairman, at this time I yield 2 minutes to the gentleman from New Mexico (Mr. Pearce).

Mr. Chairman, I yield 5 minutes to the gentleman from Texas (Mr. Hensarling).

Mr. Chairman, I yield 3 minutes to the gentleman from Texas (Mr. Culberson).

Mr. Chairman, I would like to inquire as to the remaining time on our side.

Mr. Chairman, at this time I would like to yield 3\1/2\ minutes to the gentleman from Louisiana (Mr. Baker).

Mr. Chairman, TRIA is working well as a temporary matter. The insurance market is beginning to fill out and, sadly, this is a step in the wrong direction.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I rise to claim time in opposition, although I am not opposed to the manager's amendment.

Mr. Chairman, this amendment has some improvements to the bill. I would like to express to the chairman that I appreciate his willingness to work to make, I think, some needed and technical changes to the bill. I would encourage my colleagues to vote for the manager's amendment and, again, express, although the chairman and I have some philosophical differences in the overall TRIA legislation and whether how temporary it ought to be or how permanent it ought to be or the extent of where the Federal subsidies, on this amendment we have no disagreement.

We continue to work well in a bipartisan manner despite our philosophical differences.

Mr. Chairman, I urge Members to support the manager's amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I ask unanimous consent to reclaim 30 seconds of my time.

I thank the Chairman.

Let me say to all Members of this body, we are not saying and neither has it been our position that the government does not have a role to play in offering a backstop to terrorist insurance. We believe that that ought to be a limited goal, and we believe that we ought to continue in the path of the prior TRIA extensions, where we continue to let the private market fill in.

We believe, on the other hand, and we not only believe, but this bill calls for higher deductibles, higher premiums and higher taxpayer participation, and we feel like we are reversing our role

Mr. Chairman, I want to thank the chairman of the full committee for reading that list of those that endorsed it. You will notice that some of the absences were the Consumer Federation of America, which said that this bill was not good for consumers, i.e. taxpayers. The National Taxpayers Association obviously wasn't on that list, because it is a great deal for the insurance companies, and we all acknowledge that. It merely subsidizes them at the expense of taxpayers. The one name missing is taxpayers. They will pay for this legislation.

Mr. Chairman, on September 11, in addition to the enormous loss of human life, the value of which cannot be measured, our Nation suffered catastrophic economic losses. The attacks of September 11 resulted in $30 billion worth of insured losses, the largest catastrophic insurance loss in the history of the United States, larger than any blizzard, tornado or hurricane. As a result, insurers and reinsurers began to worry about the likelihood and the cost of a future terrorist attack.

Worrying about risk and then monetizing that risk is the key to the insurance industry, which is an essential element in a modern dynamic economy. As happened, businesses with legitimate concerns about their solvency, insurance and reinsurance firms withdrew from the market where the attack took place. As the supply of terrorism insurance rapidly decreased, New York City developers, for whom terrorism insurance was essential to secure financing for their projects, were put in a precarious position. They needed terrorism insurance to continue building, but the market for insurance simply did not have enough supply to meet their demand. Similar shortages began occurring throughout the country. In simple terms, there was a market failure.

It was out of this dilemma that the critical need to address that original version of TRIA was born. TRIA increased the availability of terrorism insurance coverage by creating a Federal backstop that would share the burden of losses caused by any future attacks of terrorism with the insurance industry.

In the wake of 9/11, we had hoped that a temporary, 3-year program would provide enough of a shield to allow the market to fully recover. By late 2005, however, the Financial Services Committee and others in Congress realized that TRIA had not resulted in as quick or as robust a recovery of the market as was originally hoped. TRIA was extended for an additional 2 years, and is currently set to expire on December 31 of this year.

Mr. Chairman, the Terrorism Risk Insurance Revision and Extension Act is a major achievement. It eliminates the distinction between foreign and domestic acts of terror. It incorporates group life insurance into the program. And, most importantly, this legislation extends TRIA for another 15 years.

Let us be clear: the enemy of business is uncertainty. This is particularly true for multi-million or multi-billion dollar real estate development projects, the kind that breathe life into our Nation. Designing, securing capital and then contracting for construction

is a multi-year process, and if we want these kinds of projects to go forward during these uncertain times, there is simply no alternative to providing a long-term terrorism insurance backstop.

Extending TRIA by 15 years is not a whim. It is not an arbitrary number. A 15-year extension would allow developers to secure 10- and 15-year bonds when financing their projects and would cover the life span of construction for our Nation's most innovative and remarkable development projects.

Equally as important to our Nation's developers, insurers and reinsurers is the inclusion of the so-called ``reset mechanism'' in this legislation. This language ensures that, in the aftermath of another catastrophic terrorist attack, the affected area or areas do not experience the same capacity problems that we experienced in New York following September 11.

To be clear, however, the reset mechanism included in H.R. 2761 is not a special favor extended to New York. Under the language I worked out with Mr. Baker, representing the minority side, in the event of a terrorist attack with losses of $1 billion or greater, the deductibles for any insurance company that pays out losses due to the event immediately would lower to 5 percent, while the nationwide trigger for any insurer for any future event drops to $5 million.

Mr. Baker and I also reached agreement on my proposal to enable the Secretary of the Treasury to aggregate the total losses for two or more attacks that occur in the same geographic area in the same year, if the Secretary so chooses, so that if the total insured losses for those events are over $1 billion, the reset mechanism would be triggered. Permitting the Secretary of the Treasury to aggregate the losses of two or more attacks in the same year is absolutely essential to protect our Nation's developers, insurers and reinsurers from a scenario in which the same area suffers a loss of $1 billion in insured losses, either from two or more medium-scale attacks or from one large-scale attack.

The reset language is a true bipartisan compromise with the minority, accommodating a vast number of their concerns, and one in which I think Members of both sides should be very pleased. The new language simultaneously addresses the need to boost capacity in our Nation's highest risk areas, while recognizing that in case America suffers another catastrophic terrorist attack anywhere in this Nation, capacity shortages could be expected not only in the geographic area surrounding the site of the attack but also, quite possibly, throughout the Nation as a whole.

The chairman has asserted that he would accommodate the needs of those who have complained about the openness of the process, which I assure everybody is open. And as the leader of the conference, when the House goes into conference on this matter, Mr. Chairman, could you give us your assurance that this bill will come back in the kind of form that we will not have an issue?

This is a private letter from the leadership to myself. I will be glad to show it to a Member of the minority side that signed the letter.

I will share it with a Member of the minority side who signed the letter.

I think you have heard my answer.

This is the word of the majority leader to our delegation.

I thank the chairman.

My name was cited, along with a list of other New Yorkers having opposed the original TRIA when it came to the floor. The reason we did so is not because of TRIA, it was because the minority side, the Republican side at the time, tried to use this as a vehicle to move tort reform and added all sorts of tort reform provisions to the TRIA bill, which we absolutely opposed because it was a politically motivated move and not because of TRIA.

Mr. Chairman, I rise to claim the time in opposition.

Mr. Chairman, our friends on the Republican side pride themselves on being tough on terror, and rightfully so. To be honest, it is evident when you listen to President Bush and he says things like ``You're either with us or against us.''

But also the President said in the wake of 9/11, he said this here in this Chamber to the Congress and to the American people, and I quote our President, ``Terrorist attacks can shake the foundations of our biggest buildings, but they cannot touch the foundations of America. These acts shatter steel, but they cannot dent the steel of American resolve.'' Our President said that to us, Mr. Chairman.

After looking over the amendment, I realize the gentleman from New Mexico was not yet elected to be here and probably didn't get the memo about what the President said, because the effect of his amendment would allow terrorists to tell us where we can and where we cannot build after a catastrophic terrorist attack.

The bill would reset the deductible from 20 percent to 5 percent after a terrorist attack, which is good. The amendment that the gentleman proposes would increase the reset deductible to as high as 19 percent after a terrorist attack, which is almost the same as the original 20 percent. Small comfort.

Undermining the purpose and the intent of the reset mechanism by eliminating the incentives created by the reset would price insurers out of areas affected by terrorist attacks, prohibiting developers from rebuilding.

It would seem to me that to support this amendment is so blatantly to oppose the American resolve that President Bush claimed in the wake of September 11. Should we have left Ground Zero smoldering and not build the Freedom Tower? Should we concede defeat to Osama bin Laden? Should he dictate where we can and cannot build?

I say to the gentleman from New Mexico, if we cannot build and rebuild in the areas where terrorists attack, that is a major defeat for our country and a resounding retreat from the spirit of our Nation.

I yield to the gentleman from Massachusetts, the chairman of the committee.

Mr. Chairman, I further yield to the gentleman from Massachusetts (Mr. Frank).

Mr. Chairman, we have no further speakers. I would just urge all of our colleagues to join with the former chairman of the Republican National Committee and Mr. Frank and myself and oppose this amendment before the House.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, six years ago, when the Congress considered the bill creating the terrorism insurance program, I urged my colleagues to reject it. One of the reasons I opposed the bill was my concern that, contrary to the claims of the bill's supporters, terrorism insurance would not be allowed to sunset. As I said then:

``The drafters of H.R. 3210 claim that this creates a `temporary' government program. However, Mr. Speaker, what happens in three years if industry lobbyists come to Capitol Hill to explain that there is still a need for this program because of the continuing threat of terrorist attacks. Does anyone seriously believe that Congress will refuse to reauthorize this

`temporary' insurance program or provide some other form of taxpayer help to the insurance industry? I would like to remind my colleagues that the federal budget is full of expenditures for long-lasting programs that were originally intended to be `temporary.' ''

I am disappointed to be proven correct. I am also skeptical that, having renewed the program twice, this time for fifteen years, Congress will ever allow it to expire.

As Congress considers extending this program, I renew my opposition to it for substantially the same reasons I stated six years ago. However, I do have a suggestion on how to improve the program. Since one claimed problem with allowing the private market to provide terrorism insurance is the difficulty of quantifying the risk of an attack, the taxpayers' liability under the terrorism reinsurance program should be reduced for an attack occurring when the country is under orange or red alert. After all, because the point of the alert system is to let Americans know when there is an increased likelihood of an attack it is reasonable to expect insurance companies to demand that their clients take extra precautionary measures during periods of high alert. Reducing taxpayer subsidies will provide an incentive to ensure private parties take every possible precaution to minimize the potential damage from possible terrorists attack.

Since my fundamental objections to the program remain the same as six years ago, I am attaching my statement regarding H.R. 3210, which created the terrorist insurance program in the 107th Congress:

Mr. Chairman, no one doubts that the government has a role to play in compensating American citizens who are victimized by terrorist attacks. However, Congress should not lose sight of fundamental economic and constitutional principles when considering how best to provide the victims of terrorist attacks just compensation. I am afraid that H.R. 3210, the Terrorism Risk Protection Act, violates several of those principles and therefore passage of this bill is not in the best interests of the American people.

Under H.R. 3210, taxpayers are responsible for paying 90 percent of the costs of a terrorist incident when the total cost of that incident exceeds a certain threshold. While insurance companies technically are responsible under the bill for paying back monies received from the Treasury, the administrator of this program may defer repayment of the majority of the subsidy in order to ``avoid the likely insolvency of the commercial insurer,'' or avoid ``unreasonable economic disruption and market instability.'' This language may cause administrators to defer indefinitely the repayment of the loans, thus causing taxpayers to permanently bear the loss. This scenario is especially likely when one considers that ``avoid . . . likely insolvency, unreasonable economic disruption, and market instability'' are highly subjective standards, and that any administrator who attempts to enforce a strict repayment schedule likely will come under heavy political pressure to be more ``flexible'' in collecting debts owed to the taxpayers.

The drafters of H.R. 3210 claim that this creates a ``temporary'' government program. However, Mr. Speaker, what happens in three years if industry lobbyists come to Capitol Hill to explain that there is still a need for this program because of the continuing threat of terrorist attacks. Does anyone seriously believe that Congress will refuse to reauthorize this ``temporary'' insurance program or provide some other form of taxpayer help to the insurance industry? I would like to remind my colleagues that the federal budget is full of expenditures for long-lasting programs that were originally intended to be ``temporary.''

H.R. 3210 compounds the danger to taxpayers because of what economists call the ``moral hazard'' problem. A moral hazard is created when individuals have the costs incurred from a risky action subsidized by a third party. In such a case individuals may engage in unnecessary risks or fail to take steps to minimize their risks. After all, if a third party will bear the costs of negative consequences of risky behavior, why should individuals invest their resources in avoiding or minimizing risk?

While no one can plan for terrorist attacks, individuals and businesses can take steps to enhance security. For example, I think we would all agree that industrial plants in the United States enjoy reasonably good security. They are protected not by the local police, but by owners putting up barbed wire fences, hiring guards with guns, and requiring identification cards to enter. One reason private firms put these security measures in place is because insurance companies provide them with incentives, in the form of lower premiums, to adopt security measures. H.R. 3210 contains no incentives for this private activity. The bill does not even recognize the important role insurance plays in providing incentives to minimize risks. By removing an incentive for private parties to avoid or at least mitigate the damage from a future terrorist attack, the government inadvertently increases the damage that will be inflicted by future attacks!

Instead of forcing taxpayers to subsidize the costs of terrorism insurance, Congress should consider creating a tax credit or deduction for premiums paid for terrorism insurance, as well as a deduction for claims and other costs borne by the insurance industry connected with offering terrorism insurance. A tax credit approach reduces government's control over the insurance market. Furthermore, since a tax credit approach encourages people to devote more of their own resources to terrorism insurance, the moral hazard problems associated with federally funded insurance is avoided.

The version of H.R. 3210 passed by the Financial Services committee took a good first step in this direction by repealing the tax penalty which prevents insurance companies from properly reserving funds for human-created catastrophes. I am disappointed that this sensible provision was removed from the final bill. Instead, H.R. 3210 instructs the Treasury Department to study the benefits of allowing insurers to establish tax-free reserves to cover losses from terrorist events. The perceived need to study the wisdom of cutting taxes while expanding the federal government without hesitation demonstrates much that is wrong with Washington.

In conclusion, Mr. Chairman, H.R. 3210 may reduce the risk to insurance companies from future losses, but it increases the costs incurred by the American taxpayer. More significantly, by ignoring the moral hazard problem this bill may have the unintended consequence of increasing the losses suffered in any future terrorist attacks. Therefore, passage of this bill is not in the long-term interests of the American people.

Mr. Chairman, I thank the gentleman for yielding. I certainly thank him for his leadership in this area.

If I could paraphrase President Ronald Reagan, the closest thing to eternal life on Earth is a Federal program. And certainly the legislation that comes before us today helps prove this.

When TRIA was brought to the floor, and I, admittedly, was not here but I have read the Record, supposedly it was to be a temporary program at a time of great economic hardship to our Nation.

I just heard the gentlewoman from New York speak very eloquently on the subject. But I recall from the Record her own words: ``We are simply working to keep our economy on track with a short-term program that addresses the new terrorist threat.''

Now we are being asked for a 15-year extension on what has already been a 5-year program.

The gentleman from Pennsylvania, who is now our chairman of the Capital Markets Subcommittee: ``We wisely designed the TRIA Act as a temporary backstop to get our Nation through a period of economic uncertainty until the private sector could develop models.''

Now, maybe those on the other side of the aisle have a different definition of ``temporary.'' I was here to vote for the TRIA extension, and I voted for it. I thought that the market needed some time to develop. But let's face it. If we vote for this, we are voting for a permanent, a de facto permanent, huge government insurance program on top of those that we already have, none of which, none of which, are financially sound.

And we have to remember when we are hearing debate on the floor about how critical it is in the fight against terror that we have terrorism reinsurance. I believe terrorism reinsurance is important, but I think even more important in fighting terror is prevention, ensuring it doesn't happen in the first place. And yet we have Member after Member after Member on the other side of the aisle that would make it more difficult for our government to monitor the conversations of suspected terrorists. We have Member after Member on the other side of the aisle voting to assure that a portion of our intelligence budget, to paraphrase the former Director of the CIA, goes to spying on bugs and bunnies instead of terrorists. Prevention is what is key in the fight against this terror.

Now, of course, reinsurance is important, and, again, as I said, I voted for another extension. But to hear those on the other side of the aisle, they would say, well, there is no way that the market can develop this. I'm not sure I agree with that, and I know that the President's working group on financial markets doesn't agree with that. They say that the availability and affordability of terrorism risk insurance has improved since the terrorist attacks. Despite increases in risk retentions under TRIA, insurers have allocated additional capacity to terrorism risk, prices have declined, and take-up rates have increased.

And let me quote here from this working group: ``The presence of subsidized Federal reinsurance through TRIA appears to negatively affect the emergence of private reinsurance capacity because it dilutes demand for private sector reinsurance.''

Now, the chairman, whom I certainly respect, and he is entitled to his own opinions, he doesn't believe the market could ever develop. Well, I would respectfully say to our chairman: How are we ever going to know? How are we ever going to know when you are giving away something for free that the market otherwise would charge for and all of the signs are there that the market can develop?

Some tell us this is a new risk that we don't know how to model for. Well, there was a time when the insurance industry didn't know how to model for airline catasrophes. They didn't know how to model for data processing collapses. And this is not the first time in our Nation's history that we have faced great threats. How did we model the Cold War when thousands of nuclear arms were pointed at us and somehow construction still took place in America?

Construction has taken place in New York based upon a 3-year extension, not a de facto permanent extension, but based on a 3-year extension with higher deductibles and with less government subsidy.

So I don't believe that building is going to come to a complete stop. But if there is a market failure, we could have worked on a bipartisan basis for something restricted that was temporary, dealing with nuclear, chemical, and biological, with large deductibles and large industry retentions.

Instead, we are going to create a massive new insurance program that threatens the taxpayer, another great threat to this Nation. We should oppose this bill.