WHY THE UNITED STATES-U.S.S.R. CONSULAR TREATY SHOULD BE REJECTED EXTENSION OF REMARKS OF HON. HAROLD R. COLLIER OF ILLINOIS IN THE HOUSE OF REPRESENTATIVES WEDNESDAY, FEBRUARY 2, 1966

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• Publication Date: February 9, 1966
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A668
CONGRESSIONAL RECORD -APPENDIX February '9, 1966
NATIONS GO OWN WAYS
The delay in Surveyor indicated how much
the space accomplishments or failures of each
of the space-faring powers influence the
other. There was talk of more international
cooperation, but each nation went its own
way.
There was vigorous display of one-up-man-
ship. No sooner had the Communications
Satellite Corp. orbited Early Bird to provide
a TV and telephone relay between the United
States and Europe than Russia orbited its
communications satellite.
They called it Molniya I (lightning). It
relayed color TV between Moscow and
Vladivostok.
After Cosmonaut Alexei Leonov made the
first space walk in March on the flight of
Voskhod 2, Astronaut Edward H. White II
took a longer walk on a longer tether during
the June flight of Gemini 4.
The U.S. Air Force fired its mighty booster,
Titan 3C with 2.5 millon. pounds of thrust.
The Russians fired one with an estimated
4.2 million pounds, lifting a 13-ton satelite,
Proton I.
PRESTIGE IN ORBITS
The race for whatever prestige space
prowess confers upon a people was close in
1965. The Russians sent Zond II to photo-
graph Mars but its electronics failed, They
made no significant advance in manned space
flight, except for the space walk,
With Geminis 5 and 7, the United States
soared ahead of the Russians in the manned
effort, chalking up new records in both man
hours and vehicle hours in orbital flight.
Ours was the first rendezvous between two
piloted space vehicles.
Meanwhile, when Cape Kennedy closed
down for Christmas, the first Apollo space-
ship (unmanned) was being readied for its
maiden voyage aboard a Saturn 1B in Jan-
uary. The Apollo program flight test pro-
gram begins in 1966, as Gemini ends.
By the end of 1965, we were starting the
last lap of the 9-year program to put men
on the moon. There was every indication
we would make the schedule unless the war
in Vietnam bogged it down.
Why the United States-U.S.S
Treaty Should Be Rejckte
EXTENSION OF REMARKS
OF
HON. HAROLD R. COLLIER
OF ILLINOIS
IN THE HOUSE OF REPRESENTATIVES
Wednesday, February 2, 1966
Mr. COLLIER. Mr. Speaker, Dr. Lev
E. Dobriansky, who is a professor of eco-
nomics at Georgetown University and
chairman of the National Captive Na-
tions Week Committee, has written a
scholarly article on the proposed consular
treaty between the United States and the
Union of Soviet Socialist Republics.
Under leave to extend my remarks, I
include a portion of the article, in which
Dr. Dobriansky discusses two reasons for
rejecting the treaty:
A PORTION OF AN ARTICLE BY DR. LEV E. Do-
BRIANSKY, PROFESSOR OF ECONOMICS,
GEORGETOWN UNIVERSITY
V. THE VERY DIFFERENT DIPLOMATIC IMMUNITY
The preceding three reasons for nonrati-
fication of the pact received far less atten-
tion last August than the next two. Yet in
the broader context of understanding the
contemporary struggle, its prime sources of
tension and long-run dangers to world peace,
they carry greater weight than the next two
objections, which by themselves, of course,
are adequate to justify nonratification. It
is noteworthy how much more adept and
knowledgeable the Chinese Reds are in uti-
lizing essential facts concerning the inner
Soviet Russian Empire, Soviet Russian im-
perio-colonialism, Moscow's russification
program, and the captive status of the non-
Russian nations in the U.S.S.R. than we
are. 23 Their ends are different, but they at
least do not ,accommodate the Russian to-
talitarians in their worst features.
Contrary to the baseless contention that
this consular convention is no different or is
even slightly different from other conven-
tions, the pact is very different not only in
its relation to our prime enemy in the cold
war but also in its incredible provision of
diplomatic immunity to consular personnel
for all crimes, including espionage.29 It is
sad enough that the treaty's assumptions
and contents seriously depreciate our gen-
eral political posture as a democratic free
world leader, but this provision is an open
invitation to Red subversion of our Nation.
Every other existing convention grants im-
munity only from punishment for misde-
meanors. The reader can now understand
why I entitled an article on this subject
"The Second Treaty of Moscow." The pact
was made to order-in Moscow. Even our
allies don't enjoy this unprecedented con-
sular privilege.
In view of the concentrated discussion on
this point last August, it is unnecessary to
belabor it further. Mr. Leonard C. Meeker,
the State Department's legal adviser, admit-
ted in unqualified terms that this immunity
from criminal jurisdiction "is not pleseht in
other Consular conventions to the same ex-
tent." 30 Mr. Meeker, who is under the
illusion that some "Soviet national" animal
exists, tried to moderate the immunity pro-
vision by pointing out that it "will extend
only to those consular officers and employees
who are agreed to by the two Governments." 31
As though in actual practice this would make
any significant difference.
- The views expressed by opponents to the
treaty in the Senate Foreign Relations Com-
mittee are quite firm on this immunity pro-
vision 90 Publicized discussion of the point
lgd many to the conclusion which one Sena-
t put in these words: "It is this last; section
United States. It is the last section that
clearly indicates that this convention was
negotiated by the Soviets, not as a bilateral
pact for improving Soviet-American relations,
but as a cold war maneuver to enhance and
expand the intelligence-gathering network of
the U.S.S.R." 13
Mr. Rusk and others argue that the treaty
would offer greater protection for Americans
touring and visiting in the U.S.S.R. This
protection argument, covering some 12,000
Americans annually, is supposed to counter-
balance the lapse in it as concerns the im-
munity provision. Much is made of the
notification and access provisions regarding
arrests, Actually, this so-called Russian con-
cession should have been demanded long ago
on the purely ambassadorial level, and should
be so demanded on the simple principle of
reciprocity. U.S.S.R. representatives and
tourists are accorded the privileges and bene-
fits of our democratic criminal code; pure
reciprocal relations would demand the same
for our people. To hook the notification and
access provisions as a notable Russian "con-
cession" to the consular treaty indicates that
our negotiators had already walked ;into the
beartrap. It is as much a concession as a
thief giving up stolen property.
VI. INTENSIFIED POLITICAL WARFARE 'IN THE
UNITED STATES
Espionage was the leading word for the
next popular objection to the treaty last
August. Our FBI Director, J. Edgar Hoover,
was quoted at length in support of this
criticism. In earlier testimony before the
House Appropriations Committee, Mr. Hoover
had emphasized that U.S.S.R. "consulates in
many parts of the country * * * will make
our work more difficult. A later state-
ment by him stressed the following: "One
Soviet intelligence officer in commenting on
the agreement spoke of the wonderful oppor-
tunity this presented his service and that
it would enable the Soviets to enhance their
intelligence operations." a,; So effective were
these points that the President subsequently
issued a directive to officials to support ad-
ministration policies, aiming it particularly
at Hoover.-0
There are several aspects to this sixth rea-
son for nonratification that need some clari-
fication: First, though public hearings were
barred, it obviously behooved the Foreign
Relations Committee to invite Mr. Hoover, as
another Government witness, to testify on
the pact. Surely he is far more qualified to
discuss the likely espionage effects of the
treaty than is Secretary Rusk. Second, it is
certainly no strain on one's imagination to
envisage the expanded opportunities for So-
viet Russian espionage with consulates rang-
ing cross-country from New York to Chicago
and San Francisco.
However, considering the huge spy appa-
ratus now maintained by Moscow in this
country, one can rationally allow for only
a relatively small increase in overall effective-
ness with the presence of consulates. The
economic law of diminishing returns applies
in this field as in others. Doubtless the
establishment of consulates would make
Hoover's work more difficult, but it is doubt-
ful that the condition as concerns espionage
activity would be unmanageable. Moreover,
as I argued elsewhere, spying is a two-way
street. On the other hand, since alternatives
for different diplomatic arrangements exist,
there is no reason whatsoever to accommo-
date the Russians in this risky respect.
Especially is this so when a broader view is
taken of Soviet Russian activity in this coun-
try. The problem entails more than just
espionage. It can best be described as one of
intensified political warfare, signs of which
have already appeared in civil rights riots,
campus agitation, peace demonstrations,
overt U.S.S.R. embassy propaganda on the
Watts riot,77 and a variety of actions striking
against civil and political authority. Stra-
tegically situated consulates would not only
be additional spy nests but also active
sources of conspiracy, propaganda, blackmail
and intimidation against those with relatives
in the Red Empire, and media for under-
mining ethnic and other anti-Communist
groups. With the type of immunity offered
them, they should make bold efforts along
these lines.
Mr. Rusk and others talk.glibly about our
"open society" and the espionage risks we
have to take. They fail to see the broader
problem involved here, with long-arm rami-
fications extending to our actions in Viet-
nam, the Dominican Republic, and almost
everywhere else. Regarding espionage sole-
ly, a more naive observation by the Sec-
retary cannot be found than when he testi-
fied, "I do hope that the convention will re-
duce misunderstandings and particularly be
of assistance in not letting private citizens,
tourists, businessmen, exchange people, and
others get caught up in the atmosphere in
which this other type of problem arises." 3s
Projected into the future, this type of un-
critical thinking would virtually guarantee
the closing of our open society.
1 See "Sino-Soviet Border. Potential Pow-
der Keg." the Ukrainian Bulletin, New York,
Apr. 1-15, 1965, p. 35.
2D "Consular Convention With the Soviet
Union," p. 12.
30 Ibid.,p. 22.
It Ibid., pp. 34-35,
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February 9, 1966 CONGRESSIONAL RECORD - APPENDIX
gram goal of a lunar landing in this
decade. This thoughtful article does
much to place in proper prospective the
operational capabilities that have been
achieved as the program progresses,
The article follows:
NExT BIG STEP IN SPACE: THE MOON
(By Richard Lewis)
This was the year the United States proved
that a round trip to the moon of 8 days was
physically tolerable to human beings.
It was a new discovery. Yet, the fact it
was expected dulled its impact.
The entire Apollo program of landing two
men on the moon and bringing them back
was based on the assumption men could
withstand the trip. That had been so since
President John F. Kennedy bad declared
Apollo a national goal in 1961.
However, it remained for Astronauts Leroy
Gordon Cooper, Jr., and Charles Conrad, Jr.,
to prove it on the 8-day flight of Gemini 5
in August.
Then, in the grand climax of a year filled
with surprises and triumphs In space, the
case was clinched by Astronauts Frank Bor-
man suet James A. Lovell, Jr., on their 14-day
ride in Gemini 7 December 4 to 18.
Theirs was the greatest American ride since
Paul Revere. Gemini 7 was a shot not only
heard but seen around the world by inter-
continental television, another product of the
space age.
THE SPIRIT OF '76
Further proof of the feasibility of the
lunar voyage was provided by the spectacular
rendezvous of Gemini 6 with No. 7. As-
tronauts Walter M. Schirra, Jr., and Thomas
P. Stafford accomplished the task with such
precision they made it look easy.
It was inevitable that the double mission
of Gemini 7 and 6 should be linked with the
spirit of '76. Symbolically, it showed that
man could free himself from the ancient rule
of Mother Earth and strike out for himself
in the cosmos if he dared.
His physiology enabled him to adapt to
weightless flight. By the fourth quarter of
1965, hit; technology enabled him to perform
it for periods of time up to 2 weeks.
But would the American economy permit
the National Aeronautics and Space Admin-
istration to pursue its goals to the Moon, to
Mars and beyond?
With the escalation of U.S. military effort
in the Vietnam war, it became obvious that
expendable projects in space would have to
be cut or deferred.
That was started as the year ended. The
space agency dropped a $39 million project to
develop an advanced orbiting solar observa-
tory.
ARGONNE PROGRAM CUT BACK
Development of the mighty M-1 engine,
designed to deliver 1 million pounds of thrust
Irom the combustion of hydrogen and oxy-
gen, was shelved for a second time In 2 years.
Nuclear rocket development, proceeding at
Argonne National Laboratory near Chicago,
in the design stage, and at the Los Alamos
Scientific Laboratory in New Mexico as actual
hardware, was to be cut back.
Within the space agency, there was a de-
termination to save Project Apollo at any
cost and keep it moving on schedule. Not
only was American prestige most intimately
linked with It but by the end of 1965 the eco-
nomic well-being of much of the South de-
pended on Apollo and post-Apollo programs.
More than 300,000 men and women in 7
Southern States were on payrolls in Apollo
as skilled workers, technicians, engineers,
and scientists. It was the largest develop-
ment program since men first fashioned a
wheel.
In 1965, manned space flight ceased to be a
stunt. In most segments of American so-
ciety, it was regarded as bound up with tech-
nological development and national well-
being.
FOR ENTERTAINMENT ONLY?
Even so, a commercial television network
had equated the launch of Gemini 7, as a
species of Saturday afternoon entertainment,
with a college football game. Both were
shown on the same screen.
There was a conspicuous failure here to
distinguish between what is entertainment
and what is history. The outlook which
teamed Gemini 7's launch with the Penn
State-Maryland football game December 4
might just as well have double-billed the
siege of Pleiku and the Tonight Show.
Because of growing war, a failure in the
Gemini program this year could have de-
railed Appolo.
The failure actually did appear October 25,
when Gemini 6 was stalled on pad 19 by the
blowup of its Agena target rocket, with
which it was supposed to rendezvous and
dock in a 185-mile orbit.
The McDonnell Aircraft Co. of St. Louis,
helped pull this blazing chestnut out of the
Are. Its top engineers convinced NASA to
compensate for the setback by a double flight
of Gemini 6 and 7. NASA's boss, James E.
Webb, sold the Idea to President Johnson.
L.D.J. RUNS SHOW---AND WELL
If there was any doubt who was running
the space program, it was resolved by this
series of events. Mr. Johnson was running it.
As matters turned out, he was running it
mighty well. The debacle of October 25 be-
came the smashing success of the Spirit of
'76.
Ironically, the Agena that couldn't In Oc-
tober was merely a minor transformation of
the Agents that could earlier in the year.
Agena is an upper stage rocket developing
some 16,000 pounds of thrust. It fits on
top of an Atlas intercontinental ballistic
missile. The combination had scored the
great successes of the lunar and interplane-
tary sweepstakes during 1965.
Following the success of Ranger 7 in 1964,
Rangers 8 and 9 photographed the Moon's
surface in February and March of 1965. Al-
together, more than 20,000 brilliant photo-
graphs of the Moon were radioed back to
Earth.
The;, showed what a few astronomers had
always suspected-that the lunar surface
was not the rough and jagged landscape
Earth-based photographs suggested, but that
contours were rounded and smooth and
slopes were gentle. There had been erosion,
perhaps from the solar wind that blows a
stream of protons among the worlds.
The nature of the surface-dust, crushed
rock or hard lava-continued to be a matter
of debate. But striking evidence of vol-
canism appeared. The Moon was or had been
dynamic, like the Earth, for there appeared
great rills or splits In the surface showing
movement.
BELIEVE MOON SURFACE OK
Des;3ite the lack of surface definition from
the Ranger photographs, a consensus devel-
oped among most students of the Moon. The
surface would hold the weight of a spaceship
like he ungainly, spider-legged LEM, or
Lunar Excursion Module. Astronauts could
land without sinking into a treacherous sea
of dust.
The Atlas Agena had scored another bril-
liant success in boosting Mariner 4 to Mars.
Launched November 28, 1964, Mariner new
past the Red Planet on the evening of last
July 14.
The message it sent back to Earth startled
the world of science. Cratered like the
Moon, Mars, with only a wisp of an at-
mosphere, showed little signs it had ever
developed living organisms, or could support
them If it had at some earlier phrase of its
history.
Although it rotates as rapidly as the Earth
A667
does, Mara displayed no magnetic field. This
was Interpreted as evidence it had no liquid
nor any solid iron core, as the Earth has. It
was different from the Earth. Mars was more
like the Moon.
The 22 pictures Mariner sent back from
Mars showing a desolate. lifeless looking
landscape, rent and torn by crashing me-
teorites, evoked a new feeling o awe among
scientific and politcial leaders.
LIFE UNIQUE?
When ae saw the photos pr?ojected on a
screen In the White House. President John-
son observed:
"It may be-it may just be- -that life as
we know it with Its humanity is more unique
than many have thought."
In several respects, the discovery of the
Martian landscape eclipsed the feat of the
Gemini grogram In orbiting 10 men during
the year. And yet, it is to man teat the space
program is tied, not to machines.
For that reason the clamor of influential
scientists calling for more emphasis on un-
manned scientific satellites and less on man-
ned orbital or lunar flights was ignored.
The biologists got their way with the acti-
vation of Project Voyager, the program to de-
posit a scientific capsule on Mars in 1971 with
a life detector to see if bactera might live
there. The debate on whether there is
primitive life on Mars illuminated half dozen
scientific seminars.
ATMOSPHERE TOO THIN
The Mariner 4 data showed that the
Martian atmosphere was too thin to soft-land
a Voyager spacecraft by parachute. A brak-
ing rocket system would have to be built Into
the vehicle, significantly raising its weight.
That meant the Saturn 1B hunch vehicle
could no; be used to boost Voyager to Mars.
Instead, the booster would have to be the
mighty Saturn 5, the moon rocket.
Using the Saturn 5 would greatly increase
the cost of Voyager, from $1.2 billion to pos-
sibly $3 2 billion or more. The increase
placed the program in jeopardy If the econ-
omy ax came down, as nearly everyone ex-
pected it would.
In the meantime, Russian experiences in
trying t) soft-land lunik capsules on the
moon showed that this feat was much more
difficult than expected. Three Russian at-
tempts railed during the year and made
American project planners more cautious In
starting their own lunar soft-landing project,
Surveyor.
The first Surveyor, scheduled to ride to the
moon aboard an Atlas-Centaur in the au-
tumn, was postponed until 1966.
More work had to be done or. the Surveyor
landing system.
The Lunik crashes showed ap a problem
which engineers had suspected-ambiguity
about the location of the lunar surface. Was
the surface that reflected radar waves tens of
feet below a layer of soft material that did
not reflect?
Radar tells the Surveyor lending system
computer where the surface s. The com-
puter controls the firing of the braking rock-
ets to slow descent. If the true surface does
not refioxt, radar cannot see it. Then the
vehicle must crash.
Whether this was the reason for the Soviet
crashes was speculative. No one knew. The
problem of how to land softly on the moon
was the major unsolved one in Project Apollo
at the end of 1965.
Gemini had proved that the trip was phys-
lologica:ly feasible for men. The rendezvous
of Geminis 6 and 7 had shown that the tech-
nique could be mastered. It is essential for
the return. LEM lifts off the moon on the
return journey and must rendezvous and
dock with the orbiting Apollo spaceship for
the voyage home.
The actual landing, soft-style was the next
step in Apollo.
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February 9, 1966 CONGRESSIONAL RECORD-- APPENDIX A669
33 "Consular Convention With the Soviet way around the obstacles that block a Geneva who engage in wily subterfuge in stating
Union;" minority views, Aug. 10, 1965.: meeting. the nature of finance, charges and in-
33 Senator NORRIS COTTON, "The Consular ? What are those obstacles? The bombing terest rates.
Convention With the Soviet Union," CON- of North Vietnam is one. But the United hope that favorable consider ation
cOESSIONAL RECORD; 'Aug. 26, 1965, p. 21185, States already has suspended that bombing I will be hopgiven e that a bill le e that 32 31 "Consular Convention With the Soviet on two occasions. It may be surmised that would-be my H.R. 83dealt with
Union," minority views, p. 2. Washington would not have initiated a the
Ibid. United Nations debate were it not prepared truthfully and honestly by those who lend
11L.B.J. Policy Edict Tied to Hoover," to suspend the bombing again, if prospects money or extend credit.
the Washington Post, Aug. 21, 1965. for a peace conference could thus be i:m- I recommend to my colleagues the fol-
37 "Top Soviet Intellectuals Castigate proved. lowing article on lending practices which
United States on Riots," the Washington The chief bar to a new Geneva conference has been prepared by the Industrial Un-
Post, Aug. 22, is the refusal of Hanoi to participate unless ion Department, AFL-CIO:
3A "Consular Convention with the Soviet its Four Points are accepted and the United INTEREST: THE NEED FOR THE "TRUTH
Union," p. 29. States agrees "to recognize" the Vietcong's IN YOUR
nt But Hanoi main- IN LENDING" BILL
i ..
..
ti
F
al L b
ra
on
ro
Move Toward Vietnam Peace
EXTENSION OF REMARKS
OF
HON. JOE L. EVINS
OF TENNESSEE
IN THE HOUSE OF REPRESENTATIVES
Thursday, January 27,1966
Mr. EVINS of Tennessee. Mr. Speak-
er, President Johnson's effort to continue
the peace offensive at the same time that
he is protecting our commitment in Viet-
nam is discussed with great insight and
perception in an editorial published in
the New York Times last February 3.
The consideration of the Vietnam con-
flict in the United Nations opens new
avenues for discussions and negotiations
and brings to bear the prestige and in-
fluence-of this international organization
for a peaceful settlement.
Under unanimous consent I insert this
editorial in the Appendix of the RECORD,
believing it to be of broad general interest
to my colleagues and to the Nation.
The editorial follows:
MOVE TOWARD VIETNAM PEACE
Despite the mountainous obstacles still to
be overcome, the vote to place the Vietnam
war on the agenda of the United Nations
Security Council provides : an opening for
international action to move the conflict
from the battlefield to the conference table.
The formal debate that has been authorized
is far less important than the informal con-
sultations now opening to prepare for that
discussion.
The objective must be to draft a resolution
that can be adopted unanimously or, at least,
will obtain a Soviet abstention. Moscow can
be expected to use the threat of a veto to
influence the shape of that resolution. Yet,
there is reason to doubt that the Soviet
Union will veto a responsible effort to bring
about a negotiated settlement, even though
it may feel obliged to stand aside initially.
What would a responsible effort comprise?
No one is suggesting that the United Nations
enter into the substance of the Vietnam
dispute. Hanoi has just repeated its posi-
tion that Vietnam "falls within the com-
petence of the 1954 Geneva Conference on
Indochina, and not of the U.N. Security
Council." As Senator MANSFIELD pointed out
yesterday, the task now is for other partici-
pants in the Geneva settlement to move to
reconvene the Geneva powers.
France, as a key participant, has a special
responsibility to join with Britain for this
purpose, if Soviet reluctance rules out action
by' the two Geneva cochairmen, Britain and
Russia. Nothing in the Geneva accords lim-
its initiatives to the cochairmen. The chal-
lenge that. faces the. United Nations-and,
particularly, the African nations that joined
France in abstaining yesterday-is to find a
tains that the Four Points are nothing but
"a concentrated expression of the Geneva ac-
cords"-accords the United States supports.
Hanoi's insistence that the Liberation
Front is the "sole genuine representative" of
the South Vietnamese people has all the out-
ward marks of a bargaining maneuver to ob-
tain maximum status for the Vietcong in the
negotiations. The right to attend a recon-
vened Geneva conference cannot-by this
maneuver or any other-he denied to the
Saigon Government, which attended not only
the 1954 conference but also the one on Laos
in 1962. Both groups will have to be rep-
resented.
A Security Council resolution could well
combine a request for, suspension of the
bombing of North Vietnam with a proposal
that France, Britain and the African mem-
bers consult the Geneva participants on a
way out of the impasse, It could also call
upon the International Control Commission
in Vietnam to assemble the military com-
manders of all the combatant forces on the
ground in South Vietnam to discuss a cease-
fire.
Such a move, if successful, would open
direct contact between the major political
as well as military forces in South Vietnam-
the South Vietnamese Army and the Viet-
cong. And they undoubtedly would have
to discuss a political settlement along with
a cease-fire, since the two are inextricably
intertwined in any guerrilla war.
A resolution of this type could not be op-
posed by Washington, which has expressed
its willingness to discuss a cease-fire prior to
a Geneva conference or as the first order
of conference business. It would be difficult
for Moscow to veto such a plan, even if
Hanoi's reluctance to go to a conference pre-
vents an affirmative Soviet vote.
This is not the only resolution that could
help advance negotiations on Vietnam. Now
that the United Nations has been brought
into the Vietnam conflict, the way is open
..for fresh minds and the freest exercise of
diplomatic ingenuity. Peace is a world re-
. sponsibility; the U,N, was created to fulfill
that responsibility. Vietnam could become
its finest hour.
In Your Interest
EXTENSION OF REMARKS
OF
HON. WILLIAM F. RYAN
OF NEW YORK
IN THE HOUSE OF REPRESENTATIVES
Wednesday, February 9, 19d6
Mr. RYAN. Mr. Speaker, during the
last session of the Congress I again in-
troduced a truth-in-lending bill that is
designed to protect would-be borrowers
or credit users from some of the mach-
inations practiced by moneylenders.
At the present time the borrower is too
often victimized by unscrupulous lenders
requiring all lenders and extenders of credit
to disclose to borrowers in advance the actual
amount of their commitment and the annual
rate of interest they will be required to pay.
"The antiquated legal doctrine, `Let the
buyer beware,' should be superseded by the
doctrine, `Let the seller make. full disclo-
sure.' "-President Lyndon B. Johnson, in
his message to the Congress, "The American
Consumer," 1964.
"Excessive and untimely use of credit aris-
ing out of ignorance of its true cost is harm-
ful both to the stability of the economy and
to the welfare of the public. Legislation
should therefore be enacted requiring lend-
ers and vendors to disclose to borrowers in
advance the actual amounts and rates which
they will be paying for credit."-President
John F. Kennedy, March 15, 1962.
Had any debts lately? Of course you have
if you are like most Americans. But do you
know how much interest or other financing
costs you are paying for those loans and in-
stallment purchases?
If you do know, then chances are you are
paying only a half or a third as much in
financing costs as the person who doesn't
know the rate of interest he is paying, ac
cording to a recent study. This study
showed, for example, that among persons who
had taken out loans for $500 or less, those
who were told or took the trouble to find out
the true interest rate charged were' paying
only 12 percent, while those who did not
know the rate they were charged, actually
were paying 37 percent. Just knowing makes
a big difference. Do you?
TRUE RATES
The true annual interest rate isn't always
what you think. Do you know, for example,
that:
The 3-percent-per-month plan of small
loan companies is really 36 percent per year?
The 41/2 percent new car financing plan of
some commercial banks is really 9 percent per
year?
The advertised 5-percent rate. on home im-
provement loans is not less than a 6 percent
first mortgage, but nearly twice as much, or
almost 10 precent per year?
The .so-called 6-percent rate for financing
used cars offered by some dealers is at least
12-percent per year and sometimes very much
higher-18 to 25 percent per year or more?
The cost of teenage credit now being
promoted by some retailers as only "pennies
per week" is sometimes as high as 80 percent
per year?
Don't feel bad if these facts puzzle you.
Another recent study revealed the shocking
news that at least 4 people out of every
10 don't know how much they are paying in
credit charges. But this study was only of
persons with college educations. Probably
closer to 8 out of 10 don't know the rates
of interest they are paying.
Unfortunately, it is frequently very dif-
ficult for you to find out the true cost of
what, you pay to borrow money or to buy on
an installment plan. You know how it goes.
You and the family really want that new TV
or that late model automobile. By the time
you get to looking seriously, you want it and
need: it right then-not later 'after you have
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11670 CONGRESSIONAL RECORD - APPENDIX
taken the time to read the fine print in the
sales contract. And the salesman or loan
official makes those small monthly payments
sound like a "breeze" to repay. Then, after
you think, "I must have paid that off by
now," and the bills still keep coming, you
niey wonder how much that purchase really
cost In credit charges,
Consumer credit has become one of the
nation's biggest businesses. Nearly every-
body is a consumer of credit. Long-term
consumer debt, primarily in the form of
home mortgages, now amounts to more than
$209 billion while short- and intermediate-
term consumer debt Is $83 billion, or a total
of $292 billion. This Is almost the size of
the entire national debt.
What Is even more startling is the dra-
n vatic rise in consumer debt in the last 20
years. Long-term consumer debt has in-
creased 1,123 percent during that time;
short- and Intermediate-term consumer debt
has Increased 1,449 percent, while the na-
tional debt has increased by only 18 percent.
To make the comparison another way, If the
Federal Government had Increased Its debt
at the same rate as the American consumer
increased his, the national debt would be
nearly $3 trillion.
Perhaps the most striking figure of all,
however, is the interest paid on consumer
debt. The interest payments on long-term
consumer debt are conservatively estimated
at 811 billion a year. while short- and inter-
mediate-terns debts account for at least
another $11 billion a year. Thus, the Amer-
ican consumer, with a total debt slightly less
than the national debt, is paying at least
$22 billion a year In interest, or nearly double
the annual interest charge on the national
debt.
TOTAL Of 229 PERCENT PER YEAR
A U.S. Senate subcommittee, under the
chairmanship of Senator PAUL H. DOUGLAS, of
Illinois, recently held investigative hearings
in Louisville, St. Louis, Pittsburgh, and Bos-
ton to learn the practical effects of borrow-
ers not knowing the cost of credit. These
are only a few typical cases which witnesses
described to the subcommittee:
A man In Jersey City bought a TV set for
$123.88. He was given a coupon bookwhich
called for 24 monthly payments of $17.50.
The interest rate turned out to be 229 per-
cent per year, or more than twice the cost
of the TV for interest alone. What Is even
more tragic, he had to keep up the payments
or lose his job.
A housewife on the Lower East Side of
Manhattan purchased a couch from a door-
to-door salesman for $300. The payments
were set at $12 every 2 weeks for 2 years.
The total Interest charge was thus $324 and
the annual rate was 107 percent. although
not a word of this was mentioned at the time
of the sale.
A New Jersey bus driver borrowed $1,000
from a small loan company. He was told
the interest rate was 4.5 percent. The actual
rate turned out to be 29.5 percent, or more
than 6!~ times the claimed rate. Had the
borrower known this at the start, he said,
he would have dealt with a lower cost lender.
A similar case occurred in Pittsburgh when
a witness testified that he borrowed $900
from a small loan company and was told that
his monthly payments would be $58.10 for
24 months. The interest rate in this case
was 52 percent per year.
.mother New York witness bought a tele-
vision set on credit for 30 months. The
interest rate on this transaction turned out
to be 143 percent. The committee asked
the witness whether she would have signed
the contract if she had known the Interest
rate The witness replied, "Never In my life."
Testimony before the committee also re-
vealed that Negroes and Puerto Ricans in
New York were systematically and auto-
matically charged a higher rate of Interest,
regardless of their individual credit standing.
NOT JUST THE POOR
These examples and hundreds like them
have been disclosed which show how not
only the poor and the wage earners but
salaried, middle class, and very well edu-
cited Americans are often misled when they
borrow or buy on time. Recent Investiga-
tions disclosed a very sorry field of deception
in the case of college education loans. While
Federal education loans are available for 3
percent and various State plans run from 3
to 6 percent, Senators were shocked to learn
that some of the private loan plans which
are offered to students and parents by our
leading colleges and universities Involved an
Interest rate as high as 60 percent per year.
Interest rates on "low-cost education loans"
frequently ran from 26 to 54 percent a year.
Or consider the facts revealed during a
1965 hearing before the House Banking and
Currency Committee about a small-loan
finance company which has systematically
bilked our American servicemen. This com-
pany specialized In auto loans and mas-
queraded under an official-sounding name
as though It were a Government agency. It
charged interest rates as high as 100 percent
over a 2-year period. It also added an exces-
sive charge for insurance which sometimes
didn't even exist.
TRICKS OF THE TRADE.
Consumers simply do not know what rate
of interest they are being charged on an In-
stallment purchase or small loan. This
brings terrible and sometimes tragic burdens
on people and their families. Most of the
blame for this lies not Jut, or even pri-
marily, In the Ignorance of the buyer. The
responsibility, as Mr. DOUGLAS' Senate hear-
ing; have shown, lies with the confusing
practices of the seller.
An economist who is a top executive with
one of the largest automobile manufacturing
companies once told a Senate committee:
"The variety and complexity of finance and
Insurance arrangements and the charges for
them are such as almost to defy compre-
hension. It Is Impossible for the average
buyer to appraise the rates for finance and
Insurance services offered, as compared with
alternatives available elsewhere."
A credit union manager with many years
of experience in the lending field vividly de-
scribed the dilemma of today's consumer.
He said:
"The average borrower is caught in a
wonderland of credit where percentages mul-
tiply and divide at will, where finance
charges materialize on command and fees
are collected on the way out, where sharp
practices and rackets not only Inflate the
costs of credit, but also impose enormous
financial hardships on the debtor, particu-
larly those who can least afford it."
Consider some of the practices used by
many lenders which the DOUGLAS subcom-
mittee has uncovered and described after 5
years' study.
No rate quoted
Often no rate at all is quoted to the con-
sinner. This is the simplest and most di-
rect method of obscuring the cost of credit.
The borrower Is, for example, merely told
that he will pay $10 down and $10 a month.
Neither the total finance charge nor the in-
terest rate is evident. Unless the borrower
Is a persistent questioner and skillful mathe-
maticlan, he will not discover the true facts.
The add-on rate
The borrower Is told that the finance
charge will be $8 on a 1-year, $100 loan, re-
payable In equal monthly Installments. The
lender represents this to be a 6-percent loan,
but such a claim Is merely a play on the
number 6. The actual rate Is almost 12
percent, or nearly double the stated rate,
because the borrower is constantly repay-
Ing the loan aver the year and does not have
Febrz'ary 9, 1966
the use of the $100 for a f ill year. His aver-
age debt over the year is c my about $50. In
other words, the interest rate is quoted on
the original amount of the debt and not on
the declining or unpaid balance as is the
custom in business credit, government loans,
or mortgage transaction;. In reality the
borrower is asked to pay interest on amounts
he has already repaid.
The discount rate
This is a variation of the add-on rate.
In the case of the add-on, the borrower-re-
ceives $100 in cash or goods and must pay
bac,i $106. In the case of the discount
technique, the consumer ' borrows" $100 but
only receives $94. The finance charge again
is $3 and is of ten represented as being 6 per-
cen; interest. Again, the actual rate is
slightly more than 12 percent, or twice the
quoted rate because that borrower is periodi-
cally repaying the loan.
A simple montl ly rate
T its rate statement method is usually
quoted by small loan companies and by re-
tallers using revolving credit plans. The fi-
nan;e rate is represented as being 1, 2, 3, or
4 percent per month. The true annual rate
in this case Is 12 times the quoted figure,
or 12, 24, 36, or 48 percer t per year, if the
inte^est is based upon the unpaid balance at.
the end of each month. If It is based upon
the antire original amount of the loan which
is being gradually repaid, .he simple annual
rate is approximately 24 times the quoted
figure, or in the Illustrations cited 24, 48, 72,
or 98 percent per year,
"Loading the camel"
Scmetimes lenders compound the camou-
flaging of credit by loading on all sorts of
extraneous charges, such as exorbitant fees
for credit life insurance and excessive fees for
credit investigations, processing, and han-
dling. These charges are a cost of doing
business, and should rightfully be figured in
with the interest or finance charges. By ex-
cluding them in a separate list, the interest
rate can be superficially reduced. When
these charges are separated from the interest,
a comparison of the cost of the credit with
other rates becomes impossible. This, of
course, could be the purpose of all this
sleight of hand In the first glace.
Some dealers are even unwilling to use the
word "Interest." They prefer to call it a
"smell monthly charge."
TRUTH-IN-LENDINIG BILL
Tte confusion-and subterfuge-which
characterizes the world of credit, along with
his concern for the effect on the economy
of tl:e tremendous growth in consumer cred-
it, led Senator DOUGLAS to propose, with the
cosponsorship of many of his Senate col-
leagues, his truth-in-lending bill. The pur-
pose of the bill is simply to give the con-
sumer the truth, the whole truth, and noth-
ing but the truth about the charges he is
asked to pay when buying on time or taking
out a. loan.
In brief, the truth-in-lending bill requires
that anyone who lends Ir oney or extends
credit must supply the w' uld-be borrower
or credit user with two simple but vital facts:
First: A statement of the total finance
charge In dollars and cents; and
Second: A statement of the finance charge
expressed in terms of a true annual rate on
the outstanding unpaid balance of the obli-
gation.
The bill does not attempt to regulate or
control the rate of interest or the cost of
credit.
The bill would enable .he typical con-
sumer to compare the cost of credit from
various sources and make en Intelligent de-
cision. It would also assist him in deciding
whether or not to borrow, pay cash, or save
toward the purchase instead.
Suppose, for example, a man wants to
borrow $1,500 to finance the purchase of a
car. Assume he goes to twc lenders and the
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