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and should have. This has become one of I was working for congressional approval for You of the oil industry are partners with the great forgotten issues of 1963. It cannot the bill that would make Alaska the 49th the people of Alaska in developing the rich stay forgotten in 1964.

State. That headline, that news, did more oil treasures that lie beneath their land. to help our cause than all the rest of our It is easy to talk about economic developlobbying put together.

ment. But just what do we mean by the OIL FOR ALASKA'S ECONOMIC

It is correct to say that the Alaska petro. term?
WATERS

leum industry and the State of Alaska were In the first place, new industry means more Mr. BARTLETT. Mr. President, the born almost simultaneously. There is no jobs. It means more money to more in

dividuals and, consequently, greater opporNew York Times said last week that reason why we shouldn't remain members

of a close and happy family. "Alaska and the oil industry are showing

tunity to utilize their skills and training and

Someone once remarked that Alaska was energy here in Alaska. the mutual faithfulness of a devoted af

discovered and rediscovered many times More development means more revenue for fianced couple.” Gov. William Egan, of over.

both State and local government. More Alaska, said last week:

When I was born, the great gold stampede revenue to make those public improvements You of the oil industry are partners with era was drawing to a close. That intensive so necessary to our way of life: the constructhe people of Alaska in developing the rich mass movement undertaken by foot and by tion of schools, roads, airports, boat harbors, oil treasures that lie beneath their land. river boat was just about spent. The big and the implementation of programs which

strikes had been made, many camps were no civilized community can do without. Mr. President, Alaska and oil are going worked out and the bulk of the stampeders Programs to protect health, welfare, property, places. were drifting away.

and personal rights. Programs to aid comOver 50 wells are now in production, Alaska's fisheries then for some years took

merce, assist labor. Programs to promote most of them in the Swanson River and the center of the stage in keeping alive the

additional economic growth. Soldatna fields on the Kenai Peninsula. spectacular Alaska story and in providing

A continuing debate on the national level,

a debate which becomes particularly intense They are producing 25,000 barrels a day. our basic income and economy. The reserves on Kenai are estimated at

With the war, defense construction inter

when it appears that our tax structure is vened, and 100 million barrels.

Alaska's economy has been

about to be changed, is whether the Nation largely geared to defense ever since-a conLast month, Shell Oil, California

benefits from the oil depletion allowance. dition which, while not unique to Alaska is

Many sincere people argue forcefully and Standard Oil, and Richfield made a of considerable concern.

with some merit that the depletion allowmajor strike at their Middle Ground And now, after many discoveries and re

ance is simply a gift from all the people of Shoal No. 1 well, in the middle of Cook discoveries of Alaska-based on her re

the United States to the oil industry. In Inlet, south of Anchorage. Plans are sources and geographic position—we may

some ways this is true.

But in Alaska we can see the dramatic reunderway to construct a $512 million safely conclude that this state is entering

sults that can occur when the industry takes drilling platform in the inlet from which another great, dramatic era-that of oil.

Back in 1957, when statehood appeared purpose-to seek out, to gamble, on efforts

that gift and utilizes it for its intended 20 or more wells will be drilled. The richness of the strike, the size of the po

so close and the initial discovery applied that may pay off in new discoveries. tential can be seen in the great persethe clincher, there were still serious doubts

That gamble is paying off in Alaska and entertained as to whether Alaska could susverence of the companies at work. Cook

many in this room who know the oil industry tain itself, despite the discovery of oil. Inlet has over a 30-foot tide, a current There was great conjecture on whether pro

and its products far, far better than I, be

lieve that we have not seen anything yet. over 6 knots, strong winds, freezing rains, duction would occur in our time, on whether

You prove that by your continuing presence and thick winter ice. Drilling here is the industry would cap or pump. There was

and perseverance. the most difficult drilling job ever under- anxiety that oil might simply be left in the

The result has been that the United States taken anywhere in the world. ground in known, convenient reservoired

is stronger by gaining on that additional 300 Many miles to the north, deep within status until world needs called for Alaska

billion barrel reserve it will need by the end

of the century. It is stronger by having one the Arctic Circle, on the far side of the production in the distant future.

Today there are few doubters as to Brooks Mountain range, many oil firms whether Alaska will become an important

of its States-Alaska-better able to develop

into a strong partner in the Union of States, are doing exploratory work. The prom- oil State or whether it can sustain its own It is stronger through the creation of more ise here is immense. economy.

jobs and more business. Said the New York Times:

I noticed the other day an article in a In so many ways, the oil industry and Some petroleum men dare hope that it national magazine in which the author ex

Alaska have developed a partnership. The may rival vast reserves of the Middle East.

pressed the view that even though the oil industry, by its very nature, is, and must con

industry has invested $300 million in Alaska tinue to be, a pioneering industry, always The importance of oil to the future of in recent years it did not expect to reap seeking out new frontiers, always risking Alaska and the economic well-being of substantial returns or discover any great existing capital for future gains. Alaska, her people cannot be overestimated. new reserves.

itself a frontier, shares similar aspirations This potential, this importance, was If this is true, on behalf of all Alaskans and a similar spirit of adventure and optiwell set forth by Governor Egan last I would like to thank the industry for its mism. week in his speech at Anchorage, “Salute generous charitable contribution to our One expression of justified optimism I ran to Alaska Oil Industry.” I ask unaniState.

across recently was a statement made by

But of course such a statement is not Frank Phillips, founder of Phillips Petromous consent that the speech and a most interesting article by Lawrence E. only untrue; it is ridiculous.

leum, back at the turn of the century. After the recent inlet discovery a spokes

He said at that time, “I think people are Davies, from the October 31 issue of

man for the Shell Oil Co. told the New York going to buy quite a passel of these gasoline the New York Times, may be made a Times that it was like a “gift from heaven” buggies and they need gasoline to make them part of the RECORD at this point.

to develop such a large field so close to the go. It may be that this thing has a future.” There being no objection, the speech population centers of the west coast.

Sixty years later, the future of petroleum and article were ordered to be printed terested in the possibilities of the Arctic slope

The president of a large oil company in

as an integral part of our way of life is more

secure than ever. in the RECORD, as follows: wrote me recently expressing the view that

Many of you here tonight represent comADDRESS BY GOV. WILLIAM A. EGAN, SALUTE the slope represents, in his words, "perhaps panies that have yet to experience the thrill TO ALASKA OIL INDUSTRY, ANCHORAGE, OC the greatest petroleum potential of any geo

of an Alaska discovery. You can be sure TOBER 29, 1963 logical province within the United States."

that I and all Alaskans hope that day is not Mr. Chairman, ladies and gentlemen, it These certainly are strange comments if long coming and that it is repeated many may be my imagination, but it seems that we are to believe the negative view expressed

times over. As I said earlier, I don't mind more and more lately I am asked to speak in that national magazine.

speaking once a week; once a day, if reat an event commemorating some new de

In addition to oil's contribution to Alaska quired, to commemorate some new advance velopment in the Alaska petroleum industry. in the way of hard cash, it has served to set in the Alaska petroleum industry. If this is the case, I look forward to the time ablaze the spirit and hopes of all Alaskans

It is probably true that an oil man is welthat I am asked to speak once a week in for the development of their land. The in

come wherever he goes in this world. Have every community in Alaska. dustry's very presence here has been a tre

no doubt about it, you are welcome here. There is never any reason for the Gover- mendous psychological boost to all who are nor of Alaska to be at a loss for words at working toward Alaska's prosperous future. such occasions. So much can be said for It has been a beacon for all of us who have

(From the New York Times, Oct. 31, 1963] what oil has meant to Alaska since that never lost faith that Alaska's economy is

SEARCH FOR OIL IS ACCELERATED IN ALASKA great day in 1957 when newspapers shouted destined to be one of the richest and strongest

(By Lawrence E. Davies) the news of the first Alaska oil strike. in the Nation, an economy based on the valu ANCHORAGE, ALASKA.—Alaska and the oil

I was in Washington, D.C., at the time, able resources that lie above and below the industry are showing the mutual faithfulwhere, together with many other Alaskans, ground within our borders.

ness of a devoted affianced couple.

Petroleum concerns have courted the 49th He noted that the oil demands of six West- POLITICALLY INSPIRED CIVIL State with lavish expenditures for explora- ern States, including California, totaled about RIGHTS BILL AND FREEDOM OF tion, drilling, and production. Alaska has 1 million barrels a day, with the figure risbeen liberal in its incentive royalty rates ing to 1,800,000 barrels by 1975. More than

ASSOCIATION for a 10-year development period following 1,200,000 barrels a day of that might have Mr. TALMADGE. Mr. President, the the drilling of discovery wells. to be imported.

so-called civil rights bill now pending Companies have poured in money at a Neither exploration nor drilling has been in the other body is said to be a comrate undreamed of when the first strike was confined to the Kenai Peninsula and Cook made 6 years ago by the Richfield Oil Corp. Inlet. Charles F. Herbert, Deputy Commis

promise measure which is supposed to on Kenai Peninsula below Anchorage. sioner of Natural Resources, said at Juneau

have been watered down from its origDiscovery last month of a new field 60 that Richfield abandoned a hole on October

inal version. However, compromise or miles southwest of here in Cook Inlet by the 17 in the Wide Bay area of the Alaska Penin- not, it still treads upon the rights of Shell Oil Co. last month has spurred excite sula after failing to strike oil at 12,560 feet. the individual and of the private propment among Alaska officials, residents and This was not far from where Humble Oil hit erty owner to pick his own associates. oil explorers. And the prospect of finding a dry hole a few years ago after an expend. Moreover, in many respects, the bill viooil on the Arctic slope 1,000 miles above iture of some $7 to $8 million. The Gulf lates the Constitution and would be a these south-central fields, in quantities that Oil Corp., he said, was down to just less than

further encroachment upon the rights some petroleum men dare hope may rival 11,000 feet in a Sandy River site in the vast reserves of the Middle East, has added to Aleutians, with no report of oil to date, but

of the individual. the determination of competing companies no trouble either.

There has appeared recently two exto continue to sink millions into Alaska ex The Pan-American, Phillips, Skelly, and cellent editorials discussing this so-called ploration.

Sinclair Oil Cos. have been working to civil rights legislation. The Atlanta To date, Alaskan official estimate, the oil gether in the Cook Inlet where they recently Journal declared that it is politically incompanies have spent $280 million in the stopped a long-burning fire at an estimated

spired and will infringe upon more rights 49th State for leases, exploration, drilling, cost of $1 to $8 million. and production. The State government's Excited interest now is riveted on the

than it purports to insure. cash return has been some $65 million, in- Arctic slope where the Navy's wartime ex David Lawrence, the editor of U.S. cluding some $54 million in bonus payments ploration led to discovery of an oil field at News & World Report, pointed out that from the industry for the right to drill wild- Umiat, with estimated reserves up to 125 human relations is a matter of the mind cat wells, several of which have been worth- million barrels.

and heart and not the subject for legisless dry holes.

lation. He correctly declares that freeGov. William A. Egan declared here last

dom of association is essential to a wellnight that oil and gas would be the State's UNWARRANTED PAY RAISE

ordered society. "peak revenue producers.” He added: “What we've seen now is only a drop in Mr. TALMADGE. Mr. President, I am

Mr. President, I ask unanimous conthe bucket.”

opposed to the proposed legislation to in- sent that these editorials be printed in Governor Egan and Samuel F. Bowlby, crease the salaries of the Members of the RECORD. vice president of Shell Oil in charge of ex- Congress, the Cabinet, the Supreme

There being no objection, the ediploration and production in the western Court Justices, and other high-ranking torials were ordered to be printed in States, spoke here at the Anchorage West- Federal officials. ward Hotel at a dinner sponsored by the

the RECORD, as follows:

I do not subscribe to the theory that chamber of commerce. It was Alaska's “sa

[From U.S. News & World Report, Nov. 4, lute to the oil industry.” unless the pay is higher, we will be un

1963) Mr. Bowlby, as the industry spokesman, able to get qualified men to fill these po

SELECTION OR DISCRIMINATION? used restrained language but confessed he sitions. I know of no one who has turned would not be here if he did not believe down down a Federal appointment because the

(By David Lawrence) Alaska would really have a major oil indus pay was not high enough. Nor do I know Assuming the passage by Congress of a bill try-"one that can recover its capital invest- of anyone who would not run for Con- establishing the equal rights of citizens ment and eventually earn a profit.” So far production is confined to the Swan

gress because of an allegedly inadequate in relation to businesses of a public nature, son River and the Soldotna Fields on the

who is to decide when customers or emsalary.

ployees are fairly selected and when they are Kenai Peninsula, where the Standard Oil

I cannot support this bill. Instead of

discriminated against? Co. of California now has completed devel- proposing more gigantic Federal spend

The answer usually given is that this will opment as the operator for a combine in- ing, we should be taking positive steps to be left to the courts. cluding Richfield and other companies. achieve a balanced budget and restore Shall we see lawsuits, therefore every time Some 50 wells are in production, and the fiscal responsibility to the Government. a motel owner turns away a Negro appliState Department of Natural Resources,

Mr. President, there appeared in the cant for a room with the comment that the headed by Phil R. Holdsworth, put output at October 31 issue of the Atlanta Journal

place is "all filled up” or without giving some 25,000 barrels a day. The remaining

any reason? Shall employers and their perreserves are estimated at 100 million barrels, a splendid editorial in opposition to the

sonnel staffs be dragged into court and crossmaking it a major field. pay bill, and I ask unanimous consent

examined as to why they hire one person as In the Cook Inlet venture, which Mr. that it be printed in the RECORD.

against another? Bowlby pictured as offering the most diffi There being no objection, the editorial Thirty States have laws barring discrimina. cult drilling conditions in the world, Shell was ordered to be printed in the RECORD, tion in public accommodations. But has teamed up with California Standard and as follows:

enforcement is difficult, and litigation is Richfield.

often expensive for all concerned. Six-knot currents, 30-foot tides and thick [From the Atlanta Journal, Oct. 31, 1963)

There is actually nothing in the comwinter ice are major problems, but Mr. Bowl

UNSCRUPULOUS PAY BILL

merce clause or the 14th amendment to by said a drilling platform would be built The House of Representatives is in the po the Constitution which empowers Congress next year at a cost of $5,500,000 from which sition of making a big grab on the Treasury to pass any law prescribing who shall or shall 20 or more wells could be drilled direction for the benefit of its Members with the bill not be admitted to restaurants or hotels ally to selected targets in the 550-foot-thick for raising Government salaries.

or offered employment in businesses of any oil formation.

The bill, which has been reported out of kind. But so strong is the pressure from the "Building a platform in ice," he told a

committee, provides for adding $10,000 a year political groups which see such legislation news conference, “has never been done be to the current figure of $22,500 for Members as a vote-getting device that Congress is fore. It is a new caper, but our intention of Congress.

being pushed today into passing the measure is to work on a round-the-clock basis all year It also would raise the pay of 1.8 million anyhow. and we must stock the platform for the Government workers, with husky increases Will it really help the cause of those who period when ice is present to a depth of 7 going to Supreme Court Judges, Cabinet have been discriminated against? Thus far, to 10 feet. As many platforms will be built members, the Vice President, Speaker of the the public agitation has influenced some peras are required.” House and agency heads.

sons who have been indifferent to acts of Mr. Bowlby said that, once production got The bill, especially the part which would discrimination to take another look at their underway, a pipeline probably would be up congressional salaries, is in direct con practices. But the picketing and the built to carry the oil to shore "in reasonable tradiction to the promise by the House to "marches” also have stirred up deep resentproximity to Standard's refinery” near Kenai. hold down spending, a promise it made when ments. The advocates of strong civil rights “Our best estimates,” he said in his speech, it passed the tax-cut bill.

laws insist that the agitation process may “indicate it will be 1966 before we transport The tax cut would bring about a $11 bil- be painful but that prohibitory laws, inany oil to market from Middle Ground Shoal lion deficit.

stead of mere court orders, will be helpful (site of the new discovery well)—7 years and Representative EUGENE SILER, of Kentucky, in the long run to their cause. more than $15 million after we've started described the bill well. He said it is "un This, however, is a shortsighted view. activity in this one area of Cook Inlet.” scrupulous and untimely."

It's more of a rationalization than a realistic

examination of past experience with social It was suspected the President was more in your debt.” Therefore, the explanation problems.

interested in reelection than the plight of supplied by this exchange, the one the Strictly on principle, there is theoretically any minority.

President said he "would like to see" deemed no reason why a man should be denied a job The hot summer, the long, dry fall, and sufficient, stands in the official record merely by reason of his color if he is as capable debate on this bill have justified this point as this: as a white applicant, or why he should be of view.

Secretary Korth resigned only because the denied hotel accommodations solely because The bill finally, at long last, has come pressure of "private affairs' overcame his of race. But this theory runs up against out of congressional committee. But its "dedicated desire" to continue to "support" another basic principle—the right of a busi- passage through the House and Senate in the “leadership of our national defense" by nessman to choose his customers or his em time for the elections is by no means assured. the President and Secretary McNamara. ployees on whatever basis he wishes.

More time may prove this bill a boo Mr. Kennedy's estimate of Korth's service The 30 States which have anti-discrimina merang. Conservatives disapprove of it as was high and without qualification. tion laws on their statute books have not too much and the liberals think it is too If the press had accommodated the Presibeen able to wipe out discrimination, and little. The leaders of the very group it is dent's stated preference, and let it go at neither will the Federal Government be able

trying to please, the Negro, are divided over it. that, the subject would not have been reto do it. This was the experience with the As of now the cause of orderly progress vived by a question later in the news conconstitutional amendment prohibiting the in racial relations has been hurt rather than ference. manufacture and sale of intoxicating liquors. helped by the introduction of the bill.

Perhaps the detailed nature of this second National prohibition simply couldn't be en

As of now the set of attitudes which may inquiry persuaded Mr. Kennedy he must go forced by the Federal law officers or courts result in a white bloc vote have been hard beyond the official record he previously had as against local sentiment. The citizen ened by this action of the administration,

said he would "like” to have accepted as an couldn't be compelled to drink only what the rather than softened.

adequate explanation. However, go beyond Government told him he could drink-non

As of now, those heroes, the moderates it he did, condoning in words a breach of the alcoholic beverages. This, too, was publicized of good will of both races, are out of fashion ethics to which he pledged his administraby churchmen and lawyers as a "moral issue." as a result of this bill.

tion in the campaign of 1960 that he had After 13 years—during which law enforce

As of now the political wisdom and gen

already redeemed in action. ment generally broke down-the Constitueral sophistication of the White House is

SPEEDY RESIGNATION tion was amended to permit the States to

suspect. handle the problem as best they could.

As soon as he learned of Korth's lapses As of now the whole thing looks like a The Nation is going through another such

from this code of official ethics, the President terrible mistake, harming those it was supcrisis, and it may mean years of strain in posed to help and helping no one at all.

conveyed the word to his Navy Secretary that law enforcement as the Federal Government

immediate resignation was in order. In so tries to deal with the mess that is bound to

doing, Mr. Kennedy acted with firmness and be created.

promptness in highly favorable contrast to

THE KORTH CASE Many companies, for instance, which have

the performances of two previous adminisalways hired some Negroes complain that in Mr. WILLIAMS of Delaware. Mr.

trations in comparable circumstances. But certain categories they cannot get competent President, in the November 3 issue of

by his words at the press conference he applicants. Still they are accused of disthe New York Times there appeared a

strangely diluted his very creditable deed. crimination and threatened with picketing.

The amount of the subscription to TFX Agitation in a worthy cause does draw atvery timely article entitled “The Korth

loan to General Dynamics by the bank from tention to neglected fields of legislation. Case.” The article was written by Ar- which Korth had come to public office, said But, to be successful, the measures must thur Krock; and in it he raises some very the President, had, after all, “been a relagain the compliance of the majority of citi- pertinent points concerning the question tively small amount of money as bank loans zens—not imposed by coercion but won by of ethics in Government. I ask unani- go;” so there was “nothing improper” in the persuasion.

mous consent to have the article printed Navy Secretary's participation in the deci“Freedom of association” comes when in

at this point in the RECORD. dividuals win their way by their own quali

namics. And, as for Korth's letters on Navy

There being no objection, the article stationery, including an offer to the bank to ties of mind and their capacity to mingle congenially with others on a basis of mutual

was ordered to be printed in the RECORD, include some of its "best customers * respect. There are plenty of whites who as follows:

a little party" on the Secretary's official yacht aren't hired and who are turned away be- [From the New York Times, Nov. 3, 1963]

Sequoia, the President dismissed them by cause they do not seem personally to fit into THE KORTH CASE-KENNEDY'S EXPLANATION

saying: "This (TFX affair) has nothing to do a particular job. There are plenty of whites

OF THE NAVY SECRETARY'S RESIGNATION

with any opinion I may have about whether who are not invited to other people's homes

EXAMINED

Mr. Korth might have written more letters or into clubs because today, as always, hu

and been busier than he should have been

(By Arthur Krock) man beings select their own friends and as

in one way or another." sociates. Sometimes the process of selection WASHINGTON.-President Kennedy ex

WHITE HOUSE ATTITUDE involves an injustice or unfairness. But pressed a desire common to occupants of his "freedom of association" is essential to a well

office whom a subordinate has embarrassed That part of Mr. Kennedy's news confer

when asked at his news conference if he ence comments furnishes only another illusordered society and will not be repealed by a

tration that the stern ethical attitude of generalized demand for equal rights to jobs thought certain letters written by Navy Secor in public accommodation.

retary Korth made the resignation of this presidential candidates is prone to undergo a The problem of the future is to preserve the official "advisable" and if the President had softening process when they enter the White

House. right of selection while at the same time all

requested it. "I think,” he replied, "the citizens are urged to let their conscience letters which Mr. Korth and I exchanged

The admirable quality in President Truguide them away from acts of racial dis

are the explain the situation as I would man that evoked greater intensity in his crimination in every field. like to see it explained.”

friendship when his friends got themselves

But whether or not Mr. Kennedy's choice in trouble was supplemented by his fierce The solution to present-day controversies on civil rights will not come through Fed

of words was inadvertent, no predecessor protective instinct for his party when some eral laws as court orders. It can come only side of the proposition that the press should has arrayed himself with such candor on the of these friends got his administration in

trouble too. And President Eisenhower long through the education of the citizens generally as they are assured of the right of selecnot explore the background of official ex and stubbornly justified acceptance of gifts

by Sherman Adams that engendered the tion, irrespective of color, and as they come planations of events in Government that, on to recognize the obligations and responsibili

their face and in the attendant circum public disapproval which finally persuaded ties which go with that same right of selec

stances, are plainly a coverup of the actual Adams he was seriously injuring the Presi

situation. For the letters the President re dent by retaining his most influential White tion.

ferred to (which were not, of course, the House post.

letters his questioner described) are excel On June 18, 1959, 3 months before Adams' [From the Atlanta Journal]

lent examples of deliberate concealment. resignation, President Eisenhower gave a A TRAGEDY OF ERRORS

Secretary Korth's October 11 letter of news conference his views on the ethical

resignation to the President gave as his only issue involved, of which the following are Back before the real hot weather set in, reason the need “to return to private busi- the pertinent excerpts: the Kennedy administration proposed a ness to attend to my pressing private af “A gift is not necessarily a bribe. One is broad civil rights bill. The country was told

In his prompt reply (October 12) evil, the other is a tangible expression of its passage would be a pledge of full citizen- accepting the resignation, Mr. Kennedy made friendship. * * * Anyone who knows Shership to the Negro.

no comment on the reason for it given by man Adams has never had any doubt of his Inasmuch as minority groups already have Korth, confining his composition to gener personal integrity and honesty. * * * But such pledges under the law, there were some, ousmand deserved-praise of the Secretary's * * * in not being sufficiently alert in makincluding the Journal, who analyzed the "advancement of national security inter- ing certain that the gifts of which he was bill as political.

ests,” and said these had put "the Nation a recipient could be * * * misinterpreted

* in

as attempts to influence his political sumer in the dark about interest rates actions * * * to that extent he was

and finance charges. It exposes the kick‘imprudent.' * * * Personally, I respect him back racket that many lenders and durbecause of his personal and official integrity. able goods dealers engage in to gouge I need him.”

the consumer. ETHICAL CLEARANCE

I commend the Reader's Digest for The sponsors of the "shakedowns" for presentation portraits to judges and cam

printing this report to consumers. I feel paign funds via testimonial dinners, etc., confident that millions of consumers will that have attained a peak of frequency in now use credit more intelligently, and I Washington ask no better ethical clearance am sure that many will be saved from than this.

financial difficulties resulting from credAt Wittenberg College, October 17, 1960, it gouging. Presidential candidate Kennedy promised that if elected he would impose a single, credit abuses will galvanize public sup

Moreover, I hope that this exposé of comprehensive code on conflicts of interest *** drawing a clearer line between pro- port for the truth-in-lending bill so that priety and impropriety * * * protecting the

we will be able to overcome the powerful public against the unethical behavior. * lending lobby that is so bitterly opposing All America seeks a Government which no any legislation to require the full disman holds to his own interest *

* The

closure of consumer credit costs. next President must set the moral tone, and

Finally, I hope that the screams of anI refer not only to his language.”

This was the part of the pledge which Mr. guish from the high rate lending fraterKennedy failed to serve by excusing in words nity which probably will be uttered, will the official actions he had by deed certified not deter Reader's Digest from printing as inexcusable.

other equally informative and educa-
tional reports to consumers.

Mr. President, I ask unanimous con“WATCH THOSE INTEREST RATES,” sent that the article from the November READER'S DIGEST WARNS

1963 issue of the Reader's Digest magaMr. DOUGLAS. Mr. President, the zine entitled “Watch Those Interest most recent—November 1963—issue of Rates” be printed in its entirely at this Reader's Digest contains an excellent point in the RECORD. report to consumers entitled "Watch There being no objection, the article Those Interest Rates."

was ordered to be printed in the RECORD, I certainly agree.

as follows: The extensive hearings held by the [From Reader's Digest, November 1963] Production and Stabilization Subcom- WHEN YOU BORROW, WHEN YOU BUYmittee of the Senate Banking and Cur

WATCH THOSE INTEREST RATES rency Committee on the truth-in-lend

(By Irwin Ross) ing bill have revealed an astounding When you buy a suit of clothes or a movie range of abuses in the area of consumer ticket, you know exactly what the price is. credit. One of the primary problems Not so when you "buy" money. The cost which the truth-in-lending bill would of consumer credit is usually disguised, and correct is that consumers are not aware

the borrower will often pay, unwittingly, a of what credit really costs. The Reader's staggering rate of interest, as these citizens

: Digest warns:

A Federal employee in New Mexico bought When you buy a suit of clothes or a movie a television set for $285.55. When he asked, ticket, you know exactly what the price is. he was cheerfully told he could pay for it Not so when you “buy” money. The cost of at the rate of “about $14 per month.” Since consumer credit is usually disguised, and the not a word was said about interest, credit or borrower will often pay, unwittingly, a stag- finance charges, he sssumed the installment gering rate of interest.

arrangement was simply a courtesy extend

ed by the dealer. Over the course of 10 The article presents some typical case

months he paid $147.30. Only then, looking histories taken from our truth-in-lend- at the paper he'd signed, did he discover ing hearings which dramatically illus- that he still owed $206.22—so he had been trate the difficulties that the average charged $67.97 to finance the purchase. The consumer has in trying to use credit in annual interest rate came to more than 33 telligently when the costs of credit are percent—a rate which, if indulged in freeither hidden or understated. I com

quently, would bankrupt him. pletely agree with the Reader's Digest worth of household furniture, for which he

A mechanic in Texas bought $1,812.80 that

made a down payment of $261.80, and conThese borrowers, like millions of others, tracted to pay 36 monthly installments of were victims of a credit system that is a $56.34 each. Only after he was unable to model of contrived confusion and some meet all his obligations did he stop to figure times deception. Enormous sums are in out that the furniture was costing him volved. Consumer debt last year amounted $477.24 in finance charges a true annual to about $63 billion; $13 out of every $100 rate of 19.4 percent. in after-tax personal income went to pay A clerk-typist in Washington, D.C., in installment loans. How much of that outlay need of money because of a family illness, represented overcharges is anyone's guess. borrowed $1,000 from a bank. Her other It is particularly appropriate that this

debts made it difficult to repay. So, just to

meet installments on the loan, she obtained warning on credit costs should be issued just before the Christmas buying season

another loan-thus paying extra interest on

money to pay interest. In a few months, in when the consumer's resistance is prob

a series of Peter-to-Paul operations, she endably at the lowest ebb. I urge everyone

ed up with three bank loans totaling $2,000, who is interested in the cost of credit to

a finance company loan of $800, and some read this article. It describes the vari- $800 in other obligations. Her local credit ous tricks and gimmicks that are used union, to which she took her troubles, by lenders and sellers to keep the con- startled her by calculating that she was pay

CIX1336

ing credit charges at the rate of well over 40 percent a year.

These borrowers, like millions of others, were victims of a credit system that is a model of contrived confusion-and sometimes deception. Enormous sums are involved. Consumer debt last year amounted to about $63 billion; $13 out of every $100 in after-tax personal income went to pay installment loans. How much of that outlay represented overcharges is anyone's guess.

It is plainly evident that any consumer seeking credit today needs a detective's persistence and a mathematician's skill to determine what he actually pays in interest. The traditional way of stating the cost of credit is in terms of the annual interest rate the custom in business and in home mortgages. In consumer credit, however, lenders frequently use slick techniques to make the cost of borrowing seem cheap. There are five main methods:

The add-on: A bank may offer a loan at the cost of, say, $6 per $100-adding the interest charge right away onto the principal, which is then repaid in 12 monthly installments. This sounds like 6 percent annual interest. Actually it is about 11.58. Because the borrower is steadily paying it off, the average amount of his loan over the course of the year is only about $50; yet he pays out a full $6 interest on $100.

The discount: In this case, the interest charge of $6 per $100 is deducted when the loan is made, so the borrower receives only $94. He's being charged $6 not on a full $100 but on only $94, in addition to paying interest on parts of the loan after they have been repaid. Thus he pays even a bit more for his money than the borrower who gets a comparable add-on charge.

Monthly rate: Small-loan companies often quote interest rates of 112 to 312 percent-per month. Such rates make borrowing sound very cheap. Customers forget that, while the rate is quoted by the month, the loan is usually for a year or more. To figure the true annual rate, multiply by 12; it will range from 18 percent to 42 percent.

Department stores levy a service charge of, say 112 percent per month on "revolving credit” charge accounts. "Service charge" sounds more trifling than "interest rate," and many customers have no idea that they are really paying 18-percent interest for the convenience of charging.

No interest rate quoted at all: Here the seller merely indicates the size of the downpayment and of the installments to be paid for 12, 24, or 30 months. The total credit cost, in a lump-sum figure, may or may not be mentioned in the contract.

Loading the contract: The credit charge is inflated by extras-investigation fees, processing charges, service charges, high premiums for insurance (even though the borrower may already have insurance that would cover the loan). Many of these fees are merely disguised interest charges.

By no means are all lenders out to fleece the consumer. Many avoid mention of annual interest rates because of the widespread public impression that more than 6 percent a year is usurious, a belief that traces back to medieval church doctrine. When home mortgage credit became widely available at the beginning of this century ethical lenders held to the historical fair rate of 6 percent. But as Edward Gudeman, former Under Secretary of Commerce, points out, “Under the conditions applying to a modern installment credit system, the idea of only a 6-percent credit charge is a myth, and the public should be aware of it. Consumers should know the true cost of credit."

For a $10,000 mortgage, 6-percent annual interest or less can be a reasonable limit because a building is offered as collateral, and because the loan is large in relation to

the bank's administrative costs. But in in- writing before the transaction is closed. Kuchel

Morton

Simpson stallment loans of only a few hundred dollars Thus, the customer can tell at a glance the

Lausche
Moss

Smathers
Long, Mo. Mundt

Smith exact cost of the credit he is buying. (often with no collateral), the expenses in

Long, La. Muskie

Sparkman volved in extending credit are relatively high. The Douglas bill does not regulate credit

Magnuson Nelson

Symington For one thing, the merchant must borrow his or outlaw any of the various ways credit is

Mansfield Neuberger Talmadge money from a bank, often paying 5 percent now priced. It is simply a full-disclosure McCarthy Pearson

Thurmond or more. Then he has the costs of credit in bill. Its effect will be that when a bank McClellan Pell

Tower

McGovern Proxmire vestigation, bookkeeping, billing; sometimes quotes a $6 per $100 discount rate, it will

Williams, N.J.

McIntyre
also have to inform the borrower that this
of dunning his customers or hiring a collec-

Randolph Williams, Del.
Mechem
Ribicoff

Yarborough tion agency; also, he has an occasional un is an annual rate of 11.58 percent. Simi

Metcalf

Robertson Young, N. Dak. collectible account. When all these expenses larly, a department store will have to state

Miller
Russell

Young, Ohio are taken into consideration, a charge of that its monthly service charge of 112 per Monroney Saltonstall 12 percent a year-or more-is by no means cent is the equivalent of an annual interest Morse

Scott unreasonable. The customer, however, has a rate of 18 percent.

Mr. HUMPHREY. right not to be kept in the dark; he should The bill has won the fervent support of

I announce that know what he is really paying. credit unions, savings and loan associations,

the Senator from Oklahoma [Mr. EDAutomobile, furniture, and home appliance consumer groups and trade unions. Oppo MONDSON), the Senator from Wyoming financing seem to provide particular pitfalls sition has come from retailers' associations, [Mr. McGEE], the Senator from Michifor the unwary. The finance company fur auto dealers, small-loan companies. The gan (Mr. McNAMARA), the Senator from nishes the dealer with several rate books, National Association of

of Mutual Savings Rhode Island (Mr. PASTORE), the Senawith ascending charges, the justification be Banks supports the bill, though the Ameri

tor from Mississippi [Mr. STENNIS), and ing that some customers are poorer risks can Bankers Association opposes it. Some

the Senator from Tennessee [Mr. WALthan others. However, in States where the opponents fear it would scare away customlaw is lax, unscrupulous dealers merely select

TERS] are absent on official business. ers. More likely, full disclosure would cause the highest rate the customer seems likely to

interest rates to become more competitive, I also announce that the Senator from pay. Later, part of the credit charge may be and to fall somewhat as customers shop California [Mr. ENGLE] is absent because kicked back by the finance company to the around.

of illness. dealer; the higher the rate, the bigger the

In the event that such full disclosure be

Mr. KUCHEL. I announce that the kickback. comes law, the public will have to overcome

Senators from Vermont (Mr. AIKEN and Testifying about this practice before a Sen

its unrealistic notion that 6 percent is the ate committee in 1960, John L. O'Brien, of the ceiling for a "fair" annual interest rate. On

Mr. PROUTY], the Senator from Utah Better Business Bureau of Greater St. Louis,

small loans, repaid in installments over a [Mr. BENNETT), and the Senator from produced a set of rate charts bearing the code long period of time, no bank, finance com New York (Mr. JAVITS] are absent on numbers 7–96, 7–150, 7–163. These figures pany or retail merchant can charge a true an official business. signified that the finance company retained nual rate of 6 percent and break even-let The Senator from Arizona (Mr. GOLD$7 per $100 loaned to the customer, and, de alone make a decent profit. In this area,

WATER] is necessarily absent. pending on which chart was used, kicked true interest rates of 9, 10, 12 percent and

The PRESIDING OFFICER. A quoback $96, $150, or $163 per $1,000 to the

even higher are by no means extortionate.
There are steps which the prudent bor-

rum is present. dealer.

The question is on Even banks have been known to kick back

rower can always take to protect himself. agreeing to the amendment offered by to dealers. Herbert E. Cheever, vice presi

He should read every contract carefully be the Senator from Louisiana (Mr. ELLENdent of the First National Bank of Brook

fore signing, and make his own calculation DER] to the Mansfield-Dirksen amendings, S. Dak., testified to a typical kickback

of credit charges. He can shop around for ments to the committee amendment, on

the best deal; comparisons will generally recase in which an automobile dealer sent to a bank a customer who needed a $1,200 loan. veal that banks or credit unions provide the

page 40, line 10, to strike out "$175,000,000" and insert in

thereof lowest credit rates. And he should always

lieu The bank charged the buyer $220 in finance fees over a 3-year period, and mailed the

remember that, in the fantasy world of credit “$100,000,000.” dealer a $44 check for bringing in the busi

advertising, the cheapest sounding deal can Mr. CHURCH. Mr. President, I besometimes be the most expensive.

lieve it is obvious that the foreign aid ness. The imprudent buyer may also be lured by

The PRESIDING OFFICER. Is there program is in far more serious trouble ads which offer "no downpayment.” And further morning business? If

than it has been in many years. The

not, he may find himself signing two loan agreements, one to provide the cash for the

reasons for the resistance to the program morning business is closed.

in Congress can be found in a careful normal downpayment and the other for the

examination of the debate which has balance of his debt. Both loans have to be

AMENDMENT OF FOREIGN ASSISTpaid off simultaneously, at rates that often

been occurring in the Senate during the

ANCE ACT OF 1961 run from 30 to 50 percent.

past few days. Once enmeshed in this kind of borrowing,

An excellent summation of those rea

The Senate resumed the consideration the customer often finds no cheap escape. of the bill, H.R. 7885, to amend further

sons, having to do primarily with MemSometimes, if he decides to pay off the loan the Foreign Assistance Act of 1961, as

bers of the Senate who have traditionbefore its term ends, he is faced with an excessive payoff rate designed to deter him amended, and for other purposes.

ally supported the foreign aid program, from doing it. Small loan companies, par

The PRESIDING OFFICER. The

but who are now taking part in the effort ticularly, try to keep the customer in debt. question is on agreeing to the Ellender

to modify it—to eliminate the indefenAs one outfit candidly explained in a staff amendment to the Mansfield-Dirksen

sible excesses which have become a part memorandum, "Keep in mind that when any amendments, as amended, to the com

of it, is contained in an article written customer settles his account in full and does mittee amendment in the nature of a

by Mr. Andrew Tully, which was pubnot refinance, we are in the same position as substitute.

lished in the Twin Falls Times-News, of a department store whose customer settles his bill and stops making purchases."

Mr. MANSFIELD. Mr. President, I my own State, on July 30, 1963.

I ask unanimous consent that the arMany borrowers are careless; they sign suggest the absence of a quorum. blank contracts, fail to ask the most ele The PRESIDING OFFICER. The

ticle may be printed at this point in the mentary questions, neglect to read the fine clerk will call the roll.

RECORD. print. Credit costs are quoted in so many The legislative clerk called the roll,

There being no objection, the article different ways, however, that even the pru

was ordered to be printed in the RECORD, dent have difficulty making realistic compariand the following Senators answered to

as follows: their names: sons. Who can easily tell whether it is

MODIFYING FOREIGN AID cheaper to take an add-on rate of $5 per

[No. 210 Leg.] $100 from a bank, or a 112 percent per month

(By Andrew Tully)
Allott
Clark

Hart rate from a small loan company, or a $300 Anderson Cooper

Hartke

WASHINGTON, October 30.-President Kendown, $40 a month deal from a furniture Bartlett

Cotton
Hayden

nedy's foriegn aid program is in trouble in dealer?

Bayh
Curtis
Hickenlooper

Congress because of a revolt by the very men
Beall
Senator PAUL H. DOUGLAS, of Illinois, has

Dirksen
Hill

who always have championed the concept,
Bibie
Dodd

Holland attempted to provide a standard method of Boggs

the liberals.

Dominick Hruska credit labeling to make price comparisons Brewster

Douglas
Humphrey

Because of this revolt, the President will meaningful, through a truth-in-lending bill. Burdick

Eastland Inouye

have to use all his influence and power of Cosponsored by 19 other Senators, the bill Byrd, Va. Ellender

Jackson

patronage to get as much as $3.5 billion for requires that lenders state finance charges

Byrd, W. Va. Ervin

Johnston

the program for fiscal 1964-a billion less Cannon in two different ways—in dollars and cents,

Fong

Jordan, N.C.
Fulbright

than he requested.
Carlson

The House already has

Jordan, Idaho and also as a simple annual rate. The in

Case
Gore
Keating

chopped a billion off the authorization bill, formation is to be given to customers in Church

Gruening Kennedy

and the program still has to go through the

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