problems of prosperity. Most of these problems are resolved in the free competitive market through the energies of private enterprise. It is remarkable how well the free enterprise system does its job. The Government does not and will not tell business what to produce or labor where to work. Nor will it tell the consumer what to buy. By comparison with the scope of the market, the task of the Government is relatively small. Nonetheless, that task is vital and must be executed fully and faithfully. It must be kept up to date with the realities of modern life and a sophisticated marketplace. The Government must work to make consumer choice fully effective. The consumer must be protected against unsafe products, against misleading information, and against the deceitful practices of a few businessmen that can undermine confidence in the vast majority of diligent and reputable firms. The 89th Congress fulfilled these responsibilities. It will surely go down in history as a consumer's Congress. I proposed and you in the Congress enacted a series of measures designed to protect the consumer in the modern supermarket, on the new highspeed turnpikes of America and in our growing banking and savings institutions: -The Truth-in-Packaging Act has launched a system to tell the buyer just what he is purchasing, how much it weighs, and who made it. -The Traffic and Highway Safety Acts have begun the first comprehensive national attack on the mounting toll of death and destruction on the highways. -The Child Protection Act is safeguard ing our youngsters against needless tragedy from hazardous toys. -Additional insurance protection has been afforded to the millions of Americans who place their savings on deposit. I now call upon the 90th Congress, in Theodore Roosevelt's words, to carry forward unflinchingly in the public interest, and to build on the record of progress of the 89th Congress. For there is important unfinished and new business on the agenda to: -Provide consumers with accurate and clear information on the cost of credit. -Give our investors better protection in their interests in private pension and their purchases of undeveloped land, welfare plans and their holdings of mutual funds. -Insure that medical devices and labora tories designed to aid health do not in stead intensify illness. -Close the gaps in our system of meat inspection. -Reshape our laws dealing with hazardous household products. -Improve our shameful record of losses of life and property through fires. -Minimize the likelihood of massive electric power failures. -Insure the safety of natural gas pipelines. I have submitted many proposals at this session to benefit the poor and the disadvantaged of our land. The recommendations I am making today will help all Americans. Most of all, they will help middle income families the vast majority of Americans who can afford to enjoy the abundance of the marketplace, but who can ill afford the high cost of deceit, misinformation and confusion. TRUTH IN LENDING Consumer credit has become an essential feature of the American way of life. It permits families with secure and growing incomes to plan ahead and to enjoy fully and promptly the ownership of automobiles and modern household appliances. It finances higher education for many who otherwise could not afford it. To families struck by serious illness or other financial setbacks, the opportunity to borrow eases the burden by spreading the payments over time. Because of these benefits, consumers rely heavily on credit. Outstanding consumer credit today totals $95 billion. $75 billion takes the form of installment credit. The interest costs on consumer credit alone amounted to nearly $13 billion in 1966. The consumer has the right to know the cost of this key item in his budget just as much as the price of any other commodity he buys. If consumers are to plan prudently and to shop wisely for credit, they must know what it really costs. In many instances today, consumers do not know the costs of credit. Charges are often stated in confusing or misleading terms. They are complicated by "add-ons" and discounts and unfamiliar gimmicks. The consumer should not have to be an actuary or a mathematician to understand the rate of interest that is being charged. As a matter of fair play to the consumer, the cost of credit should be disclosed fully, simply and clearly. Now that the right of consumers to be fully informed is protected when they shop in the supermarkets, the time has come to protect that right for shoppers who seek credit. I recommend the Truth-in-Lending Act of 1967 to assure that, when the consumer shops for credit, he will be presented with a price tag that will tell him the percentage rate per year that is being charged on his borrowing. We can make an important advance by incorporating the wisdom of past discussions on how the costs of credit can best be expressed. As a result of these discussions. I recommend legislation to assure: -Full and accurate information to the borrower, and -Simple and routine calculations for the lender. This legislation is urgently needed to: -Close an important gap in consumer information. -Protect legitimate lenders against com petitors who misrepresent credit costs. The Truth-in-Lending Act of 1967 would strengthen the efficiency of our credit markets, without restraining them. It would allow the cost of credit to be freely determined by informed borrowers and responsible lenders. It would permit the volume of consumer credit to be fully responsive to the growing needs, ability to pay and aspirations of the American consumer. THE INVESTING PUBLIC With savings derived from an abundant economy, America has become a Nation of investors. The landmark securities laws enacted during President Franklin Roosevelt's first term have provided important safeguards over the last three decades to the millions of Americans who invest in stock. The deposit insurance laws of the New Deal safeguard our checking and savings accounts. Today new efforts are needed to assure that Federal protection of the investor keeps pace with the changing needs and growing wealth of the American economy. There are three areas of rapidly expanding investment that require the attention of the Congress in 1967-interstate land sales, private pension and welfare plans and mutual funds. 1. Interstate Land Sales Many investors-particularly older Americans are attracted to advertisements offering inexpensive retirement homesites. The interstate mail order sales of such land runs into many millions of dollars each year. Most buyers get what they pay for. But, according to evidence obtained by the Senate Subcommittee on Frauds and Misrepresentations Affecting the Elderly, "slippery language and omission of important facts" have given too many buyers grossly distorted impressions of the land they later purchased. Some of our senior citizens have become victims of subtle and sharp sales practices. They have wasted much of their life savings on a useless piece of desert or a swampland. A number of states have enacted legislation to deal with these abuses. But only the Federal Government can have effective authority over interstate mail order sales. Only the exercise of such authority can protect the buyer and legitimate seller alike against loss and injury. I recommend the Interstate Land Sales Full Disclosure Act of 1967 to afford the public greater safeguards against sharp and unscrupulous practices. Under the Act, developers engaged in interstate commerce, who offer to sell unimproved subdivided lots, would be required to disclose to potential buyers fully, simply, and clearly all of the material facts needed for an informed choice. This can be assured-without burdening the legitimate developerthrough a Securities and Exchange Commission registration procedure. The procedure would be similar to the proven and effective disclosure technique used for public offerings of corporate stock. 2. Pension and Welfare Plans More than 40 million workers on the payroll of American industry are now participating in private welfare and pension plans. These plans are of vital importance to the worker and his family. They are a source of retirement income. They help meet the bills when illness or disability strikes. In combina tion with the Federal social security system, they provide a framework of protection for the American worker in his old age. These private plans have grown sharply. Today, they account for assets of $90 billion. The very size of these plans make it essential that they be soundly administered in the public interest. Because employer and worker alike rely upon them so heavily, they must be operated with unquestioned prudence and integrity. The vast majority of welfare and pension plans are managed wisely by able officials, who follow the strictest code of fair dealing. Yet our goal must be to guarantee to every American worker that the steward of his particular plan, just as any other trustee, follows the highest standards of responsibility. Federal law provides a number of safeguardsbut there are serious gaps which must be closed. The law, for example, does not bar conflicts of interest between the plan and its employer company. Nor does it now adequately prohibit a conflict between the private or personal interests of the plan's manager and the larger interests of the beneficiaries. There have even been cases where managers have obtained loans for themselves and their personal friends. In some cases, serious abuses of trust have not been reached by the law. In other instances, a timely audit could have prevented fraudulent activity. But the law requires no such independent check. I recommend the Welfare and Pension Plan Protection Act of 1967, to extend additional protection to the American worker, his family and his employer. Under this Act: -Time-tested standards of responsibility and fair dealing will be required of plan administrators. -Yearly independent audits of welfare. and pension plans will be conducted by certified or licensed public ac countants. -Disclosure of the plan's financial ac tivities will be made more complete. -Maximum limits will be placed on the portion of the plan that may be invested in stock of the employer company. -The enforcement and investigatory powers of the Secretary of Labor will be expanded. -Legal remedies will be available to recover losses to the beneficiary resulting from breaches of faith by administrators of the plan. This law will not interfere with the discretion of plan managers in making legitimate investment decisions. It will, however, insure the worker and his family that their welfare and pension plans will be administered fairly and honestly. 3. Mutual Funds In 1940, President Roosevelt signed the Investment Company Act-and for the first time direct protection was extended to the investor in a mutual fund. At that time, about 300,000 Americans held mutual fund shares, worth $450 million. Today, mutual fund investors number more than 3.5 million. Their holdings are worth over $38 billion. Many of these investors are families of modest means. The spectacular growth of the mutual fund industry is an indication of its popularity and of the important role it plays in the economy. Through these funds, the small investor can obtain professional management and an interest in a diversified portfolio of securities. He expects to and is willing to pay reasonable fees for these services. The vast expansion of mutual funds, particularly in the last decade, has brought to the fore new issues which were either non existent or of secondary importance when the Investment Company Act was passed over a quarter of a century ago. A wise and forward-looking Congress in 1940 authorized the Securities and Exchange Commission to conduct a study of mutual funds if “any substantial further increase in the size of investment companies creates any problem involving the protection of investors or the public interest." Acting under this mandate, the Securities and Exchange Commission has made periodic studies of the mutual fund industry. Two months ago, the Commission submitted to the Congress a thoughtful and exhaustive 346-page analysis, "Public Policy Implications of Investment Company Growth." The SEC report reaffirms the diligent manner in which the funds are managed and cites the proud record of the industry. However, it raises a number of serious questions when it states that: -The great economies of size resulting -Sales charges for mutual funds may chased "front end load" plans under The Commission's study concludes that mutual fund shareholders need additional safeguards in the areas mentioned above and that protections under present law should be extended. I urge the Congress to give careful consideration to the Report and recommendations of the Securities and Exchange Commission. In my judgment, they provide a sound basis for measures which will be beneficial to the investing public and promote the health and stability of the industry itself. PROTECTING THE PUBLIC'S HEALTH Today, we have a network of safeguards protecting the public's health. In 1938 the Congress strengthened the Food, Drug and Cosmetics Act to require that the safety of drugs be cleared prior to marketing. In 1962, the law was further reinforced to require that the effectiveness of drugs also be cleared prior to marketing. The value of these laws is beyond question. Nonetheless, important gaps in the law remain which should be closed now. 1. Insuring the Safety and Effectiveness of Medical Devices Under present law, dangerous and worthless devices may be marketed until the Government-sometimes by chance, sometimes by complaint-discovers them and gathers the necessary evidence to establish that they are hazardous or ineffective. This is a laborious process. It requires many months. It is costly. In the meantime, the elderly and the seriously ill suffer most. Improper treatment with worthless devices can be the cruelest hoax of all. We want to foster continued research and development of lifesaving devices. But we must be sure they have been adequately tested before they are put on the market. We cannot be sure today. Congressional testimony has revealed that -Defective nails and screws for bone re pair have required repeated operations to correct the damage. -Some artificial eyes have resulted in serious infection. -Useless heating and vibrating devices have caused the ill to squander their money and delay the pursuit of effective treatment. -X-ray machines, which could have been properly safeguarded at little cost, emitted excessive doses of radiation. I recommend the Medical Device Safety Act of 1967. Under this Act, the Food and Drug Administration would be required to pre-clear certain therapeutic materials-such as artificial organ transplants-used mainly on or in the body. In addition, the FDA will establish standards to assure the safety and performance of certain classes of widely used devices-bone pins, catheters, x-ray equipment, and diathermy machines. In every case, the rights of the parties will be protected by fair hearings. This new law will not apply to simple and ordinary patient care items which have withstood the test of time and are generally recognized as safe and reliable. It will not apply to an item specially ordered or designed by a surgeon or physician. Nor will it inhibit the research and development essential to the advancement of the medical arts. It will, however, protect physician and patient alike from devices which are dangerous and unreliable. 2. Improving our Clinical Laboratories Most clinical laboratories render outstanding and dedicated services to patients and doctors. But the sub-standard clinical laboratory remains outside the reach of the law. There have been deeply disturbing revela |