difficult problem of timing the availability of war-damage-insurance policies.

Notwithstanding the many difficult problems with which the formulation of appropriate legislation for war-damage insurance is faced, the National Association of Insurance Brokers wishes to emphasize as vigorously as possible the need for setting up the mechanics for making such insurance available. We do not believe that such legislation should be long deferred. It is needed now.

The CHAIRMAN. Mr. Pomeroy, you believe that it is desirable to enact this legislation at the earliest possible date?

Mr. POMEROY. Yes; we do, sir.

The CHAIRMAN. We are glad to have your views.

Mr. MCKINNON. You realize, of course, Mr. Pomeroy, and I think everybody realizes, that war damage is apt to come as a blitz overnight without any warning.

Mr. POMEROY. Yes.

Mr. MCKINNON. Now in regard to your compromise suggestion that the factory or home owner does not have to pay for this insurance until such time as active war is declared or until such time as open war hostility occurs, is it your opinion that it likewise follows in private insurance that the insured would not have to pay for fire insurance on his house until his house burns down?

Mr. POMEROY. That is not quite the tenor of this suggestion. Bearing in mind that some people feel that it would be a mistake to make these insurance policies available right now and other people want them available right now, it was the purpose of this compromise to make possible a coverage in the event of loss through hostile enemy action and provide that anybody who wanted this conditional coverage could subscribe for it and they would be definitely committed to take a policy and pay for it if hostile enemy action should occur, but if we should go through many years of troubled peace but no actual damage, war damage, then these policies never would be issued at all.

It was the thought that this met the two opposing points of view. Mr. DEANE. Who is going to pay the cost of issuing the policies? Mr. POMEROY. The cost of issuing these subscriptions would, of course, not be met under this suggested compromise. On the other hand, there would be no risk of loss to the Government in the event that war damage did ensue because at that time the Government would receive exactly the same premiums that it would receive should you issue policies right now.

In other words, it would be just a deferred premium.

Mr. MCKINNON. You would not be able to conduct your War Damage Corporation without cost and the person who would collect from the War Damage Corporation certainly should be the one to pay the cost of the Corporation.

Mr. POMEROY. It may well be that a small charge might be paid for such subscriptions. In other words, instead of a premium of $25 or $30, it might be a dollar charge, which would go to defray the mechanical costs, not the actual insurance rating charges.

Mr. MCKINNON. And the operation of your insurance broker, who goes out and writes a policy, and who was paid 10 percent last time for his efforts in placing the policy, has his expenses too. Would he not have to be reimbursed?

Mr. POMEROY. I did wish to emphasize that this was an idea which was presented by a number of our membership rather recently and the association is not formally proposing it, but you may say that a number of brokers have indicated that they would be willing to cooperate in such a compromise arrangement, marketing these subscriptions without any desire to obtain a commission at the time of selling the subscription. They would be willing to wait to collect their commission at the time premium was paid.

How many would, I could not say, but there is a possibility that a great many agents and brokers would be willing to do that.

Mr. MCKINNON. Of course, we realize from the War Damage Corporation last time that in the 2 years from 1944 to 1946, when there was a profit without any losses to speak of, that they continued to extend the insurance free of charge, so in view of what they have done in the past it gets to be primarily a question of whether you are going to get your cake before the meal or after the meal.

Mr. COLE. My questions were covered.

The CHAIRMAN. That is all. Stand aside.

The CLERK. Milton Wertz, legislative attorney, Comptroller General's Office, accompanied by C. A. Hurley of the General Accounting Office.

STATEMENT OF MILTON WERTZ, LEGISLATIVE ATTORNEY, COMPTROLLER GENERAL'S OFFICE, ACCOMPANIED BY C. A HURLEY, ASSISTANT DIRECTOR, CORPORATE AUDITS DIVISION, GENERAL ACCOUNTING OFFICE

Mr. WERTZ. I am Milton Wertz, legislative attorney from the Comptroller General's office, General Accounting Office, and this is Mr. Curtis Hurley, assistant auditor, General Accounting Office.

Our only purpose in being here is to urge certain amendments to the legislation under consideration whereby the cost of the program to the Government will be more nearly reflected in any balance sheet that is prepared in the future by the Corporation.

We think this is particularly pertinent in a corporation such as will probably emerge from this legislation, because there is a possibility of some form of profit or loss sharing.

The bill in which we believe the amendments would be most pertinent is the bill known as H. R. 9802, although the amendments could be worked into any of the other bills and members of the Comptroller General's staff would be willing to work with the staff of the committee at any time to work out any details.

The first amendment which we would propose would be an amendment on page 2, line 6, right after the word "Act," insert:

The Corporation shall pay interest to the Reconstruction Finance Corporation on such funds, including those realized from capital stock, at a rate commensurate with that charged on borrowings to the Reconstruction Finance Corporation by the Treasury.

The other amendment which we would propose and which also could work into other legislation, but for the purposes of submitting them we have labeled as "Section 6 to H. R. 9802", would read as follows

Mr. BUCHANAN. That is not reflected in the act of 1942?
Mr. WERTZ. No, sir; it was not.

Mr. WOLCOTT. That would be necessary only on the difference between the amount collected previously, the amount which the RFC would have to make available up to a certain period?

Mr. WERTZ. It would depend on how much money the War Damage Corporation obtained from the RFC. I understand in the last operation, whereas they had authority to draw $100,000,000, they actually only drew $1,000,000.

Mr. WOLCOTT. I am correct then in the statement, as I understand it, that it would only be on the amount which would be the difference between the premiums collected and the amount which the RFC would have to make available to War Damage Corporation, which could not exceed $1,000,000,000.

Mr. WERTZ. I believe that is correct, sir.

Mr. WOLCOTT. It would be a total of $1,000,000,000, less the amount of collected premiums?

Mr. WERTZ. Yes. The proposed section 6 would be:

The Corporation shall contribute to the Civil Service Retirement and Disability Fund, on the basis of annual billings as determined by the Civil Service Commission, for the Government's share of the cost of the Civil Service Retirement System applicable to the Corporation's employees. The Corporation shall also contribute to the Employees' Compensation Fund, on the basis of annual billings as determined by the Federal Security Administrator, for the benefit payments made from such fund on account of the Corporation's employees. The annual billings shall also include a statement of the fair portion of the cost of the administration of the respective funds, which shall be paid by the Corporation into the Treasury as miscellaneous receipts.

Mr. WOLCOTT. That would be contingent, of course, upon the agents and employees of the War Damage Corporation being appointed under the Classification Act and under the Civil Service Act; would it not?

(The scheduled witness, not appearing on Monday, December 11, 1950, this concluded open hearings of the committee on this subject.)

Mr. WERTZ. Yes; it would, to a great extent, and also as to whether or not they actually had any employees in the War Damage Corporation. I understand that there is some consideration being given to having most of the employees actually in RFC, and the War Damage Corporation only being billed for the cost of the services performed.

Mr. WOLCOTT. On page 5 of H. R. 9802, the Corporation is authorized to appoint such officers, agents, attorneys, and employees as may be necessary. The question was raised yesterday, I believe, that according to that language they would not have to appoint them according to the Classification Act or the civil-service laws. I think they should be appointed under the Classification Act and the civil-service laws and if they are not, I think, the amendment should be written in.

Mr. WERTZ. I think it would be more appropriate, but I think under the language as it reads it is possible that they are subject to the Classification Act of 1949, which was specifically made applicable to Government corporations. There is some question as to whether or not this is a wholly owned Government corporation. I understand it started out as a private corporation.

Mr. WOLCOTT. There is some question as to whether that general act applies

Mr. WERTZ. There is some question. It would be better to make it clear.

The CHAIRMAN. Any further questions?

If not, you may stand aside.

Mr. WERTZ. Thank you, sir.

The CHAIRMAN. These are all the witnesses we have this morning. There is one other witness, but we will adjourn to meet Monday at 10 o'clock and we will hear that witness and then we will meet in executive session to report this bill out.

(The following communications were submitted by Hon. A. J. Multer, of New York:)

Hon. ABRAHAM J. MULTER,
House of Representatives,

Washington, D. C.

BROOKLYN CHAMBER OF COMMERCE,
Brooklyn 2, N. Y., December 1, 1950.

DEAR CONGRESSMAN MULTER: The Brooklyn Chamber of Commerce urges that war damage insurance be reinstated at the earliest possible date. It is our belief that enabling legislation should be enacted to create within some existing Government agency & War Damage Corporation. Existing Government facilities should be used and insurance provided as was done by the War Damage Corporation in World War II. The plan should be, we believe, on a voluntary basis. In bringing this matter to your attention, we trust we can enlist your support of such legislation.

Yours very truly,

HOWARD A. SWAIN, Secretary, General Insurance Council.

CHAMBER OF COMMERCE OF THE STATE OF NEW YORK,
New York 5, N. Y., December 7, 1950.

To the COMMITTEE ON BANKING AND CURRENCY OF THE HOUSE OF REPRESENT-
ATIVES:

We understand that hearings are now under way on legislation which would reactivate the War Damage Corporation.

Members of our chamber have requested us to convey to you their concern that serious financial losses might occur if we should be unfortunate enough to be visited by an enemy causing property loss resulting from war risks.

We respectfully suggest that the War Damage Corporation be reactivated in order that it may act promptly in case of need; and we further suggest that its operations, if and when resumed, be patterned on those used in the last war.

In view of the undoubted importance of New York City as a prime military target, we are sure that you fully realize our feelings that prompt this communication.

Respectfully,

ROBERT L. HAMILL,

President, Chamber of Commerce of the State of New York. Whereupon, at 11:40 a. m. the committee adjourned, to reconvene at 10 a. m. Monday, December 11, 1950, in executive session.