[Senate Hearing 108-657]
[From the U.S. Government Publishing Office]
S. Hrg. 108-657
THE FEDERAL GOVERNMENT'S ROLE IN
EMPOWERING AMERICANS TO MAKE
INFORMED FINANCIAL DECISIONS
=======================================================================
HEARING
before the
FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL SECURITY
SUBCOMMITTEE
of the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MARCH 30, 2004
__________
Printed for the use of the Committee on Governmental Affairs
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94-201 WASHINGTON : 2004
____________________________________________________________________________
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COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Amy B. Newhouse, Chief Clerk
------
FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL SECURITY
SUBCOMMITTEE
PETER G. FITZGERALD, Illinois, Chairman
TED STEVENS, Alaska DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
ARLEN SPECTER, Pennsylvania THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael J. Russell, Staff Director
Richard J. Kessler, Minority Staff Director
Nanci E. Langley, Minority Deputy Staff Director
Tara E. Baird, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Fitzgerald........................................... 1
Senator Akaka................................................ 3
Senator Lautenberg........................................... 6
WITNESSES
Tuesday, March 30, 2004
Hon. Mike Enzi, a U.S. Senator from the State of Wyoming......... 7
Hon. Paul S. Sarbanes, a U.S. Senator from the State of Maryland. 10
Hon. Debbie Stabenow, a U.S. Senator from the State of Michigan.. 12
Brian C. Roseboro, Acting Under Secretary for Domestic Finance,
U.S. Department of the Treasury................................ 15
Nina Shokraii Rees, Deputy Under Secretary for Innovation and
Improvement, U.S. Department of Education...................... 17
Susan Ferris Wyderko, Director, Office of Investor Education and
Assistance, U.S. Securities and Exchange Commission............ 18
Don M. Blandin, President, American Savings Education Council.... 28
Dara Duguay, Executive Director, Jump$tart Coalition for Personal
Financial Literacy............................................. 31
Robert F. Duvall, President and Chief Executive Officer, National
Council on Economic Education.................................. 35
Alphabetical List of Witnesses
Blandin, Don M.:
Testimony.................................................... 28
Prepared statement........................................... 73
Duguay, Dara:
Testimony.................................................... 31
Prepared statement........................................... 77
Duvall, Robert F.:
Testimony.................................................... 35
Prepared statement........................................... 82
Enzi, Hon. Mike:
Testimony.................................................... 7
Rees, Nina Sokraii:
Testimony.................................................... 17
Prepared statement........................................... 51
Roseboro, Brian C.:
Testimony.................................................... 15
Prepared statement........................................... 48
Sarbanes, Hon. Paul S.:
Testimony.................................................... 10
Prepared statement........................................... 43
Stabenow, Hon. Debbie:
Testimony.................................................... 12
Prepared statement........................................... 45
Wyderko, Susan Ferris:
Testimony.................................................... 18
Prepared statement........................................... 55
Appendix
Kathy Cloninger, Chief Executive Officer, Girl Scouts of the USA,
prepared statement............................................. 87
Visa U.S.A. Inc., prepared statement............................. 89
The Bond Market Association, prepared statement.................. 91
Hon. Susan Molinari, Chairman, Americans for Consumer Education
and Competition, prepared statement............................ 95
THE FEDERAL GOVERNMENT'S ROLE IN
EMPOWERING AMERICANS TO MAKE
INFORMED FINANCIAL DECISIONS
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TUESDAY, MARCH 30, 2004
U.S. Senate,
Financial Management, the Budget, and
International Security Subcommittee,
of the Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:32 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Peter G.
Fitzgerald, Chairman of the Subcommittee, presiding.
Present: Senators Fitzgerald, Akaka, and Lautenberg.
OPENING STATEMENT OF SENATOR FITZGERALD
Senator Fitzgerald. This hearing will come to order. Today,
we are conducting an oversight hearing to examine the current
status and effectiveness of Federal financial literacy programs
and to assess the proposed activities of the new Federal
Financial Literacy and Education Commission.
I would like to welcome all of the witnesses who are
present today and thank them for taking time out of their busy
schedules to share their expertise and insights with us.
I also want to acknowledge the dedication and hard work in
this area of Senator Sarbanes, Senator Enzi, and Senator
Stabenow, from whom we will hear shortly, and our Ranking
Member, Senator Akaka. Senator Akaka's resolutions marking
April of this year as Financial Literacy Month and April of
last year as Financial Literacy for Youth Month have laid the
foundation for Financial Literacy Day on Capitol Hill. The
second annual Financial Literacy Day will be held here in the
Dirksen Building on April 22 and will be sponsored by the
National Council on Economic Education, Junior Achievement,
Goldman Sachs Foundation, and the Jump$tart Coalition.
Today, across the Nation, scores of State and local
agencies, schools, nonprofit organizations, businesses, and
other entities are working to empower individuals with
financial and economic knowledge that will be helpful toward
making sound personal investment choices. In my home State of
Illinois, for example, the City of Chicago soon will be
celebrating the 2004 Money Smart Week. The Federal Reserve Bank
of Chicago, along with members of its Money Smart Advisory
Council, designated the week of May 10 this year for the
sponsorship of free educational activities to teach consumers
about managing their personal finances and to provide awareness
of various financial education programs.
Agencies throughout the Federal Government also play a
major role in promoting financial literacy. In 2002, the Bush
Administration established the Office of Financial Education
within the Treasury Department, and in 2003, Congress passed
the Fair and Accurate Credit Transactions Act, which created
the Financial Literacy and Education Commission. The major
purpose of the Commission, which is supported by Treasury, is
to complement, encourage, and coordinate the work of
individuals and institutions committed to financial literacy.
Financial education can empower consumers of all ages to
create effective budgets, enhance strategic investment
decisions, and achieve both short- and long-term financial
goals, such as the accumulation of savings. It is important to
note that regardless of an individual's income, saving must be
done steadily and deliberately, and it must occur over a
lifetime.
Policy changes have also contributed to a credit explosion.
Today's young adults have access to credit at a much earlier
age than their parents did. Our young consumers, therefore,
need a more comprehensive understanding of credit than previous
generations.
Because of technology, a favorable legal structure under
the Fair Credit Reporting Act, and innovation in the financial
services industry, there is now a wider variety of credit
products offered to a greater number of people, including those
at risk, and at more accessible prices than ever before in our
Nation's history.
The Treasury Department reports that 64 percent of credit
card holders ages 18 to 24 do not even know the interest rates
they pay on their credit cards. In addition, a recent survey by
Consumer Reports reveals that 28 percent of 12-year-olds did
not know that using credit cards is synonymous with borrowing
money. And 40 percent of 12-year-olds do not realize that banks
charge interest on loans. Yet more than 20 percent of students
ages 12 to 19 have their own credit cards or access to a
parent's credit card.
Another significant development is the role that technology
now plays in the financial services market. Technology allows
increased organizational efficiency and enhanced consumer
convenience, but today's consumers must have a greater
understanding of and comfort level with the way in which
computers are a part of every financial transaction, from the
clearing of a check to the purchase of shares of stock.
Consumers also need to have a greater understanding of more
complex investment transactions, such as the buying and selling
of mutual funds. This Subcommittee recently held two hearings
on the mutual fund industry. One of the major themes discussed
during the hearings was that many investors did not have the
necessary information or the requisite knowledge to make truly
informed investment decisions. Our hearings revealed that many
investors were allowing their mutual funds and brokers to
charge fees significantly higher than what the investors
thought they were paying. Moreover, our hearings revealed that
unnecessary or excessive mutual fund fees can alone erode one's
retirement nest egg by 35 to 40 percent over 30 years of
investing.
Our hearings and hearings before the Senate Banking
Committee underscore the need to educate investors and make the
mutual fund fee structure more transparent. In part for this
reason, on February 10, 2004, Senator Levin, Chairman Collins,
and I introduced S. 2059, the Mutual Fund Reform Act of 2004.
This bill would improve the financial literacy of Americans by
mandating clear and comprehensive disclosures, simplifying the
fee structure, eliminating certain indefensible transactions as
to which disclosure would only confuse investors, and directing
the Securities and Exchange Commission to determine ways in
which the Internet may be better used as a vehicle for investor
education. I look forward to hearing from our witnesses their
views on this legislative proposal.
Today, we will hear a broad spectrum of informed opinions
on the importance of financial literacy. On our first panel, we
will hear from Senators Sarbanes, Enzi, and Stabenow, who are
playing leadership roles in the U.S. Senate to support
financial literacy efforts.
The administration's perspective will be presented on our
second panel. These officials are active in the promotion of
financial education among America's consumers and youth and
will provide a status report on the administration's efforts in
this area.
Finally, on our third panel, experts from leading private
not-for-profit organizations will provide their recommendations
on what more can be done to help consumers truly help
themselves in achieving the American dream of financial
security.
At this time, I would like to welcome our Ranking Member,
Senator Akaka. I know, Senator Enzi, that you are under
somewhat of a time constraint, so we want to get to you
quickly. Do we have time for Senator Akaka? OK, Senator Akaka
will make an opening statement, followed by Senator Lautenberg,
who has joined us, as well.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Mr. Chairman. I want to
express my deep appreciation to you for conducting this
hearing. You have been a great leader and Chairman of our
Subcommittee. I appreciate your willingness to work with me on
this important issue.
I am also pleased to be joined today by some of my
colleagues who are important advocates for financial literacy.
I am grateful for my colleagues' efforts, which were essential
in the creation of the Financial Literacy and Education
Commission, and their work with me on financial literacy
legislation and funding.
As Chairman of the Senate Banking Committee, Senator
Sarbanes held a series of hearings on financial literacy and
related topics like remittances and bringing unbanked
individuals into mainstream financial institutions. I enjoyed
participating in those hearings as a Member of the Banking
Committee. Senator Sarbanes has been an outstanding leader on
this issue and we have worked extensively on a number of
initiatives, such as the Commission, the authorization for the
financial literacy multimedia campaign, and funding for the
Excellence in Economic Education Act.
Senator Enzi has also been a staunch ally in financial
literacy efforts in addition to his role in the creation of the
Commission. Together, we introduced the Financial Literacy and
Higher Education Act, S. 1968, which seeks to improve the
financial literacy of college students.
I also welcome Senator Stabenow, who is a strong voice for
the need for improving financial literacy and the creation of
the Commission.
I also want to briefly recognize the efforts of a couple of
our colleagues, Senator Corzine and Senator Allen, who will not
be here today but who are also champions of financial and
economic literacy.
Mr. Chairman, my interest in financial literacy dates back
to when I was in the fourth grade. My teacher made sure that we
each had a piggy bank. She made us save our pennies and count
what we saved. We were made to understand how money saved a
little at a time--we didn't have much at that time--can grow
into a large amount, enough to buy things that would have been
impossible to obtain without savings.
My experience with a piggy bank taught me important lessons
about money management that have stayed with me throughout my
life. More people need to be taught these important lessons so
that they are better able to manage their resources as well.
Americans of all ages and backgrounds face increasingly
complex financial decisions as members of the Nation's
workforce, managers of their family's resources, and voting
citizens. Many find these decisions confusing and frustrating
because they lack the necessary tools that would enable them to
make wise personal choices about their finances. Now,
statistics show that there is an even greater need for improved
financial literacy.
For instance, last year, consumer debt increased for the
first time to more than $2 trillion. The rate of FHA
foreclosures was the highest ever recorded, and the percentage
of income used for household debt payments, including
mortgages, credit cards, and student loans, rose to the highest
level in more than a decade in 2001 and remained above 13
percent. Personal bankruptcies nearly doubled in the past
decade, including more than 1.6 million people who filed for a
personal bankruptcy in fiscal year 2003. And despite
technological advances that make it even more convenient and
less costly to manage money through accounts at banks and
credit unions, between 25 million and 56 million adults are
unbanked or are not using mainstream insured financial
institutions.
All of this tells me that we cannot overlook the need for
financial literacy and education in this country, starting with
early years in school and continuing throughout life.
My colleagues and I have worked on several important
initiatives for financial literacy. My legislation, the
Excellence in Economic Education Act, or Triple-E Act, was
enacted as part of the No Child Left Behind Act and was finally
funded in fiscal year 2004. Although the $1.49 million
appropriation is a relatively small amount when compared to
amounts for Federal programs emphasizing other basic
educational subjects, it is a start. The competitive grant
process for this funding recently started, and I hope the
program is given time to work.
As some of you know, the Triple-E is intended to fund a
range of activities, such as teacher training, research and
evaluation, and school-based activities to further economic
principles. I was disappointed that the administration
recommended no funding for this program in its fiscal year 2005
budget, but I am committed to ensuring that funding is included
for this important program in the fiscal year 2005
appropriations process.
In another example, and Senator Enzi may touch on this, as
well, last year, we introduced S. 1968, the Financial Literacy
in Higher Education Act. This was a compromise version of
legislation I introduced earlier as S. 1800, the College LIFE,
or Literacy in Finance and Economics Act, in preparation for
the Higher Education Act reauthorization. The legislation
includes financial and economic education and counseling as
allowable activities within existing programs, such as TRIO,
GEAR-UP, and minority-serving institutions. It also proposes a
pilot program involving annual credit counseling and personal
financial literacy courses and measuring these efforts'
effectiveness in, hopefully, positive behavioral change.
The reason for these and other provisions in the bill are
simple. Many students start college with little understanding
of economic concepts like supply and demand, or benefits versus
costs, or personal finance concepts like money management or
the importance of maintaining a good credit history. The result
is that college students are not effectively evaluating credit
alternatives, managing debt, and preparing for long-term
financial goals. I am hoping that this legislation will move
forward whenever the Higher Education Act reauthorization
proceeds.
Mr. Chairman, for students and adults alike, many Federal
agencies have already been working to improve financial
literacy and have attempted to engage in innovative programs to
better inform students, consumers, and investors. The
Securities and Exchange Commission has been extremely creative
in its efforts to protect investors, despite being challenged
with limited resources. I am pleased that as a result of the
global settlement, a nonprofit organization will be created and
provided with $52.5 million over 5 years to equip Americans
with the knowledge and skill necessary to make informed
investment decisions.
The Federal Reserve, the U.S. Department of Agriculture's
Cooperative Extension, the FDIC, and many other agencies have
financial education programs for their various constituencies.
We can improve the effectiveness of these programs through
increased collaboration and coordination between agencies.
Title V of the Fair and Accurate Transactions Act created
the Financial Literacy and Education Commission in December of
last year. The Commission is charged with developing a national
strategy to promote financial literacy and education among all
American consumers. It will review financial literacy and
education efforts throughout the Federal Government, identify
and eliminate duplicative financial literacy efforts, and
coordinate the promotion of Federal financial literacy efforts,
including outreach partnerships between Federal, State, and
local governments, nonprofit organizations and enterprises. I
have great expectations for the Commission. I will be closely
monitoring its development activities.
We must continue to work together to encourage better
economic and financial literacy, which in turn will result in
stronger families, better functioning markets, and a more
secure future for our Nation.
I thank our witnesses for being with us today and I look
forward to working with all of you to ensure that the
Commission is effective and that the financial literacy of our
country increases.
Thank you very much, Mr. Chairman.
Chairman Fitzgerald. Thank you, Senator Akaka. Senator
Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. I will try to be brief, Mr. Chairman,
and I am pleased to see our colleagues on the firing line here
because we know that they will be able to enlighten us in terms
of where they come from and where their committee positions
think we ought to be going.
The one thing that we have to try to include in our
financial information flow, and that is beware of the
unscrupulous company. Beware of those investments that look so
good that you can't lose anything, that you will make a fortune
in a short time. As soon as you hear that it is going to be
quick and it is going to be enormous, we should say, turn away
from it, because for the most part, 98 or 99 percent of the
people who invest in those, maybe even 100, will not profit by
it.
In our view, in my view, teaching our children and the
public to be more sophisticated about money matters is
critically important, especially to understand what happens if
when someone reaches retirement age, and as we now know,
pensions aren't there, typically, to provide the sort of
security that we often thought would be there.
I remember days when if you worked for a particular
company, you could count on that just as much as you could
count on the sun rising the next day to be there. We don't see
that anymore, and as a consequence, it is much more critical
that the average person know something about investing their
money, protecting their assets, so that if it comes to a
catastrophic case with an illness or loss of job or something
like that or a child's special needs, that they have the
reserves to do it.
One of the things that we have to be conscious of is that
when a company seduces an employee to invest in the company,
like Enron, if you are getting bad information, no matter what
the company tells you about your future security or what have
you, the question is, should you be there? But this is offset
and it is a complicated situation, Mr. Chairman. It is offset.
I will brag for a moment about my own company, ADP, which I
helped start, 40,000 employees today. It was started from
nothing. People who invested in that company made lots and lots
of money over the years, but it depends on the honesty within
the country. It depends on their commitment to appropriate
messages out to the public and if there is something awry, they
talk about it. You can't protect anybody, no matter how well
educated they can be, against an unscrupulous leadership in the
company.
So we have got a task on our hands and we want to make sure
that people understand what happens. The statistics are
legendary about all of the people, more than half of the
American workers not having saved a penny for their retirement.
I think as important a message as it is to invest wisely, it is
also important to save, no matter what you think. You can't be
invested to your last penny in something that you have no
control over and hope that you are going to be all right when a
day, if a day comes and you need support.
So, Mr. Chairman, while I think this is an important
hearing, I think it is critical that we continue providing
information about how you deal with your financial
requirements, how you deal with the assets. It is too bad that
the administration has decided to cut the Excellence in
Economic Education programs, those programs that help teach
those who work for not-for-profits to manage whatever resources
they have carefully. It is a subject that needs airing and
review, and above all, to be careful when you invest and make
sure that you understand fully what is in that investment.
I commend you, Mr. Chairman and our friends who are here to
make their statements.
Chairman Fitzgerald. Thank you, Senator Lautenberg.
Before I begin with Senator Enzi, I just saw that ADP was
listed in Barron's magazine this week as one of the few
companies that has for the last 25 years consistently increased
its dividend and earnings every year.
Senator Lautenberg. If I may correct the record, the last
42 years.
Chairman Fitzgerald. The last 42 years. [Laughter.]
Senator Lautenberg. It increased its earnings.
Chairman Fitzgerald. Anyway, our first witness is the Hon.
Mike Enzi from Wyoming, the only accountant in the U.S. Senate.
Senator Enzi was elected to the Senate in 1996. He is Chairman
of the Securities and Investment Subcommittee of the Banking
Committee. He is also Chairman of the Employment, Safety, and
Training Subcommittee of the Health, Education, Labor, and
Pensions Committee, and he serves as a Member of the Committees
on Foreign Relations, the Budget, and Small Business and
Entrepreneurship, and the Special Committee on Aging. You are
on an awful lot of committees.
Senator Enzi is an original cosponsor of S. 1532, the
Financial Literacy Community Outreach Act, which would create a
commission for agencies to coordinate and assess their
financial literacy efforts.
Senator Enzi, I know you have been waiting for some time
and you have another appointment. If it is OK with Senator
Sarbanes and Senator Stabenow, I would like to allow Senator
Enzi to proceed at this time.
Senator Sarbanes. Mr. Chairman, we waive the seniority
rules. [Laughter.]
TESTIMONY OF HON. MIKE ENZI, A U.S. SENATOR FROM THE STATE OF
WYOMING
Senator Enzi. I very much appreciate that, and I thank you,
Mr. Chairman, for holding this hearing. Anything we can do to
promote financial literacy will make a difference in this
country. You not only have some very strong advocates at this
table and I know Members of the Subcommittee are strong
advocates, but probably nothing compared to some of the people
that are sitting behind us today. If we all work together on
this, America will be a better place because each individual
will have a brighter financial outlook.
My first involvement with financial literacy, over 30 years
ago, was when I got elected mayor of a boom town. I was 29
years old and I was one of the oldest people in the boom town,
because when you have a boom town, the people that come there
to work are not the ones that already have jobs. It is the ones
willing to take a risk who need a job, so they are very young
people.
But they make a lot of money and they were making more
money than their parents had ever made, and their parents owned
the house and a recreational vehicle and a motorcycle and a
boat and a whole bunch of other things, and since they were
making more money than their parents were, they thought they
deserved those things, too. They ran out and bought them. Then
they found out that paying for them is a little difficult no
matter how much you are making.
We had to find a way to get financial literacy to these
young people because it caused a lot of family problems. One of
the things we did discover was that people that bought a house
were more stable, and once they bought a house, once they
figured out how to do that, they became owners of the
community. They became real participants in the community. But
that only comes out of good financial literacy.
Since I got here, I have been able to work with a
consortium of bankers and realtors and community development
and housing agencies, the University of Wyoming, and Fannie Mae
and put together a series of videos for people in Wyoming to
learn financial literacy and how to buy homes. That program has
been working out very well.
But Senator Stabenow and I noticed that most of the Federal
Government agencies also had requirements for financial
literacy efforts with excellent programs and initiatives. For
example, the FDIC has the Money Smart program. The Securities
and Exchange Commission has depositories for broker dealer and
investment advisor information. The Department of Labor and
Social Security Administration have extensive initiatives on
retirement savings and investment issues. And other agencies,
such as the Department of Defense, have financial literacy
programs targeted at assisting their employees, and these are
just a few of the many programs that we have found.
So we got together and worked on an amendment along with
Senator Akaka to make sure that we could get some information
on this. We had direction in the early timeframe when we were
working on it from Senator Sarbanes' efforts, who was then the
Chairman of the Banking Committee. He not only contributed his
ideas to us, but he also drafted some additional legislation
and then, fortunately, when Senator Shelby became Chairman, he
also continued to help on this and incorporated things that
Senator Sarbanes and Senator Stabenow had put together. Those
efforts became a part of the Fair Credit Reporting Act
amendments, the Fair and Accurate Credit Transactions Act.
That law established the Financial Literacy and Education
Commission. It is mandated to develop a national strategy on
financial literacy and education, as well as establish a
Website and toll-free number as entry points for consumers to
gain access to the Federal Government's financial literacy
efforts.
The Commission shall take steps as necessary to coordinate
and promote financial literacy and education efforts at State
and local levels, including working with State and local
governments, nonprofit organizations, and private enterprises.
Secretary Snow of the Department of the Treasury chaired
the first meeting of the Commission on January 29. There were a
number of notable people from a number of different
commissions. I won't go into all of those who attended. I would
ask that my full statement be a part of the record.
Chairman Fitzgerald. Without objection.
Senator Enzi. From all indications, that first meeting was
a great success. We do know that financial literacy and
education is essential in today's financial markets. Senator
Sarbanes held very extensive hearings on some of the problems
with corporate America that have been mentioned, and brought to
light some of the things that I am pretty sure go back to when
they were young people, and have come up with some solutions
that I think will straighten the country out. Of course, it
still relies on good people making good decisions based on good
values and good moral background.
I thank you for holding this hearing and Senator Akaka for
all of his different efforts that he has had as well as the
people here on the panel with me. Thank you, and thank you for
your courtesy.
Chairman Fitzgerald. Senator Enzi, thank you very much.
Our second and third witnesses are Senator Sarbanes and
Senator Stabenow. Senator Sarbanes is the senior Senator from
Maryland and the Ranking Member of the Senate Committee on
Banking. Senator Sarbanes also is a senior member of the
Foreign Relations Committee, the Budget Committee, and the
Joint Economic Committee.
He was elected to the Senate in 1976 and was the chief
Senate sponsor of the Sarbanes-Oxley Act, which has been
referred to as the most far-reaching reform of American
business practices since the time of President Franklin
Roosevelt. Senator Sarbanes also is the author of S. 1470, the
Financial Literacy and Education Coordinating Act.
Senator Stabenow is the junior Senator from Michigan. She
was elected to the Senate in the year 2000. She now serves on
the Committee on Budget, Banking, Agriculture, and on the
Special Committee on Aging. Within the Banking Committee, she
serves on three subcommittees: Financial Institutions,
Securities and Investment, and Housing and Transportation.
Prior to her election to the Senate, Senator Stabenow
served for two terms in the House of Representatives, for 4
years in the Michigan State Senate, and for 12 years in the
State House of Representatives, where she rose in leadership to
become the first woman to preside over the State House. Does
that mean the Speaker of the House?
Senator Stabenow. Assistant Speaker, yes.
Chairman Fitzgerald. Assistant Speaker, OK. Well, welcome.
Senator Sarbanes and Senator Stabenow, thank you very much.
Returning now to the seniority system, we will let Senator
Sarbanes go first. Thank you, Senator, for your patience.
TESTIMONY OF HON. PAUL S. SARBANES,\1\ A U.S. SENATOR FROM THE
STATE OF MARYLAND
Senator Sarbanes. Thank you very much, Chairman Fitzgerald,
Ranking Member Akaka, and Senator Lautenberg. It is a pleasure
to be here before you.
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\1\ The prepared statement of Senator Sarbanes appears in the
Appendix on page 43.
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Senator Lautenberg referred to these advertisements that
were too good to be true, and usually they are not true. If
they are too good to be true, there is a very high probability
that they are not true and people need to be aware of that.
Mr. Chairman, I want to commend you and the Ranking Member
for holding this important hearing on the government's role in
enabling Americans to make informed decisions about financial
affairs. As was mentioned, it was high on the agenda of the
Banking, Housing, and Urban Affairs Committee in the last
Congress and we held a series of hearings on financial literacy
and education.
In this Congress, under Chairman Shelby's leadership, we
included in the Fair and Accurate Credit Transactions Act a
separate title for the purpose of promoting financial literacy.
This had been introduced earlier as the Financial Literacy and
Education Improvement Act. It is now part of the law of the
land.
I want to underscore the tremendous and terrific work that
was done by Senator Akaka, who previously was on our panel, and
Senators Enzi and Stabenow in putting together this legislation
and also the support it received from Chairman Shelby when we
included it in.
Mr. Chairman, there is no mystery to financial literacy. It
plays a role in our lives with respect to financial matters,
which is analogous to the role played by basic literacy in our
daily lives. We know that basic illiteracy exacts a heavy toll.
The same is true of financial illiteracy.
Numerous statistical studies have shown significant
numbers--amazing numbers, actually--of men and women of all
ages are financially illiterate or have only a limited degree
of financial literacy. They are ill equipped to make informed
and responsible decisions about crucial financial matters.
Lacking the context to make thorough and realistic assessments,
they are at serious risk, vulnerable to exploitation, with
potentially devastating consequences for themselves and their
family.
In a series of hearings we held in the Banking Committee,
we received sobering testimony on this point. Our witnesses
were men and women of all ages and from all backgrounds. They
included college-age youth, retirees, newly employed, and
workers near the end of their employment years, those who are
investing in capital markets and those without bank accounts.
And what came across from that testimony was that we needed to
improve and expand financial education in this country.
Now, our hearings established that while there are some
significant programs in the area of financial education both
within the government and in the private sector and a number of
States--Senator Enzi actually, when he served in the Wyoming
legislature, took the lead in developing financial literacy
programs at the State level in Wyoming. But there is not an
overall comprehensive strategy. Too little coordination, too
much overlap and duplication.
Don Blandin, whom you are hearing from later in this
hearing, testified before our committees as President of the
American Savings Education Council, and I am just quoting him:
``Organizations in both the private and public sectors must
collaborate on all levels to help educate Americans about the
importance of taking control of their financial future. By
combining and leveraging our comprehensive networks and
resources, we have a better chance of reaching people that none
of us would be able to reach alone.''
That is why in the legislation, we established the
Financial Literacy and Education Commission. They are charged
with a mandate to develop a national strategy. Using its own
Website and 1-800 number, the Commission has served consumers
by providing one-stop user accessible information about all
financial literacy programs offered by government agencies.
By bringing together the heads of the Federal agencies that
sponsor active financial education programs, the Commission
will be able to better coordinate the activities of the various
departments and agencies, eliminate unnecessary duplication,
facilitate collaboration, promote cooperation of the Federal
agencies with State and local government, and with the
nonprofit and other private sector organizations to sponsor
programs in financial literacy and education. I want to
underscore the very find work being done by a number of
nonprofit and other private sector organizations.
Now, the first meeting of the Commission was held on
January 29. I am going to take a minute to read some of the
leading members there. Senator Enzi refrained from doing so.
But Treasury Secretary Snow was there. He chairs a commission
under the legislation. Federal Reserve Board Chairman
Greenspan, Commissioner of Social Security Barnhart, FDIC
Chairman Powell, FTC Chairman Morris, OTS Director Gilleran,
and National Credit Union Administrator Bauer.
I think this active participation by the heads of these
agencies will testify to the importance of its work, and the
Commission needs to sustain an unflagging support of its
members. I know you are going to be hearing from Acting Under
Secretary for Domestic Affairs Roseboro, who has already
indicated his own keen interest in this subject matter.
Americans today face a daunting array of complex financial
decisions that have both long-range and short-term
consequences. Financial literacy is critical to responsible
decisionmaking.
Mr. Chairman, I applaud you and Senator Akaka for holding
today's hearings and I look forward to working with you and
other colleagues to strengthen our financial education programs
and raise the standards of financial literacy in every part of
our country. Thank you very much.
Senator Fitzgerald. Senator Sarbanes, thank you. Thanks
very much for taking time out of your busy schedule to be here.
We appreciate it very much.
Senator Stabenow.
TESTIMONY OF HON. DEBBIE STABENOW,\1\ A U.S. SENATOR FROM THE
STATE OF MICHIGAN
Senator Stabenow. Thank you, Mr. Chairman, and to our
Ranking Member, Senator Akaka, and Senator Lautenberg, it is
wonderful to be here with you. I join with my colleagues in
thanking you for holding this very important hearing and also,
Senator Akaka, for all of your leadership and support. It has
been wonderful to work with Senator Sarbanes and Senator Enzi
and others--including Senator Shelby, our Banking Chairman--on
this very important issue and to actually be able to get
results, and I think it is exciting to see that we are making
steps forward.
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\1\ The prepared statement of Senator Stabenow appears in the
Appendix on page 45.
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I can't stress enough how important I feel that financial
literacy is to all Americans, and I know you share that
feeling. The financial services industry has changed a great
deal over the last several years and continues to change. A
large number of new and diverse products are available in the
marketplace.
In addition, as we have all said, people are finding it
easier to get credit, whether for a new home, a car or a credit
card. I know as a parent of two young people who went through
their high school years and every day I saw a new credit card
or a new credit card application coming in the mail, which I
would take and make sure they didn't receive. But there is no
question that we are seeing a constant bombardment with young
people as well as people of all ages on the availability of new
credit cards.
However, more credit comes with increased responsibilities,
as we have all said today, and a greater need to manage
resources effectively, and I think that is all of our
challenge.
Mr. Chairman, it is also important to note that we are
seeing an economic environment in which people are increasingly
having to plan more aggressively to meet a number of financial
needs, including our children's education as well as our own
retirement.
Unfortunately, as we have all indicated today, we are
nowhere near where we should be in terms of financial
education, financial literacy, and we all have a stake in
making sure that happens for the future of our country and for
our families.
Just to share some statistics as well, the personal savings
rate fell to only 1.6 percent of disposable income in 2001.
One-point-six percent was saved. From 1990 to 2000, outstanding
credit card debt among American households more than tripled,
from $200 billion to $600 billion. In 2001, the total household
debt of Americans exceeded total household disposable income by
nearly 10 percent.
With all the opportunities for investments available today,
barely half of American households hold any stock in any form,
including mutual funds or a 401(k) style pension plan. And
almost 50 percent of all workers have accumulated less than
$50,000 for their retirement. One-third have saved less than
$10,000 for their retirement.
Mr. Chairman, Senators Sarbanes, Enzi, and I wanted to do
something about this, and the Banking Committee along with
Senator Akaka, to address these problems and that is precisely
what we did. I introduced my bill, the Financial Literacy
Community Outreach bill, last July along with Senator Enzi and
six other cosponsors from the Banking Committee with a simple
goal in mind, to make the Federal Government more efficient and
strategic in how we deliver financial literacy assistance to
the American people.
We teamed up with Senator Sarbanes, who had his own bill,
and we merged the best parts of each of those bills into a new
package that was enacted into law, as has been indicated,
during the reauthorization of the Fair Credit Reporting Act.
The new law will streamline and improve the delivery of Federal
financial literacy services.
Prior to the enactment of our law, many Federal agencies
offered financial literacy services, materials, and grants, but
there was absolutely no coordination. In fact, we were amazed
when we looked at what was there to find that, in fact, there
were many different programs. But we weren't aware of them and
neither was the public, necessarily.
Our Federal Financial Literacy Commission changes that. For
the first time, all stakeholders in the government who work on
financial literacy will sit at the same table and be able to
coordinate their message. They will be able to eliminate
duplication and fill in the gaps where we are providing no
financial literacy assistance and where we should be.
I am also happy to note that not only do we strive to get
key members of the government talking to each other, our bill
is also designed to make the government more accessible to the
people that we serve. We instructed the Commission to set up a
one-stop Website for consumers. Now the American people won't
have to surf dozens of government Websites to find the
information that they need. They will be able to go to one site
and get information on everything from credit card management
to buying a home to understanding their Social Security
benefits.
For those who are less Web-savvy, we have a 1-800 number
that consumers can use, as well. People will be able to call
the number, indicate what sort of information they are seeking,
and the Commission will mail it to them.
So as you can see, as its very core, our legislation
improves what the government does on financial literacy and
then we do everything we can to make all government information
readily available to those who are seeking it.
I am excited to see that the administration is moving
forward to implement the Act and commend everyone who was
involved with that. I am particularly pleased to see the high
level of commitment by many administration officials, as has
been noted already. I think this bodes well and sends a very
strong message for the importance of the Commission's work.
Mr. Chairman, financial literacy is really about empowering
people. It is about helping them to help themselves and that is
something that I know all of us feel is very important, whether
it is teaching a retiree in Detroit how to avoid a predatory
mortgage loan or helping a sophomore at Michigan State
University avoid taking on credit card debt that he or she
can't afford. I have high hopes for the concrete benefits that
the new law can bring to the American people, both in my State
of Michigan and around the country.
I once again thank you for your leadership on this issue. I
am looking forward to working with you, with this Subcommittee,
my colleagues, and with the Commission in order to make sure
that we do everything that we can to make sure people have the
information they need to be successful. Thank you, Mr.
Chairman.
Senator Fitzgerald. Senators, thank you very much for being
here. We really appreciate your testifying before our
Subcommittee. We appreciate your interest in the issue and
thank you so much for being here. We appreciate it.
Senator Sarbanes. Thank you, Mr. Chairman.
Senator Stabenow. Thank you.
Senator Fitzgerald. Thanks. At this point, I would like to
call the witnesses on panel two up to the table. I would like
to introduce our witnesses on the second panel. Nina Shokraii
Rees leads the newly-created Office of Innovation Improvement
at the Department of Education. This office oversees the
administration of approximately 25 competitive grant programs
and has a program budget of $2 billion and approximately 100
full-time staff. The Office of Innovation and Improvement
supports education innovation, disseminates the lessons learned
from these programs, and helps to make strategic investments in
promising educational practices.
Prior to joining the Education Department, Ms. Rees was a
senior aide to Vice President Cheney, advising him on domestic
policy issues, including education, crime, home ownership,
race, welfare, and other issues affecting families and
children.
Also joining us is Susan Ferris Wyderko, who serves as the
Director of the Office of Investor Education and Assistance for
the U.S. Securities and Exchange Commission (SEC). This office
serves individual investors by ensuring that their problems and
concerns are known throughout the SEC. In addition to handling
questions and complaints, the Office of Investor Education and
Assistance creates and disseminates educational literature and
materials to help Americans learn how to save and invest
wisely, prepare for retirement, and achieve financial security.
Ms. Wyderko previously served as the SEC's Director of
Legislative Affairs and Acting Director of Public Affairs. She
was counsel to former Chairman Arthur Levitt and has held other
senior positions within the SEC.
Brian Roseboro serves as the Acting Under Secretary of the
Treasury for Domestic Finance. He also serves as Chief Advisor
to the Treasury Secretary and Deputy Secretary on domestic
financial matters and oversees the Assistant Secretary for
Financial Markets, the Assistant Secretary for Financial
Institutions, and the Fiscal Assistance Secretary.
Mr. Roseboro has served as Assistant Secretary for
Financial Markets and as a senior advisor to the Secretary of
the Treasury in developing and implementing the Federal
Government's policies for debt management in all matters
relating to financial markets. Mr. Roseboro, I was giving a
nice introduction of your biography. We appreciate you joining
us.
If you are ready to proceed, Mr. Roseboro, we are ready to
begin with you and then we will go right down the line with Ms.
Rees and Ms. Wyderko. Thank you.
TESTIMONY OF BRIAN C. ROSEBORO,\1\ ACTING UNDER SECRETARY FOR
DOMESTIC FINANCE, U.S. DEPARTMENT OF THE TREASURY
Mr. Roseboro. Thank you very much, Mr. Chairman. Chairman
Fitzgerald, Ranking Member Akaka, and distinguished Members of
the Subcommittee, I welcome this opportunity to testify today
on the Treasury Department's role in ensuring that Americans
have access to financial education programs and in helping to
learn to make informed financial choices throughout their
lives.
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\1\ The prepared statement of Mr. Roseboro appears in the Appendix
on page 48.
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America has great economic opportunity, and never before
have we had access to such a broad array of financial products
and services to make our lives better. We choose from a variety
of options for financing everyday purchases, from buying cars
and homes to financing college educations. But along with the
rewards of a plentiful marketplace go notable risk. The
blessings of the marketplace might remain locked, or even
become a burden, to the uninformed or the unwary. Financial
education does make a difference.
To prove this point, allow me to enlist the help of three
individuals, Sarah, Maria, and Tom. They are fictional people,
but they don't need to be. Any one of them could live in one of
the communities you represent.
Sarah is a typical high school student. She and her teenage
peers spent $175 billion in 2003, and yet only a little over 25
percent of young people report that their parents actively
taught them how to manage money. She is among the one in three
teens who carries his or her own credit card, yet only 21
percent of students like Sarah say that they have taken a
finance course in school.
Next, let us move on to Maria. Recently, Maria legally
immigrated to America and speaks English as a second language.
She comes to this country from a place where access to consumer
financial services is not common, where checking accounts,
credit cards, and credit reports are virtually unknown, and
where a bank has not always been seen as a safe place to place
one's money. Moreover, Maria is among the estimated ten million
individuals in the United States who do not have a relationship
with a financial institution. Without a bank account, Maria is
more vulnerable to financial scams at worst, and at best, her
choices appear to be limited to higher-cost financial services.
Now consider Tom, who is near retirement. He is among the
one-fourth of our workers 45 or older who plan to delay
retirement for financial reasons. He could be among the 16
percent of all workers who say they are not confident at all
about having enough money to retire comfortably.
Sarah, Maria, and Tom are familiar to all of us. When we do
not understand the most important and fundamental concepts of
finance, we are less likely to achieve our full economic
potential. This would hurt us as individuals and all of us as a
community, State, and as a Nation.
Recognizing the role that financial education plays in
preparing Americans to make better financial decisions, the
Department of Treasury established the Office of Financial
Education in 2002. The office helps Americans obtain practical
knowledge and skills to make informed financial choices
throughout their lives by focusing on four key subject areas:
Basic savings, credit management, home ownership, and
retirement planning.
Many of the office's efforts are focused on three groups in
particular where financial education needs are most acute:
Young people, recent immigrants, and those nearing retirement.
While financial education is important for all Americans, we
believe our efforts can be of the greatest impact on these
groups.
We have found that there are many wonderful financial
education programs around the country, often providing their
services at little or no charge to participants. The great
challenge is making people aware of these programs, and equally
challenging, making people aware of the need for these
programs. Our office seeks to meet these challenges by setting
standards for successful financial education programs and
recognizing exemplary programs that meet those standards.
Last year, Congress selected the Office of Financial
Education to lend its expertise and support to the newly
created Financial Literacy and Education Commission. The
Financial Literacy and Education Commission is chaired by the
Secretary of the Treasury and composed of 20 Federal
departments and agencies and commissions. The Commission's goal
is to promote financial education and to improve the financial
literacy of all Americans. Its charge is to coordinate the
financial education efforts of the Federal Government and to
encourage government and private sector efforts to promote
financial literacy.
At the Commission's first meeting on January 29, the
members of the Commission established two subcommittees. The
first is to establish a Website to serve as a clearinghouse for
people in search of financial education information and
programs. This effort is being led by the Commodity Futures
Trading Commission. The second subcommittee, chaired by the
Federal Deposit Insurance Corporation, is to establish a toll-
free hotline for financial education information.
In the 60 days since the first meeting of the full
Commission, these two groups have convened and begun their
important work. The Commission members are working together and
learning from each other how we can best succeed in our efforts
to make Americans aware of the many benefits of our financial
system. This effort demonstrates the high priority President
Bush and the administration place on financial education and on
teamwork.
Thank you, sir, and I am pleased to answer any questions
the Subcommittee may have.
Senator Fitzgerald. Secretary Roseboro, thank you very
much. Ms. Rees.
TESTIMONY OF NINA SHOKRAII REES,\1\ DEPUTY UNDER SECRETARY FOR
INNOVATION AND IMPROVEMENT, U.S. DEPARTMENT OF EDUCATION
Ms. Rees. Chairman Fitzgerald and Ranking Member Akaka, I
am pleased to be here today to discuss the Department of
Education's efforts to improve the financial and economic
literacy of our Nation's students.
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\1\ The prepared statement of Ms. Rees appears in the Appendix on
page 51.
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Our focus at the Department of Education is on educating
every child so that no child is left behind. Last year,
Secretary Page joined hands with the then-Treasury Secretary
Paul O'Neill in announcing the administration's initiatives to
raise awareness about financial education and he acknowledged
that, in addition to learning skills in the core academic
subjects, it is important for students to gain financial
literacy.
Toward that end, the Department has made several
investments to promote financial literacy. First and foremost,
in fiscal year 2002 the Department made a grant to the
Jump$tart Coalition worth up to about $250,000. The Jump$tart
Coalition is a coalition of about 140 national organizations
that is carrying out a project aimed at improving students'
knowledge about personal finances so that they can make
informed financial decisions. The grant from the Department
supports such activities as an online clearinghouse that
provides a central listing of personal finance books, lesson
plans, videos, software, and other high-quality educational
resources.
In addition, the Jump$tart Coalition has created a set of
voluntary national standards in personal finance that identify
what K through 12 students should know and be able to do in
personal finance. These standards can be aligned with local
education goals or be used as a tool to help policy makers
create standards for personal finance.
In addition to that, in fiscal year 2003, the Department
made a grant to Operation Hope, again worth about $250,000, to
expand the number of schools that are using its ``Banking on
Our Future'' program. Banking on Our Future is a year-round
financial literacy program for youth ages 8 through 18, taught
in schools and community-based organizations that serve
primarily low- and moderate-income students. The project
matches each lesson with the math standards of each grade level
and integrates the modules into the mathematics curriculum in
the classroom.
The Department also administers Mr. Akaka's Excellence in
Economic Education program, which Senator Akaka sponsored, and
which received $1.5 million for the first time this year. We
are very proud to also let you know that we have announced the
competition for this grant. The closing date notice for this
competition is on April 16, and we look forward to getting
applications for this program.
This program will consist of a competitive grant to a
single national nonprofit educational organization to promote
economic and financial literacy among students in kindergarten
through the 12th grade. Once the grantee is selected, that
organization will be responsible for national activities, such
as building relationships with economic education
organizations, dissemination of effective economics teaching,
research on effective economics teaching, and dissemination of
materials to foster economic literacy.
In addition, the grantee will award sub-grants to State
education agencies, local education agencies, and State or
local economic personal finance or entrepreneur educational
organizations for a variety of purposes, including teacher
training, economics curriculum development, evaluations of the
impact of economics education on students, research on economic
education, and so forth.
I also want to mention the options that school districts
currently have to use flexible formula grant programs for
financial education and economic literacy. Activities to
promote consumer economic and personal finance education are
specified as an allowable use of funds for school districts
receiving grants under the State Grants for Innovative
Programs, the Department's broad formula program that supports
State and local efforts in education reform and improvement.
In addition, if a school district chooses to exercise the
flexibility available through the No Child Left Behind Act, the
district may transfer funds from several other eligible
programs to its Innovation Programs formula grant to make funds
available for this purpose without having to go through a
separate grant application process.
In the post-secondary arena, departmental regulations
require post-secondary institutions to provide loan counseling
to Federal student loan borrowers. This includes both initial
and exit counseling. During the exit counseling, borrowers are
reminded of their obligations to repay their loans, informed of
the repayment options, and provided with information about
effective debt management strategies that facilitate repayment.
Some institutions include more general credit counseling as
part of these required activities.
In conclusion, I would like to emphasize the fact that the
Department of Education is very pleased to be working as a
member of President Bush's newly established Commission on
Financial Literacy and Education, headed by Secretary Snow, to
coordinate the financial education resources of the government
and the private sector.
I would be pleased to answer any questions you may have
about the programs that we currently have, and thank you for
having me testify today.
Senator Fitzgerald. Thank you very much, Ms. Rees. Ms.
Wyderko.
TESTIMONY OF SUSAN FERRIS WYDERKO,\1\ DIRECTOR, OFFICE OF
INVESTOR EDUCATION AND ASSISTANCE, U.S. SECURITIES AND EXCHANGE
COMMISSION
Ms. Wyderko. Chairman Fitzgerald and Ranking Member Akaka,
on behalf of the Securities and Exchange Commission, thank you
for the opportunity to be here to testify about our efforts to
educate investors.
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\1\ The prepared statement of Ms. Wyderko appears in the Appendix
on page 55.
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I am the Director of the SEC's Office of Investor Education
and Assistance. My office is the front door of the Commission
to all individual investors. Each year, my staff answers tens
of thousands of complaints and questions from investors who
contact the SEC. We attend investor fairs, speak at gatherings,
and we talk with the media about financial education concepts.
We create and disseminate a great deal of neutral, unbiased
information directed at helping people make wise investment
choices and avoid fraud. We don't copyright any of our
materials. We make them freely available in both Spanish and
English.
Our goal is to empower investors, to give them the tools
they need to evaluate their investment options and to make
informed decisions. We maintain a database containing
information on the products, people, and firms about which
people complain. We use that information to inform other
divisions at the SEC so the agency can better deploy its
investigative and enforcement resources and better identify the
next problem down the road.
We use our Website, www.sec.gov, to disseminate all of our
educational materials. Our Website contains interactive tools,
such as our mutual fund cost calculator, which allows investors
to compare the costs of holding different mutual funds over a
period of time that they specify.
We also make it easy to research whether a broker or an
investment advisor has a history of customer complaints or
fraud.
We do realize that many people who are on the Internet
looking for that ``can't miss'' investment opportunity aren't
stopping to read our prudent, sensible advice before investing.
That is why we also run a series of fake investment scams on
the Internet, designed to illustrate the warning signs of
online investment fraud. If you click to invest, you get a
message from us about the necessity of researching before you
invest.
We are also working with public libraries. Libraries are
where many Americans who don't have computers at home go to E-
mail their families and to research their stocks. We are
working to provide reference librarians with the resources they
need to help their patrons effectively research their
investment options.
Our commitment to financial literacy does not stop with our
own efforts. Last year, the Commission entered into a $1.4
billion global settlement of an action against ten leading
investment firms over conflicts of interest between investment
banking and research at those firms. Fifty-two-point-five
million dollars of that money will be paid into a new nonprofit
entity that will fund programs designed to equip investors with
the knowledge and skills necessary to make informed investment
decisions.
While the Federal Government can play an important role in
encouraging financial literacy for all Americans, we can't do
it all. That is why it is so important for us to work in
partnership with other agencies, localities, and private sector
entities that sponsor high-quality financial education.
The SEC is a proud member of the Financial Literacy and
Education Commission, which had its inaugural meeting earlier
this year. We are also a member of the Jump$tart Coalition, the
American Savings Education Council, and the Department of
Defense's Financial Readiness Initiative.
In closing, I would like to thank the Subcommittee Members
for recognizing the importance of the Commission's role in
empowering Americans to make informed financial decisions. I
appreciate your inviting me to speak on behalf of the
Commission and I would be happy to answer any questions that
you may have.
Senator Fitzgerald. Ms. Wyderko, thank you very much.
I just want to clarify one thing. I am not sure if I heard
you correctly. In describing the Commission's efforts on the
Internet, you said that if you put the word ``invest'' into a
search engine, such as a Google search, you will come up with
an actual SEC Website on things to look out for when you
invest?
Ms. Wyderko. We run a series of fake scams on the Internet,
so we have a fake company, McWhortle.com----
Senator Fitzgerald. OK.
Ms. Wyderko [continuing]. And it urges you to invest
quickly in order to become amazingly wealthy. But if you click
to invest, you get a warning message. Watch out. If you had
invested in an opportunity like this, you could have been
taken.
Senator Fitzgerald. I bet you get a lot of hits on that
Website--that fake investment scam--don't you?
Ms. Wyderko. We have a series of fake sites, and yes, we
have had over two million hits thus far.
Senator Fitzgerald. Can you get us more detailed statistics
on how long those Websites have been up and how many people
click on it every day, every week, every month? I would be very
interested in that.
It seems to me that there are a couple angles we could go
at on financial literacy. Most of our government efforts seem
to be focused on just telling people how to manage their own
finances in terms of use of credit, good banking products, and
good mutual fund products. But there is a whole other angle
that I think the SEC is focused on in terms of helping people
preserve their principal, such as not losing it in a scam--and
there are lots of scams out there.
I was a banking attorney before I went into government and
politics and I remember in one bank, there was a Ponzi
operation being run across the street from the bank. Customers
were coming in and the bank was offering maybe 6 percent
interest at the time and the customer said, hey, across the
street they are offering a guaranteed 21 percent return. People
were coming in, and taking their money out.
The bank didn't really know who it was across the street,
but sure enough, after a while, the bank looked into it, and
made a complaint to the authorities. It was shut down. It was a
pyramid scheme. Of course, they were just taking the last money
in, using it to pay somebody who wanted their money out today,
and the proprietors of that operation had absconded with some
$40 or $50 million.
I would say in the Chicago area, every 2 weeks or so, we
read about a new pyramid scheme or Ponzi operation that is shut
down. My guess is only a small number of them are detected.
Some of these go on for years and years before they actually
fall apart.
I also have had the experience years ago in referring some
of those scams to State or Federal regulators, and it does take
a long time for the Feds to be able to shut them down. For me,
when I hear somebody is offering a guaranteed 21 percent, I
just know it is a scam without having to do any research on it.
Is there anything Congress could do to enhance the SEC's
ability to shut these scams down? Sometimes it can be very time
consuming. The defendants can hire lawyers to really delay and
draw it out. Has the SEC ever taken a look at this as to
whether there would be enhanced authorities that Congress could
give you to shut these down?
Ms. Wyderko. I am going to defer to my enforcement division
on an answer to that question. They are going to have to get
back to you. I do investor education and I don't want to speak
for them.\1\
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\1\ The information from Ms. Wyderko appears in the Appendix on
page 69.
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Senator Fitzgerald. I certainly would be interested in
that, if there is anything we could do to enhance your powers
to shut them down. I also think that sometimes these scams are
referred to State securities authorities who are often just
bamboozled and confused by these people and complaints are not
directed to the SEC, which has more resources and more
capability, typically, to handle these complaints. I wonder if
there shouldn't be more of an effort to concentrate consumer
complaints about pyramid schemes and Ponzi operations at the
Federal level as opposed to the State level. I have seen these
guys delay and bamboozle State regulators.
Ms. Wyderko. I think that the State and the Federal
regulators all work together, and so for all intents and
purposes, notifying one of them is as good, I think, as
notifying everyone. We do work together to make sure that
investors are protected, particularly in the area of securities
fraud. I can't speak to other types of fraud.
Senator Fitzgerald. Senator Akaka, would you have some
questions at this time?
Senator Akaka. Yes. Secretary Roseboro, thank you very much
for visiting. We had a good chat the other day.
The Financial Literacy and Education Improvement Act
mandates that the Commission develop a national strategy to
promote financial literacy and education among all American
consumers within 18 months of the date of enactment, which was
December 4, 2003. My question to you is, what actions are being
taken by the Department and the Commission to ensure that this
mandate is met?
Mr. Roseboro. Thank you, sir. The Commission has, since the
first meeting in January, has been working very hard in laying
the foundation to move forward on the statutory agenda of
setting the national agenda. In particular, it has been laying
the foundation in terms of making sure the national agenda is
going to be effective as well as achievable.
On the effective side of the equation, it has been meeting
with numerous public as well as private agencies, basically
soliciting what are best practices, what is working, where are
the synergies among the private as well as public agencies in
terms of achieving the results--I mentioned in my testimony
that the Commission initial set forth and established two
subcommittees, one on the toll-free line and one on the Web--to
gather resources and make access to them more centralized and
more effective.
The Commission is next looking toward a national strategy
in the time table of 18 months. At its next meeting that is
scheduled, it is to form a subcommittee specifically to define
the national strategy with the support that it has garnered
from the actions and we will follow that meeting and going
forth will look forward to communicating with you on how that
is developing.
Senator Akaka. Thank you. Ms. Wyderko, I am concerned that
certain mutual fund advertisements are misleading to investors.
In particular, I am concerned about the use of unsustainable
past performance data, incubator funds and claims about merged
funds. What is the SEC doing to prevent consumers from being
misled by these advertisements and what else should be done to
protect investors from deceptive advertising?
Ms. Wyderko. Well, as you may know, last September, the
Commission adopted amendments to raise the standard for mutual
fund advertising. The amended rules require that in the
advertisements, the investors have to be told that they need to
consider fees as well as objectives and risks before investing.
That is very important information.
The rule also says that the advertisements have to direct
the investors to the prospectus to get information about the
fees and the risks, and the rules require more balanced
information when the mutual funds do advertise their
performance, as well as access to more timely performance
information.
The prior problems have stemmed from untimely, essentially,
performance information, or stale performance information in
those ads, and now they are being directed to allow consumers
to update that information.
Senator Akaka. Ms. Rees, I mentioned in my opening
statement that the Excellence in Economic Education Act is a
program that I strongly believe in. You noted in your written
testimony that the Department's intention to terminate the
program in fiscal year 2005 is consistent with the
administration's policy of terminating small categorical
programs in order to fund higher priorities. How is the
Department defining and distinguishing small categorical
programs from others?
Ms. Rees. Well, our general belief is that States are
better served in being given more freedom and flexibility in
the use of Federal funds so, since taking office, we have made
a strong push towards eliminating most every categorical
program, allowing States to roll those programs into their
funds in programs such as the Title I aid to disadvantaged
students, and to also decide where those funds should be
invested.
We feel that the best thing we can do at the Federal level
in the area of financial literacy is through our work with the
Commission and highlighting the need for more financial
literacy and encouraging States and school districts to then
use their flexibility with Federal funds to make better
investments in the programs that best suit their needs, rather
than to have one small program at the Federal level focused on
a specific categorical area.
Senator Akaka. Ms. Rees, you also mention in your testimony
that, currently, the flexibility exists to allow school
districts to promote consumer economic and personal finance
education through one of the Department's broad formula
programs. Can you quantify for me how many State dollars have
gone toward the promotion of consumer economic and personal
finance education, or how many programs the States have
initiated under this provision?
Ms. Rees. I am happy to take a look at the way States are
using Title V funds to see how they are expending the funds and
see if they are investing in this particular area, but it would
be very difficult, because again, this is a flexible pot of
money. We try not to micromanage what States are doing. But I
am happy to get back to you.
Having said that, the investments we have made in the
Jump$tart program that I just mentioned and in Operation Hope
do indicate that some States are taking steps towards
incorporating financial literacy in their curricula. Some
States, like Pennsylvania, have set standards in this field,
and I think once you have a few States that have paid attention
to this area, more States will follow suit.
Senator Akaka. You also mentioned in your written statement
that you made grants in 2002 and 2003, respectively, to the
Jump$tart Coalition, who will be testifying today on panel
three, and Operation Hope. I believe that the 2002 grant was in
the amount of $250,000. What was the amount of the 2003 grant?
Is the Department committed to making this type of grant
annually, or if so, how will it go about selecting the grant
recipient?
Ms. Rees. The second installment to Operation Hope was also
for $250,000. We don't have any plans to continue funding these
programs. However, we believe that the new program that we
have--the one you have put in place, the $1.5 million program,
is one that a lot of entities that are currently getting money
from us could certainly apply for. We also hope that this
entity will research different methods of teaching financial
literacy so that we gain a greater understanding of how to go
about teaching this subject so that more students are able to
learn the basics of financial literacy.
Senator Akaka. Mr. Roseboro, seeking your advice again,
what lessons should be learned from the American Savings
Education Council's Governmental Interagency Group, and how can
these be helpful with the continuing development of the
Financial Literacy and Education Commission?
Mr. Roseboro. In the beginning, they were started in 1996
as they brought together different Federal agencies involved in
this initiative, as well as those in the private sector, will
give the Financial Literacy and Education Commission and has
given the Financial Literacy and Education Commission a great
base which to start from, depending on reinventing of the
wheel, as it were, in terms of working with the other agencies,
coordinating, being able to move from a networking which was
developed among some of these agencies with their efforts to
delivering tangibles as mandated by the Act, the Commission we
have been working on.
For the last 10 years, Treasury's Office of Financial
Education has been participating with this group. Even prior to
that, one of our bureaus, the Bureau of Public Debt, was active
with the group prior to the Treasury establishing the office.
We wanted to build on what they have set as a standard for us
to start with as they participate, as well, with the
Commission.
Senator Akaka. Thank you. Ms. Wyderko, I know that a series
of additional SEC investor meetings have been discussed to be
held in various locations across the country, including
Honolulu. Could you please provide me an update on the status
of these events?
Ms. Wyderko. We have been discussing with the Department of
Defense hosting town meetings aimed at military families. Last
fall and earlier this year, we were exploring the possibility
of hosting one in Hawaii aimed at the military families who
live in Hawaii. However, during this spring, during the time
period where we were planning this event, Hawaii experienced a
massive troop deployment and the event got postponed or put
off.
But right now, the Department of Defense, we understand, is
rethinking the best approach to informing their service
members, their personnel and families, about financial
education. We continue to stand ready to work with them when
they decide on the best course of action.
Senator Akaka. Thank you very much. Thank you very much,
Mr. Chairman.
Senator Fitzgerald. It just occurs to me that we have many
financial literacy programs across the whole government, and
there are probably many in departments that are not even here
today. I would imagine HUD has programs teaching people on how
to go about buying a home and taking out a mortgage and so
forth. For all of the panelists, do you think it would make
some sense for us to divide up some responsibilities here?
For example, for the Education Department that Ms. Rees
represents, it would seem to make sense that our K through 12
schools focus on some very basic issues like maintaining a
checking account, using basic banking services, and avoiding
excessive credit card debt at young ages. HUD or the Treasury
Department perhaps could focus on different people who at a
later stage in their life are considering buying a home and
taking out a mortgage. The Department could assist them to
avoid paying too many points or excessive interest rates, and
to understand the differences between variable and fixed rate
mortgages. Then leave it to the SEC to focus on securities,
which they do anyway, and how to buy stocks and bonds, using
brokers, and how to buy mutual funds.
Do you think it makes sense for us to divvy up the
responsibilities? Because it seems to me right now there are so
many different agencies involved in some aspect of the issue
that no one is really accountable across the government for
making sure people are educated about basic banking services or
mortgages.
I would say that the SEC probably feels an obligation to
educate the public on securities because that is specifically
their mission. But what do you think about that, Mr. Roseboro?
Mr. Roseboro. It ultimately may, but I would say at this
point it is too early to tell. I would like to have the
Commission have a bit more time to inventory, to work together,
to find out what synergies, what conflicts, what type of
programs, activities can supplement each other. Just from the
perspective of while they are, and I also personally feel
strongly about this, it makes sense in terms of educating K
through 12 on basic economic fundamentals and finance, but
those citizens are going to move into the mainstream and buying
homes, investing, such that issues that concern that group will
concern senior citizens and all the ones in between.
It may not be the optimal structure to partition it, but
to, as the Commission is seeking to do now, have the agencies
work better together instead of going off on individual paths
to development within particular specialties. I think as the
national strategy is developed, that may show the long-time
answer to whether or not that is ultimately the appropriate way
or not the appropriate way to go in terms of fragmenting the
mission.
Senator Fitzgerald. Well, if you would take that idea back
to the Commission, I think that might make some sense, because
right now, nobody seems to be accountable amongst the
government agencies for making sure we are getting the job
done.
We need some more financial literacy on Capitol Hill
amongst our own staffs. I think it was reported recently that
some Capitol Hill staffers had fallen for one of those scam
letters from Nigeria which you see all the time. That is really
kind of frightening that somebody working here in the Congress
was misled. We need more financial education at all levels and
in all strata of our society.
Just back to Ms. Wyderko, one final question. I compliment
the SEC for your new initiatives on trying to clean up the
advertising of mutual funds. Some in the fund industry think it
is almost unethical to advertise past performances. I know John
Bogel, the founder of the Vanguard Group, has always thought
that is very misleading. In fact, there are many studies that
show you that whoever was the highest performing last year, in
the top quartile last year, is likely to be in the bottom
quartile this year. It is the last who will be first and first
who will be last. Just seeing what the performance was last
year is not at all an indicator of what it is likely to be in
future years.
So I compliment you on pointing out that people should
consider fees. But I wonder if you shouldn't encourage people
to look at fees even more than you are now poised to do,
because my understanding is 88 percent of mutual funds
outperform the market and that the single most determinative
factor in deciding how well your funds will do over a lifetime
of investing is fees. The fund industry doesn't want you to
believe that because they live on your fees, and nearly $200
billion a year are being paid to investment advisors on fees.
But one percentage point of fees charged to your mutual fund
will reduce someone's retirement nest egg by 35 to 40 percent
over a lifetime of investing.
Almost all funds underperform the markets. The markets have
averaged at 12 percent return in the last 20 years. Mutual
funds have averaged a 9 percent return during the last 20
years. The disparity between the market return and the funds'
returns is attributable to the fees.
Now, the average mutual fund shareholder has averaged a 2.6
percent return over the last 20 years. That is not all
attributed to the funds' performance. A lot of it is due to
individual investors coming into their mutual funds in the
advanced stages of a bull market, at exactly the wrong time,
and then pulling out when everything collapses. They should do
exactly the reverse. They should go in when things are at the
bottom, and get out when it is in the advanced stages of a bull
market. That is where we need more financial literacy, too.
But I would encourage you to take that message back to the
SEC to emphasize the importance of considering fees even more,
and I would encourage you to go forward with rules you are
considering that would require a dollar disclosure of the fees.
The way the fees are disclosed now is as a percentage of the
assets in your account and they are made to sound like they are
minimal or diminutive, that they don't matter. You are charged
1\1/2\ percent or 1 percent a year. No one knows what that
means.
If there are mandatory disclosures that one percentage
point of fees can dramatically reduce your retirement nest egg
and if those fees were disclosed in dollars and cents, it would
be similar to when a bank takes money out of a bank account,
they have to put it on your statement in dollars and cents. If
they took $30 out last month for a check charge, it appears on
your statement.
Mutual funds take money out of your account all the time
and don't have to disclose it to you except in a prospectus
when you first opened the account and it is in percentage
terms. We take 1, 1\1/2\ percent out a year, and then about
half the expenses aren't disclosed at all. Those are the
transaction expenses. Only about 50 percent of the expenses are
disclosed at all.
So I encourage those at the SEC who are working on reform
to continue those reforms and go even farther. Given that most
Americans are now relying on mutual funds for their household,
college, and retirement savings, I think that is an extremely
important issue.
So with that, I would like to thank you all for being here
and invite the third panel to testify. Thank you all for your
time.
Wait, I was a little bit too abrupt. Senator Akaka has
another question. I am sorry.
Senator Akaka. Thank you so much, Mr. Chairman. I have a
question for Mr. Roseboro and one for Ms. Wyderko.
Mr. Roseboro. Almost got away. [Laughter.]
Senator Akaka. Mr. Roseboro, an estimated $1.75 billion
intended to assess low-income families went to commercial tax
preparers and affiliated national banks for tax assistance,
electronic filing fees, and high costs to refund loans in 1999.
These fees unnecessarily diminish Earned Income Tax Credit
benefits for working families.
Senator Bingaman and I have introduced legislation to
regulate refund anticipation loans, RALs, and expand access to
free tax preparation services. S. 685 would create a grant
program to link tax preparation services with the establishment
of a bank or credit union account. Having an account provides
consumers alternatives to rapid refund loans, check cashing
services, and lower cost remittances.
What is the Treasury Department doing to expand access to
free tax preparation services for low-income taxpayers?
And what is the Department doing to encourage people to
utilize mainstream financial institutions?
Mr. Roseboro. I will go to the former question and the
Treasury Department's support of tax counseling. One of the
IRS's major initiatives in that area is to supply training and
help with a program called the Volunteer Income Tax Assistance
program, which basically is directed at wage earners earning
$35,000 and less in terms of giving help in terms of tax
preparation.
In addition to that, supporting and identifying programs,
private sector programs such as one in Dade County, Florida,
recently we recognized which not only helped in the tax program
preparation, but if someone was getting a refund, took that
opportunity to also encourage them to open up a direct deposit
checking account to savings account, along those lines.
With regard to the latter question in terms of trying to
bring more individuals to the banking system, Treasury's
largest initiative there had to do with the First Accounts
program. As of May 2002, 15 programs were granted a total of
$8.4 million to encourage that type of development and we are
right now in the process of actually seeking someone to do an
evaluation of these programs and their effectiveness to again
identify best practices and where those areas can be most
effective in the future if these programs are to continue.
Senator Akaka. Thank you for that. My final question is to
Ms. Wyderko. I have been impressed by your fake scam Websites.
Despite limited resources, you have taught investors valuable
lessons, and I think that was your intent. Please describe for
the Subcommittee the most memorable inquiry that one of your
sites generated. [Laughter.]
Ms. Wyderko. Well, we have had more than a few investors
send us their bank account numbers, wire transfer instructions,
and credit card numbers. We have had a few complain that our
Website won't take their credit card number.
I personally recall a lengthy conversation with a
psychiatrist from Long Island who could not understand that the
SEC was related to that investment opportunity that he was sure
was terrific.
I think the highlight of our life in crime came last fall
when we were contacted by the venture capitalist from a very
well-known investment banking firm who wanted to get in on one
of our fake IPOs. But more disturbingly, just last week, our
fake hedge fund, GRDI, that is pronounced ``greedy,'' was
contacted and solicited to participate in something called a
capital introduction session. We were promised that the event
would put us in contact with high net worth individuals,
foundations, and endowments. We were, of course, very
interested in learning how much it would cost to get access to
these groups, these investors, but sadly, the promoter must
have clicked to invest before sending us the material.
But it is an interesting lesson. Our fake sites have fooled
the most sophisticated people in industry as well as ordinary
individuals alike. I think that gives you a good understanding
of the depths of the issues that we have to confront when
people are faced with an investment opportunity that just
simply is too good to be true.
Senator Akaka. Thank you very much, Mr. Chairman.
Senator Fitzgerald. Do you ever get anybody referring your
fake Websites to the SEC and say, this must be a scam?
Ms. Wyderko. We certainly do. We have been referred to our
Enforcement Division a number of times and we are thrilled when
that happens, sir.
Senator Fitzgerald. OK. Thank you all for your time.
At this point, we will invite the third panel up to
testify.
I would like to introduce our panelists on the third panel
now and appreciate your patience. You have had two previous
panels to sit through, and so we thank you very much for your
forbearance.
Don Blandin is President of the American Savings Education
Council. The Council was established in 1995 and is a coalition
of public and private sector institutions that undertake
initiatives to raise public awareness about the importance of
obtaining personal financial independence. The Council works
through its partners to educate Americans on all aspects of
personal finance and savings, including credit management,
college savings, home purchase, and retirement planning. Mr.
Blandin serves on a number of boards, including for the
Jump$tart Coalition for Personal Financial Literacy and the
Certified Financial Planner Board of Standards.
Dara Duguay is the Executive Director of the Jump$tart
Coalition for Personal Financial Literacy. The Coalition's
mission is to improve the financial literacy skills of young
adults so they can make informed financial decisions. The
Coalition consists of 150 organizations, including Junior
Achievement, the Federal Reserve, the Credit Union National
Association, Visa, the National Council on Economic Education,
and others.
Previously, Ms. Duguay was the Director of Education for
the Consumer Credit Counseling Service of Los Angeles that
specializes in providing free budget and debt counseling. Ms.
Duguay also is the author of several books on personal finance
and money management.
Dr. Robert Duvall has served as President and Chief
Executive Officer for the National Council on Economic
Education, NCEE, since 1995. The NCEE was founded as an
independent, nonpartisan, nonprofit organization 55 years ago
by business leaders and educators who saw the need to improve
economic and personal finance education in the Nation's
schools. Under Dr. Duvall's leadership, NCEE has grown to be a
preeminent national organization promoting economic and
financial literacy.
Dr. Duvall is recognized as a national and international
spokesman for the cause of improving economic and financial
education as a core component of the K through 12 curriculum.
Prior to joining NCEE, Dr. Duvall was President of Pacific
University in Oregon for 12 years.
We thank all of you for being here today. In the interest
of time, we will include your full statements in the record,
and if you are able, we ask that you limit your remarks to no
more than 5 minutes, please.
Mr. Blandin, you may proceed with your opening statement at
this time.
TESTIMONY OF DON M. BLANDIN,\1\ PRESIDENT, AMERICAN SAVINGS
EDUCATION COUNCIL
Mr. Blandin. Thank you. Chairman Fitzgerald, Ranking Member
Akaka, and other distinguished Members of the Subcommittee, I
want to thank you for the opportunity to appear before you
today to discuss the role the Federal Government can play in
helping Americans understand how to better manage their money
and learn about personal finance.
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\1\ The prepared statement of Mr. Blandin appears in the Appendix
on page 73.
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ASEC works through its partners, as you mentioned earlier,
to educate Americans on all aspects of financial management,
anything from first home ownership to long-term health care to
planning for retirement to sending your children through
college, any aspect of financial education including the wise
use of credit cards.
We were launched in July 1995 following discussion between
the U.S. Department of Labor and the Employee Benefit Research
Institute, our parent organization, who then decided that it
was time to bring the savings message to the American public.
At an event in July 1995 involving the Department of Treasury
and the Department of Labor, ASEC was launched as a public-
private coalition made up of large membership organizations,
financial services firms, as well as many Federal and State
Government agencies to help with the education message. It is a
501(c)(3) nonprofit organization. We do not lobby or take
public policy positions.
As President of ASEC, I have had the unique opportunity and
privilege to work closely with private sector organizations
since 1996 in helping them, what I call ``connect the dots''
among and between the various financial education efforts. As
Senator Sarbanes mentioned earlier, we feel very strongly that
by combining and leveraging our partners' comprehensive
networks and resources, we are able to reach people
collectively who none of us could be able to reach alone.
Education, in our mind, is still key to helping individuals
make changes in their financial behavior and we fully support
any initiative to forward this mission that we all share.
First and foremost, I would like to commend the creation by
the Congress of the Financial Literacy and Education
Commission. I attended the Commission's first meeting in
January and it was reassuring to see so many heads of agencies
and their key staff participating in the meeting and showing
their support for and commitment to the Commission's work.
Additionally, I would like to commend the Congress for
enacting the Financial Literacy and Education Empowerment
Improvement Act. This document is comprehensive and well
thought out and clearly lays the groundwork for the
Commission's work, including points at which that work will be
measured by independent agencies.
The American Savings Education Council looks forward to
helping the Commission meet all of its goals and objectives.
At ASEC, our goal is to bring together organizations and
groups that might not normally be at the same table, but that
clearly should be at the same table. From the beginning, we
recognized the important contributions and efforts of each of
our government partners. As a matter of fact, two Federal
agencies were integral in helping to launch ASEC, Treasury and
Labor.
In an attempt to facilitate coordination and open the lines
of communication between our Federal Government partners, in
1996, we created the ASEC Government Interagency Group, or GIG,
as it has been commonly referred to. GIG meetings take place
every 2 months and are coordinated and co-convened jointly by
ASEC and the Department of the Treasury Bureau of the Public
Debt. Representatives from approximately 12 Federal agencies
have regularly participated in these meetings over the last 8
years and GIG meetings are informative and informal and serve
as a highly effective information clearinghouse.
We feel that three factors greatly contribute to the
success and longevity of GIG. One, a commitment by our partner
organizations to attend the meetings. Over time, attendees have
gotten to know each other very well, having a real feel for
what each organization can bring to the table, and work well
together.
Two, it is a trusted, non-threatening forum for information
exchange. People are very comfortable sharing their ideas and
opinions, asking for assistance and counsel, and providing
materials and support to assist each other's events and
initiatives.
And finally, three. It has provided effective time
management. A lot of work can be accomplished in a short period
of time. For example, ASEC updates all the agencies about
upcoming opportunities and events at local, State, and national
levels and agency representatives are quick to express an
interest and offer their assistance and input on various
projects.
GIG attendees leave the meetings knowing what all the other
agencies are doing in the area of financial education, and
those seeking assistance with a project usually come out with
valuable contacts of people and agencies willing to immediately
help. Overall, it is truly a win-win situation for everyone.
However, despite our efforts to coordinate our work and
explore all possibilities in pushing the savings education
message, we still face major challenges. First, it is very
challenging to engage the public about the importance of saving
and planning for their future when many people are not
receptive to hearing the message.
We have all tried to reach out to individuals through
public service campaigns, educational materials and Websites,
meetings, and seminars. Those we are able to reach are small
segments of the population. Millions of Americans remain
laxidasical about their financial planning approach. To borrow
from Aesop's Fable about the grasshopper and the ant, we seem
to be dealing with a lot more ``live for today'' grasshoppers
than ``plan for tomorrow'' ants. Millions of baby boomers are
expecting to retire in the near future, but our research shows
that many are inadequately prepared to support themselves
financially in retirement.
Second, we are not seeing enough coordination and outreach
among groups that are very involved in this issue of financial
education. Organizations are more apt to create their own
campaign or event, even reinvent the wheel, rather than
collaborate on programs and initiatives that will have the
biggest impact. The potential with this new Commission exists
for public and private sector organizations to align themselves
under one massive, far-reaching umbrella, financial education
campaign.
Finally, the Congress and the President have an opportunity
in 2005 to build added momentum and coordination when the Third
White House and Congressional Summit on Retirement Savings will
be held, as called for by the SAVER Act, Savings Are Vital to
Everyone's Retirement Act of 1997. Previous summits in 1998 and
2002 provided an opportunity for hundreds of delegates to work
together to design the educational initiatives that can make a
difference. For example, the SAVER Summit endorsed the ``choose
to save'' television and radio PSA program. We are in its
seventh year, which now lands in 49 States.
What we know from the summits and from the many partners of
ASEC is that there are many organizations and individuals truly
committed to helping Americans become financially literate and
even savvy about money management. That is the topic that
touches all of us and will have a lasting effect on future
generations.
We believe that the Commission can help the President and
the Congress with the agenda for the 2005 SAVER Summit and thus
be able to mobilize a larger group of Coalition members
nationally at all levels and reaching all social and economic
incomes for all Americans in the years ahead.
As an entity made up of government agencies, we feel that
the Commission will be able to achieve its goals if they are
able to coordinate the limited resources that are already out
there within both the public and the private sector.
As I said at the beginning of my testimony, by reaching out
to groups and organizations at all levels, we will be able to
achieve greater things collectively than any of us would be
able to do alone. Thank you very much for your time.
Senator Fitzgerald. Thank you, Mr. Blandin. Ms. Duguay.
TESTIMONY OF DARA DUGUAY,\1\ EXECUTIVE DIRECTOR, JUMP$TART
COALITION FOR PERSONAL FINANCIAL LITERACY
Ms. Duguay. Thank you, Chairman Fitzgerald and Ranking
Member Akaka for this opportunity to testify today, and thank
you also for the opportunity to speak extemporaneously, which I
prefer, so I will try to go through my notes in a quick
fashion.
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\1\ The prepared statement of Ms. Duguay appears in the Appendix on
page 77.
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I am the Executive Director of the Jump$tart Coalition, and
when I moved to Washington, DC, in 1995, the Coalition had
about a dozen members. And here we are now in 2004 and we have
150 national organizations. Almost all of the members of the
new Commission are members of the Jump$tart Coalition, so they
have been involved in our effort and most of them are on our
Board of Directors, also. They have been involved since the
very beginning. We also have financial corporations, many
nonprofit organizations, and associations together.
The main commonality is that they are all interested in
promoting financial literacy for youth, K through college. So
my comments today are really going to be directed more toward K
through college and K through 12, specifically, education
policy and how I feel the Commission can help in that regard.
I think the main reasons that the Commission was formed is
we look at surveys that have been conducted showing their dire
financial literacy results, and the Jump$tart Coalition
conducted our first survey in 1997. It was a survey conducted
in public high schools of high school seniors. We gave them a
31-question test to find out what they knew about the basics in
money management, checking, saving, and investing, and the
average score was an F, a 57 percent.
Unfortunately, every 2 years, we have been readministering
this test and the score has gone down. In 2000, it went down to
52 percent. In 2002, it went down to 50 percent. Our 2004
results, I cannot release them today, I will be breaking
embargo, but please stay tuned. In 2 days at the Federal
Reserve at 10:30 in the morning, we will have our press
conference with our 2004 results. This is a huge survey. Four
thousand high school seniors have been surveyed. And although I
can't tell you the results yet, I can tell you that we are
still not encouraged that high school seniors are graduating
with the skills that they need to make wise decisions in the
marketplace.
Let me give you some results from the 2002 survey, just the
highlights. Sixty-eight percent of the high school seniors had
failing scores on the survey. Keep in mind that the high school
seniors, when they reach the age of 18, of course, they are
legally responsible for these financial instruments. But we
found that their average score, again, was just 50 percent,
which on a basic grading scale is considered an F.
And so we look at the fact that this score is in light of
the fact that also a third of high school students have access
to a credit card. Even a higher percentage have access to an
ATM card. And when we look at statistics that are showing the
bankruptcy filings for those in the 18 through 25 year-old age
bracket, numbered 150,000 in the year 2000. This, in terms of
the total number of bankruptcy filings, is a small percentage,
but we have to keep in mind this was a ten-fold increase in
just 5 years. So this is extremely disturbing to us in terms of
the number of young adults filing something as drastic as a
bankruptcy.
The Jump$tart Coalition is deeply committed to the works of
the Commission because we believe in what it is all about and
in its essence because we also believe in not reinventing the
wheel. That is one of the main missions of Jump$tart, is to
collaborate, to network, to make sure that other members of the
Coalition are not duplicating exactly what other members are
doing. We feel that this is a waste of resources. We feel that
through teamwork and collaborating together as a solid entity,
we as a coalition, as Mr. Blandlin also explained, coalitions
take their strength from its membership, doing as a group what
any single individual organization could not do on their own.
So in that regard, the Coalition has offered the Commission
already access to a wide variety of personal finance tools that
we have developed over the years and I just wanted to highlight
a few of them.
Number one, we have a wide, enormous variety of educational
materials listed on our Website. We have been identifying and
evaluating. We don't list anything that exists. It must pass
our quality standards. So our online database of curricula for
kindergarten through college currently has over 600 listings.
You can search by age, you can search by subject, you can put
in a key word like ``bankruptcy.''
You can also search by free. At last count, about a third
of the materials listed in our site have absolutely no cost
whatsoever. So one of the biggest push-backs we hear from
school districts is, we are broke. We have no money. We say,
look, there are many free resources that are available.
And so keep in mind that this clearinghouse, we would love
the Commission to link to. It is a database that we have wide
access to already. We encourage our membership to advertise and
publicize the existence of this clearinghouse. And we also
don't want people to reinvent the wheel by creating something
that we have been now creating and evaluating for over 7 years.
The second tool that we have is something that is going to
prove to be, I think, very important. One of the mantras that
we are hearing now as a consequence of No Child Left Behind is
that assessment is critical in K through 12 education. If it is
not tested, it is not taught.
And so what we decided to do is, in addition to our
standards that Ms. Rees from the U.S. Department of Education
referenced earlier, we have developed, or we are in the
process--we hope to have this whole process completed within a
month--of developing an assessment. This is going to be a test
bank of almost 1,000 questions at the high school level that is
going to be linked to these standards.
But particularly, we would like this assessment test bank
to be given, again for free, to assessment directors around the
country, at State Departments of Education, at large local
school district levels that are in the process of developing
assessments for other disciplines and say, listen, if you are
developing the math assessment, can you take a couple of these
thousand questions. Many of them are computation examples. If
they are figuring out compound interest, it is a multiplication
exercise.
And please put them into a test because that is the reality
in education policy today. If it is not in the standards, if it
is not tested, you can have the best curricula in the world and
it will never ever get into the classroom. So these are just
some of the realities that we see today in education policy.
And then finally, we felt the need to develop a series of
best practices. The first set of best practices that a task
force has developed is in curricula. Best practices is, in
essence, what works, and we have a wonderful document on our
Website which we have shared with all the Coalition members
that are creating curricula all the time, and it just basically
lists things like obvious things, must be accurate, must be up
to date, and then things that are not so obvious, such as must
have connectivity to the school's Internet system and so forth,
but basically a compilation of what works in terms of producing
curricula so that the curricula that is out there is of the
highest quality.
Really, the problem in this country is not lack of supply.
With our 600-plus items in our clearinghouse, many of which are
just fantastic materials, the problem is not lack of supply.
The problem is lack of demand. Our 2002 survey found that only
15 percent of students in this country graduate from high
school ever having received financial education while in
school. We find that many of them don't learn from their
parents if it is a taboo subject, or it is the situation of the
blind leading the blind. Parents have never learned themselves,
or if your parents have filed bankruptcy for the third time,
are they the best teachers to show you how to use credit
wisely.
So we find that schools are one of the best places for kids
to learn, because if they don't learn there and they don't
learn at home, by default, they are learning in the school of
hard knocks, and they always say the school of hard knocks has
a very high tuition, so we definitely don't want them to learn
there.
And so these are just some of the recommendations, in
closing, to the Commission where I think that they can be
extremely effective when we talk about education policy in this
country.
I wanted to share with you one of the positive--so far, I
have talked about some of the negative results of the survey. I
want to talk about a positive trend that we have been seeing in
the last 2 years, especially last year and this year. In 2003,
six bills were passed on a State level, and in total, 27 bills
were introduced requiring some kind of inclusion of personal
finance in the K through 12 curricula. We are very excited by
this resultant success of the bills, because in the past, there
would be a bill introduced here and there and they would always
fail. So the fact that six bills passed, we think is incredibly
exciting.
Just to give you one example, the State of Utah passed a
bill that is requiring as a mandate that every high school
student must have a course in personal finance. So this, to us,
is very encouraging. Now we can actually get the doors open and
get the curricula into the classrooms.
We have also seen that there is an incredible amount of
increase in teacher training, because it is not enough to just
give a teacher a material and say, teach this. We have to
remember that most teachers feel very uncomfortable teaching
this subject. Again, it is in many cases the situation of the
blind leading the blind. So we have found through many of
Jump$tart's members that offer teacher training and through our
vast State coalition network, we have been able to conduct
statewide teacher training in 18 States last year and we had
representation by many State treasurers, attorney generals,
governors, first ladies, that came in attendance to these
statewide teacher training to make sure the teachers get up to
speed.
So I feel that legislative record last year, in addition to
so far this year, we found that there has been a wide plethora
of bills already introduced, in fact, 17. And if you are
interested, Jump$tart's Website, jump$tart.org, has a whole,
very accurate, up-to-date legislative section that lists all of
these bills. So, so far this year, 17 bills, resolutions,
proclamations have been introduced on the State level. We think
this is an incredible area and we hope that the Commission will
applaud these efforts.
Second, we would like for the Commission to urge the
inclusion of personal financial standards into the standards of
other disciplines. Personal finance is not a separate
discipline unto itself. Therefore, it is the stepchild. It has
to piggyback onto economics or math. Currently, it piggybacks
in many cases onto business or family and consumer science,
which in many States are electives and not required classes. So
the more that we can include personal finance into classes like
economics or math that are more required disciplines in more
States, so much the better. So the more that the Commission can
encourage the inclusion of our standards, especially the U.S.
Department of Education, this would really help our efforts.
And then finally, I have been at, I would say half-a-dozen
financial literacy symposia over the last 2 years and the
audience is usually packed. But what we found is that the
groups that are missing in the audience are really the key
education groups in the country. We are missing education
associations. We are missing the State Departments of
Education. We are missing involvement from the educators.
What I feel is one of our greatest challenges is that we
have a gap that exists between the financial institutions, the
nonprofit, the government agencies that are true believers in
this cause, and there is a chasm between those groups and the
education policy makers that are really the ones that are
responsible for helping with all of the integration of personal
finance into their curricula.
So if we can somehow figure out how to close this gap, I
think if the Commission can encourage more involvement with the
State Departments of Education, we find that in the States
where legislation is pending that they are fighting our efforts
in many cases. And in many cases, their fears are unfounded.
They think it is going to cost money to buy the curricula or
money to train the teachers, and we have proved that in States
where legislation has passed, this is not the case.
So if we can close the gap, I guess that is my last and
final hope, that if the Commission can help us in that regard,
and I was encouraged by Ms. Rees's comments, that she said that
would be the way that the U.S. Department of Education could
help the most, and really, that will be the most beneficial
way, is to spread the word about the importance of financial
education and urge their adoption and also promotion of this
issue. So thank you very much for the opportunity to testify
today.
Senator Fitzgerald. Thank you very much, Ms. Duguay.
With Senator Akaka's permission, I would like to turn the
gavel over to him now. I have another appointment I am going to
have to run to, but I appreciate Dr. Duvall's contribution to
this hearing. I am sorry I have to go, but we have your written
testimony. I am going to turn the gavel over to Senator Akaka,
and you can go ahead and deliver your opening statement. Thank
you all very much.
TESTIMONY OF ROBERT F. DUVALL,\1\ PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL COUNCIL ON ECONOMIC EDUCATION
Mr. Duvall. Thank you, sir, for the opportunity. Senator
Akaka, we have been together before and it is an honor for me
to have this opportunity and particularly to be the clean-up
hitter in an obviously timely and important hearing.
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\1\ The prepared statement of Mr. Duvall appears in the Appendix on
page 82.
---------------------------------------------------------------------------
As Senator Fitzgerald said, you have my written testimony
for the Subcommittee and I just want to say that, with the
others, I appreciate very much what this testimony means, what
this series of testimonies means in terms of giving focus to a
very important issue.
The National Council on Economic Education, the NCEE, was
formed 55 years ago after the Second World War by a group of
business leaders and educators who saw the GIs pouring back
into the workforce after the war and saw a growing number of
high school graduates and college graduates entering the
workforce and realized that too many of them did not have a
clue about how the economic system worked that they were going
to work in.
So we were given the mission, the charge of trying to
improve on that situation by following the very strategies that
have been enumerated by my colleagues--setting standards,
teaching the teachers how to make economics and personal
finance come alive in the classroom, and arming those teachers
with good materials and resources, doing assessment and
evaluation and follow-up so that you could see results, and
then enunciating those best practices for others,
communicating, getting the word out, serving as both an
advocacy group for the importance of the issue and a service
provider in terms of making available resources for teachers
that could make a difference in the schools.
One way to make a real and lasting difference, we believe,
in the lives of young people, and indeed of all Americans, is
to teach the teachers how to make economics and personal
financial decisionmaking skills seem relevant to them and
useful in their lives. Too many people think that economics is
what they do in Economics 101 at MIT, not what you do when you
are making basic, practical decisions. Getting the principles
of economics into the curriculum, cost-benefit analysis, supply
and demand, opportunity cost, things that you can use as a
framework for making good decisions in your life, opens the
door and sets the stage for making good personal finance
decisions.
In many ways, personal finance is the entre to learning
something about economics that you can use in your life all
your life as a responsible citizen and informed consumer. It is
also the result of knowing some good basic economic principles.
So we try to work to respond to the local and regional
needs and interests of the States and of the school districts
through a unique nationwide network of State councils and
university centers. That is how we get to the teachers. The
teachers come to our more than 200 university centers for
teacher training in using these materials and infusing them
into the curriculum.
Still, too many high schools do not offer economics as a
stand-alone subject, let alone, as Ms. Duguay said, personal
finance. The trick is to get it into the social studies and
into history and geography and into mathematics. We have
produced a curriculum in economics and math, Connections for
Life, which is an example of the way in which you can get basic
principles into the curriculum in many subject areas. I don't
believe you can talk about U.S. history and the Boston Tea
Party if you don't say something about taxation and how it
works, and that is our approach to this question.
What we need is a strategy and support for seeing not only
that the life skills of economics and personal finance are
taught, but that they are taught well. What we know is that
well-prepared teachers instill in our young people a sense that
they themselves are future stakeholders, decisionmakers, and
movers of the American economy. By teaching the teachers, we
and other organizations can help equip them to teach economics
as a stand-alone subject and to weave it into other subject
areas K to 12.
The question that has come up today, the focus of this
hearing, is what can Congress do? Let me respectfully commend
two actions that will have impact on the issue, actions already
referenced by others giving testimony, as a kind of concluding
note.
First, we urge that attention be paid to ensure that the
Financial Literacy and Education Commission go forward to
develop and produce a real national strategy to coordinate
Federal financial literacy efforts. Get as much public
participation as possible and encourage public-private sector
partnerships.
We believe it is important for the Commission's charge to
be implemented and for its work to be proactive. Coordination
and coherence are essential to enable us all to go forward in
financial literacy efforts, especially with the 2006 first-ever
National Assessment of Educational Progress, the NAEP
assessment in economics, coming up, the report card on the
Nation.
Second, Congress has recently implemented your modestly
funded but important program that will go a long way to improve
K to 12 economic education. The 2004 Consolidated
Appropriations Act did provide $1.5 million for Excellence in
Economic Education seed money, and we hope that your efforts
and the efforts of other Senators to promote that and to carry
it forward will succeed, and we offer you all possible support
from the National Council on Economic Education and from our
nationwide network of affiliated councils and centers.
In conclusion, on behalf of the National Council on
Economic Education, let me say that we are very pleased that
the Subcommittee is focusing on economic education and
financial literacy, especially the work ahead for this
Commission. I have been very interested in listening to the
testimony today, because we believe that effective and
effectively teaching practical economics and personal finance
and personal financial decisionmaking skills is not only vital
to an individual's success and well-being, but will ultimately
contribute to ensuring a strong national economy. Thank you
very much.
Senator Akaka [presiding]. Thank you very much, Dr. Duvall.
I want to thank all of you for your testimony.
Mr. Blandin, please provide the Subcommittee with your
assessment of the Department of Defense's Financial Readiness
Campaign. This is a question I directed to our witness from the
SEC. I know that a series of additional SEC investors' town
meetings have been discussed to be held in various locations
across the country, including Honolulu, and as I asked on that
question, could you please provide me with an update on the
status of these events?
Mr. Blandin. Certainly, I will try to. As you know, the
Department of Defense is one of our partner institutions and we
worked very closely with the DOD in the establishment of the
Financial Readiness program, which we think is very much needed
and very welcome as a coordinating activity within the
Department of Defense among the various uniformed services.
You probably also know the uniformed services have had
financial education initiatives for many years. The one that I
am most familiar with is the Department of the Navy, which for
over 20 years has been teaching recruits, enlistees, young
service members, the basic principles of learning to save and
spend and earn money and invest it. That program has been going
on for almost 25 years now.
There has been also, obviously, activities in the Army, the
Navy, the Air Force, the Coast Guard, the Reserve and others,
the Air Force in particular that I am familiar with.
As I said, the Department of Defense's Financial Readiness
Initiative is to make sure that all of the men and women who
serve our country have the educational tools available to them
to better manage their day-to-day personal finances. I think
the last thing we want when we are asking those men and women
who could be defending our country is to have them be worried
about financial issues at home.
And so what we are trying to do is go out to the various
military bases and try to get them at a time when they are
receptive to educational programs, not necessarily the time
they are being deployed to another part of the world, but
certainly in the time when they are home on base and can attend
workshops and learn the basic skills that they might not have
learned, as Dara said, in high school and in other more formal
educational settings.
We are also taking the great model that we have been very
much a part of over the years of the SEC investor town meeting
and doing a variation of that to see if we can fine-tune it and
make it very targeted to military families, particularly those
spouses who stay at home when the man or wife is out--the
husband or wife is out on deployment, in the situation where
the family is split up, yet the bills keep coming and financial
decisions need to be made for both the short term and the long
term.
So what we are doing, as Susan Wyderko said, is working
closely with the Department of Defense to see if we could
design essentially an educational fair, a savings and
investment opportunity, educational opportunity for those men
and women in our military who serve us both in difficult times
and at times when we hopefully will get to when it is not so
difficult and there will be more peace.
Senator Akaka. Ms. Duguay, last year I enjoyed learning
about the numerous private and governmental efforts to help
increase financial literacy during the Financial Literacy for
Youth Day held on the Hill last April. Can you please describe
this year's Financial Literacy Day for the Subcommittee, I
believe which will be held on April 22?
Mr. Duvall. Sure. The event this year, we are hoping that
we will get at least equal the participation of last year,
which was very good. We hope we will either get equal or
increase the population.
But primarily, the format is to have staffers on the Hill
come and be able to see all of the different financial literacy
programs, curricula, and initiatives that will be exhibited.
So far, we have invited all of the Jump$tart Coalition
members to attend this day. Where is Marissa? She has the grid.
I gave it to her earlier. But I think there are about 22
organizations so far that have said they wanted to exhibit at
this event. So this is more than last year.
There she is. She heard her name. You will say, well, I
don't know if she gave me the spreadsheet or not, but suffice
it to say we have very good participation this year.
The format last year was having presentations by yourself
and some other noted dignitaries and really talk about the
issue of financial literacy. So I believe that was an extremely
informative day and I can't imagine that this year will not
surpass the success of last year's.
Senator Akaka. I must tell you that last year, I was
pleasantly surprised at the materials that were available and
the interest that people had in it. I am looking forward to
this one with more agencies involved. I am sure there will be
better materials all around, but it really was a great exhibit
for me.
Dr. Duvall, you recall history very well when men were
returning from the wars and had to face the unknown. I was one
of them, and I have got to thank God for the GI Bill, which
helped to educate many of us. We learned a lot, but I must
admit that there was no focus on financial literacy at that
time. It was just to get a good education, and we struggled
along. But this time we are wiser and I hope that we will give
the focus that is needed towards financial and economic
education.
I want to thank NCEE for all of its efforts over the past
55 years, all that you have done and others have done in
bringing attention to that need. We are going to make every
effort to join you in doing this.
I look upon what we are doing here today and what we have
done last year as a springboard to better things in the future.
You have expressed many good ideas and programs that can be
done in the future to help to bring this about. We are no
longer saying financial literacy for youth, but it is financial
literacy for everybody, and a Financial Literacy Day event, as
well.
So I am wondering, Dr. Duvall, if you could give your
thoughts about the role that the Federal Government can play to
support States and local agencies so that what we know about
economics and personal finance can be effectively translated in
the classroom.
Mr. Duvall. Well, we are making some progress, Senator, as
you pointed to. Several years ago, there were fewer than 30
states that included economics in their State education
standards. Today, it is 48, and we are going to get those last
two as soon as I can go out of this room.
There is a growing awareness of the need for financial and
economic literacy, that that literacy is very much as important
for successful lives of individuals and for communities as
literacy in mathematics or literacy in reading or literacy in
technology.
I think the Jump$tart Coalition, of which we are a founding
member, has helped enormously to put the spotlight on the need
and then to show how that need can be better met. So there is
increased public consciousness, and the Federal efforts can
continue to do that.
Two years ago, the National Council on Economic Education,
together with the Federal Reserve, put on the first National
Summit on Economic and Financial Literacy. Senator Sarbanes was
our keynote speaker. The call to action at the end of that
summit was for a national commission to take a look at how our
efforts could be coordinated starting at the Federal level, but
then going out into the States and into the education systems
of the country.
We are off to a good start with this Commission and with
others who have expressed that hope. I believe the Commission's
work can help set the pace for better coordination, which means
better concentration on the issue in the States.
So the government can provide leadership. The government
can provide support, such as funding for the Excellence in
Economic Education Act, recognizing that economics, including
personal finance, is one of the ten core subject areas in No
Child Left Behind. We can continue to push that from the
Federal level while having it enacted and acted upon by the
States according to their individual circumstances and State
standards and requirements.
Senator Akaka. Mr. Blandin, in your statement, you
mentioned that you are not seeing enough coordination in
outreach among groups that are very involved in financial
education and that organizations are more apt to create their
own campaign or event rather than collaborate on programs and
initiatives that have the biggest impact.
My question is, what should be done to facilitate increased
coordination and collaboration amongst financial education
organizations?
Mr. Blandin. Well, first, let me say what could be done and
then maybe give you some examples of what probably needs to be
done more. What could be done is that this whole national
Commission, once it feels that it has lined up the various
Federal agencies that sit around its table and possibly invite
a few more in that aren't at the table right now, get their
efforts coordinated in a way where they are targeting specific
areas of need. They are finding and looking at the right agency
with the right skill set to help in that area, and that they
are meeting on a regular basis to compare how they are doing in
terms of making progress.
Once the Commission has been able to organize the Federal
agencies and hopefully bring in some of the State agencies, as
well--Susan Wyderko mentioned the States securities regulators,
many of whom have their own financial education offices--so
reaching out to, say, State securities regulators, reaching
certainly out to State treasurers who are in many cases
managing the State's major pension fund for the citizens of
that State. There are a lot of what I call stakeholders in this
area that could be brought together.
So once the government has kind of gotten its act together,
and I also want to add to that some of the things that you have
done, Senator Akaka, including the upcoming event here on the
Hill, I think before Federal agencies and Congress go out
telling others what they should be doing in the financial
education, it is good to see that some agencies and the
Congress are bringing educational programs to their own
staffers.
The Federal Reserve Board, under direction from Chairman
Greenspan, is doing internal financial education for the
employees. The Office of Personnel Management is working with
other Federal agencies to promote financial education in the
Federal workforce. The SEC is having an internal program. So I
think it is good that before we go out and tell other sectors
what to do about financial education, that the Federal
Government and other government entities get their act
together.
Having said that, there are tremendous opportunities for
public and private sector partnerships. One example I would
give where I think there needs to be more coordination is this
idea of new public service announcements. The Ad Council up in
New York has an initiative underway to try to fund for the
first time a financial literacy campaign. That campaign, they
are looking for private sector contributions from the financial
services industries.
I would ask the question, well, how does that campaign link
to what is being planned by the Department of Treasury through
the National Commission on Financial Education and Financial
Literacy? Are they at all related? Is the Ad Council and the
private sector talking to anyone in Treasury? And then the
basic question is, do we need more public service
announcements? Do we need more PSAs? Is that the most effective
use of our money? I think that question has to be asked, as
well.
So I really think that the Commission can generate the kind
of discussion among the various sectors, whether it is
nonprofit, private sector, governmental sector, what is called
the independent sector, the faith-based sector, whatever the
sector is, get them at the table together with the Federal
Government kind of showing a vision of where we ought to be
going and also giving some credit to those in the private
sector who are doing a lot of this good work, as well. I think
that we have an opportunity with this new Commission to do
that. It is that umbrella I talked about earlier in my
testimony.
Senator Akaka. I want to thank all of you for your
enthusiastic responses and your dedication to the effort and to
tell you that I really appreciate your attendance here today.
Senator Fitzgerald and I want to thank our witnesses for
being with us today to discuss this, for us, very important
subject. The hearing record, I want you to know, will remain
open until the close of business this Friday, April 2. If any
Members of this Subcommittee wish to submit a written
statement, they must do it by that time.
I would like to insert into the record a written statement
submitted by Kathy Cloninger, Chief Executive Officer of the
Girl Scouts of the USA.\1\
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\1\ The prepared statement of Ms. Cloninger appears in the Appendix
on page 87.
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I would also like to insert a statement from Visa USA,
Inc.,\2\ which has been submitted for the record.
---------------------------------------------------------------------------
\2\ The prepared statement of Visa USA, Inc. appears in the
Appendix on page 89.
---------------------------------------------------------------------------
Senator Akaka. If there is no further business to come
before this Subcommittee, this hearing is adjourned.
[Whereupon, at 5 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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