[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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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
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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
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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.
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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.
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\1\ The prepared statement of Ms. Dann-Messier appears in the
appendix on page 50.
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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.
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\1\ The prepared statement of Ms. Schock appears in the appendix on
page 55.
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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.
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\1\ The prepared statement of Mr. Wright appears in the appendix on
page 63.
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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.
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\1\ The Report submitted by Mr. Wright appears in the appendix on
page 114.
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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.
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\1\ The prepared statement of Mrs. Petraeus appears in the appendix
on page 69.
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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.]
A P P E N D I X
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