[Senate Hearing 110-337]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-337
 
                      FEDERAL GOVERNMENT'S ROLE IN 
                      EMPOWERING AMERICANS TO MAKE 
                      INFORMED FINANCIAL DECISIONS 

=======================================================================

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                     THE FEDERAL WORKFORCE, AND THE
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


  OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE, AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware           TED STEVENS, Alaska
MARK L. PRYOR, Arkansas              TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana          JOHN WARNER, Virginia

                   Richard J. Kessler, Staff Director
                  Evan Cash, Professional Staff Member
     Matthew Pippin, Legislative Assistant (Senator Akaka's Office)
             Jennifer A. Hemingway, Minority Staff Director
           Theresa Prych, Minority Professional Staff Member
                      Emily Marthaler, Chief Clerk















































                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1

                               WITNESSES
                         Monday, April 30, 2007

Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation 
  (FDIC).........................................................     3
Morgan Brown, Assistant Deputy Secretary for Innovation and 
  Improvement, U.S. Department of Education......................     8
Dan Iannicola, Jr., Deputy Assistant Secretary for Financial 
  Education, U.S. Department of the Treasury.....................    10
Robert F. Danbeck, Associate Director, Human Resources Products 
  and Services, Office of Personnel Management...................    12
Yvonne D. Jones, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office..............    14
Robert F. Duvall, President and Chief Executive Officer, National 
  Council on Economic Education..................................    26
Stephen Brobeck, Executive Director, Consumer Federation of 
  America........................................................    28

                     Alphabetical List of Witnesses

Bair, Sheila C.:
    Testimony....................................................     3
    Prepared statement...........................................    35
Brobeck, Stephen:
    Testimony....................................................    28
    Prepared statement...........................................    94
Brown, Morgan:
    Testimony....................................................     8
    Prepared statement...........................................    50
Danbeck, Robert F.:
    Testimony....................................................    12
    Prepared statement...........................................    61
Duvall, Robert F.:
    Testimony....................................................    26
    Prepared statement...........................................    88
Iannicola, Dan Jr.,:
    Testimony....................................................    10
    Prepared statement...........................................    54
Jones, Yvonne D.:
    Testimony....................................................    14
    Prepared statement...........................................    70

                                APPENDIX

Background.......................................................   100
North American Securities Administrators Association, Inc., 
  prepared statement.............................................   103
Responses to questions for the Record from:
    Mr. Iannicola................................................   108
    Mr. Brobeck..................................................   109
Copy of Title V from Public Law 108-159..........................   112


                      FEDERAL GOVERNMENT'S ROLE IN 
                      EMPOWERING AMERICANS TO MAKE 
                      INFORMED FINANCIAL DECISIONS 

                              ----------                              


                         MONDAY, APRIL 30, 2007

                                 U.S. Senate,      
              Subcommittee on Oversight of Government      
                     Management, the Federal Workforce,    
                            and the District of Columbia,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka, Chairman of the Subcommittee, presiding.
    Present: Senator Akaka.

              OPENING STATEMENT OF CHAIRMAN AKAKA

    Chairman Akaka. The U.S. Senate Committee on Homeland 
Security and Governmental Affairs, Subcommittee on Oversight of 
Government Management, the Federal Workforce, and the District 
of Columbia hearing will come to order. I call this 
Subcommittee to order. It is very appropriate that this hearing 
be conducted today, on the last day of Financial Literacy 
Month.
    My interest in financial literacy dates back to when my 
fourth grade teacher required me to have a piggybank. We were 
made to understand how money that was saved a little at a time 
can grow into a large amount, enough to buy things that would 
have been impossible to obtain without savings.
    My experience with a piggybank taught me important lessons 
about money management that have stayed with me throughout my 
life. More people need to be taught these important lessons so 
that they are better able to manage their resources.
    Americans of all ages and backgrounds face increasingly 
complex financial decisions as members of our Nation's 
workforce, as managers of their families' resources, and as 
voting citizens. Many find these decisions confusing and 
frustrating because they lack the information and skills 
necessary that would enable them to make wise personal choices 
about their finances.
    A sample of economic statistics presents some disturbing 
realities. Consumer debt exceeded a record $2.4 trillion in 
2006, and household debt reached a record $12.8 trillion. 
Americans' rate of personal savings as a percentage of 
disposable personal income declined from minus 0.4 percent in 
2005 to minus 1.1 percent in 2006, making 2005 and 2006 the 
only years since the Great Depression when this savings rate 
has been negative.
    In a 2006 survey, Jump Start Coalition for Personal 
Financial Literacy found that high school seniors scored an 
average of only 52.4 percent on an exam testing knowledge of 
basic personal finance. The Retirement Confidence Survey 
conducted by Employee Benefit Research Institute found that 
only 42 percent of workers or their spouses calculated how much 
they need to save for retirement, down from 53 percent in the 
year 2000.
    Millions of working families are susceptible to predatory 
lending because they are left out of the financial mainstream. 
The unbanked rely on alternative financial service providers to 
obtain cash from checks, pay bills, send remittances, utilize 
payday loans, and obtain credit. Many of the unbanked or low- 
and moderate-income families can ill afford to have their 
earnings diminished by reliance on these high-cost and often 
predatory financial services. In addition, the unbanked are 
unable to save securely to prepare for the loss of a job, a 
family illness, a downpayment on a first home, or education 
expenses. Without this sufficient understanding of economics 
and personal finance, individuals will not be able to manage 
their finances appropriately, evaluate credit opportunities, 
and successfully invest for long-term financial goals in an 
increasingly complex marketplace.
    It is essential that we work toward improving education, 
consumer protection, and empowering individuals and families 
through economic and financial literacy in order to build 
stronger families, businesses, and communities.
    My colleagues and I have worked on several important 
initiatives for financial literacy. My legislation, the 
Excellence in Economic Education Act, or the EEE Act, was 
enacted as part of the No Child Left Behind Act. The EEE is 
intended to fund a range of activities such as teacher 
training, research and evaluation, and school-based activities 
to further economic principles. I have obtained funding of 
approximately $1.5 million for the EEE Act each year, in each 
fiscal year since fiscal year 2004. I will continue to work to 
fund this important Federal program.
    In the year 2003, the Fair and Accurate Transactions Act 
created the Financial Literacy and Education Commission. The 
Commission is tasked with reviewing financial literacy and 
education efforts throughout the Federal Government, 
identifying and eliminating duplicative financial literacy 
efforts, and coordinating the promotion of Federal financial 
literacy efforts, including outreach partnerships between 
Federal, State, and local governments, nonprofit organizations, 
and enterprises. The Commission also established a website, 
MyMoney.gov, and a toll-free hotline to serve as a 
clearinghouse and provide a coordinated point of entry for 
information about Federal financial literacy and education 
programs, grants, and other information the Commission deems 
appropriate.
    I worked with my colleagues on this Subcommittee to bring 
about the enactment of the Thrift Savings Plan Open Elections 
Act of 2004. This mandated that the Office of Personnel 
Management develop and implement a retirement financial 
literacy and education strategy for Federal employees. During 
today's hearing, we will learn more about the effectiveness of 
our Federal financial literacy efforts and what must be done to 
improve financial literacy throughout the Nation. Greater 
financial literacy will result in stronger families, better 
functioning markets, and a more secure future for our country.
    I thank our witnesses for being with us today, and I look 
forward to your testimony and to working with all of you 
towards this very important goal.
    In our first panel, it is my pleasure to welcome the 
Chairman of the Federal Deposit Insurance Corporation, Sheila 
Bair. I know we share a deep commitment to improving the 
financial literacy of our country. I have greatly appreciated 
her outstanding financial literacy efforts during her service 
at the Department of the Treasury, the FDIC, and at the 
University of Massachusetts at Amherst.
    Chairman Bair, it is the custom of this Subcommittee to 
swear in all witnesses, so will you please stand and raise your 
hand and take the oath? Do you swear that the testimony you 
will give before this Subcommittee is the truth, the whole 
truth, and nothing but the truth, so help you, God?
    Ms. Bair. I do.
    Chairman Akaka. Thank you very much. Let the record note 
that the witness responded in the affirmative.
    Although the statements are limited to 5 minutes, I want 
all of our witnesses to know that their entire statement will 
be included in the record.
    Chairman Bair, will you please proceed with your statement?

   TESTIMONY OF SHEILA C. BAIR,\1\ CHAIRMAN, FEDERAL DEPOSIT 
                  INSURANCE CORPORATION (FDIC)

    Ms. Bair. Chairman Akaka, thank you very much. I appreciate 
this opportunity to testify on the state of financial literacy 
in America.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Bair appears in the Appendix on 
page 35.
---------------------------------------------------------------------------
    The world of finance is far more complicated today than it 
was just a generation ago. Back then the average consumer had a 
checking account, a passbook savings account, and maybe a home 
mortgage with their local bank. Today, after 40 years of 
deregulation, new technology, and market innovation, consumers 
have a vast array of financial services from which to choose. 
More and more of these services are delivered outside 
traditional bank branches. Electronic payments are replacing 
cash and checks, and new credit products are reaching all parts 
of society.
    Competition and innovation ultimately give consumers more 
choices at lower prices. But it has gotten so complicated these 
days that it can make your head swim when you go to open an 
account or take out a loan. This is not good for anybody--
consumers, bankers, lenders, or the U.S. economy at large.
    On top of that, we are a Nation that has forgotten how to 
save. We are great at spending, but we do not know how to save 
our hard-earned money. Nationwide, the savings rate, as you 
pointed out, Mr. Chairman, was a negative 1.1 percent last 
year.
    I am not suggesting that American consumers become 
accountants and penny pinchers. We are just saying it is time 
to get smart about your money and learn how to handle it, 
especially those just starting out or with a lower income.
    Recognizing the need for improved financial literacy, the 
FDIC developed its Money Smart curriculum in 2001 to help low- 
and moderate-income adults enhance their money management 
skills, understand basic mainstream financial services, avoid 
pitfalls, and become more savvy about using banking services.
    In light of emerging problems in the subprime mortgage 
markets, we will be updating Money Smart this summer to help 
consumers evaluate and compare different types of mortgages, in 
particular, the risks and trade-offs between fixed and 
adjustable rate mortgages.
    To date, more than 864,000 adults have attended at least 
one class using the Money Smart curriculum. A year from now, 1 
million will have taken the training. This is a very popular 
program. We had hoped to train a million people by 2010, so we 
are 2 years ahead of schedule.
    Adults are not the only ones we need to reach. I am a big 
believer, as are you, Mr. Chairman, in educating our young 
people about money as early as possible. Children have a 
natural curiosity about money, so why not get started early 
teaching them how to handle it?
    The FDIC recently started a pilot project to further 
integrate our program into public schools. While a number of 
States, including Hawaii, already use Money Smart in their 
educational programs, we will be directly contacting about 120 
school systems and related government agencies about using this 
program.
    In addition, many States such as Massachusetts have school 
bank programs that teach students practical financial skills. 
Building on these programs, the FDIC is also developing school-
based initiatives as part of our Alliance for Economic 
Inclusion, to help financial institutions and others set up 
student-run banks in high schools. This can be a powerful--and 
I hope fun--way for students to learn financial skills.
    The final point I want to make is that these programs do 
work. This morning we announced the results of a new Gallup 
poll we commissioned to assess the impact of financial 
education on long-term consumer behavior. This is a landmark 
survey. It is the first ever to document what consumers do 
after being taught how to better handle their money. The 
results clearly show that education makes a big difference in 
the way people save and spend their money.
    The poll found that seven out of ten people said they saved 
more 6 to 12 months after completing our Money Smart program. 
One in two reported that their debt decreased. And three in 
five said they were more likely to comparison shop when opening 
a bank account. Thirty-seven percent of those who did not have 
a savings account opened a savings account after completing our 
program, and over 25 percent started using direct deposit for 
the first time.
    This proves the lasting benefits and the power of learning 
how to manage your money. For consumers it is the ticket to 
financial freedom.
    Also this morning, we helped launch D.C. Saves, a new 
initiative to encourage Washingtonians to reduce debt, save 
money, and build wealth. Such community efforts, which are part 
of the FDIC's mission, are another effective means to educate 
the public.
    Let me end by observing that financial education is no 
panacea, and it certainly is no excuse for irresponsible 
financial products or services. However, a consumer who knows 
the right questions to ask, understands economic fundamentals, 
and has the confidence to challenge products and practices that 
seem too good to be true is a regulator's best weapon as we 
work to protect the public.
    Thank you very much. I would be happy to answer any 
questions, and before I completely conclude, I would like to 
acknowledge that we are a very proud partner of the Federal 
Literacy and Education Commission (FLEC). I focused mainly on 
our FDIC efforts this morning, but given the second panel, I 
did want to say that we are very pleased to work with that 
effort as well.
    I would also like to note that I was just advised that ABC 
News will be disseminating to its affiliates tonight a Money 
Minute segment on the Gallup poll survey results and the 
important impacts that Money Smart is having. And that should 
reach about a million individuals, and so that should also be 
an important way of getting our word out about our financial 
education efforts.
    Thank you, Mr. Chairman.
    Chairman Akaka. Thank you for your statement, Chairman 
Bair. Thank you for doing all you can to support education of 
our young people, as you said, and the general public as well.
    I am very pleased to learn from your statement that the 
Money Smart program has resulted in positive behavioral change 
among consumers.
    Ms. Bair. Yes.
    Chairman Akaka. What lessons learned from Money Smart could 
help other agencies implement effective financial literacy 
programs?
    Ms. Bair. I think a couple of things. First of all, Money 
Smart is written in a very direct, straightforward, basic way. 
It is very understandable to a wide segment of the population.
    Also, in terms of delivery mechanisms, we work very closely 
with nonprofits, and some banks, to offer the Money Smart 
curriculum as well. But I think working with nonprofits--people 
that are in the communities, groups that are in the 
communities--is particularly important to reach especially the 
lower- and lower-middle-income segments of the population. 
Also, making the financial education transaction-related so 
that it has an immediate relevance to the individual or family 
enrolled in the curriculum. A lot of the folks who come to use 
the Money Smart curriculum are buying homes for the first time. 
They are receiving counseling through NeighborWorks of America, 
and they receive the Money Smart curricula as part of that 
transaction-oriented impetus.
    Many others will open up a checking account or a savings 
account for the first time at a bank, after the curricula is 
offered. So tying financial education to a financial 
transaction and making it immediately relevant to that 
transaction, I think, is very helpful.
    Chairman Akaka. Chairman Bair, I am deeply concerned that 
too many working families are taken advantage of by 
unscrupulous lenders through payday loans. In your statement, 
you indicate that the FDIC issued the Affordable Small-Dollar 
Loan Guidelines last year intended to develop low-cost small 
loans coupled with savings opportunities.
    Ms. Bair. Yes.
    Chairman Akaka. How have FDIC-insured banks responded to 
these guidelines?
    Ms. Bair. They have been very supportive. The comment 
letters were almost all uniformly supportive, and we are 
encouraged. We have many banks that have approached us that are 
interested in launching a low-cost, small-dollar loan program, 
at least on a pilot basis.
    I think the one challenge we have in engaging the broader 
financial banking community is to prove that these loans can be 
responsibly priced and profitable. I think there are some 
misconceptions about the credit risk involved. They are not as 
high, I think, as a lot of banks perceive them to be, given the 
fact that we are talking about providing a product to an 
individual who is already a bank customer. The thing that is 
frustrating about payday loans is those folks already have 
banking accounts. They have to provide a check as collateral 
for the loan.
    So the customer is already there, and I think working with 
banks so that they can understand that there are models to lend 
in a way that is responsibly priced, but also profitable, is 
going to be our main challenge going forward. But we have had a 
tremendous and very encouraging response, so I am optimistic 
that we are going to be able to get some significant level of 
small-dollar alternative options at a lower cost, and also have 
a savings component built into that.
    Chairman Akaka. Chairman Bair, I am worried also that 
Americans are not saving enough.
    Ms. Bair. Yes. Me, too.
    Chairman Akaka. Also they are accumulating so much debt.
    Ms. Bair. Yes.
    Chairman Akaka. I hear this a lot from parents of college 
students who receive their children's bills. They are very 
concerned. What policies need to be implemented to encourage 
savings and discourage debts?
    Ms. Bair. Well, I think what we are doing in financial 
education is helpful. Also, supporting the America Saves 
program, which is spearheaded by Consumer Federation of America 
and local efforts is important. I was in Ohio to support 
Cleveland Saves. We were involved with a D.C. Saves event this 
morning. I think these types of efforts are important in terms 
of getting the word out concerning how important saving is.
    Also, it is important to work with banks to make sure that 
there are savings vehicles available for lower-income people 
that do not have high minimum balances or high fees to get 
people started with just $5, $10 or $25 a month. Really, you 
just need to get started somewhere, but making sure that there 
is a low-cost savings product that is accessible to them is 
very important.
    I think also as regulators, bank regulators, we need to 
make sure that the incentives we provide banks are equally 
weighted between credit and savings products. Perhaps in the 
past we have put a little too much emphasis on the extension of 
credit. Certainly credit needs to be widely available. But I 
think we need to put at least as much emphasis on asset 
accumulation and savings products.
    And, finally, it is important to come up with savings 
products that facilitate making savings automatic, even tying 
them to debt programs, like a small-dollar loan program. For 
example, qualifying someone for a small-dollar loan, but as 
they make the repayment, an amount would automatically go into 
a savings account.
    There are a lot of creative ways, I think, that banks can 
make savings automatic, and all the research shows that if you 
make it automatic, and make it easy, people will save.
    Chairman Akaka. As you know, approximately 10 million 
households in the United States do not have accounts at 
mainstream financial institutions. Unfortunately, too many of 
these households depend on high-cost, fringe financial 
services. They miss out on opportunities for saving and 
borrowing at credit unions and banks.
    What do you think must be done to bring these households 
into mainstream financial institutions?
    Ms. Bair. Here, again, I think financial education is key. 
Also, it is important to work with banks to make sure that the 
product mix that they offer and the marketing that they offer 
taps into this vast untapped market. This is a huge market 
opportunity for banks as well as a very good public policy 
objective.
    It is important that the product mix is right, including a 
savings account and basic financial services like money orders. 
A lot of lower-income families do not need a complicated 
checking account when they are starting off on their banking 
relationship. If they are introduced to a product that is too 
complex that ends up costing them money as opposed to saving 
money, they are going to sour in their view of banks.
    Working with banks, to make sure that the regulatory 
incentives are of the right mix, and also encouraging the 
availability of very basic entry-level types of financial 
services that are needed by lower-income families is a good way 
to start.
    Chairman Akaka. Yes. Well, I really appreciate your 
responses to my questions today, and we are all in this 
together to try to highlight financial literacy and to help 
people make better decisions.
    I want to thank you so much for your part in our government 
to help bring this about. There is no question we need to work 
together as a team to make this happen throughout the country, 
and you have been such an integral part of this. I look forward 
to working with you further on this, and I want to thank you 
again for being here.
    Ms. Bair. I also very much appreciate the support you have 
given me over the years, and I am very pleased to be here this 
morning. Thank you.
    Chairman Akaka. Thank you, Chairman Bair.
    Now I ask the second panel of witnesses to come forward. 
Testifying on the second panel are: Morgan Brown, Assistant 
Deputy Secretary for Innovation and Improvement, U.S. 
Department of Education; Dan Iannicola, Jr., Deputy Assistant 
Secretary for Financial Education, U.S. Department of the 
Treasury; Robert Danbeck, Associate Director for Human 
Resources Products and Services Division, Office of Personnel 
Management; and Yvonne Jones, Director, Financial Markets and 
Community Investment Team, Government Accountability Office.
    I want to welcome all of you and thank you so much for 
being here. As you know, it is the custom of this sUBCommittee 
to swear in all witnesses, so will you please stand and raise 
your right hand? Do you swear that the testimony you are about 
to give this Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Brown. I do.
    Mr. Iannicola. I do.
    Mr. Danbeck. I do.
    Ms. Jones. I do.
    Chairman Akaka. Thank you very much. Let the record note 
that the witnesses responded in the affirmative.
    Thank you very much for being here. This is a hearing that 
will certainly help every person in our country. So I would 
like to call on Mr. Brown to please proceed with your 
statement.

 TESTIMONY OF MORGAN BROWN,\1\ ASSISTANT DEPUTY SECRETARY FOR 
    INNOVATION AND IMPROVEMENT, U.S. DEPARTMENT OF EDUCATION

    Mr. Brown. Thank you, Mr. Chairman, and good afternoon. 
Thank you for the opportunity to appear before you today to 
discuss the important topic of financial literacy and what the 
U.S. Department of Education is doing to address this issue.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Brown appears in the Appendix on 
page 50.
---------------------------------------------------------------------------
    In recognition of April being Financial Literacy Month, 
Secretary Spellings last week joined the heads of other Federal 
agencies, as well as business and nonprofit leaders at the 
White House, to, in the words of the President, ``make sure 
that the Federal effort toward financial literacy is well 
coordinated with the private sector.''
    The first program I want to talk about is the Excellence in 
Economic Education (EEE) program that you earlier made 
reference to, Mr. Chairman.
    The EEE program is administered by the Office of Innovation 
and Improvement, which I head. This program promotes efforts to 
increase the economic and financial literacy of elementary and 
secondary students. The objectives of the program are to: one, 
increase students' knowledge of and achievement in economics; 
two, strengthen teachers' understanding of and competence in 
economics; three, encourage economic education research and 
development; four, assist States in measuring the impact of 
education in economics; and, five, leverage and expand 
increased private and public support for economic education 
partnerships at the national, State, and local levels.
    Under the statute, the Department is authorized to award 
one competitive grant to a national nonprofit educational 
organization whose primary mission is to improve the quality of 
student understanding of personal finance and economics. The 
grantee must subgrant 75 percent of its grant funds to State or 
local educational agencies and State or local economic, 
personal finance, or entrepreneurial education organizations. 
The subgrantees must work in partnership with other 
organizations that promote, among other things, personal 
finance education and economic development.
    Over the 3-year life of the program, the Department has 
awarded almost $4.5 million in grant funding to the National 
Council on Economic Education (NCEE), who you will be hearing 
from in the next panel of witnesses. During that time NCEE has 
implemented a variety of initiatives designed to improve 
financial literacy in our schools. NCEE's mission is to promote 
economic and financial literacy for all students in grades K-12 
through its network of State councils and university-based 
centers, by training thousands of teachers who will reach 
millions of students. NCEE's project activities are intended to 
help students to develop the skills they need to become 
knowledgeable consumers, savers, investors, and effective 
participants in a global economy.
    Through the Excellence in Economic Education Program, NCEE 
has awarded 310 subgrants totaling nearly $3.35 million to 
State and local education agencies as well as State and local 
organizations that provide economic, personal finance, or 
entrepreneurial education programs. To ensure greater cost-
effectiveness and corporate community involvement, subgrantees 
are required by the Excellence in Economic Education program 
statute to match their Federal funding dollar for dollar.
    My office is in the process of measuring the performance of 
the grantee by determining the percentage of students and 
teachers trained under the project that demonstrate an improved 
understanding of personal finance and economics as compared to 
similar students whose teachers have not had the training 
provided by this project. We expect to have baseline 
information by the end of the current fiscal year and 
comparison data a year later.
    With regard to the future of the EEE program, the 
President's budget requests no funding for fiscal year 2008, 
consistent with the Admistration's policy of eliminating small 
categorical programs that have limited national impact and 
reallocating these funds to high priorities. Districts that 
wish to implement economic education activities, however, can 
use funds provided under other Federal programs to do so. For 
example, the Improving Teacher Quality State Grants program 
supports efforts to ensure that all teachers of core academic 
subjects, including economics, are highly qualified, so funding 
under that program may be used for professional development 
activities in economics education.
    I want to say a word about the Financial Literacy and 
Education Commission. The Department of Education also 
continues to work in partnership with the Financial Literacy 
and Education Commission in its efforts to improve financial 
literacy in our country. Earlier this year, the Departments of 
Education and the Treasury cohosted a 2-day Kindergarten 
through Postsecondary Financial Education Summit. Attendees 
included a diverse group representing educational agencies and 
foundations, banking and investment institutions, nonprofit 
organizations, and private corporations. The focus of the 
summit was to engage public and private financial education 
practitioners in a dialogue to discuss innovative strategies to 
promote the integration of financial education into the core 
curriculum.
    In closing, let me once again thank the sUBCommittee for 
inviting me to speak today. We will continue to monitor the 
effectiveness of our grant to the NCEE and to work with the 
Department of the Treasury on future financial literacy 
initiatives.
    Thank you, Mr. Chairman. I would be happy to take any 
questions.
    Chairman Akaka. Thank you very much for your statement, Mr. 
Brown. Mr. Iannicola.

TESTIMONY OF DAN IANNICOLA, JR.,\1\ DEPUTY ASSISTANT SECRETARY 
    FOR FINANCIAL EDUCATION, U.S. DEPARTMENT OF THE TREASURY

    Mr. Iannicola. Good afternoon, Chairman Akaka. Thank you 
for this opportunity to appear before you today to talk about 
the important issue of financial literacy in America. Mr. 
Chairman, your leadership on this issue stretches back several 
years, and I commend you for your early recognition of 
financial literacy as an area of national concern.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Iannicola appears in the Appendix 
on page 54.
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    I would like to briefly discuss the financial literacy 
issue we are faced with and then discuss the Federal responses 
to that issue.
    Our robust marketplace of financial products and services 
has given Americans more options than ever before on activities 
such as investing, financing a home, or obtaining other 
consumer credit. Additionally, the steady migration from 
defined benefit plans to defined contribution plans has given 
people even more decisions to make about retirement. It is as 
if every American has woken to find himself or herself promoted 
to the position of CFO of his or her own household. Are we 
ready for the job? And if not, how do we address the new 
reality that our economic choices have simply outpaced our 
financial knowledge?
    The answer, of course, is financial education. Only when we 
learn more about our money will we be able to move forward 
confidently in the modern financial marketplace.
    The Fair and Accurate Credit Transactions Act of 2003 
established a 20-agency group called the Financial Literacy and 
Education Commission and named the Secretary of the Treasury as 
Chair of the Commission. The law required the group TO produce 
a website, a hotline, a multimedia campaign, and a national 
strategy. I will describe progress on each of these projects.
    In October 2004, the Commission launched MyMoney.gov, a 
one-stop shop for Federal financial education information which 
is available in English and Spanish. The site has 399 links and 
has had 1.7 million hits. Also in October 2004, the Commission 
launched a toll-free hotline called 1-888-MyMoney, which is 
available in English and Spanish and has received 18,000 calls. 
The multimedia campaign is well underway and will be launched 
in the fall of 2007.
    The FACT Act also required the Commission to develop a 
national strategy for financial literacy. In April 2006, the 
Commission released the document entitled ``Taking Ownership of 
the Future.'' Each of the strategy's 13 chapters end with 
numbered calls to action. These calls to action are milestones 
for the Commission which allow us to measure its performance.
    I will give a chronological summary of progress on the 
calls to action.
    In April 2006, the Small Business Administration completed 
Call to Action 3-2 by adding retirement training tools for 
small businesses to MyMoney.gov, and the Treasury Department 
completed Call to Action 5-2, with the release of an identity 
theft DVD. Sixty thousand of these DVDs were subsequently 
distributed.
    In July 2006, and following Call to Action 2-1, the 
Departments of Housing and Urban Development and the Treasury 
Department cohosted a homeownership roundtable. And in August 
2006, Call to Action 12-2 was completed when GSA and the 
Treasury Department finished the first survey of Federal 
financial education programs and resources.
    As of December 2006, and as part of Call to Action 6-2, the 
Federal Reserve Banks and the Treasury Department converted 
three-quarters of a million paper check benefit recipients to 
direct deposit enrollees.
    Under Call to Action 6-3, the Department of Health and 
Human Services implemented a public education campaign which 
helped to enroll more than 1.4 million beneficiaries in 
Medicare's Part D program so they could take advantage of the 
new drug benefit.
    In February 2007, as mentioned by Mr. Brown, the 
Departments of Education and the Treasury cohosted a 2-day 
summit on youth financial education as part of Call to Action 
10-1.
    In March 2007, under Call to Action 8-1, the third of four 
regional summits on the unbanked occurred in Seattle. Earlier 
summits occurred in Chicago in May 2006 and in Edinburg, Texas, 
in December 2006. These events were the result of a partnership 
with many financial institution regulators.
    Also in March 2007, the Treasury Department hosted a 
financial literacy roundtable focused on Native populations. 
And just last week, Call to Action 1-1 was completed when the 
Treasury Department launched a public service announcement 
campaign promoting the MyMoney website.
    In December 2006, the Government Accountability Office 
issued a report on the Commission. The Commission welcomed the 
insights of GAO. As part of the Commission's statutorily 
mandated annual review of the strategy, the Commission 
incorporated many of the GAO recommendations into its 2007 
strategy revisions, including defining the terms ``financial 
education'' and ``financial literacy''; committing to conduct a 
usability study and a customer satisfaction survey on the 
MyMoney website; and committing to have an independent review 
of Federal financial education programs and resources.
    Last, GAO recommended that the Commission work closely with 
private entities, State, and local governments, which was 
accomplished earlier this month when the Treasury Department 
and the Office of Personnel Management completed Call to Action 
12-5, by establishing the National Financial Education Network 
of Federal, State, and local governments.
    As we move forward, the Commission will be implementing the 
remaining calls to action in the National Strategy.
    I hope this discussion has given you a useful overview of 
the Commission's work. We hope that through our emphasis on 
increased financial literacy people gain the skills to make 
better decisions and, therefore, live better lives.
    Thank you, and I look forward to your questions.
    Chairman Akaka. Thank you very much, Mr. Iannicola, for 
your statement.
    Mr. Danbeck, would you please proceed with your statement?

 TESTIMONY OF ROBERT F. DANBECK,\1\ ASSOCIATE DIRECTOR, HUMAN 
RESOURCES PRODUCTS AND SERVICES, OFFICE OF PERSONNEL MANAGEMENT

    Mr. Danbeck. Good afternoon, Mr. Chairman. It is my 
pleasure to be here today to outline the important work the 
Office of Personnel Management is doing to ensure Federal 
employees are ready for retirement. OPM is committed to 
educating Federal employees about the need for retirement 
savings and investments and providing information on how to 
plan for retirement, including how to calculate the retirement 
savings and investments needed to meet their retirement goals. 
As part of that commitment, we were pleased to participate in 
Financial Literacy Day on Capitol Hill last week, where we 
provided information about the various benefit programs 
available to Federal employees and had experts available to 
answer attendees' questions. We also invited representatives 
from the Thrift Savings Plan (TSP) to join us, thereby 
providing attendees with additional resources to discuss this 
important facet of their retirement benefits.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Danbeck appears in the Appendix 
on page 61.
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    As you know, the Thrift Savings Plan is a Federal 
Government-sponsored retirement savings and investment plan 
open to Federal civilian employees and to members of the 
uniformed services. The TSP offers savings and tax benefits 
comparable to what many private corporations refer to as 401(k) 
plans. We strongly encourage all eligible Federal employees to 
take advantage of TSP as a means of preparing for their future. 
Due to your leadership, Congress took steps to help make 
Federal employees more aware of the opportunities available to 
them through the TSP when it passed the Thrift Savings Plan 
Open Elections Act of 2004. The Act directed OPM to develop a 
``strategy to provide employees information on how to plan for 
retirement and how to calculate the retirement investment 
needed to meet their retirement goals.''
    OPM is doing this through a strategy based on an education 
model we call Retirement Readiness NOW. The model focuses on 
the outcome of our retirement financial education programs to 
provide employees information on how to plan for retirement and 
how to calculate retirement investments needed to meet their 
retirement goals.
    Retirement readiness combines basic information about the 
benefits provided by the government, as an employer, and the 
broader financial education needs of employees. Rather than 
being a ``near-retirement'' event, the retirement readiness 
model considers retirement financial literacy and education as 
a career-long process. The model incorporates the broad range 
of information employees need to help them make informed 
retirement planning decisions. It also recognizes that these 
needs change as a person moves through his or her career.
    Our Retirement Readiness NOW model takes a total balanced 
approach to planning that covers:
    Networking Engagement--finding enjoyable challenges, 
connecting with other people in meaningful activities such as 
volunteer work, or even exploring a new career;
    Overall Health--staying as healthy as you can for however 
long you live; and understanding the aging process and how best 
to approach health care such as preventative and disease 
treatment;
    And, finally, Wealth--preparing financially to have 
sufficient income to support your own standard of living in 
retirement.
    OPM has three key roles in retirement planning: Capacity, 
Coordination, and Catalyst. Building capacity means providing 
training and tools to agency benefits officers so that they can 
help employees understand their benefits and identify their 
financial education needs.
    OPM's Retirement System Modernization (RSM) project will 
provide employees with tools that for the first time ever will 
allow them to model their future retirement benefits based on a 
complete set of their actual Federal employment information. 
RSM modeling tools will include a web-based application that 
will contain personalized content and decision support, 
enabling employee self-service access 24 hours a day, 7 days a 
week, by telephone or via a web interface. The RSM tools will 
allow a one-stop experience for employees to initiate changes 
to their retirement benefits. These capabilities will be 
available beginning February 2008.
    Another important step we have taken is the development of 
a partnership with the American Savings Education Council of 
the Employee Benefits Research Institute. Through this 
partnership, we have developed the Federal Ballpark Estimater, 
which is based on the widely-used American Savings Education 
Council Ballpark Estimater, and our Estimater will go live 
shortly.
    However, OPM and agencies cannot provide employee 
retirement readiness without the direct involvement of the 
employees themselves. Employees must take advantage of 
opportunities provided and must assume responsibility for 
taking steps to meet their own retirement goals. Our 
responsibility, and one we work on daily, is to provide as many 
tools as possible so that folks have this information as they 
near retirement.
    OPM also is very proud of the active role it has taken as a 
member of the Financial Literacy and Education Commission. We 
were on the national strategy working group and earlier this 
month co-hosted with the Department of the Treasury the first 
meeting of the National Financial Education Network. This 
clearinghouse will not only serve as a valuable resource for 
State and local governments, it will identify a rich array of 
resources agency benefits officers can use to explain their 
retirement readiness education program for Federal employees.
    I appreciate this opportunity to testify before the 
Subcommittee on this very important issue. I will be glad to 
answer any questions you may have.
    Chairman Akaka. Thank you very much for your statement, Mr. 
Danbeck.
    Ms. Jones, will you please proceed with your statement?

 TESTIMONY OF YVONNE D. JONES,\1\ DIRECTOR, FINANCIAL MARKETS 
AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Jones. Mr. Chairman, I appreciate the opportunity to 
discuss how the Financial Literacy and Education Commission 
developed the National Strategy for Financial Literacy. My 
comments are based on a report that GAO issued in December 2006 
that assessed the Commission's effectiveness. Today I will 
discuss how the Commission developed a national strategy to 
promote financial literacy and education, implemented its 
website and telephone hotline, coordinated Federal financial 
literacy efforts, and promoted partnerships among government, 
nonprofit, and commercial organizations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Jones appears in the Appendix on 
page 70.
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    First, the National Strategy includes a series of 
recommendations presented as calls to action. The calls to 
action are largely descriptive, not strategic, and mainly 
describe existing programs. Consequently, most Federal and 
nonprofit agencies we interviewed said that the strategy was 
unlikely to affect their financial literacy and education 
efforts.
    Based on our review, we recommended that the Commission 
include in the strategy concrete definitions for financial 
literacy and financial education, clear and specific goals and 
performance measures, actions needed to accomplish the goals, a 
description of required resources, and a discussion of the 
appropriate roles and responsibilities for Federal agencies and 
other organizations.
    The Treasury Department, as Chair of the Commission, 
responded that the Commission is a new entity and that the 
strategy is largely a blueprint to provide general direction. 
Also, the strategy will be updated annually.
    Additionally, in its April 2007 report to the Congress, the 
Commission partially responded to our recommendations by 
including definitions for financial literacy and financial 
education, as Mr. Iannicola mentioned.
    The Commission also established the MyMoney website that 
connects consumers with close to 400 Federal financial English 
language websites and over 40 similar sites in Spanish. 
Representatives of financial literacy organizations generally 
said that the site is effectively serving its purpose. Website 
usage has been growing and reached 76,000 visits in March 2007.
    However, we recommended that the Commission conduct 
usability tests and measure customer satisfaction. Last month, 
the Commission informed Congress that it would undertake these 
evaluations by the second quarter of 2009.
    Consumers can also use the telephone hotline the Commission 
established to order a free toolkit of English and Spanish 
language financial literacy publications from several Federal 
agencies. But we found that the number of calls to the hotline 
have been limited: 526 calls in March 2007.
    The Commission was also required by law to develop a plan 
to improve Federal agency coordination. The Commission created 
a single Federal focal point, but it faced challenges because 
of the agency's differing missions, its limited staff and 
funding, and the lack of legal authority to compel agencies to 
take action.
    The Act also tasked the Commission with identifying areas 
of duplication and overlap among Federal financial literacy 
activities and with reviewing the effectiveness of these 
activities. However, the Commission's reviews relied largely on 
agency self-assessments. We recommended that the Commission 
provide for independent evaluations by a disinterested party, 
which the Commission has said it will do by 2009.
    To promote partnerships between Federal agencies and State 
and local governments as well as with the nonprofit and private 
organizations, the Commission has taken a number of steps, 
including public meetings and outreach events. But the impact 
of these steps is unclear.
    Our report recommended that the Commission explore 
additional ways to cultivate partnerships with nonprofit and 
private organizations. For example, enhancing cooperation with 
State and local governments is particularly important given the 
crucial role the school districts have in improving financial 
literacy. Last month, as Mr. Iannicola said, the Commission 
held the first meeting of the National Financial Education 
Network, one of whose goals is to create a dialogue on 
financial education.
    We recognize the significant challenges confronting the 
Commission, notably the inherent difficulty of coordinating the 
efforts of 20 Federal agencies. Given the small number of the 
staff the Commission has and its limited funding, we believe 
that early efforts undertaken by it represent some positive 
first steps. At the same time, more progress is needed if we 
expect the Commission to have a meaningful impact on improving 
the Nation's financial literacy.
    Mr. Chairman, this concludes my prepared statement. I would 
be pleased to respond to any questions that you may have.
    Chairman Akaka. Thank you very much, Ms. Jones, for your 
statement.
    Mr. Iannicola, in your statement, I was glad to hear of the 
activities and the programs that you have and learn that there 
has been some coordination among Federal agencies as well.
    In fiscal year 2005, $1 million was appropriated for the 
development and implementation of the National Strategy. How 
have these resources been spent?
    Mr. Iannicola. Mr. Chairman, we did receive that 
appropriation and put it to good use. Roughly $200,000 of that 
appropriation was put towards the actual production of the 
National Strategy itself, which includes putting together 
transcripts from six public meetings we had used to get 
comments from organizations. That occurred over several months. 
And then we also spent a fair amount of money on translating 
the documents into Spanish so that more people could access it. 
We hired some professional editors to help make it more clear. 
In addition there were designing, printing, and distribution 
costs, so all that totaled a little over $200,000.
    The balance was put towards the development of a multimedia 
campaign, which is also required under the FACT Act and called 
for under the strategy. And that totaled somewhere around 
$700,000, and we have obligated those funds to a partnership 
with Ad Council and an ad agency out of New York called Lowe 
Advertising. And we have been working with them on developing a 
multimedia campaign, have gone through things like focus groups 
and some early creative stages and hope to see that completed 
in the fall of this year.
    Interestingly, based on what we have been talking about, 
the target that we have decided on is young people and credit 
management, so that will be the thrust of that ad campaign.
    Chairman Akaka. Your Commission activities, as you 
mentioned, have been ongoing. In a statement made by Ms. Jones, 
she indicated that effective national strategies should include 
discussions of costs, the sources and types of resources 
needed, and where those resources should be targeted.
    Mr. Iannicola, what resources are needed to ensure that the 
Commission can adequately fulfill its mandates?
    Mr. Iannicola. Well, presently, under our situation, we 
have found that the coordination called for by the FACT Act, 
working together with the 20 agencies has provided us enough 
synergy such that we have been able to add value without having 
to add resources. And right now that is where we still are. We 
believe we can accomplish the mandates of the statute and the 
calls to action under the National Strategy with existing 
resources.
    Chairman Akaka. Mr. Danbeck, as you know, a number of 
Federal agencies have campaigns intended to improve the 
financial literacy of their employees. Are there any specific 
efforts currently being conducted by agencies that you consider 
to be models that could be duplicated and implemented by other 
Federal agencies?
    Mr. Danbeck. Well, the one that immediately comes to mind 
is a program that is being currently coordinated by the 
Department of Agriculture through its benefits officers, where 
it is using its Cooperative State Research Extension Centers to 
disseminate information from a financial planning/financial 
literacy perspective to all of its constituents. So it is a 
rather creative program to use the extension centers that are 
already in place for normal function, but also to promote 
financial literacy.
    We are also working with the Social Security 
Administration, the Department of Justice, the Department of 
Health and Human Services, and with our colleagues at the 
Treasury Department on a number of financial fairs, where we go 
out and assist them in providing the information on-site to 
their employees.
    Chairman Akaka. Ms. Jones, the GAO report recommends that 
the Commission implement outcome measures to gauge its success. 
Could you please give us some examples of outcome measures they 
could use?
    Ms. Jones. Mr. Chairman, it is difficult to--[off 
microphone]--credit. They might also look at other things like 
a reduction in the number of people who are unbanked.
    Chairman Akaka. Mr. Brown, in your testimony you state that 
the NCEE could continue its financial education activities 
without Federal support, solely relying on the Nation's private 
institutions which have business incentives to stress certain 
consumer behaviors. This greatly concerns me because I believe 
that although private resources can be useful, we have an 
obligation that our students have a basic understanding of 
economics and personal finance so that they can effectively 
participate in the modern economy.
    Is your statement specifically aimed at the activities of 
the NCEE? Or are you suggesting that there is no need for any 
Federal funding for financial education and that our students 
should have to depend on private efforts for their education?
    Mr. Brown. Thank you for your question, Mr. Chairman. My 
comments are specifically with regard to the EEE program in 
that because of the substantial increases the President has 
made in such high-priority areas as Title I funding for low-
income children or School Improvement Grants, that to offset 
those substantial increases he has proposed not requesting 
funding in the next fiscal year for a number of smaller 
programs.
    Having said that, if the Congress were to decide not to 
fund the EEE program, we would certainly be willing to work 
with NCEE to give them information about other sources of 
funding that are not specifically focused on economic education 
or financial literacy but could be used, were State and local 
government entities aware of them, for that. And then, as you 
mentioned, in my written testimony I suggested that there may 
be opportunities to raise additional funds in some areas of the 
private sector that have a strong interest in financial 
literacy and consumer education among students as well.
    So those would be two areas that we would be happy to work 
on.
    Chairman Akaka. Mr. Brown, in your testimony you stated 
that the Administration's policy has been elimination of 
``small categorical programs that have limited national impact 
and reallocating these funds to high priorities,'' such as EEE. 
However, in 2006, our Nation faced record consumer debt levels 
and negative savings rates. Even in your testimony, you state 
that ``financial literacy has gained attention as it has become 
more financial literacy has gained attention as it has become 
apparent that improving financial education in our Nation's 
schools is important to ensure that young people are equipped 
with the necessary skills to make sound financial decisions.''
    How does the Administration reconcile its policy with the 
pressing need for financial education? And what else is the 
Administration pursuing to address this issue?
    Mr. Brown. Mr. Chairman, I think it is important to note, 
as I did in my testimony, that the President certainly thinks 
financial literacy is enormously important, and he even hosted 
a meeting at the White House just last week with the heads of 
both the Education Department and the Treasury Department, as 
well as leaders from the private and nonprofit sectors that are 
very interested in financial education to highlight the 
importance of it. And so through the efforts of a number of 
agencies, including the Treasury Department and including the 
Commission that we have talked about, I think there is a lot--
there is certainly interest in making sure that we promote 
financial education and work with a lot of both public and 
private sector partners.
    However, within the K-12 education budget, in terms of the 
President's proposal for that budget, he has made a decision 
that there are higher-priority areas for funding, again, Title 
I, School Improvement Grants, IDEA, etc., and that to offset 
those, he did not request funding for a number of smaller grant 
programs.
    So it was simply in the issue of the K-12 budget and the 
President setting priorities for his request to Congress, but 
it is not a statement that he believes the Administration 
should have no involvement in the efforts to promote financial 
literacy.
    Chairman Akaka. Mr. Danbeck, I am concerned that not enough 
people have planned and prepared for retirement. As a 
consequence, they will not be able to retire on their own 
terms. What did OPM learn from the Retirement Readiness survey 
conducted among Federal employees?
    Mr. Danbeck. Thank you, Mr. Chairman. That is a very good 
question.
    What we found was that the majority of Federal employees, 
more than eight out of ten, stated that they are on track 
relative to their planning for retirement. And it is 
interesting because, if you look at the private sector, the 
same survey questions would say approximately four out of ten 
workers in the private sector feel that they are on track. So 
our Federal employees do feel that they are making progress 
towards their goal.
    Only one in four workers feel they will have to work in 
retirement in another position, which is rather interesting. 
And only two out of ten actually have a professional financial 
advisor who they use to help them with retirement plans.
    So it is a rather mixed bag, if you will, of responses.
    Chairman Akaka. Mr. Iannicola, I understand that the 
Department of the Treasury is planning to hold roundtables on 
financial education topics that concern specific multicultural 
and multilingual populations. I am pleased that the first one 
in this series was held in March 2007, and it was focused on 
Native populations.
    What actions will be taken to address the financial 
literacy needs of American Indian, Alaska Natives, and Native 
Hawaiians?
    Mr. Iannicola. Well, thank you. We did have a productive 
meeting, and what we hope will come out of all these meetings 
are a few things. First, we will have some sort of 
documentation, some sort of White Paper to come out, so others 
can learn what happened there and what we want to see follow 
from it, even if they were not able to attend. But what we have 
seen already is an impetus towards networking. We had at that 
meeting lenders, we had those representing Native communities, 
as well as a whole host of representatives across the Federal 
Government. Many parts of the Federal Government touch native 
communities, and we found people who did not know who each 
other were and needed to. So those connections were made right 
away.
    We hope to have continued connections of those sorts and 
continue an informal network to make sure the assets and the 
resources the Federal Government does offer are getting to the 
right people.
    But part of the conference was about lenders and others 
having a chance to hear what the community really needs. For 
instance, the importance of trust is something that is 
necessary to get people in the door of a financial institution. 
People are told if something is too good to be true, it 
probably is, and so they put their guard up. But, by the same 
token, we want to tell them to walk into a financial 
institution and trust that institution to open an account. So 
there are some messages that appear to conflict, but it takes 
some special understanding of the community to get the point 
across. So that roundtable was an opportunity to give those 
ideas.
    We are also working with other communities and doing the 
same thing to try to advance the conversation and build new 
connections.
    Chairman Akaka. Is this going to be extended to American 
Indians, Alaska Natives, and Native Hawaiians?
    Mr. Iannicola. We are certainly open to expanding to any 
organizations that would like to be involved in this effort. 
The whole point of this conversation is to broaden the circle. 
So, yes, we have put the invitation out far and wide, and if 
there are other groups that you would like to put us in touch 
with, we would be happy to follow through.
    Chairman Akaka. Do you have a timetable on that?
    Mr. Iannicola. We will be having another one--actually, two 
of these over the summer, one with Asian and Pacific Islander 
organizations and another one with African American 
organizations. And in the fall, we will be working with 
Hispanic groups for another focused community conversation. And 
so anytime in the next several months would be appropriate to 
build this type of effort.
    Chairman Akaka. Thank you.
    Ms. Jones, are there commissions similar to the Financial 
Literacy and Education Commission that share its challenges? If 
so, what lessons could be learned from those experiences that 
could be used to improve the Commission?
    Ms. Jones. Mr. Chairman, I think that GAO has done some 
other work looking at commissions that were broadly comparable 
to the Financial Literacy and Education Commission. I mentioned 
earlier in my testimony that having clear and specific goals 
and performance measures and specifying the actions and 
implementation plan to accomplish goals, including a 
description of resources that are needed and a discussion of 
the appropriate roles and responsibilities for Federal agencies 
and other organizations. These kinds of observations that we 
made about the Commission were based on prior work.
    What I could offer to do, Mr. Chairman, is to provide you 
with a more detailed summary of the work that GAO has done on 
other commissions, if that would be helpful.
    Chairman Akaka. Yes, I would like that, please.
    Ms. Jones. OK.
    Chairman Akaka. Mr. Iannicola, one of the mandates of the 
legislation establishing the Commission was to identify areas 
of overlap and duplication among Federal financial literacy and 
education activities and propose means of eliminating such 
overlap and duplication.
    Why has the Commission not found any duplication of 
government financial literacy efforts?
    Mr. Iannicola. That is a good question. Obviously, we are 
very concerned about being good stewards of Federal dollars and 
want to make sure that every dollar is being used properly. The 
Treasury Department and GSA do a survey every 6 months 
internally of our Commission members, and we have not found 
substantive overlap, but we have found areas where we have 
avoided overlap. And let me talk about each.
    Sometimes it appears on the surface that there is some 
overlap. For instance, the Department of Labor has an Internet 
publication called ``Preparing for Retirement.'' SSA, the 
Social Security Administration, has something called ``Step by 
Step Retirement Planner.'' However, they both offer very 
different information when you dig a little deeper. The 
Department of Labor is focused on the private elements of one's 
plan, maybe personal savings or something that you would get 
from your employer. However, the piece produced by Social 
Security, as you might imagine, is focused on Social Security 
benefits. So while they both deal with retirement and probably 
have a few pages of overlap, they differ when they get more 
specific.
    Other programs and other publications differ based on the 
community upon which they are focusing. We have some programs 
that focus on savings for adults and others that focus on kids. 
We have some publications that focus on teaching savings to 
adults so that they can save, and there is even a publication 
that teaches teachers about how to talk to kids about savings.
    So when we probed further, we found that any overlap has 
either been minimal or necessary, or both. So we do think it is 
important and will continue to keep an eye on this and believe 
it so strongly that even though the FACT Act does not require 
that we have an independent organization look at it, we took 
the good suggestion of GAO and committed to doing that going 
forward. So we share that concern.
    Chairman Akaka. Thank you.
    Mr. Iannicola, legislation that created the Commission 
permits the President to appoint up to five additional members 
to the Commission. Has anyone been appointed?
    Mr. Iannicola. We presently have it at the existing 20 so, 
no, no one has been appointed additionally.
    Chairman Akaka. Why has no one been appointed?
    Mr. Iannicola. We have had a lot of success working with 
organizations in an informal manner without appointing other 
agencies to this Commission. When we've found a need to work 
with another agency outside the Commission, we have called them 
up, and they have been cooperative. But the 20 covers just 
about most of our needs. I mean, it was a fairly strong list of 
those who were doing financial literacy in the government.
    Chairman Akaka. Is there a timeline for these appointments?
    Mr. Iannicola. No. As I understand, under Title V,\1\ I 
think we can add an agency at any time, and so as situations 
change or as we see an agency that needs to be in the 
Commission that may not be, we will certainly reconsider adding 
such an agency.
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    \1\ Copy of Title from Public Law 108-159 appears in the Appendix 
on page 112.
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    Chairman Akaka. Mr. Danbeck, I am pleased to learn more 
about OPM's effort to ensure that Federal employees have the 
resources they need to make informed decisions regarding their 
retirement. At the same time, retirement planning is just one 
part of the larger financial picture. Other than retirement 
preparation, how does OPM educate Federal employees about other 
aspects of economic education such as predatory lenders, credit 
card debt, and sound investing practices?
    Mr. Danbeck. Well, Mr. Chairman, our Retirement Readiness 
NOW model is much more. It takes a broader view than just the 
retirement related to financial literacy, and our approach is 
not just about money. It combines basic information about 
benefits that are provided by the government as an employer, 
and the broader financial education needs of employees, to 
include many of the things you just mentioned. And the model 
incorporates a broad range of information employees need to 
help them make informed retirement decisions. As I also 
mentioned in our Retirement Readiness NOW model we take into 
consideration overall health as well as networking and 
engagement as employees get ready for retiring.
    So we try to have a much more broader, holistic approach to 
retirement readiness than just thinking about the financial 
side, although that is a critical component.
    Chairman Akaka. Mr. Brown, in his statement Dr. Duvall of 
the National Council on Economic Education mentions the need 
for well-prepared teachers and meaningful curriculum materials 
toward which some of the EEE subgrants have been directed in 
order to promote economic and financial education.
    Aside from EEE, have any other financial resources gone to 
support financial literacy education activities for teacher 
training?
    Mr. Brown. Mr. Chairman, as I mentioned in my statement, 
there are other sources of funding, particularly for teacher 
professional development in the area of economics. Those are 
resources where they are not dedicated necessarily to financial 
literacy or economics education, but they could be used--they 
have the flexibility at both the State and local levels to be 
used that way. Certainly that would include some of the Title 
II program funding, and also it would include the Improving 
Teacher Quality State grants program that I mentioned earlier.
    So, again, that is something that, whether or not there 
continues to be funding specifically for the EEE program, we 
would certainly be happy to work with NCEE and other entities 
to get the word out at the State and local level that these 
funds can be used that way if the State and local entities wish 
to do so.
    Chairman Akaka. Thank you.
    Mr. Iannicola, I have some questions pertaining to the 
website and the hotline. When will the website incorporate the 
Web Managers Advisory Council's recommendations and best 
practices for websites?
    Mr. Iannicola. Well, we are in review of the website on a 
regular basis. However, I would think as part of the usability 
testing and the customer satisfaction, it will be done, if not 
sooner, it will be done by, I believe, the 2009 timeline we had 
given when we are implementing the GAO recommendation. We may 
have it sooner, but certainly by that time it will be 
completed.
    Chairman Akaka. So no definite timeline was set for that 
type of information?
    Mr. Iannicola. No, but its safe to say it will be done by 
the second quarter 2009, and perhaps sooner.
    Chairman Akaka. Has the Commission identified a point of 
contact for the website to address consumers' questions and 
concerns?
    Mr. Iannicola. I believe there is a link right now on the 
site that will allow individuals to ask a question, but it is 
more for questions about the website. It is not for asking 
financial education information questions but, rather, it is 
for questions about the basic functioning of the website. So 
there is a possibility to eventually get a hold of someone 
through the website links.
    Chairman Akaka. Mr. Iannicola, approximately 10 million 
households in the United States do not have accounts at 
mainstream financial institutions. What is being done by the 
Treasury Department and the Commission to encourage people to 
utilize mainstream financial institutions?
    Mr. Iannicola. We see that as an issue as well, Mr. 
Chairman, and that is why one of the more aggressive calls to 
action we have in the strategy is on the unbanked, and we 
already are three-fourths of the way through it in that we have 
committed to having regional roundtables on this issue to bring 
together players in the private sector and not-for-profits and 
to focus on the different issues of the unbanked.
    We had one in Chicago last May. We also had one in 
Edinburg, Texas, back in December and focused more on border 
issues there and the special complexities involved with that. 
And then this March, we had a conference in Seattle, and we 
will be having a conference in the Northeast later on this 
fall. So the upshot of all these conversations is to produce a 
White Paper with recommendations.
    We found some interesting things. We found, as I mentioned 
before, the idea of trust is important, but also the idea of 
approachability. We had a credit union tell us in Seattle that 
one of the things that brought more people in the door was just 
dressing their people in jeans and T-shirts because that is the 
way the customers dress. The tradition coat and tie seemed to 
intimidate some people.
    So it is these unique observations that one gets by 
listening to the grass roots, and that is what we were able to 
do and bring a lot more of these ideas to the forefront.
    Also the conference provided networking possibilities, we 
heard from a lot of people already that they made connections 
at that conference and have asked to build a list and serve off 
of that.
    So these are the types of tools that will naturally flow 
from these types of conversations, so we are going to continue 
to do that with respect to the unbanked.
    Chairman Akaka. Mr. Iannicola, the GAO report mentions that 
the financial literacy toolkit is missing information on some 
vital issues, such as home ownership and credit.
    What resources does the Commission need to provide a more 
comprehensive toolkit?
    Mr. Iannicola. We have also noted that there are 
publications we would like to get in the toolkit and are 
working with our agency partners to see what they can do to 
help us fill those holes.
    Chairman Akaka. In his written statement, Mr. Brobeck from 
the Consumer Federation of America outlines several strategies 
to achieve significant and measurable improvements to specific 
financial decisions made by most Americans. Examples of these 
include encouraging self-measurement of net personal wealth, 
use of automatic savings opportunities, public checking of 
credit records, and on-time repayment of loans. He also 
recommends that the Commission develop an online toolkit that 
could be widely promoted as an annual financial checkup 
instrument. This is a very interesting recommendation that 
could lead to the development of concrete proposals that will 
result in positive behavioral change.
    Will the Commission be developing strategies to achieve 
significant and measurable improvement in the decisionmaking of 
consumers?
    Mr. Iannicola. We will continue to implement the strategy 
to reach these tangible goals you are talking about. One of our 
primary tools to do that right now is the MyMoney website and 
the toll-free number. And we do have links on there now that 
can do that, and I would note that the Ballpark Estimate that 
OPM has put together is something that can be useful for 
Federal employees, but similar calculations can be useful for 
everyone, as Mr. Brobeck notes, to see where they are and where 
they need to be.
    So we will continue to measure the amount of penetration we 
get, the amount of people who actually use the website, and we 
hope, through our customer satisfaction survey, to realize how 
we can do that better.
    Right now that is one of our better tangible measures, and 
so we will continue to watch that closely to see how we can get 
the website to people who need it.
    Chairman Akaka. Mr. Danbeck, one of the keys to ensuring 
the financial literacy of Federal employees is the appropriate 
and ongoing training of agency benefit officers. Consequently, 
I am glad to hear about your upcoming Retirement Financial 
Education Symposium and your series of Workshops in a Box. I 
think, however, that it is also vital to have assessment 
measures in place to ensure that this training is effective.
    What, if any, measures has OPM put into place to ensure 
that benefits officers have the knowledge necessary to 
accurately convey retirement information to Federal employees?
    Mr. Danbeck. Mr. Chairman, we plan to survey benefits 
officers later in the year. Our strategy, as you mentioned, is 
to get the word out to the various agencies through the 
benefits officers, and we have done a number of things in that 
regard, including, as you noted, the series of Workshops in a 
Box and the financial education fairs. We have also provided 
the agency benefits officers recently with guidelines on how to 
perform retirement readiness plans.
    So we will check later in the year to assess how the 
agencies are performing. They will have to come back to us and 
tell us what they have implemented and what successes they have 
had. Then based on that, we will determine a measurement 
process. And to be perfectly honest, we have not gotten to that 
point yet, sir.
    Chairman Akaka. Well, thank you very much for that 
response.
    Mr. Iannicola, what has the Commission done to address the 
issue of measuring results and ensuring accountability?
    Mr. Iannicola. As we mentioned, the calls to action are 
something that we hold ourselves accountable to, and they have 
dates and actors. But beyond that, we have collected and will 
continue to collect information from our member agencies.
    For instance, we know that, as mentioned in my testimony, 
about 760,000 people were converted from receiving paper checks 
to electronic deposit, and we know all the benefits of that. 
That was done by the Treasury Department and the Federal 
Reserve banks. We had a DVD that went out; 60,000 of those were 
ordered by the public. Also, we have seen a number of outreach 
activities, even in our own office at the Treasury Department. 
Over a few years, we have gone to 42 States, held 304 financial 
education sessions, and reached over 24,000 people. In addition 
to that, we generated 470 media stories so that our word got 
out to more people than just attended the events.
    So these are the type of numbers that, while useful, are 
not everything we want; that is to say, the ideal measure is 
knowing that you have changed someone's behavior. That measure 
for financial educators in Federal or private sector efforts is 
always a challenging number to get. And it is even harder to 
tell when financial education was the delta, the reason that 
some conduct changed. It could be many other things.
    Ms. Jones had mentioned that it is difficult coming up with 
those measures, and we would agree.
    So we try to keep the numbers that we can, largely input 
numbers, to see how we are doing, while continuing to try to 
figure out ways to get even better numbers.
    Chairman Akaka. Mr. Brown, according to your advance 
testimony, you are currently measuring the NCEE's progress and 
fulfilling the goals of the Excellence in Economic Education 
grant by determining the percentage of students and teachers 
trained under the project that demonstrate an improved 
understanding of personal finance. The Department of Education 
has not yet finished compiling its information on the efficacy 
of the EEE program. How then can the Department of Education 
assess the national impact of the EEE program and assure that 
the requirements will be met by shifting responsibilities for 
financial education training from EEE to other grants?
    Mr. Brown. Mr. Chairman, as you noted in my testimony, we 
are in the process of doing an evaluation that we think will 
provide some quite clear results because there will be a 
control group of students who have not been instructed by 
teachers who have gone through the training provided by the 
program. And so we hope to get the kind of concrete results by 
using the control group that is sometimes difficult to get when 
you are doing these type of evaluations.
    I should also mention that for the first year of the grant 
program to NCEE, there has been an evaluation study done that 
we would be more than happy to share with you and other Members 
of the Subcommittee that was done for the first year of the 
grant program, which was fiscal year 2004, and that evaluation 
was released in the summer of last year. And that was not quite 
the thorough kind of evaluation we are doing now. It was mostly 
based on survey research of teachers and students and grantees. 
But the results were very positive, even for that first year, 
in terms of the survey research that came back. And I am sure 
Mr. Duvall, when he comes up to testify, will want to say even 
more about that.
    So, again, in no way is the discussion about looking at 
other resources for funding the EEE program or NCEE through 
that program a commentary on the performance of NCEE. Again, 
the evaluations we have so far are very positive. It really has 
much more to do with funding priorities for the President in 
the context of the education budget.
    Chairman Akaka. Thank you very much. I will just ask one 
more question, but I will also be keeping the record open for 
one week for other Members to submit questions they may have 
for you.
    Mr. Iannicola, on February 1, the Treasury Department 
officials kicked off a nationwide earned income tax credit 
awareness campaign. The EITC is a vitally important program for 
working families.
    What resources have been dedicated to this campaign?
    Mr. Iannicola. As you mentioned, on that day, February 1, 
Secretary of the Treasury and IRS Commissioner all got together 
and talked about the importance of EITC and declared that EITC 
Awareness Day, and that is also why we featured it in the 
National Strategy.
    There are just too many people who are leaving money on the 
table, as you well know, and some of the resources that have 
been put toward that from the Treasury Department's perspective 
come through IRS and the working of their Volunteer Income Tax 
Assistance (VITA) sites. They work with organizations across 
the country to train them to help people get their taxes filed, 
and while they are doing that, they will introduce them to the 
idea of the earned income tax credit if they are eligible for 
it and help them to claim it. They can also use that as a 
teachable moment to get the person a bank account or a 
relationship with a credit union if they do not have one.
    The IRS has also recently developed a split refund 
technological ability so that now an individual can be enticed 
to put some of the money into an account and yet still have 
something to take home. That was new this tax year. So through 
the VITA sites and IRS, significant resources have been put to 
improving participation in the earned income tax credit.
    Chairman Akaka. Well, I want to thank the second panel for 
your responses and tell you that your responses have been 
helpful. We will keep the record open for a week for any other 
questions.
    I also want you to know that we have a third panel that is 
coming up, and I would encourage you to stay if you can and 
have the time to hear the third panel.
    So, again, thank you very much for being here, and have a 
good day.
    Now I call on the third panel of witnesses to come forward: 
Robert Duvall, who is President and Chief Executive Officer of 
the National Council on Economic Education; and Stephen 
Brobeck, Executive Director, Consumer Federation of America. It 
is good to have you here as witnesses on the third panel.
    It is the custom of this Subcommittee to swear in all 
witnesses. So will you please stand and raise your right hand? 
Do you swear that the testimony you are about to give this 
Subcommittee is the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Mr. Duvall. I do.
    Mr. Brobeck. I do.
    Chairman Akaka. Thank you very much, and let the record 
note that the witnesses responded in the affirmative.
    Let me ask you, Mr. Duvall, to please proceed with your 
testimony.

TESTIMONY OF ROBERT F. DUVALL,\1\ PRESIDENT AND CHIEF EXECUTIVE 
        OFFICER, NATIONAL COUNCIL ON ECONOMIC EDUCATION

    Mr. Duvall. Thank you very much, Chairman Akaka, and thank 
you for inviting me to testify today on this timely, critical, 
and vital issue of the Federal Government's role in empowering 
all Americans to make informed financial decisions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Duvall appears in the Appendix on 
page 88.
---------------------------------------------------------------------------
    The National Council on Economic Education (NCEE), is a 
unique nonprofit, nonpartisan, independent organization 
directed by a governing board of volunteer leaders from 
education and business, with the clear purpose of helping young 
people learn while in school to think and choose responsibly 
and successfully when they go into the real world.
    For 60 years, the NCEE has been leading the charge to 
improve economic and financial literacy through education in 
the Nation's schools. We believe that today both the need for 
what we do best and the opportunities to effect change and to 
show, as you have called for, measurable results are greater 
than ever.
    With partners, as you know, we helped to host and promote 
Financial Literacy Day on Capitol Hill last week, and your 
leadership has been inspiring for the development of that 
effort over the years.
    The NCEE is differentiated by our mission. We believe that 
financial literacy comes through effective economic education, 
and that this education ought to be part of the core learning 
experience that our young people get while they are in school. 
We believe they will best learn the basics of practical, 
applied economics and personal financial decisionmaking skills 
through well-trained teachers, who are equipped with excellent 
standards-based teaching materials.
    The need to strengthen, expand, and enhance education in 
basic practical economics and personal finance in our Nation's 
schools remains urgent. We must prepare our students with the 
foundation of economic and financial competence so that they 
can succeed in life.
    There is widespread agreement for this proposition among 
policymakers, business leaders, and educators. The questions 
now before us, I believe, are: How can we best improve and 
expand economic and financial literacy efforts? How can we 
measure results and outcomes to be sure we are making a 
difference? And what role can both government and the private 
sector play in this effort?
    Let me pick up the theme of much of the discussion today in 
which I have an earnest interest, and that is, focus on the 
importance of the Excellence in Economic Education Act (EEE).
    Thanks to your efforts, Mr. Chairman, Congress authorized 
the EEE program as part of the No Child Left Behind Act ``to 
promote economic and financial literacy of all students in 
kindergarten through grade 12.'' The EEE directly supports 
activities that educators can take to improve financial 
education in our elementary and secondary schools--through 
professional development for teachers, distributing high-
quality, standards-based, and standards-setting educational 
materials; fostering active learning for students; and 
evaluating and assessing outcomes and promoting, and then 
disseminating best practices.
    We know that well-prepared teachers instill in our children 
a sense that they are themselves future stakeholders, 
decisionmakers, and movers of the American economy. The EEE has 
provided meaningful resources for teacher training, which is at 
the heart of making a difference.
    In the first year of the EEE, 36 subgrants were awarded to 
establish and conduct teacher training programs, including for 
those teachers who specialize in another discipline. This is 
important. The infusion of personal finance and economics into 
other classes can be an effective way to assure that these 
subjects have a place in the core curriculum.
    This year, EEE funding allowed the NCEE to distribute 
14,000 Virtual Economics CD-ROMS to every school district in 
the country. Thanks to the EEE, this program is now available, 
a unique resource for teachers, in every school district in the 
United States.
    I think one of the most important ways we can improve 
economic and financial education and ensure results is through 
rigorous evaluation and assessment. Let me just mention--and it 
is in my written testimony in a fuller way--one glowing example 
of how the NCEE has used Federal funds provided by the EEE to 
make a real difference, pursuant to Deputy Secretary Brown's 
comment.
    Financial Fitness for Life, developed by the NCEE, is an 
award-winning, highly acclaimed, comprehensive K-12 personal 
finance program, which helps students apply economic and 
financial decisionmaking skills to the real world of earning 
and spending an income, saving, using credit, investing, and 
managing their money--that is, a financial fitness program for 
getting in shape financially.
    The NCEE awarded a grant of funds, through the EEE program, 
to two researchers at Eastern Kentucky University, who tested 
the effectiveness of Financial Fitness for Life in an 
economically underprivileged region of Kentucky. This study 
found that the use of Financial Fitness for Life significantly 
increased student performance on a post-test basis when 
compared with a pre-test of those same students. The study also 
found that Financial Fitness for Life increases financial 
literacy, and that, for 7th-, 8th-, and 10th-grade students, 
this increase is higher than what resulted from any other 
curriculum, if any, that teachers were previously using to 
teach financial concepts.
    Now, this is a powerful study, and it was presented to the 
American Economic Association (AEA), in January in Chicago. 
This kind of evaluation and assessment is something that we are 
focused on at the NCEE and I see us doing as an increasing 
contribution to understanding where and how we can make a 
significant difference.
    Through your leadership, Senator Akaka, and the bipartisan 
support that you have mustered from many others, Congress has 
provided needed resources to make a difference through the EEE 
program. And as I have illustrated, the Excellence in Economic 
Education program allows the Federal Government to strengthen, 
expand, and leverage effective economic and financial literacy 
education at the local level, at the grass-roots level, in our 
Nation's primary and secondary schools, for relatively few 
dollars.
    The EEE maximizes the impact of each Federal dollar by 
requiring matches for subgrants and leveraging ongoing private 
sector efforts. And the EEE addresses the key pieces of the 
economic education and financial literacy puzzle: teacher 
training, development and delivery of curricular materials, 
student activities that work, and evaluation and assessment of 
results.
    So I would urge the Congress to maintain and, if possible, 
increase funding for this needed and outstanding program.
    I am very gratified that this Subcommittee is focusing on 
economic education and financial literacy. Teaching sound 
economics and personal finance, and making it stick, is not 
only vital to an individual's success, but will ultimately 
contribute to ensuring a strong national economy and a more 
prosperous future for our country.
    Thank you again for inviting me to testify today, and I 
will be happy to answer any questions.
    Chairman Akaka. Thank you very much, Dr. Duvall. And now, 
Mr. Brobeck, your testimony.

 TESTIMONY OF STEPHEN BROBECK,\1\ EXECUTIVE DIRECTOR, CONSUMER 
                     FEDERATION OF AMERICA

    Mr. Brobeck. Thank you, Mr. Chairman. CFA appreciates the 
opportunity to testify before this Subcommittee on the role of 
the Federal Government in helping Americans make more informed 
financial decisions, and we also appreciate your personal 
leadership in the area of financial education and many other 
pressing financial services issues.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Brobeck appears in the Appendix 
on page 94.
---------------------------------------------------------------------------
    My written testimony suggests that for many years Federal 
agencies have played an important role in increasing financial 
literacy. It also notes that since its establishment, FLEC has 
strengthened this Federal role. The Commission, led by the 
Treasury Department's Office of Financial Education, has 
compiled unique and valuable information about financial 
education programs and opportunities, has encouraged more 
cooperation among Federal agencies, and has provided 
information to increasing numbers of Americans through its 
MyMoney website.
    Our testimony, however, agrees with GAO that FLEC has not 
yet developed a comprehensive national strategy to advance 
financial literacy, though it also notes that the Commission 
faces severe constraints in seeking to develop such a strategy. 
These constraints suggest that it would be more useful for FLEC 
to develop and implement informational strategies for 
encouraging consumers to take specific financial actions. These 
actions could include--and you mentioned several of them in 
your questions to the previous panel--an annual financial 
checkup in which people assess the status of their spending, 
saving, and use of credit; a more detailed assessment of 
current and future net wealth; automatic savings through 
workplace retirement programs and through preauthorized regular 
transfers from checking to savings; periodic checking of credit 
reports and credit scores, which increasingly affect not just 
credit availability and costs, but also the availability of 
rental housing, utilities, insurance, and even employment; and 
prompt loan payments to avoid late fees, penalty interest 
rates, and lower credit scores.
    There are many FLEC members with a potential interest in 
promoting each of these prudent financial actions. They could 
develop strategies that involve cooperation with nonprofit and 
private groups as well as with other government agencies. These 
strategies should include specific national goals for different 
actions, such as X million additional Americans self-
administering a web-based financial checkup, or estimating 
their current and future net assets using a website, or 
participating in workplace retirement programs, or checking 
their credit reports, or reducing the frequency of late loan 
payments. And the strategies should utilize the kind of social 
marketing approaches employed in campaigns against smoking or 
drunk driving.
    Our written testimony suggests that financial education has 
really yet to adequately prove its worth to the Nation. 
Targeted informational initiatives led by Federal agencies to 
help people use their financial resources more effectively 
would demonstrate the value of this education while improving 
the lives of millions of Americans.
    Thank you.
    Chairman Akaka. Thank you very much, Mr. Brobeck, for your 
statement.
    Mr. Brobeck, you recommend urging the Commission to develop 
specific financial literacy strategies to achieve measurable 
improvements in financial decisions. Can you give us an example 
of the kind of financial decisions you are talking about and 
how the Commission could work to develop measures to improve 
these financial decisions?
    Mr. Brobeck. Well, in your question to the previous panel, 
you had actually focused on annual financial checkups, so let 
me use that as an example.
    This could be encouraged by FLEC, and I would assume there 
would be at least eight to ten Federal agencies, perhaps led by 
the Office of Financial Education, that would develop a very 
powerful, compelling web-based instrument that any American 
could use to check on how they manage their money, their use of 
credit, their saving, and their investments.
    After they develop this, they would then ask 
nongovernmental experts to critique and suggest improvements in 
that instrument. They would then test that instrument on groups 
in the population, including the disadvantaged, who may need 
the assistance of third parties in order to adequately use that 
instrument. Keep in mind that there is still a very high 
percentage of low- and moderate-income and minority Americans 
that do not have ready access to the World Wide Web. And then--
and this is very important--they would set a specific goal of 3 
million Americans, 10 million Americans, maybe eventually 20 
million Americans, actually utilizing that instrument in the 
course of a year.
    And then--and this is in some ways the hardest thing--they 
would take the lead to put together a very aggressive, 
comprehensive national campaign that included thousands of 
organizations in order to encourage and to assist Americans to 
take this checkup. And that would include not just the media. 
It would include financial institutions we work with who I know 
would support this, I am certain. It would include a whole 
array of nonprofits, the housing community, and, of course, 
government agencies at the State and local level as well.
    And then, finally, in each year--this could be a multiyear 
campaign; it would probably have to be to be effective--the 
effectiveness would be measured. You could measure this, of 
course, by looking to see how many Americans actually used the 
website, accessed the website to check the state of their 
finances. But you could also go out and take random samples of 
the population or even people who utilized the checkup to ask 
them whether taking that checkup led to behavioral change.
    Chairman Akaka. Thank you for that.
    Dr. Duvall, I was interested to hear during your testimony 
that more often than not, teachers assigned to educate students 
on financial literacy actually specialize in other subject 
areas. In your experience, what is the key to encouraging 
teachers to integrate financial literacy lessons into their 
classrooms?
    Mr. Duvall. Well, we have seen some real progress in that 
area over the past several years, Senator, as the advocacy 
effort has had an effect to make people aware of the importance 
of the issue. You have been a real champion in that.
    As States through their own legislative actions have tried 
to address the problem within the States of financial 
illiteracy, more and more States are incorporating economics 
and personal finance into their State standards and making it a 
requirement that it be taught, and even in a growing number of 
States that a course be taken from graduation.
    As that kind of push is developed, teachers are called upon 
to respond to the challenge--and school districts--by having 
well-qualified people to teach those courses. So we are seeing 
a greater demand for educating the--teaching the teachers so 
that they can more effectively teach the students.
    In our nationwide network, there is a kind of standing joke 
that a lot of high school economics teachers have the same 
first name: ``Coach.'' They are people who have been drafted 
into doing a course in personal finance or in basic practical 
economics. We can help those teachers by giving them good 
curriculum and training them, which is terribly important, in 
how to talk about these basic concepts. Too many teachers have 
not had themselves economics or personal finance in their own 
background. And then we can infuse economics into other subject 
areas.
    One of the publications that teaching resources at the NCEE 
did this past year and was published this summer and has 
already become a best seller for us, if you will, is a book for 
high school teachers of American history. It is called ``Focus 
on Economics in U.S. History.'' We think you cannot talk about 
the Boston Tea Party without saying something about taxation or 
the roots of the American Civil War without saying something 
about the impact of the invention of the cotton gin on the 
Southern economy.
    That kind of infusion into other subject areas--math, 
history, geography, civics and government--is a way to get the 
basic concepts into the heads and hands of our kids, but it 
takes teacher training to do it.
    Chairman Akaka. Thank you for that answer.
    Mr. Brobeck, in your opinion, why has the Commission not 
found any duplication of government financial literacy efforts?
    Mr. Brobeck. We are actually not that aware of much 
duplication in the financial education initiatives of the 
different FLEC members. But we would add that duplication is 
not necessarily undesirable because the needs of the people are 
so great here.
    What is really important to us, though, is greater 
interagency coordination to meet measurable goals related to 
behavioral change. And the specific initiatives that I 
mentioned in both my written and oral testimony I think provide 
an opportunity for such coordination.
    Chairman Akaka. Dr. Duvall, as you noted in your testimony, 
one of the key components of an effective national financial 
literacy strategy is evaluation and assessment. I was pleased 
to hear about the Eastern Kentucky University study which 
indicated the effectiveness of the Financial Fitness for Life 
program.
    Can you tell me if there are any plans to conduct similar 
studies in the near future? What should be done to assure that 
critical assessments will continue?
    Mr. Duvall. Well, it certainly is a priority for the 
ongoing work of the National Council on Economic Education. I 
think in the years that I have had the opportunity to think and 
talk with you, Senator, about this important issue, we have 
seen some real change. We have moved from the need for making 
people aware of the issue, although that need continues, to 
seeing how the issue can be best addressed. We have looked at 
best practices. We have been talking more and more about 
solutions to the problem that we have helped people become more 
aware of. And now I think we are standing right on the edge of 
the third important part of this effort, and that is, testing, 
evaluation, and assessment, to see what does work and how it 
changes behavior. So that will be a priority for our work going 
forward, and I think it is and can be an important part of the 
work of many others.
    That is why I am so pleased that it is the fourth component 
of the EEE legislation and why I so earnestly hope that program 
will continue. It is teacher training, curriculum, and teaching 
resources, student activities, active student learning, and 
then measuring results.
    Chairman Akaka. Thank you.
    Mr. Brobeck, I am concerned that consumers are not provided 
with enough information about the long-term consequences of 
making only the minimum credit card payment. What do you think 
must be done to ensure that consumers are adequately informed 
of the true cost of making only the minimum payment?
    Mr. Brobeck. Senator, we are very concerned, too. Too many 
Americans run up thousands of dollars, sometimes tens of 
thousands of dollars of credit card debt, in part because the 
low minimums convince them that the debts are affordable. And 
they are not. And when they finally realize that they cannot 
even make a 2- or 3-percent payment, it is just too late and 
they are candidates for bankruptcy.
    So credit card statements, in our view, should inform 
consumers about the consequences of paying at or just above the 
minimum, and the most useful type of information included is 
how long and how costly it is to pay off the debt just by 
making the minimum payments.
    Your proposed legislation, the Credit Card Minimum Payment 
Warning Act, provides this personalized disclosure, and so we 
strongly support it.
    Chairman Akaka. Thank you.
    Dr. Duvall, according to your testimony, one of the most 
important actions educators can take to improve economic 
education is to foster active learning for students. Can you 
give me some examples of these active learning strategies?
    Mr. Duvall. Yes. In our own lineup of things that we offer, 
there is the Economics Challenge. The Federal Reserve System 
has a Fed Challenge. These are programs that engage students in 
a competitive activity that requires that they know something 
and be able to show what they know. At the lower grade levels, 
you can have games and activities, even at the--I have been 
challenged by people who see our mission statement that we are 
concerned with K-12 education: Can you really teach young 
people while they are in kindergarten something about some 
basic personal finance? Absolutely. They can borrow a little 
lunch money and then pay it back, and you begin to show them 
how that works. You can make a list of the things that you want 
and then put price tags by it and then divide that in half and 
say, ``All right. What are you going to do now to make 
choices?'' And if they say, ``Well, we will pay for what we 
can, and then we will put the rest on a credit card,'' as was 
just said, we have got some education work to do.
    But those kinds of things you take the dismal science--
economics--and make it come alive. And, again, I would say that 
the things that have been laid out in the EEE legislation--the 
teacher training and the student activities--are very important 
if you are going to make that happen.
    Chairman Akaka. Mr. Brobeck, I am deeply concerned that too 
many families are taken advantage of by unscrupulous lenders 
through payday loans. What must be done to better protect 
consumers and encourage the development of payday loan 
alternatives?
    Mr. Brobeck. Yes, Senator, we share your concern. Consumers 
spend billions of dollars annually on these loans that have 
triple-digit interest rates.
    Now, ideally, we think that Congress should extend the 
consumer protections that they approved for members of the 
military a year ago to all Americans. But failing that, we 
believe Congress should prohibit certain abusive practices, 
such as payday lenders, for example, partnering with banks to 
evade laws regulating small loans. This protection and many 
other important protections is part of your Predatory Payday 
Loan Prohibition Act, and we also strongly support that 
legislation.
    Chairman Akaka. Thank you for the support. Mr. Brobeck, I 
want to thank you and your staff for working so closely with me 
on consumer protection issues: Travis Plunkett, Jean Ann Fox, 
along with Chi Chi Wu at the National Consumer Law Center, and 
Barbara Roper. They are all extremely dedicated and talented 
individuals. I want you to tell them how I feel.
    I will submit my last question pertaining to refund 
anticipation loans for the record.
    I want to again thank you so much for coming today and 
being a part of this hearing. I wanted to take the time to 
assess where we are. So many of you have participated in 
promoting financial literacy throughout our country. I am just 
at a point of trying to be sure we know what the situation is 
and where we should be going to improve financial literacy. You 
all have helped us do that, and I really appreciate your 
participation.
    I want to thank all the witnesses for appearing today. This 
is, again, an enormously important issue because financial 
literacy directly impacts the quality of life for our working 
families. Increasing the knowledge and opportunities of 
consumers will help them be better able to save for a child's 
education, manage debt, utilizer lower-cost financial services, 
purchase a home, and retire on their own terms. I will continue 
to work with all of you to improve Federal financial literacy 
efforts.
    I want to tell you, again, I look forward to continuing 
these discussions and initiatives as well. The hearing record 
will be open for one week for additional statements or 
questions other Members may have pertaining to the hearing.
    And so with all of this gratitude, this hearing is 
adjourned.
    [Whereupon, at 4:29 p.m., the Subcommittee was adjourned.]








































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