[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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                   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

                              ----------                              


                        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.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Sarbanes appears in the 
Appendix on page 43.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Stabenow appears in the 
Appendix on page 45.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Roseboro appears in the Appendix 
on page 48.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Rees appears in the Appendix on 
page 51.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Wyderko appears in the Appendix 
on page 55.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
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    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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