[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
IMPROVING FINANCIAL LITERACY: WORKING
TOGETHER TO DEVELOP PRIVATE SECTOR
COORDINATION AND SOLUTIONS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 28, 2006
__________
Printed for the use of the Committee on Financial Services
Serial No. 109-124
U.S. GOVERNMENT PRINTING OFFICE
31-553 WASHINGTON : 2007
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
RON PAUL, Texas JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
JIM RYUN, Kansas GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut JOSEPH CROWLEY, New York
VITO FOSSELLA, New York WM. LACY CLAY, Missouri
GARY G. MILLER, California STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota JOE BACA, California
TOM FEENEY, Florida JIM MATHESON, Utah
JEB HENSARLING, Texas STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida AL GREEN, Texas
RICK RENZI, Arizona EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas GWEN MOORE, Wisconsin,
TOM PRICE, Georgia
MICHAEL G. FITZPATRICK, BERNARD SANDERS, Vermont
Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California
Robert U. Foster, III, Staff Director
Subcommittee on Financial Institutions and Consumer Credit
SPENCER BACHUS, Alabama, Chairman
WALTER B. JONES, Jr., North BERNARD SANDERS, Vermont
Carolina, Vice Chairman CAROLYN B. MALONEY, New York
RICHARD H. BAKER, Louisiana MELVIN L. WATT, North Carolina
MICHAEL N. CASTLE, Delaware GARY L. ACKERMAN, New York
EDWARD R. ROYCE, California BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
SUE W. KELLY, New York LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas DENNIS MOORE, Kansas
PAUL E. GILLMOR, Ohio PAUL E. KANJORSKI, Pennsylvania
JIM RYUN, Kansas MAXINE WATERS, California
STEVEN C. LaTOURETTE, Ohio DARLENE HOOLEY, Oregon
JUDY BIGGERT, Illinois JULIA CARSON, Indiana
VITO FOSSELLA, New York HAROLD E. FORD, Jr., Tennessee
GARY G. MILLER, California RUBEN HINOJOSA, Texas
PATRICK J. TIBERI, Ohio JOSEPH CROWLEY, New York
TOM FEENEY, Florida STEVE ISRAEL, New York
JEB HENSARLING, Texas CAROLYN McCARTHY, New York
SCOTT GARRETT, New Jersey JOE BACA, California
GINNY BROWN-WAITE, Florida AL GREEN, Texas
J. GRESHAM BARRETT, South Carolina GWEN MOORE, Wisconsin
RICK RENZI, Arizona WM. LACY CLAY, Missouri
STEVAN PEARCE, New Mexico JIM MATHESON, Utah
RANDY NEUGEBAUER, Texas BARNEY FRANK, Massachusetts
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
MICHAEL G. OXLEY, Ohio
C O N T E N T S
----------
Page
Hearing held on:
September 28, 2006........................................... 1
Appendix:
September 28, 2006........................................... 41
WITNESSES
Thursday, September 28, 2006
Beck, Ted, President and CEO, National Endowment for Financial
Education...................................................... 13
Brobeck, Stephen, Executive Director, Consumer Federation of
America........................................................ 29
Chernow, David S., President and Chief Executive Officer, JA
Worldwide...................................................... 11
Cripe, Julie, President and COO, Omnibank (Houston, TX), on
behalf of American Bankers Association......................... 22
Kittell, Donald D., Executive Vice President, Securities Industry
Association.................................................... 28
Kittle, David G., President, Principle Wholesale Lending, Inc.
(Louisville, KY), on behalf of the Mortgage Bankers Association 24
Pollack, Frank, President/CEO, Pentagon Federal Credit Union, on
behalf of National Association of Federal Credit Unions........ 31
Sorgatz, Carl, CEO, Hawthorne Community Credit Union
(Napersville, IL), on behalf of Credit Union National
Association.................................................... 26
Walter, Elisse B., Senior Executive Vice President, Regulatory
Policy and Programs, NASD...................................... 9
APPENDIX
Prepared statements:
Bachus, Hon. Spencer......................................... 42
Hinojosa, Hon. Ruben......................................... 45
Waters, Hon. Maxine.......................................... 48
Beck, Ted.................................................... 52
Brobeck, Stephen............................................. 74
Chernow, David S............................................. 80
Cripe, Julie................................................. 83
Kittell, Donald D............................................ 102
Kittle, David G.............................................. 116
Pollack, Frank............................................... 123
Sorgatz, Carl................................................ 138
Walter, Elisse B............................................. 151
Additional Material Submitted for the Record
Bachus, Hon. Spencer:
Statement of America's Community Bankers..................... 160
Statement of the North American Securities Administrators
Association, Inc........................................... 164
Hinojosa, Hon. Ruben:
Text of H. Res. 973.......................................... 168
Letter from the Financial Services Roundtable................ 171
Letter from the U.S. Hispanic Chamber of Commerce............ 173
Letter from Kirk W. Francis, on behalf of the Financial
Planning Association....................................... 174
Letter from the Financial Planning Association............... 175
Dear Colleague Letter regarding co-sponsoring H. Res. 973.... 176
IMPROVING FINANCIAL LITERACY: WORKING
TOGETHER TO DEVELOP PRIVATE SECTOR
COORDINATION AND SOLUTIONS
----------
Thursday, September 28, 2006
U.S. House of Representatives,
Subcommittee on Financial Institutions
and Consumer Credit,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:01 a.m., in
the Rayburn House Office Building, Hon. Spencer Bachus
[chairman of the subcommittee] presiding.
Present: Representatives Bachus, Biggert, Sanders, Maloney,
Moore, Carson, Hinojosa, and Baca.
Mrs. Biggert. [presiding] This hearing of the Subcommittee
on Financial Institutions and Consumer Credit will come to
order. Without objection, all members' opening statements will
be made a part of the record.
The chairman, Mr. Bachus, is here, but we traded places for
the moment. I will recognize myself for 5 minutes.
I would like to thank Chairman Oxley and Chairman Bachus
for agreeing to hold this hearing, and for their leadership on
an issue that is near and dear to all of our hearts, financial
literacy and economic education. I would also like to thank our
witnesses, who represent some of the most active groups and
effective programs in the country.
I know many of you and your programs, and I know your
insight will be invaluable to the committee. One particular
witness today also happens to be a constituent from my district
in Napersville, Illinois: Carl Sorgatz, who is here
representing CUNA. Thanks to all of you for joining us.
One of the first things that I did when I was elected to
Congress back in 1998 was to go down to the Federal building in
Chicago to observe the proceedings of the bankruptcy court. And
I was struck by how many people who had gotten themselves into
trouble, and they might never have, had they had had just one
parent, a counselor, a teacher, or a friend, who taught them
the basics of money and credit.
In part, that is why we are here today, to make sure that
we are effective in reaching those Americans who need us,
whether they are school children, young adults, working
families, or senior citizens. The witnesses here today
demonstrate that there is no lack of interest in doing just
that.
When my friend and colleague, Ruben Hinojosa, and I founded
the Congressional Caucus on Financial Literacy, we quickly
learned how interested our colleagues are. Seventy-nine members
of the House have now joined the caucus. And we literally began
to hear from hundreds of private and public sector groups, not
to mention government agencies with programs designed to serve
the needs of these specific groups of Americans.
But with so many organizations mobilized, so many unmet
needs, and so many people asking what they can do to help, we
urgently need to develop ways to coordinate our efforts,
eliminate duplication programs, and keep pace with new demands.
On the Federal level, we created, under the FACT Act in
2003, the Financial Literacy and Education Commission, FLEC,
housed at the Department of Treasury. Its mission was
threefold: coordinate Federal efforts; create a hotline and Web
site; and develop a national strategy to promote financial
literacy among all Americans.
In April, the commission released its report, aptly titled,
``Taking Ownership of the Future.'' That's a good first step,
but we need your help and your advice, as we move forward. I
think my colleagues here would agree that this committee is 100
percent committed, in a non-partisan way, to doing whatever we
can to meet the challenge. In virtually every bill that crosses
our desks, we are conscious of the need to educate and inform
and elevate the level of financial literacy in this country.
So, I look forward to hearing your views on a number of
questions. First is, what works and what doesn't work? Where
are the gaps? How could we tap into the private and nonprofit
and local government efforts, and bring them into the Federal
fold? Would a universal clearinghouse be helpful? What
roadblocks are you facing? How can we answer those who want to
join the effort when they ask us how they can help?
All of you have great stories and insights. We have a lot
to cover in a short time. So, unfortunately, it is not possible
to include every contributing organization in this hearing
today, and I cannot mention all of them. But I did want to
thank the American Institute of Certified Professional
Accountants for their report, ``360 Degrees of Financial
Literacy,'' and for their national effort to improve the
financial understanding of Americans. The AICPA is yet another
national organization doing an outstanding job in improving
financial literacy.
So, thank you all again, and I will recognize the ranking
member, Mr. Sanders, for an opening statement.
Mr. Sanders. Thank you, Madam Chairwoman, and thank you,
Mr. Bachus, for holding this important hearing. Clearly, the
lack of financial literacy in this country is negatively
impacting the economic wellbeing of millions of Americans.
The truth is that 25 years ago, all that was needed to
become financially literate in this country was a basic
understanding of how to balance a checkbook and how to manage a
savings account. Unfortunately, that is not the case today.
Each and every year, consumers are being bombarded with
over six billion--and I have one of them here--credit card
proposals--six billion solicitations in mail. Many of these
solicitations are highly deceptive and misleading. In addition,
a significant number of consumers who receive financing from
payday lenders are unaware that the interest rates on their
loans can total as high as 700 percent.
And anyone who has ever borrowed money to purchase a home
realizes how complicated the mortgage lending process can be,
for even the most astute consumer. Unfortunately, it seems that
one has to have a law degree these days in order to understand
all of the hidden transfer costs, the excessive late fees, and
exploding interest rates that are being charged by not only
predatory lenders, but also some of the most ``reputable
banks'' in America.
It shouldn't come as a surprise, therefore, that consumers
aged 45 and older often lack the knowledge of basic financial
and investment terms, according to a national survey conducted
by AARP. Our young adults are in a similar situation; in a
survey by the Jump$tart Coalition, high school seniors
correctly answered an average of only 52 percent of questions
on basic personal finances.
Meanwhile, a number of trends in recent years have
underscored the importance of financial literacy in everyday
life. Since the second quarter of 2005, the personal savings
rate has reached a level of roughly -1 percent--something that
hasn't happened since the Great Depression. A record breaking
two million Americans filed for bankruptcy last year. In fact,
bankruptcy rates have more than quadrupled over the last 20
years, etc., etc.
Mr. Chairman--or Madam Chairwoman--clearly, we must do more
to increase financial education in this country. But I would
emphasize that while financial education is important, it is
only part of what we have to do. I am growing increasingly
concerned that some in the financial services industry are
using the lack of financial literacy in this country as a way
to receive a get-out-of-jail free card, if you like, for some
of their blatantly deceptive and misleading tactics.
In other words, financial literacy, yes. But we must also,
through this Congress, stop the deceptive advertising that is
permeating American society. For example, in my view, the
credit card industry, payday lenders, and others should not be
allowed to charge outrageous interest rates and sky-high fees.
And that's why I have introduced legislation called the Loan
Shark Prevention Act.
Now, let me conclude, and tell you why we need to go beyond
financial literacy. Right here, I have a proposal from American
Express, which a staff member of mine recently received. And
there it is, right in there, it says, ``Zero introductory APR.
Pay no interest on new purchases for the first 12 months.''
There is a little footnote there, go to footnote four, ``See
enclosed terms and conditions for details.''
Well, you go, here is one of these long, single-spaced,
tiny-worded documents, and there it says, ``The terms of your
account, including APRs, are subject to change. The APRs for
this offer are not guaranteed. APRs may change to higher APRs;
fixed APRs may change to variable, or variable APRs may changed
to fixed; we may change the terms, including APRs, at any time
for any reason.''
We may change it for any time and any reason, but they just
told us in big print that you get zero interest? Now, you tell
me what that is. I regard it as fraud. And we can have--and
there are some six billion of these things that are sent out to
American consumers all over America. I used to think I got all
of them, but apparently some of you are getting them, as well.
So, Madam Chairwoman, financial literacy is extremely
important. But this Congress has to finally stand up to the
credit card industry, it has to stand up to the banks, and it
has to stand up to the people who are ripping off American
consumers in a very deceptive and dishonest way. Thank you,
Madam Chairwoman.
Mrs. Biggert. The gentleman yields back, and now I am happy
to recognize the chairman of the subcommittee, Mr. Bachus.
Chairman Bachus. [presiding] Thank you. Today's hearing was
requested by Mrs. Biggert. And that's appropriate, because Mrs.
Biggert has really been the leader on our committee in
stressing the need for financial literacy.
As all of our panel knows, it is increasingly important for
people to have a working knowledge of credit cards, of mortgage
products, and even of investment plans. And this committee
has--and Mr. Sanders mentioned--seen a lot of evidence. And
when we go out in our community and talk to our constituents,
we hear many heart-breaking stories about people who lacked
financial literacy and really, not only the problems it
creates, but in some cases the devastation that it creates.
We have, as a committee, I think--one of our more
substantial steps was recognizing the important role of
financial literacy by including a financial literacy component
in the legislation we call the FACT Act, the Fair and Accurate
Credit Transaction Act. Title five of the FACT Act established
the Financial Literacy and Education Commission, with the
purpose of improving financial literacy and education.
The FACT Act also mandated the GAO report on
recommendations for improving financial literacy among
consumers, and the GAO will be releasing their recommendations
some time later this year. I look forward to hearing their
insight, and also to Mrs. Biggert--or maybe Mr. Sanders, or
someone else chairing a hearing concerning that, either this
year or next.
Mrs. Biggert and Mr. Hinojosa, who is here with us today,
has joined us. There are 80 members--I'm a member--of the
Financial Literacy Caucus. We are united in the goal of
encouraging the private sector, and also the Federal Government
and State governments, to take a role in promoting financial
literacy, and in also making suggestions and giving us advice.
And that is really what this hearing is about this morning.
It's about both the private sector, private organizations--your
organizations--as well as the Federal Government, and what role
you are playing back in communities all over America, to ensure
that people have the knowledge and the information to take full
advantage of our credit markets and the financial products
which are offered to all Americans.
Let me close by simply saying again that I want to commend
Mrs. Biggert. Each year in April she sponsors a resolution with
Mr. Hinojosa--I know for the past 3 years--stressing financial
literacy, reminding all of us that it is something that is an
ongoing mission. And I believe that Mrs. Biggert and Mr.
Hinojosa, and the work that they have done, has had an enormous
impact on educating Members of Congress, their staffs, and even
the American public about the importance of understanding
financial transactions.
And I commend the organizations today. Many of the
organizations that are here at this first panel testifying have
created unique ways of educating consumers on financial
opportunities. I admire your efforts, I commend you, and I look
forward to your testimony. I yield back the balance of my time.
Mrs. Biggert. Thank you, Mr. Bachus. That resolution is
always a tough battle on the Floor. Last year it passed by 423
to 1, and I am still after that 1 to vote for it.
I would like to recognize the gentlelady from New York.
Mrs. Maloney. Thank you, Madam Chairwoman, and I thank all
of the panelists for being here. I would like very much to be
associated with the comments of my colleague, Mr. Sanders, on
truth in advertising, and the comments of my colleague, Mr.
Bachus, on the FACT Act, and the important GAO report that will
be coming out.
As a former teacher and a member of the Financial Literacy
Caucus, I strongly support the subject of our hearing today. We
know from scientific evidence, that financial literacy prevents
abuse and enables individuals to better achieve their financial
goals.
For example, one effort that I observed almost 5 years ago,
Freddie Mac conducted one of the first studies in this area,
looking at some 40,000 mortgages, to see whether pre-purchased
financial education reduced the 90-day delinquency rates.
Borrowers receiving personalized financial education in
preparation for a home purchase had a 34 percent lower
delinquency rate: a remarkable statistic.
Since then, other studies, including studies by the
National Endowment for Financial Education have confirmed what
common sense tells all of us: individuals who improve their
financial literacy are better able to achieve their financial
objectives, whether it is getting out of debt, purchasing a
home, sending a child to college, or saving for retirement.
As these studies show, while the benefits of financial
literacy apply to all sectors of our society, those most
vulnerable stand to benefit the most. The La Raza study, for
example, confirms that minorities and those in lower income
brackets are least financially knowledge, and that as a result,
they often end up incurring significant unnecessary costs when
they cash a check, get a loan, or otherwise use financial
services.
Financial literacy gives all Americans necessary tools to
achieve their financial objectives. And I thank the gentlelady
for her leadership, and my colleague, Mr. Hinojosa, for his.
Thank you.
Mrs. Biggert. Thank you very much. And I would like to
recognize Mr. Hinojosa, from Texas, for his opening statement.
Mr. Hinojosa. Thank you very much. It is indeed a pleasure
for me, as the co-chair of the Financial and Economic Literacy
Caucus, to work with my good friend and colleague, Judy
Biggert.
I want to express my sincere appreciation for you holding
this extremely important hearing today. I also want to take
this opportunity to thank you again for holding a hearing at my
request on banking the unbanked and financial literacy in
general in 2003.
That particular hearing was very informative, enlightening,
and comprehensive. I am glad that you have called yet another
hearing on financial literacy, at the request of Congresswoman
Biggert. These hearings inherently incorporate an assessment of
ways to bank the unbanked.
I believe that all of us here today share a common purpose:
improving financial literacy for all Americans. It is a very
daunting task, especially in light of the tremendous number of
financial literacy programs, and the many comments, advice, and
recommendations that we receive from off-the-Hill on the
methodology to use, the exposure to give, and the oversight
needed to coordinate and collaborate with these programs.
The programs run the gamut from some preschool financial
literacy programs such as the Money Mammals, programs geared
toward K-12 students, college students, young adults, a few for
those in mid-life, and several geared for those planning for
their retirement, or already retired.
There are too many programs to discuss and consider in one
hearing. Madam Chairwoman, despite daily challenges of
balancing work, family, and personal matters, it is important,
now more than ever, that all Americans take time to increase
their financial knowledge and plan for a secure future.
Like most people, we all have hopes and dreams and life
goals for ourselves and our families. These might include
buying a home or a business, saving for college education for
our children, taking a dream vacation, reducing taxes, or
retiring comfortably. Too many Americans lack basic financial
literacy to accomplish many of these goals.
Last year, in 2005, one bankruptcy petition was filed for
every 60 households, which was a 23 percent increase from the
previous year. According to the Federal Reserve, revolving debt
for American consumers totaled $805 billion in March of this
year. Worse yet, the United States personal savings rate, based
on the percentage of personal disposable income devoted to
savings, was -.5 percent at one time last year--I repeat, the
savings rate reached an all-time low of -.5 percent last year.
And at the end of 2005, the savings rate increased to a
dismal -2 percent. I think we all agree that a negative
personal savings rate is unacceptable, and actions must be
taken to remedy the problem. We must continue to work with our
colleagues here on the Hill, work with the relevant Federal
agencies, work with various associations, nonprofits and
community-based groups, and yes, especially with the private
sector. We must work with all of them if we are to obtain our
goal of improving financial literacy rates across the United
States.
There is one area in particular that I have to address in
my remarks this morning, and that is that we still need to find
additional ways and means to bank the unbanked, and that is a
tough order. Such action will help them, help their families,
help the financial institutions with which they bank, and
ultimately, help their communities, their counties, their
States, and overall, our U.S. economy.
Several of you who will testify today have done an
admirable job of trying to find ways to bring Hispanics,
African Americans, Native Americans, and Pan Asians into the
banking system. I applaud you and your efforts in this area. It
is essential that we work towards improving education, consumer
protection, empowering individuals and families through
economic and financial literacy in order to build stronger
families, businesses, and communities.
Having read his testimony, I must say that Mr. Beck,
representing the National Endowment for Financial Education,
has presented the most comprehensive plan for government
involvement in the financial literacy cause. I agree with him,
that the government can and should do the following: Lead by
example and coordinate and communicate a unified message.
We should sponsor a broad-based public awareness campaign
comprised of a very ambitious, mass-market multi-media effort
in support of a national financial literacy initiative on the
scale of the current truth campaign, developed through the
public education fund to discourage smoking among young people.
I also like his idea of creating a literacy corps, because
one-on-one financial counseling provides the greatest potential
to affect positive change in the management of one's finances.
Madam Chairwoman, 1-800 numbers and Web sites are fine. But
one-on-one counseling does a much better job. It does the
trick. This type of counseling was needed when Katrina hit the
coast and thousands of people needed one-on-one financial
counseling to put their lives back together. The government
failed miserably in that arena.
I am pleased to learn that the National Endowment for
Financial Education has, for years, worked with the American
Red Cross on pioneering financial education for consumers
related to disaster preparedness and disaster recovery. I must
note that the material was created in cooperation with the
AICPA Foundation, and it's available to all consumers through
the American Red Cross in print, as well as online.
Hopefully, the two groups also provide one-on-one financial
counseling to victims of natural disasters such as that
provided comprehensively by Operation Hope. It is my personal
goal to succeed in ultimately integrating the term financial
literacy into the everyday vocabulary.
As I close, I want to say that I could go on and on for the
remainder of the day, discussing all that needs to be done to
improve financial literacy, which is exactly the problem. The
Financial Literacy Education Commission published and released
its national strategy for financial literacy. It was a good
first step, but it is not the ultimate solution to all the
financial literacy problems.
Hence, the need for this and future hearings, and finding
ways for the government and private sector to coordinate and
collaborate on improving financial literacy.
Madam Chairwoman, I want to thank you, your entire staff,
as well as Chairman Bachus's leadership, and his staff:
Danielle English, Dina Ellis and Emily Pfeiffer, and Jaime
Lizarraga, with Congressman Frank--for all their contributions,
not only to this hearing, but especially all of our efforts, as
a group, towards this very worthwhile cause. We make a good
team.
And with that, I yield back the remainder of my time.
Mrs. Biggert. Thank you very much, Mr. Hinojosa, and thank
you for all that you have done for the cause, and it has been a
real pleasure to work with you on this issue, and we will
continue to make more headway as a team. Thank you so much for
being here. I would just recognize Mr. Bachus for a procedural
matter.
Chairman Bachus. Thank you. I would like to, without
objection, introduce the written testimony of two
organizations. One is the American Community Bankers, which is
not on our second panel, but they agreed to submit their
testimony in writing because of time restraints. And I thank
them, and they have played a very important role.
The other one is the written statement of the North
American Securities Administrators Association. This is
actually the oldest international organization devoted to
investor protection. The incoming president is Mr. Joe Borg,
who is the Alabama securities commissioner in Alabama. But the
reason that they are not testifying is not--they played a great
role, but we limited our testimony at today's hearing to the
private sector.
After the GAO report gets in, we will have an additional
hearing. And at that time, I fully expect their association and
other government or associations made up of government
witnesses to testify. So, without objection, I would like to
introduce that.
Mrs. Biggert. Without objection.
Chairman Bachus. Thank you. I would also like to join with
what Mr. Hinojosa said, and thank your staff Emily, Danielle
English, and Dina Ellis, and--but your staff is very prominent
in organizing this hearing. Thank you.
Mrs. Biggert. Thank you very much, Mr. Chairman. And I now
recognize the gentlelady from Indiana, Ms. Carson, for an
opening statement. Three minutes.
Ms. Carson. Thank you very much, Madam Chairwoman, and to
all other people on the committee at this point--the ranking
member.
All of us on this committee understand how important
financial literacy is to the American people. The savings rate
for America is in the red. Wages are decreasing. As prices are
increasing, personal bankruptcies have increased over the last
decade, because of the growth of the credit card industry.
Pension plans are being replaced with voluntary contribution
retirement funds and financial products are becoming more and
more complicated.
Three years ago, I convened a financial literacy workshop
for the Congressional Black Caucus. My guest was the Honorable
Alan Greenspan, who did a tremendous job in articulating the
need for financial literacy. We also had other experts there,
following Mr. Greenspan, who enhanced the need for people to
understand financial literacy.
We have a pocket of students now who just reach out in
their mailbox and get credit cards, and they don't worry about
how they are going to pay for them, they just worry about how
they are going to use them. And then, the credit card industry
is left holding the bag if the parents don't--what it is.
I believe that financial literacy courses should be
mandatory for education, whether it be at the elementary level,
the high school level, or the college level. People should
teach students financial literacy. I am appalled at the way our
young people spend their money: $200 tennis shoes, as opposed
to going to a discount house and getting the same pair of
tennis shoes. They just see what they want.
I am concerned about these promises on rebates, where this
industry promises you a rebate on something you purchased, and
the rebate never comes in the mailbox.
But I believe that, with us working together, that we will
be able to resolve things.
Finally, let me say that in Indiana, I created a consumer
hotline where, before people sign their names the first time on
mortgages, they call the consumer hotline to discern whether or
not it would be the right thing to do, in terms of signing
whatever contract was put before them. The number is 1-888-722-
WAIT. That is to wait before you sign your name. And it has
been extremely successful, where the consumers around the State
call up and ask questions about these promises to pay that have
been placed before them.
So, I think with the collaboration of all of us, that we
will be able to address and redress some of the problems that
occur in the consumer market, unnecessarily. So I appreciate
very much all of you being here.
And I am going to have to leave, because I have an Amtrak
meeting at the same time, but thank you.
Mrs. Biggert. Well, thank you for being here. And I will
now introduce the first panel of witnesses. On my left, Ms.
Elisse B. Walter, senior executive vice president, regulatory
policy and programs, NASD. Welcome.
Next, we have Mr. David Chernow, president and chief
officer of Worldwide Junior Achievement. Welcome.
And Mr. Ed Beck, president and CEO of National Endowment
for Financial Education--NEFE, I believe it is pronounced.
Welcome.
Without objection, your written statements will be made a
part of the record, and you will each be recognized for a 5-
minute summary of your testimony. We will start with Ms.
Walter. You are recognized for 5 minutes.
STATEMENT OF ELISSE B. WALTER, SENIOR EXECUTIVE VICE PRESIDENT,
REGULATORY POLICY AND PROGRAMS, NASD
Ms. Walter. Thank you. Madam Chairwoman, Ranking Member
Sanders, and members of the committee, good morning. Thank you
for inviting me to testify about NASD's efforts to educate
investors.
And thank you, too, for your support of the recently passed
Military Personnel Financial Services Protection Act. A
provision in this important legislation will enable NASD to
make information about brokers available to investors in an
easier-to-use format, via the Internet. We appreciate your
leadership on this important legislation.
Madam Chairwoman, NASD is the private sector securities
regulator for the U.S. securities industry. By law, broker
dealers must belong to NASD if they do business with the
public. We write and enforce the rules governing them, and our
mission is to ensure the protection of investors, and the
integrity of the markets.
NASD firmly believes that educating investors is the first
line of defense in protecting them from harm. The more
knowledgeable an investor is, the more she is able to make
sound decisions and avoid costly mistakes.
To determine how to reach investors better, NASD conducted
a survey to assess where most people are when it comes to
knowledge about investing. And we found an overwhelming number
of investors realized they need to be better informed, and we
have responded with a variety of resources.
We have issued educational materials to alert investors to
potential problems, and we provide plain English explanations
of products and processes. We have developed tools for
investors to use in making financial decisions. We conduct
public education events to reach out to investors. And a major
segment of our Web site, nasd.com, is devoted to information
that mainstream investors can use.
For example, NASD Broker Check, which is also available--
the information also being available by toll free telephone
number, provides disciplinary history and information on
brokerage firms and brokers. Another online tool available to
all investors is our mutual fund expense analyzer.
Because the fees and expenses charged by mutual funds can
make a big difference in the performance of an investment, we
provide expense information on virtually every mutual fund, so
that investors can analyze the impact of fees and expenses on
fund performance by showing how those fees add up over time.
Investors can research one fund at a time, or can compare the
cost of as many as three funds at a time, to learn how expenses
can cut into fund performance, particularly over the long term.
Developing free investor tools such as these, and
furthering investor education in all its forms are critical
aspects of what we do, and we are quite proud to be doing them.
But at the same time, we know that our education programs reach
only a small percentage of the population that could benefit
from them. That is why it is essential, as many of you have
already said, that we and others in the investor education
community, leverage resources and use all means of
communication to reach the most people, and partner with others
who share this mission.
Madam Chairwoman, NASD is also building on Congress's work
in the recently enacted pension bill. The unfortunate fact is
that almost a third of recently hired employees who are
eligible to participate in their company's defined contribution
plan do not participate. And participation for employees
earning less than $20,000 a year is even lower.
Yet, a number of academic studies have found that changing
the default options to require investors to opt out of, instead
of opt into participation in 401(k) plans raises participation
rates to more than 90 percent.
To help solve this problem, NASD is working with AARP and
the retirement security project to encourage employers to adopt
automatic 401(k) enrollment as the default option for their
plans.
Taking partnership in a different direction, NASD recently
created the NASD Investor Education Foundation to support
innovative research and educational products that give
investors the tools they need to better understand the markets
and the basic principles of not only investing, but also
saving.
In its first 2 years of operation, the foundation awarded
nearly $5 million in grants for educational programs and
research projects targeting the underserved segments of the
population. For example, through an NASD Foundation grant, Ohio
State is developing guidelines for effective investor education
programs targeted at traditionally underserved communities. And
a grant to Kids Online, a nonprofit group in LA, is supporting
the production of an interactive web-based financial literacy
show to be broadcast in high schools around the country.
The foundation has also launched an effort to educate
military service persons about saving and investing, and to
help them to avoid fraudulent and inappropriate products and
sales pitches. I urge you to visit saveandinvest.org, our Web
site devoted to helping members of the military make sound
financial decisions, to learn more about this program.
Madam Chairwoman, all Americans deserve the opportunity to
create a secure financial future for themselves and their loved
ones. NASD works every day to help more Americans take control
of their financial decisionmaking. We applaud your effort to
shed light on this issue, and thank you again for the
opportunity to testify. I would be happy to answer any
questions.
[The prepared statement of Ms. Walter can be found on page
151 of the appendix.]
Mrs. Biggert. Thank you very much. Mr. Chernow, you are
recognized for 5 minutes.
STATEMENT OF DAVID S. CHERNOW, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, JA WORLDWIDE
Mr. Chernow. Madam Chairwoman and members of the
subcommittee, it is a true honor and privilege to be with you
this morning as we meet together to discuss this very important
topic.
In my role as president and chief executive officer of
Junior Achievement Worldwide, I represent over 2,600
professional staff, over 240 local and national boards of
directors who are comprised of over 8,000 members of the board,
mostly from the private sector, and I work in over 100
countries around the world in our shared goal of inspiring and
preparing young people to succeed in a global economy.
Here in the United States, nearly four million children go
through Junior Achievement, annually participating in hands-on
experiential learning programs that are delivered at over
20,000 different schools by over 135,000 volunteers in nearly
170,000 classrooms. Our programs span the wide spectrum of
business, economics, and free enterprise education with a focus
on what we believe are the three key elements of preparation of
our young people's future success. Those are: work force
readiness; entrepreneurship; and financial literacy.
To put it as simply as I can, time is of the essence. We
are experiencing an epidemic in this country. Financial
illiteracy is threatening sustained economic growth and
development of the populace. And what we have learned is that
this problem cannot be solved alone. And that is why I want to
share with you today a few words on the topic of collaboration
and partnership in financial literacy education.
One of Junior Achievement's core values is a belief in the
power of partnership and collaboration. Junior Achievement is
particularly dedicated to working with the private sector. Each
and every one of Junior Achievement's programs, which is
kindergarten through 12th grade, has been delivered to students
in the United States since 1919, and requires the active
involvement of trained business volunteers.
This private sector commitment to financial literacy
education is a key component of our success, and something we
believe is absolutely essential in our efforts to improve
financial literacy in this country. Private sector volunteers
serve as meaningful, inspiring role models to our youth, as
they share their personal and professional insights with
students who sincerely wish to prepare for financial stability
in their own lives.
I also want to emphasize the value of partnership and
collaboration among fellow nonprofit organizations. Rather than
continuously reinventing the wheel in the financial literacy
arena, it is much more efficient for nonprofit organizations to
pool our limited resources to reach as many youth as we
possibly can.
This is something which Junior Achievement has been
particularly committed to in recent years. Since 2004, for
example, we have been pleased to join with the Jump$tart
Coalition for personal financial literacy, and the National
Council on Economic Education, in establishing the Partnership
for Financial Education Policy. This partnership sponsors the
annual--and very successful, I am glad to say--Financial
Literacy Day on the Hill event, and arranges other activities
in consultation with the Financial and Economic Literacy
Caucus, led so passionately by Congresswoman Biggert and
Congressman Hinojosa.
Similarly, several months ago, we entered into a
collaborative arrangement with America's credit unions, and the
Credit Union National Association, to develop a new financial
literacy and entrepreneurship education television series for
children, aptly entitled, ``JA's BizKid$.'' This new program,
to be aired on PBS stations nationwide next year, is being
produced by the team who brought us, ``Disney's Bill Nye, the
Science Guy.''
By pooling resources and expertise, America's credit unions
and JA Worldwide will be able to bring financial literacy
education, hopefully, to literally millions of children in
large and small communities across the country.
Another collaboration worthy of mentioning is our brand new
relationship with my co-leader, to my left, the National
Endowment for Financial Education, or NEFE. Beginning next
year, Junior Achievement business volunteers will take NEFE's
award winning high school financial planning program into high
school classrooms throughout the United States to extend the
reach of this great curriculum to tens of thousands of new
students each year.
Although our focus is on collaboration among the private
sector groups, I would like to briefly note our commitment to
similar collaborations with government at the Federal and the
State and the local levels. Like our involvement with the
private sector, this coordination is perhaps most critical at
the local level. While Junior Achievement's programs are being
developed by worldwide headquarters, each of our local chapters
work closely with State and local school officials to determine
the most appropriate programs for the local market, and to
integrate State education standards into our curricula.
Of course, we are committed to partnering with policymakers
at the Federal level. As noted, we work closely with the
financial and economic literacy caucus here, in Congress. We
are also involved with the Financial Literacy and Education
Commission, and are working on specific initiatives with
individual Federal agencies, such as the Small Business
Administration. These collaborations are the types of
partnerships we remain committed to in our shared quest of
providing quality financial education to today's youth.
We applaud the efforts of this committee to keep its eye on
such a critical issue for our youth, and we thank you for
allowing us to share our thoughts with you today. As I leave
today, finally, I just wanted to point out that I hope everyone
realizes that collaboration is the key to success in solving
this critical problem. And our collective efforts, in words and
in action, will provide the solution. Thank you.
[The prepared statement of Mr. Chernow can be found on page
80 of the appendix.]
Mrs. Biggert. Thank you very much, Mr. Chernow.
Mr. Beck, you are recognized for 5 minutes.
STATEMENT OF TED BECK, PRESIDENT AND CEO, NATIONAL ENDOWMENT
FOR FINANCIAL EDUCATION
Mr. Beck. Thank you. Thank you, Madam Chairwoman, and the
other members of the committee. We greatly appreciate the
opportunity to be here today.
My testimony will touch on three areas: first of all,
NEFE's philosophy regarding financial literacy; I will also
talk about the importance of partnership in our community and
offer some comments on how the Federal Government can enhance
and cooperate with our efforts to make them more effective.
First of all, regarding philosophy, NEFE is an organization
that is wholly focused on improving the financial wellbeing of
all Americans, and we are specifically concerned by the
situation faced by the various underserved communities. We
agree that there is a greater need right now than there has
ever been to build financial education literacy in the
community.
However, we are also convinced that the American public is
up to this challenge if they are given the proper education,
tools, and continual reinforcement and encouragement to do so.
We believe very much in the power of the teachable moment,
and that throughout one's economic life there are numerous
opportunities where economic and financial education are
needed, and that the nonprofit community, the government, and
the private sector can step up and help individuals at these
times.
To do that, though, we must partner. NEFE partners in
literally everything we do. At any given time, we will have
over 50 partnerships in place. These range from research at
universities, where we are studying behavior change, and how to
get people more interested in looking after their financial
wellbeing, to working with specific organizations, ranging from
the American Red Cross, the National Multiple Sclerosis
Society, and the American Indian College Fund, for issues
specifically facing their constituents. We feel we need to work
through such organizations to be most effective in dealing with
the issues that their communities face.
We have talked briefly about the NEFE High School Financial
Planning Program, and I think it is a classic example. We have
had very successful partnerships with the Cooperative Extensive
Service and the Nation's credit unions for several years. The
high school program goes back to 1984. During that time, we
have had over 4\1/2\ million students attend the program.
Last year alone, we had over 630,000 students in all 50
States covering 7,500 classrooms take the course, and we feel
it's a very effective program, and we are very excited about
the announcement this week of the new alliance with Junior
Achievement, that will allow us to extend this program even
more broadly through the outstanding field network that Junior
Achievement possesses.
I think it's also important to point out that the program
is provided free to all students in all schools throughout the
country, as everything else we do at NEFE is free to anybody
who uses our service.
Some suggestions for the Federal Government as far as
involvement in what we are doing include: First of all, the
comment made earlier, lead by example. There are some very
interesting and promising developments going on in various
Federal agencies, and specifically in the military, that we
think will be great best practices that the government can
adapt to its own work force, and that the private community
could then also adapt. And we strongly suggest you encourage
and foster those programs.
We also suggest that you sponsor a broad public awareness
campaign. We currently sponsor a program called, ``Smart About
Money.'' It's been in place since September of 2005. We spent
$1.3 million on this effort, and it's a public awareness
program to help people deal with key issues in their lives:
things like save for a house; save for education; and stop
living paycheck-to-paycheck. We think that Federal programs
sponsoring a similar effort could have great reach, and really
utilize those teachable moments we talked about a few minutes
ago.
We would also like to see you help create demand for
existing programs. At the moment, our community is very
fragmented, and we really haven't focused on key messages that
need to be disseminated. Meetings like this meeting today can
greatly enhance that effort.
We also would love to see the sponsoring of a financial
literacy corps, similar to the service corps of retired
executives. There are many people in society who understand the
basics, and one-on-one counseling from those individuals to the
people who need it would be a very powerful and very cost-
effective tool to help the underserved communities we talked
about.
And then, finally, we suggest you look for partners who are
very skilled at dealing with the issues of different groups
ranging from K through 12, college, the workplace, those in
special situations, and the military, where the partners
understand how to maximize those teachable moments. Make sure
those people start working together and cooperating with each
other. Thank you for letting us be here today.
[The prepared statement of Mr. Beck can be found on page 52
of the appendix.]
Mrs. Biggert. Thank you very much for all of your
testimony. We will now turn to questions, and members will have
5 minutes to ask their questions and get their responses. So,
with that, would you like to start, Mr. Bachus?
Chairman Bachus. I would very much appreciate that
opportunity.
Let me--and I heard in your testimony you gave some good
advice, general advice, about--I know, Mr. Beck, you said,
``Don't live from paycheck to paycheck.'' Earlier, Ms. Walter,
you were talking about knowing who you are dealing with, which
is so important. And I know college kids--I have five children,
and they will come back with a credit card and I will, you
know, say, ``How did you get this?'' ``It came in the mail.''
And they know nothing about the company.
But what are the--I would say what are the most important
messages that we can get to our young people, or anyone that
lacks financial literacy? You know, the main themes that we
should be emphasizing to consumers. Just--
Ms. Walter. I would be happy to start. I think you have to
start with the very basics. You have to tell people that they
should never undertake to do something they don't understand,
whether it is a credit card or a loan or buying into an
investment. You really must ask questions, and you must
understand what you are doing. You must look before you leap.
I know all of these sound like platitudes, but they are
very basic, sound investment advice. If it sounds too good to
be true, it is too good to be true. And they should also learn
to draw on the resources that actually are out there to help
them, because there are a number of them.
We, obviously, given our role, concentrate on investing.
But we have a large number of sound resources, and draw on the
resources of others, and partner with folks like the two
gentlemen to my left, to provide sound, objective advice for
people.
So, they need to learn not to respond to pressure, and to
feel very comfortable with what they are doing. And the first
thing they need to do is to set aside money for future events.
And that, perhaps, is the hardest lesson for young people to
learn. They feel immortal, and it is hard for them to look
ahead.
Chairman Bachus. Thank you.
Mr. Beck. Just a couple of quick things. First of all,
understand wants versus needs. And--
Chairman Bachus. What was that? I didn't--
Mr. Beck. Understand wants versus needs in your personal
spending patterns. Second, budget. I mean, it sounds very
simple, but the idea of sitting down and figuring out what you
are bringing in, and what that allows you to spend, and also
what sort of incentive that creates for you to improve your
financial situation, is a very key thing. Understanding the
basics of your own personal budget is a very key thing.
Another point is get involved with whatever savings
opportunities are available to you. So, if you are working,
start to get involved in whatever plans are available to you,
either independently or through your company. Whatever it takes
to get started, start. It doesn't matter how small it is. But
once you get started, you start to see the benefits of it.
And the other thing is to start as soon as possible. Don't
assume that things are going to happen that are going to create
a very safe haven for you. The sooner you start to develop a
plan for yourself, the more likely you are to be financially
stable in your future.
Chairman Bachus. Mr. Chernow?
Mr. Chernow. You know, just to reinforce two quick
concepts, young people are never too young to learn the
important aspects of financial literacy. And what I am sure you
have learned, and us as youth organizations have learned very
quickly, is that habits are very important to develop. At the
early age of 11, 12, and 13, psychological experts will tell
you that the ability to impact attitudes and behaviors are
greatly enhanced at that age. So we need to get to them
younger.
And Mr. Beck just pointed out two quick things. Wants and
needs is a very important concept to young people. But the
other concept that I don't think they fully understand that
needs to be reinforced, based on the information Congressman
Hinojosa indicated, was that savings is critical to young
people's future success. And we need to emphasize that, and
tell them the beauty of savings. Educate them and inspire them
about that.
Chairman Bachus. And, you know, the whole media world--I
guess you say Madison Avenue--says, ``You need this to be
happy.'' And it's usually a product or a thing you have to
purchase. And, you know, that is--and it creates the--the
advertising world creates wants. And it is very important that
there is a counter-message there that, you know, what you need
to be happy is a little savings or a little cushion, not
something you have to pay for down the road.
But the counter-message is a strong message. So you are up
against a lot of competition that is telling them just the
opposite. So, thank you.
Mrs. Biggert. Thank you, Mr. Bachus. The gentleman from
Texas, Mr. Hinojosa, you are recognized for 5 minutes.
Mr. Hinojosa. Thank you, Madam Chairwoman. I enjoyed
listening to each one of your presentations. They are very
interesting approaches to this project. I would ask each one of
you to answer the first question that I have: What
recommendations would you make to improve the National Strategy
for Financial Literacy?
And the second question to each one of you is: What would
you recommend to streamline the Financial Literacy Education
Commission? I will start with you, Ms. Walter.
Ms. Walter. I believe, Mr. Hinojosa, that the most
important thing that the government can do, either through the
existing body or otherwise, is exactly what you are here doing
today, to shed light on the issues that Americans face in
saving and investing, to make sure that is given a prominent
place among the public issues of the day, and to highlight the
resources that are available.
I believe that, in the private sector, we have made a
number of first and second good steps in reaching collaborative
efforts, and in learning not to compete, but to rely on each
other and not reinvent the wheel, as was mentioned earlier, but
to build on things. And the government can help us do that by
directing people to us and allowing us to use those resources.
So that, ultimately, is what I would recommend, because I
do think there are a number of private sector resources that
have been applied to very good use, mostly in the content area.
And now, we need to concentrate in large part, as you have
highlighted before, on the issue of distribution. How do we
make sure, with respect to all of the groups who are out there
in our population, particularly the underserved groups, how to
reach them most effectively, with the messages--very clear,
concise, and good messages--that have been developed?
Mr. Hinojosa. Thank you.
Mr. Chernow. Congressman, two quick comments. One is--I
will throw out two words, awareness and action. You asked the
question what recommendations would we do to improve the
national strategy. I think there is, first, the issue of making
sure that people understand in this country the important issue
that is before us. I am not sure that we have as much
awareness.
We are lucky that some organizations go out and do large
statements out there, and spend millions of dollars to get the
message out. But as Chairman Bachus said earlier, you know,
sometimes it's the wrong message. Savings is a great message,
it's just not said enough.
The second thing is, in terms of action, I think we need to
showcase the great examples of success in this arena. And I
would just re-emphasize that where we need probably the
greatest help, is for us to go out and reach those children who
need us the most in our area. We are not getting out to the
rural communities. We are not getting the messages out, and we
are not--we need the assistance of government, quite honestly,
to help us get exposed to those young people who need us, so
that we can have our effective programs be implemented.
Mr. Hinojosa. I want to respond to one of the earlier
comments that you made on wants versus needs, personal budget,
and starting savings plans being so critical.
On the last one, I want to say that my colleague,
Congresswoman Biggert, and I serve on the Education Committee,
on the Higher Education Committee, and we share a similar
interest in trying to increase the number of students earning
bachelor's, master's, and Ph.D.s in STEM careers. And we are
envious of the Chinese in the success that they have had in
science and technology and engineering.
So, a group of us got on an airplane and went to China and
went to visit seven universities, and asked them, ``How is it
that you all are so successful?'' And among the discussions,
one of the responses was that high school--I think education is
free until about the eighth grade. Then, from the 9th to the
12th, and higher education, they have to pay for it.
So, they said that they have a one child policy per family,
and so the parents, and then the four grandparents, all focus
on that one child. And they save money, they said. They save 10
percent of their income to pay for that latter part of the high
school, and for the college education. And it was difficult for
me to understand how they could make such small annual incomes
and yet put away 10 percent.
So, you are definitely hitting the points that those folks
stressed, which was a combination of parental involvement, and
then the savings. And so, I think that, somehow, we are going
to have to find examples of those who have been able to do that
so that others can say, ``If he could do it, I can do it.'' And
they definitely are an example of success for the STEM careers,
international decathlon of mathematics and science.
And so, we need to take a look at that. My time has run
out, but I want to stay and hope that there is a second round
of questions. With that, I yield back.
Mrs. Biggert. Thank you very much. I will recognize myself
for 5 minutes. This is not the second round, Mr. Bachus.
We have heard from various sources that it is difficult to
track how much progress is being made in the financial literacy
area. How are you able to evaluate the impact of your efforts--
your efforts, or other programs? We will start with Mr. Beck
this time, and go the other way.
Mr. Beck. Well, there are a couple of things we are doing.
We are just finishing a grant project at the University of
Georgia for a measurement tool that can be used in any
financial literacy program.
It tracks not only whether you learned something, but also
behavior change. And that is a program that will be rolling out
at the end of October. And as with everything else we do, that
will be made available to anybody who wants to use it, and
actually we have had several meetings with different government
agencies who are very interested in it.
With our high school program, when people finish the
course, we ask them a question regarding how much they were
aware of certain financial issues before they took the course,
and how they have changed in their opinions. For example, in
asking, do you understand the cost of buying on credit, 12
percent said that prior to taking the course, they felt
strongly about that, that they knew that. That went to 31
percent afterwards.
Now, the important thing is that as we go back 3 months
later and ask them the same question--and at that point, 49
percent felt strongly that they understand the cost of buying
on credit. Comparing prices when I shop: 25 percent before, 33
percent right after, jumping to 52 percent 3 months later.
So what we are most interested in with anything we do is in
trying to figure out not only did people acquire some knowledge
during that event, but is it affecting them several months
later, and is it creating behavior change? Because the real
Holy Grail is behavior change, not just being able to pass a
quiz.
As we evaluate programs, that is the key thing for us.
Mrs. Biggert. Thank you. Mr. Chernow?
Mr. Chernow. Similarly to Mr. Beck, we actually have, over
the last 10 years as an organization, have invested literally
millions of dollars on evaluation. We do not believe, unless we
are able to evaluate the efficacy and the impact of the
programs, that we should be delivering those programs. So it's
not just about reaching children, it's about having an impact.
Our studies are pre and post. Those pre and post studies do
indicate increases in learning. So we do have a pre-test and a
post-test, and are able to determine if there are increases.
And it is about increased learning. And as Mr. Beck said, what
you are able to evaluate on a short-term basis--and,
unfortunately, because we are not able to track the students
from privacy issues, we are able to do initial studies--we are
able to determine whether or not there has been an attitudinal
change.
You know, the hope will be that some day down the road we
will be able to track their actual actions in regard to
financial literacy. Are they getting credit cards? Are they
doing a good job of getting loans for homes and businesses and
paying them off? We don't have that information too short-term,
but the truth is, we are evaluating the increases in learning
and the impact on their attitudes. And through our testing, we
are able to show marked increases in learning and
understanding.
Mrs. Biggert. Thank you. Ms. Walter?
Ms. Walter. I would agree with everything that has been
said already. And I also think that it is important for those
of us who have grant-making programs to ensure that our
grantees are undertaking things that can be evaluated and
measured.
So, we always require our grantees to have an evaluation
plan. And where we conduct programs ourselves or with partners,
as in our military effort, we seek to do that as well. We have
brought in an outside consultant in order to assess whether
what we are doing is moving the needle or not.
Mrs. Biggert. Thank you. And with that, I would yield back,
and yield 5 minutes to Mr. Baca from California.
Mr. Baca. Thank you, Madam Chairwoman, and thank you very
much for having what I believe is a very important hearing on
improving financial literacy, especially among the elementary
and secondary level, and also our post-secondary level. And I
appreciate the panelists coming here.
I was pleased to hear the gentleman, Mr. Chernow, talk
about Junior Achievement. I am quite familiar with Junior
Achievement, because I used to coordinate about seven or eight
different schools on the Junior Achievement program. At that
time, it was for GT; now it's Verizon. And I believe those
programs were excellent, because not only did we have a
production line and began to orientate the students about
starting your own business, running your own business, and
getting into the stock market, too, as well, so they actually
learned a lot about finance and controlling their own.
The problem was that we couldn't reach all of the kids. And
that's the problem. I wish every student would have signed on
to a Junior Achievement program. They would have had a better
understanding of financial literacy.
And I know that the message is so important, and I know
that you talked about collaboration and partnerships. And we
need to develop that, both for the private and the public
sectors, in terms of our schools. And how do we reach our
students, and what kind of an outreach do we do, to make sure
that every student is aware?
Because, ultimately, it affects their lives. It affects
their lives in the TR rating that many of them don't even know,
because most of them are being solicited to fill out an
application for a credit card. They get that. Later on in life
they try to buy a home, purchase something else. The TR rating
is there because maybe they failed.
Or, the attitude by many of these young kids, apparently
they feel, ``Well, okay, I will apply for a credit card now,
and I will just file bankruptcy. That's okay. You know, they
won't do anything to me, I am only a teenager.'' So those
attitudes are still there, but it is hurting them.
And I know that we need to incorporate something with the
public sector that needs to be done, whether it is done in
developing master plans--because each site administrator
develops a site plan, in terms of how they are going to
implement their curriculum. What we need to do is to look at
how we might coordinate something with site administrators in
developing a master plan where financial literacy needs to be a
part of the school system.
And my question to you is how do we approach this, and how
do we do this? Because when we look at the percentages, you
know, 55 percent of college students acquire their first credit
card during their first year in college, and 92 percent of
college students acquire at least one credit card by the second
year in college.
And yet, only 26 percent of the people between the ages of
13 to 29 reported that their parents actively taught them how
to manage their money--which, a lot of us don't--so when you
come from poor families, disadvantaged families, and others who
live paycheck-to-paycheck, and don't know how to even manage
their money, what can we do to create a continuum of financial
literacy education in the K through 12 and beyond--which is one
of my questions, and I sort of like set some ideas of what
things that we may be doing, but we need to incorporate that.
I feel it's so important that it needs to be incorporated,
especially at the secondary level, as part of a curriculum that
needs to be taught for our students. It just can't be by the
private sector or the public sector, or volunteer programs like
the Junior Achievement program, that are super programs, but we
only reach a certain segment of the community, or the students,
and we need to reach others.
So, maybe any one of you that want to answer this? And I do
appreciate what the others are doing too, as well, in trying to
reach out.
Ms. Walter. I think Mr. Beck will have a lot to say. I
would like to lead off by saying that we--it is our opinion
that one of the issues with respect to K through 12 financial
education--which has really been a focal point of the tension
in the financial literacy effort--one of the issues has come
about, we think, because educators were not as much involved as
perhaps they should have been, and therefore it made it
difficult for it to be thoroughly integrated into the
curriculum.
So, one of the things that we have done is, last year, we
gave a grant to the National Association of State Boards of
Education, and they are going to convene a panel of State
boards of education members. They are doing this now, and
others to work with them, to examine current practices, and
develop a set of recommendations that will be used to go
forward to help truly integrate financial literacy into K
through 12 educations.
And there will be a report on that issued next month, and
it will be distributed quite broadly. And we are hoping that,
by bringing the educators themselves into the fold, it will
help make efforts more available.
I also think that here, as with respect to other areas--as
we have done, for example, in our grant to First Nations with
the Native American population, it is very important to reach
out into the community to get people involved, who the people
you are trying to reach trust. So we have trained--helped to
train, through that grant, people in the Native American
community.
In our military education program, one of the things that
we are doing is training military spouses, so they can provide
no-charge services to other military families. And those types
of efforts need to be strengthened.
Mr. Beck. There are several things that we could talk about
there. First of all, I very much agree that we fully need to
understand the dynamics of each community. While educational
content might be similar--a checking account is a checking
account--the rules of the different communities appear to be
somewhat different, and we need to take that into
consideration.
We did a think tank with the Latino immigrant community
last year, and we really learned a great deal. We are also
working with First Nations, the Native American group, trying
to understand the issues that they face in trying to take
financial literacy to their communities, so that we can then be
responsive to them.
The second issue is awareness. A lot of school districts
are not aware of the programs that are available to them. We
have a really high-class problem at NEFE, in that we give
everything away. Anybody who wants it can have it for free, and
we would love to have more people asking for it. And that's one
of the reasons we are trying to expand our partnerships.
Let me just give you a quick story. When I go to our
teacher training programs around the country, I am always
intrigued by who is in the room. There is not a natural home
for a financial curriculum in a high school. Very few schools
have it. I am pleased to say last year we had our first English
and Physics teachers take our training course, so they could
incorporate financial literacy into their specialty, because
they think it is important for their students.
So, trying to find a more natural home for financial
education in the school system--starting earlier than high
school, even--I think would be a great step forward.
Mr. Baca. Mr. Beck, I indicated that it needs to start with
the administrator that develops a master plan. And apparently
they develop those master plans during the summer that they
incorporate during the curriculum year. If it's not
incorporated there, then it becomes very difficult for teachers
and others to implement financial literacy programs and others.
But that needs to be incorporated, and you're absolutely right,
in terms of getting the message out.
Mrs. Biggert. Thank you very much, Mr. Baca. With that, the
Chair notes that some members may have additional questions for
this panel, which they may wish to submit in writing.
So, without objection, the hearing record will remain open
for 30 days for members to submit written questions to the
witnesses, and to place the responses in the record.
And with that, thank you very much, panel, for being here.
Your expert testimony is really appreciated. We will now call
up the second panel.
Mr. Hinojosa. Madam Chairwoman, I would like to, while the
other panel comes up, ask that H.R. 973, recognizing October 2-
8, 2006, as Financial Planning Week, as well as letters of
support, be inserted into the record.
Mrs. Biggert. Without objection.
Mr. Hinojosa. Thank you.
Mrs. Biggert. Welcome to the second panel. Thank you for
being here, and I will introduce the panel first. On my left is
Ms. Julie Cripe, president and COO of Omnibank in Houston,
Texas. And she is here on behalf of the American Bankers
Association.
Second is Mr. David G. Kittle, president/principal,
Principle Wholesale Lending, Incorporated, from Louisville,
Kentucky, on behalf of the Mortgage Bankers Association.
Welcome.
Next is Mr. Carl Sorgatz, CEO, Hawthorne Community Credit
Union, again from my district in Napersville, Illinois, on
behalf of the Credit Union National Association. Welcome.
And then Mr. Donald D. Kittell--that's a very close name,
sir, it's just spelled a little bit differently, I believe--
executive vice president, Securities Industry Association.
Welcome.
And Mr. Stephen Brobeck, executive director, Consumer
Federation of America.
And last, but not least, Mr. Frank Pollack, president/CEO
of Pentagon Federal Credit Union, on behalf of the National
Association of Federal Credit Unions.
Again, as I stated to the first panel, you will be
recognized for 5 minutes' testimony, your summary, and then
after that we will have 5 minutes for questions from each
member. So, Ms. Cripe, you are recognized for 5 minutes.
STATEMENT OF JULIE CRIPE, PRESIDENT AND COO, OMNIBANK (HOUSTON,
TX), ON BEHALF OF AMERICAN BANKERS ASSOCIATION
Ms. Cripe. Chairman Biggert and members of the committee,
my name is Julie Cripe. I am president of Omnibank in Houston,
Texas, which is a $325 million community bank which has been in
existence for 52 years. I am also chair of the American Bankers
Association Education Foundation, and I am pleased to be here
today to represent ABA.
I want to thank Chairwoman Biggert for holding this hearing
on the importance of financial education. I also want to thank
Representatives Biggert, Green, Hinojosa, and Tiberi, and many
others, for participating with bankers in the ABA Education
Foundation's National Teach Children to Save Day last April.
And I want to acknowledge Representative Lucas and others who
plan to participate in ABA's national Get Smart About Credit
Day this October. Your efforts show your dedication to this
issue, and demonstrate how much we can accomplish by working
together.
The ABA recognizes that everybody has a vested interest in
being as smart about their money as possible. But too many
people fail to realize their dreams, and lose their hard-earned
money because they lack basic money management skills. As
bankers, we are well positioned to help stop the circle and
cycle of financial illiteracy. Thousands of bankers nationwide
are dedicating time and resources to developing financial
education programs that are specifically tailored to meet the
needs of their local communities. We are going into classrooms,
churches, and community centers to help people learn about
budgeting, saving for the future, and managing credit wisely.
The ABA Education Foundation provides resources to help
bankers teach financial literacy, including the new Get Smart
About Credit e-learning program. The program is an online tool,
interactive, that teaches teens and young adults how to obtain
and manage credit, and is available both in English and
Spanish. It is really designed to grab the attention of teens,
and make financial education fun. Banks offer the program
through their Web sites. And earlier this year, my bank became
the first in the country to do so.
The ABA also produced this tool box on financial education,
provided free of charge to all our members. This tool box
contains five books that guide banks on how to start or enhance
a financial education program. It also contains case studies
from banks that have created successful outreach programs--in
other words, what works--and has information on how to partner
with community-based groups.
Bankers are not alone in their efforts to increase
financial education outreach. All of the groups testifying
today know each other well, and we all continue to look for
ways that we can work together. Linking financial education
efforts together will promote efficiency, and should be
encouraged. But it is important to realize that financial
education has developed in a fashion similar to our Nation's
highways.
Like individual roads that were built to meet the
geographic needs of particular cities and towns, financial
education programs are built to meet the unique needs of
individuals and businesses in our communities.
Attempting to organize and distribute the depth and breadth
of material that each sector has created may not make the most
sense. For example, 91 percent of the loans my bank makes are
in low and moderate income areas. The financial education
programs we employ are specifically designed to reach this
audience. Others may want to tailor their programs to meet the
particular needs of the communities they serve.
We are building bridges to connect our separate efforts,
and we should continue doing so. We should also continue
developing financial education solutions that are designed to
address our unique community needs. Just as there are benefits
to having a choice of roads when traveling, there are benefits
to having financial education options. I think we can all agree
that choice in learning is a good thing.
The Federal Government can help us by: number one,
encouraging bank regulators to grant CRA credit for financial
education programs; two, supporting minimum financial education
requirements in schools; three, sponsoring public service
announcements that teach basic money management; and four,
providing financial support for existing programs with proven
track records.
I appreciate the opportunity to testify today. The ABA
welcomes the opportunity to work with Congress, the banking
agencies, and my fellow panelists, to expand the financial
education opportunities in all the communities we serve.
[The prepared statement of Ms. Cripe can be found on page
83 of the appendix.]
Mrs. Biggert. Thank you so much. Mr. Kittle, you are
recognized for 5 minutes.
STATEMENT OF DAVID G. KITTLE, PRESIDENT, PRINCIPLE WHOLESALE
LENDING, INC. (LOUISVILLE, KY), ON BEHALF OF THE MORTGAGE
BANKERS ASSOCIATION
Mr. Kittle. Thank you, Madam Chairwoman. We are in the
middle of the highest homeownership rate in our country's
history. Nearly 70 percent of Americans now own their own
homes, and are building great wealth. The Federal Reserve said
in 2004 that the median net worth for homeowners was $184,000.
For renters, it was only $4,000. Homeowners have been
successful in accumulating wealth, mainly by building up equity
through their monthly mortgage payments and home price
appreciation.
We are committed to educating consumers about the
importance of good credit, of working within a budget, and of
better understanding the mortgage process and the range of loan
products available. By understanding all of these elements,
consumers are able to determine if homeownership is the right
choice for them. And if it is, what type of financing is right
for their personal financial situation.
While we want to ensure that homebuyers have the
educational tools they need, we also want to ensure that our
industry has the tools necessary to inspire public confidence.
That is why the Mortgage Bankers Association is so committed to
providing educational opportunities to its members. The
capstone to MBA's education program is the certified mortgage
banker designation.
I am proud to be a CMB, which was conferred upon me by MBA
when I completed the demanding curriculum. I had to be in the
industry for at least 3 years, go through a rigorous education
program with both oral and written exams, and commit to my
continuing education.
One of the challenges we have in advancing financial
literacy is to reach the people where they are. When people
shop for homes and mortgages to finance them, they talk to
mortgage bankers. Ensuring these professionals are well
qualified and highly knowledgeable is one of the key ways we
can further financial literacy.
At the Mortgage Bankers Association, we are also active in
reaching out to potential borrowers. Our home loan learning
center Web site is a great step-by-step tool to help home
buyers understand the home buying process. It also teaches
people the importance of their credit status to their ability
to qualify for a mortgage and achieve homeownership.
We are also reaching out to homeowners, industry, and law
enforcement, to stop mortgage fraud. Mortgage fraud against
lenders is sometimes confused with, but differs from, predatory
lending, which involves unscrupulous lending to an unknowing
borrower. Mortgage fraud is a problem, not only because lenders
and borrowers are hurt, but because people can lose their
homes.
MBA is also a supporter of Dollar Wise, the financial
literacy campaign of the U.S. Conference of Mayors, whose goal
is to develop local financial literacy strategies to reach
people where they live. MBA recently held consumer information
summits in Mississippi and Louisiana, in the wake of hurricanes
Katrina and Rita. Later this year, we will host another in
Philadelphia. These events are designed to provide attendees
with the kinds of information that will be most useful to local
leaders and their constituents.
On November 1st, the National Home Equity Mortgage
Association--or NHEMA--will formally conclude its merger into
MBA. In 2001, NHEMA established an independent organization,
the Borrow Smart Public Education Foundation, to facilitate
community efforts to increase financial literacy. As the merger
moves forward, MBA will integrate Borrow Smart into the overall
financial literacy efforts.
Financial literacy is described as the solution to many
different challenges. It comes up in the context of predatory
lending debate, discussions about whether borrowers are making
the right decisions about their mortgages they take out, and
other legislative and regulatory issues.
The financial literacy of consumers is critical to a
smoothly functioning, self-regulating market that, ultimately,
will lessen mortgage delinquencies and foreclosures. Government
has an important role to play in promoting financial literacy.
Most importantly, government at all levels can help by
urging that financial literacy be taught in our Nation's
schools. While we understand the Federal Government does not
generally determine curricula in this country, Congress should,
itself, set the task of identifying ways to encourage States
and local school boards to introduce or enhance curricula to
teach financial literacy.
Greater coordination of financial literacy efforts is also
necessary. We, government and industry, are all making efforts.
Too often, we only engage when people find themselves in
significant financial trouble, and are avoiding calls from bill
collectors.
Mortgage bankers have a responsibility to their customers.
The mortgage transaction is complex, and the product innovation
over the last decade has left even the most educated customers
with a need to learn more about an incredible array of options.
But a well informed consumer can better navigate the complexity
and shop for the best possible loan product.
On behalf of our members, MBA appreciates the opportunity
to participate in this important hearing. I look forward to
your questions, and thank you for your time.
[The prepared statement of Mr. Kittle can be found on page
116 of the appendix.]
Mrs. Biggert. Thank you very much, Mr. Kittle. Mr. Sorgatz,
you are recognized for 5 minutes.
STATEMENT OF CARL SORGATZ, CEO, HAWTHORNE COMMUNITY CREDIT
UNION (NAPERSVILLE, IL), ON BEHALF OF CREDIT UNION NATIONAL
ASSOCIATION
Mr. Sorgatz. Thank you, Madam Chairwoman, and members of
the committee. I appreciate the opportunity to appear before
the committee today on behalf of the Credit Union National
Association, CUNA, to provide an outline of the programs and
initiatives that CUNA and its member credit unions are involved
in to promote financial education among youths and adults.
CUNA is the Nation's largest credit union advocacy
organization, representing approximately 90 percent of the
Nation's 8,800 Federal and State credit unions, and their 87
million members. I am Carl Sorgatz, and I serve as president
and treasurer of Hawthorne Credit Union, headquartered in the
Chicago suburb of Napersville, Illinois. I also serve as
president of the Illinois Credit Union League.
I would like to begin by commending my Congresswoman, Judy
Biggert, for her strong commitment to the issue of financial
literacy, and for her efforts as co-chair of the House
Financial Literacy Caucus, to keep issues of financial literacy
and education before the Congress.
I was also delighted by the fact that Mrs. Biggert was able
to take the time during this busy final week of Congress to
participate in CUNA's first financial literacy summit. The
summit was envisioned by CUNA chairman, Yuri Valdov, as an
annual forum for credit union leaders from all parts of the
country to share ideas and coordinate strategies on how best to
address the distinct financial literacy needs of youth, working
age families, and recent immigrants in underserved groups. The
summit also featured the Treasury Department's national
strategy on financial literacy.
Hawthorne Credit Union was established during the Great
Depression in 1935, and currently has over 15,000 members. That
was a time when many financial institutions were going out of
business, and those who were in business weren't interested in
serving the working class people.
In fact, there were fewer than six credit unions in
Illinois when our founder, Senn Heath, and other Western
Electric employees, began their planning. They were intrigued
by the concept of people helping people. Since early in the
21st century, Hawthorne Credit Union has centered our community
involvement in enrichment strategy on financial literacy.
Financial literacy fits well with our number one goal for
our credit union, our members and their families, to become our
members' trusted financial advisor. In pursuing our strategy to
improve financial literacy, Hawthorne Credit Union began to
work with a not-for-profit group in Napersville, Illinois,
called Families Helping Families. This group assists
individuals who are in great need of financial assistance and
guidance in getting their lives back on track. The adopted
families are often single mothers and their children, who have
been victims of domestic violence and poverty.
They asked us if we were interested in facilitating
financial literacy classes for their participants. We were very
interested, and began to develop a program that would care for
the needs of these families. Our training manager connected
with NEFE, a highly respected organization that CUNA has
partnered with, to offer resources to credit unions in their
communities.
Hawthorne Credit Union created two classes that the
participants are required to attend. In class one, it covers
money management and the basics of maintaining a savings and
checking account, and class two covers lending topics, credit
reports, and bankruptcy.
When the participants complete class two, many of them work
with our lending manager and/or one of our loan officers
regarding credit counseling. We review their credit report and
determine a plan of action to help them repair damaged credit.
In some cases, we are able to assist the participant through a
loan product. We are often able to refinance a high interest
automobile loan, issue a share-secured Visa credit card, or
process a share-secured loan, in order to pay off some debt.
Most of the participants are single parents. We supply the
space, and Families Helping Families supplies the babysitters--
usually a few mentors and some high school-aged students. The
children usually are in the age ranges of 1 to 13 years old.
During the last class this past August, we provided a
financial literacy session for the children, and provided games
using play money. We gave each child $10 to start their
savings. The parents opened minor savings accounts for the
children, and we told them that if they saved $100 within that
first year, we would give them another $10.
Through these efforts supported by NEFE, Hawthorne Credit
Union is able to assist those who are in need of not just
financial aid, but who desperately need financial education. In
this way, they can go from being homeless and struggling with
day-to-day issues that most of us find as normal occurrences,
to being self-sufficient, contributing members to our society
who are able to support themselves and their families.
Our commitment to provide financial literacy to our
community is important to our charter, our strategic plan, and
our center to our success. Becoming our members' trusted
financial advisory often starts with helping individuals like
these better understand their financial options.
And in conclusion, CUNA and its member credit unions have
long been a leading advocate and implementer of financial
literacy programs for members of all ages. Among its
initiatives, CUNA developed an Hispanic outreach program for
credit unions to utilize. Through other programs, such as
Jump$tart, NEFE, Thrive By Five, National Youth Involvement
Board, and the National Youth Savings Challenge, which I have
detailed in my written testimony, credit unions continue to
make a difference in many lives through financial education and
counseling, and to maintain the high standards of people
helping people.
Once again, thank you for having me here today, and I am
happy to answer any questions you may have.
[The prepared statement of Mr. Sorgatz can be found on page
138 of the appendix.]
Mrs. Biggert. Thank you very much. Mr. Kittell, you are
recognized for 5 minutes.
STATEMENT OF DONALD D. KITTELL, EXECUTIVE VICE PRESIDENT,
SECURITIES INDUSTRY ASSOCIATION
Mr. Kittell. Thank you, Madam Chairwoman, and Congressman
Hinojosa. I will speak on behalf of the securities industry,
and specifically, the Securities Industry Association and the
Bond Market Association, with whom we are merging later this
year.
Both associations have established foundations for investor
education. They are targeted in two broad areas. The first is
to students, primarily grades 4 through 12, and the other
programs are for adults. The perspective is from an investor
education beginning, but a lot of our content covers broad
financial literacy issues of the kind that you have talked
about this morning.
The cornerstone of our student program is the Stock Market
Game, a simulation in which teams of students in grades 4
through 12 learn the fundamentals of investing through a hands-
on simulation of investing $100,000 over approximately a 10-
week period. We currently have 500,000 students every year
participating in this game, along with 14,000 teachers. Since
inception, we think we have reached over 10 million students
over the last 10 years.
The curriculum is correlated to national standards in
mathematics, economics, business, and marketing, so it is not
just a stock-picking game. The true value of the game is its
ability to capture the interest of students through
competitions and keeping score, and our experience is that
teachers find that students become extremely motivated during
this game.
Our member firms are very active in supporting the game. At
the risk of naming a few and leaving out some, I will mention
Merrill Lynch, particularly, Wachovia Securities, Morgan
Stanley, AG Edwards, PNC Financial Services, Charles Schwab,
Cabrera Capital Markets, and American Century Brokerage. We
also partner with other organizations in the industry, such as
the Investment Company Institute, and the New York Stock
Exchange.
One of the aspects of the game is a Capitol Hill challenge.
I am pleased to note that the team representing Speaker
Hastert's district won the 2004 competition. Chairman Bachus's
district was victorious in 2005, and Representative Bart Gordon
took the honors this year. There were 10 members of the
subcommittee sponsored teams in the competition this year, and
an additional 7 members of the full committee have
participated.
We, 2 years ago, introduced a national and State essay-
writing contest in order to demonstrate--or to allow students
to demonstrate--what they have learned from the game. This is
the most important new growth area in our program.
Turning to the adult game--or, excuse me, the adult
education program--we have sponsored the Path to Investing Web
site for a number of years. Based on market research we have
done with investors who have told us the kinds of education
they want--they want it customized, they want it totally
objective, without a sales pitch, they want it entertaining,
and they want it to be easy to understand. Path to Investing
attempts to do that within the limits of a Web site. We have
more than 1,500 pages of content, covering a wide range of the
subjects that you have talked about today.
As many of the other panelists have said today, we partner
with many other organizations in the financial area. I would
mention specifically the Alliance for Investor Education, which
represents close to 20 private sector, as well as government,
and organizations that are interested in investor education.
We also partner with regulators, both at the Federal and
State level, and I would like to particularly mention that the
Treasurer of the United States, Anna Escobedo Cabral, spoke at
our California stock market game event just this week, and her
story, if you haven't heard it, was inspiring for everyone who
heard her remarks.
The Treasury also sponsored a financial literacy and
education event at Treasury, and our 2006 essay winner was a
participant in that event.
The Bond Market Association also has a Web site entitled,
``Tomorrow's Money,'' which addresses activities targeted at
young people aged 18 to 34, Spanish-speaking Americans, people
facing financial decisions of a specific kind, and so on. The
Bond Market Association also works with the State treasurers in
partnering with Web sites that offer education in each State.
And they have also participated in a number of programs with
the American Red Cross, United Services Group, and so on,
helping families who are victims of 9/11, Katrina, and other
disaster events.
The securities industry, in sum, has a lot of resources and
a lot of commitment to this subject, and we are looking forward
to working with all of you to further your objectives. Thank
you.
[The prepared statement of Mr. Kittell can be found on page
102 of the appendix.]
Mrs. Biggert. Thank you very much. Mr. Brobeck, you are
recognized for 5 minutes.
STATEMENT OF STEPHEN BROBECK, EXECUTIVE DIRECTOR, CONSUMER
FEDERATION OF AMERICA
Mr. Brobeck. Thank you, Madam Chairwoman. We at the
Consumer Federation of America greatly appreciate the
opportunity to participate in this important hearing.
For decades, CFA has undertaken numerous financial
education initiatives to increase financial literacy. For
example, for more than a decade, we led a government, business,
nonprofit consumer literacy consortium to inform Americans how
to purchase products intelligently. The group's brochure on
``66 Ways to Save Money'' has, for years, been the most popular
consumer publication distributed by the Federal Government for
a fee.
Yet, as we have undertaken these and many other
initiatives, we have been mindful of the limits of financial
education. Knowledge alone cannot ensure true financial
literacy, which is reflected in sensible financial behaviors.
Consumers must value this knowledge enough to learn and to
practice it, and there must be accessible opportunities for
utilizing these skills.
For example, knowledge about retirement programs is
virtually impossible to apply if one does not have available at
work a contributory plan. But even when one is available, a
significant minority of employees are not sufficiently
motivated to participate.
That is why, by allowing employers to automatically enroll
employees in 401(k)s and other contributory programs, the
pension legislation passed by Congress earlier this year
represents a far more significant advance for employees and
society as a whole, than any conceivable related financial
education program.
Furthermore, knowledge complements, but cannot substitute,
for consumer protection. In the area of consumer credit, for
example, these protections begin with disclosures required by
law, such as truth in lending and truth in savings. But even
these requirements are not sufficient to protect the millions
of Americans who are baffled by the growing complexity of
financial services products, and are vulnerable to aggressive
deceptive sales practices.
That is why the Department of Defense and many senators are
supporting, as part of Defense reauthorization legislation, the
inclusion of important consumer protections that include a 36
percent cap on interest rates charged to military personnel
Truly effective financial education that significantly
increases financial literacy is linked to motivation and
opportunities to produce desired behavioral changes, and has
the opportunity of going to scale. That is, reaching tens of
millions of Americans.
One such program that has this potential--and my
organization is involved in--is America Saves, which, in dozens
of local and regional areas, often with the assistance of
Cooperative Extension, has recruited about 1,000 public and
private organizations, 200 of which are banks and credit
unions, to undertake campaigns to enroll tens of thousands of
non-saving individuals as Savers.
These participants are required to make written commitments
to implement a specific plan that they have developed to meet a
savings goal. To date, nearly 60,000 Americans--about half of
whom are African American or Hispanic American--have enrolled
as Savers, and hundreds of thousands of others say, in our
research, that they have benefitted from our programs.
Just as importantly, the local campaigns have persuaded
important local institutions, such as banks and credit unions
and employers, to more effectively promote saving. For example,
in several dozen areas where campaigns exist, most banks and
credit unions have lowered opening and monthly savings minimums
considerably, so that less affluent families who cannot afford
a $300 or $400 opening balance on a savings account can afford
to begin saving.
Committee members may also be interested to learn that the
Department of Defense has embraced its own Military Saves
initiative, which is coordinated by a member of my staff.
In closing, I would suggest one initiative that would not
only help link diverse financial education programs, but also
motivate, as well as inform consumers. That is a call to all
consumers to estimate and then periodically monitor their net
personal wealth. Awareness of net assets is an important
motivator for better money management and debt management, as
well as savings accumulation.
People who know their net wealth are more likely to spend
their money carefully, monitor their finances, live within
their financial means, and patiently accumulate wealth through
retirement savings, homeownership, and other savings
strategies.
In other words, if Americans were more aware of their net
personal wealth, they would be far more receptive to effective
financial education programs that help them monitor, conserve,
and accumulate financial resources. My written testimony
suggests how such an initiative might be developed as well as
an appropriate role for the Federal Government.
Again, thank you for the opportunity to testify.
[The prepared statement of Mr. Brobeck can be found on page
74 of the appendix.]
Mrs. Biggert. Thank you very much. And Mr. Pollack, you are
recognized for 5 minutes.
STATEMENT OF FRANK POLLACK, PRESIDENT/CEO, PENTAGON FEDERAL
CREDIT UNION, ON BEHALF OF NATIONAL ASSOCIATION OF FEDERAL
CREDIT UNIONS
Mr. Pollack. Thank you. Good morning, Madam Chairwoman,
Congressman Hinojosa, and members of the committee. I am Frank
Pollack, president and CEO of the Pentagon Federal Credit
Union, headquartered in Alexandria, Virginia.
I am here today, on behalf of the National Association of
Federal Credit Unions, to testify on the financial literacy
efforts of our Nation's Federal credit unions.
Pentagon Federal Credit Union is a not-for-profit financial
cooperative governed by a volunteer board of directors, who are
elected by our member owners. Our credit union was chartered in
1935. We have 730,000 members, and just over $9 billion in
assets.
As Americans are faced with an ever-widening array of
financial services, it is important that consumers are armed
with a sound understanding of the basics of personal finance.
Financially literate individuals are more likely to spend
prudently, and put money in savings, retirement funds, and
other wealth-building accounts. Conversely, the same
individuals are less likely to rack up large, burdensome, and
sometimes unaffordable, debt.
NAFCU and our member Federal credit unions know that
financial illiteracy is an issue that touches all Americans at
every age and income level. Accordingly, NAFCU makes available
to credit unions a financial education curriculum based on the
Federal Deposit Insurance Corporation's Money Smart program.
The curriculum, which NAFCU, in working with the FDIC,
tailored to credit unions, is aimed at teaching individuals
outside the financial mainstream how to manage their finances
while also stressing the importance of long-term savings.
Additionally, the credit union industry is a key partner in
the fight against predatory lending. Credit unions are
dedicated to helping their members avoid unscrupulous lenders
by providing them with low cost loan alternatives, and offering
financial education to assist members in developing sound debt
management skills.
Many credit unions have developed innovative financial
literacy programs to educate their members. I would like to
take this opportunity to tell you a little bit about our credit
union's program.
In 2001, we created the Pentagon Federal Credit Union
Foundation, a nonprofit organization fully devoted to improving
the financial literacy and wellbeing of the military members
served by the credit union. The foundation sprung to life as a
result of the numerous abusive predatory lenders that thrive on
making high-cost loans to young, inexperienced military
personnel.
To combat predatory lending, our foundation created the
asset recovery kit program, which provides small cash loans to
our military members. In order to be approved for the loan, our
members are required to undergo financial counseling by members
of the National Federation of Consumer Credit Counseling. The
council will help to renegotiate monthly bills, and teach the
borrower how to maintain a budget. Members can receive as many
as five loans over the course of a year. Neither the foundation
nor the credit union earns a profit from the program. The sole
purpose is to help our members get out of trouble, and develop
solid budgeting skills.
The program has been a runaway success. As of the end of
August, PFCU had made 709 loans under this program. Our charge-
off rate is only 8 percent. That figure is phenomenal,
considering that these are unsecured loans to people that have
risky credit, and who have also maxed out on traditional credit
facilities.
Further, fewer than 5 percent of the people who have
applied for loans have used all five renewals. I think this is
strong evidence that the credit counseling services mandated by
the program are paying off.
Earlier this year, we entered into an agreement with Fort
Bragg Federal Credit Union, which now offers the program, as
well. We are also working to roll the program out at other
Defense credit unions.
Another major initiative about to be launched by the
foundation is a program called Dream Makers. This program is
aimed at helping military personnel and Department of Defense
employees to achieve the American dream of homeownership.
Members who are first time home buyers can receive grants of up
to $5,000. These grants do not have to be repaid.
It is our hope that, with these and other programs, we can
help to foster financial literacy, personal wealth, and success
for all of our members. These brave men and women are joining
our armed forces and laying their lives on the line for us
every day. We want to give them all that we can, in exchange
for their service to our country.
We hope that Congress, the NCUA, and Federal agencies will
work with the credit union community to continue to foster an
environment where such programs can exist. Many other credit
unions are also stepping up to the challenge, and helping
Americans of all ages to build a solid foundation of financial
management skills. PFCU is just one example of the way in which
the credit union industry has reached out to improve financial
literacy.
Because the credit union mission has always been to promote
savings, credit union staff and volunteers were some of the
first financial educators in America. In addition to being
among the first to emphasize the importance of financial
literacy, today's credit unions are also among the finest at
providing sound, financial management advice to their members.
NAFCU and the Federal credit union community stand ready to
work with the House Financial Services Committee on this
important issue. Thank you, and I would be happy to answer any
questions you might have.
[The prepared statement of Mr. Pollack can be found on page
123 of the appendix.]
Mrs. Biggert. Thank you very much. We will now proceed to
the questioning, and I will yield myself 5 minutes.
Ms. Cripe, I participated in your tenth annual National
Teach Children to Save Day, and one of the things that I really
like to do is to go into the schools and teach classes, or
whatever I'm going to be doing, from--well, actually, from Head
Start all the way through college.
But I think in the elementary schools and the middle school
is really fun. This happened to be the elementary school, where
we were talking about saving and whether it is a want or a
need, and the kids would hold up the cards if--they first made
a list of all the different items, and you would say, ``Well,
television, is that a want or a need?'' And of course, they did
differ, and then we had to discuss it. But it was a great
program, and I really liked it.
And then, Mr. Kittell, I did participate in the stock
program. I was very upset, because I am very competitive, that
Speaker Hastert won in Illinois every year--he didn't win
nationally all the time, but the first time. So my teams are
going to do better next time. But that's also a very good
program.
I would--talking to the kids, I did mention to them--
because it is a short period of time, I think 6 weeks--that
they should keep those papers and go back, you know, 10 years
or 20 years later, and see how those stocks have held up to the
picks. You know, they would have about six stocks. And it was
kind of interesting what was bought. I remember one year it was
Google. They did very well, the kids who bought Google at that
time; it was a good pick.
But I appreciate all of the--I feel like a kid when I go
back into--so it's really--the programs are so much fun, and I
think the kids really enjoy them. And I know Mr. Hinojosa
participated in the bank one, too.
So, my question is that we have been working to perhaps
develop legislation that would establish a comprehensive
director of financial literacy programs in the United States,
and I know, Ms. Cripe, that you have one for the American
Banking Association. And in your testimony, you said that--I
was kind of surprised, because you said ``attempting to
organize and distribute the depth and breadth of material that
each sector has created would be a frustrating exercise that is
likely to fall short in expectations.''
Do you then think it's not a good idea to have a directory?
Or it might be so voluminous because I know there are so many
groups that have something and probably changed the focus, but
we have so many groups and, you know, that people might be
searching for something that they can use in their school, or
their organizations, or such.
Ms. Cripe. I think it's a great idea to have a
collaborative effort, to have a directory. We have worked with
Jump$tart, as many of my colleagues up here have done.
What I hesitate about is to have a stop in the great
programs that are going on to accumulate this information. As
long as we keep going with all the great programs, and then add
to the list I support it because, for example, what's in our
quick reference guide, the national strategy from the Treasury,
that list is incomplete. I notice that many of us here are not
on it as resources. And so, just to add to that and continue
the collaborative effort, I think, is a great way to go.
Mrs. Biggert. Well, our emphasis on the--with the national
strategy, and what we had asked, was to organize within the
Federal agencies that were duplicative, or that they would work
together.
And actually, that happened in Katrina, where we actually
asked them to call--the Secretary of the Treasury to call a
meeting, and which we attended, and they sat down and really
went over what each agency was doing in Katrina then. And so
that they realized that some of them were doing the same
things, so they did get together and sit together, then, and
talk about it.
Is there something--you know, we had originally proposed
then having something with the private sector. But it's so
immense, I think now, that is this something that needs to be
done, or would the Federal Government stay out of it, as far as
what you all think? We will start with Mr. Pollack. Do you--
Mr. Pollack. Well, I don't think the Federal Government
should stay out of it. I think the only way we are going to
solve this is to put a lot of effort into this, because we need
to change the education pattern in the United States. That is
the only way we are going to teach people how to manage money
properly. And that is a long-term effort.
Unlike some of the issues we have, though, this doesn't
require billions of dollars. It requires a lot of effort, and
continuous effort.
Mrs. Biggert. Mr. Brobeck?
Mr. Brobeck. As are the kids in Lake Woebegon, all
financial education programs are above average. But all of us
in the area know that some of those programs are much better
than others.
So, while a directory that describes the programs is
extremely useful, it would also be useful to aspire to
including, at some point, an evaluation of the effectiveness of
those programs.
Mrs. Biggert. Mr. Kittell?
Mr. Kittell. Yes. One of the things that we have had
trouble with is that there are no generic solutions across
school systems, across the States. It's very much a local
solution, we find, in trying to work with teachers.
So--and the investor education material that is available,
it's a pretty chaotic area. I mean, there is an awful lot of
stuff. But it's very difficult to sort out, you know, just what
is really meaningful for a given purpose, and what isn't.
So, I guess I would encourage certainly awareness of what
is out there, and maybe a look at more generic solutions to
what happens in our schools.
Mrs. Biggert. Okay, thank you. Mr. Sorgatz?
Mr. Sorgatz. I would go back to what the previous panel
said about the awareness issue. I think it is very important
for the government's participation to--through a public service
address, to get the issue out there in front of the public.
I think it's not just the youth issue of financial
literacy. I also think it is the adult financial literacy
problem that we have in the country today, and I think the
awareness of where can people go for resources, and to, first,
of all, make sure that everybody understands this is a key
problem, and the cause/effect situations, and how it affects
the economy, and how it affects people's daily lives.
Also, Mr. Kittell's comment about the schools, in terms of
having the variety of materials to choose from, I think one of
the difficulties that we have had, in terms of being able to
partner up with schools, is to be able to get into the right
people, make those connections, and then work through the
issues of whether or not it is going to be a curriculum item
that is incorporated, or whether it's something that we can
present, in conjunction and partnership with the teacher
themselves.
And we are trying to work that partnership out without
stepping on toes. And yet, it seems to be a struggle as we go
along. It is always more difficult for us to work out that
partnership than it should be.
Mrs. Biggert. Is the usual response to your request that
they have just so much time for the academics, and they just
can't fit it into the program?
Mr. Sorgatz. Part of it has been that. Part of it is to
where does it fit, as was talked about, again, in a previous
panel. And it's the timing issue. I think if we could be given
some information as to, you know, you want to partner up with
us, here is the time frame to come in and set this up.
As was mentioned again previously, the summer time is when
some of those curricula are put together. But how to get in
touch with some of these people has been very challenging, to
say the least.
Mrs. Biggert. Mr. Kittle?
Mr. Kittle. Madam Chairwoman, I agree with two of the
things that have been said here. Personally, I have been
involved in my own children's schools with Junior Achievement.
All of the people on both the panels today are here because
they want to give back to their communities, and they are
concerned about financial literacy.
We, at the Mortgage Bankers Association, tend to deal with
not in the school age, but obviously, when you're out
purchasing your first home. So those people need to make sure
that they are educated. We want to educate those home
borrowers. Mortgage Bankers Association has spent over $2
million in the last 2 years on our home loan learning center,
to make sure that they are educated in the process that we deal
with every day.
The consumer needs to know that they need to shop for their
mortgage loan, and not just take the first offer that comes
along. And they also need to be educated to the fact that when
they go to the loan closing, and something is not right, they
have every right to get up and leave.
Mrs. Biggert. Thank you. Ms. Cripe?
Ms. Cripe. I think we all agree that awareness and getting
to the most people is of key importance. The lesson that you
participated in, as well as Congressman Hinojosa, Congressman
Green, and Congressman Tiberi, are examples. We all agree that
this is something that is necessary, and we managed to get into
the schools.
Noting those frustrations, I know that many bankers also
use these same lessons by going to churches and community
centers after school and on the weekends, in order to reach the
most and highest proportion of consumers. So, we have found
that to be a successful way.
We have also designed our programs and our lesson plans to
fit into a math curriculum, an English curriculum, or a social
studies curriculum, so that we can go to the school and say,
``This is where you can put it. This is where you can use the
lesson.'' And we think that making it simple is a good way to
do that.
Mrs. Biggert. Thank you. I yield to Mr. Hinojosa.
Mr. Hinojosa. Thank you, Madam Chairwoman. I think that the
first panel and the second panel are equally good in the
material that you all have presented. Very, very interesting,
and certainly you have caught my interest.
I don't think that in 5 minutes I could ask questions of
each one of you, so let me see if I can focus on the last
three, because you touched on something that is very important
in my Congressional district, and that is that 80 percent of
the 652,000 constituents I represent are Hispanic. I come from
Mexican immigrant parents: 11 children; I am number 8.
So, my father, as a first generation American--because he
got his citizenship right after World War II--taught me
something, and that is that we needed to learn how to save. And
he, like me, because I was good at following instructions and
math, and things like that, and so he showed me how he would
put away 2 percent of every day's deposits. He had a little
grocery store, and then started a meat processing company, and
that was his practice.
And so, I followed suit. I am second generation, and I was
lucky to enough to make a more comfortable life for myself
because I not only had the savings, but I invested it in the
stock market.
I particularly liked the fact that Donald Kittell and
Stephen Brobeck spoke about what they are doing with the
Hispanic community. The Hispanic community is a growing
population that accounts for about $800 billion of buying power
annually. So that certainly is a group to focus on if we are
going to make a big difference.
My question to you--each one of you, Mr. Kittell and Mr.
Brobeck--are you working with any of the Hispanic organizations
like NCLR, National Council of La Raza, or LULAC, or others who
focus so much on trying to improve the quality of life in the
Hispanic community? I will start with Don Kittell.
Mr. Kittell. I can't speak of any direct partnership with
the organizations you have mentioned, but our firms and our
programs are very much targeted to the Hispanic community, as
is the entire securities industry's diversity program, both in
employing Hispanics and other minorities, as well as marketing
to them.
But in the stock market game program, our firms have been
very interested in--particularly in underserved communities,
particularly inner city. One of the firms I mentioned in my
oral testimony, Martin Cabrera, was a gentleman who grew up in
Chicago, inner city Hispanic, took the stock market game and,
20 years later, has his own securities firm, and is a great
supporter of our game.
So, we are very focused on inner city. We are translating
our material into Spanish. And it's a market that we are very
interested in serving.
Mr. Hinojosa. Thank you. Mr. Brobeck?
Mr. Brobeck. One of the most important priorities of this
expanding America Saves program is to reach out to Latino
communities. And in order to do that, we have partnered with
national nonprofits and corporations to develop a unique set of
materials, such as this ``Build Wealth, Not Debt'' pamphlet in
Spanish, and a Web site, and other related materials. But we
have also gone outside of Washington to try to organize savings
groups in primarily Latino communities.
My colleague and associate director, Nancy Register, this
very day is working with dozens of Latino groups in El Paso on
El Paso Saves, on a whole array of initiatives. And a couple of
weeks ago she was working on Miami Saves, which is led by
Latino groups. So this is a very high priority at the Consumer
Federation of America, and we look forward to working with you.
Mr. Hinojosa. If you would draw an imaginary line from El
Paso to San Antonio to Corpus Christi and down to the southern
tip of Texas and Brownsfield, there are approximately 12
million--maybe 14 million--people, of which 80 percent are
Hispanic. And I would be happy--our staff would be happy--to
assist you with the organizations that I believe would gladly
collaborate to get your materials, both English and Spanish,
and see how we can get it out into the communities, and get
many more involved in the programs that you have.
And the last question, to Mr. Pollack. I was very pleased
to see that you are focusing on our soldiers, our veterans,
because $5,000 help towards closing costs for a home could go a
long way. We are trying to encourage them to look at the--not
scholarships, but money that is available similar to our GI
Bill, for them to attend and access higher education.
So, if we could combine those for veterans and for our
soldiers coming back from Iraq and Afghanistan, I think would
do two things. One is educate them, and if part of that package
included financial literacy education, I think they will
leapfrog forward, in terms of increasing their income for the
family, and their equity, so that that would help them a great
deal. And I thank you for that kind of work.
Mr. Pollack. Thank you so much. And we would be honored to
work with you on that.
Mr. Hinojosa. Thank you. I yield back, Madam Chairwoman.
Mrs. Biggert. Thank you, Mr. Hinojosa. Just a couple of
quick things. We are expecting a vote any minute now.
In the FACT Act, Mr. Kittle, we had in there that everyone
would receive a free consumer credit report. Does your
organization do anything to help people to--how to use their
credit report? Is this something, when you're doing a mortgage,
that this helps?
Mr. Kittle. My company specifically, or the mortgage
banking--
Mrs. Biggert. Well, I meant the mortgage--the association,
not your--
Mr. Kittle. The Mortgage Bankers Association, again,
through our home loan learning center, yes ma'am, it does. And
they can log on to that. It takes them through the entire
process, from before you buy a house, the actual origination of
the loan, the closing cost, and the closing. So, yes ma'am.
Mrs. Biggert. So that has been helpful, for them to know
how to deal with their credit score?
Mr. Kittle. Yes, ma'am. We certainly feel that it has.
Mrs. Biggert. Then, Mr. Sorgatz, you mentioned that many
credit unions are working in the schools to teach the personal
financial skills. What should--do you see tests that kids are
improving when they leave high school, or they leave college,
as far as the skills that they have developed? Is there any way
that you can judge that?
Mr. Sorgatz. Well, looking at the statistics that CUNA has
put together, it certainly shows an improvement that occurs
after there has been a financial literacy program that has been
implemented. And most of the statistical information is
included in my report, written report. But definitely.
Mrs. Biggert. What about--we're always talking about, well,
everybody should have a budget and start very young with kids.
How important is that to all of you, either with your families
or with your organizations, that--do you find that kids that
know about budgeting, that they do better later? Anyone have
any stories on that? Mr. Brobeck?
Mr. Brobeck. Our belief is that the most important thing we
can do in the area of financial education for kids K to six is
to inculcate good financial habits. Knowledge is of limited use
to them at that point.
The two types of habits that are most helpful are how to
live within a budget, as you mentioned, in terms of giving an
allowance, perhaps, giving them work to do, paying them, and
then requiring that they make certain expenditures, you know,
within that budget.
And then, secondly, promoting savings, providing perhaps
financial incentives for them to save. And some kids--only a
minority, unfortunately today--have opportunities to save at
school. There are still a few banks and credit unions that work
with schools to promote regular savings. And that is
invaluable. If there is one thing that could be done for K to
six to improve financial literacy, it would be to reinstitute
bank/credit union savings programs nationwide.
Mrs. Biggert. Isn't it true right now that our savings is
-.02 percent, and that is the lowest it has been since the
Great Depression? So there is a generation there that needs
some help.
Mr. Hinojosa, do you have any further--
Mr. Hinojosa. Again, I want to compliment all the
panelists, because I liked all the presentations. I am going to
take the liberty of taking some of these sets of copies of each
of your presentations and get them out to different parts of
the country, where I think that they should duplicate them and
get them out to organizations that would like to know what you
all are doing.
But in closing, I want to say that if we could get parents,
particularly mothers, to hear the presentations, I believe that
they could probably take their sons and daughters to the bank
and open up their first account, their first savings account,
and that might be the start of trying to change that -2 percent
savings, and getting us at least a straight line, and then on
up to saving as my father and mother taught me, and I have
taught my children.
They have not only a stock portfolio, but they have a
savings account. And every--I think it's every 60 days, the
part that they have saved for the bank account, for the savings
account, we take them to go deposit it. And I am pleased to
tell you that the oldest one, who is 12 years old, has had a
portfolio, stock portfolio, for 10 years. And it surprised me
with the stock market changes that improved here these last few
weeks, she is at 180,000, and the 10-year-old has only had it
for 3 years, and she is at 50,000.
So, all of this to say that they have gotten comfortable
about hearing reports from time to time at the table, about how
their stock is doing, and how we look it up in the stock market
in the NASDAQ section, and comfortable going to the bank. And
again, one is 10 and the other one is 12. So, mothers, I
believe, are the key that we can invest time and training,
because they are going to see to it that their daughters and
sons learn this art of saving.
But the financial literacy portion that you all teach, oh,
that is absolutely gold, as far as I am concerned. It is the
best. So when I choose not to be in Congress and I step down, I
think I am going to set up a center, a national center, that
will coordinate all these things that all of you are doing so
that we can get it out to both English speaking and non-English
speaking people, so that we can improve this.
I am delighted to work with my friend and the Chair, Judy
Biggert, and together we are going to keep on doing great
things. Thank you.
Mrs. Biggert. Thank you. And don't everybody rush after the
hearing for financial investment advice from Mr. Hinojosa.
The Chair notes that some members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses, and to place their responses in the record, without
objection.
And let me just say that you all have been a great panel.
It has really been very, very great to have the expert
testimony. We will continue to work on this issue. This hearing
is adjourned.
[Whereupon, at 12:17 p.m., the hearing was adjourned.]
A P P E N D I X
September 28, 2006
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