[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                 IMPROVING CONSUMER FINANCIAL LITERACY

                    UNDER THE NEW REGULATORY SYSTEM

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


                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 25, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-50



                  U.S. GOVERNMENT PRINTING OFFICE
52-407                    WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             THADDEUS G. McCOTTER, Michigan
RON KLEIN, Florida                   KEVIN McCARTHY, California
CHARLES A. WILSON, Ohio              BILL POSEY, Florida
ED PERLMUTTER, Colorado              LYNN JENKINS, Kansas
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
ANDRE CARSON, Indiana
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         JEB HENSARLING, Texas
MELVIN L. WATT, North Carolina       J. GRESHAM BARRETT, South Carolina
GARY L. ACKERMAN, New York           MICHAEL N. CASTLE, Delaware
BRAD SHERMAN, California             PETER T. KING, New York
DENNIS MOORE, Kansas                 EDWARD R. ROYCE, California
PAUL E. KANJORSKI, Pennsylvania      WALTER B. JONES, Jr., North 
MAXINE WATERS, California                Carolina
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
CAROLYN McCARTHY, New York               Virginia
JOE BACA, California                 SCOTT GARRETT, New Jersey
AL GREEN, Texas                      JIM GERLACH, Pennsylvania
WM. LACY CLAY, Missouri              RANDY NEUGEBAUER, Texas
BRAD MILLER, North Carolina          TOM PRICE, Georgia
DAVID SCOTT, Georgia                 PATRICK T. McHENRY, North Carolina
EMANUEL CLEAVER, Missouri            JOHN CAMPBELL, California
MELISSA L. BEAN, Illinois            KEVIN McCARTHY, California
PAUL W. HODES, New Hampshire         KENNY MARCHANT, Texas
KEITH ELLISON, Minnesota             CHRISTOPHER LEE, New York
RON KLEIN, Florida                   ERIK PAULSEN, Minnesota
CHARLES A. WILSON, Ohio              LEONARD LANCE, New Jersey
GREGORY W. MEEKS, New York
BILL FOSTER, Illinois
ED PERLMUTTER, Colorado
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 25, 2009................................................     1
Appendix:
    June 25, 2009................................................    35

                               WITNESSES
                        Thursday, June 25, 2009

Diaz, Lautaro ``Lot,'' Vice President, Housing and Community 
  Development, National Council of La Raza (NCLR)................    10
Gannon, John M., Senior Vice President, Office of Investor 
  Education, and President of the FINRA Investor Education 
  Foundation, The Financial Industry Regulatory Authority (FINRA)    17
Jones, Stephanie J., Executive Director, National Urban League 
  Policy Institute...............................................    13
Lauber, Gerald, Chief Senior Advisor, National Urban Alliance 
  (NUA)..........................................................    15
Levine, Laura, Executive Director, Jump$tart Coalition for 
  Personal Financial Literacy....................................     8
Neiser, Brent A., Director of Strategic Programs and Alliances, 
  National Endowment for Financial Education (NEFE)..............    19
Salisbury, Dallas L., President and CEO, Employee Benefit 
  Research Institute (EBRI)......................................    11

                                APPENDIX

Prepared statements:
    Hinojosa, Hon. Ruben.........................................    36
    Diaz, Lautaro ``Lot''........................................    45
    Gannon, John M...............................................    52
    Jones, Stephanie J...........................................    60
    Lauber, Gerald...............................................    67
    Levine, Laura................................................    73
    Neiser, Brent A..............................................    78
    Salisbury, Dallas L..........................................    82

              Additional Material Submitted for the Record

Hinojosa, Hon. Ruben:
    GAO Testimony Before the Subcommittee on Oversight of 
      Government Management, the Federal Workforce, and the 
      District of Columbia, Committee on Homeland Security and 
      Governmental Affairs, U.S. Senate, entitled, ``Financial 
      Literacy and Education Commission, Progress Made in 
      Fostering Partnerships, but National Strategy Remains 
      Largely Descriptive Rather Than Strategic,'' dated April 
      29, 2009...................................................   126
    Washington State Financial Literacy Work Group Final Report 
      entitled, ``Putting The Pieces Together,'' dated December 
      1, 2008....................................................   146


                      IMPROVING CONSUMER FINANCIAL

                         LITERACY UNDER THE NEW

                           REGULATORY SYSTEM


                              ----------                              


                        Thursday, June 25, 2009

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2128, Rayburn House Office Building, Hon. Luis V. 
Gutierrez [chairman of the subcommittee] presiding. *(Chairman 
Gutierrez was unable to preside at this hearing due to a 
pressing commitment at the White House.)
    Members present: Representatives Sherman, Hinojosa, 
McCarthy of New York, Baca, Green, Scott, Cleaver; Hensarling, 
Royce, Marchant, and Paulsen.
    Mrs. McCarthy of New York. [presiding] Good afternoon 
everybody.
    We certainly appreciate everybody being here.
    This hearing of the Subcommittee on Financial Institutions 
and Consumer Credit will come to order. I want to thank 
everybody and the witnesses for agreeing to appear before the 
subcommittee today.
    Today's hearing, entitled, ``Improving Consumer Financial 
Literacy Under the New Regulatory System,'' will examine the 
continuing need for financial literacy, with a particular focus 
on the role of consumer financial literacy under the 
President's newly proposed regulatory framework.
    Among the issues that will be addressed here: how the 
consumer-friendly plain-language products proposed under the 
regulatory reconstruction plan will be created and regulated; 
the efficiency of previous Federal financial literacy efforts; 
and which agency should have primacy over financial literacy 
efforts going forward under the new plan.
    We will be limiting our opening statements to 15 minutes 
per side. But without objection, the hearing record will be 
held open for all members' opening statements to be made a part 
of the record.
    I now recognize Mr. Hensarling for 5 minutes.
    Mr. Hensarling. Thank you, Madam Chairwoman.
    I very much appreciate this hearing being called.
    I do believe that financial literacy is a very important 
subject, one that Members on both sides of the aisle have 
championed in the past, so it continues to be a very laudable 
goal for our Nation to improve the financial literacy of our 
fellow citizens.
    And, in fact, although I cannot do the quote justice, I 
will paraphrase something that one of our Founding Fathers, 
Thomas Jefferson, once said, and that is, if we disagree with 
how our fellow citizens exercise their discretion, the remedy 
is not to take it from them but to help inform their 
discretion.
    My apologies to any Jeffersonian scholars in the audience. 
I know that was not a literal quote, but that is essentially 
the paraphrase. And so, in some respects, although I appreciate 
the hearing, I am curious why we are having the hearing. I am 
curious because, as I look at the underlying legislation that 
would create the Financial Product Safety Commission, our 
colleague Mr. Delahunt's bill, which roughly parallels what the 
Obama Administration has furthered, I essentially see a rather 
draconian effort that allows an unelected body of bureaucrats 
to essentially decide that if they subjectively believe that a 
consumer financial product is ``unfair,'' if they subjectively 
believe that a consumer financial product is ``anti-consumer,'' 
they can ban it, just ban it from the market.
    It is not even a Federal preemption. It is essentially a 
layer of regulation and regulators that is poured on top of the 
present regulatory structure. And as I read the statute that 
was presented, again, by our colleague yesterday in our full 
committee hearing, it also encompasses the goal of having these 
regulators create ``plain vanilla'' products.
    You know, it is laudable if people want vanilla, but some 
people want strawberry, some people want chocolate, and some 
people want the 32 flavors of Baskin-Robbins. Typically, in a 
competitive market, the competitive market is going to produce 
what the people want. That is kind of one of the basic tenets 
of capitalism. And so, again, I wish our fellow citizens would 
indeed be--that we could help achieve and figure out a coherent 
strategy and plan to achieve a greater level of financial 
literacy, but I don't know if it is going to be needed if this 
legislation becomes law.
    I mean, after all, you really don't need to know how to 
read if your nanny reads you all your material at the end of 
each evening. And, in fact, if your nanny prevents you from 
putting your hands on any piece of literature, you are 
foreclosed from being able to read.
    And so now we are going to have an unelected group of 
bureaucrats who ultimately can decide what mortgages we have, 
what bank accounts we can open, and whether or not we will even 
be trusted with a credit card.
    And given that there is an entire new level of criminal and 
civil penalties that can be applied for those who produce 
subjectively unfair products or subjectively anti-consumer 
products, functionally no product is going to come to market 
that isn't pre-cleared by this unelected group of bureaucrats.
    And so, on the one hand, maybe only plain vanilla products 
will be available on the market. I am not sure how financially 
literate one needs to be. If you are only offered one flavor of 
ice cream, I suppose all you need to read on the board is 
vanilla. There is nothing else to read.
    And so, again, we have these philosopher-kings who will 
decide what is best for us, philosopher-kings whom I feel quite 
confident are not familiar with the Rodriguez family of 
Mesquite, Texas, that I have the opportunity of representing in 
Congress. My guess is they don't know exactly what precise bank 
account will help that family the most.
    My guess is that this unelected group of bureaucrats will 
be unacquainted with the Laird family of Athens, Texas, and 
they probably don't know what mortgage product is going to be 
best for their homeownership dreams in America.
    My guess is they probably are not well acquainted with the 
Shane family of Kaufman County, Texas, whom I represent in 
Congress. And my guess is they really shouldn't decide whether 
or not Kenneth Shane and his wife can use a credit card to help 
finance their American dream.
    Part of our challenge clearly is ineffective disclosure. We 
all agree on that. But most of the disclosure, I mean, it is 
kind of like Pogo. We have met the enemy, and it is us. We are 
the ones who require it. When you disclose everything, you end 
up disclosing nothing. And so we should work to have effective 
disclosures written in English, not voluminous disclosures 
written in legalese.
    So, again, I appreciate calling the hearing. I hope it 
proves to be a useful hearing. But ultimately, if the 
President's initiative is passed, it is all for naught.
    With that, Mr. Chairman, I yield back the balance of my 
time.
    Mr. Hinojosa. [presiding] Thank you, Ranking Member 
Hensarling.
    I am glad to be able to make my statement. And I want to 
welcome the witnesses to today's hearing. I especially want to 
commend Chairman Luis Gutierrez for holding it.
    Today's hearing on financial literacy is important to all 
of us in Congress, for today's witnesses, to all of you 
attending this hearing in person, via live webcast, or archived 
webcast, and really, each and every resident in the United 
States, but especially for our children and the generations to 
come.
    I ask that those of you with financial literacy programs 
understand that we have a limited amount of time and space for 
everyone to testify today. But I believe that we have put 
together a comprehensive panel of witnesses, and I personally 
welcome any statements you might make for submission in today's 
record.
    I am wearing several hats today. I am a member of this 
subcommittee. I am a co-Founder and co-Chair of the Financial 
and Economic Literacy Caucus, alongside my good friend and 
colleague from Illinois, Congresswoman Judy Biggert, and her 
dedicated staff, Nicole Austin and Zach Cikanek. I am chairman 
of the Subcommittee on Higher Education, and I am chairman of 
the Congressional Hispanic Caucus Task Force on Education. I am 
a consumer, just like all of you here today, and most 
important, I am a father. I have five children and six 
grandchildren. So financial literacy is extremely important to 
my family and to millions and millions of families throughout 
our country.
    What we do here today, the actions we take during the 111th 
Congress, and the steps that the States take to graduate 
financially literate students are all of the utmost importance. 
We need to improve the financial literacy rates of all 
residents throughout the United States, and I believe that 
today we might find some of the tools necessary to accomplish 
this goal which most definitely will include revamping the 
Financial Literacy and Education Commission and selecting one 
agency to have primacy over financial literacy efforts going 
forward under the new Financial Services regulatory plan 
proposed by President Obama.
    With that, I yield back the remainder of my time, and I 
want to recognize Mr. Paulsen for 3 minutes.
    Mr. Paulsen. Thank you, Mr. Chairman. I appreciate it.
    I also strongly believe that we must increase the financial 
literacy of our citizens. This is a basic life skill that, 
unfortunately, many in our country truly lack. This is really a 
family and a financial security issue.
    What concerns me is that nowhere in the Administration's 
proposal that we have now begun hearings on are the words 
``financial literacy'' mentioned. The plan doesn't do anything 
to encourage individuals, from what I can see, to empower 
themselves or help people better understand personal finance 
and the decisions that they have to make on a daily basis.
    Instead, what I see is that, is one of my chief concerns, 
that it actually takes away the ability of individual choice 
and decisions from individuals. And rather than seeking to 
increase financial literacy, the underlying legislation creates 
this panel that potentially will take away choices from 
consumers out of a fear that things will be too complicated for 
them to understand. In other words, someone else is going to 
make decisions about what is best for you. And I think that is 
the wrong approach.
    Congress should not be taking away choices from the 
American people. Congress shouldn't be stifling innovation at a 
time when we need innovation. Instead, I think Congress should 
be helping these individuals understand what options are 
available so that they can make the right decisions for 
themselves. And I sincerely hope that this committee can work 
in a bipartisan way to improve upon the Administration's 
proposal as we go forward in crafting really some commonsense 
legislation that is needed to make sure that ultimately we are 
empowering all Americans to make sound and educated judgements 
with regard to their own personal finances.
    And I yield back.
    Mr. Hinojosa. Thank you.
    I, at this time, wish to recognize Congressman Green for 3 
minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I thank Chairman Gutierrez for his assistance with this as 
well.
    Mr. Chairman, generally speaking, financial success is 
directly proportional to financial literacy. People who 
understand financial products can make good decisions about the 
products that they have to negotiate. I think that this hearing 
is exceedingly important because it will give us an opportunity 
to examine the means by which we can, not only improve the 
products themselves by way of conveying what they are about to 
the public, but also, it helps us to understand where best to 
have this type of assistance located. We can have it in many 
different places, or we can have it in one place. I think that 
this is the type of hearing where we can get the intelligence 
necessary to make some decision as to where the actual delivery 
mechanism is located.
    I am exceedingly excited about this, and I look forward to 
our being able to develop the plain language that Americans 
would like to have so that they can understand and, to be quite 
candid with you, so that I can understand. I have had the good 
fortune to get a decent education in this country. And I can 
tell you that when I read some of my credit card materials, I 
am tempted to call a lawyer. I happen to have a law degree, but 
I haven't found that it has been of great benefit to me on some 
occasions, and went so far as to talk to my friend, who is a 
lawyer, who reminded me that he, too, has problems.
    So I am looking forward to our working together to come up 
with the kind of language that people can understand that makes 
a lot of sense and deciding where we should have the agency, or 
which agency is most appropriate to help us with this line of 
products.
    I thank you, Mr. Chairman, and I yield back.
    Mr. Hinojosa. Thank you.
    At this time, I would like to recognize Congressman 
Marchant for 4 minutes.
    Mr. Marchant. Thank you, Mr. Chairman.
    After reviewing last night all of the testimony that we 
will be given today, I am struck that all of your testimony 
seems to be directed towards a system that I think Mr. 
Hensarling has already pointed out is most likely not to be in 
place this time next year.
    In fact, with the current--the legislation that we just 
passed in the last few months, two pieces of legislation about 
credit cards, and the President has signed one of those pieces 
of legislation, significantly limiting the terms and conditions 
of credit cards and simplifying the credit card system; and 
taking into consideration that probably 80 percent of all home 
loans are made now through either FHA, VA, Fannie Mae, or 
Freddie Mac, and all of those documents are promulgated through 
HUD and through government agencies already; it seems to me 
that your task in the future may be trying to figure out how 
you can work with those Federal agencies, this new Financial 
Consumer Protection Agency, how you can work with them to try 
to help them promulgate all of these loan forms and all of the 
loan documents that each and every banker and lender in America 
will most likely have to go and get their loan papers approved 
and everything they do, and make sure that promulgation of 
documents is done through that agency.
    So it may simplify your job if you can, if you think you 
can trust this new financial consumer agency to draft the 
documents to where everyone who reads them will have no 
problem. So I think my questions today, Mr. Chairman, are going 
to be directed in that direction, and ask you what your opinion 
is of that agency and how you plan on interfacing with that 
agency.
    Thank you.
    Mr. Hinojosa. Thank you.
    I would like to ask Congressman Cleaver to take 3 minutes, 
please.
    Mr. Cleaver. Thank you, Mr. Chairman.
    I appreciate very much the hearing. I am very much 
concerned about the issue of financial literacy. The purpose of 
this hearing is to discuss plain-language initiatives and 
financial literacy promotion. Both of these subjects are 
extremely important to me. And I have advocated in our hearings 
over the years for plain language.
    In fact, in the 2006 GAO report, ``Increased Complexity in 
Rates and Fees Heightens Need For More Effective Disclosure to 
Consumers,'' is I think a bold and accurate statement about 
what is needed. Some credit card disclosure statements, and I 
think all of you are familiar with this, are written in 27th 
grade language. That is 12 years of high school and 12 years of 
college and 3 years of graduate school.
    And this sort of deliberate and sometimes deceptive way of 
presenting credit card information is at worst appalling and 
despicable, and at best, just plain arrogant. Plain-language 
regulations could go far to help eliminate these misleading and 
confusing practices.
    When I teach Bible study, I always teach that, in the 
Bible, the main thing is the plain thing, and the plain thing 
is the main thing. And it would be, I think, appropriate if we 
adopted a similar policy as it relates to what we incorporate 
into insurance--I am sorry, into our credit card statements and 
frankly, even into mortgage documents.
    Plain language can lead to the watering down of ideas also, 
which can also create some problems as well. And for this 
reason, I have just introduced H.R. 3037, to create a pilot 
program for financial literacy. I will incorporate into this 
program a pilot project for 10 school districts across the 
country. These projects would receive Federal funding to help 
them educate and train the teachers in order to integrate 
financial literacy into the curricula of grades K through 12. 
And this pilot program is just one step toward ensuring that 
all students in all school districts will be able to 
participate in similar programs in their schools.
    And finally, Mr. Chairman, if you look at the crisis that 
we have found ourselves in today, it doesn't take a Ph.D. to 
realize that we have a public that, in many instances, just did 
not understand what they were getting into when they 
participated in these exotic mortgages. And so I think the 
thing we need to let people know is that what you don't owe 
won't hurt you.
    Mr. Hinojosa. Thank you.
    At this time, I would like to call on Congressman Royce for 
1 minute.
    Mr. Royce. Thank you, Mr. Chairman.
    I think financial literacy here is key. I think, in my 
view, I am a little afraid that one of the reasons we are here 
today is because of the overreliance on the government to 
determine what is best for consumers. And I think a lot of 
consumers looked at this and said, well, if the government says 
it is okay, then it must be. And I think this flawed line of 
thinking led millions of consumers to get involved in subprime 
and Alt-A loans. They, after all, had that government support.
    And I think a similarly faulty line of thinking led 
investors in institutions around the world to embrace financial 
derivatives based on the U.S. housing market. Why? Well, the 
government-supported rating agencies rated these products 
Triple-A. So what could the problem be?
    And there was a belief that the rating agencies and Federal 
regulators knew something that everyone else did not know. And 
clearly, they didn't know the problem. But there was a reliance 
on the government, and in fact, in many instances, they were 
responsible for the development and proliferation of these 
products.
    According to a former Federal Reserve official, CRA 
regulations led to the development of subprime loans, and the 
proliferation of subprime and Alt-A loans was in itself enabled 
through low-income housing goals that were placed on Fannie Mae 
and Freddie Mac by their regulators and by Congress.
    So, clearly, the belief in an all-knowing regulator is 
flawed. And instead of attempting to address this problem 
through increasing the regulatory presence over the industry, 
which will exacerbate the belief that the government does know 
best, we should be encouraging an educated, knowledgeable 
consumer and investor base that makes sound financial decisions 
for themselves and their families; hence, the importance of 
financial literacy and the importance of disclosure.
    Thank you, Mr. Chairman.
    Mr. Hinojosa. Thank you, Congressman Royce.
    I want to announce that the House has begun the voting. I 
am going to ask that the technicians put that work that is 
going on in the House of Representatives on the screens so that 
you can see the progress that we are making. But we have seven 
amendments to vote on, plus the eighth, which is final passage. 
We anticipate that it is going to take 1 hour. So I am going to 
recess to allow all members to participate. And we will 
reconvene in 1 hour.
    I am looking forward to the testimony of these witnesses. I 
think that it is going to be very informative and something 
that we are going to be very proud of in getting into the 
record.
    With that, we stand in recess.
    [recess]
    Mrs. McCarthy of New York. [presiding] Let me apologize. 
Unfortunately, we are running through a whole bunch of votes, 
and we are going to have more votes in probably less than an 
hour. I am fairly fast, to say the least, so we are going to go 
on, get all your testimony in, so that we don't have to have 
another recess, if that is all right with everybody.
     First, I would like to introduce the witnesses from 
today's panel:
    Ms. Laura Levine, executive director, Jump$tart Coalition 
for Personal Financial Literacy; Mr. Lot Diaz, vice president, 
community development, National Coalition of La Raza; Mr. 
Dallas Salisbury, president and CEO, Employee Benefit Research 
Institute; Mr. Brent Neiser, director of strategic programs and 
alliances, National Endowment for Financial Education.
    I am sorry, I skipped one; Mr. John Gannon, senior vice 
president, Office of Investor Education, and president of the 
Financial Industry Regulatory Authority, Investor Education 
Foundation. That is a mouthful.
    And Dr. Gerald Lauber, chief senior advisor, National Urban 
Alliance.
    I would like to certainly extend a warm welcome to Dr. 
Lauber. He is the chief advisor and a board member of the 
National Urban Alliance. He brings an extensive background to 
the position, including academic, technology, and corporate 
experience in New York schools and was a first responder at 
Ground Zero.
    Mr. Green. Madam Chairwoman, did we cover the Urban League? 
Ms. Jones?
    Mrs. McCarthy of New York. I'm sorry. They didn't give it 
to me. Stephanie Jones is the executive director of the 
National Urban League Policy Institute, a position she has held 
since the year 2005. Prior to coming to the Urban League, she 
was chief counsel for Senator John Edwards.
    Welcome to all of you, and thank you.
    Let me explain the lighting system. You will each get 5 
minutes. The yellow light means you have a minute left. We will 
ask you to try to finish off your sentence or thought at that 
particular time.
    With that, Ms. Levine.

   STATEMENT OF LAURA LEVINE, EXECUTIVE DIRECTOR, JUMP$TART 
           COALITION FOR PERSONAL FINANCIAL LITERACY

    Ms. Levine. Thank you, Representative McCarthy, and members 
of the subcommittee.
    Good afternoon. Thank you for this opportunity to speak 
with you today.
    My name is Laura Levine, and I am the executive director of 
the Jump$tart Coalition for Personal Financial Literacy, a 
nonprofit organization based here in Washington, D.C.
    Jump$tart is a coalition of about 180 companies, such as 
Visa and Charles Schwab, and organizations like NEFE, EBRE, and 
FINRA, as well as Federal agencies which share a commitment to 
advance financial literacy among students in kindergarten 
through college. Jump$tart is also a network of 48 affiliated 
State coalitions.
    The Coalition was founded in 1995 by a small group of 
organizations that recognized the need to educate students 
about personal finance, as well as the importance of meeting 
this need through a collaborative effort. Jump$tart does not 
conduct financial education itself or create financial 
education resources; rather, its role is to support and promote 
individual and collective efforts to educate young people about 
money management.
    As the committee considers the importance of financial 
literacy within the regulatory system, Jump$tart encourages you 
to keep in mind the difference between educating and informing 
adult consumers and providing standards-based tested personal 
finance education for students in kindergarten through high 
school. Any widespread effort to require personal finance 
education at that level must be coordinated by or with the 
Department of Education, as well as the State Departments of 
Education and the various appropriate educational organizations 
at the State, local, and national levels.
    Jump$tart believes that financial literacy is an important 
element of consumer protection, and even with better regulation 
designed to protect consumers and more readable disclosures 
that most consumers can easily understand, an adequate level of 
financial literacy would give most consumers comfort, 
confidence, and the ability to make decisions most advantageous 
to their specific needs.
    But today, many young people are not adequately prepared to 
handle the growing variety and complexity of financial products 
and services or to make wise decisions in managing their own 
money.
    In 1997, the Jump$tart Coalition launched its first survey 
of financial literacy among high school students. The survey 
was conducted again in 2000 and has been repeated biannually 
since. Nationally, the average score on the test portion of the 
survey has ranged from 48.3 percent and, unfortunately, that 
was the most recent survey in 2008, to a high of 57 percent, 
which still could be called a failing grade.
    In each of the surveys, participants were 12th grade 
students recruited from randomly selected public high schools. 
It is important to note that the Jump$tart survey is intended 
as a general measure of the level of financial literacy among 
high school students and is not designed to be an assessment of 
the effectiveness of specific financial education curricula, 
and therefore, we should not conclude that the low scores 
reflect that financial education is ineffective.
    Rather, the consistently disappointing results over more 
than a decade of research do seem to indicate the need for more 
and better financial education.
    In 2008, Jump$tart also surveyed college students for the 
first time. Given the same test questions, college students on 
average answered 62.2 percent of the questions correctly, 
substantially better than their high school counterparts. But, 
unfortunately, college graduates are still a relatively small 
segment of our total population.
    Jump$tart believes that personal finance must be included 
in the education of all students during the kindergarten 
through high school years to provide young people with the 
knowledge and skills they need to make smart financial 
decisions. Some positive strides have been made in financial 
education in recent years.
    Jump$tart has identified three States, Missouri, Tennessee 
and Utah, that currently require all students to take and pass 
a one-semester course devoted to personal finance in order to 
graduate from high school. And another 18 States require some 
personal finance content to be incorporated into the other 
subject matter.
    I think it is important to note that personal finance 
education is taking place in schools across the country, 
whether or not the State or local jurisdiction requires it. We 
believe that personal finance education needs to be introduced 
early in the elementary school years while students are forming 
their behaviors and beliefs, and we believe that effective 
financial education in the middle grades could help troubled or 
unmotivated students make the connection between staying in 
school and their lifelong income-earning potential, possibly 
changing the path of would-be dropouts.
    Thank you for the opportunity to speak with you today. And 
as you start to shape the future of the regulatory atmosphere 
for financial institutions, I urge you to keep the financial 
literacy of our Nation's students in mind, too. More and not 
less personal finance education is needed, and we need to have 
a long-term nationwide strategy in place to ensure that this 
education is available to all students.
    Thank you.
    [The prepared statement of Ms. Levine can be found on page 
73 of the appendix.]
    Mr. Hinojosa. [presiding] Thank you, Ms. Levine.
    At this time, I would like to recognize Mr. Diaz.

 STATEMENT OF LAUTARO ``LOT'' DIAZ, VICE PRESIDENT, COMMUNITY 
        DEVELOPMENT, NATIONAL COUNCIL OF LA RAZA (NCLR)

    Mr. Diaz. Good afternoon. My name is Lot Diaz, and I am 
vice president for housing and community development at the 
National Council of La Raza.
    NCLR is the largest Hispanic civil rights organization in 
the United States dedicated to improving the opportunities for 
Hispanic Americans.
    I would like to thank Chairman Gutierrez and Ranking Member 
Hensarling for inviting us to share our views.
    I would also like to thank Congressman Hinojosa for his 
leadership in the area of financial literacy.
    In my remarks today, I will lay out a strategy for using 
national financial counseling programs as a glue to hold major 
asset-building programs together.
    There are a number of Federal programs, like housing 
counseling, individual development accounts, and the VITA 
initiative that aim to increase asset ownership among low- and 
moderate-income families. However, none of them offer a 
targeted strategy for improving the choices of financial 
consumers and advancing them to more sophisticated products and 
transactions.
    In 1997, NCLR created a counseling network that today 
consists of 51 community-based counseling providers that will 
this year provide counseling education to over 40,000 families.
    Also in 2005, NCLR released a report which found that most 
financial education programs did not have the impact of helping 
Hispanic families obtain assets. We have learned that one-on-
one counseling to low-income families is a meaningful and 
effective tool for building financial knowledge and sustainable 
wealth.
    While one goal of the Administration's proposed Consumer 
Finance Protection Agency would be to streamline financial 
literacy and education efforts, we believe a bolder, more 
targeted approach is necessary to achieve a shared goal, the 
shared goal of changing consumer choices and behavior.
    A successful national counseling program should include 
elements like in-person, one-on-one service, provide advice on 
a wide range of financial services, and deliver services 
through community-based organizations currently providing asset 
programs.
    As Congress considers regulatory reform, it must also 
consider how to improve the efforts of Federal agencies to 
educate financial consumers. Several proposed reforms, like 
additional disclosure, will curb deceptive practices. However, 
these reforms will not necessarily improve the daily financial 
decisions of families or ensure that these decisions set them 
on a path to build true financial security.
    Many times, improving families' financial decisions 
requires tailored guidance from a professional who can take 
into consideration the totality of the family's circumstances 
and goals. In fact, this is a mainstream approach taken by 
families with the means to do so. They seek advice from a 
professional financial planner or investment advisor.
    One NHN member, the Resurrection Project in Chicago, 
provides a model that brings these large wealth-building 
programs together through financial counseling. TRP is a 
certified housing counseling agency which provides free tax 
preparation, financial counseling, and other services. A 
typical client meets with a counselor individually to determine 
their financial status. A counselor reviews the client's credit 
report, budget, and financial goals.
    On average, 80 percent of the Resurrection Project's 
clients are not ready to purchase a home and likely need to 
work through other financial barriers before pursuing 
homeownership. In some cases, homeownership may not be the 
right choice. Together, the client and the counselor establish 
an action plan that would address credit repair, plan savings 
accounts, financial dictation and available tax programs. As 
the family works through their action plans, they continue to 
meet with the counselor, who helps them tackle basic and 
complex financial issues.
    Organizations like the Resurrection Project run into 
several barriers implementing this model due to the structure 
of the current system. As stated earlier, financial counseling 
is not a federally funded stand-alone service. They are also 
limited in size and scope of the current Federal programs.
    A national financial counseling program would allow 
counselors to move families through asset-building programs to 
create a real opportunity for families to make fruitful 
financial choices.
    NCLR applauds the Administration's and Congress' efforts to 
modernize our financial regulatory system. We urge you not to 
lose sight of the long-time bipartisan goal of improving 
families' understanding and choices in financial matters.
    A national financial counseling program would offer 
meaningful tailored financial advice, link existing asset 
programs, and improve the relationship between underserved 
communities and the banking sector.
    In conclusion, NCLR recommends that: Congress establish a 
national financial counseling program; they expand programs 
that help families obtain assets; and finally, they create new 
incentives for low-income families.
    Thank you.
    [The prepared statement of Mr. Diaz can be found on page 45 
of the appendix.]
    Mr. Hinojosa. Thank you, Mr. Diaz.
    And now, I would like to recognize Mr. Salisbury.

 STATEMENT OF DALLAS L. SALISBURY, PRESIDENT AND CEO, EMPLOYEE 
               BENEFIT RESEARCH INSTITUTE (EBRI)

    Mr. Salisbury. Mr. Chairman, members of the committee, it 
is a pleasure to be here. I thank you for the invitation to 
testify today.
    My employer since 1978, the Employee Benefit Research 
Institute, I would note, does not lobby or take positions for 
or against proposals. And my full submission for the record 
includes a significant amount of survey data and financial 
literacy status information as dealing with the full 
description.
    The letter you sent me, however, inviting me to testify 
asked four specific questions that actually call for the 
statement of positions, and in that sense, I would want to 
stress that my statements from this point forward are my own 
personal views and not those of my employer.
    First, as a consumer of financial services, my reaction is 
positive to the creation of an independent consumer financial 
protection agency if, and I would stress this, the consumer is 
a dominant presence on the board and in advisory council 
positions.
    For example, deep experience in financial services, in 
quotation marks, should be interpreted broadly enough to 
include lifetime consumers of financial services, not just 
individuals working for the financial services industry. I 
would personally prefer regulation and protection by an entity 
that is not governed by the regulated or, as stated on page 29 
of the President's document, captured by the regulated, a 
problem found in recent years at the regional Federal Reserve 
banks, the Federal Reserve, and other existing regulatory 
agencies.
    As a consumer, I currently see no such independent 
regulator, which if properly implemented, the CFPA could 
become. If the consumer is not dominant at CFPA, however, I 
would stress that the agency would likely be a waste of time, 
money, and effort and would only serve to mislead the public 
into thinking that they will be protected.
    Second, the plain-language financial products proposed need 
to be what my grandmother termed, and the ranking member 
termed, plain vanilla. For example, a 20 percent down, 30-year 
fixed-rate mortgage with clearly specified closing costs and 
that can be paid off with no penalties; or a 3-year fixed-rate 
car loan that can be paid off any time without the complexity 
of the Rule of 78 that I got tripped up by in 1972 personally, 
in spite of thinking that I am an informed consumer; or a 
charge or credit card that tells you any and all fees in 
advance and cannot change fees without giving you notice that 
the opportunity to cancel is present and giving you a prorated 
refund for any annual card fee.
    Research has found that individuals make the same choices 
with a 1-page disclosure as with multiple pages of fine print; 
thus, they require one plain English summary page with all key 
facts in addition to more detailed disclosure.
    Third, the President's Advisory Council on Financial 
Literacy has proven to be a worthy effort. It has also provided 
direct input to the Treasury and to the Financial Literacy 
Education Commission.
    Long-term value, however, will depend upon some 
formalization of the role of the White House and some level of 
dedicated funding and staffing. The current approach of heavily 
depending upon those appointed to donate time, money, and other 
resources or to raise them from others, leads to potential 
conflicts of interest and confusion of roles.
    Related to FLEC, I find, regrettably, that I am in 
agreement with the critical review by the Government 
Accountability Office that, as currently structured, FLEC has 
not met the legislated objectives. The Administration may 
already contemplate integration of FLEC into CFPA, but if it is 
not focused on this issue, the Administration and the Congress 
should do so as details of CFPA are developed.
    Fourth, and finally, as your request letter notes, the 
President's document states the CFPA should review and 
streamline existing financial literacy and education 
initiatives government-wide. Based upon my work on savings and 
retirement issues since joining the Labor Department in 1975, 
giving one agency the absolute responsibility for direction of 
all Executive Branch activities in the area of financial 
literacy and education could possibly add needed coordination 
and consistency. But that would only occur if the leadership of 
the agency was committed to the issue and to the approach set 
out in the legislation.
    Over my 34 years of working on this issue, I have watched 
multiple agency programs and priorities and financial education 
shift dramatically as political leadership changes. This is not 
just the case when party control changes, but occurs within a 
party even with new staff changes. Thus, the role being set out 
for CFPA may or may not add value in this area, depending upon 
the specificity of the legislation, the attitudes and 
priorities of the director, and adequate staff and budget 
resources provided for funding.
    Assurance that most of those appointed to the board and 
advisory committee with ``deep experience in financial 
services'' are there as individual financial services 
consumers, not as financial services industry representatives, 
would make success more likely. Needed technical expertise can 
be hired. But policy direction from the appointed leadership 
and advisors will determine ultimate results.
    I look forward to working with your committee and all 
others on these important issues. Financial literacy on issues 
as simple as understanding compound interest would be 
essential, even if there are plain-vanilla products.
    Thank you.
    [The prepared statement of Mr. Salisbury can be found on 
page 82 of the appendix.]
    Mr. Hinojosa. Thank you, Mr. Salisbury.
    Now, I would like to call on Ms. Jones.

 STATEMENT OF STEPHANIE J. JONES, EXECUTIVE DIRECTOR, NATIONAL 
                 URBAN LEAGUE POLICY INSTITUTE

    Ms. Jones. Thank you, Chairman Hinojosa.
    I thank the subcommittee for this opportunity to testify 
today. I am Stephanie J. Jones, executive director of the 
National Urban League Policy Institute.
    Based upon our long experience providing frontline 
financial education and housing counseling services in Urban 
League affiliate programs throughout the country, the National 
Urban League has developed considerable experience and insight 
on this issue. We are glad to offer our recommendations, which 
I will briefly outline now but are presented in greater detail 
in my written testimony.
    In this whole process, our overarching concern is the 
consumer, and we feel very strongly that the new regulatory 
framework must include inherent checks and balances that 
guarantee the advancement of the five consumer protection 
objectives. And those objectives are: consumer financial 
services markets operate fairly and efficiently; consumers have 
the information they need to make responsible financial 
decisions; consumers are protected from abuse, unfairness, 
deception and discrimination; traditionally underserved 
consumers and communities have access to lending, investment, 
and financial services; and national community-based 
organizations, such as the National Urban League, the National 
Council of La Raza, and others that have demonstrated 
effectiveness in reaching underserved minority communities, be 
included as full partners in any consumer protection effort.
    We are pleased that this committee is focusing on financial 
literacy today. This is a critical aspect of this issue, and it 
is a top priority for the National Urban League. But we can't 
forget that while financial literacy is important, the 
fundamental problem at the heart of today's foreclosure crisis 
was not the inadequacy of the disclosures or the financial 
literacy of the borrowers. Rather, it was that lenders should 
not have made loans that they knew borrowers would be unable to 
sustain without refinancing. Therefore, to effectively protect 
consumers, it is critical that the regulatory system monitor 
and address market incentives that encourage loan originators 
to push risky or unsuitable loan products, and must also 
include independent, redundant back-up systems that provide 
layers of protection against financial excess.
    And as you know, financial literacy is at the core of the 
Urban League's mission to empower African Americans to attain 
economic self-sufficiency. The rationale for our emphasis on 
financial literacy is buttressed by some startling data, as 
revealed in our annual, ``State of Black America'' report. 
Among other things, we have found that African Americans' 
economic standing is 57 percent that of White Americans, and 
that the median net wealth of African Americans is $10,000 
versus $109,000 for whites.
    The Urban League strategy for addressing this glaring gap 
is to create culturally competent programs that address both 
financial principles and long-term behavioral change. Overall 
evaluation research of our financial literacy programs 
consistently finds significant correlations between the level 
of financial knowledge and good financial management practices.
    Housing counseling also plays a key role in support of the 
goal to increase financial awareness and sophistication and to 
close the wealth gap between minority and non-minority 
households. In addition to a deeper national commitment to 
housing counseling, a core tenet of our Homebuyers Bill of 
Rights, the National Urban League advocates three primary 
objectives that the Federal Government and the Financial 
Literacy and Education Commission should pursue to promote 
economic opportunity for minority and low-income families and 
communities.
    First, we must expand access to capital and financial 
services through mainstream banks and thrifts, particularly by 
ensuring that the CRA remains effective.
    Second, bank the unbanked with innovative new private 
sector products and services driven by new incentives for 
financial services for the poor.
    Third, we must promote savings among the poor by catalyzing 
wide-scale establishment of individual development accounts and 
other mechanisms that help low-income families save for 
homeownership and other key assets.
    And of course, particular emphasis must be placed in all of 
this on reaching neighborhoods with low-income and minority 
populations.
    On behalf of the National Urban League, I thank you for the 
opportunity to offer our views today on this very important 
issue, and we look forward to continuing to work with you as 
you develop and implement a new regulatory system.
    Thank you very much.
    [The prepared statement of Ms. Jones can be found on page 
60 of the appendix.]
    Mr. Hinojosa. Thank you very much, Ms. Jones.
    And I now call on Dr. Lauber.

  STATEMENT OF GERALD LAUBER, CHIEF SENIOR ADVISOR, NATIONAL 
                      URBAN ALLIANCE (NUA)

    Mr. Lauber. Thank you.
    Good afternoon, Mr. Chairman, and distinguished members of 
the committee. Thank you for the opportunity to testify before 
you today about the need for effective financial literacy 
education for Americans.
    I am Gerald Lauber, the financial literacy advisor to the 
president of the National Urban Alliance, which is a not-for-
profit corporation out of Syosset, New York.
    Prior to working with the NUA, I was a school 
superintendent, an assistant superintendent for instruction, a 
principal, and a classroom teacher. In all, I have devoted over 
45 years to the process of helping students.
    The mission of the NUA is to focus on helping schools 
assess their instructional programs and deliver professional 
development for teachers so they are better prepared to help 
their students master content and learning skills. We have 
learned a great deal about education and organizations. We know 
that teaching a subject does not ensure that all students will 
learn it.
    Financial literacy programs must contend with common 
complications for teaching and learning while competing for 
sufficient space in the crowded instructional day. To contend 
successfully with these complications is a matter of 
professional skill and organizational focus. Without plans for 
professional development and content that is integrated into 
the curriculum through material relevant to students, financial 
literacy will be just another catch phrase in our past history 
of failing to educate our citizens about how they manage their 
daily life to position them for long-term financial security.
    I hope the creation of a new government consumer financial 
protection agency, as expressed by the Administration, will 
exemplify a real commitment to fight for the education and 
protection of consumers. That fight must recognize that 
financial education right from the start is part of the answer 
to protect consumers and build a foundation for behaviors that 
support a healthy U.S. economy.
    Why can't we provide the impetus to help our children 
create a new generation of consumers who use reason to direct 
the use of their resources rather than celebrating conspicuous 
consumption and debt accumulation that currently endanger the 
basic fabric of our country?
    Strategies that help people make informed decisions will 
work if we provide education programs that help all people 
obtain financial literacy and decision-making skills. 
Application of these skills will strengthen their knowledge in 
areas such as credit cards, mortgages, insurance, and other 
financial products. In a consumer-credit-based society, we must 
teach children about credit and the wise use of it so they are 
prepared to be informed consumers. The lack of inclusion of 
financial literacy in the vast majority of our Nation's schools 
continues to create a new generation of consumers who are not 
informed about the use of money.
    Unfortunately, what is clear is that the current effort to 
transfer knowledge about financial literacy has not worked. 
While more than 90 percent of America's students attend public 
schools, the President's Advisory Council on Financial 
Literacy, as it is presently constituted, has only one member 
who has any public school experience. This fact has not gone 
unnoticed by the Nation's educational community. How does this 
government demonstrate its commitment to this issue when only 
1/20th of the advisors have classroom experience?
    Yes, consumers need to be presented financial products in a 
simpler, straightforward manner that is clear, accurate, and 
contains understandable information. I applaud efforts by this 
subcommittee and the Congress to demand that our financial 
products industry makes information about their products more 
transparent to consumers.
    Yet I must warn and emphasize that without effective 
financial literacy education, an understanding of these 
products will continue to be difficult and will not result in 
desirable behavioral changes by consumers. Consumer protection 
and relevant financial education must go hand-in-hand and must 
include an emphasis on our Nation's young people.
    Over the past 6 months, this Congress has authorized nearly 
$1 trillion of American taxpayers' money to Wall Street to 
clean up our financial mess that they created that brought this 
country to an economic condition not seen since the Great 
Depression.
    On January 6, 2009, the President's Advisory Council on 
Financial Literacy, established by President Bush, stated as 
its principal recommendation: ``The United States Congress 
should mandate financial education in all grades for students, 
kindergarten through 12.''
    Local school districts cannot afford another unfunded 
mandate. Now is the time to supplement that investment by 
committing some of those resources to sound financial literacy 
education for Americans.
    I urge this committee to strongly support both this message 
and the messengers working to refine and deliver effective 
financial literacy education. It is critical to building the 
information base our citizens need to live as informed 
consumers. But just using well-written financial literacy 
material without a well-thought-out delivery system will not 
enable them to transform information into action.
    Thank you again for inviting me to testify today. And I 
will be happy to answer any questions you may have.
    [The prepared statement of Dr. Lauber can be found on page 
67 of the appendix.]
    Mr. Hinojosa. Thank you.
    At this time, I would like to recognize Mr. Gannon.

 STATEMENT OF JOHN M. GANNON, SENIOR VICE PRESIDENT, OFFICE OF 
    INVESTOR EDUCATION, AND PRESIDENT OF THE FINRA INVESTOR 
    EDUCATION FOUNDATION, THE FINANCIAL INDUSTRY REGULATORY 
                       AUTHORITY (FINRA)

    Mr. Gannon. Mr. Chairman, Ranking Member Hensarling, and 
members of the subcommittee, I am John Gannon, senior vice 
president for investor education at the Financial Industry 
Regulatory Authority, or FINRA. On behalf of FINRA, I would 
like to thank you for the opportunity to testify today.
    Mr. Chairman, I commend you for having today's hearing on 
the critically important topic of improving financially 
literacy. In these uncertain financial times, the role of 
financial education is more important than ever. FINRA and the 
FINRA Investor Education Foundation are committed to expanding 
the knowledge and confidence of all Americans wishing to build 
a more secure financial future through saving and investing. 
And we share your interests in considering how best to promote 
financial literacy in the context of reforming the financial 
regulatory system.
    FINRA's Office of Investor Education provides an array of 
educational opportunities to investors. These include 
maintaining our prominent investor information area on the 
FINRA Web site, providing a comprehensive market data resource, 
and publishing information on such critical topics as 
investment fraud, job dislocation and investing in bonds.
    Interactive tools, such as FINRA's Fund Analyzer, allow 
investors to compare fees and expenses among competing 
investment alternatives.
    In 2003, FINRA established the FINRA Investor Education 
Foundation, which is the largest foundation in the United 
States dedicated to investor education. The Foundation's 
mission is to provide Americans with the knowledge, skills, and 
tools necessary for financial success throughout life.
    Foundation grants are used solely to fund educational 
programs, publications, and research. Recent grants have 
supported efforts to help low-income individuals build savings 
and achieve financial goals and guide working Americans as they 
make the transition into retirement.
    FINRA commends the Administration's inclusion of 
recommendations focused on improving financial education and 
literacy in its proposals for regulatory reform. The 
Administration's proposal to mandate a financial education 
authority signals a commitment to increasing financial literacy 
of all consumers.
    It will be important for all regulators with roles in 
financial oversight and consumer protection to coordinate and 
communicate about their financial education initiatives to 
ensure that the government leverages its resources for maximum 
impact.
    FINRA further commends the Administration's proposal to 
enact an automatic IRA program with an opt-out. A similar and 
successful approach has been taken by a number of employers 
with 401(k) plans. FINRA has teamed with the Retirement 
Security Project and AARP to establish Retirement Made Simpler, 
an effort to increase participation rates among employees whose 
companies offer 401(k) plans by encouraging more employers to 
adopt automatic 401(k)s.
    FINRA's work in investor education has provided us with 
experience in managing the challenges of how to most 
effectively and efficiently get information out to investors 
and consumers. Let me highlight now some issues to consider for 
improving financial education and literacy efforts.
    First, there is a need for baseline data on financial 
capability and literacy. The FINRA Foundation is currently 
working on a survey that should provide that crucial data. 
Recommended by the President's Advisory Council on Financial 
Literacy, the survey of over 25,000 Americans addresses a 
comprehensive array of financial topics, including retirement 
planning, investment choices, household budgeting, credit 
consumer protections, and the use of financial education 
resources. This data will help inform the efforts of both 
public and private entities as they attempt to best structure 
financial literacy and investor education initiatives.
    Second, I would want to emphasize the importance of 
distribution channels in financial literacy efforts. 
Recognizing that high-quality investor education resources 
already exist, the FINRA Foundation and its partners focus on 
making sure that such resources get into the hands of all those 
who need them the most.
    The FINRA Foundation's grants and projects leverage 
partnerships with other organizations and use new and 
conventional media to widen access necessary to the resources 
for financial success. Sometimes this is via the Internet or 
public broadcasting. At other times, it is through a counselor 
or a workplace representative.
    The government has a variety of existing robust 
distribution channels at its disposal. The Social Security 
Administration, the IRS, the Postal Service, and the Federal 
Citizens Information Center are just some of the potential 
channels that could be used to promote and advance financial 
literacy efforts with an extremely wide reach.
    Finally, as Congress considers how to improve financial 
literacy, it is vital to provide adequate funding for whichever 
agencies or groups are given responsibility for this task. 
Further, given that a variety of existing agencies and 
departments have roles to play in investor and consumer 
protection and education, those agencies should have a clear 
mandate to provide financial education, coordinate those 
efforts with other Federal agencies, and engage in partnerships 
to broaden their reach.
    FINRA appreciates the opportunity to testify on these 
important issues, and I would be happy to answer any questions 
you may have. Thank you.
    [The prepared statement of Mr. Gannon can be found on page 
52 of the appendix.]
    Mr. Hinojosa. Thank you.
    And finally, I would like to call on Mr. Neiser.

 STATEMENT OF BRENT A. NEISER, DIRECTOR OF STRATEGIC PROGRAMS 
   AND ALLIANCES, NATIONAL ENDOWMENT FOR FINANCIAL EDUCATION 
                             (NEFE)

    Mr. Neiser. Thank you, Mr. Chairman, Ranking Member 
Hensarling, and members of the subcommittee.
    I am Brent Neiser, director of strategic programs and 
alliances for the National Endowment for Financial Education, 
otherwise known as NEFE. We are based near Denver, Colorado. We 
are a 501(c)(3) private-operating foundation, nonprofit, 
nonpartisan, noncommercial.
    At the end of my written testimony, there are several 
examples of initiatives we undertake. Our high school program 
trained over 6 million students in public and private high 
schools throughout the United States in the last 20 years; a 
college program with nearly 300 enrolled institutions; and a 
free, noncommercial source called CashCourse.org. There is a 
growing interest among community colleges signing up for this 
Web resource. We do research on retirement issues, teacher 
training, unique populations, immigration issues, and student 
financial behavior all related to personal finance. We are also 
concerned about workplace, and collaborate with many of the 
organizations represented on this panel, as well as the Boy 
Scouts of America, the American Cancer Society, and scores of 
other nonprofit groups.
    We believe financial literacy is an important component of 
consumer protection, and any kind of work toward regulatory 
reform should consider it. It is a baseline. Financial markets 
and products change, but consumers need to be equipped with a 
basic understanding of personal finance so they can make the 
best decisions and be aware of the positive and the negative 
consequences of those decisions. Also, there are appropriate 
times to connect financial education to events in their 
lifespan and when products are appropriate. This has to come 
out through this basic baseline and financial understanding.
    We think that individual financial literacy and education 
are not the whole solution. Automatic features in behavioral 
economics, product disclosure, social markets, etc., all play 
into this beautifully.
    The President's advisory council, on which NEFE CEO and 
president Ted Beck serves, has identified some of the concepts 
and definitions for a proposed body of knowledge that can form 
as a baseline for this effort.
    We want to empower Americans to make their own decisions 
about which products and behaviors will maximize their 
financial wellbeing; be aware of financial products and 
strategies that may not be suitable and would concern them.
    Also, financial literacy needs to move to a level of full 
engagement in society through a public education campaign, 
social marketing, a nationwide financial checkup, consistent 
and repetitive messaging, and a clear link to financial 
literacy tools at points of transaction where appropriate, and, 
again, across one's financial lifespan.
    I will close by mentioning five points or principles that 
might be considered under any regulatory reform that links 
financial literacy education and issues with consumer reform 
considerations.
    First, definition: Building on the President's advisory 
council, setting baseline standards, as Mr. Gannon mentioned, 
will create a consistent framework for public and private 
financial education efforts.
    Number two, context: Providing the context for 
understanding a product and its relationship to life goals and 
timing within one's economic lifespan will increase the 
effectiveness of any disclosures that are contemplated by 
Congress.
    Number three, simplicity: We need to actually take a step 
back. And we talk about plain vanilla, there needs to be plain 
vanilla financial literacy, too, to make any type of 
disclosures work, focusing on financial understanding, 
capability, and literacy. Again, a social marketing campaign 
could include basic messages, principles that people can think 
about when they are interacting or contemplating a product and 
interacting or working with an adviser. Thrift, paying yourself 
first, having an emergency fund, understanding the time value 
of money when it comes to debt as well as growth of an equity 
investment, the appropriate use of credit and diversification--
without these principles embedded in the minds of Americans at 
all ages, at different times in their lifespans, disclosures 
may not be effective and might even be confusing.
    Number four, relevance: Message campaigns need to be 
culturally and circumstantially relevant and age-appropriate. 
Underserved audiences need special attention.
    Finally, number five, self-assessment: A nationwide 
financial checkup, as recommended by the President's advisory 
council, would allow Americans to assess their own financial 
knowledge and provide appropriate links to trustworthy sources 
of information to fill any gaps.
    Finally, let me just congratulate the leadership of 
Congress, especially the Financial Literacy and Economic 
Caucus, Representative Hinojosa, Representative Biggert, and 
all Members, for a true bipartisan approach to this issue.
    Thank you.
    [The prepared statement of Mr. Neiser can be found on page 
78 of the appendix.]
    Mr. Hinojosa. Thank you.
    I want to say that, before we start a line of questioning 
by each of the Members of Congress, I ask unanimous consent to 
submit for the record GAO's April 29th, 2009, testimony before 
the Senate Subcommittee on Oversight of Government Management.
    Hearing no objections, so be it.
    I would like to recognize myself for 5 minutes. And every 
other member will also receive 5 minutes to have an opportunity 
to ask questions.
    I am dissatisfied with the Financial Literacy and Education 
Commission, commonly known as FLEC. They have yet to produce a 
true national strategy for financial literacy despite having 4 
years to produce one.
    On April 29th, the GAO testified before the Senate 
Subcommittee on Oversight and Government Management, and, in 
their testimony, GAO concluded that the so-called national 
strategy remains more descriptive than strategic. Others have 
referred to this, their strategy, as, ``the strategy to 
strategize on a national strategy,'' which I don't understand 
what that means and I don't think they do either.
    Congresswoman Judy Biggert and I knew that this likely 
would happen prior to the enactment of the FACT Act. We had our 
own competent legislation that would not have created an 
unwieldy entity unable to arrive at a national strategy to help 
the United States and its economy.
    So, moving on to ask my first question of Mr. Diaz, Mr. 
Salisbury, and Ms. Jones, and I would ask you to react to my 
statement and tell me what you think of this legislation, of 
this Act.
    Mr. Diaz. Mr. Chairman, the financial literacy for us has 
been--it increases awareness. Our take on it has been we have 
done, run many programs. We have seen a lot of programs 
operate. It does impart knowledge, but it doesn't change 
decision-making behavior necessarily. We have seen lots of 
examples, whether it is credit cards or payday lending, where 
consumers have been given a lot of education and yet it does 
not change behavior.
    So my feeling related to financial literacy education 
awareness is that it never hurts anybody, but our concern is to 
really increase wealth amongst Latino families. And that is a 
little bit more targeted and a little bit more tricky 
objective, because it requires changing behavior, in many 
cases, and that usually requires both time and a situation 
where you can actually exchange information.
    So, in my testimony, I referred to one-on-one counseling as 
an effective tool to do that. I can tell you of countless 
examples where families are taken from a starting place and end 
up at a very different place anywhere from 6, 12, 18 months 
later because they have had the ability to converse and reflect 
on their situation with an impartial party who is only 
interested in making sure they progress.
    Mr. Hinojosa. Thank you, Mr. Diaz.
    I would like to get a response from Mr. Salisbury.
    Mr. Salisbury. Mr. Chairman, first, I would just note that, 
at the most recent meeting of FLEC, it was noted by Assistant 
Treasury Secretary Barr, who was in his first week at the 
Department, that a multi-agency review of the documents and of 
the report from the Government Accountability Office has begun 
and is underway.
    I mention that because I think that is a very positive 
statement on an initial review process that tries to be 
responsive to what the Government Accountability Office said. I 
think that the combined testimony of this panel, but in 
particular the suggestions of Mr. Gannon and Mr. Neiser, 
essentially laid out the core of what could become a strategic 
document that could then move to implementation.
    I think that, as I noted in my testimony, the key is the 
focus, and it is one of the reasons that I have discussed the 
desirability of a new agency such as that suggested by the 
Administration, with FLEC being built into it. Essentially, the 
entire realm of financial literacy coordination across the 
Administration would be directed by an agency that puts far 
more particular focus on the consumer. This is opposed to what, 
most particularly in the last 18 months, has been a rather 
large national economic problem that, quite appropriately, is 
where most of the attention of the Treasury Department has 
been. And, given where we are, frankly, for the next 2 years, 
as a citizen, I hope that is where most of their attention will 
be.
    Mr. Hinojosa. Thank you, Mr. Salisbury.
    I would like to get a reaction from Ms. Jones.
    Ms. Jones. Mr. Chairman, we feel very strongly that 
anything that is done at the Federal level related to financial 
literacy must take into account what the actual needs are in 
the communities and must link very directly to those 
communities.
    That is one of the reasons we strongly suggest that the 
government work closely with national intermediaries such as La 
Raza and the National Urban League, who are working on the 
ground, in the communities, who know what the needs are and can 
get directly to the people but, also, who people will come to. 
People trust us; they understand what we do there. They know 
that we are there in the community working every day.
    Because there often is a disconnect. And there really is no 
shortage of housing counseling providers. There are all sorts 
of, for example, for-profit providers out there who are 
offering all manner of services that don't necessarily address 
the real needs of our constituents. And so it is important for 
people to know where to go and to go to organizations and 
entities that have a proven track record and know what they are 
doing, frankly.
    And I think anything that is done at the Federal level must 
take that into account and must consider that and should be 
used in a way that enables our constituents to get the best 
possible service.
    Mr. Hinojosa. My time has run out, Ms. Jones. Thank you 
very much.
    I now yield 5 minutes to the ranking member, Congressman 
Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman. And, again, let me 
recognize your leadership in this effort, along with the 
gentlelady from Illinois, Mrs. Biggert. Clearly, this entire 
committee respects your body of work, your leadership, her 
leadership, in trying to help educate our populace on the 
financial products that are available to them and help our 
communities.
    I continue to be concerned, if you were here for my opening 
statement. I know the subject has to do with financial 
literacy.
    My first question would be, how many on the panel are 
familiar with H.R. 1705, which is the House version of the 
President's initiative for the Consumer Financial Products 
Agency? Have any of you studied that?
    Mr. Salisbury, have you studied it? And, I am sorry, Ms. 
Jones, as well? Did I understand, are you all supportive of 
that legislation? Or have you formed an opinion? Have your 
organizations formed--not yet? You continue to study the 
legislation? Okay.
    Mr. Diaz, in your testimony, I think, if I heard you 
properly, you mentioned the term ``choice'' on many occasions, 
leading me to believe that consumer choice is at least 
something that would be valued by your organization. Is that 
correct?
    Mr. Diaz. Absolutely. That is critical.
    Mr. Hensarling. Section 5(B)(i)(a) of H.R. 1705 creates an 
unelected group that has the legal authority to ban from the 
marketplace any consumer financial product, practice, or 
feature it considers ``unfair'' or ``anti-consumer.'' Those 
seem to be rather subjective terms, as opposed to objective 
terms.
    If, for some reason, this bill became law and the unelected 
members of the Financial Products Safety Commission decided to 
ban electronic remittances because they viewed them as 
inherently unfair or anti-consumer, would that trouble your 
organization?
    Mr. Diaz. Well, that is a big hypothetical. Remittances are 
obviously a current standard practice that many immigrant 
families transfer excess income down to families of their place 
of origin. I can't imagine the question of whether they would 
ban remittances. I mean, that is--I don't know if there is 
anything in the legislation where they have written or seen 
about that that would be even the case. So it is a 
hypothetical--
    Mr. Hensarling. But it doesn't trouble you that this 
particular commission could have that power without any review. 
So you would be trusting that simply wouldn't happen.
    How about with respect to payday lending, which is 
controversial within a number of areas and communities? It 
seems among some disadvantaged and low-income communities, some 
believe they serve a valuable purpose; other people, frankly, 
would like to see them banned.
    I don't know what the position of La Raza is. But would it 
trouble you if this particular panel decided to ban all payday 
lending as inherently ``unfair'' or ``anti-consumer?''
    Mr. Diaz. Well, like I said, the devil is always in the 
details. But what we would be focused on is access to credit, 
did that change. We at NCLR believe low-income families have to 
have access to credit. We don't believe that families should be 
taken advantage of, so just because they can sell a family a 
product doesn't mean it is right for that family.
    So what I would tell you is that the key for us is, 
whatever that new commission sets up to do, we would be focused 
on: What is the civil rights implication, one? And, two, is it 
still going to allow product innovation even within the rules 
that it establishes?
    Mr. Hensarling. And, as various panel members look at the 
challenge of disclosure, financial literacy--it takes two to 
communicate, the communicator, the communicatee. And I have 
heard some verbiage, and there is no doubt, that there have 
been lenders who have purposely tried to deceive borrowers. 
There has been a lot of controversy in subprime mortgages and 
in credit cards.
    I am just curious if any of you have undertaken an analysis 
of the disclosures necessary in the average credit card 
agreement.
    I just happen to have one in front of me that indicates 
that 43 percent of the content is mandated by Federal law, 
including Regulation P, Regulation Z, the FACT Act; 5 percent 
of the content is dictated by State statutory law; 16 percent 
arises from legal risk management--in other words, liability 
exposure; meaning essentially two-thirds of the disclosure 
written in legalese is, frankly, mandated by Federal and State 
government and liability exposure.
    So I am curious if anybody on the panel has engaged in a 
similar study and have come to the same or different 
conclusion. Anybody who cares to--
    Mr. Lauber. I will jump in quickly.
    It is not the content of the disclosure that is important, 
because, as we have heard from many distinguished members, they 
read it and they don't understand it. Eighty percent of what we 
take in we take in visually. And if we can't visualize and 
understand the concepts, no matter how long and extensive the 
regulations may be, they are going to fall on deaf ears.
    We talk about a product, but we don't talk about how to 
market the product. And the marketing of the product comes from 
the understanding of the concepts that you are addressing. So 
failure to educate consumers to understand how to ask the right 
questions, or banks or financial institutions, how to present 
information so it is understandable, that is a major part of 
the problem.
    Mr. Salisbury. And, Congressman, I would just quickly note 
that, with that versus the disclosure, I personally would look 
at the statement.
    And before this hearing, I looked last night. I have five 
credit cards; I looked at my most recent five credit card 
statements. From one of the companies, it is a clean, 
uncluttered statement that has the basic information in large 
print and nothing hidden. With the worst of them, it takes 
minutes to figure out how much you pay, if what you want to do 
is pay it off.
    Mr. Hensarling. So the market has provided at least one 
plain vanilla.
    Mr. Salisbury. One plain vanilla. And so, what I mean by 
plain vanilla is something that is instantly and easily, by 
visualization, understandable.
    Mr. Hinojosa. The gentleman's time has expired.
    I would like to call on Congresswoman McCarthy from New 
York.
    Mrs. McCarthy of New York. Thank you.
    And I thank everybody for their testimony.
    By the way, we are hoping that we are going to clear that 
up as we go forward with the credit card clarity, so that we 
can have that kind of a credit card. But five credit cards, I 
don't know. I only use one, that is it.
    One of the things that I want to say is that--not only do I 
sit on this committee, but I also sit on the Education 
Committee. And in the higher education bill, financial literacy 
would be included in that. We are now starting to work on Leave 
No Child Behind or whatever name it is going to be. There is 
language in that, which I plan on offering that will be from 
kindergarten to 12th grade. I happen to think it can be worked 
into the school day, so there is no extra time.
    I have already spoken in front of a large group of 
superintendents, teachers, parents, PTAs, and they are starting 
to get it, mainly because we want to educate the children, and 
especially those children learning a second language, so they 
can help their parents when they go home.
    So we have a lot of work to do for the future, but I guess 
the question--I am going to start with Dr. Lauber. We have 
been, unfortunately, under terrible economic strain, everybody. 
I doubt very much if there are too many people who haven't been 
touched by this.
    Now, obviously, we know there are an awful lot of people 
who are excellent in financial literacy, hopefully--but they 
still got hurt. But what would you say to the majority of our 
constituents, do you think they had enough financial literacy 
background that wouldn't have gotten them into the amount of 
debt they have carried, taking their money out of their home?
    Mr. Lauber. I think, especially on Long Island, where we 
know best, and affluent areas, that was one level of the 
population that was hurt. But the populations that we work with 
at the National Urban Alliance were hurt much more than that, 
because these are people who started without all of the assets 
that we have to deal with.
    Why did they get hurt? They got hurt not necessarily 
because they didn't have the knowledge someplace in their mind, 
but there was a problem with the application of the knowledge. 
So I heard a comment before, it is not what we can do, it is 
what we should do. And unfortunately, the process of thinking 
about making decisions, about what we should do with economic 
choices, is not ingrained in our students.
    Thinking is not taught in our schools. Our schools are 
basically content-based. And I think the challenge that you 
identified is absolutely correct: How do we fit this in the 
school day? It cannot be a replacement to mandated courses. We 
work with teachers to help them substitute examples in 
financial literacy for the courses that they are currently 
teaching and use brain-based learning strategies. The brain can 
only take in new information for 5 to 7 minutes, and that may 
be a good thing for all of us to listen to, but then you need 
another 10 or 15 minutes to apply that knowledge; otherwise, it 
doesn't stick.
    And I think if we could somehow take all of the work that 
is being done to focus on financial literacy education--and 
there is wonderful material out there. Where it falls apart is 
that it is not being integrated into the school day; it is not 
a high priority.
    And you know from the forums that we are having around New 
York State, where we are bringing all the school stakeholders 
together--parents, teachers, administrators, superintendents, 
board members--this is a topic that they are starting to want 
to discuss, because it has just been ignored.
    Mrs. McCarthy of New York. I thank you.
    One of the other things, you know, when you are talking 
about private and government working together, I think we are 
going to have to do that, because the government can't answer 
everybody's questions, and they can't.
    For years, talking to the bankers, talking to the credit 
unions, talking to many other financial institutions, saying we 
need financial literacy, and they said, ``We are doing it,'' 
and I said, ``Where?'' because I have never really seen that 
much out there. I am seeing it now, to be honest with you. 
There is more out there. I hope that we can continue to do 
that.
    But how do we work with--how does the government work with 
a private enterprise, whether it is our bankers--we can't 
mandate them to do this with us. Maybe we can, I guess the way 
we are going today. But how do we bring those two together so 
that we can also not only reach all the young students for the 
future generations, but how do we also reach out to the 
families?
    One thing I found out, especially with all the 
foreclosures, people knew they were in trouble, and they didn't 
know who to go to. They could have prevented half the 
foreclosures out there if they had found out who to go to.
    If you could just give me a quick answer, because I see my 
time is up.
    Mr. Salisbury. I will give you one quick example, which 
could be dealt with by an amendment to the FACT Act or by this 
new agency. FLEC put together a Web site called MyMoney.gov. 
Under Treasury regulations, MyMoney.gov cannot have anything on 
it that relates to nongovernmental organizations. So it can't 
be a one-stop shop across for-profit, nonprofit, government, or 
noncommercial.
    So there are relatively simple things that could be done to 
bring information together just by making some changes in 
regulation.
    Mrs. McCarthy of New York. Thank you.
    Mr. Hinojosa. At this time, I would like to recognize the 
Congressman from Texas, Mr. Marchant.
    Mr. Marchant. Thank you, Mr. Chairman.
    I would like to follow a line of questions based on the 
number of groups that are attempting to accomplish the same 
thing. And would any of you venture to say how many different 
groups in the United States have their sole focus on the 
financial literacy of America? There are about seven here, so--
    Mr. Salisbury. The American Savings Education Council 
Program has partners from all 50 States, and there are State 
banking agencies and various others across the United States 
working on this.
    What is lacking is as much of a coordination mechanism as 
would be desirable and, frankly, a place to go in the Federal 
Government to work broadly with the Federal Government. I think 
this was the intention of what FLEC would become, but it hasn't 
gotten there yet.
    Ms. Jones. Also, I want to clarify the National Urban 
League, while financial literacy and housing counseling is an 
important part of what we do, it is certainly not our sole 
focus. We provide all manner of training.
    I do think, though, that the fact that there are so many 
entities out here doing it shows the extent of the need. And I 
know, at least from the National Urban League's perspective, we 
could serve exponentially more people if we had the capacity. 
People are beating down our doors trying to get help, because 
the need is so great out in the community.
    Ms. Levine. And I might add that my organization, the 
Jump$tart Coalition, is a coalition of about 180 organizations 
nationally over a network of 48 affiliated State coalitions, 
each with their own partners. And we know we don't have all of 
them, but there is an effort to work together. And the 
Coalition members do come from the private and the public and 
nonprofit sectors. And so I think that it is a step in the 
right direction and we need to do more.
    Mr. Marchant. Was there an expectation that, under FLEC, 
there would be a national coordinator of this, someone that is 
responsible for giving all government grants out, and that 
there was a place to go to get funding for this?
    And I know HUD funds it. Every entity probably has some 
kind of a funding mechanism for this, correct? Some of you are 
saying yeah.
    Mr. Diaz. I will take that.
    Financial literacy education is funded through a variety of 
mechanisms and different types of institutions.
    But I would also say that it is something that is--we don't 
treat it as a stand-alone product, generally. Because, as 
someone said before, you don't learn unless you do, to some 
degree. And so, our experience with financial education is it 
does increase awareness of certain aspects of financial 
transactions; it doesn't change their ability to transact well.
    And so, what we have done, we have embedded the tools of 
financial literacy inside other programs as they are practicing 
something that they want to achieve in their lives.
    Mr. Marchant. I am going to lose my time, sir.
    I want to ask Mr. Salisbury, you are the one who talked 
about the new CFPA. How would you make the new CFPA independent 
of financial institutions' influence?
    Mr. Salisbury. I would say it is not as much totally 
independent as making sure that consumers are included. That 
is, if there is a board of five, a majority of that board is 
made up of people who view themselves principally as financial 
consumers, as opposed to, for example, members of the regional 
Federal Reserve banks.
    Six of the nine board members are appointed by the banks, 
who own the Fed. The Federal Reserve Board banks are basically 
self-regulatory organizations, the banks regulating the banks. 
If that was what this agency was, I would argue a consumer 
agency that is run by the financial services organizations 
definitionally can't be a consumer protection agency.
    So it would be that, if there is a board of five, making 
sure a majority of that board are actually financial consumers, 
not those who basically have come out of the financial services 
industry and, if history is a guide, would go back to work for 
the financial services industry after service on the board.
    Mr. Marchant. Thank you.
    Mr. Hinojosa. I have just been informed that in 10 minutes, 
we are going to start another long series of votes. And I would 
like to give all the members present an opportunity to ask 
questions. And I ask unanimous consent that we shorten the time 
to 2\1/2\ minutes so that everybody can ask questions.
    Hearing no objections, I would like to recognize the 
gentleman from Texas, Congressman Al Green.
    Mr. Green. Thank you, Mr. Chairman.
    Friends, to properly understand why these contracts that we 
are talking about are written in such legalese, I think we have 
to understand what they are designed to do. Are they designed 
to inform the consumer, or are they designed to protect one of 
the parties?
    And if they are designed to protect one of the parties, 
then we have one set of circumstances to deal with. But let's 
just assume it is designed to inform the consumer, then we have 
to ask ourselves, will this contract in some way entrap the 
consumer?
    Because there are many who would have language somehow 
associated with a contract that would indicate, ``I have read 
this, I understand what I have read,'' and once you indicate 
you have read it and you understand, at some point later on the 
party who designed the contract to protect himself or herself 
uses that language against you by saying, ``You knew, or should 
have known, because you read, and we assume that you understood 
because you said you understood.''
    So I am mentioning this to you in my 2\1/2\ minutes simply 
because I think that we do have to give a lot of thought to 
what we want these contracts--and that is what they are--to do.
    When we close on a home--and I am sure all of you have 
closed on a home--when you close on a home, you are sitting 
there, it is a great, happy occasion, and somebody brings in a 
stack of documents with no blanks filled in, saving the one 
that you will sign on, and your name is typed there perhaps, 
and then, ``Sign here,'' you sign, and later on you find out 
that you may have signed something that was not in your best 
interest.
    So the question becomes this, friends: How do we get to a 
point where we can have these documents inform the consumer and 
work to benefit the consumer, as opposed to the person who drew 
the contract and is trying to protect himself? That is what we 
have to do now.
    If anybody would give me a quick response, I think my time 
is almost up.
    Mr. Lauber. Quick response. I think it is important that, 
whatever documentation is presented, that the consumer 
demonstrates that they understand it. Someone saying, ``Do you 
understand it?'' and them saying, ``Yes,'' does not prove they 
understand it.
    Mr. Green. Quick question. Do we need to let the consumer 
take it home?
    Mr. Lauber. They can take it home. They can do it online. 
In New York, when I wanted to take get a reduction on my 
insurance, I take a driving test online.
    Mr. Green. Just quickly, should the consumer have the 
opportunity to peruse it for some period of time before signing 
it?
    Mr. Lauber. Absolutely.
    Mr. Green. Should there be some opportunity for the 
consumer to perhaps rescind the contract if the contract is one 
that proves to be adverse to the consumer's best interests and 
the consumer doesn't have time to peruse it, a take-it-or-
leave-it kind of deal?
    Mr. Lauber. Yes.
    Mr. Green. And finally, let me just ask this with the 2\1/
2\ minutes, or maybe it is just a comment that I would make.
    I am concerned about this agency. Is it going to be a 
watchdog, as some have said, which means that it would have 
some bark, maybe some bite? Is it going to be a guard dog that 
would have a lot of bite, maybe some bark? Or is it going to be 
one of these dogs with no bark, no bite, which is really a dog 
to watch as opposed to a watchdog?
    I am very concerned about what this agency will ultimately 
become. Because if it becomes a watchdog with no bark, no bite, 
then we have done the consumer a disservice.
    Thank you. I yield back.
    Mr. Hinojosa. Thank you.
    At this time, I would like to recognize the gentleman, 
Congressman Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Salisbury, I just have one question. In your comments, 
in your written statement, you said that you believe that 
financial literacy ought to be mandated for K through 12 and 
that it ought to be tested. I happen to agree with you. I think 
there is anecdotal evidence aplenty that would support your 
position.
    My question is that the critics, I think, would say that if 
we mandated such a curriculum and teachers realize that they 
would be measured by the ability of the students to regurgitate 
the information, that they may do what many of them are doing 
all across the country now, which is teaching the test. And 
teaching the test doesn't always equate to teaching the 
student, and the student, in the long run, turns out not to 
have accomplished much.
    What would you say to the critics?
    Mr. Salisbury. I would basically play off of what Dr. 
Lauber said, with which I totally agree, which is: Part of this 
can simply be to, by mandate, require that the equivalent of 
the financial literacy education be built into the existing 
curriculum through examples, etc., which, to his point, can be 
4 and 5 minutes here and there, with some type of quiz to 
follow.
    I think that I am hopeful vis-a-vis the current situation 
because the President himself had extensive exposure to this in 
Chicago through the Ariel Academy. The current Education 
Secretary was involved with the Ariel Academy and recognizes 
and has stated in his confirmation hearings and elsewhere his 
view that that basic financial literacy education is absolutely 
essential.
    And so I think, if you can do it by building it into 
curricula, and if what you are trying at the earliest grades to 
teach are very basic concepts such as what is money, what is 
interest, what is compound interest, if one is going to be 
critical of testing to that or teaching to that, as long as it 
is--pick a number, if it is 15 simple critical elements of 
knowledge for people to have, then my response would be, so be 
it. If they teach to that test, that it is 15 key things that 
will help everyone get more successfully through life, hey, 
fine.
    Mr. Cleaver. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Hinojosa. Thank you.
    At this time, I would like to recognize the Congressman 
from Georgia, Congressman Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    And thank you all for coming.
    I can't think of really any more important thing we can do 
than financial literacy to deal with what has happened in this 
financial crisis. Because, quite honestly, if we had had an 
informed, educated constituency consumer base, we wouldn't be 
in this situation we are in now, where we are literally having 
to spend trillions of dollars just to find our way back to 
shore.
    And education is important; K through 12 is important. But 
this financial system of ours is so complicated, it is so 
complex, and even as we are dealing with trying to fix it now, 
it is getting even more complex and more complicated, for the 
public not only lacks the education to understand how we got 
into this situation, they are lacking the education as to what 
we are doing to fix it.
    So financial literacy has to come front and center. And I 
am so glad, Mr. Chairman, that we are hosting this hearing. And 
I hope that we will be able to lift financial literacy up to 
the proper level it needs to be as a major component of our 
financial regulatory reform.
    So the question that we have to ask is, how can we 
incorporate financial literacy into our new financial 
regulatory system in a way that can certainly protect the 
consumer today, as they stand? And I don't see how we can do 
this without having some infrastructure and money and resources 
behind it connecting the Federal Government to this.
    By that, I mean this: I believe that we have to have 
something out there, right now, as a part of our reform, to 
have the consumer to say, ``Here is somewhere I can call to get 
information now.'' Our system is complex. There are credit 
cards coming, we have credit card reform; there is banking 
coming.
    Plus, we need a monitoring system to make these loan 
originators, these credit card companies behave themselves. 
Because if nobody is monitoring them, we are going to be right 
back in the situation that we have now.
    So I would like for us to give some thought to trying to 
come up with a monitoring system, a toll-free 1-800 number with 
human beings at the end of it anchored here in the government, 
at the Treasury Department, not a counseling program, but folks 
like the Urban League and the NAACP and ACORN and the senior 
citizens group, people who have a relationship with the most 
vulnerable out there. Because the damage is that these folks 
out there target people, and we need something that we have 
that targets them to give a help line. Therefore, we can have a 
way for people to call in and ask questions about what that 
situation is. And I am hopeful we can put something like that 
together and probably put it in Treasury in the reform.
    I know my time is up, Mr. Chairman, but I just wanted to 
say that, and commend everybody for coming, and I look forward 
to working on this going forward.
    Mr. Hinojosa. I thank you for your remarks and especially 
your recommendations.
    I would like, at this time, to call on the gentleman from 
California, Mr. Brad Sherman.
    Mr. Sherman. Thank you very much.
    First, a comment about this new protection agency, consumer 
protection agency. I think it is important that it be a law 
enforcement agency, not a law-making agency. I have seen a 
tendency to think in terms of, ``We will have the Fed take care 
of investment in the economy, and we will have this new agency 
take care of consumers and make all the rules for consumers, 
and then we can go out of business here in the Financial 
Services Committee.'' I think lawmaking should be done here in 
Congress.
    Second, as to this education program, I couldn't agree with 
it more. And I think that a use of Quicken or similar software 
would be an important part of this. Financial literacy should 
be for the 21st Century, not what I learned when I had hair.
    As to Mr. Gannon, I will ask you to just respond for the 
record, but one thing we have to educate consumers about is the 
fact that FINRA is not really a government agency. And the name 
implies that it is. So I hope that either FINRA would change 
its name or add something to all of its communications or that 
its foundation would get the word out that it is wonderful 
private association but, in spite of the word ``regulatory''--
most regulatory authorities are government agencies.
    I will let you respond very briefly.
    Mr. Gannon. Congressman, thank you for that comment.
    I think that we try to make sure that people understand 
that we are a private-sector regulator. Most of our messaging 
goes to that. But that is a very good point.
    Mr. Sherman. I hope that you would do that. And you might 
even think of a name change, although you are a relatively new 
organization.
    Now, for the one question. The fact is consumers in 
mortgage transactions often don't see their loan documents 
until they arrive at the closing and they are presented them. 
In April of this year, in the mark-up of H.R. 7028, an 
amendment was offered to amend RESPA to give borrowers at least 
24 hours to review their closing documents, which, with the 
exception of extenuating circumstances, would be complete and 
finalized by the lender and the settlement agent 24 hours 
before the closing.
    And I will ask whoever wants to to respond to this: Would 
providing key closing documents to consumers in advance help 
consumers to understand the closing process better and to help 
ensure that they do not enter into an unsuitable loan 
transaction, which so often leads to unpleasant surprises, 
frustration, potential nonperformance, which then can collapse 
an entire free world economy?
    Mr. Salisbury. It would have helped me.
    Mr. Sherman. It would have?
    Mr. Neiser. I would say, Representative, it would prompt a 
kitchen table conversation, if there is a spouse or a partner 
involved, where two or more can counsel each other as to, are 
we doing this, are we in agreement. And if they are not, it 
gives them an out.
    Mr. Lauber. I think, providing they were given the right 
questions to ask. I think two people not knowledgeable about a 
mortgage statement talking to each other could be very humorous 
at times. They must have structured questions and understand 
the concepts of what they are asking, perhaps with assistance 
of some of the organizations that were represented here today.
    Mr. Sherman. And the documents would have to disclose, 
``Here is the check you are going to have to write at closing; 
here are your monthly payments.'' Because those are the two 
most basic questions. ``Honey, can we afford this house?''
    Mr. Salisbury?
    Mr. Salisbury. The reason I made my comment--and so I don't 
disagree with the doctor, but I sort of do, in that my wife and 
I, over the years, walked out of three different settlements 
because what was put in front of us at the settlement table was 
not consistent with what we told were told beforehand the deal 
was.
    Mr. Sherman. Mr. Salisbury, you are so much stronger than 
the average consumer. Every other average consumer signed the 
papers in those three closings.
    Mr. Salisbury. Fair enough. They are not married to my 
wife.
    Mr. Sherman. I believe my time has expired.
    Mr. Hinojosa. Thank you, Mr. Sherman.
    I wanted to ask unanimous consent that a December 2008 
report prepared by the Washington State Financial Literacy Work 
Group entitled, ``Putting the Pieces Together,'' be entered 
into the record.
    Without objection, it is so ordered.
    Also, I would like to ask on behalf of other members of 
this committee for unanimous consent that the following six 
written statements be entered into this hearing record: a 
statement by Dr. Annamaria Lusardi, professor of economics at 
Dartmouth College; second, the testimony of Dr. Camille 
Busette, vice president of EARN organization; the third one is 
the statement by Dr. Rickie Keys on behalf of the National 
Indigenous Literacy Association; the fourth is a statement by 
J. Bradley Jansen, executive director of the Center for 
Financial Privacy and Human Rights; the fifth is the testimony 
of the SIFMA Foundation for Investor Education; and lastly, 
unanimous consent for the testimony from the Financial Services 
Roundtable.
    Without objection, it is so ordered.
    I would like to make some closing remarks and simply say 
that it is very helpful to listen to the presentation made by 
each of the witnesses and that I hope, when this is all 
finished, that we would consider having some of the methods 
that are now being used in classrooms--a congressional hearing 
on the Education Committee that I sit on was held here 2 weeks 
ago, showing us what 16 percent of schools in our country are 
now using to keep students from getting bored by what is being 
taught, how to keep their interest in math and science and many 
other courses being taught.
    And it is blackboard where they use cell phones, they use 
texting, they use what the weathermen use on television where 
they can touch the screen and move things around, making it 
very interesting, particularly for K-12 students. They must get 
this kind of education. But let me tell you, what works for 
them will also work for adults, because it can be interesting.
    And there should be tests like the ones that are now being 
given to high school students, who are only passing, I think, 
with a 48 percent passing percentage, or college students. It 
doesn't matter that they pass it or don't pass it; it is just 
so that they will know just how much they know and understand 
about financial literacy.
    I think that we are going to have to think out of the box 
and have a way in which to progress on what has already been 
built on the last 4 years.
    I want to particularly thank the group that was responsible 
for helping us start the Financial Caucus. And I will just do 
it very shortly. I want to say thank you to Ms. Levine, because 
Jump$tart, Junior Achievement, and the Council for Financial 
Education coordinated with me on several Financial Literacy Day 
fairs in the Cannon Caucus Room, and have been very successful. 
And I think that it has proven one thing: that even the people 
who work here, Members of Congress and staff, want to have this 
kind of financial literacy. And so we are going to have to 
really build on it.
    Time has run out, and I have to have some parts to close 
out this hearing. And I want to thank the witnesses and the 
members for their participation in this hearing.
    The Chair notes that some members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Therefore, without objection, the hearing record will 
remain open for 30 days for members to submit written questions 
to the witnesses and to place their responses in the record.
    This subcommittee hearing is now adjourned. And I thank 
you.
    [Whereupon, at 5:20 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             June 25, 2009


[GRAPHIC] [TIFF OMITTED] 52407.001

[GRAPHIC] [TIFF OMITTED] 52407.002

[GRAPHIC] [TIFF OMITTED] 52407.003

[GRAPHIC] [TIFF OMITTED] 52407.004

[GRAPHIC] [TIFF OMITTED] 52407.005

[GRAPHIC] [TIFF OMITTED] 52407.006

[GRAPHIC] [TIFF OMITTED] 52407.007

[GRAPHIC] [TIFF OMITTED] 52407.008

[GRAPHIC] [TIFF OMITTED] 52407.009

[GRAPHIC] [TIFF OMITTED] 52407.010

[GRAPHIC] [TIFF OMITTED] 52407.011

[GRAPHIC] [TIFF OMITTED] 52407.012

[GRAPHIC] [TIFF OMITTED] 52407.013

[GRAPHIC] [TIFF OMITTED] 52407.014

[GRAPHIC] [TIFF OMITTED] 52407.015

[GRAPHIC] [TIFF OMITTED] 52407.016

[GRAPHIC] [TIFF OMITTED] 52407.017

[GRAPHIC] [TIFF OMITTED] 52407.018

[GRAPHIC] [TIFF OMITTED] 52407.019

[GRAPHIC] [TIFF OMITTED] 52407.020

[GRAPHIC] [TIFF OMITTED] 52407.021

[GRAPHIC] [TIFF OMITTED] 52407.022

[GRAPHIC] [TIFF OMITTED] 52407.023

[GRAPHIC] [TIFF OMITTED] 52407.024

[GRAPHIC] [TIFF OMITTED] 52407.025

[GRAPHIC] [TIFF OMITTED] 52407.026

[GRAPHIC] [TIFF OMITTED] 52407.027

[GRAPHIC] [TIFF OMITTED] 52407.028

[GRAPHIC] [TIFF OMITTED] 52407.029

[GRAPHIC] [TIFF OMITTED] 52407.030

[GRAPHIC] [TIFF OMITTED] 52407.031

[GRAPHIC] [TIFF OMITTED] 52407.032

[GRAPHIC] [TIFF OMITTED] 52407.033

[GRAPHIC] [TIFF OMITTED] 52407.034

[GRAPHIC] [TIFF OMITTED] 52407.035

[GRAPHIC] [TIFF OMITTED] 52407.036

[GRAPHIC] [TIFF OMITTED] 52407.037

[GRAPHIC] [TIFF OMITTED] 52407.038

[GRAPHIC] [TIFF OMITTED] 52407.039

[GRAPHIC] [TIFF OMITTED] 52407.040

[GRAPHIC] [TIFF OMITTED] 52407.041

[GRAPHIC] [TIFF OMITTED] 52407.042

[GRAPHIC] [TIFF OMITTED] 52407.043

[GRAPHIC] [TIFF OMITTED] 52407.044

[GRAPHIC] [TIFF OMITTED] 52407.045

[GRAPHIC] [TIFF OMITTED] 52407.046

[GRAPHIC] [TIFF OMITTED] 52407.047

[GRAPHIC] [TIFF OMITTED] 52407.048

[GRAPHIC] [TIFF OMITTED] 52407.049

[GRAPHIC] [TIFF OMITTED] 52407.050

[GRAPHIC] [TIFF OMITTED] 52407.051

[GRAPHIC] [TIFF OMITTED] 52407.052

[GRAPHIC] [TIFF OMITTED] 52407.053

[GRAPHIC] [TIFF OMITTED] 52407.054

[GRAPHIC] [TIFF OMITTED] 52407.055

[GRAPHIC] [TIFF OMITTED] 52407.056

[GRAPHIC] [TIFF OMITTED] 52407.057

[GRAPHIC] [TIFF OMITTED] 52407.058

[GRAPHIC] [TIFF OMITTED] 52407.059

[GRAPHIC] [TIFF OMITTED] 52407.060

[GRAPHIC] [TIFF OMITTED] 52407.061

[GRAPHIC] [TIFF OMITTED] 52407.062

[GRAPHIC] [TIFF OMITTED] 52407.063

[GRAPHIC] [TIFF OMITTED] 52407.064

[GRAPHIC] [TIFF OMITTED] 52407.065

[GRAPHIC] [TIFF OMITTED] 52407.066

[GRAPHIC] [TIFF OMITTED] 52407.067

[GRAPHIC] [TIFF OMITTED] 52407.068

[GRAPHIC] [TIFF OMITTED] 52407.069

[GRAPHIC] [TIFF OMITTED] 52407.070

[GRAPHIC] [TIFF OMITTED] 52407.071

[GRAPHIC] [TIFF OMITTED] 52407.072

[GRAPHIC] [TIFF OMITTED] 52407.073

[GRAPHIC] [TIFF OMITTED] 52407.074

[GRAPHIC] [TIFF OMITTED] 52407.075

[GRAPHIC] [TIFF OMITTED] 52407.076

[GRAPHIC] [TIFF OMITTED] 52407.077

[GRAPHIC] [TIFF OMITTED] 52407.078

[GRAPHIC] [TIFF OMITTED] 52407.079

[GRAPHIC] [TIFF OMITTED] 52407.080

[GRAPHIC] [TIFF OMITTED] 52407.081

[GRAPHIC] [TIFF OMITTED] 52407.082

[GRAPHIC] [TIFF OMITTED] 52407.083

[GRAPHIC] [TIFF OMITTED] 52407.084

[GRAPHIC] [TIFF OMITTED] 52407.085

[GRAPHIC] [TIFF OMITTED] 52407.086

[GRAPHIC] [TIFF OMITTED] 52407.087

[GRAPHIC] [TIFF OMITTED] 52407.088

[GRAPHIC] [TIFF OMITTED] 52407.089

[GRAPHIC] [TIFF OMITTED] 52407.090

[GRAPHIC] [TIFF OMITTED] 52407.145

[GRAPHIC] [TIFF OMITTED] 52407.146

[GRAPHIC] [TIFF OMITTED] 52407.147

[GRAPHIC] [TIFF OMITTED] 52407.148

[GRAPHIC] [TIFF OMITTED] 52407.149

[GRAPHIC] [TIFF OMITTED] 52407.150

[GRAPHIC] [TIFF OMITTED] 52407.151

[GRAPHIC] [TIFF OMITTED] 52407.152

[GRAPHIC] [TIFF OMITTED] 52407.153

[GRAPHIC] [TIFF OMITTED] 52407.154

[GRAPHIC] [TIFF OMITTED] 52407.155

[GRAPHIC] [TIFF OMITTED] 52407.156

[GRAPHIC] [TIFF OMITTED] 52407.157

[GRAPHIC] [TIFF OMITTED] 52407.158

[GRAPHIC] [TIFF OMITTED] 52407.159

[GRAPHIC] [TIFF OMITTED] 52407.160

[GRAPHIC] [TIFF OMITTED] 52407.161

[GRAPHIC] [TIFF OMITTED] 52407.162

[GRAPHIC] [TIFF OMITTED] 52407.163

[GRAPHIC] [TIFF OMITTED] 52407.164

[GRAPHIC] [TIFF OMITTED] 52407.108

[GRAPHIC] [TIFF OMITTED] 52407.109

[GRAPHIC] [TIFF OMITTED] 52407.110

[GRAPHIC] [TIFF OMITTED] 52407.111

[GRAPHIC] [TIFF OMITTED] 52407.112

[GRAPHIC] [TIFF OMITTED] 52407.113

[GRAPHIC] [TIFF OMITTED] 52407.114

[GRAPHIC] [TIFF OMITTED] 52407.115

[GRAPHIC] [TIFF OMITTED] 52407.116

[GRAPHIC] [TIFF OMITTED] 52407.117

[GRAPHIC] [TIFF OMITTED] 52407.118

[GRAPHIC] [TIFF OMITTED] 52407.119

[GRAPHIC] [TIFF OMITTED] 52407.120

[GRAPHIC] [TIFF OMITTED] 52407.121

[GRAPHIC] [TIFF OMITTED] 52407.122

[GRAPHIC] [TIFF OMITTED] 52407.123

[GRAPHIC] [TIFF OMITTED] 52407.124

[GRAPHIC] [TIFF OMITTED] 52407.125

[GRAPHIC] [TIFF OMITTED] 52407.126

[GRAPHIC] [TIFF OMITTED] 52407.127

[GRAPHIC] [TIFF OMITTED] 52407.128

[GRAPHIC] [TIFF OMITTED] 52407.129

[GRAPHIC] [TIFF OMITTED] 52407.130

[GRAPHIC] [TIFF OMITTED] 52407.131

[GRAPHIC] [TIFF OMITTED] 52407.132

[GRAPHIC] [TIFF OMITTED] 52407.133

[GRAPHIC] [TIFF OMITTED] 52407.134

[GRAPHIC] [TIFF OMITTED] 52407.135

[GRAPHIC] [TIFF OMITTED] 52407.136

[GRAPHIC] [TIFF OMITTED] 52407.137

[GRAPHIC] [TIFF OMITTED] 52407.138

[GRAPHIC] [TIFF OMITTED] 52407.139

[GRAPHIC] [TIFF OMITTED] 52407.140

[GRAPHIC] [TIFF OMITTED] 52407.141

[GRAPHIC] [TIFF OMITTED] 52407.142

[GRAPHIC] [TIFF OMITTED] 52407.143

[GRAPHIC] [TIFF OMITTED] 52407.144

