    [Senate Hearing 112-119]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-119

      FINANCIAL LITERACY: EMPOWERING AMERICANS TO MAKE INFORMED FINANCIAL
                                   DECISIONS

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

                                    HEARING

                                   before the

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

                                     of the

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 12, 2011

                                   __________

             Available via the World Wide Web: http://www.fdsys.gov

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

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    67-127 PDF                WASHINGTON : 2011
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    20402-0001

            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   JOSEPH I. LIEBERMAN, Connecticut, Chairman
    CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
    DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
    THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
    MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
    MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
    CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
    JON TESTER, Montana                  ROB PORTMAN, Ohio
    MARK BEGICH, Alaska                  RAND PAUL, Kentucky

                      Michael L. Alexander, Staff Director
                   Nicholas A. Rossi, Minority Staff Director
                      Trina Driessnack Tyrer, Chief Clerk
                Joyce Ward, Publications Clerk and GPO Detailee

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

                       DANIEL K. AKAKA, Hawaii, Chairman
    CARL LEVIN, Michigan                 RON JOHNSON, Wisconsin
    MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
    MARK BEGICH, Alaska                  JOHN ENSIGN, Nevada

                    Lisa M. Powell, Majority Staff Director
                Benjamin B. Rhodeside, Professional Staff Member
                   Alan Elias, Legislatve Assistant Minority
                          Aaron H. Woolf, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Akaka................................................     1
        Senator Johnson..............................................     3
        Senator Coburn...............................................     3

                                   WITNESSES
                            Tuesday, April 12, 2011

    Hon. Gene L. Dodaro, Comptroller General of the United States,
      U.S. Government Accountability Office; accompanied by Alicia
      Puente Cackley, U.S. Government Accountability Office; Barbara
      D. Bovbjerg, U.S. Government Accountability Office; and Susan
      Offutt, U.S. Government Accountability Office..................     5
    Brenda Dann-Messier, Assistant Secretary, Office of Vocational
      and Adult Education, U.S. Department of Education..............    16
    Lori J. Schock, Director, Office of Investor Education and
      Advocacy, U.S. Securities and Exchange Commission..............    18
    Joshua Wright, Acting Director, Office of Financial Education and
      Financial Access, U.S. Department of the Treasury..............    20
    Hollister K. Petraeus, Director, Office of Servicemember Affairs,
      Consumer Financial Protection Bureau...........................    23

                         Alphabetical List of Witnesses

    Dann-Messier, Brenda:
        Testimony....................................................    16
        Prepared statement...........................................    50
    Dodaro, Hon. Gene L.:
        Testimony....................................................     5
        Prepared statement...........................................    35
    Petraeus, Hollister K.:
        Testimony....................................................    23
        Prepared statement...........................................    69
    Schock, Lori J.:
        Testimony....................................................    18
        Prepared statement...........................................    55
    Wright, Joshua:
        Testimony....................................................    20
        Prepared statement...........................................    63

                                    APPENDIX

    Background.......................................................    74
    Statement of Ben Bernanke........................................    79
    Questions and responses submitted for the record from:
        Mr. Dodaro...................................................    95
        Ms. Dann-Messier.............................................    98
        Ms. Schock...................................................   102
        Mr. Wright...................................................   104
        Mrs. Petraeus................................................   110
    Safe Report submitted by Mr. Wright..............................   114

                         FINANCIAL LITERACY: EMPOWERING
                 AMERICANS TO MAKE INFORMED FINANCIAL DECISIONS

                                  ----------

                             TUESDAY APRIL 12, 2011

                                     U.S. Senate,
                  Subcommittee on Oversight of Government
                         Management, the Federal Workforce,
                                and the District of Columbia,
                          of the Committee on Homeland Security
                                            and Governmental Affairs,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:33 p.m., in
    room 628, Dirksen Senate Office Building, Hon. Daniel K. Akaka,
    Chairman of the Subcommittee, presiding.
        Present: Senators Akaka, Johnson, and Coburn.

                   OPENING STATEMENT OF SENATOR AKAKA

        Senator Akaka. I call this hearing of the Subcommittee on
    Oversight of Government Management, the Federal Workforce, and
    the District of Columbia to order.
        Aloha and good afternoon, everyone. I want to welcome our
    witnesses to today's hearing, ``Financial Literacy: Empowering
    Americans to Make Informed Financial Decisions.'' Thank you for
    being here.
        This April is Financial Literacy Month, our opportunity to
    showcase the importance of financial literacy in America. My
    first lessons in financial literacy date back to my childhood.
    My fourth grade teacher required us to have a piggy bank to
    teach us about money management. We learned that money saved a
    little at a time can grow into a large amount, enough to buy
    things that would have been impossible without savings. My
    piggy bank taught me important lessons about money management
    that I never forgot.
        Growing up, my family did not have a bank account where we
    could save money securely and earn interest. I grew up in a
    large family and you could say we were poor. We budgeted by
    putting our money in a box that was divided into sections. If
    the food compartment was empty, we did not eat, even if there
    was money in the clothing compartment.
        I know personally the challenges that families face when
    they are unable to save or to borrow money for unexpected
    expenses. My parents made difficult choices to provide better
    opportunities for their children. I understand now how much
    worse off we would have been if my parents had not worked so
    hard to understand difficult financial decisions and to make
    careful choices, or if they had fallen prey to the types of
    predatory practices we have seen flourish in recent years.
        All of this led to a better life for me and gave me an
    appreciation for the importance of financial literacy. Too many
    Americans do not have the financial knowledge they need to
    effectively manage their finances, use credit, and plan for
    retirement. Improving our Nation's level of financial literacy
    has been a top priority for me during my time in the Senate. I
    have worked to educate, protect, and empower Americans through
    financial literacy.
        Through financial education, we can provide individuals
    with the knowledge and skills they need to make better
    financial choices. Through consumer protection, we can
    safeguard individuals against harmful practices and bad
    information that lead to poor financial choices. Accomplishing
    these two goals will result in economic empowerment for all
    Americans.
        Just 10 years ago, Congress made its first serious
    commitment to financial literacy when we enacted my Excellence
    in Economic Education Act as part of the No Child Left Behind
    Act. My bill authorized a range of activities to promote
    economic and financial literacy in our schools. Then in 2003,
    we created the Financial Literacy and Education Commission
    (FLEC). The Commission is tasked with coordinating and
    improving the effectiveness and efficiency of Federal financial
    literacy efforts.
        I am proud of my efforts with the help of many of my
    colleagues to educate, protect, and empower Americans. For
    example, credit card statements are now required to contain
    information about the costs of making minimum payments. More
    meaningful information will be available for consumers
    purchasing investment products or sending remittances to family
    members abroad. The Department of the Treasury is implementing
    provisions I authored to provide financial education to
    prospective homeowners and financial access to the unbanked and
    underbanked. Still, there is more work to be done.
        The Federal Reserve estimates that household debt in
    America totals $13.4 trillion. Most Americans do not have a
    budget and do not save for retirement, and many are unable to
    pay their bills on time. We are still in the midst of record
    rates of mortgage defaults and home foreclosures. One in three
    homeowners say their mortgages are not what they expected.
        It is when people lose jobs and wages fall, when home
    values decline and foreclosures rise, and when retirement
    account values plummet, that the true costs of financial
    illiteracy becomes apparent. Financial literacy is more
    important than ever, and the Federal Government has a vital
    role in promoting financial literacy throughout the country.
        Today, we will examine that role as well as the progress of
    Federal financial literacy initiatives and the Financial
    Literacy and Education Commission. I look forward to hearing
    from our witnesses today and I look forward to hearing from our
    other witnesses, as well.
        Senator Johnson, your opening remarks.

                  OPENING STATEMENT OF SENATOR JOHNSON

        Senator Johnson. Thank you, Mr. Chairman. Aloha.
        Senator Akaka. Aloha.
        Senator Johnson. Mr. Dodaro, it is nice to see you again
    here.
        I would like to thank the Chairman, first of all, for
    holding this hearing. Financial literacy is pretty dear to my
    heart. The last 10 years in Oshkosh, most of my volunteer
    efforts were really centered around education, and the last 2
    years in particular, I was the Business Co-Chair of our
    Partners in Education Council of the Oshkosh Chamber. This was
    a group of individuals, educators from high school,
    administrators and teachers, as well as the University of
    Wisconsin-Oshkosh, Fox Valley Technical College, the private
    schools, as well as the Catholic school system, and a number of
    business leaders from the community.
        And as we discussed the problems with education, certainly
    the business leaders' input always was what we were seeing in
    terms of recent graduates coming to our workplace, and it was
    amazing. The consensus view from all the business leaders was
    that recent graduates were coming to our workplace totally
    unprepared for not only work not understanding the importance
    of attendance, appearance, work ethic, attitude--but tragically
    coming to the workplace in way too much debt. And that is not
    only just high school graduates, that is also kids who have
    just graduated from college who had gotten in way over their
    head in debt with college loans.
        So I do believe that financial literacy is an incredibly
    important topic for our Nation. It really challenges our
    success as we move forward. But I guess what I would like to
    get out of this hearing is certainly what we were doing is we
    were addressing it at the local level, which I think, in
    general, is where this is going to have to be addressed, with
    each individual student. And so I guess the questions I will be
    having is what is the Federal role? How effective are we at
    performing that role? How cost efficient are we?
        That is really kind of what I am looking to get out of this
    hearing, so thank you, Mr. Chairman.
        Senator Akaka. Thank you very much, Senator Johnson.
    Senator Coburn, your opening.

                  OPENING STATEMENT OF SENATOR COBURN

        Senator Coburn. First of all, Mr. Chairman, I love you
    tremendously. I think you are a sweetheart of a person. I have
    a completely different thought on this.
        I would go back to what you said. Who taught Chairman Akaka
    his financial literacy? His teacher. We have to fix the real
    problem. It means what we are doing is not teaching the
    teachers, and therefore it is not taught. The problem is our
    educators today are not taught financial literacy and not
    taught to teach financial literacy.
        I have heard you tell about your stories and your family at
    our prayer breakfast on Wednesday. It is always wonderful to
    hear what you learned from your family. I am not going to be
    able to stay for the whole hearing, but Mr. Dodaro is going to
    talk about some things that came about out of his report. What
    we know is that we have 20 different agencies in the Federal
    Government. We know that we have 56 separate financial literacy
    programs and we in Congress have not done oversight on any of
    them.
        So I have some questions. No. 1 is do we have the moral
    authority to teach financial literacy from the Federal
    Government when we have a $14.2 trillion debt, when we run
    deficits of $1.2 to $1.6 trillion a year. It takes a lot of
    arrogance on our part to think that we can teach young people
    when we are managing a Government that has that kind of
    imbalance. I think we lack the moral authority.
        I think we also lack the constitutional authority. If you
    look at education since 1978, we have spent $2 trillion on
    education. You cannot find one metric that is better since we
    have been involved in it. Again, Thomas Jefferson said, if you
    want the Federal Government involved in education, you have to
    change the Constitution. We did not do that. We just ignored
    it.
        What we do not lack is the goal that we would assume that
    we can teach somebody financial literacy. So I am very
    concerned about where we are going. This is an area where I
    think we ought to have oversight. I think we ought to have
    consolidation of programs. If, in fact, it is a legitimate role
    for the Federal Government, we ought to be consolidating and
    doing oversight to make sure that we get good value of the
    programs that we run. There is nothing wrong with our Federal
    employees in trying to do this, there is a problem with
    Congress in terms of oversight.
        So the fact that you are having this hearing today, I
    congratulate you. I think it is important that we do it so we
    can find out about the 20 different agencies and the 56
    different programs. Thank you.
        Senator Akaka. Thank you Senator Coburn.
        I welcome our first panel of witnesses to the Subcommittee,
    the Honorable Gene Dodaro, Comptroller General of the United
    States and head of the U.S. Government Accountability Office
    (GAO).
        It is the custom of this Subcommittee to swear in all
    witnesses. Please stand and raise your right hand.
        Do you swear that the testimony you are about to give this
    Subcommittee is the truth, the whole truth, and nothing but the
    truth, so help you, God?
        Mr. Dodaro. I do.
        Senator Akaka. Thank you. Let it be noted in the record
    that the witness answered in the affirmative.
        Before we start, I want you to know that your full written
    statement will be part of the record and I would like to remind
    you to please limit your oral remarks to 5 minutes. Mr. Dodaro,
    please proceed with your statement.

    STATEMENT OF HON. GENE L. DODARO,\1\ COMPTROLLER GENERAL OF THE
         UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE;
    ACCOMPANIED BY ALICIA PUENTE CACKLEY, BARBARA D. BOVBJERG, AND
                              SUSAN OFFUTT

        Mr. Dodaro. Thank you very much, Mr. Chairman. Good
    afternoon to you, Ranking Member Senator Johnson, and Senator
    Coburn. It is nice to see all of you this afternoon.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Dodaro appears in the appendix on
    page 35.
    ---------------------------------------------------------------------------
        I am particularly pleased to be here on Financial Literacy
    month to talk about this topic which is important to the well-
    being of our citizens and the economic health of our country.
    Senator Akaka, I would like to recognize your leadership on the
    many initiatives that you taken over the years on this topic.
        GAO's involvement has been, at the request of Congress,
    looking at a lot of these individual agency efforts on specific
    areas such as the student loan programs, disclosures in banking
    and investment products, products that are trying to be sold to
    members of our military, also in retirement and savings areas.
    So we have done a lot of work looking at individual areas.
        More broadly across the Government, as Senator Coburn
    mentioned, we have observed that there are 20 agencies engaged
    in this activity and there are over 56 different programs or
    activities that are underway, which raises questions about
    fragmentation and potential duplication. It places a premium on
    the need for Federal agencies, to the extent they are going to
    be involved in these activities, to coordinate their activities
    effectively.
        Consequently, we have also looked at the activities of the
    Financial Literacy and Education Commission since it was formed
    in statute back in 2003. 2006 was the first year that they had
    created a national strategy. We thought it was a useful first
    step, but that it was more descriptive of what was going on
    rather than strategic. Recently this year, they have issued the
    second version of their national strategy, which has more clear
    goals and objectives stated in it but does not yet have
    performance measures, what resources are required, or clear
    roles and responsibilities enumerated for the agencies. Senator
    Johnson and Senator Coburn, both of those areas go to the heart
    of your issue. We do not really know right now what the total
    investment is in these programs and what the clear roles and
    responsibilities should be.
        Now, the implementation plan that the Financial Literacy
    and Education Commission is going to create, I think, could be
    a platform for oversight activities of this Congress. It is due
    to be issued before the end of this fiscal year.
        Also, there is a new development with the creation of the
    Bureau for Consumer Financial Protection that was created under
    the Wall Street Reform Act. That new Bureau is to be up and
    running by July of this year and it is charged with developing
    a strategy on financial counseling activities, credit
    counseling for consumers as well as savings and borrowing
    areas. So its charter somewhat is similar to what the charter
    is for the Commission and that underscores the need for
    additional coordination and communication across the executive
    branch and with this new Bureau going forward.
        Clearly, this effort requires a partnership, whatever
    Congress determines to be the Federal role. There are partners
    at the local level in academia at the nonprofit organizations,
    and a lot of people interact with the public in this, and it
    really will require, I believe, a true partnership over a
    period of time.
        There is also a dearth of knowledge about what works and
    what does not work in financial literacy education. One of the
    mandates we have under the Wall Street Reform Act is to
    evaluate the effectiveness of Federal literacy education
    efforts that have taken place so far. We are in the process of
    completing that work. We will have a report out this summer.
    But it really does not look like there is a lot of empirical
    information on what works in terms of not only educating and
    increasing knowledge, but how you effect a change in behavior
    on the part of the individuals provided that education.
        So it is very important to continue to focus on these
    activities. I think congressional oversight is warranted, and
    could be a constructive force in making sure whatever is done
    is done effectively and efficiently.
        I can assure you GAO will remain committed to this area. It
    is one of my top priorities that I would like to focus on
    throughout my tenure at the GAO because I believe it is
    important. But we really have to figure out how best to tackle
    this subject and do it in a cost effective manner.
        So I thank you, Mr. Chairman. I would be happy to answer
    your questions. I have with me today some of our experts in
    financial markets and retirement and education areas that will
    help me answer questions, and I may call upon them, if it is OK
    with you, to answer some questions. Alicia Puente Cackley,
    Barbara D. Bovbjerg, and Susan Offutt, our Chief Economist.
        So thank you very much. I would be happy to answer
    questions.
        Senator Akaka. Thank you very much, Mr. Dodaro, and I want
    to tell you that they are welcome to join you to answer
    questions.
        Mr. Dodaro, I want to commend and thank you for making
    promoting greater financial literacy in the United States a top
    priority. I share your belief that this issue is important
    enough to warrant the focus of the Comptroller General. My
    question to you is, how do you believe you can best leverage
    your position to accomplish this critical and challenging goal?
        Mr. Dodaro. There are really three elements to it, Mr.
    Chairman. First, we have a strong foundation of knowledge in
    responding to congressional requests and looking at how Federal
    law as enacted has been implemented in these areas to try to
    provide financial literacy education and interact with the
    public on important Government programs that it offers and
    provide the protection. So to the extent to which Congress has
    already determined that certain activities will be done by the
    Federal agencies, we have evaluated how they are operating, and
    so we start off with a strong base of knowledge, institutional
    knowledge in GAO.
        Second, we have the resources and the support to effectuate
    and bring together multiple parties. So we have the convening
    power. The Comptroller General forums is one that we have used
    historically throughout GAO. It was used by my predecessors,
    Dave Walker, Chuck Bowsher, to bring people together from
    different elements of society to talk through issues so we can
    identify what kind of gaps exist, what challenges are there,
    and what the proper role should be for GAO and for the Federal
    Government in that matter and advise the Congress on what
    others think about it.
        For example, I plan to convene a forum this fall to bring
    together people from Federal, State, and local levels,
    nonprofit, private sector, and academia, to talk about this
    subject and to get collective judgments and experiences of
    those people. Also, the unique position that I am in is that I
    have a 15-year tenure. So you have a long period of time to
    focus on the subject, and this subject will take time. To the
    extent to which the Federal Government wants to achieve
    objectives in this area, it will take time, and I believe that
    enables me to work across Congresses, across administrations,
    and be able to be a source of institutional knowledge and also
    one that can continue to track progress and what is working and
    what is not.
        Senator Akaka. Thank you, Mr. Dodaro.
        As you noted in your testimony, providing Americans with
    the information they need to make responsible financial
    decisions is key to their well-being and the economic health of
    our Nation. What unique capabilities does the Federal
    Government contribute to financial literacy efforts?
        Mr. Dodaro. Well, there are two things. First, I would say,
    there is a lot of expertise in departments and agencies on
    specific issues, whether it is investor information,
    retirement, pension information, or student loan programs. So
    there is a reservoir of knowledge. But also, importantly, the
    Federal Government is a source of unbiased objective
    information. There is no financial interest on the part of the
    Government in providing this information and it can make
    information available to people through its normal exchanges of
    dealing with the Federal Government.
        Now, I would say to Senator Coburn's point, I think the
    Federal Government could do a much better job being a role
    model in this area and exhibiting behavior on the part of its
    financial practices itself. But I do think the Federal
    Government has both the ability to tap into resources that are
    there and to provide objective information.
        Senator Akaka. Mr. Dodaro, I am concerned that GAO's recent
    report noting possible fragmentation of Federal financial
    literacy efforts has been inaccurately characterized as
    evidence of duplication. Would you please clarify GAO's
    findings and explain why enhanced coordination may be
    beneficial in the area of financial literacy.
        Mr. Dodaro. Yes. Back in 2006, when we commented on the
    national strategy, one of the recommendations we made to the
    Financial Literacy and Education Commission was that it have an
    outside objective look at the extent of potential overlap and
    duplication in its activity. So we were concerned back then.
    They have had a couple of studies since then. Both studies have
    concluded there is little evidence of exact duplication of same
    services to the same beneficiaries, but clearly there is
    fragmentation in these areas in that you have multiple agencies
    acting in the same area of national interest.
        And so, our concern is that fragmentation left without
    proper oversight can lead to duplication down the road. I think
    in this particular area, the fragmentation and potential
    duplication is heightened a bit by the creation of this new
    Bureau of Consumer Financial Protection at the Federal Reserve,
    so I think congressional oversight would be warranted in this
    area.
        So there really is not evidence to date. We are concerned
    about it. That is why we put it in the report that we gave to
    the Congress. And clearly, fragmentation is really only
    controlled through effective communication and coordination. If
    that does not happen, then these things can easily lead to
    inefficiencies in how we use our resources.
        Senator Akaka. Well, we will have a second round of
    questions. I will now pass it on to Senator Johnson for his
    questions.
        Senator Johnson. Thank you, Mr. Chairman.
        You mentioned there are 20 agencies involved in this. In
    terms of how this is organized, is there a lead agency? Is
    there a pecking order here?
        Mr. Dodaro. Yes. There is an Office of Financial Education
    within the Treasury Department that coordinates the work for
    the Financial Literacy and Education Commission. So they are
    sort of the coordinating entity, by statute, I believe.
        Senator Johnson. You say you really do not know how much is
    spent in total. I mean, can you hazard a guess? Are we talking
    millions, hundred millions, billions? I mean, do you have any
    clue at all?
        Mr. Dodaro. Let me just check. Yes. There is really not a
    way to determine it because there are not budget items for this
    subject clearly marked. So we really cannot--I cannot give you
    a guess at this point, even an educated guess.
        Senator Johnson. Is there any line item within a particular
    agency that would give you some sort of feel of, well, the
    Treasury is spending--they have an office that spends $20
    million on it, or----
        Mr. Dodaro. Yes. Well, I think there are a few people in
    the Treasury Department, and one of the things that we have
    recommended is their implementation plan is going to be issued
    by the end of this fiscal year, that it include resource
    estimates in the plan. We are saying is you ought to be clearer
    about the roles and responsibilities and the resources that are
    needed. I take it from our team we have tried to determine the
    amount of resources, but we have not yet been able to do so.
        Senator Johnson. Just in kind of getting ready for this
    hearing, I think one of the things that jumps off the page at
    me is the Financial Literacy and Education Commission was first
    formed in 2003, is that----
        Mr. Dodaro. The law was passed in 2003, right.
        Senator Johnson. Can you point to some accomplishments
    since 2003 of them creating strategies and then doing another
    strategy and then doing a report, or----
        Mr. Dodaro. Yes. Well, they have created a website. They
    have it established, it is mymoney.gov. It has resources that
    are connected and have links on it there. They have improved
    the coordination and communication among themselves within the
    Federal agencies. But they would be in a better position to
    give you more specifics. Those are the things that we have
    noted over time.
        Senator Johnson. Financial literacy can be a relatively
    broad topic----
        Mr. Dodaro. Right.
        Senator Johnson [continuing]. And cover all types of
    things. Is there any kind of priority in terms of what we are
    trying to teach, I mean, what the Federal Government is
    concentrating on here?
        Mr. Dodaro. Yes. One of the things in their new strategy
    that they just put out this year were developing some core
    competencies, and those competencies would deal with issues in
    terms of what they think the average citizen should know,
    savings, borrowing, credit, those sorts of things. They are due
    to be able to develop that coming forward and then we will be
    able to review that and be able to see whether or not that
    makes sense as the right approach to do.
        So far, they have focused a lot on awareness and raising
    education and providing resources to people to be able to use
    available resources to help inform them. But one of the things
    that we have noted is there really are not any performance
    measures in their plan, and that is what we are hoping to see
    in the implementation plan. If you do not have clear roles and
    responsibilities, if you do not know how much resources that
    you are using and you do not know how you are going to measure
    your performance going forward, you are really not going to be
    in a good position to demonstrate achievement or answer the
    questions you are asking about what progress have they made
    over a period of time.
        Senator Johnson. I mean, if they have not even in 7 years
    defined what it is they are going to teach--or am I
    misinterpreting that? When you started talking about they are
    trying to define the core competencies, I mean, that is 7 years
    just trying to lay out that, and, we really ought to teach kids
    about running up credit card debt or getting in too deep in
    terms of student loans or how do you educate the public in
    terms of mortgage literacy. Are we really, after 7 years, just
    laying out what those core competencies are? Is that as far as
    we have gotten?
        Mr. Dodaro. Well, as I mentioned, they have established
    websites, have links, have created some partnerships and
    activities and getting other people involved, and so I think
    they are trying to go about this in a more systematic manner.
    Quite frankly, I think this was an important initiative, but I
    think the last recession has really underscored how important
    it is and that has spurred people to become a little bit more
    active in this area. Most of these programs we are talking
    about have only been created in the last decade, and we are
    going to be pursuing the individual cost of these programs in
    our future work.
        Senator Johnson. When you have 20 different agencies
    involved, again, you are spanning--can you just name the top
    five or six agencies that really have accomplished objectives
    here or actually have some sort of focused effort?
        Mr. Dodaro. Well, I can name some of the ones that are
    involved. I am not sure I can name the ones that have the
    greatest accomplishments. But the Treasury Department is
    involved. The Department of Defense (DOD) is involved in
    providing information to military servicemembers, and for
    there, we have made a number of recommendations that they have
    implemented. So I think there has been some progress in that
    area, as well. The Department of Health and Human Services
    (HHS) has a number of programs that are dealing with both
    health issues as well as aging.
        If I might, I might ask Alicia to come to the table and
    help give more specifics, Senator.
        Senator Johnson. That would be great. Thanks.
        Ms. Cackley. So the question being which agencies have the
    largest proportion of programs. I think some of the major ones
    would be the Department of Housing and Urban Development (HUD),
    and the Education Department (DOE), the Federal Trade
    Commission (FTC), the Securities and Exchange Commission (SEC).
    Those are some of the programs that we have identified.
        Senator Johnson. Can you just give me an example of--a
    program that has worked, in terms of what it is we are trying
    to educate and how we go about implementing that. How do we
    push this back down to the level of people actually learning.
        Ms. Cackley. I can give you examples of programs. We have
    not done the work to say which ones are working that we have
    identified best practices yet. There are certainly programs
    that we are looking at. There is a Homebuyers' Counseling Grant
    Program that we are mandated to look at that is run out of the
    Office of the Treasury, actually, but it is for individuals who
    are planning on buying a home, that they get counseling
    beforehand about financial literacy issues, about how to save
    for a downpayment, about just how to go about doing the
    purchase of a home.
        Senator Johnson. Thank you. Well, I guess I have run out of
    time. Thanks.
        Mr. Dodaro. Senators, one program at the Federal Deposit
    Insurance Corporation (FDIC) called Money Smart, we would be
    happy to provide some information for the record on that one. I
    think that one has a pretty good reputation and has a good
    evaluation component built into it. Excuse me, Senator.
        Senator Akaka. Thank you very much. Senator Coburn.
        Senator Coburn. Mr. Dodaro, can you imagine anybody sitting
    at home--they are obviously not seeing this. This does not rank
    high on C-SPAN's coverage. But this is the classic case of why
    this country is in trouble. In 2003, we passed a law. I
    question whether or not we had the authority to do that under
    the Constitution, but let us say we did. In 2006, you make
    major recommendations. Whether or not they have been followed
    or not, you have not reported on. In 2011, a full 8 years after
    the bill is passed, we now start with core competencies, which
    is the very thing we should have started with in 2003. I am not
    trying to Monday morning quarterback this, but can you think of
    a worse way to set things up than what we have done? Can you
    ask any American who would think that the Federal Government
    ought to have 56 different programs for financial literacy?
    Even if we were running our budget well, and even if we do have
    the constitutional authority, 56? What is our goal? Our goal is
    to be financially incompetent if that is the way we are going
    to run the Federal Government.
        I have a great relationship with your team and this is a
    classic example of a well-meaning intent by the Senator from
    Hawaii to accomplish a purpose. However, we have zero metrics
    that we know of. Your report could give us zero metrics on any
    of them. That does not mean they are not out there, but right
    now, this Congress, 8 years after this has happened, we have
    zero metrics. And what do we do? We duplicate your Commission
    with the Consumer Product Safety Board with another set of
    rules, exactly the opposite of what we should have done. What
    we should have done is consolidate them all in one and say,
    what is our goal? How are we going to measure it? Who are we
    going to put in charge of it. Instead, we have financial
    literacy programs at 20 different Federal agencies. That is
    insanity.
        This is a classic case of what not to do. It does not mean
    people are not trying to do the right thing. It means we have
    not done the oversight to see what should happen.
        I will go back to the original thought. Our failure is in
    the Department of Education, because financial literacy is not
    hard. You can learn it in the sixth grade. Chairman Akaka
    learned it in the third grade. But the fact is, we are not
    teaching the teachers. Because we are failing at one program,
    now we have 56 programs to try to make up for it.
        You can tell I am intense on this issue, not because of
    this one program, but I can show you 100 other programs with
    great intentions, great compassion for people in this country
    that are failing just like this is. The fact that we do not
    have metrics and we do not know what it costs, the fact that we
    cannot even tell what it costs is another big problem, that you
    could not find out what it has cost.
        By the way, the reference for all this came out of the work
    that the GAO did in terms of the last debt limit extension to
    where we were trying to find duplication in the Federal
    Government. GAO has looked at about, I guess, a third of the
    Federal Government. But to me, it is very frustrating that we
    are where we are. The lesson we should learn from this report
    is, let us not go there again.
        And I tell you, what you are setting up in terms of the
    consumer, do not make the mistakes. There should not be one
    thing that does not have a metric on it. There should not be
    anything outside of core competencies, and if they are
    effective over here, then let us eliminate the rest of it, but
    let us do not have dual paths. Nobody can tell me with 56
    different programs that we are efficient utilizing Federal
    employees in doing that when we could have three or four and
    accomplish the same thing.
        So end of my statement. No question. I apologize for
    ranting.
        Senator Akaka. Thank you very much, Senator Coburn.
        Mr. Dodaro, as you noted in your testimony, evaluating
    financial literacy programs is challenging. However, you note
    that the FDIC's Money Smart program does have a strong
    evaluation component. GAO is in the process of reviewing
    existing studies of the effectiveness of financial literacy. My
    question is, do the methods used to evaluate the Money Smart
    program show promise as a model that could be adjusted for
    other agency programs?
        Mr. Dodaro. There are two components of the Money Smart
    evaluation program that I think are really important and could
    be helpful going forward. One is they are attempting to measure
    not only what information is passed to the people who use the
    program, participate in the program, but also whether it is
    changing their behavior, which is a real important outcome of
    this, not to just in terms of provide the education, but hope
    it achieves an objective of having them make sounder decisions.
        And then, second, it has a longitudinal component, so it is
    trying to measure the performance over time, which I think is
    another important measure. So, yes, there are important lessons
    that could be learned out of that program. What we are finding
    overall, though, is there is very little empirical research on
    the effectiveness of financial literacy efforts and even fewer
    studies that are actually measuring the behavior as the Money
    Smart program is trying to do. So we are analyzing those
    studies now and we will be providing our report to the Congress
    this summer.
        Senator Akaka. You say you are analyzing these studies now.
    Is there a timeframe for releasing the results of this report?
        Mr. Dodaro. Yes. We have to report by the anniversary date
    of the Dodd-Frank Act, which will be by July, and so we will be
    reporting by then.
        Senator Akaka. Mr. Dodaro, I am pleased that the 2011
    National Strategy for Financial Literacy developed by FLEC
    incorporates many of the GAO's recommendations. I am looking
    forward to reviewing FLEC's forthcoming plan to implement the
    national strategy. Based on the best practices GAO has
    observed, what elements must an effective implementation plan
    contain?
        Mr. Dodaro. There needs to be clear goals and objectives in
    the plan, a statement of what issues are trying to be addressed
    or the problem that it is trying to be solved or help improve
    the situation. There need to be clear resource measures as to
    what level of investment is going to be made in the program.
    There need to be measures of progress and metrics of success.
        We think the current plan that was produced this year has
    clear goals and objectives in it, but it lacks the performance
    measures, resources to be invested, and clear roles and
    responsibilities of the departments and agencies. So we are
    hoping that the implementation plan that the Commission is
    scheduled to release by the end of this calendar year contains
    those elements. I think that would be very important and it
    would provide a good benchmark, as well, as the new Bureau is
    stood up over at the Federal Reserve.
        Senator Akaka. Mr. Dodaro, as you know, I have long
    championed efforts, such as the GPRA Modernization Act, aimed
    at enhancing collaboration and coordination across the Federal
    Government. In 2003, as you mentioned, we created the Financial
    Literacy and Education Commission to enable this coordination
    among the key agencies working to improve financial literacy.
    How can the FLEC buildupon the progress its members have
    already made?
        Mr. Dodaro. Well, I think two things are important. One is
    this implementation plan. It has to be clear of what is
    expected to be achieved and over what period with what level of
    investment. They can also begin to do more evaluations of the
    programs of success to find out what works and what does not
    and how to buildupon the successful elements of what they are
    achieving. And third, they need to really coordinate closely
    with this new Bureau so that the resources that are spent by
    the Federal Government are spent as most effectively and
    efficiently as possible.
        Senator Akaka. Mr. Dodaro, the GAO has found Americans with
    limited English proficiency face significant barriers to
    financial literacy. This places them at greater risk for
    predatory practices and poor financial decisions. In your view,
    how would increasing financial literacy among those with
    limited English proficiency benefit individual consumers and
    the economy as a whole?
        Mr. Dodaro. Yes. Well, to the extent to which everyone
    would benefit from financial literacy, they would benefit, as
    well, in terms of increasing their self-sufficiency and being
    able to guard against practices that are really trying to be
    deceptive, if you will.
        Many of the people with limited English proficiency also
    would benefit from making sure that they are using our
    financial system so they are getting the benefit of those
    systems rather than payday lenders or using money orders or
    other more costly methods of basically conducting their
    financial business. It is estimated that one in four households
    does not have a checking or a savings account and thus they
    turn to these other measures. And so the extent to which people
    can be educated that there are better ways to be able to do it
    and more cost-effective ways for them, I think everybody would
    benefit.
        Senator Akaka. Thank you very much for your responses.
    Senator Johnson.
        Senator Johnson. Thank you again, Mr. Chairman.
        Mr. Dodaro, you talked about studies being conducted. Who
    is conducting those studies?
        Mr. Dodaro. One was done by the Research and Development
    (RAND) analysis. Let me let--Alicia can give you more
    specifics.
        Ms. Cackley. There were two studies that were done. The
    first was done by a post-doctoral student who was contracted to
    do the analysis. We looked at that work and suggested that
    there could be a more objective analysis done, and then the
    RAND study was done as a result.
        Mr. Dodaro. Were you talking, Senator, about the studies
    that were done more broadly evaluating financial literacy
    efforts----
        Senator Johnson. Yes. I am trying to determine----
        Mr. Dodaro [continuing]. Those studies?
        Senator Johnson [continuing]. First of all, who is
    conducting the studies----
        Mr. Dodaro. Right.
        Senator Johnson [continuing]. What are they studying.
        Mr. Dodaro. Right.
        Senator Johnson. Specifically, what are they looking at?
        Mr. Dodaro. Right. He is talking about the 200 studies we
    are currently looking at.
        Ms. Cackley. The 200 studies of----
        Mr. Dodaro. The financial literacy efforts, our current
    mandate.
        Ms. Cackley. Our current mandate looks at what--we started
    with a broad set of studies. I was looking puzzled because we
    got from 200 down to a smaller number when we established the
    criteria of whether they were good empirical studies, so it is
    a smaller number now. But GAO did an analysis of the
    literature, so we went out and looked across the academic
    literature and found which were the most robust studies of
    financial literacy that were within the last--how many years--
    10 years, I believe.
        Senator Johnson. So again, these are academic studies, not
    really commissioned by the GAO, but you are just searching the
    academic literature in terms of people conducting studies on
    financial literacy.
        Ms. Cackley. Right. Conducting studies on the effectiveness
    of financial literacy programs, yes.
        Senator Johnson. OK. Which programs? What were they
    studying, or just they were studying everything?
        Ms. Cackley. I think there is a variety of different
    outcome measures or specifics. It is not as if everybody looked
    at exactly the same thing. So there is a range of populations
    that were studied. There is a range of outcome measures,
    whether or not the studies looked at, I think as we said
    before, just an increase in knowledge or a change in behavior.
    There is quite a difference.
        Senator Johnson. Again, I am sorry. I am confused. Mr.
    Dodaro, you were talking about you are mandated by the Dodd-
    Frank bill to complete the study by the anniversary date of the
    Dodd-Frank----
        Mr. Dodaro. Right.
        Senator Johnson. What study?
        Mr. Dodaro. Right.
        Senator Johnson. I mean, are you studying the studies?
        Mr. Dodaro. Basically, we are studying what is known about
    the effectiveness of various financial literacy efforts, and so
    we are doing a synthesis of the studies. We are not trying to
    go out and do a--we do not have time to be able to do a de novo
    study of this. So, yes, we are looking at all the studies that
    were done. We do this routinely in certain different areas, and
    then we determine which of the studies have enough good
    methodologies to be able to be relied on and then we will sort
    of summarize that for the Congress. I would be happy to give
    you a list of the studies that we are working on, what was
    studied and what was done, but this is in process and we should
    have the final results out. So, yes, we are analyzing studies
    done by others.
        Senator Johnson. And not necessarily targeting Government
    programs. So the study you are doing really may have nothing to
    do whatsoever with these 20 agencies or these 56 different
    programs. I mean, you are just kind of picking whatever is out
    there in the academic literature.
        Mr. Dodaro. Well, it will cover whatever is done by the
    agencies plus what would be done by others. So it will cover
    everything that has been done. We are not excluding any studies
    that might have been done by Federal departments or agencies or
    focused on their programs, but it is broad-based.
        Senator Johnson. So have there been studies, then, that
    have been done by the Government agencies on their educational
    programs, their financial literacy programs? I mean, those
    things actually do exist?
        Ms. Cackley. Different agencies have done--have a different
    level of analysis of that, the effectiveness of their programs.
    So one example is the Department of Labor (DOL), which has done
    focus groups to determine the effectiveness of their different
    forms of outreach and understanding of the content of the
    material that they provide. So that is one example. But each
    agency--because each agency has a different program, may target
    a different population, they may have a different evaluation
    method. That is part of the fragmentation that we have
    identified.
        Senator Johnson. So let us just say the Department of Labor
    study, as one example. Who is the Department of Labor targeting
    for financial literacy education?
        Mr. Dodaro. Yes. Let me--Barbara Bovbjerg handles our work
    in that area. Let me have her come up, Senator.
        Senator Johnson. Great. Thanks.
        Ms. Bovbjerg. Hi, Senator Johnson. I am Barbara Bovbjerg. I
    am Managing Director of Education, Workforce, and Income
    Security at GAO. We have looked at the Department of Labor's
    outreach for a number of years, ever since Congress passed the
    SAVER Act back in the 1990's, because they have been tasked
    with working with other Federal agencies and trying to reach
    out to American workers on how to save for retirement and how
    to understand some of the various retirement investment
    instruments that are out there. At our recommendation, they did
    try to look at how effective this outreach was, and I know that
    they have been running focus groups, I thought fairly
    regularly, although I have not seen any results from them
    really recently.
        But it is just an example of there are different ways that
    different agencies attempt to address this. I guess I also
    wanted to say that I think that different agencies have a
    different idea of what they are trying to do with regard to
    financial literacy. The Department of Labor is not trying to
    teach young people how to calculate rates of return or
    percentages. They are dealing with working adults and trying to
    explain to them what the different options are for them for
    retirement saving and how important it might be to pursue some
    of those options. So it can be different in the different
    agencies' approaches.
        Senator Johnson. OK. Thank you. I am running out of time
    and I am just trying to get up to speed on this.
        Senator Akaka. Thank you. If you have another question, you
    may proceed.
        Well, I want to thank you very much, Comptroller General
    Dodaro, for being here, and also thank you, Alicia and Barbara,
    for joining him. I want to tell you that we appreciate your
    testimony and your answers here. They have been valuable for
    us. We continue to look at what is happening so that we can
    improve the system and that is out intent. If we can work on
    this together and improve the system, it will certainly serve
    our country well.
        So I look forward to working with you and this Committee
    does, and hopefully, we can have better methods of oversight
    and measuring what we are doing and also the resources that we
    need, as well. Thank you very much for your testimony today.
    Thank you.
        Mr. Dodaro. Thank you very much, Mr. Chairman. I will say
    that we will provide your staffs information on the methodology
    we are using for this study of financial literacy efforts and
    be happy to have any input that either you, Senator Akaka, or
    Senator Johnson have to help us make sure that we do the best
    job that we can in doing this review.
        Senator Akaka. You can tell that Senator Johnson and I as
    partners in this Subcommittee are very anxious and excited
    about moving this along. So we look forward to working with
    you. Thank you.
        I would ask our second panel of witnesses to come forward,
    please.
        I welcome our second panel of witnesses to the
    Subcommittee: The Honorable Brenda Dann-Messier, Assistant
    Secretary for the Office of Vocational and Adult Education at
    the U.S. Department of Education; Lori Schock, Director for the
    Office of Investor Education and Advocacy (OIEA) at the U.S.
    Securities and Exchange Commission; Joshua Wright, Acting
    Director for the Office of Financial Education and Financial
    Access at the U.S. Department of the Treasury; and Holly
    Petraeus, Director of the Office of Servicemember Affairs of
    the Consumer Financial Protection Bureau (CFPB) at the U.S.
    Department of Treasury.
        It is the custom of the Subcommittee to swear in all
    witnesses, so will you please stand and raise your right hand.
        Do you solemnly swear that the testimony you are about to
    give the Subcommittee is the truth, the whole truth, and
    nothing but the truth, so help you, God?
        Ms. Dann-Messier. I do.
        Ms. Schock. I do.
        Mr. Wright. I do.
        Mrs. Petraeus. I do.
        Senator Akaka. Thank you. Let it be noted for the record
    that the witnesses answered in the affirmative.
        Before we start, I want to note that your full written
    statements will be made part of the record and I would like to
    remind you to please limit your oral remarks to 5 minutes.
        Assistant Secretary Dann-Messier, will you please proceed.

       STATEMENT OF BRENDA DANN-MESSIER,\1\ ASSISTANT SECRETARY,
     OFFICE OF VOCATIONAL AND ADULT EDUCATION, U.S. DEPARTMENT OF
                               EDUCATION

        Ms. Dann-Messier. Thank you very much. Good afternoon,
    Chairman Akaka and Ranking Member Johnson. Thank you for the
    opportunity to appear before you today to discuss what the
    United States Department of Education is doing to help
    Americans improve their ability to make informed financial
    decisions.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Dann-Messier appears in the
    appendix on page 50.
    ---------------------------------------------------------------------------
        The Department of Education remains committed to doing its
    part in its own programs and in coordination with others to
    help elementary, secondary, post-secondary, and adult students
    develop the knowledge and skills needed to make sound financial
    decisions for themselves, their families, and their
    communities.
        As you know, President Obama has set an ambitious goal. By
    2020, America will once again have the highest proportion of
    college graduates in the world. He has called this our No. 1
    economic issue of our time, declaring the countries that out-
    educate us today will out-compete us tomorrow. So when we think
    about the role of the United States Department of Education in
    empowering Americans to make informed financial decisions,
    helping students and families navigate the decision to invest
    in higher education is front and center for us.
        As Secretary Duncan has said, we think financial education
    should happen at least as early as kindergarten and continue
    throughout a student's time in school. With that in mind, I am
    pleased to provide a review of our financial education efforts.
        Our Office of Innovation and Improvement (OII) continues to
    administer the Excellence in Economic Education Program, which
    supports national, State, and local efforts to improve student
    performance in economics, personal finance, and
    entrepreneurship. In 2010, the Council awarded subgrants to 94
    projects spanning 41 States for activities such as conducting
    teacher training and program evaluation. One example, Mr.
    Chairman, is the work of the Junior Achievement in Honolulu,
    Hawaii, connecting schools with local businesses to help
    teachers improve students' understanding of economics and
    personal finance. Another example is the Lakeland College
    Center for Economic Education in Plymouth, Wisconsin. They have
    established an economics and financial education curriculum at
    a Milwaukee public charter school that enrolls more than 600
    students from preschool through grade eight.
        In July, I discussed the Department's doubling of its
    commitment to financial literacy in Fiscal Year (FY) 2010 by
    reprogramming $1.7 million from the Data Quality Initiative to
    create the new Financial Education for College Access and
    Success Program. This grant was made to the Tennessee
    Department of Education to develop, implement, and evaluate the
    effectiveness of personal finance, instructional materials, and
    corresponding teacher training materials.
        Our proposal to reauthorize the Elementary and Secondary
    Education Act of 1965 includes $246 million for effective
    teaching and learning for a well-rounded education. This
    broader program would replace several often narrowly focused
    programs with a single authority supporting efforts to
    strengthen instruction and improve student achievement across
    multiple subject areas, including economics and financial
    literacy. The funds would be awarded competitively to States,
    high-need local education agencies, and other entities. This
    amount is $20.1 million, or a 9-percent increase over levels of
    the 2010 appropriations for the programs consolidated under
    this broader framework. We see this program as a cornerstone of
    our focused and flexible approach for Federal K through 12
    funding.
        Our TRIO programs are also geared toward helping
    individuals from disadvantaged backgrounds to enter college and
    post-secondary education. This year's applicants for Talent
    Search, one of the TRIO programs, were required in their
    projects to provide connections to services designed to improve
    financial and economic literacy.
        Also, our National Center for Education and Statistics
    (NCES) is developing tools to help students and families
    identify the actual costs of higher education as they plan for
    college costs. Later this year, pursuant to the Higher
    Education Act (HEA), NCES will unveil a new College
    Affordability and Transparency Center to provide information on
    post-secondary institutions, public tuition, and net prices,
    ranked from high to low, indicating which institutions' prices
    are climbing fastest.
        The efforts undertaken by our Office of Federal Student Aid
    (FSA) represents our largest and most focused investment at
    helping families to pay for post-secondary education. We
    estimate we provide over $155 billion this year in grants,
    loans, and work-study, but we still have a lot of work to do to
    help ensure all of our students see higher education as a
    realistic goal, as something they can afford to do, even if
    their parents never went to college. Students can see how much
    Federal student aid they receive by completing our Free
    Application For Student Aid (FAFSA), and we have worked hard to
    make this process easier for students. We have eliminated over
    20 questions, removed two-thirds of the screened applicants,
    and they now automatically can import their tax information
    from the Internal Revenue Service (IRS).
        Finally, I would like to highlight the financial literacy
    initiative we are working on with other Federal agencies. Last
    year, the Department had ongoing conversations with the Federal
    Deposit Insurance Corporation (FDIC) and the National Credit
    Union Administration (NCUA) to discuss the ways that we can
    work together on our shared literacy goals, and I am pleased to
    report that in November 2010, Secretary Duncan signed a new
    interagency agreement with these two agencies and we are off to
    a strong start. We look forward to our continued work with
    these agencies on empowering Americans to make informed
    financial decisions and to identify additional ways to work
    with our colleagues throughout the Federal Government.
        Thank you, Mr. Chairman, thank you, Ranking Member, for
    your leadership on this important issue and I am happy to
    answer any questions.
        Senator Akaka. Thank you for your testimony. Director
    Schock, please proceed.

     STATEMENT OF LORI J. SCHOCK,\1\ DIRECTOR, OFFICE OF INVESTOR
    EDUCATION AND ADVOCACY, U.S. SECURITIES AND EXCHANGE COMMISSION

        Ms. Schock. Thank you, Chairman Akaka and Ranking Member
    Johnson. My name is Lori Schock and I am the Director of the
    Office of Investor Education and Advocacy (OIEA) of the United
    States Securities and Exchange Commission. Thank you for the
    opportunity to testify today about the SEC's efforts to improve
    the financial literacy of individual investors throughout the
    United States.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Schock appears in the appendix on
    page 55.
    ---------------------------------------------------------------------------
        Our office administers the SEC's nationwide investor
    education program. OIEA provides a variety of services and
    tools to address the problems and questions that individual
    investors may face. We conduct educational outreach, assist
    with investor complaints and questions, and facilitate
    individual investors in bringing their perspectives to the
    Commission and its staff. Today, I would like to describe for
    you briefly some of the specific programs that we use to
    support our mission to educate U.S. investors.
        In October 2009, the SEC launched investor.gov, its first
    ever website focused exclusively on the retail investor and
    investor education. Earlier this month, we relaunched
    investor.gov with a new design and additional information in an
    even more user friendly format. Investor.gov also offers tools
    and materials targeted to investors who may face particular
    investment needs, such as members of the military, teachers,
    and retirees.
        For those investors who prefer to have print publications,
    we continue to offer these materials, as well. Some of our
    brochures are targeted to specific audiences, such as senior
    guides. Some are more topical, like our guide on stopping
    affinity fraud, while others are product specific, such as our
    brochure on variable annuities. All of our print publications
    are available in both English and Spanish. Our materials are
    also available free of charge and are not copyrighted so that
    the widest possible dissemination is encouraged.
        Another way the SEC reaches out to individual investors is
    through investor alerts and bulletins. In the past year, we
    published alerts and bulletins on a variety of subjects,
    including stock trading basics, margin rules, pre-IPO investor
    fraud, and investment scams related to BP payouts. We issued a
    number of joint alerts, including one on target date funds with
    the Department of Labor and another on leveraged ETFs with the
    Financial Industry Regulatory Authority (FINRA).
        The SEC also partners with other Government agencies,
    localities, and private sector financial education groups to
    reach investors. Two recent examples of our partnerships
    include the Outsmarting Investment Fraud Program, where we
    continue to work with the FINRA Foundation, AARP, and State
    securities regulators on a campaign designed to reduce
    investment fraud among older Americans. With our partners, we
    regularly participate in events to teach seniors how to
    identify common persuasion techniques used by con artists and
    how to protect themselves from investment fraud.
        The second program is the SEC Graduate Program, where we
    work with the NYSE Euronext on professional development
    programs designed to help educators teach students about the
    financial marketplace and its importance in their lives and the
    global economy. Last July, more than 30 educators from across
    the country attended the inaugural SEC Graduate Program, a 4-
    day workshop that focused on the securities market, investor
    protection, and the Federal Government's oversight role.
        In addition to our participation in various programs, the
    SEC through my office responds to tens of thousands of
    complaints and questions from individual investors every year.
    Our efforts to facilitate informal resolutions of complaints
    often succeed. In appropriate cases, OIEA refers complaints to
    other offices or divisions within the SEC, including the
    Division of Enforcement, or to State or other Federal
    regulators.
        Investor testing is another important component of our
    program. We are currently conducting investor testing to
    examine the effectiveness of certain SEC mandated disclosure
    documents in communicating useful information to individual
    investors. The study will also serve as a predicate for a
    significant portion of a separate study regarding the financial
    literacy among investors as mandated by Section 917 of the
    Dodd-Frank Act. That provision calls for the SEC to identify
    the existing level of financial literacy among retail
    investors, methods to improve the timing, content, and format
    of disclosures, and the most effective existing private and
    public efforts to educate investors. Section 917 requires us to
    deliver a final report to Congress in July 2012. Because the
    report requires us to focus on the financial literacy of
    investors as opposed to financial literacy more generally, we
    believe the study has the potential to arm us with a great deal
    of valuable data about individual investors in the United
    States.
        As the Committee recognizes, improving financial literacy
    is an important goal that can empower individual investors to
    participate in the financial markets and to secure their
    financial futures. Thank you for the opportunity to appear here
    today. I would be pleased to answer any questions you may have.
        Senator Akaka. Thank you very much, Ms. Schock.
        Director Wright, will you please proceed.

       STATEMENT OF JOSHUA WRIGHT,\1\ ACTING DIRECTOR, OFFICE OF
     FINANCIAL EDUCATION AND FINANCIAL ACCESS, U.S. DEPARTMENT OF
                              THE TREASURY

        Mr. Wright. Chairman Akaka and Ranking Member Johnson,
    thank you for the opportunity to appear before you today on a
    topic of critical importance to the Administration, the
    Department of Treasury, and our Nation, empowering Americans to
    make better informed financial decisions. I want to especially
    thank you, Chairman Akaka. You have been a tremendous champion
    for financial empowerment of all Americans.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Wright appears in the appendix on
    page 63.
    ---------------------------------------------------------------------------
        All Americans, regardless of income and level of
    educational attainment, must have appropriate consumer
    financial protections, be equipped with financial knowledge and
    skills, and have financial access to make informed decisions in
    an increasingly complex financial marketplace. The future
    financial prosperity of our citizens and Nation depend in part
    on the ability of Americans to make these informed financial
    decisions.
        My testimony will include an update on the activities of
    the Financial Literacy and Education Commission, the
    President's Advisory Council on Financial Capability (PACFC),
    and Treasury's own Financial Education and Access Initiatives.
    All these efforts aim to improve the financial literacy and
    financial access and promote the economic stability of all
    Americans.
        Treasury is honored to serve as the lead agency for the
    Commission and to report on the Commission's activities. I want
    to thank the members of the Commission that are here today for
    all of their continued efforts. The Department of Education,
    the Securities and Exchange Commission, as well as the
    implementation team for the Consumer Financial Protection
    Bureau have all been great partners. The Commission has been
    leveraging our unique resources in working together to better
    equip Americans with the necessary financial knowledge and
    skills.
        Recently, the Strategy for Assuring Financial Empowerment
    Report (SAFE), which is a summary of the Commission's
    activities, was submitted to the Senate Banking, Housing, and
    Urban Affairs Committee and the House Financial Services
    Committee to inform members and the public of the Commission's
    activities. My testimony includes several highlights from the
    report. I respectfully request that the SAFE Report be included
    in today's hearing record.\1\
        The Fair and Accurate Credit Transactions Act (FACT Act)
    requires the Commission to develop a national strategy to
    coordinate Federal efforts and promote basic financial literacy
    and education among all Americans. In July 2009, the Commission
    convened a special meeting to review its approach to carrying
    out its purpose and rule. Subsequently, Commission members set
    up a working group to craft a new national strategy, which is
    titled Promoting Financial Success in the United States: A
    National Strategy for Financial Literacy 2011. The Commission
    undertook a comprehensive and inclusive process in creating
    this new strategy.
    ---------------------------------------------------------------------------
        \1\ The Report submitted by Mr. Wright appears in the appendix on
    page 114.
    ---------------------------------------------------------------------------
        The new national strategy provides a road map for
    organizations providing financial education and provides goals
    to help guide America toward financial well-being. Treasury, in
    conjunction with the Commission members, is developing the
    implementation plan for the new national strategy. This
    includes Treasury engaging with Commission members to develop
    implementation plans specific to the constituents they serve.
        The new national strategy and its implementation plan will
    address many of the comments about financial literacy from the
    Government Accountability Office report, Opportunity to Reduce
    Potential Duplication in Government Programs, Save Tax Dollars,
    and Enhance Revenue. This was published in March 2011. But let
    me take this opportunity to comment further on the report.
        Educating Americans to be more financially literate is a
    difficult challenge and requires the attention of many
    agencies. The Federal entities engaged in financial literacy
    often have different missions, constituencies, and expertise
    which can and should be leveraged to deliver optimal financial
    literacy education and access. Just a few examples of the
    Federal entities that have financial education programs provide
    a window into understanding the need for this varied yet
    integrated approach. An example of these essential efforts
    include investor education provided by the SEC, promoting
    financial literacy among students provided by the Department of
    Education, housing counseling provided by HUD, military
    personnel educational initiatives provided by the Department of
    Defense to ensure financial readiness of our troops.
        In addition, the new Consumer Financial Protection Bureau
    will have a special focus on educating consumers and will
    assume the Vice Chairmanship of the Commission. Treasury will
    continue to work with the CFPB to clearly delineate the roles
    of both entities. Bringing these various approaches together to
    complement rather than duplicate efforts is a key role of the
    Commission, and we believe taken seriously by all member
    agencies.
        On January 29, 2010, the President signed an Executive
    Order which created the President's Advisory Council on
    Financial Capability. The Council is tasked with recommending
    methods to coordinate and maximize the effectiveness of
    existing private and public sector efforts and identify new
    approaches to increasing financial capability through financial
    education and financial access. Treasury is coordinating
    efforts between the Council and the Commission.
        I will now briefly discuss the highlights of the Treasury's
    specific financial education and access efforts. In conjunction
    with the Community Development Financial Institutions (CDFI)
    Fund, the Treasury has been implementing the Financial
    Education and Counseling (FEC) Pilot Program to provide
    competitive grants to promote financial education and
    counseling to prospective home buyers. The effort is aimed to
    ensure that working families have the financial knowledge
    required to effectively prepare for and evaluate housing
    choices. The CDFI Fund made a second round of awards in this
    program in October.
        Treasury's Electronic Payment Initiative continues with the
    expansion of disbursement of Federal electronic payments
    through a GoDirect and Direct Express debit card MasterCard
    program. When fully implemented, these initiatives would save
    the Federal Government over $500 million in 5 years and provide
    basic financial access to many benefit recipients. Individuals
    receiving Federal benefit payments who do not have an account
    at a financial institution or who prefer to receive their
    payments on a prepaid debit card can receive a Direct Express
    card. This card is a safe, convenient, and consumer-friendly
    way for benefit recipients to receive payments and safely
    manage their benefits.
        Treasury is also currently conducting a Tax Time Account
    Pilot. This pilot has the potential to improve tax
    administration and provide basic financial access. The pilot
    has the potential to streamline the tax administration process,
    save the Government money, and deliver tax refunds in a faster,
    more efficient manner.
        Chairman Akaka, your work in authorizing Title 12 of Dodd-
    Frank will provide opportunities for increased financial access
    for the unbanked and underbanked. Our most significant proposed
    initiative utilizing the authority provided in Title 12 is Bank
    On USA. The program is designed to bolster local and private
    sector initiatives to ensure low-and moderate-income
    individuals have access to safe financial services and products
    as well as financial education.
        The Office of Financial Education and Financial Access, in
    conjunction with the CDFI Fund, is working with financial
    institutions, community-based organizations, community
    development and financial institutions, credit unions,
    financial education providers, and local government officials
    to ensure that Title 12 is quickly implemented once funding
    becomes available. These programs will include financial
    access, financial education, as well as efforts to spur new
    products and services that will better meet the needs of the
    unbanked and underbanked.
        We are developing the necessary infrastructure to support
    community-based efforts intended to increase financial access.
    Although we have begun these initial steps, appropriated
    resources are necessary to fully implement all the proposed
    activities that are envisioned to utilize the authority in
    Title 12.
        American families are focused on building more secure
    financial futures for themselves and they desire a fair, stable
    financial system as well as the skills and access needed to
    navigate a complex financial marketplace. Treasury looks
    forward to working with this Committee and others to improve
    the financial capability of all Americans.
        Thank you again, Mr. Chairman and Ranking Member Johnson,
    for the opportunity to appear before you today.
        Senator Akaka. Thank you very much, Director Wright.
        Now, we will hear from Director Petraeus. Please proceed.

      STATEMENT OF HOLLISTER K. PETRAEUS,\1\ DIRECTOR, OFFICE OF
      SERVICEMEMBER AFFAIRS, CONSUMER FINANCIAL PROTECTION BUREAU

        Mrs. Petraeus. Chairman Akaka, Ranking Member Johnson,
    thank you for the opportunity to speak with the Subcommittee
    today about the importance of financial education for
    servicemembers and their families.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mrs. Petraeus appears in the appendix
    on page 69.
    ---------------------------------------------------------------------------
        I come from a military family. I am an Army daughter,
    sister, wife, and mother. I have seen the problems that can
    arise from too much month and not enough money, and I have also
    seen the devastating impact financial scams and predatory
    lending can have on servicemembers and their families.
    Unfortunately, too many troops still learn about wise spending
    through hard experience and years of paying off expensive debt
    rather than through an effective financial education class.
        As a Senior Family Readiness Group Advisor at Fort
    Campbell, Kentucky, during the first year of the Iraq War, I
    saw the unforeseen financial problems that came with
    deployment. In 2004, I became the Director of BBB Military
    Line, providing consumer education for military families, a
    position that I held for 6 years. While with the BBB, I guided
    development of 6 adult financial workshops and wrote a monthly
    military consumer newsletter to over 3,000 subscribers.
        This January, I was asked to join the Consumer Financial
    Protection Bureau and set up the Office of Servicemember
    Affairs. My office is assigned the responsibility to, quote,
    ``educate and empower servicemembers and their families to make
    better informed decisions regarding consumer financial products
    and services.'' I consider this a high priority. In my years
    working with servicemembers and their families, I have seen
    them victimized by scams that might have been avoided if they
    knew the red flags of a bad deal. Many of them are in over
    their heads with expensive car financing and other costly
    loans, and the military has not been immune to the housing
    crisis, either. Many servicemembers who thought home ownership
    would be a good thing are now locked into mortgages in some of
    the worst-hit States, where houses have declined significantly
    in value.
        The financial well-being of our military personnel is not
    just an issue of dollars and cents. Financial problems can be a
    dangerous distraction for our troops and are the No. 1 cause of
    lost security clearances. Personal financial readiness equates
    to mission readiness, and a vital component of personal
    financial readiness is a sound financial education.
        Since I became the Director of the Office of Servicemember
    Affairs, I have been reaching out to the military to get input
    on how to make financial education work best for them. In late
    January, Professor Warren and I had two roundtable discussions
    at Joint Base San Antonio, Texas, and there are more trips to
    military bases planned in the next month.
        In San Antonio, the military financial counselors told us
    they were concerned about military debt, telling us that the
    average trainee arrives at their base already over $10,000 in
    debt. They spoke of the need for followup financial education
    after basic training. The military personnel and spouses we
    spoke with at the second roundtable felt strongly about the
    need for continuing financial education throughout a career,
    both for their own personal education and to help them be
    better leaders. The entire group thought that financial
    training should be mandatory.
        I agree with them that continuing financial education must
    have a central role in protecting the financial future of
    military families. I have already met with the Deputy Assistant
    Secretary of Defense for Military Community and Family Policy,
    who oversees financial literacy programs within the Department
    of Defense. I will work with the Pentagon, Veterans Service
    Organizations, and industry to identify and field the most
    effective financial education.
        No amount of prosecutors can stop every scammer or
    predatory lender, so we must provide the right tools to
    servicemembers so they recognize the red flags and make sound
    financial choices.
        I am committed to ensuring that we not reinvent the wheel
    and duplicate what has already been created. We will work to
    identify what techniques and materials work best and then apply
    them. We need to capitalize on the teachable moments, which may
    vary at different times in a military career. What is pertinent
    to a new soldier shopping for his first car may not be relevant
    to a 20-year lifer contemplating buying a house. We will work
    on engaging our students and developing metrics to engage the
    effectiveness of what we have taught, and we will keep tweaking
    it until we get it right.
        In conclusion, the Office of Servicemember Affairs is
    already working hard to ensure that servicemembers and their
    families, who devote their lives to protecting our Nation, will
    have a strong advocate to help protect them from financial
    threats. We will work with the military, the public sector, and
    the business community toward the goal of every military family
    being a financially-educated family that is armed with the
    knowledge of how to avoid scams and poor financial decisions
    and willing and able to invest toward long-term financial
    goals.
        Thank you for the opportunity to testify before the
    Committee today and I welcome any questions that you may have
    for me.
        Senator Akaka. Thank you very much, Director Petraeus.
        This question is for all of the witnesses. A recent GAO
    report found that Federal financial literacy activities may be
    fragmented and recommended greater coordination of efforts. I
    would like to invite each of you to comment on this finding.
        Mr. Wright. Thank you for the question, Senator Akaka. It
    is pretty clear that financial literacy and education is
    conducted in a number of agencies across the Federal
    Government. The report that we commissioned by RAND actually
    found that there is very little duplication across those
    efforts, but they do happen in lots of different places. And as
    I said in my testimony, we actually feel that we are leveraging
    the unique expertise and functions and outreach to constituents
    that these different agencies have, and so it makes sense that
    the Department of Education would be trying to educate
    students, that the Department of Defense would be focused on
    military readiness, that the FDIC would be providing the Money
    Smart curriculum that can be used by educators across the
    country, and that the SEC, for example, is focused on investor
    education.
        As a Commission, we need to continue to have our efforts
    focused on making sure there is not duplication in that. We
    need to leverage things like the mymoney.gov website to provide
    a sole location for people as an entry point to find out
    information, unbiased information that the Federal Government
    provides around curriculum and as we learn in the future what
    works and what does not.
        We are still making efforts to try and really determine
    what works in terms of outcomes. It is easier to measure what
    the inputs are. It is much harder to measure what the outcomes
    are, particularly when you are talking about behavior change.
    And so the Financial Literacy and Education Commission actually
    has two very interesting subcommittees connected to this. One
    is that we now have a Research and Evaluation Subcommittee that
    is focused on talking about the research efforts that we are
    funding across the Federal Government and really trying to
    focus those efforts in on figuring out what truly does work,
    what is absolutely best, and then the other is a Financial
    Access Subcommittee which is focused on thinking about how the
    different agencies and touchpoints they have can help the
    unbanked and underbanked. Thank you.
        Senator Akaka. Thank you.
        Ms. Schock. Well, why don't I segue into what the SEC does.
    We are very unique in the fact that we are the only Federal
    agency that is charged with and focuses on investor education,
    and we think that because of the expertise that we have at the
    Commission--the people who wrote the rules work at the SEC, it
    is a very complex area--and so in order to distill these
    complex financial products and concepts into something that is
    meaningful for individual investors, that the SEC is best
    positioned for investor education.
        We do work through FLEC and we work with Federal agencies
    where we intersect. I talked about the joint alert that we did
    with the Department of Labor. They have oversight over 401(k)
    plans, but one of the products that was in there were these
    target date funds that we have jurisdiction over. So we worked
    together to put out this joint investor bulletin to talk about
    target date funds and what we saw that was happening with them.
        As far as working together with FLEC, we are on the
    Subcommittee for Research and Evaluation because we, too,
    believe that we need to have meaningful metrics in place to
    show that our messages do have consequences and behavior
    change--positive behavior change is taking part as a part of
    those messages.
        Ms. Dann-Messier. Mr. Chairman, at the Department of
    Education, we really agree that we need to do a better job of
    coordinating our efforts and really target our resources and do
    fewer things better, and that is why we are proposing to
    consolidate the seven narrow programs, including some of our
    financial literacy efforts, into a much larger program. But we
    will keep a focus on economic and financial literacy, but we
    really think that it is just good Government policy, to do a
    better job of coordinating our resources.
        Senator Akaka. Thank you very much, Assistant Secretary
    Dann-Messier. Mrs. Petraeus.
        Mrs. Petraeus. Mr. Chairman, I do agree certainly that
    coordination and consultation is very important. I will
    reiterate that the Director of the Consumer Financial
    Protection Bureau will be the Vice Chairman of the FLEC, so our
    intent is to work very closely with them to be sure that we
    coordinate our efforts and that we consult with them.
        From my office specifically, we are authorized to enter
    into agreements with the Department of Defense to be sure that
    we are working in tandem and that we are coordinating what we
    do, and I have already--I mentioned that I had spoken with the
    Deputy Assistant Secretary of Defense for Military Community
    and Family Policy, but I have also spoken with his counterpart
    with Wounded Warrior Care and Transition Policy so we can also
    coordinate with that office for the needs of transitioning
    servicemembers.
        Senator Akaka. This question is for Assistant Secretary
    Dann-Messier. I have worked on the Excellence in Economic
    Education Program (EEE), which funds financial education
    projects in classrooms. The Hawaii Council on Economic
    Education is one of many subgrant recipients who have done
    great work with these funds. Additionally, the Native Financial
    Education Coalition has indicated that EEE can help meet the
    need for increased financial literacy in Native communities.
    For example, a EEE subgrant enabled a study that examined the
    financial literacy of Native American high school students in
    Montana, New Mexico, and South Dakota. Would you please discuss
    how EEE funding has benefited Native communities and how it can
    help reduce the disparity in Native and non-Native financial
    literacy.
        Ms. Dann-Messier. Certainly, Mr. Chairman. I am happy to do
    that. I just also wanted to remind you that I was formerly the
    President of a nonprofit adult and family learning center in
    Providence, Rhode Island, and we served the underserved and
    low-income communities, and I know from my own professional and
    personal experience the importance of financial literacy. So
    the initiative certainly from the Excellence in Economic
    Education Program and its work with Native communities has been
    very, very, very important to make sure that they have all the
    financial literacy information that they need to fully
    participate in our society.
        We think those efforts need to continue and we need to
    focus on reaching all of the underserved populations across our
    country so that they are not harmed by predatory practices and
    really can save enough money for themselves and their families,
    whether it is to buy a home or to go on to college. So we very
    much support those efforts and plan to continue those efforts
    and really understand the importance of embedding financial
    literacy in all of our educational programs so that everybody
    has that knowledge and information. Thank you.
        Senator Akaka. Thank you very much for your response.
    Senator Johnson.
        Senator Johnson. Thanks, Mr. Chairman.
        I would like to thank all of you for your efforts here
    again. This is important. In particular, Mrs. Petraeus, I would
    really like to thank you for the sacrifice you and your family
    and your husband have made to this Nation. I had the real
    privilege of meeting your husband on a trip to Afghanistan, so
    it is nice to meet you here.
        Just a quick question to all of you. I will throw it out
    there. As I was questioning Mr. Dodaro, were you wanting to
    answer any of those questions at all? I will first make that
    offer. [No response.]
        OK, not a problem. Certainly, I was trying to get to the
    bottom of what does this cost. I am hoping maybe within your
    agencies you have some sort of feel, so I will just kind of go
    down the line. Can you tell me approximately what, for example,
    the Department of Education is spending on its financial
    literacy efforts?
        Ms. Dann-Messier. Well, I can point to two initiatives. We
    are spending $1.7 million on a new initiative. We are giving
    funds to the State of Tennessee to develop teacher preparation
    programs and teacher materials for students. We also are
    spending $1.4 million on the Excellence in Economic Education,
    so that is $3.1 million. I am sure there is additional funding,
    but I do not have the exact figure. I am happy to get it back
    to you, Senator Johnson, but those are the two examples I can
    give you.
        Senator Johnson. So are you kind of thinking it is maybe in
    the millions? Tens of millions? I mean, is it a relatively
    small amount in the Department of Education, or----
        Ms. Dann-Messier. I would rather get back to you with that
    figure so I do not mislead you. Thank you.
        Senator Johnson. OK. Ms. Schock.
        Ms. Schock. If we include staffing costs as well as program
    costs for all of our programs--that includes handling investor
    complaints and questions, educational outreach, and then having
    input into policy matters at the SEC--we are under $10 million
    a year.
        Senator Johnson. OK.
        Mr. Wright. In the Office of Financial Education and
    Financial Access, in 2010, we spent $2.1 million. The Financial
    Education Counseling Pilot Program was a $4.3 million grant
    program. But it is also hard to tell some of the numbers
    because you take things like our Direct Express program and
    electronic Treasury efforts and that has a financial education
    component and actually over 5 years will save the Government
    $500 million. So there are different numbers and it depends on
    how much you want to be focused specifically on education
    within a program versus the other components of the program.
        Senator Johnson. OK.
        Mrs. Petraeus. Since we are a new agency, I obviously have
    no figures for you. We are just standing up and we are in the
    process of building our budget, so I have no figures at this
    time.
        Senator Johnson. OK. Mrs. Petraeus, I would kind of like to
    use you to get into some other issues, just in terms of you
    standing up this program. I particularly appreciate the fact
    that you said you do not want to reinvent the wheel here. So as
    you are trying to determine, first of all, what needs to be
    taught, I mean, have you already gone down the list within the
    military in terms of these are the core competencies, these are
    the subject areas that need to be taught to our troops?
        Mrs. Petraeus. No, we are not at that point yet. Right now,
    again, we are an agency in the process of being created. What I
    am doing right now is really listening and talking to the
    military very informally and hearing often from the mouths of
    servicemembers themselves and their spouses what they think is
    important.
        Senator Johnson. Do you have an idea of where you are going
    to go to access curriculum that is already developed or the
    best practice teaching methods for some of these things?
        Mrs. Petraeus. I would say that we are in the process of
    hiring staff, and one person within my office will be someone
    to look at those programs more closely to see exactly what are
    the ones that we think that will work the best with the
    military. So right now, we are not, again, at that point where
    we have a road map, if you will, of where we are going to go.
        Senator Johnson. OK. Mr. Wright, you mentioned mymoney.gov.
    Is that the kind of a go-to site that could provide Mrs.
    Petraeus with that kind of information?
        Mr. Wright. That site has many links to the various
    Government programs, including the military's current website
    about providing financial education to the troops. We are in
    regular conversation with the Consumer Financial Protection
    Bureau implementation team about as they are standing up the
    agency and figuring out what direction they want to go in and
    how they are going to do that, we are in constant conversation
    to make sure there is not duplication.
        So my money does provide an opportunity for a starting
    point and there are curriculum out there. I think there still
    will be efforts within each part of the CFPB to figure out, do
    those existing curriculums really meet their constituents'
    needs.
        Senator Johnson. Is that a kind of goal of the overall FLEC
    in terms of developing a centralized clearinghouse for these
    best practice teaching methods?
        Mr. Wright. Yes. There is actually--part of mymoney's
    future upgrades is a research clearinghouse which would
    actually be, as this research comes online about what is being,
    what works most effectively at changing behaviors, the mymoney
    will have a clearinghouse that provides a central location for
    people, both educators and individuals as well as researchers,
    to go and see what research is out there and what actually
    works.
        Senator Johnson. OK. So that is research--would that be the
    same thing, though, as a clearinghouse for best practice? I
    mean, this is how you teach taking out a mortgage in an
    efficient manner----
        Mr. Wright. Well, best practice, I think, needs to be
    connected to research, right, because you do not want to--you
    are not just testing whether the person gets the answer right
    about how to do that. You actually want to see, do they carry
    out the behavior change. So those two are linked and best
    practice--figuring out what best practice is should be driven
    by quality evaluation and research.
        I would kind of like to ask, do you actually reach the
    targeted audience? I mean, on the one hand, in terms of
    education, it is pretty obvious. You teach in the schools. In
    the military, you taught to the troops. The SEC has websites in
    terms of investors being able to go to. But when you start
    talking about things like teaching financial literacy to
    general consumers, to people that are shopping for a mortgage,
    I mean, is that not far more difficult to try and target and
    get information to those folks? I mean, what is the strategy
    behind that?
        Ms. Schock. We have adopted the strategy of going where the
    investors are already gathered. So instead of holding town hall
    meetings where we are picking up the cost and expense of trying
    to drive people to a meeting, we go to other conferences and
    events where we know that investors will be there who would be
    receptive to our message.
        Mr. Wright. We generally have a philosophy of trying to be
    relevant, timely, and actually connected to the product or
    decision that needs to be made. I think the Financial Education
    Counseling Pilot is a good example of this, trying to really
    work with prospective home buyers to educate them about the
    home purchase decision so that they make the--they improve
    their credit scores, they start budgeting, but also is focused
    on making that home purchase decision and figuring out if
    purchasing a home is the right thing for them. Sometimes it is
    the right thing, sometimes it is not. So relevant, timely, and
    connected to product and decision.
        Senator Johnson. OK. Well, again, thank you all for coming
    here.
        Senator Akaka, I am going to have to go to another
    appointment. Thank you very much for holding this hearing. This
    is, again, a very important subject, so aloha.
        Senator Akaka. Thank you so much for being a part of this
    hearing, Senator Johnson.
        Director Schock, I worked to include a provision in the
    Dodd-Frank Act that requires the SEC to conduct a study of
    financial literacy among retail investors and to work with FLEC
    to increase investor financial literacy. How has the study
    progressed thus far, and what steps must be taken to implement
    a strategy that brings about positive changes in investor
    behavior?
        Ms. Schock. We are very excited about the investor literacy
    study under Section 917 of the Dodd-Frank Act. We think that it
    will provide valuable data to the SEC as well as to our
    colleagues at the FLEC to help bring about more informed
    investment decisions.
        At this point in time, we have a plan in place. That
    project plan is ready to go. We also hope to publish
    information in the Federal Register for public comment
    regarding the best public and private efforts to educate
    investors. And then, also, we have been sort of doing a study
    of studies that have been done in the past.
        But I will be honest with you, Senator. It is a matter of
    funding at this point in time. We sort of are ready for gold
    level, silver level, or bronze level implementation of our
    project plan, and so if we have full funding for our study the
    way we would like to have it done, I think we would have a very
    robust study to submit to Congress in July 2012. Should the
    funding levels fall or if we do not have any additional money
    from our 2010 levels, that will impact the depth that we are
    able to do and we may end up doing a study of studies.
        Senator Akaka. Thank you.
        Director Wright, Title 12 of the Dodd-Frank Act was based
    on my Improving Access to Mainstream Financial Institutions
    Act. Title 12 authorizes initiatives to improve financial
    access and empower the unbanked and underbanked. Will you
    please discuss the status of implementing Title 12. What
    challenges must be overcome to expand financial access for the
    underbanked?
        Mr. Wright. Thank you for that question, Senator Akaka. We
    are right now in the process of planning out the Bank On USA
    Program, which is our signature program under Title 12 that
    uses those authorities. The President has money in the 2011
    budget as well as the 2012 budget for Bank On USA, and right
    now, we are currently setting up the infrastructure to move
    forward with that program, but we will not be able to fully
    implement it until we have appropriations.
        So currently, we are working on making sure that we have in
    place the robust data gathering tools that we can use and work
    with banks figuring out ways to make sure that communities have
    the right tools to assess how they should best undertake the
    Bank On Program, as well as creating websites where
    participants in the Bank On USA Program can share information
    and knowledge about best practices. But really, to move forward
    with both Bank On USA and any efforts around small dollar loan
    alternatives for predatory small dollar loans, we really need
    appropriations.
        Senator Akaka. My next question is for Director Petraeus.
    Individuals' financial literacy needs change continuously
    throughout the stages of their lives. How must financial
    education and advice change based on where servicemembers are
    in their careers?
        Mrs. Petraeus. Well, I think you are absolutely right.
    There are different teachable moments at different times. I
    think it is important that you do reach military personnel at
    the very beginning of their service. Sometimes the message can
    be as simple as, I always joke and say, that good-looking girl
    in the kiosk at the mall is not there to be your girlfriend.
    She is there to sell you something very expensive. Or, do not
    ask what my monthly payment is. Ask what is the total cost I am
    paying for this computer that I am buying, or this hot new car
    that I am buying. Later in a career, it may be a decision about
    buying a home or even a decision about whether or not to
    transition out of the military, and then there are going to be
    other things that need to be taught.
        We have heard from servicemembers themselves that just
    having it in basic training is not enough. Basic trainees are
    usually tired, stressed, not really focusing on what they are
    hearing. You need to have something in there, but then you need
    to continue it, at the basic non-commissioned officer course,
    the advanced non-commissioned officer course, some of the more
    senior schools. And a good way to reach people is to tell them,
    we need you to know this so you can teach your soldiers this,
    as well. Then they are very much more open to hearing that.
        So I think there are different approaches, different
    teachable moments, and we need to be sure we are teaching the
    right thing to the right group at the right time.
        Senator Akaka. I worked to establish the Office of
    Financial Education within the Consumer Financial Protection
    Bureau. The CFPB should have a consumer education focus. Please
    explain the relationship between FLEC, the CFPB, and Office of
    Financial Education. What role will the CFPB and OFE have in
    FLEC?
        Mr. Wright. So the Treasury Department will continue to be
    the chair of FLEC, and it is very intentional, as you know, in
    the legislation that the CFPB becomes the Vice Chair. And so we
    will continue to work very closely together to make sure that
    our efforts are coordinated and not duplicated between our
    offices as well as with the other FLEC members.
        The Treasury will continue to remain focused on
    coordinating the FLEC overall, taking advantage of its unique
    position to test out innovative products that connect education
    and access together, and the CFPB, as you said, will have a
    focus on really educating consumers, and it is still being
    determined, the best way to do that, as they stand up the
    office.
        Mrs. Petraeus. I will just add that we brought on
    yesterday, we now have an Associate Director for Education and
    Engagement, and her name is Gail Hillebrand. She has a long
    experience with Consumers Union, very experienced in consumer
    issues. Again, she just started yesterday or she might be
    sitting here talking to you instead of me.
        Senator Akaka. Assistant Secretary Dann-Messier, an
    increasingly common product on college campuses is the student
    loan debit or credit card. These loan cards may have high or
    hidden fees that harm student borrowers. How can we ensure that
    students fully understand the risks of these products?
        Ms. Dann-Messier. Mr. Chairman, it is really what we have
    been talking about all afternoon, and it is making sure that
    all our students have all the financial literacy information
    that they need in order to make wise and informed decisions.
    And so that is part of the--it should be part of their
    discussion with the financial aid officers and with all of the
    counseling staff at the universities and colleges as they are
    entering into the institution as part of the admissions
    process, that they are informed about what resources are
    available, what resources are there to assist them, and that we
    direct them to the resources that they can take full advantage
    of that will not take advantage of them. So it is really a part
    of the financial literacy and counseling that we think needs to
    be part of the admissions process into higher education.
        Senator Akaka. Director Schock, in order to bring about a
    positive change in investor behavior, we must provide investors
    with the tools and information they need to make informed
    decisions. My provision in the Dodd-Frank Act authorizes the
    Commission to require specific disclosures about investment
    products be made at the point of sale. What must be done to
    ensure that these disclosures are meaningful and effective?
        Ms. Schock. We fully agree with you that these disclosures
    need to be made in the best interest of investors, and the best
    interest is at the time before they actually make the purchase.
    The disclosure needs to be clear, simple, and meaningful at or
    before the time of the purchase by the individual investor.
        Unfortunately, Dodd-Frank sort of derailed that initiative
    at the SEC. We have not abandoned it, but we just have some
    other work that we need to get done on some set time lines. But
    we are still actively pursuing the point of sale disclosure
    because we do think that it is a meaningful product of what we
    need and that investors need.
        Senator Akaka. Mr. Wright, with Hawaii's high cost of
    living, home ownership is a challenge for many families. In
    order to educate prospective home owners and promote
    responsible home ownership, I authorized and secured funding
    for the Financial Education and Counseling Pilot Program. How
    will you measure and evaluate the success of these
    demonstrations in providing a strong model for home ownership
    education, and counseling?
        Mr. Wright. Yes, in Hawaii, we have provided a grant to the
    Council for Native Hawaiian Advancement, and we have worked
    with the CDFI fund to make sure that there are very clear
    outcome measures, so looking at things like changes in people's
    savings rates or their increase in credit scores and how that
    then helps them to make the decision around home purchase. Now,
    that is a 3-year grant, so we will be tracking that over time
    and actually working with GAO on that project to make sure that
    the evaluation is thorough and we understand the outcomes.
        Senator Akaka. Thank you. Director Petraeus, today's
    operational tempo means that servicemembers are gone for
    extended periods of time. Many spouses must assume full
    responsibility for managing the family's budget. What more must
    be done to ensure that spouses are prepared for this important
    task?
        Mrs. Petraeus. I think that is a very valid concern and a
    very good question. Many of the spouses are young and they may
    not have learned financial literacy at home, so it is important
    to reach out to them. I think the difficulty is, unlike the
    military member, you cannot order the spouse to come to class,
    but I think there are some things you can do.
        There is a great deal of success now reaching the spouses
    online. A lot of units have what is called a Virtual Family
    Readiness Group (FRG) when a unit deploys that is online and
    families use it because they are interested in getting the
    information about what the unit is doing overseas. In fact, as
    a military mother, I will tell you that I used the Virtual FRG
    for my son's unit while he was deployed to Afghanistan. And I
    think there is a possibility, maybe, to tie some financial
    education into that venue, where you might be able to reach the
    spouses who are not apt to come onto base and participate in
    activities, but truly need that assistance and that education
    on good, smart financial management, or at the very least,
    where to go for help.
        Senator Akaka. Mr. Wright, I authored the Taxpayer Abuse
    Prevention Act to increase safeguards against harmful refund
    anticipation loans. I am pleased that the IRS has eliminated
    the debt indicator and that regulators have acted against
    unsafe and unsound refund anticipation loan practices. I
    believe we must build on this progress and continue to empower
    taxpayers. How is Treasury working to improve financial access
    for low-and moderate-income taxpayers?
        Mr. Wright. We have a number of efforts. One is related to
    research, so we just released recently a report done by the
    Urban Institute in conjunction with the IRS that looks at the
    use of refund anticipation loans across a number of factors. As
    we look to provide alternatives to people to refund
    anticipation loans, we want to make sure that we do that in a
    way that does not harm them as refund anticipation loans are
    removed from the market. So that report and research is the
    first step.
        In addition, I think the IRS's effort to get rid of the
    debt indicator was a big step, and their ongoing efforts to
    license and require examination for preparers is also going to
    be very helpful in making sure that we have qualified
    preparers.
        In addition, Treasury has to provide, over time, choices
    for people at tax time. There are a couple examples of this
    already. One is the opportunity to put your tax refund into a
    savings bond to actually save at tax time. This is the second
    year that has been in effect and already the numbers show that
    people using that functionality is growing.
        And then, second, we are piloting a tax time account. We
    mailed out offers to 800,000 individuals across the country.
    People are enrolling in using that account and we will learn
    from that pilot to figure out the best way to provide an
    account in the future, integrate it into the tax return
    process. And that pilot and the study that will go along with
    that will be one of the factors to determine how best to do
    that and the timing under which to do it.
        And then the last thing is that we need to continue to make
    improvements to speed up the process for people to get their
    refunds. So the faster someone can get their refund, the less
    likely they are to need a refund anticipation loan and the less
    value a refund anticipation loan will have. I will say that we
    are optimistic that we will see the number of refund
    anticipation loans fall drastically because of some of the
    efforts that you mentioned around the debt indicator as well as
    the steps by the regulators.
        Senator Akaka. I want to thank all of our witnesses for
    being here today. Your testimony and your responses have been
    very valuable. I look forward to continuing to work with all of
    you as we seek to empower Americans to make informed financial
    decisions.
        The hearing record will be open for 1 week for additional
    statements or questions other members may have.
        I look forward to our continuing to make progress in
    financial literacy and that we will continue to celebrate this
    month of financial literacy. Thank you very much for your
    participation.
        The hearing is adjourned.
        [Whereupon, at 4:25 p.m., the Subcommittee was adjourned.]

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