Senate Hearing, 110TH Congress - Federal Government's Role in Empowering Americans To Make Informed Financial Decisions

S. Hrg.
110337
FEDERAL GOVERNMENTS ROLE IN

EMPOWERING AMERICANS TO MAKE
INFORMED FINANCIAL DECISIONS
HEARING
BEFORE THE
OVERSIGHT OF GOVERNMENT MANAGEMENT,

THE FEDERAL WORKFORCE, AND THE
DISTRICT OF COLUMBIA SUBCOMMITTEE
OF THE
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
APRIL 30, 2007
Available via http://www.access.gpo.gov/congress/senate
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii
TED STEVENS, Alaska
THOMAS R. CARPER, Delaware
GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas
NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana
TOM COBURN, Oklahoma
BARACK OBAMA, Illinois
PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri
JOHN WARNER, Virginia
JON TESTER, Montana
JOHN E. SUNUNU, New Hampshire
MICHAEL L. ALEXANDER, Staff Director
BRANDON L. MILHORN, Minority Staff Director and Chief Counsel
TRINA DRIESSNACK TYRER, Chief Clerk
OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE, AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE
DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan
GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware
TED STEVENS, Alaska
MARK L. PRYOR, Arkansas
TOM COBURN, Oklahoma
MARY L. LANDRIEU, Louisiana
JOHN WARNER, Virginia
RICHARD J. KESSLER, Staff Director
EVAN CASH, Professional Staff Member
MATTHEW PIPPIN, Legislative Assistant (Senator Akakas Office)
JENNIFER A. HEMINGWAY, Minority Staff Director
THERESA PRYCH, Minority Professional Staff Member
EMILY MARTHALER, Chief Clerk
(II)
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CONTENTS
Opening statements:
Senator Akaka ..................................................................................................
Page
WITNESSES
MONDAY, APRIL 30, 2007
Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation (FDIC) .......
Morgan Brown, Assistant Deputy Secretary for Innovation and Improvement,
U.S. Department of Education ............................................................................
Dan Iannicola, Jr., Deputy Assistant Secretary for Financial Education, U.S.
Department of the Treasury ................................................................................
Robert F. Danbeck, Associate Director, Human Resources Products and Services, Office of Personnel Management ................................................................
Yvonne D. Jones, Director, Financial Markets and Community Investment,
U.S. Government Accountability Office ..............................................................
Robert F. Duvall, President and Chief Executive Officer, National Council
on Economic Education ........................................................................................
Stephen Brobeck, Executive Director, Consumer Federation of America ...........
ALPHABETICAL LIST
OF
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WITNESSES
Bair, Sheila C.:

Testimony ..........................................................................................................
Prepared statement ..........................................................................................
Brobeck, Stephen:
Testimony ..........................................................................................................
Brown, Morgan:
Testimony ..........................................................................................................
Danbeck, Robert F.:
Testimony ..........................................................................................................
Duvall, Robert F.:
Testimony ..........................................................................................................
Iannicola, Dan Jr.,:
Testimony ..........................................................................................................
Jones, Yvonne D.:
Testimony ..........................................................................................................
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APPENDIX
Background ..............................................................................................................
North American Securities Administrators Association, Inc., prepared statement ......................................................................................................................
Responses to questions for the Record from:
Mr. Iannicola .....................................................................................................
Mr. Brobeck .......................................................................................................
Copy of Title V from Public Law 108159 .............................................................
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(III)
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FEDERAL GOVERNMENTS ROLE IN

EMPOWERING AMERICANS TO MAKE
INFORMED FINANCIAL DECISIONS
MONDAY, APRIL 30, 2007
U.S. SENATE,
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT
MANAGEMENT, THE FEDERAL WORKFORCE,
AND THE DISTRICT OF COLUMBIA,
OF THE COMMITTEE ON HOMELAND SECURITY
AND GOVERNMENTAL AFFAIRS,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:30 p.m., in Room
SD342, Dirksen Senate Office Building, Hon. Daniel K. Akaka,
Chairman of the Subcommittee, presiding.
Present: Senator Akaka.
OPENING STATEMENT OF CHAIRMAN AKAKA
Chairman AKAKA. The U.S. Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Oversight of
Government Management, the Federal Workforce, and the District
of Columbia hearing will come to order. I call this Subcommittee
to order. It is very appropriate that this hearing be conducted
today, on the last day of Financial Literacy Month.
My interest in financial literacy dates back to when my fourth
grade teacher required me to have a piggybank. We were made to
understand how money that was saved a little at a time can grow
into a large amount, enough to buy things that would have been
impossible to obtain without savings.
My experience with a piggybank taught me important lessons
about money management that have stayed with me throughout
my life. More people need to be taught these important lessons so
that they are better able to manage their resources.
Americans of all ages and backgrounds face increasingly complex
financial decisions as members of our Nations workforce, as managers of their families resources, and as voting citizens. Many find
these decisions confusing and frustrating because they lack the information and skills necessary that would enable them to make
wise personal choices about their finances.
A sample of economic statistics presents some disturbing realities. Consumer debt exceeded a record $2.4 trillion in 2006, and
household debt reached a record $12.8 trillion. Americans rate of
personal savings as a percentage of disposable personal income de(1)
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clined from minus 0.4 percent in 2005 to minus 1.1 percent in
2006, making 2005 and 2006 the only years since the Great Depression when this savings rate has been negative.
In a 2006 survey, Jump Start Coalition for Personal Financial
Literacy found that high school seniors scored an average of only
52.4 percent on an exam testing knowledge of basic personal finance. The Retirement Confidence Survey conducted by Employee
Benefit Research Institute found that only 42 percent of workers or
their spouses calculated how much they need to save for retirement, down from 53 percent in the year 2000.
Millions of working families are susceptible to predatory lending
because they are left out of the financial mainstream. The unbanked rely on alternative financial service providers to obtain
cash from checks, pay bills, send remittances, utilize payday loans,
and obtain credit. Many of the unbanked or low- and moderate-income families can ill afford to have their earnings diminished by
reliance on these high-cost and often predatory financial services.
In addition, the unbanked are unable to save securely to prepare
for the loss of a job, a family illness, a downpayment on a first
home, or education expenses. Without this sufficient understanding
of economics and personal finance, individuals will not be able to
manage their finances appropriately, evaluate credit opportunities,
and successfully invest for long-term financial goals in an increasingly complex marketplace.
It is essential that we work toward improving education, consumer protection, and empowering individuals and families
through economic and financial literacy in order to build stronger
families, businesses, and communities.
My colleagues and I have worked on several important initiatives
for financial literacy. My legislation, the Excellence in Economic
Education Act, or the EEE Act, was enacted as part of the No
Child Left Behind Act. The EEE is intended to fund a range of activities such as teacher training, research and evaluation, and
school-based activities to further economic principles. I have obtained funding of approximately $1.5 million for the EEE Act each
year, in each fiscal year since fiscal year 2004. I will continue to
work to fund this important Federal program.
In the year 2003, the Fair and Accurate Transactions Act created
the Financial Literacy and Education Commission. The Commission is tasked with reviewing financial literacy and education efforts throughout the Federal Government, identifying and eliminating duplicative financial literacy efforts, and coordinating the
promotion of Federal financial literacy efforts, including outreach
partnerships between Federal, State, and local governments, nonprofit organizations, and enterprises. The Commission also established a website, MyMoney.gov, and a toll-free hotline to serve as
a clearinghouse and provide a coordinated point of entry for information about Federal financial literacy and education programs,
grants, and other information the Commission deems appropriate.
I worked with my colleagues on this Subcommittee to bring
about the enactment of the Thrift Savings Plan Open Elections Act
of 2004. This mandated that the Office of Personnel Management
develop and implement a retirement financial literacy and education strategy for Federal employees. During todays hearing, we
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will learn more about the effectiveness of our Federal financial literacy efforts and what must be done to improve financial literacy
throughout the Nation. Greater financial literacy will result in
stronger families, better functioning markets, and a more secure
future for our country.
I thank our witnesses for being with us today, and I look forward
to your testimony and to working with all of you towards this very
important goal.
In our first panel, it is my pleasure to welcome the Chairman of
the Federal Deposit Insurance Corporation, Sheila Bair. I know we
share a deep commitment to improving the financial literacy of our
country. I have greatly appreciated her outstanding financial literacy efforts during her service at the Department of the Treasury,
the FDIC, and at the University of Massachusetts at Amherst.
Chairman Bair, it is the custom of this Subcommittee to swear
in all witnesses, so will you please stand and raise your hand and
take the oath? Do you swear that the testimony you will give before
this Subcommittee is the truth, the whole truth, and nothing but
the truth, so help you, God?
Ms. BAIR. I do.
Chairman AKAKA. Thank you very much. Let the record note
that the witness responded in the affirmative.
Although the statements are limited to 5 minutes, I want all of
our witnesses to know that their entire statement will be included
in the record.
Chairman Bair, will you please proceed with your statement?
TESTIMONY OF SHEILA C. BAIR,1 CHAIRMAN, FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC)
Ms. BAIR. Chairman Akaka, thank you very much. I appreciate

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

Thank you for the opportunity to appear before you today to discuss the important topic of financial literacy and what the U.S. Department of Education is doing to address this issue.
In recognition of April being Financial Literacy Month, Secretary
Spellings last week joined the heads of other Federal agencies, as
well as business and nonprofit leaders at the White House, to, in
the words of the President, make sure that the Federal effort toward financial literacy is well coordinated with the private sector.
The first program I want to talk about is the Excellence in Economic Education (EEE) program that you earlier made reference
to, Mr. Chairman.
The EEE program is administered by the Office of Innovation
and Improvement, which I head. This program promotes efforts to
increase the economic and financial literacy of elementary and secondary students. The objectives of the program are to: one, increase
students knowledge of and achievement in economics; two,
strengthen teachers understanding of and competence in economics; three, encourage economic education research and development; four, assist States in measuring the impact of education in
economics; and, five, leverage and expand increased private and
public support for economic education partnerships at the national,
State, and local levels.
Under the statute, the Department is authorized to award one
competitive grant to a national nonprofit educational organization
whose primary mission is to improve the quality of student understanding of personal finance and economics. The grantee must
subgrant 75 percent of its grant funds to State or local educational
agencies and State or local economic, personal finance, or entrepreneurial education organizations. The subgrantees must work in
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partnership with other organizations that promote, among other
things, personal finance education and economic development.
Over the 3-year life of the program, the Department has awarded
almost $4.5 million in grant funding to the National Council on
Economic Education (NCEE), who you will be hearing from in the
next panel of witnesses. During that time NCEE has implemented
a variety of initiatives designed to improve financial literacy in our
schools. NCEEs mission is to promote economic and financial literacy for all students in grades K12 through its network of State
councils and university-based centers, by training thousands of
teachers who will reach millions of students. NCEEs project activities are intended to help students to develop the skills they need
to become knowledgeable consumers, savers, investors, and effective participants in a global economy.
Through the Excellence in Economic Education Program, NCEE
has awarded 310 subgrants totaling nearly $3.35 million to State
and local education agencies as well as State and local organizations that provide economic, personal finance, or entrepreneurial
education programs. To ensure greater cost-effectiveness and corporate community involvement, subgrantees are required by the
Excellence in Economic Education program statute to match their
Federal funding dollar for dollar.
My office is in the process of measuring the performance of the
grantee by determining the percentage of students and teachers
trained under the project that demonstrate an improved understanding of personal finance and economics as compared to similar
students whose teachers have not had the training provided by this
project. We expect to have baseline information by the end of the
current fiscal year and comparison data a year later.
With regard to the future of the EEE program, the Presidents
budget requests no funding for fiscal year 2008, consistent with the
Admistrations policy of eliminating small categorical programs
that have limited national impact and reallocating these funds to
high priorities. Districts that wish to implement economic education activities, however, can use funds provided under other Federal programs to do so. For example, the Improving Teacher Quality State Grants program supports efforts to ensure that all teachers of core academic subjects, including economics, are highly qualified, so funding under that program may be used for professional
development activities in economics education.
I want to say a word about the Financial Literacy and Education
Commission. The Department of Education also continues to work
in partnership with the Financial Literacy and Education Commission in its efforts to improve financial literacy in our country. Earlier this year, the Departments of Education and the Treasury
cohosted a 2-day Kindergarten through Postsecondary Financial
Education Summit. Attendees included a diverse group representing educational agencies and foundations, banking and investment institutions, nonprofit organizations, and private corporations. The focus of the summit was to engage public and private financial education practitioners in a dialogue to discuss innovative
strategies to promote the integration of financial education into the
core curriculum.
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In closing, let me once again thank the sUBCommittee for inviting me to speak today. We will continue to monitor the effectiveness of our grant to the NCEE and to work with the Department
of the Treasury on future financial literacy initiatives.
Thank you, Mr. Chairman. I would be happy to take any questions.
Chairman AKAKA. Thank you very much for your statement, Mr.
Brown. Mr. Iannicola.
TESTIMONY OF DAN IANNICOLA, JR.,1 DEPUTY ASSISTANT
SECRETARY FOR FINANCIAL EDUCATION, U.S. DEPARTMENT
OF THE TREASURY
Mr. IANNICOLA. Good afternoon, Chairman Akaka. Thank you for

this opportunity to appear before you today to talk about the important issue of financial literacy in America. Mr. Chairman, your
leadership on this issue stretches back several years, and I commend you for your early recognition of financial literacy as an area
of national concern.
I would like to briefly discuss the financial literacy issue we are
faced with and then discuss the Federal responses to that issue.
Our robust marketplace of financial products and services has
given Americans more options than ever before on activities such
as investing, financing a home, or obtaining other consumer credit.
Additionally, the steady migration from defined benefit plans to defined contribution plans has given people even more decisions to
make about retirement. It is as if every American has woken to
find himself or herself promoted to the position of CFO of his or
her own household. Are we ready for the job? And if not, how do
we address the new reality that our economic choices have simply
outpaced our financial knowledge?
The answer, of course, is financial education. Only when we
learn more about our money will we be able to move forward confidently in the modern financial marketplace.
The Fair and Accurate Credit Transactions Act of 2003 established a 20-agency group called the Financial Literacy and Education Commission and named the Secretary of the Treasury as
Chair of the Commission. The law required the group TO produce
a website, a hotline, a multimedia campaign, and a national strategy. I will describe progress on each of these projects.
In October 2004, the Commission launched MyMoney.gov, a onestop shop for Federal financial education information which is
available in English and Spanish. The site has 399 links and has
had 1.7 million hits. Also in October 2004, the Commission
launched a toll-free hotline called 1888MyMoney, which is available in English and Spanish and has received 18,000 calls. The
multimedia campaign is well underway and will be launched in the
fall of 2007.
The FACT Act also required the Commission to develop a national strategy for financial literacy. In April 2006, the Commission
released the document entitled Taking Ownership of the Future.
Each of the strategys 13 chapters end with numbered calls to ac1 The
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tion. These calls to action are milestones for the Commission which
allow us to measure its performance.
I will give a chronological summary of progress on the calls to
action.
In April 2006, the Small Business Administration completed Call
to Action 32 by adding retirement training tools for small businesses to MyMoney.gov, and the Treasury Department completed
Call to Action 52, with the release of an identity theft DVD. Sixty
thousand of these DVDs were subsequently distributed.
In July 2006, and following Call to Action 21, the Departments
of Housing and Urban Development and the Treasury Department
cohosted a homeownership roundtable. And in August 2006, Call to
Action 122 was completed when GSA and the Treasury Department finished the first survey of Federal financial education programs and resources.
As of December 2006, and as part of Call to Action 62, the Federal Reserve Banks and the Treasury Department converted threequarters of a million paper check benefit recipients to direct deposit
enrollees.
Under Call to Action 63, the Department of Health and Human
Services implemented a public education campaign which helped to
enroll more than 1.4 million beneficiaries in Medicares Part D program so they could take advantage of the new drug benefit.
In February 2007, as mentioned by Mr. Brown, the Departments
of Education and the Treasury cohosted a 2-day summit on youth
financial education as part of Call to Action 101.
In March 2007, under Call to Action 81, the third of four regional summits on the unbanked occurred in Seattle. Earlier summits occurred in Chicago in May 2006 and in Edinburg, Texas, in
December 2006. These events were the result of a partnership with
many financial institution regulators.
Also in March 2007, the Treasury Department hosted a financial
literacy roundtable focused on Native populations. And just last
week, Call to Action 11 was completed when the Treasury Department launched a public service announcement campaign promoting
the MyMoney website.
In December 2006, the Government Accountability Office issued
a report on the Commission. The Commission welcomed the insights of GAO. As part of the Commissions statutorily mandated
annual review of the strategy, the Commission incorporated many
of the GAO recommendations into its 2007 strategy revisions, including defining the terms financial education and financial literacy; committing to conduct a usability study and a customer satisfaction survey on the MyMoney website; and committing to have
an independent review of Federal financial education programs and
resources.
Last, GAO recommended that the Commission work closely with
private entities, State, and local governments, which was accomplished earlier this month when the Treasury Department and the
Office of Personnel Management completed Call to Action 125, by
establishing the National Financial Education Network of Federal,
State, and local governments.
As we move forward, the Commission will be implementing the
remaining calls to action in the National Strategy.
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I hope this discussion has given you a useful overview of the
Commissions work. We hope that through our emphasis on increased financial literacy people gain the skills to make better decisions and, therefore, live better lives.
Thank you, and I look forward to your questions.
Chairman AKAKA. Thank you very much, Mr. Iannicola, for your
statement.
Mr. Danbeck, would you please proceed with your statement?
TESTIMONY OF ROBERT F. DANBECK,1 ASSOCIATE DIRECTOR,
HUMAN RESOURCES PRODUCTS AND SERVICES, OFFICE OF
PERSONNEL MANAGEMENT
Mr. DANBECK. Good afternoon, Mr. Chairman. It is my pleasure

to be here today to outline the important work the Office of Personnel Management is doing to ensure Federal employees are
ready for retirement. OPM is committed to educating Federal employees about the need for retirement savings and investments and
providing information on how to plan for retirement, including how
to calculate the retirement savings and investments needed to meet
their retirement goals. As part of that commitment, we were
pleased to participate in Financial Literacy Day on Capitol Hill last
week, where we provided information about the various benefit programs available to Federal employees and had experts available to
answer attendees questions. We also invited representatives from
the Thrift Savings Plan (TSP) to join us, thereby providing attendees with additional resources to discuss this important facet of
their retirement benefits.
As you know, the Thrift Savings Plan is a Federal Governmentsponsored retirement savings and investment plan open to Federal
civilian employees and to members of the uniformed services. The
TSP offers savings and tax benefits comparable to what many private corporations refer to as 401(k) plans. We strongly encourage
all eligible Federal employees to take advantage of TSP as a means
of preparing for their future. Due to your leadership, Congress took
steps to help make Federal employees more aware of the opportunities available to them through the TSP when it passed the Thrift
Savings Plan Open Elections Act of 2004. The Act directed OPM
to develop a strategy to provide employees information on how to
plan for retirement and how to calculate the retirement investment
needed to meet their retirement goals.
OPM is doing this through a strategy based on an education
model we call Retirement Readiness NOW. The model focuses on
the outcome of our retirement financial education programs to provide employees information on how to plan for retirement and how
to calculate retirement investments needed to meet their retirement goals.
Retirement readiness combines basic information about the benefits provided by the government, as an employer, and the broader
financial education needs of employees. Rather than being a nearretirement event, the retirement readiness model considers retirement financial literacy and education as a career-long process. The
model incorporates the broad range of information employees need
1 The
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to help them make informed retirement planning decisions. It also
recognizes that these needs change as a person moves through his
or her career.
Our Retirement Readiness NOW model takes a total balanced
approach to planning that covers:
Networking Engagementfinding enjoyable challenges, connecting with other people in meaningful activities such as volunteer work, or even exploring a new career;
Overall Healthstaying as healthy as you can for however long
you live; and understanding the aging process and how best to approach health care such as preventative and disease treatment;
And, finally, Wealthpreparing financially to have sufficient income to support your own standard of living in retirement.
OPM has three key roles in retirement planning: Capacity, Coordination, and Catalyst. Building capacity means providing training and tools to agency benefits officers so that they can help employees understand their benefits and identify their financial education needs.
OPMs Retirement System Modernization (RSM) project will provide employees with tools that for the first time ever will allow
them to model their future retirement benefits based on a complete
set of their actual Federal employment information. RSM modeling
tools will include a web-based application that will contain personalized content and decision support, enabling employee self-service
access 24 hours a day, 7 days a week, by telephone or via a web
interface. The RSM tools will allow a one-stop experience for employees to initiate changes to their retirement benefits. These capabilities will be available beginning February 2008.
Another important step we have taken is the development of a
partnership with the American Savings Education Council of the
Employee Benefits Research Institute. Through this partnership,
we have developed the Federal Ballpark Estimater, which is based
on the widely-used American Savings Education Council Ballpark
Estimater, and our Estimater will go live shortly.
However, OPM and agencies cannot provide employee retirement
readiness without the direct involvement of the employees themselves. Employees must take advantage of opportunities provided
and must assume responsibility for taking steps to meet their own
retirement goals. Our responsibility, and one we work on daily, is
to provide as many tools as possible so that folks have this information as they near retirement.
OPM also is very proud of the active role it has taken as a member of the Financial Literacy and Education Commission. We were
on the national strategy working group and earlier this month cohosted with the Department of the Treasury the first meeting of
the National Financial Education Network. This clearinghouse will
not only serve as a valuable resource for State and local governments, it will identify a rich array of resources agency benefits officers can use to explain their retirement readiness education program for Federal employees.
I appreciate this opportunity to testify before the Subcommittee
on this very important issue. I will be glad to answer any questions
you may have.
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Chairman AKAKA. Thank you very much for your statement, Mr.
Danbeck.
Ms. Jones, will you please proceed with your statement?
TESTIMONY OF YVONNE D. JONES,1 DIRECTOR, FINANCIAL
MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. JONES. Mr. Chairman, I appreciate the opportunity to discuss how the Financial Literacy and Education Commission developed the National Strategy for Financial Literacy. My comments
are based on a report that GAO issued in December 2006 that assessed the Commissions effectiveness. Today I will discuss how the
Commission developed a national strategy to promote financial literacy and education, implemented its website and telephone hotline, coordinated Federal financial literacy efforts, and promoted
partnerships among government, nonprofit, and commercial organizations.
First, the National Strategy includes a series of recommendations presented as calls to action. The calls to action are largely descriptive, not strategic, and mainly describe existing programs.
Consequently, most Federal and nonprofit agencies we interviewed
said that the strategy was unlikely to affect their financial literacy
and education efforts.
Based on our review, we recommended that the Commission include in the strategy concrete definitions for financial literacy and
financial education, clear and specific goals and performance measures, actions needed to accomplish the goals, a description of required resources, and a discussion of the appropriate roles and responsibilities for Federal agencies and other organizations.
The Treasury Department, as Chair of the Commission, responded that the Commission is a new entity and that the strategy
is largely a blueprint to provide general direction. Also, the strategy will be updated annually.
Additionally, in its April 2007 report to the Congress, the Commission partially responded to our recommendations by including
definitions for financial literacy and financial education, as Mr.
Iannicola mentioned.
The Commission also established the MyMoney website that connects consumers with close to 400 Federal financial English language websites and over 40 similar sites in Spanish. Representatives of financial literacy organizations generally said that the site
is effectively serving its purpose. Website usage has been growing
and reached 76,000 visits in March 2007.
However, we recommended that the Commission conduct
usability tests and measure customer satisfaction. Last month, the
Commission informed Congress that it would undertake these evaluations by the second quarter of 2009.
Consumers can also use the telephone hotline the Commission
established to order a free toolkit of English and Spanish language
financial literacy publications from several Federal agencies. But
we found that the number of calls to the hotline have been limited:
526 calls in March 2007.
1 The
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The Commission was also required by law to develop a plan to
improve Federal agency coordination. The Commission created a
single Federal focal point, but it faced challenges because of the
agencys differing missions, its limited staff and funding, and the
lack of legal authority to compel agencies to take action.
The Act also tasked the Commission with identifying areas of duplication and overlap among Federal financial literacy activities
and with reviewing the effectiveness of these activities. However,
the Commissions reviews relied largely on agency self-assessments. We recommended that the Commission provide for independent evaluations by a disinterested party, which the Commission has said it will do by 2009.
To promote partnerships between Federal agencies and State
and local governments as well as with the nonprofit and private organizations, the Commission has taken a number of steps, including public meetings and outreach events. But the impact of these
steps is unclear.
Our report recommended that the Commission explore additional
ways to cultivate partnerships with nonprofit and private organizations. For example, enhancing cooperation with State and local governments is particularly important given the crucial role the school
districts have in improving financial literacy. Last month, as Mr.
Iannicola said, the Commission held the first meeting of the National Financial Education Network, one of whose goals is to create
a dialogue on financial education.
We recognize the significant challenges confronting the Commission, notably the inherent difficulty of coordinating the efforts of 20
Federal agencies. Given the small number of the staff the Commission has and its limited funding, we believe that early efforts undertaken by it represent some positive first steps. At the same
time, more progress is needed if we expect the Commission to have
a meaningful impact on improving the Nations financial literacy.
Mr. Chairman, this concludes my prepared statement. I would be
pleased to respond to any questions that you may have.
Chairman AKAKA. Thank you very much, Ms. Jones, for your
statement.
Mr. Iannicola, in your statement, I was glad to hear of the activities and the programs that you have and learn that there has been
some coordination among Federal agencies as well.
In fiscal year 2005, $1 million was appropriated for the development and implementation of the National Strategy. How have
these resources been spent?
Mr. IANNICOLA. Mr. Chairman, we did receive that appropriation
and put it to good use. Roughly $200,000 of that appropriation was
put towards the actual production of the National Strategy itself,
which includes putting together transcripts from six public meetings we had used to get comments from organizations. That occurred over several months. And then we also spent a fair amount
of money on translating the documents into Spanish so that more
people could access it. We hired some professional editors to help
make it more clear. In addition there were designing, printing, and
distribution costs, so all that totaled a little over $200,000.
The balance was put towards the development of a multimedia
campaign, which is also required under the FACT Act and called
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for under the strategy. And that totaled somewhere around
$700,000, and we have obligated those funds to a partnership with
Ad Council and an ad agency out of New York called Lowe Advertising. And we have been working with them on developing a
multimedia campaign, have gone through things like focus groups
and some early creative stages and hope to see that completed in
the fall of this year.
Interestingly, based on what we have been talking about, the target that we have decided on is young people and credit management, so that will be the thrust of that ad campaign.
Chairman AKAKA. Your Commission activities, as you mentioned,
have been ongoing. In a statement made by Ms. Jones, she indicated that effective national strategies should include discussions
of costs, the sources and types of resources needed, and where
those resources should be targeted.
Mr. Iannicola, what resources are needed to ensure that the
Commission can adequately fulfill its mandates?
Mr. IANNICOLA. Well, presently, under our situation, we have
found that the coordination called for by the FACT Act, working together with the 20 agencies has provided us enough synergy such
that we have been able to add value without having to add resources. And right now that is where we still are. We believe we
can accomplish the mandates of the statute and the calls to action
under the National Strategy with existing resources.
Chairman AKAKA. Mr. Danbeck, as you know, a number of Federal agencies have campaigns intended to improve the financial literacy of their employees. Are there any specific efforts currently
being conducted by agencies that you consider to be models that
could be duplicated and implemented by other Federal agencies?
Mr. DANBECK. Well, the one that immediately comes to mind is
a program that is being currently coordinated by the Department
of Agriculture through its benefits officers, where it is using its Cooperative State Research Extension Centers to disseminate information from a financial planning/financial literacy perspective to
all of its constituents. So it is a rather creative program to use the
extension centers that are already in place for normal function, but
also to promote financial literacy.
We are also working with the Social Security Administration, the
Department of Justice, the Department of Health and Human
Services, and with our colleagues at the Treasury Department on
a number of financial fairs, where we go out and assist them in
providing the information on-site to their employees.
Chairman AKAKA. Ms. Jones, the GAO report recommends that
the Commission implement outcome measures to gauge its success.
Could you please give us some examples of outcome measures they
could use?
Ms. JONES. Mr. Chairman, it is difficult to[off microphone]
credit. They might also look at other things like a reduction in the
number of people who are unbanked.
Chairman AKAKA. Mr. Brown, in your testimony you state that
the NCEE could continue its financial education activities without
Federal support, solely relying on the Nations private institutions
which have business incentives to stress certain consumer behaviors. This greatly concerns me because I believe that although pri-
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vate resources can be useful, we have an obligation that our students have a basic understanding of economics and personal finance so that they can effectively participate in the modern economy.
Is your statement specifically aimed at the activities of the
NCEE? Or are you suggesting that there is no need for any Federal
funding for financial education and that our students should have
to depend on private efforts for their education?
Mr. BROWN. Thank you for your question, Mr. Chairman. My
comments are specifically with regard to the EEE program in that
because of the substantial increases the President has made in
such high-priority areas as Title I funding for low-income children
or School Improvement Grants, that to offset those substantial increases he has proposed not requesting funding in the next fiscal
year for a number of smaller programs.
Having said that, if the Congress were to decide not to fund the
EEE program, we would certainly be willing to work with NCEE
to give them information about other sources of funding that are
not specifically focused on economic education or financial literacy
but could be used, were State and local government entities aware
of them, for that. And then, as you mentioned, in my written testimony I suggested that there may be opportunities to raise additional funds in some areas of the private sector that have a strong
interest in financial literacy and consumer education among students as well.
So those would be two areas that we would be happy to work on.
Chairman AKAKA. Mr. Brown, in your testimony you stated that
the Administrations policy has been elimination of small categorical programs that have limited national impact and reallocating
these funds to high priorities, such as EEE. However, in 2006, our
Nation faced record consumer debt levels and negative savings
rates. Even in your testimony, you state that financial literacy has
gained attention as it has become more financial literacy has
gained attention as it has become apparent that improving financial education in our Nations schools is important to ensure that
young people are equipped with the necessary skills to make sound
financial decisions.
How does the Administration reconcile its policy with the pressing need for financial education? And what else is the Administration pursuing to address this issue?
Mr. BROWN. Mr. Chairman, I think it is important to note, as I
did in my testimony, that the President certainly thinks financial
literacy is enormously important, and he even hosted a meeting at
the White House just last week with the heads of both the Education Department and the Treasury Department, as well as leaders from the private and nonprofit sectors that are very interested
in financial education to highlight the importance of it. And so
through the efforts of a number of agencies, including the Treasury
Department and including the Commission that we have talked
about, I think there is a lotthere is certainly interest in making
sure that we promote financial education and work with a lot of
both public and private sector partners.
However, within the K12 education budget, in terms of the
Presidents proposal for that budget, he has made a decision that
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there are higher-priority areas for funding, again, Title I, School
Improvement Grants, IDEA, etc., and that to offset those, he did
not request funding for a number of smaller grant programs.
So it was simply in the issue of the K12 budget and the President setting priorities for his request to Congress, but it is not a
statement that he believes the Administration should have no involvement in the efforts to promote financial literacy.
Chairman AKAKA. Mr. Danbeck, I am concerned that not enough
people have planned and prepared for retirement. As a consequence, they will not be able to retire on their own terms. What
did OPM learn from the Retirement Readiness survey conducted
among Federal employees?
Mr. DANBECK. Thank you, Mr. Chairman. That is a very good
question.
What we found was that the majority of Federal employees, more
than eight out of ten, stated that they are on track relative to their
planning for retirement. And it is interesting because, if you look
at the private sector, the same survey questions would say approximately four out of ten workers in the private sector feel that they
are on track. So our Federal employees do feel that they are making progress towards their goal.
Only one in four workers feel they will have to work in retirement in another position, which is rather interesting. And only two
out of ten actually have a professional financial advisor who they
use to help them with retirement plans.
So it is a rather mixed bag, if you will, of responses.
Chairman AKAKA. Mr. Iannicola, I understand that the Department of the Treasury is planning to hold roundtables on financial
education topics that concern specific multicultural and multilingual populations. I am pleased that the first one in this series
was held in March 2007, and it was focused on Native populations.
What actions will be taken to address the financial literacy needs
of American Indian, Alaska Natives, and Native Hawaiians?
Mr. IANNICOLA. Well, thank you. We did have a productive meeting, and what we hope will come out of all these meetings are a
few things. First, we will have some sort of documentation, some
sort of White Paper to come out, so others can learn what happened there and what we want to see follow from it, even if they
were not able to attend. But what we have seen already is an impetus towards networking. We had at that meeting lenders, we had
those representing Native communities, as well as a whole host of
representatives across the Federal Government. Many parts of the
Federal Government touch native communities, and we found people who did not know who each other were and needed to. So those
connections were made right away.
We hope to have continued connections of those sorts and continue an informal network to make sure the assets and the resources the Federal Government does offer are getting to the right
people.
But part of the conference was about lenders and others having
a chance to hear what the community really needs. For instance,
the importance of trust is something that is necessary to get people
in the door of a financial institution. People are told if something
is too good to be true, it probably is, and so they put their guard
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up. But, by the same token, we want to tell them to walk into a
financial institution and trust that institution to open an account.
So there are some messages that appear to conflict, but it takes
some special understanding of the community to get the point
across. So that roundtable was an opportunity to give those ideas.
We are also working with other communities and doing the same
thing to try to advance the conversation and build new connections.
Chairman AKAKA. Is this going to be extended to American Indians, Alaska Natives, and Native Hawaiians?
Mr. IANNICOLA. We are certainly open to expanding to any organizations that would like to be involved in this effort. The whole
point of this conversation is to broaden the circle. So, yes, we have
put the invitation out far and wide, and if there are other groups
that you would like to put us in touch with, we would be happy
to follow through.
Chairman AKAKA. Do you have a timetable on that?
Mr. IANNICOLA. We will be having another oneactually, two of
these over the summer, one with Asian and Pacific Islander organizations and another one with African American organizations. And
in the fall, we will be working with Hispanic groups for another focused community conversation. And so anytime in the next several
months would be appropriate to build this type of effort.
Chairman AKAKA. Thank you.
Ms. Jones, are there commissions similar to the Financial Literacy and Education Commission that share its challenges? If so,
what lessons could be learned from those experiences that could be
used to improve the Commission?
Ms. JONES. Mr. Chairman, I think that GAO has done some
other work looking at commissions that were broadly comparable
to the Financial Literacy and Education Commission. I mentioned
earlier in my testimony that having clear and specific goals and
performance measures and specifying the actions and implementation plan to accomplish goals, including a description of resources
that are needed and a discussion of the appropriate roles and responsibilities for Federal agencies and other organizations. These
kinds of observations that we made about the Commission were
based on prior work.
What I could offer to do, Mr. Chairman, is to provide you with
a more detailed summary of the work that GAO has done on other
commissions, if that would be helpful.
Chairman AKAKA. Yes, I would like that, please.
Ms. JONES. OK.
Chairman AKAKA. Mr. Iannicola, one of the mandates of the legislation establishing the Commission was to identify areas of overlap and duplication among Federal financial literacy and education
activities and propose means of eliminating such overlap and duplication.
Why has the Commission not found any duplication of government financial literacy efforts?
Mr. IANNICOLA. That is a good question. Obviously, we are very
concerned about being good stewards of Federal dollars and want
to make sure that every dollar is being used properly. The Treasury Department and GSA do a survey every 6 months internally
of our Commission members, and we have not found substantive
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overlap, but we have found areas where we have avoided overlap.
And let me talk about each.
Sometimes it appears on the surface that there is some overlap.
For instance, the Department of Labor has an Internet publication
called Preparing for Retirement. SSA, the Social Security Administration, has something called Step by Step Retirement Planner.
However, they both offer very different information when you dig
a little deeper. The Department of Labor is focused on the private
elements of ones plan, maybe personal savings or something that
you would get from your employer. However, the piece produced by
Social Security, as you might imagine, is focused on Social Security
benefits. So while they both deal with retirement and probably
have a few pages of overlap, they differ when they get more specific.
Other programs and other publications differ based on the community upon which they are focusing. We have some programs that
focus on savings for adults and others that focus on kids. We have
some publications that focus on teaching savings to adults so that
they can save, and there is even a publication that teaches teachers
about how to talk to kids about savings.
So when we probed further, we found that any overlap has either
been minimal or necessary, or both. So we do think it is important
and will continue to keep an eye on this and believe it so strongly
that even though the FACT Act does not require that we have an
independent organization look at it, we took the good suggestion of
GAO and committed to doing that going forward. So we share that
concern.
Mr. Iannicola, legislation that created the Commission permits
the President to appoint up to five additional members to the Commission. Has anyone been appointed?
Mr. IANNICOLA. We presently have it at the existing 20 so, no,
no one has been appointed additionally.
Chairman AKAKA. Why has no one been appointed?
Mr. IANNICOLA. We have had a lot of success working with organizations in an informal manner without appointing other agencies
to this Commission. When weve found a need to work with another
agency outside the Commission, we have called them up, and they
have been cooperative. But the 20 covers just about most of our
needs. I mean, it was a fairly strong list of those who were doing
financial literacy in the government.
Chairman AKAKA. Is there a timeline for these appointments?
Mr. IANNICOLA. No. As I understand, under Title V,1 I think we
can add an agency at any time, and so as situations change or as
we see an agency that needs to be in the Commission that may not
be, we will certainly reconsider adding such an agency.
Chairman AKAKA. Mr. Danbeck, I am pleased to learn more
about OPMs effort to ensure that Federal employees have the resources they need to make informed decisions regarding their retirement. At the same time, retirement planning is just one part
of the larger financial picture. Other than retirement preparation,
how does OPM educate Federal employees about other aspects of
1 Copy
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economic education such as predatory lenders, credit card debt, and
sound investing practices?
Mr. DANBECK. Well, Mr. Chairman, our Retirement Readiness
NOW model is much more. It takes a broader view than just the
retirement related to financial literacy, and our approach is not
just about money. It combines basic information about benefits that
are provided by the government as an employer, and the broader
financial education needs of employees, to include many of the
things you just mentioned. And the model incorporates a broad
range of information employees need to help them make informed
retirement decisions. As I also mentioned in our Retirement Readiness NOW model we take into consideration overall health as well
as networking and engagement as employees get ready for retiring.
So we try to have a much more broader, holistic approach to retirement readiness than just thinking about the financial side, although that is a critical component.
Chairman AKAKA. Mr. Brown, in his statement Dr. Duvall of the
National Council on Economic Education mentions the need for
well-prepared teachers and meaningful curriculum materials toward which some of the EEE subgrants have been directed in order
to promote economic and financial education.
Aside from EEE, have any other financial resources gone to support financial literacy education activities for teacher training?
Mr. BROWN. Mr. Chairman, as I mentioned in my statement,
there are other sources of funding, particularly for teacher professional development in the area of economics. Those are resources
where they are not dedicated necessarily to financial literacy or economics education, but they could be usedthey have the flexibility at both the State and local levels to be used that way. Certainly that would include some of the Title II program funding, and
also it would include the Improving Teacher Quality State grants
program that I mentioned earlier.
So, again, that is something that, whether or not there continues
to be funding specifically for the EEE program, we would certainly
be happy to work with NCEE and other entities to get the word
out at the State and local level that these funds can be used that
way if the State and local entities wish to do so.
Mr. Iannicola, I have some questions pertaining to the website
and the hotline. When will the website incorporate the Web Managers Advisory Councils recommendations and best practices for
websites?
Mr. IANNICOLA. Well, we are in review of the website on a regular basis. However, I would think as part of the usability testing
and the customer satisfaction, it will be done, if not sooner, it will
be done by, I believe, the 2009 timeline we had given when we are
implementing the GAO recommendation. We may have it sooner,
but certainly by that time it will be completed.
Chairman AKAKA. So no definite timeline was set for that type
of information?
Mr. IANNICOLA. No, but its safe to say it will be done by the second quarter 2009, and perhaps sooner.
Chairman AKAKA. Has the Commission identified a point of contact for the website to address consumers questions and concerns?
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Mr. IANNICOLA. I believe there is a link right now on the site
that will allow individuals to ask a question, but it is more for
questions about the website. It is not for asking financial education
information questions but, rather, it is for questions about the
basic functioning of the website. So there is a possibility to eventually get a hold of someone through the website links.
Chairman AKAKA. Mr. Iannicola, approximately 10 million households in the United States do not have accounts at mainstream financial institutions. What is being done by the Treasury Department and the Commission to encourage people to utilize mainstream financial institutions?
Mr. IANNICOLA. We see that as an issue as well, Mr. Chairman,
and that is why one of the more aggressive calls to action we have
in the strategy is on the unbanked, and we already are threefourths of the way through it in that we have committed to having
regional roundtables on this issue to bring together players in the
private sector and not-for-profits and to focus on the different
issues of the unbanked.
We had one in Chicago last May. We also had one in Edinburg,
Texas, back in December and focused more on border issues there
and the special complexities involved with that. And then this
March, we had a conference in Seattle, and we will be having a
conference in the Northeast later on this fall. So the upshot of all
these conversations is to produce a White Paper with recommendations.
We found some interesting things. We found, as I mentioned before, the idea of trust is important, but also the idea of approachability. We had a credit union tell us in Seattle that one of the
things that brought more people in the door was just dressing their
people in jeans and T-shirts because that is the way the customers
dress. The tradition coat and tie seemed to intimidate some people.
So it is these unique observations that one gets by listening to
the grass roots, and that is what we were able to do and bring a
lot more of these ideas to the forefront.
Also the conference provided networking possibilities, we heard
from a lot of people already that they made connections at that
conference and have asked to build a list and serve off of that.
So these are the types of tools that will naturally flow from these
types of conversations, so we are going to continue to do that with
respect to the unbanked.
Chairman AKAKA. Mr. Iannicola, the GAO report mentions that
the financial literacy toolkit is missing information on some vital
issues, such as home ownership and credit.
What resources does the Commission need to provide a more
comprehensive toolkit?
Mr. IANNICOLA. We have also noted that there are publications
we would like to get in the toolkit and are working with our agency
partners to see what they can do to help us fill those holes.
Chairman AKAKA. In his written statement, Mr. Brobeck from
the Consumer Federation of America outlines several strategies to
achieve significant and measurable improvements to specific financial decisions made by most Americans. Examples of these include
encouraging self-measurement of net personal wealth, use of automatic savings opportunities, public checking of credit records, and
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on-time repayment of loans. He also recommends that the Commission develop an online toolkit that could be widely promoted as an
annual financial checkup instrument. This is a very interesting recommendation that could lead to the development of concrete proposals that will result in positive behavioral change.
Will the Commission be developing strategies to achieve significant and measurable improvement in the decisionmaking of consumers?
Mr. IANNICOLA. We will continue to implement the strategy to
reach these tangible goals you are talking about. One of our primary tools to do that right now is the MyMoney website and the
toll-free number. And we do have links on there now that can do
that, and I would note that the Ballpark Estimate that OPM has
put together is something that can be useful for Federal employees,
but similar calculations can be useful for everyone, as Mr. Brobeck
notes, to see where they are and where they need to be.
So we will continue to measure the amount of penetration we
get, the amount of people who actually use the website, and we
hope, through our customer satisfaction survey, to realize how we
can do that better.
Right now that is one of our better tangible measures, and so we
will continue to watch that closely to see how we can get the
website to people who need it.
Chairman AKAKA. Mr. Danbeck, one of the keys to ensuring the
financial literacy of Federal employees is the appropriate and ongoing training of agency benefit officers. Consequently, I am glad to
hear about your upcoming Retirement Financial Education Symposium and your series of Workshops in a Box. I think, however, that
it is also vital to have assessment measures in place to ensure that
this training is effective.
What, if any, measures has OPM put into place to ensure that
benefits officers have the knowledge necessary to accurately convey
retirement information to Federal employees?
Mr. DANBECK. Mr. Chairman, we plan to survey benefits officers
later in the year. Our strategy, as you mentioned, is to get the
word out to the various agencies through the benefits officers, and
we have done a number of things in that regard, including, as you
noted, the series of Workshops in a Box and the financial education
fairs. We have also provided the agency benefits officers recently
with guidelines on how to perform retirement readiness plans.
So we will check later in the year to assess how the agencies are
performing. They will have to come back to us and tell us what
they have implemented and what successes they have had. Then
based on that, we will determine a measurement process. And to
be perfectly honest, we have not gotten to that point yet, sir.
Chairman AKAKA. Well, thank you very much for that response.
Mr. Iannicola, what has the Commission done to address the
issue of measuring results and ensuring accountability?
Mr. IANNICOLA. As we mentioned, the calls to action are something that we hold ourselves accountable to, and they have dates
and actors. But beyond that, we have collected and will continue
to collect information from our member agencies.
For instance, we know that, as mentioned in my testimony, about
760,000 people were converted from receiving paper checks to elec-
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tronic deposit, and we know all the benefits of that. That was done
by the Treasury Department and the Federal Reserve banks. We
had a DVD that went out; 60,000 of those were ordered by the public. Also, we have seen a number of outreach activities, even in our
own office at the Treasury Department. Over a few years, we have
gone to 42 States, held 304 financial education sessions, and
reached over 24,000 people. In addition to that, we generated 470
media stories so that our word got out to more people than just attended the events.
So these are the type of numbers that, while useful, are not everything we want; that is to say, the ideal measure is knowing that
you have changed someones behavior. That measure for financial
educators in Federal or private sector efforts is always a challenging number to get. And it is even harder to tell when financial
education was the delta, the reason that some conduct changed. It
could be many other things.
Ms. Jones had mentioned that it is difficult coming up with those
measures, and we would agree.
So we try to keep the numbers that we can, largely input numbers, to see how we are doing, while continuing to try to figure out
ways to get even better numbers.
Chairman AKAKA. Mr. Brown, according to your advance testimony, you are currently measuring the NCEEs progress and fulfilling the goals of the Excellence in Economic Education grant by
determining the percentage of students and teachers trained under
the project that demonstrate an improved understanding of personal finance. The Department of Education has not yet finished
compiling its information on the efficacy of the EEE program. How
then can the Department of Education assess the national impact
of the EEE program and assure that the requirements will be met
by shifting responsibilities for financial education training from
EEE to other grants?
Mr. BROWN. Mr. Chairman, as you noted in my testimony, we
are in the process of doing an evaluation that we think will provide
some quite clear results because there will be a control group of
students who have not been instructed by teachers who have gone
through the training provided by the program. And so we hope to
get the kind of concrete results by using the control group that is
sometimes difficult to get when you are doing these type of evaluations.
I should also mention that for the first year of the grant program
to NCEE, there has been an evaluation study done that we would
be more than happy to share with you and other Members of the
Subcommittee that was done for the first year of the grant program, which was fiscal year 2004, and that evaluation was released
in the summer of last year. And that was not quite the thorough
kind of evaluation we are doing now. It was mostly based on survey
research of teachers and students and grantees. But the results
were very positive, even for that first year, in terms of the survey
research that came back. And I am sure Mr. Duvall, when he
comes up to testify, will want to say even more about that.
So, again, in no way is the discussion about looking at other resources for funding the EEE program or NCEE through that program a commentary on the performance of NCEE. Again, the eval-
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uations we have so far are very positive. It really has much more
to do with funding priorities for the President in the context of the
education budget.
Chairman AKAKA. Thank you very much. I will just ask one more
question, but I will also be keeping the record open for one week
for other Members to submit questions they may have for you.
Mr. Iannicola, on February 1, the Treasury Department officials
kicked off a nationwide earned income tax credit awareness campaign. The EITC is a vitally important program for working families.
What resources have been dedicated to this campaign?
Mr. IANNICOLA. As you mentioned, on that day, February 1, Secretary of the Treasury and IRS Commissioner all got together and
talked about the importance of EITC and declared that EITC
Awareness Day, and that is also why we featured it in the National
Strategy.
There are just too many people who are leaving money on the
table, as you well know, and some of the resources that have been
put toward that from the Treasury Departments perspective come
through IRS and the working of their Volunteer Income Tax Assistance (VITA) sites. They work with organizations across the country
to train them to help people get their taxes filed, and while they
are doing that, they will introduce them to the idea of the earned
income tax credit if they are eligible for it and help them to claim
it. They can also use that as a teachable moment to get the person
a bank account or a relationship with a credit union if they do not
have one.
The IRS has also recently developed a split refund technological
ability so that now an individual can be enticed to put some of the
money into an account and yet still have something to take home.
That was new this tax year. So through the VITA sites and IRS,
significant resources have been put to improving participation in
the earned income tax credit.
Chairman AKAKA. Well, I want to thank the second panel for
your responses and tell you that your responses have been helpful.
We will keep the record open for a week for any other questions.
I also want you to know that we have a third panel that is coming up, and I would encourage you to stay if you can and have the
time to hear the third panel.
So, again, thank you very much for being here, and have a good
day.
Now I call on the third panel of witnesses to come forward: Robert Duvall, who is President and Chief Executive Officer of the National Council on Economic Education; and Stephen Brobeck, Executive Director, Consumer Federation of America. It is good to have
you here as witnesses on the third panel.
It is the custom of this Subcommittee to swear in all witnesses.
So will you please stand and raise your right hand? Do you swear
that the testimony you are about to give this Subcommittee is the
truth, the whole truth, and nothing but the truth, so help you,
God?
Mr. DUVALL. I do.
Mr. BROBECK. I do.
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Chairman AKAKA. Thank you very much, and let the record note
that the witnesses responded in the affirmative.
Let me ask you, Mr. Duvall, to please proceed with your testimony.
TESTIMONY OF ROBERT F. DUVALL,1 PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL COUNCIL ON ECONOMIC
EDUCATION
Mr. DUVALL. Thank you very much, Chairman Akaka, and thank
you for inviting me to testify today on this timely, critical, and vital
issue of the Federal Governments role in empowering all Americans to make informed financial decisions.
The National Council on Economic Education (NCEE), is a
unique nonprofit, nonpartisan, independent organization directed
by a governing board of volunteer leaders from education and business, with the clear purpose of helping young people learn while in
school to think and choose responsibly and successfully when they
go into the real world.
For 60 years, the NCEE has been leading the charge to improve
economic and financial literacy through education in the Nations
schools. We believe that today both the need for what we do best
and the opportunities to effect change and to show, as you have
called for, measurable results are greater than ever.
With partners, as you know, we helped to host and promote Financial Literacy Day on Capitol Hill last week, and your leadership
has been inspiring for the development of that effort over the
years.
The NCEE is differentiated by our mission. We believe that financial literacy comes through effective economic education, and
that this education ought to be part of the core learning experience
that our young people get while they are in school. We believe they
will best learn the basics of practical, applied economics and personal financial decisionmaking skills through well-trained teachers,
who are equipped with excellent standards-based teaching materials.
The need to strengthen, expand, and enhance education in basic
practical economics and personal finance in our Nations schools remains urgent. We must prepare our students with the foundation
of economic and financial competence so that they can succeed in
life.
There is widespread agreement for this proposition among policymakers, business leaders, and educators. The questions now before
us, I believe, are: How can we best improve and expand economic
and financial literacy efforts? How can we measure results and outcomes to be sure we are making a difference? And what role can
both government and the private sector play in this effort?
Let me pick up the theme of much of the discussion today in
which I have an earnest interest, and that is, focus on the importance of the Excellence in Economic Education Act (EEE).
Thanks to your efforts, Mr. Chairman, Congress authorized the
EEE program as part of the No Child Left Behind Act to promote
economic and financial literacy of all students in kindergarten
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through grade 12. The EEE directly supports activities that educators can take to improve financial education in our elementary
and secondary schoolsthrough professional development for
teachers, distributing high-quality, standards-based, and standards-setting educational materials; fostering active learning for students; and evaluating and assessing outcomes and promoting, and
then disseminating best practices.
We know that well-prepared teachers instill in our children a
sense that they are themselves future stakeholders, decisionmakers, and movers of the American economy. The EEE has provided meaningful resources for teacher training, which is at the
heart of making a difference.
In the first year of the EEE, 36 subgrants were awarded to establish and conduct teacher training programs, including for those
teachers who specialize in another discipline. This is important.
The infusion of personal finance and economics into other classes
can be an effective way to assure that these subjects have a place
in the core curriculum.
This year, EEE funding allowed the NCEE to distribute 14,000
Virtual Economics CDROMS to every school district in the country. Thanks to the EEE, this program is now available, a unique
resource for teachers, in every school district in the United States.
I think one of the most important ways we can improve economic
and financial education and ensure results is through rigorous
evaluation and assessment. Let me just mentionand it is in my
written testimony in a fuller wayone glowing example of how the
NCEE has used Federal funds provided by the EEE to make a real
difference, pursuant to Deputy Secretary Browns comment.
Financial Fitness for Life, developed by the NCEE, is an awardwinning, highly acclaimed, comprehensive K12 personal finance
program, which helps students apply economic and financial decisionmaking skills to the real world of earning and spending an income, saving, using credit, investing, and managing their money
that is, a financial fitness program for getting in shape financially.
The NCEE awarded a grant of funds, through the EEE program,
to two researchers at Eastern Kentucky University, who tested the
effectiveness of Financial Fitness for Life in an economically underprivileged region of Kentucky. This study found that the use of Financial Fitness for Life significantly increased student performance
on a post-test basis when compared with a pre-test of those same
students. The study also found that Financial Fitness for Life increases financial literacy, and that, for 7th-, 8th-, and 10th-grade
students, this increase is higher than what resulted from any other
curriculum, if any, that teachers were previously using to teach financial concepts.
Now, this is a powerful study, and it was presented to the American Economic Association (AEA), in January in Chicago. This kind
of evaluation and assessment is something that we are focused on
at the NCEE and I see us doing as an increasing contribution to
understanding where and how we can make a significant difference.
Through your leadership, Senator Akaka, and the bipartisan support that you have mustered from many others, Congress has provided needed resources to make a difference through the EEE pro-
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gram. And as I have illustrated, the Excellence in Economic Education program allows the Federal Government to strengthen, expand, and leverage effective economic and financial literacy education at the local level, at the grass-roots level, in our Nations primary and secondary schools, for relatively few dollars.
The EEE maximizes the impact of each Federal dollar by requiring matches for subgrants and leveraging ongoing private sector efforts. And the EEE addresses the key pieces of the economic education and financial literacy puzzle: teacher training, development
and delivery of curricular materials, student activities that work,
and evaluation and assessment of results.
So I would urge the Congress to maintain and, if possible, increase funding for this needed and outstanding program.
I am very gratified that this Subcommittee is focusing on economic education and financial literacy. Teaching sound economics
and personal finance, and making it stick, is not only vital to an
individuals success, but will ultimately contribute to ensuring a
strong national economy and a more prosperous future for our
country.
Thank you again for inviting me to testify today, and I will be
happy to answer any questions.
Chairman AKAKA. Thank you very much, Dr. Duvall. And now,
Mr. Brobeck, your testimony.
TESTIMONY OF STEPHEN BROBECK,1 EXECUTIVE DIRECTOR,
CONSUMER FEDERATION OF AMERICA
Mr. BROBECK. Thank you, Mr. Chairman. CFA appreciates the

opportunity to testify before this Subcommittee on the role of the
Federal Government in helping Americans make more informed financial decisions, and we also appreciate your personal leadership
in the area of financial education and many other pressing financial services issues.
My written testimony suggests that for many years Federal
agencies have played an important role in increasing financial literacy. It also notes that since its establishment, FLEC has
strengthened this Federal role. The Commission, led by the Treasury Departments Office of Financial Education, has compiled
unique and valuable information about financial education programs and opportunities, has encouraged more cooperation among
Federal agencies, and has provided information to increasing numbers of Americans through its MyMoney website.
Our testimony, however, agrees with GAO that FLEC has not yet
developed a comprehensive national strategy to advance financial
literacy, though it also notes that the Commission faces severe constraints in seeking to develop such a strategy. These constraints
suggest that it would be more useful for FLEC to develop and implement informational strategies for encouraging consumers to take
specific financial actions. These actions could includeand you
mentioned several of them in your questions to the previous
panelan annual financial checkup in which people assess the status of their spending, saving, and use of credit; a more detailed assessment of current and future net wealth; automatic savings
1 The
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through workplace retirement programs and through preauthorized
regular transfers from checking to savings; periodic checking of
credit reports and credit scores, which increasingly affect not just
credit availability and costs, but also the availability of rental
housing, utilities, insurance, and even employment; and prompt
loan payments to avoid late fees, penalty interest rates, and lower
credit scores.
There are many FLEC members with a potential interest in promoting each of these prudent financial actions. They could develop
strategies that involve cooperation with nonprofit and private
groups as well as with other government agencies. These strategies
should include specific national goals for different actions, such as
X million additional Americans self-administering a web-based financial checkup, or estimating their current and future net assets
using a website, or participating in workplace retirement programs,
or checking their credit reports, or reducing the frequency of late
loan payments. And the strategies should utilize the kind of social
marketing approaches employed in campaigns against smoking or
drunk driving.
Our written testimony suggests that financial education has really yet to adequately prove its worth to the Nation. Targeted informational initiatives led by Federal agencies to help people use their
financial resources more effectively would demonstrate the value of
this education while improving the lives of millions of Americans.
Thank you.
Chairman AKAKA. Thank you very much, Mr. Brobeck, for your
statement.
Mr. Brobeck, you recommend urging the Commission to develop
specific financial literacy strategies to achieve measurable improvements in financial decisions. Can you give us an example of the
kind of financial decisions you are talking about and how the Commission could work to develop measures to improve these financial
decisions?
Mr. BROBECK. Well, in your question to the previous panel, you
had actually focused on annual financial checkups, so let me use
that as an example.
This could be encouraged by FLEC, and I would assume there
would be at least eight to ten Federal agencies, perhaps led by the
Office of Financial Education, that would develop a very powerful,
compelling web-based instrument that any American could use to
check on how they manage their money, their use of credit, their
saving, and their investments.
After they develop this, they would then ask nongovernmental
experts to critique and suggest improvements in that instrument.
They would then test that instrument on groups in the population,
including the disadvantaged, who may need the assistance of third
parties in order to adequately use that instrument. Keep in mind
that there is still a very high percentage of low- and moderate-income and minority Americans that do not have ready access to the
World Wide Web. And thenand this is very importantthey
would set a specific goal of 3 million Americans, 10 million Americans, maybe eventually 20 million Americans, actually utilizing
that instrument in the course of a year.
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And thenand this is in some ways the hardest thingthey
would take the lead to put together a very aggressive, comprehensive national campaign that included thousands of organizations in
order to encourage and to assist Americans to take this checkup.
And that would include not just the media. It would include financial institutions we work with who I know would support this, I am
certain. It would include a whole array of nonprofits, the housing
community, and, of course, government agencies at the State and
local level as well.
And then, finally, in each yearthis could be a multiyear campaign; it would probably have to be to be effectivethe effectiveness would be measured. You could measure this, of course, by
looking to see how many Americans actually used the website,
accessed the website to check the state of their finances. But you
could also go out and take random samples of the population or
even people who utilized the checkup to ask them whether taking
that checkup led to behavioral change.
Chairman AKAKA. Thank you for that.
Dr. Duvall, I was interested to hear during your testimony that
more often than not, teachers assigned to educate students on financial literacy actually specialize in other subject areas. In your
experience, what is the key to encouraging teachers to integrate financial literacy lessons into their classrooms?
Mr. DUVALL. Well, we have seen some real progress in that area
over the past several years, Senator, as the advocacy effort has had
an effect to make people aware of the importance of the issue. You
have been a real champion in that.
As States through their own legislative actions have tried to address the problem within the States of financial illiteracy, more
and more States are incorporating economics and personal finance
into their State standards and making it a requirement that it be
taught, and even in a growing number of States that a course be
taken from graduation.
As that kind of push is developed, teachers are called upon to respond to the challengeand school districtsby having well-qualified people to teach those courses. So we are seeing a greater demand for educating theteaching the teachers so that they can
more effectively teach the students.
In our nationwide network, there is a kind of standing joke that
a lot of high school economics teachers have the same first name:
Coach. They are people who have been drafted into doing a
course in personal finance or in basic practical economics. We can
help those teachers by giving them good curriculum and training
them, which is terribly important, in how to talk about these basic
concepts. Too many teachers have not had themselves economics or
personal finance in their own background. And then we can infuse
economics into other subject areas.
One of the publications that teaching resources at the NCEE did
this past year and was published this summer and has already become a best seller for us, if you will, is a book for high school teachers of American history. It is called Focus on Economics in U.S.
History. We think you cannot talk about the Boston Tea Party
without saying something about taxation or the roots of the Amer-
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ican Civil War without saying something about the impact of the
invention of the cotton gin on the Southern economy.
That kind of infusion into other subject areasmath, history, geography, civics and governmentis a way to get the basic concepts
into the heads and hands of our kids, but it takes teacher training
to do it.
Chairman AKAKA. Thank you for that answer.
Mr. Brobeck, in your opinion, why has the Commission not found
any duplication of government financial literacy efforts?
Mr. BROBECK. We are actually not that aware of much duplication in the financial education initiatives of the different FLEC
members. But we would add that duplication is not necessarily undesirable because the needs of the people are so great here.
What is really important to us, though, is greater interagency coordination to meet measurable goals related to behavioral change.
And the specific initiatives that I mentioned in both my written
and oral testimony I think provide an opportunity for such coordination.
Chairman AKAKA. Dr. Duvall, as you noted in your testimony,
one of the key components of an effective national financial literacy
strategy is evaluation and assessment. I was pleased to hear about
the Eastern Kentucky University study which indicated the effectiveness of the Financial Fitness for Life program.
Can you tell me if there are any plans to conduct similar studies
in the near future? What should be done to assure that critical assessments will continue?
Mr. DUVALL. Well, it certainly is a priority for the ongoing work
of the National Council on Economic Education. I think in the
years that I have had the opportunity to think and talk with you,
Senator, about this important issue, we have seen some real
change. We have moved from the need for making people aware of
the issue, although that need continues, to seeing how the issue
can be best addressed. We have looked at best practices. We have
been talking more and more about solutions to the problem that we
have helped people become more aware of. And now I think we are
standing right on the edge of the third important part of this effort,
and that is, testing, evaluation, and assessment, to see what does
work and how it changes behavior. So that will be a priority for our
work going forward, and I think it is and can be an important part
of the work of many others.
That is why I am so pleased that it is the fourth component of
the EEE legislation and why I so earnestly hope that program will
continue. It is teacher training, curriculum, and teaching resources,
student activities, active student learning, and then measuring results.
Mr. Brobeck, I am concerned that consumers are not provided
with enough information about the long-term consequences of making only the minimum credit card payment. What do you think
must be done to ensure that consumers are adequately informed of
the true cost of making only the minimum payment?
Mr. BROBECK. Senator, we are very concerned, too. Too many
Americans run up thousands of dollars, sometimes tens of thousands of dollars of credit card debt, in part because the low mini-
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mums convince them that the debts are affordable. And they are
not. And when they finally realize that they cannot even make a
2- or 3-percent payment, it is just too late and they are candidates
for bankruptcy.
So credit card statements, in our view, should inform consumers
about the consequences of paying at or just above the minimum,
and the most useful type of information included is how long and
how costly it is to pay off the debt just by making the minimum
payments.
Your proposed legislation, the Credit Card Minimum Payment
Warning Act, provides this personalized disclosure, and so we
strongly support it.
Dr. Duvall, according to your testimony, one of the most important actions educators can take to improve economic education is
to foster active learning for students. Can you give me some examples of these active learning strategies?
Mr. DUVALL. Yes. In our own lineup of things that we offer, there
is the Economics Challenge. The Federal Reserve System has a Fed
Challenge. These are programs that engage students in a competitive activity that requires that they know something and be able
to show what they know. At the lower grade levels, you can have
games and activities, even at theI have been challenged by people who see our mission statement that we are concerned with K
12 education: Can you really teach young people while they are in
kindergarten something about some basic personal finance? Absolutely. They can borrow a little lunch money and then pay it back,
and you begin to show them how that works. You can make a list
of the things that you want and then put price tags by it and then
divide that in half and say, All right. What are you going to do
now to make choices? And if they say, Well, we will pay for what
we can, and then we will put the rest on a credit card, as was just
said, we have got some education work to do.
But those kinds of things you take the dismal scienceeconomicsand make it come alive. And, again, I would say that the
things that have been laid out in the EEE legislationthe teacher
training and the student activitiesare very important if you are
going to make that happen.
Chairman AKAKA. Mr. Brobeck, I am deeply concerned that too
many families are taken advantage of by unscrupulous lenders
through payday loans. What must be done to better protect consumers and encourage the development of payday loan alternatives?
Mr. BROBECK. Yes, Senator, we share your concern. Consumers
spend billions of dollars annually on these loans that have tripledigit interest rates.
Now, ideally, we think that Congress should extend the consumer protections that they approved for members of the military
a year ago to all Americans. But failing that, we believe Congress
should prohibit certain abusive practices, such as payday lenders,
for example, partnering with banks to evade laws regulating small
loans. This protection and many other important protections is part
of your Predatory Payday Loan Prohibition Act, and we also strongly support that legislation.
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Chairman AKAKA. Thank you for the support. Mr. Brobeck, I
want to thank you and your staff for working so closely with me
on consumer protection issues: Travis Plunkett, Jean Ann Fox,
along with Chi Chi Wu at the National Consumer Law Center, and
Barbara Roper. They are all extremely dedicated and talented individuals. I want you to tell them how I feel.
I will submit my last question pertaining to refund anticipation
loans for the record.
I want to again thank you so much for coming today and being
a part of this hearing. I wanted to take the time to assess where
we are. So many of you have participated in promoting financial
literacy throughout our country. I am just at a point of trying to
be sure we know what the situation is and where we should be
going to improve financial literacy. You all have helped us do that,
and I really appreciate your participation.
I want to thank all the witnesses for appearing today. This is,
again, an enormously important issue because financial literacy directly impacts the quality of life for our working families. Increasing the knowledge and opportunities of consumers will help them
be better able to save for a childs education, manage debt, utilizer
lower-cost financial services, purchase a home, and retire on their
own terms. I will continue to work with all of you to improve Federal financial literacy efforts.
I want to tell you, again, I look forward to continuing these discussions and initiatives as well. The hearing record will be open for
one week for additional statements or questions other Members
may have pertaining to the hearing.
And so with all of this gratitude, this hearing is adjourned.
[Whereupon, at 4:29 p.m., the Subcommittee was adjourned.]
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Senate Hearing, 110TH Congress - Federal Government's Role in Empowering Americans To Make Informed Financial Decisions

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Senate Hearing, 110TH Congress - Federal Government's Role in Empowering Americans To Make Informed Financial Decisions

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S. Hrg.

FEDERAL GOVERNMENTS ROLE IN

OVERSIGHT OF GOVERNMENT MANAGEMENT,

For sale by the Superintendent of Documents, U.S. Government Printing Office

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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

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Bair, Sheila C.:

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FEDERAL GOVERNMENTS ROLE IN

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Ms. BAIR. Chairman Akaka, thank you very much. I appreciate

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prepared statement of Ms. Bair appears in the Appendix on page 35.

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Mr. BROWN. Thank you, Mr. Chairman, and good afternoon.

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prepared statement of Mr. Brown appears in the Appendix on page 50.

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Mr. IANNICOLA. Good afternoon, Chairman Akaka. Thank you for

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prepared statement of Mr. Iannicola appears in the Appendix on page 54.

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Mr. DANBECK. Good afternoon, Mr. Chairman. It is my pleasure

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prepared statement of Mr. Danbeck appears in the Appendix on page 61.

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prepared statement of Mr. Jones appears in the Appendix on page 70.

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