[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
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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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35-529 PDF WASHINGTON DC: 2008
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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
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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
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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.
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\1\ The prepared statement of Ms. Bair appears in the Appendix on
page 35.
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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.
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\1\ The prepared statement of Mr. Brown appears in the Appendix on
page 50.
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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.
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\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.
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\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.
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\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.
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\1\ The prepared statement of Mr. Duvall appears in the Appendix on
page 88.
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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.
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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.]
A P P E N D I X
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