IMPROVING CONSUMER FINANCIAL LITERACY

UNDER THE NEW REGULATORY SYSTEM

HEARING
BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT
OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION

JUNE 25, 2009

Printed for the use of the Committee on Financial Services

Serial No. 11150

(
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

52407 PDF

2009

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

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HOUSE COMMITTEE ON FINANCIAL SERVICES

BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
LUIS V. GUTIERREZ, Illinois
ZQUEZ, New York
NYDIA M. VELA
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
BRAD SHERMAN, California
GREGORY W. MEEKS, New York
DENNIS MOORE, Kansas
MICHAEL E. CAPUANO, Massachusetts
N HINOJOSA, Texas
RUBE
WM. LACY CLAY, Missouri
CAROLYN MCCARTHY, New York
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
AL GREEN, Texas
EMANUEL CLEAVER, Missouri
MELISSA L. BEAN, Illinois
GWEN MOORE, Wisconsin
PAUL W. HODES, New Hampshire
KEITH ELLISON, Minnesota
RON KLEIN, Florida
CHARLES A. WILSON, Ohio
ED PERLMUTTER, Colorado
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
CARSON, Indiana
ANDRE
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

SPENCER BACHUS, Alabama

MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
RON PAUL, Texas
DONALD A. MANZULLO, Illinois
WALTER B. JONES, JR., North Carolina
JUDY BIGGERT, Illinois
GARY G. MILLER, California
SHELLEY MOORE CAPITO, West Virginia
JEB HENSARLING, Texas
SCOTT GARRETT, New Jersey
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia
PATRICK T. MCHENRY, North Carolina
JOHN CAMPBELL, California
ADAM PUTNAM, Florida
MICHELE BACHMANN, Minnesota
THADDEUS G. McCOTTER, Michigan
KEVIN McCARTHY, California
BILL POSEY, Florida
LYNN JENKINS, Kansas

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel

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SUBCOMMITTEE

ON

FINANCIAL INSTITUTIONS

AND

CONSUMER CREDIT

LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
BRAD SHERMAN, California
DENNIS MOORE, Kansas
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
N HINOJOSA, Texas
RUBE
CAROLYN MCCARTHY, New York
JOE BACA, California
AL GREEN, Texas
WM. LACY CLAY, Missouri
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
EMANUEL CLEAVER, Missouri
MELISSA L. BEAN, Illinois
PAUL W. HODES, New Hampshire
KEITH ELLISON, Minnesota
RON KLEIN, Florida
CHARLES A. WILSON, Ohio
GREGORY W. MEEKS, New York
BILL FOSTER, Illinois
ED PERLMUTTER, Colorado
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho

JEB HENSARLING, Texas

J. GRESHAM BARRETT, South Carolina
MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
WALTER B. JONES, JR., North Carolina
SHELLEY MOORE CAPITO, West Virginia
SCOTT GARRETT, New Jersey
JIM GERLACH, Pennsylvania
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia
PATRICK T. MCHENRY, North Carolina
JOHN CAMPBELL, California
KEVIN McCARTHY, California
KENNY MARCHANT, Texas
CHRISTOPHER LEE, New York
ERIK PAULSEN, Minnesota
LEONARD LANCE, New Jersey

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CONTENTS
Page

Hearing held on:

June 25, 2009 ....................................................................................................
Appendix:
June 25, 2009 ....................................................................................................

1
35

WITNESSES
THURSDAY, JUNE 25, 2009
Diaz, Lautaro Lot, Vice President, Housing and Community Development,
National Council of La Raza (NCLR) .................................................................
Gannon, John M., Senior Vice President, Office of Investor Education, and
President of the FINRA Investor Education Foundation, The Financial
Industry Regulatory Authority (FINRA) ............................................................
Jones, Stephanie J., Executive Director, National Urban League Policy Institute ........................................................................................................................
Lauber, Gerald, Chief Senior Advisor, National Urban Alliance (NUA) ............
Levine, Laura, Executive Director, Jump$tart Coalition for Personal Financial
Literacy .................................................................................................................
Neiser, Brent A., Director of Strategic Programs and Alliances, National
Endowment for Financial Education (NEFE) ....................................................
Salisbury, Dallas L., President and CEO, Employee Benefit Research Institute (EBRI) ...........................................................................................................

10
17
13
15
8
19
11

APPENDIX
Prepared statements:
Hinojosa, Hon. Ruben .......................................................................................
Diaz, Lautaro Lot ..........................................................................................
Gannon, John M. ..............................................................................................
Jones, Stephanie J. ...........................................................................................
Lauber, Gerald ..................................................................................................
Levine, Laura ....................................................................................................
Neiser, Brent A. ................................................................................................
Salisbury, Dallas L. ..........................................................................................
ADDITIONAL MATERIAL SUBMITTED

FOR THE

RECORD

Hinojosa, Hon. Ruben:

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

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IMPROVING CONSUMER FINANCIAL

LITERACY UNDER THE NEW
REGULATORY SYSTEM
Thursday, June 25, 2009

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
AND CONSUMER CREDIT,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2 p.m., in room
2128, Rayburn House Office Building, Hon. Luis V. Gutierrez
[chairman of the subcommittee] presiding. *(Chairman Gutierrez
was unable to preside at this hearing due to a pressing commitment at the White House.)
Members present: Representatives Sherman, Hinojosa, McCarthy
of New York, Baca, Green, Scott, Cleaver; Hensarling, Royce,
Marchant, and Paulsen.
Mrs. MCCARTHY OF NEW YORK. [presiding] Good afternoon everybody.
We certainly appreciate everybody being here.
This hearing of the Subcommittee on Financial Institutions and
Consumer Credit will come to order. I want to thank everybody
and the witnesses for agreeing to appear before the subcommittee
today.
Todays hearing, entitled, Improving Consumer Financial Literacy Under the New Regulatory System, will examine the continuing need for financial literacy, with a particular focus on the
role of consumer financial literacy under the Presidents newly proposed regulatory framework.
Among the issues that will be addressed here: how the consumerfriendly plain-language products proposed under the regulatory reconstruction plan will be created and regulated; the efficiency of
previous Federal financial literacy efforts; and which agency should
have primacy over financial literacy efforts going forward under the
new plan.
We will be limiting our opening statements to 15 minutes per
side. But without objection, the hearing record will be held open for
all members opening statements to be made a part of the record.
I now recognize Mr. Hensarling for 5 minutes.
Mr. HENSARLING. Thank you, Madam Chairwoman.
I very much appreciate this hearing being called.
I do believe that financial literacy is a very important subject,
one that Members on both sides of the aisle have championed in
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2
the past, so it continues to be a very laudable goal for our Nation
to improve the financial literacy of our fellow citizens.
And, in fact, although I cannot do the quote justice, I will paraphrase something that one of our Founding Fathers, Thomas Jefferson, once said, and that is, if we disagree with how our fellow
citizens exercise their discretion, the remedy is not to take it from
them but to help inform their discretion.
My apologies to any Jeffersonian scholars in the audience. I
know that was not a literal quote, but that is essentially the paraphrase. And so, in some respects, although I appreciate the hearing, I am curious why we are having the hearing. I am curious because, as I look at the underlying legislation that would create the
Financial Product Safety Commission, our colleague Mr. Delahunts
bill, which roughly parallels what the Obama Administration has
furthered, I essentially see a rather draconian effort that allows an
unelected body of bureaucrats to essentially decide that if they subjectively believe that a consumer financial product is unfair, if
they subjectively believe that a consumer financial product is anticonsumer, they can ban it, just ban it from the market.
It is not even a Federal preemption. It is essentially a layer of
regulation and regulators that is poured on top of the present regulatory structure. And as I read the statute that was presented,
again, by our colleague yesterday in our full committee hearing, it
also encompasses the goal of having these regulators create plain
vanilla products.
You know, it is laudable if people want vanilla, but some people
want strawberry, some people want chocolate, and some people
want the 32 flavors of Baskin-Robbins. Typically, in a competitive
market, the competitive market is going to produce what the people
want. That is kind of one of the basic tenets of capitalism. And so,
again, I wish our fellow citizens would indeed bethat we could
help achieve and figure out a coherent strategy and plan to achieve
a greater level of financial literacy, but I dont know if it is going
to be needed if this legislation becomes law.
I mean, after all, you really dont need to know how to read if
your nanny reads you all your material at the end of each evening.
And, in fact, if your nanny prevents you from putting your hands
on any piece of literature, you are foreclosed from being able to
read.
And so now we are going to have an unelected group of bureaucrats who ultimately can decide what mortgages we have, what
bank accounts we can open, and whether or not we will even be
trusted with a credit card.
And given that there is an entire new level of criminal and civil
penalties that can be applied for those who produce subjectively
unfair products or subjectively anti-consumer products, functionally
no product is going to come to market that isnt pre-cleared by this
unelected group of bureaucrats.
And so, on the one hand, maybe only plain vanilla products will
be available on the market. I am not sure how financially literate
one needs to be. If you are only offered one flavor of ice cream, I
suppose all you need to read on the board is vanilla. There is nothing else to read.

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3
And so, again, we have these philosopher-kings who will decide
what is best for us, philosopher-kings whom I feel quite confident
are not familiar with the Rodriguez family of Mesquite, Texas, that
I have the opportunity of representing in Congress. My guess is
they dont know exactly what precise bank account will help that
family the most.
My guess is that this unelected group of bureaucrats will be
unacquainted with the Laird family of Athens, Texas, and they
probably dont know what mortgage product is going to be best for
their homeownership dreams in America.
My guess is they probably are not well acquainted with the
Shane family of Kaufman County, Texas, whom I represent in Congress. And my guess is they really shouldnt decide whether or not
Kenneth Shane and his wife can use a credit card to help finance
their American dream.
Part of our challenge clearly is ineffective disclosure. We all
agree on that. But most of the disclosure, I mean, it is kind of like
Pogo. We have met the enemy, and it is us. We are the ones who
require it. When you disclose everything, you end up disclosing
nothing. And so we should work to have effective disclosures written in English, not voluminous disclosures written in legalese.
So, again, I appreciate calling the hearing. I hope it proves to be
a useful hearing. But ultimately, if the Presidents initiative is
passed, it is all for naught.
With that, Mr. Chairman, I yield back the balance of my time.
Mr. HINOJOSA. [presiding] Thank you, Ranking Member Hensarling.
I am glad to be able to make my statement. And I want to welcome the witnesses to todays hearing. I especially want to commend Chairman Luis Gutierrez for holding it.
Todays hearing on financial literacy is important to all of us in
Congress, for todays witnesses, to all of you attending this hearing
in person, via live webcast, or archived webcast, and really, each
and every resident in the United States, but especially for our children and the generations to come.
I ask that those of you with financial literacy programs understand that we have a limited amount of time and space for everyone to testify today. But I believe that we have put together a comprehensive panel of witnesses, and I personally welcome any statements you might make for submission in todays record.
I am wearing several hats today. I am a member of this subcommittee. I am a co-Founder and co-Chair of the Financial and
Economic Literacy Caucus, alongside my good friend and colleague
from Illinois, Congresswoman Judy Biggert, and her dedicated
staff, Nicole Austin and Zach Cikanek. I am chairman of the Subcommittee on Higher Education, and I am chairman of the Congressional Hispanic Caucus Task Force on Education. I am a consumer, just like all of you here today, and most important, I am
a father. I have five children and six grandchildren. So financial
literacy is extremely important to my family and to millions and
millions of families throughout our country.
What we do here today, the actions we take during the 111th
Congress, and the steps that the States take to graduate financially literate students are all of the utmost importance. We need

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4
to improve the financial literacy rates of all residents throughout
the United States, and I believe that today we might find some of
the tools necessary to accomplish this goal which most definitely
will include revamping the Financial Literacy and Education Commission and selecting one agency to have primacy over financial literacy efforts going forward under the new Financial Services regulatory plan proposed by President Obama.
With that, I yield back the remainder of my time, and I want to
recognize Mr. Paulsen for 3 minutes.
Mr. PAULSEN. Thank you, Mr. Chairman. I appreciate it.
I also strongly believe that we must increase the financial literacy of our citizens. This is a basic life skill that, unfortunately,
many in our country truly lack. This is really a family and a financial security issue.
What concerns me is that nowhere in the Administrations proposal that we have now begun hearings on are the words financial
literacy mentioned. The plan doesnt do anything to encourage individuals, from what I can see, to empower themselves or help people better understand personal finance and the decisions that they
have to make on a daily basis.
Instead, what I see is that, is one of my chief concerns, that it
actually takes away the ability of individual choice and decisions
from individuals. And rather than seeking to increase financial literacy, the underlying legislation creates this panel that potentially
will take away choices from consumers out of a fear that things
will be too complicated for them to understand. In other words,
someone else is going to make decisions about what is best for you.
And I think that is the wrong approach.
Congress should not be taking away choices from the American
people. Congress shouldnt be stifling innovation at a time when we
need innovation. Instead, I think Congress should be helping these
individuals understand what options are available so that they can
make the right decisions for themselves. And I sincerely hope that
this committee can work in a bipartisan way to improve upon the
Administrations proposal as we go forward in crafting really some
commonsense legislation that is needed to make sure that ultimately we are empowering all Americans to make sound and educated judgements with regard to their own personal finances.
And I yield back.
Mr. HINOJOSA. Thank you.
I, at this time, wish to recognize Congressman Green for 3 minutes.
Mr. GREEN. Thank you, Mr. Chairman.
I thank Chairman Gutierrez for his assistance with this as well.
Mr. Chairman, generally speaking, financial success is directly
proportional to financial literacy. People who understand financial
products can make good decisions about the products that they
have to negotiate. I think that this hearing is exceedingly important because it will give us an opportunity to examine the means
by which we can, not only improve the products themselves by way
of conveying what they are about to the public, but also, it helps
us to understand where best to have this type of assistance located.
We can have it in many different places, or we can have it in one
place. I think that this is the type of hearing where we can get the

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5
intelligence necessary to make some decision as to where the actual
delivery mechanism is located.
I am exceedingly excited about this, and I look forward to our
being able to develop the plain language that Americans would like
to have so that they can understand and, to be quite candid with
you, so that I can understand. I have had the good fortune to get
a decent education in this country. And I can tell you that when
I read some of my credit card materials, I am tempted to call a
lawyer. I happen to have a law degree, but I havent found that it
has been of great benefit to me on some occasions, and went so far
as to talk to my friend, who is a lawyer, who reminded me that
he, too, has problems.
So I am looking forward to our working together to come up with
the kind of language that people can understand that makes a lot
of sense and deciding where we should have the agency, or which
agency is most appropriate to help us with this line of products.
I thank you, Mr. Chairman, and I yield back.
Mr. HINOJOSA. Thank you.
At this time, I would like to recognize Congressman Marchant
for 4 minutes.
Mr. MARCHANT. Thank you, Mr. Chairman.
After reviewing last night all of the testimony that we will be
given today, I am struck that all of your testimony seems to be directed towards a system that I think Mr. Hensarling has already
pointed out is most likely not to be in place this time next year.
In fact, with the currentthe legislation that we just passed in
the last few months, two pieces of legislation about credit cards,
and the President has signed one of those pieces of legislation, significantly limiting the terms and conditions of credit cards and simplifying the credit card system; and taking into consideration that
probably 80 percent of all home loans are made now through either
FHA, VA, Fannie Mae, or Freddie Mac, and all of those documents
are promulgated through HUD and through government agencies
already; it seems to me that your task in the future may be trying
to figure out how you can work with those Federal agencies, this
new Financial Consumer Protection Agency, how you can work
with them to try to help them promulgate all of these loan forms
and all of the loan documents that each and every banker and
lender in America will most likely have to go and get their loan papers approved and everything they do, and make sure that promulgation of documents is done through that agency.
So it may simplify your job if you can, if you think you can trust
this new financial consumer agency to draft the documents to
where everyone who reads them will have no problem. So I think
my questions today, Mr. Chairman, are going to be directed in that
direction, and ask you what your opinion is of that agency and how
you plan on interfacing with that agency.
Thank you.
Mr. HINOJOSA. Thank you.
I would like to ask Congressman Cleaver to take 3 minutes,
please.
Mr. CLEAVER. Thank you, Mr. Chairman.
I appreciate very much the hearing. I am very much concerned
about the issue of financial literacy. The purpose of this hearing is

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6
to discuss plain-language initiatives and financial literacy promotion. Both of these subjects are extremely important to me. And
I have advocated in our hearings over the years for plain language.
In fact, in the 2006 GAO report, Increased Complexity in Rates
and Fees Heightens Need For More Effective Disclosure to Consumers, is I think a bold and accurate statement about what is
needed. Some credit card disclosure statements, and I think all of
you are familiar with this, are written in 27th grade language.
That is 12 years of high school and 12 years of college and 3 years
of graduate school.
And this sort of deliberate and sometimes deceptive way of presenting credit card information is at worst appalling and despicable, and at best, just plain arrogant. Plain-language regulations
could go far to help eliminate these misleading and confusing practices.
When I teach Bible study, I always teach that, in the Bible, the
main thing is the plain thing, and the plain thing is the main
thing. And it would be, I think, appropriate if we adopted a similar
policy as it relates to what we incorporate into insuranceI am
sorry, into our credit card statements and frankly, even into mortgage documents.
Plain language can lead to the watering down of ideas also,
which can also create some problems as well. And for this reason,
I have just introduced H.R. 3037, to create a pilot program for financial literacy. I will incorporate into this program a pilot project
for 10 school districts across the country. These projects would receive Federal funding to help them educate and train the teachers
in order to integrate financial literacy into the curricula of grades
K through 12. And this pilot program is just one step toward ensuring that all students in all school districts will be able to participate in similar programs in their schools.
And finally, Mr. Chairman, if you look at the crisis that we have
found ourselves in today, it doesnt take a Ph.D. to realize that we
have a public that, in many instances, just did not understand
what they were getting into when they participated in these exotic
mortgages. And so I think the thing we need to let people know is
that what you dont owe wont hurt you.
Mr. HINOJOSA. Thank you.
At this time, I would like to call on Congressman Royce for 1
minute.
Mr. ROYCE. Thank you, Mr. Chairman.
I think financial literacy here is key. I think, in my view, I am
a little afraid that one of the reasons we are here today is because
of the overreliance on the government to determine what is best for
consumers. And I think a lot of consumers looked at this and said,
well, if the government says it is okay, then it must be. And I think
this flawed line of thinking led millions of consumers to get involved in subprime and Alt-A loans. They, after all, had that government support.
And I think a similarly faulty line of thinking led investors in institutions around the world to embrace financial derivatives based
on the U.S. housing market. Why? Well, the government-supported
rating agencies rated these products Triple-A. So what could the
problem be?

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And there was a belief that the rating agencies and Federal regulators knew something that everyone else did not know. And clearly, they didnt know the problem. But there was a reliance on the
government, and in fact, in many instances, they were responsible
for the development and proliferation of these products.
According to a former Federal Reserve official, CRA regulations
led to the development of subprime loans, and the proliferation of
subprime and Alt-A loans was in itself enabled through low-income
housing goals that were placed on Fannie Mae and Freddie Mac by
their regulators and by Congress.
So, clearly, the belief in an all-knowing regulator is flawed. And
instead of attempting to address this problem through increasing
the regulatory presence over the industry, which will exacerbate
the belief that the government does know best, we should be encouraging an educated, knowledgeable consumer and investor base
that makes sound financial decisions for themselves and their families; hence, the importance of financial literacy and the importance
of disclosure.
Thank you, Mr. Chairman.
Mr. HINOJOSA. Thank you, Congressman Royce.
I want to announce that the House has begun the voting. I am
going to ask that the technicians put that work that is going on in
the House of Representatives on the screens so that you can see
the progress that we are making. But we have seven amendments
to vote on, plus the eighth, which is final passage. We anticipate
that it is going to take 1 hour. So I am going to recess to allow all
members to participate. And we will reconvene in 1 hour.
I am looking forward to the testimony of these witnesses. I think
that it is going to be very informative and something that we are
going to be very proud of in getting into the record.
With that, we stand in recess.
[recess]
Mrs. MCCARTHY OF NEW YORK. [presiding] Let me apologize. Unfortunately, we are running through a whole bunch of votes, and
we are going to have more votes in probably less than an hour. I
am fairly fast, to say the least, so we are going to go on, get all
your testimony in, so that we dont have to have another recess, if
that is all right with everybody.
First, I would like to introduce the witnesses from todays panel:
Ms. Laura Levine, executive director, Jump$tart Coalition for
Personal Financial Literacy; Mr. Lot Diaz, vice president, community development, National Coalition of La Raza; Mr. Dallas Salisbury, president and CEO, Employee Benefit Research Institute;
Mr. Brent Neiser, director of strategic programs and alliances, National Endowment for Financial Education.
I am sorry, I skipped one; Mr. John Gannon, senior vice president, Office of Investor Education, and president of the Financial
Industry Regulatory Authority, Investor Education Foundation.
That is a mouthful.
And Dr. Gerald Lauber, chief senior advisor, National Urban Alliance.
I would like to certainly extend a warm welcome to Dr. Lauber.
He is the chief advisor and a board member of the National Urban
Alliance. He brings an extensive background to the position, includ-

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8
ing academic, technology, and corporate experience in New York
schools and was a first responder at Ground Zero.
Mr. GREEN. Madam Chairwoman, did we cover the Urban
League? Ms. Jones?
Mrs. MCCARTHY OF NEW YORK. Im sorry. They didnt give it to
me. Stephanie Jones is the executive director of the National
Urban League Policy Institute, a position she has held since the
year 2005. Prior to coming to the Urban League, she was chief
counsel for Senator John Edwards.
Welcome to all of you, and thank you.
Let me explain the lighting system. You will each get 5 minutes.
The yellow light means you have a minute left. We will ask you
to try to finish off your sentence or thought at that particular time.
With that, Ms. Levine.
STATEMENT OF LAURA LEVINE, EXECUTIVE DIRECTOR,
JUMP$TART COALITION FOR PERSONAL FINANCIAL LITERACY

Ms. LEVINE. Thank you, Representative McCarthy, and members

of the subcommittee.
Good afternoon. Thank you for this opportunity to speak with
you today.
My name is Laura Levine, and I am the executive director of the
Jump$tart Coalition for Personal Financial Literacy, a nonprofit organization based here in Washington, D.C.
Jump$tart is a coalition of about 180 companies, such as Visa
and Charles Schwab, and organizations like NEFE, EBRE, and
FINRA, as well as Federal agencies which share a commitment to
advance financial literacy among students in kindergarten through
college. Jump$tart is also a network of 48 affiliated State coalitions.
The Coalition was founded in 1995 by a small group of organizations that recognized the need to educate students about personal
finance, as well as the importance of meeting this need through a
collaborative effort. Jump$tart does not conduct financial education
itself or create financial education resources; rather, its role is to
support and promote individual and collective efforts to educate
young people about money management.
As the committee considers the importance of financial literacy
within the regulatory system, Jump$tart encourages you to keep in
mind the difference between educating and informing adult consumers and providing standards-based tested personal finance education for students in kindergarten through high school. Any widespread effort to require personal finance education at that level
must be coordinated by or with the Department of Education, as
well as the State Departments of Education and the various appropriate educational organizations at the State, local, and national
levels.
Jump$tart believes that financial literacy is an important element of consumer protection, and even with better regulation designed to protect consumers and more readable disclosures that
most consumers can easily understand, an adequate level of financial literacy would give most consumers comfort, confidence, and

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the ability to make decisions most advantageous to their specific
needs.
But today, many young people are not adequately prepared to
handle the growing variety and complexity of financial products
and services or to make wise decisions in managing their own
money.
In 1997, the Jump$tart Coalition launched its first survey of financial literacy among high school students. The survey was conducted again in 2000 and has been repeated biannually since. Nationally, the average score on the test portion of the survey has
ranged from 48.3 percent and, unfortunately, that was the most recent survey in 2008, to a high of 57 percent, which still could be
called a failing grade.
In each of the surveys, participants were 12th grade students recruited from randomly selected public high schools. It is important
to note that the Jump$tart survey is intended as a general measure of the level of financial literacy among high school students
and is not designed to be an assessment of the effectiveness of specific financial education curricula, and therefore, we should not
conclude that the low scores reflect that financial education is ineffective.
Rather, the consistently disappointing results over more than a
decade of research do seem to indicate the need for more and better
financial education.
In 2008, Jump$tart also surveyed college students for the first
time. Given the same test questions, college students on average
answered 62.2 percent of the questions correctly, substantially better than their high school counterparts. But, unfortunately, college
graduates are still a relatively small segment of our total population.
Jump$tart believes that personal finance must be included in the
education of all students during the kindergarten through high
school years to provide young people with the knowledge and skills
they need to make smart financial decisions. Some positive strides
have been made in financial education in recent years.
Jump$tart has identified three States, Missouri, Tennessee and
Utah, that currently require all students to take and pass a onesemester course devoted to personal finance in order to graduate
from high school. And another 18 States require some personal finance content to be incorporated into the other subject matter.
I think it is important to note that personal finance education is
taking place in schools across the country, whether or not the State
or local jurisdiction requires it. We believe that personal finance
education needs to be introduced early in the elementary school
years while students are forming their behaviors and beliefs, and
we believe that effective financial education in the middle grades
could help troubled or unmotivated students make the connection
between staying in school and their lifelong income-earning potential, possibly changing the path of would-be dropouts.
Thank you for the opportunity to speak with you today. And as
you start to shape the future of the regulatory atmosphere for financial institutions, I urge you to keep the financial literacy of our
Nations students in mind, too. More and not less personal finance
education is needed, and we need to have a long-term nationwide

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strategy in place to ensure that this education is available to all
students.
Thank you.
[The prepared statement of Ms. Levine can be found on page 73
of the appendix.]
Mr. HINOJOSA. [presiding] Thank you, Ms. Levine.
At this time, I would like to recognize Mr. Diaz.
STATEMENT OF LAUTARO LOT DIAZ, VICE PRESIDENT, COMMUNITY DEVELOPMENT, NATIONAL COUNCIL OF LA RAZA
(NCLR)

Mr. DIAZ. Good afternoon. My name is Lot Diaz, and I am vice

president for housing and community development at the National
Council of La Raza.
NCLR is the largest Hispanic civil rights organization in the
United States dedicated to improving the opportunities for Hispanic Americans.
I would like to thank Chairman Gutierrez and Ranking Member
Hensarling for inviting us to share our views.
I would also like to thank Congressman Hinojosa for his leadership in the area of financial literacy.
In my remarks today, I will lay out a strategy for using national
financial counseling programs as a glue to hold major asset-building programs together.
There are a number of Federal programs, like housing counseling, individual development accounts, and the VITA initiative
that aim to increase asset ownership among low- and moderate-income families. However, none of them offer a targeted strategy for
improving the choices of financial consumers and advancing them
to more sophisticated products and transactions.
In 1997, NCLR created a counseling network that today consists
of 51 community-based counseling providers that will this year provide counseling education to over 40,000 families.
Also in 2005, NCLR released a report which found that most financial education programs did not have the impact of helping Hispanic families obtain assets. We have learned that one-on-one
counseling to low-income families is a meaningful and effective tool
for building financial knowledge and sustainable wealth.
While one goal of the Administrations proposed Consumer Finance Protection Agency would be to streamline financial literacy
and education efforts, we believe a bolder, more targeted approach
is necessary to achieve a shared goal, the shared goal of changing
consumer choices and behavior.
A successful national counseling program should include elements like in-person, one-on-one service, provide advice on a wide
range of financial services, and deliver services through community-based organizations currently providing asset programs.
As Congress considers regulatory reform, it must also consider
how to improve the efforts of Federal agencies to educate financial
consumers. Several proposed reforms, like additional disclosure,
will curb deceptive practices. However, these reforms will not necessarily improve the daily financial decisions of families or ensure
that these decisions set them on a path to build true financial security.

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Many times, improving families financial decisions requires tailored guidance from a professional who can take into consideration
the totality of the familys circumstances and goals. In fact, this is
a mainstream approach taken by families with the means to do so.
They seek advice from a professional financial planner or investment advisor.
One NHN member, the Resurrection Project in Chicago, provides
a model that brings these large wealth-building programs together
through financial counseling. TRP is a certified housing counseling
agency which provides free tax preparation, financial counseling,
and other services. A typical client meets with a counselor individually to determine their financial status. A counselor reviews the
clients credit report, budget, and financial goals.
On average, 80 percent of the Resurrection Projects clients are
not ready to purchase a home and likely need to work through
other financial barriers before pursuing homeownership. In some
cases, homeownership may not be the right choice. Together, the
client and the counselor establish an action plan that would address credit repair, plan savings accounts, financial dictation and
available tax programs. As the family works through their action
plans, they continue to meet with the counselor, who helps them
tackle basic and complex financial issues.
Organizations like the Resurrection Project run into several barriers implementing this model due to the structure of the current
system. As stated earlier, financial counseling is not a federally
funded stand-alone service. They are also limited in size and scope
of the current Federal programs.
A national financial counseling program would allow counselors
to move families through asset-building programs to create a real
opportunity for families to make fruitful financial choices.
NCLR applauds the Administrations and Congress efforts to
modernize our financial regulatory system. We urge you not to lose
sight of the long-time bipartisan goal of improving families understanding and choices in financial matters.
A national financial counseling program would offer meaningful
tailored financial advice, link existing asset programs, and improve
the relationship between underserved communities and the banking sector.
In conclusion, NCLR recommends that: Congress establish a national financial counseling program; they expand programs that
help families obtain assets; and finally, they create new incentives
for low-income families.
Thank you.
[The prepared statement of Mr. Diaz can be found on page 45 of
the appendix.]
Mr. HINOJOSA. Thank you, Mr. Diaz.
And now, I would like to recognize Mr. Salisbury.
STATEMENT OF DALLAS L. SALISBURY, PRESIDENT AND CEO,
EMPLOYEE BENEFIT RESEARCH INSTITUTE (EBRI)

Mr. SALISBURY. Mr. Chairman, members of the committee, it is

a pleasure to be here. I thank you for the invitation to testify
today.

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My employer since 1978, the Employee Benefit Research Institute, I would note, does not lobby or take positions for or against
proposals. And my full submission for the record includes a significant amount of survey data and financial literacy status information as dealing with the full description.
The letter you sent me, however, inviting me to testify asked four
specific questions that actually call for the statement of positions,
and in that sense, I would want to stress that my statements from
this point forward are my own personal views and not those of my
employer.
First, as a consumer of financial services, my reaction is positive
to the creation of an independent consumer financial protection
agency if, and I would stress this, the consumer is a dominant
presence on the board and in advisory council positions.
For example, deep experience in financial services, in quotation
marks, should be interpreted broadly enough to include lifetime
consumers of financial services, not just individuals working for the
financial services industry. I would personally prefer regulation
and protection by an entity that is not governed by the regulated
or, as stated on page 29 of the Presidents document, captured by
the regulated, a problem found in recent years at the regional Federal Reserve banks, the Federal Reserve, and other existing regulatory agencies.
As a consumer, I currently see no such independent regulator,
which if properly implemented, the CFPA could become. If the consumer is not dominant at CFPA, however, I would stress that the
agency would likely be a waste of time, money, and effort and
would only serve to mislead the public into thinking that they will
be protected.
Second, the plain-language financial products proposed need to
be what my grandmother termed, and the ranking member termed,
plain vanilla. For example, a 20 percent down, 30-year fixed-rate
mortgage with clearly specified closing costs and that can be paid
off with no penalties; or a 3-year fixed-rate car loan that can be
paid off any time without the complexity of the Rule of 78 that I
got tripped up by in 1972 personally, in spite of thinking that I am
an informed consumer; or a charge or credit card that tells you any
and all fees in advance and cannot change fees without giving you
notice that the opportunity to cancel is present and giving you a
prorated refund for any annual card fee.
Research has found that individuals make the same choices with
a 1-page disclosure as with multiple pages of fine print; thus, they
require one plain English summary page with all key facts in addition to more detailed disclosure.
Third, the Presidents Advisory Council on Financial Literacy has
proven to be a worthy effort. It has also provided direct input to
the Treasury and to the Financial Literacy Education Commission.
Long-term value, however, will depend upon some formalization
of the role of the White House and some level of dedicated funding
and staffing. The current approach of heavily depending upon those
appointed to donate time, money, and other resources or to raise
them from others, leads to potential conflicts of interest and confusion of roles.

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Related to FLEC, I find, regrettably, that I am in agreement
with the critical review by the Government Accountability Office
that, as currently structured, FLEC has not met the legislated objectives. The Administration may already contemplate integration
of FLEC into CFPA, but if it is not focused on this issue, the Administration and the Congress should do so as details of CFPA are
developed.
Fourth, and finally, as your request letter notes, the Presidents
document states the CFPA should review and streamline existing
financial literacy and education initiatives government-wide. Based
upon my work on savings and retirement issues since joining the
Labor Department in 1975, giving one agency the absolute responsibility for direction of all Executive Branch activities in the area
of financial literacy and education could possibly add needed coordination and consistency. But that would only occur if the leadership of the agency was committed to the issue and to the approach
set out in the legislation.
Over my 34 years of working on this issue, I have watched multiple agency programs and priorities and financial education shift
dramatically as political leadership changes. This is not just the
case when party control changes, but occurs within a party even
with new staff changes. Thus, the role being set out for CFPA may
or may not add value in this area, depending upon the specificity
of the legislation, the attitudes and priorities of the director, and
adequate staff and budget resources provided for funding.
Assurance that most of those appointed to the board and advisory committee with deep experience in financial services are
there as individual financial services consumers, not as financial
services industry representatives, would make success more likely.
Needed technical expertise can be hired. But policy direction from
the appointed leadership and advisors will determine ultimate results.
I look forward to working with your committee and all others on
these important issues. Financial literacy on issues as simple as
understanding compound interest would be essential, even if there
are plain-vanilla products.
Thank you.
[The prepared statement of Mr. Salisbury can be found on page
82 of the appendix.]
Mr. HINOJOSA. Thank you, Mr. Salisbury.
Now, I would like to call on Ms. Jones.
STATEMENT OF STEPHANIE J. JONES, EXECUTIVE DIRECTOR,
NATIONAL URBAN LEAGUE POLICY INSTITUTE

Ms. JONES. Thank you, Chairman Hinojosa.

I thank the subcommittee for this opportunity to testify today. I
am Stephanie J. Jones, executive director of the National Urban
League Policy Institute.
Based upon our long experience providing frontline financial education and housing counseling services in Urban League affiliate
programs throughout the country, the National Urban League has
developed considerable experience and insight on this issue. We are
glad to offer our recommendations, which I will briefly outline now
but are presented in greater detail in my written testimony.

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In this whole process, our overarching concern is the consumer,
and we feel very strongly that the new regulatory framework must
include inherent checks and balances that guarantee the advancement of the five consumer protection objectives. And those objectives are: consumer financial services markets operate fairly and
efficiently; consumers have the information they need to make responsible financial decisions; consumers are protected from abuse,
unfairness, deception and discrimination; traditionally underserved
consumers and communities have access to lending, investment,
and financial services; and national community-based organizations, such as the National Urban League, the National Council of
La Raza, and others that have demonstrated effectiveness in reaching underserved minority communities, be included as full partners
in any consumer protection effort.
We are pleased that this committee is focusing on financial literacy today. This is a critical aspect of this issue, and it is a top
priority for the National Urban League. But we cant forget that
while financial literacy is important, the fundamental problem at
the heart of todays foreclosure crisis was not the inadequacy of the
disclosures or the financial literacy of the borrowers. Rather, it was
that lenders should not have made loans that they knew borrowers
would be unable to sustain without refinancing. Therefore, to effectively protect consumers, it is critical that the regulatory system
monitor and address market incentives that encourage loan originators to push risky or unsuitable loan products, and must also include independent, redundant back-up systems that provide layers
of protection against financial excess.
And as you know, financial literacy is at the core of the Urban
Leagues mission to empower African Americans to attain economic
self-sufficiency. The rationale for our emphasis on financial literacy
is buttressed by some startling data, as revealed in our annual,
State of Black America report. Among other things, we have
found that African Americans economic standing is 57 percent that
of White Americans, and that the median net wealth of African
Americans is $10,000 versus $109,000 for whites.
The Urban League strategy for addressing this glaring gap is to
create culturally competent programs that address both financial
principles and long-term behavioral change. Overall evaluation research of our financial literacy programs consistently finds significant correlations between the level of financial knowledge and good
financial management practices.
Housing counseling also plays a key role in support of the goal
to increase financial awareness and sophistication and to close the
wealth gap between minority and non-minority households. In addition to a deeper national commitment to housing counseling, a
core tenet of our Homebuyers Bill of Rights, the National Urban
League advocates three primary objectives that the Federal Government and the Financial Literacy and Education Commission
should pursue to promote economic opportunity for minority and
low-income families and communities.
First, we must expand access to capital and financial services
through mainstream banks and thrifts, particularly by ensuring
that the CRA remains effective.

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Second, bank the unbanked with innovative new private sector
products and services driven by new incentives for financial services for the poor.
Third, we must promote savings among the poor by catalyzing
wide-scale establishment of individual development accounts and
other mechanisms that help low-income families save for homeownership and other key assets.
And of course, particular emphasis must be placed in all of this
on reaching neighborhoods with low-income and minority populations.
On behalf of the National Urban League, I thank you for the opportunity to offer our views today on this very important issue, and
we look forward to continuing to work with you as you develop and
implement a new regulatory system.
Thank you very much.
[The prepared statement of Ms. Jones can be found on page 60
of the appendix.]
Mr. HINOJOSA. Thank you very much, Ms. Jones.
And I now call on Dr. Lauber.
STATEMENT OF GERALD LAUBER, CHIEF SENIOR ADVISOR,
NATIONAL URBAN ALLIANCE (NUA)

Mr. LAUBER. Thank you.

Good afternoon, Mr. Chairman, and distinguished members of
the committee. Thank you for the opportunity to testify before you
today about the need for effective financial literacy education for
Americans.
I am Gerald Lauber, the financial literacy advisor to the president of the National Urban Alliance, which is a not-for-profit corporation out of Syosset, New York.
Prior to working with the NUA, I was a school superintendent,
an assistant superintendent for instruction, a principal, and a
classroom teacher. In all, I have devoted over 45 years to the process of helping students.
The mission of the NUA is to focus on helping schools assess
their instructional programs and deliver professional development
for teachers so they are better prepared to help their students master content and learning skills. We have learned a great deal about
education and organizations. We know that teaching a subject does
not ensure that all students will learn it.
Financial literacy programs must contend with common complications for teaching and learning while competing for sufficient
space in the crowded instructional day. To contend successfully
with these complications is a matter of professional skill and organizational focus. Without plans for professional development and
content that is integrated into the curriculum through material relevant to students, financial literacy will be just another catch
phrase in our past history of failing to educate our citizens about
how they manage their daily life to position them for long-term financial security.
I hope the creation of a new government consumer financial protection agency, as expressed by the Administration, will exemplify
a real commitment to fight for the education and protection of consumers. That fight must recognize that financial education right

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from the start is part of the answer to protect consumers and build
a foundation for behaviors that support a healthy U.S. economy.
Why cant we provide the impetus to help our children create a
new generation of consumers who use reason to direct the use of
their resources rather than celebrating conspicuous consumption
and debt accumulation that currently endanger the basic fabric of
our country?
Strategies that help people make informed decisions will work if
we provide education programs that help all people obtain financial
literacy and decision-making skills. Application of these skills will
strengthen their knowledge in areas such as credit cards, mortgages, insurance, and other financial products. In a consumer-credit-based society, we must teach children about credit and the wise
use of it so they are prepared to be informed consumers. The lack
of inclusion of financial literacy in the vast majority of our Nations
schools continues to create a new generation of consumers who are
not informed about the use of money.
Unfortunately, what is clear is that the current effort to transfer
knowledge about financial literacy has not worked. While more
than 90 percent of Americas students attend public schools, the
Presidents Advisory Council on Financial Literacy, as it is presently constituted, has only one member who has any public school
experience. This fact has not gone unnoticed by the Nations educational community. How does this government demonstrate its
commitment to this issue when only 1/20th of the advisors have
classroom experience?
Yes, consumers need to be presented financial products in a simpler, straightforward manner that is clear, accurate, and contains
understandable information. I applaud efforts by this subcommittee
and the Congress to demand that our financial products industry
makes information about their products more transparent to consumers.
Yet I must warn and emphasize that without effective financial
literacy education, an understanding of these products will continue to be difficult and will not result in desirable behavioral
changes by consumers. Consumer protection and relevant financial
education must go hand-in-hand and must include an emphasis on
our Nations young people.
Over the past 6 months, this Congress has authorized nearly $1
trillion of American taxpayers money to Wall Street to clean up
our financial mess that they created that brought this country to
an economic condition not seen since the Great Depression.
On January 6, 2009, the Presidents Advisory Council on Financial Literacy, established by President Bush, stated as its principal
recommendation: The United States Congress should mandate financial education in all grades for students, kindergarten through
12.
Local school districts cannot afford another unfunded mandate.
Now is the time to supplement that investment by committing
some of those resources to sound financial literacy education for
Americans.
I urge this committee to strongly support both this message and
the messengers working to refine and deliver effective financial literacy education. It is critical to building the information base our

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citizens need to live as informed consumers. But just using wellwritten financial literacy material without a well-thought-out delivery system will not enable them to transform information into action.
Thank you again for inviting me to testify today. And I will be
happy to answer any questions you may have.
[The prepared statement of Dr. Lauber can be found on page 67
of the appendix.]
Mr. HINOJOSA. Thank you.
At this time, I would like to recognize Mr. Gannon.
STATEMENT OF JOHN M. GANNON, SENIOR VICE PRESIDENT,
OFFICE OF INVESTOR EDUCATION, AND PRESIDENT OF THE
FINRA INVESTOR EDUCATION FOUNDATION, THE FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA)

Mr. GANNON. Mr. Chairman, Ranking Member Hensarling, and

members of the subcommittee, I am John Gannon, senior vice
president for investor education at the Financial Industry Regulatory Authority, or FINRA. On behalf of FINRA, I would like to
thank you for the opportunity to testify today.
Mr. Chairman, I commend you for having todays hearing on the
critically important topic of improving financially literacy. In these
uncertain financial times, the role of financial education is more
important than ever. FINRA and the FINRA Investor Education
Foundation are committed to expanding the knowledge and confidence of all Americans wishing to build a more secure financial
future through saving and investing. And we share your interests
in considering how best to promote financial literacy in the context
of reforming the financial regulatory system.
FINRAs Office of Investor Education provides an array of educational opportunities to investors. These include maintaining our
prominent investor information area on the FINRA Web site, providing a comprehensive market data resource, and publishing information on such critical topics as investment fraud, job dislocation
and investing in bonds.
Interactive tools, such as FINRAs Fund Analyzer, allow investors to compare fees and expenses among competing investment alternatives.
In 2003, FINRA established the FINRA Investor Education
Foundation, which is the largest foundation in the United States
dedicated to investor education. The Foundations mission is to provide Americans with the knowledge, skills, and tools necessary for
financial success throughout life.
Foundation grants are used solely to fund educational programs,
publications, and research. Recent grants have supported efforts to
help low-income individuals build savings and achieve financial
goals and guide working Americans as they make the transition
into retirement.
FINRA commends the Administrations inclusion of recommendations focused on improving financial education and literacy in its
proposals for regulatory reform. The Administrations proposal to
mandate a financial education authority signals a commitment to
increasing financial literacy of all consumers.

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It will be important for all regulators with roles in financial oversight and consumer protection to coordinate and communicate
about their financial education initiatives to ensure that the government leverages its resources for maximum impact.
FINRA further commends the Administrations proposal to enact
an automatic IRA program with an opt-out. A similar and successful approach has been taken by a number of employers with 401(k)
plans. FINRA has teamed with the Retirement Security Project
and AARP to establish Retirement Made Simpler, an effort to increase participation rates among employees whose companies offer
401(k) plans by encouraging more employers to adopt automatic
401(k)s.
FINRAs work in investor education has provided us with experience in managing the challenges of how to most effectively and efficiently get information out to investors and consumers. Let me
highlight now some issues to consider for improving financial education and literacy efforts.
First, there is a need for baseline data on financial capability and
literacy. The FINRA Foundation is currently working on a survey
that should provide that crucial data. Recommended by the Presidents Advisory Council on Financial Literacy, the survey of over
25,000 Americans addresses a comprehensive array of financial
topics, including retirement planning, investment choices, household budgeting, credit consumer protections, and the use of financial education resources. This data will help inform the efforts of
both public and private entities as they attempt to best structure
financial literacy and investor education initiatives.
Second, I would want to emphasize the importance of distribution channels in financial literacy efforts. Recognizing that highquality investor education resources already exist, the FINRA
Foundation and its partners focus on making sure that such resources get into the hands of all those who need them the most.
The FINRA Foundations grants and projects leverage partnerships with other organizations and use new and conventional
media to widen access necessary to the resources for financial success. Sometimes this is via the Internet or public broadcasting. At
other times, it is through a counselor or a workplace representative.
The government has a variety of existing robust distribution
channels at its disposal. The Social Security Administration, the
IRS, the Postal Service, and the Federal Citizens Information Center are just some of the potential channels that could be used to
promote and advance financial literacy efforts with an extremely
wide reach.
Finally, as Congress considers how to improve financial literacy,
it is vital to provide adequate funding for whichever agencies or
groups are given responsibility for this task. Further, given that a
variety of existing agencies and departments have roles to play in
investor and consumer protection and education, those agencies
should have a clear mandate to provide financial education, coordinate those efforts with other Federal agencies, and engage in partnerships to broaden their reach.

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19
FINRA appreciates the opportunity to testify on these important
issues, and I would be happy to answer any questions you may
have. Thank you.
[The prepared statement of Mr. Gannon can be found on page 52
of the appendix.]
Mr. HINOJOSA. Thank you.
And finally, I would like to call on Mr. Neiser.
STATEMENT OF BRENT A. NEISER, DIRECTOR OF STRATEGIC
PROGRAMS AND ALLIANCES, NATIONAL ENDOWMENT FOR
FINANCIAL EDUCATION (NEFE)

Mr. NEISER. Thank you, Mr. Chairman, Ranking Member Hensarling, and members of the subcommittee.
I am Brent Neiser, director of strategic programs and alliances
for the National Endowment for Financial Education, otherwise
known as NEFE. We are based near Denver, Colorado. We are a
501(c)(3) private-operating foundation, nonprofit, nonpartisan, noncommercial.
At the end of my written testimony, there are several examples
of initiatives we undertake. Our high school program trained over
6 million students in public and private high schools throughout
the United States in the last 20 years; a college program with nearly 300 enrolled institutions; and a free, noncommercial source
called CashCourse.org. There is a growing interest among community colleges signing up for this Web resource. We do research on
retirement issues, teacher training, unique populations, immigration issues, and student financial behavior all related to personal
finance. We are also concerned about workplace, and collaborate
with many of the organizations represented on this panel, as well
as the Boy Scouts of America, the American Cancer Society, and
scores of other nonprofit groups.
We believe financial literacy is an important component of consumer protection, and any kind of work toward regulatory reform
should consider it. It is a baseline. Financial markets and products
change, but consumers need to be equipped with a basic understanding of personal finance so they can make the best decisions
and be aware of the positive and the negative consequences of
those decisions. Also, there are appropriate times to connect financial education to events in their lifespan and when products are appropriate. This has to come out through this basic baseline and financial understanding.
We think that individual financial literacy and education are not
the whole solution. Automatic features in behavioral economics,
product disclosure, social markets, etc., all play into this beautifully.
The Presidents advisory council, on which NEFE CEO and president Ted Beck serves, has identified some of the concepts and definitions for a proposed body of knowledge that can form as a baseline for this effort.
We want to empower Americans to make their own decisions
about which products and behaviors will maximize their financial
wellbeing; be aware of financial products and strategies that may
not be suitable and would concern them.

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Also, financial literacy needs to move to a level of full engagement in society through a public education campaign, social marketing, a nationwide financial checkup, consistent and repetitive
messaging, and a clear link to financial literacy tools at points of
transaction where appropriate, and, again, across ones financial
lifespan.
I will close by mentioning five points or principles that might be
considered under any regulatory reform that links financial literacy
education and issues with consumer reform considerations.
First, definition: Building on the Presidents advisory council,
setting baseline standards, as Mr. Gannon mentioned, will create
a consistent framework for public and private financial education
efforts.
Number two, context: Providing the context for understanding a
product and its relationship to life goals and timing within ones
economic lifespan will increase the effectiveness of any disclosures
that are contemplated by Congress.
Number three, simplicity: We need to actually take a step back.
And we talk about plain vanilla, there needs to be plain vanilla financial literacy, too, to make any type of disclosures work, focusing
on financial understanding, capability, and literacy. Again, a social
marketing campaign could include basic messages, principles that
people can think about when they are interacting or contemplating
a product and interacting or working with an adviser. Thrift, paying yourself first, having an emergency fund, understanding the
time value of money when it comes to debt as well as growth of
an equity investment, the appropriate use of credit and diversificationwithout these principles embedded in the minds of Americans
at all ages, at different times in their lifespans, disclosures may not
be effective and might even be confusing.
Number four, relevance: Message campaigns need to be culturally and circumstantially relevant and age-appropriate. Underserved audiences need special attention.
Finally, number five, self-assessment: A nationwide financial
checkup, as recommended by the Presidents advisory council,
would allow Americans to assess their own financial knowledge
and provide appropriate links to trustworthy sources of information
to fill any gaps.
Finally, let me just congratulate the leadership of Congress, especially the Financial Literacy and Economic Caucus, Representative Hinojosa, Representative Biggert, and all Members, for a true
bipartisan approach to this issue.
Thank you.
[The prepared statement of Mr. Neiser can be found on page 78
of the appendix.]
Mr. HINOJOSA. Thank you.
I want to say that, before we start a line of questioning by each
of the Members of Congress, I ask unanimous consent to submit for
the record GAOs April 29th, 2009, testimony before the Senate
Subcommittee on Oversight of Government Management.
Hearing no objections, so be it.
I would like to recognize myself for 5 minutes. And every other
member will also receive 5 minutes to have an opportunity to ask
questions.

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I am dissatisfied with the Financial Literacy and Education
Commission, commonly known as FLEC. They have yet to produce
a true national strategy for financial literacy despite having 4
years to produce one.
On April 29th, the GAO testified before the Senate Subcommittee on Oversight and Government Management, and, in
their testimony, GAO concluded that the so-called national strategy
remains more descriptive than strategic. Others have referred to
this, their strategy, as, the strategy to strategize on a national
strategy, which I dont understand what that means and I dont
think they do either.
Congresswoman Judy Biggert and I knew that this likely would
happen prior to the enactment of the FACT Act. We had our own
competent legislation that would not have created an unwieldy entity unable to arrive at a national strategy to help the United
States and its economy.
So, moving on to ask my first question of Mr. Diaz, Mr. Salisbury, and Ms. Jones, and I would ask you to react to my statement
and tell me what you think of this legislation, of this Act.
Mr. DIAZ. Mr. Chairman, the financial literacy for us has been
it increases awareness. Our take on it has been we have done, run
many programs. We have seen a lot of programs operate. It does
impart knowledge, but it doesnt change decision-making behavior
necessarily. We have seen lots of examples, whether it is credit
cards or payday lending, where consumers have been given a lot
of education and yet it does not change behavior.
So my feeling related to financial literacy education awareness is
that it never hurts anybody, but our concern is to really increase
wealth amongst Latino families. And that is a little bit more targeted and a little bit more tricky objective, because it requires
changing behavior, in many cases, and that usually requires both
time and a situation where you can actually exchange information.
So, in my testimony, I referred to one-on-one counseling as an effective tool to do that. I can tell you of countless examples where
families are taken from a starting place and end up at a very different place anywhere from 6, 12, 18 months later because they
have had the ability to converse and reflect on their situation with
an impartial party who is only interested in making sure they
progress.
Mr. HINOJOSA. Thank you, Mr. Diaz.
I would like to get a response from Mr. Salisbury.
Mr. SALISBURY. Mr. Chairman, first, I would just note that, at
the most recent meeting of FLEC, it was noted by Assistant Treasury Secretary Barr, who was in his first week at the Department,
that a multi-agency review of the documents and of the report from
the Government Accountability Office has begun and is underway.
I mention that because I think that is a very positive statement
on an initial review process that tries to be responsive to what the
Government Accountability Office said. I think that the combined
testimony of this panel, but in particular the suggestions of Mr.
Gannon and Mr. Neiser, essentially laid out the core of what could
become a strategic document that could then move to implementation.

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I think that, as I noted in my testimony, the key is the focus,
and it is one of the reasons that I have discussed the desirability
of a new agency such as that suggested by the Administration,
with FLEC being built into it. Essentially, the entire realm of financial literacy coordination across the Administration would be
directed by an agency that puts far more particular focus on the
consumer. This is opposed to what, most particularly in the last 18
months, has been a rather large national economic problem that,
quite appropriately, is where most of the attention of the Treasury
Department has been. And, given where we are, frankly, for the
next 2 years, as a citizen, I hope that is where most of their attention will be.
Mr. HINOJOSA. Thank you, Mr. Salisbury.
I would like to get a reaction from Ms. Jones.
Ms. JONES. Mr. Chairman, we feel very strongly that anything
that is done at the Federal level related to financial literacy must
take into account what the actual needs are in the communities
and must link very directly to those communities.
That is one of the reasons we strongly suggest that the government work closely with national intermediaries such as La Raza
and the National Urban League, who are working on the ground,
in the communities, who know what the needs are and can get directly to the people but, also, who people will come to. People trust
us; they understand what we do there. They know that we are
there in the community working every day.
Because there often is a disconnect. And there really is no shortage of housing counseling providers. There are all sorts of, for example, for-profit providers out there who are offering all manner of
services that dont necessarily address the real needs of our constituents. And so it is important for people to know where to go
and to go to organizations and entities that have a proven track
record and know what they are doing, frankly.
And I think anything that is done at the Federal level must take
that into account and must consider that and should be used in a
way that enables our constituents to get the best possible service.
Mr. HINOJOSA. My time has run out, Ms. Jones. Thank you very
much.
I now yield 5 minutes to the ranking member, Congressman
Hensarling.
Mr. HENSARLING. Thank you, Mr. Chairman. And, again, let me
recognize your leadership in this effort, along with the gentlelady
from Illinois, Mrs. Biggert. Clearly, this entire committee respects
your body of work, your leadership, her leadership, in trying to
help educate our populace on the financial products that are available to them and help our communities.
I continue to be concerned, if you were here for my opening statement. I know the subject has to do with financial literacy.
My first question would be, how many on the panel are familiar
with H.R. 1705, which is the House version of the Presidents initiative for the Consumer Financial Products Agency? Have any of
you studied that?
Mr. Salisbury, have you studied it? And, I am sorry, Ms. Jones,
as well? Did I understand, are you all supportive of that legisla-

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tion? Or have you formed an opinion? Have your organizations
formednot yet? You continue to study the legislation? Okay.
Mr. Diaz, in your testimony, I think, if I heard you properly, you
mentioned the term choice on many occasions, leading me to believe that consumer choice is at least something that would be valued by your organization. Is that correct?
Mr. DIAZ. Absolutely. That is critical.
Mr. HENSARLING. Section 5(B)(i)(a) of H.R. 1705 creates an
unelected group that has the legal authority to ban from the marketplace any consumer financial product, practice, or feature it considers unfair or anti-consumer. Those seem to be rather subjective terms, as opposed to objective terms.
If, for some reason, this bill became law and the unelected members of the Financial Products Safety Commission decided to ban
electronic remittances because they viewed them as inherently unfair or anti-consumer, would that trouble your organization?
Mr. DIAZ. Well, that is a big hypothetical. Remittances are obviously a current standard practice that many immigrant families
transfer excess income down to families of their place of origin. I
cant imagine the question of whether they would ban remittances.
I mean, that isI dont know if there is anything in the legislation
where they have written or seen about that that would be even the
case. So it is a hypothetical
Mr. HENSARLING. But it doesnt trouble you that this particular
commission could have that power without any review. So you
would be trusting that simply wouldnt happen.
How about with respect to payday lending, which is controversial
within a number of areas and communities? It seems among some
disadvantaged and low-income communities, some believe they
serve a valuable purpose; other people, frankly, would like to see
them banned.
I dont know what the position of La Raza is. But would it trouble you if this particular panel decided to ban all payday lending
as inherently unfair or anti-consumer?
Mr. DIAZ. Well, like I said, the devil is always in the details. But
what we would be focused on is access to credit, did that change.
We at NCLR believe low-income families have to have access to
credit. We dont believe that families should be taken advantage of,
so just because they can sell a family a product doesnt mean it is
right for that family.
So what I would tell you is that the key for us is, whatever that
new commission sets up to do, we would be focused on: What is the
civil rights implication, one? And, two, is it still going to allow
product innovation even within the rules that it establishes?
Mr. HENSARLING. And, as various panel members look at the
challenge of disclosure, financial literacyit takes two to communicate, the communicator, the communicatee. And I have heard
some verbiage, and there is no doubt, that there have been lenders
who have purposely tried to deceive borrowers. There has been a
lot of controversy in subprime mortgages and in credit cards.
I am just curious if any of you have undertaken an analysis of
the disclosures necessary in the average credit card agreement.
I just happen to have one in front of me that indicates that 43
percent of the content is mandated by Federal law, including Regu-

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lation P, Regulation Z, the FACT Act; 5 percent of the content is
dictated by State statutory law; 16 percent arises from legal risk
managementin other words, liability exposure; meaning essentially two-thirds of the disclosure written in legalese is, frankly,
mandated by Federal and State government and liability exposure.
So I am curious if anybody on the panel has engaged in a similar
study and have come to the same or different conclusion. Anybody
who cares to
Mr. LAUBER. I will jump in quickly.
It is not the content of the disclosure that is important, because,
as we have heard from many distinguished members, they read it
and they dont understand it. Eighty percent of what we take in we
take in visually. And if we cant visualize and understand the concepts, no matter how long and extensive the regulations may be,
they are going to fall on deaf ears.
We talk about a product, but we dont talk about how to market
the product. And the marketing of the product comes from the understanding of the concepts that you are addressing. So failure to
educate consumers to understand how to ask the right questions,
or banks or financial institutions, how to present information so it
is understandable, that is a major part of the problem.
Mr. SALISBURY. And, Congressman, I would just quickly note
that, with that versus the disclosure, I personally would look at the
statement.
And before this hearing, I looked last night. I have five credit
cards; I looked at my most recent five credit card statements. From
one of the companies, it is a clean, uncluttered statement that has
the basic information in large print and nothing hidden. With the
worst of them, it takes minutes to figure out how much you pay,
if what you want to do is pay it off.
Mr. HENSARLING. So the market has provided at least one plain
vanilla.
Mr. SALISBURY. One plain vanilla. And so, what I mean by plain
vanilla is something that is instantly and easily, by visualization,
understandable.
Mr. HINOJOSA. The gentlemans time has expired.
I would like to call on Congresswoman McCarthy from New
York.
Mrs. MCCARTHY OF NEW YORK. Thank you.
And I thank everybody for their testimony.
By the way, we are hoping that we are going to clear that up as
we go forward with the credit card clarity, so that we can have that
kind of a credit card. But five credit cards, I dont know. I only use
one, that is it.
One of the things that I want to say is thatnot only do I sit
on this committee, but I also sit on the Education Committee. And
in the higher education bill, financial literacy would be included in
that. We are now starting to work on Leave No Child Behind or
whatever name it is going to be. There is language in that, which
I plan on offering that will be from kindergarten to 12th grade. I
happen to think it can be worked into the school day, so there is
no extra time.
I have already spoken in front of a large group of superintendents, teachers, parents, PTAs, and they are starting to get it, main-

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ly because we want to educate the children, and especially those
children learning a second language, so they can help their parents
when they go home.
So we have a lot of work to do for the future, but I guess the
questionI am going to start with Dr. Lauber. We have been, unfortunately, under terrible economic strain, everybody. I doubt very
much if there are too many people who havent been touched by
this.
Now, obviously, we know there are an awful lot of people who are
excellent in financial literacy, hopefullybut they still got hurt.
But what would you say to the majority of our constituents, do you
think they had enough financial literacy background that wouldnt
have gotten them into the amount of debt they have carried, taking
their money out of their home?
Mr. LAUBER. I think, especially on Long Island, where we know
best, and affluent areas, that was one level of the population that
was hurt. But the populations that we work with at the National
Urban Alliance were hurt much more than that, because these are
people who started without all of the assets that we have to deal
with.
Why did they get hurt? They got hurt not necessarily because
they didnt have the knowledge someplace in their mind, but there
was a problem with the application of the knowledge. So I heard
a comment before, it is not what we can do, it is what we should
do. And unfortunately, the process of thinking about making decisions, about what we should do with economic choices, is not ingrained in our students.
Thinking is not taught in our schools. Our schools are basically
content-based. And I think the challenge that you identified is absolutely correct: How do we fit this in the school day? It cannot be
a replacement to mandated courses. We work with teachers to help
them substitute examples in financial literacy for the courses that
they are currently teaching and use brain-based learning strategies. The brain can only take in new information for 5 to 7 minutes, and that may be a good thing for all of us to listen to, but
then you need another 10 or 15 minutes to apply that knowledge;
otherwise, it doesnt stick.
And I think if we could somehow take all of the work that is
being done to focus on financial literacy educationand there is
wonderful material out there. Where it falls apart is that it is not
being integrated into the school day; it is not a high priority.
And you know from the forums that we are having around New
York State, where we are bringing all the school stakeholders togetherparents, teachers, administrators, superintendents, board
membersthis is a topic that they are starting to want to discuss,
because it has just been ignored.
Mrs. MCCARTHY OF NEW YORK. I thank you.
One of the other things, you know, when you are talking about
private and government working together, I think we are going to
have to do that, because the government cant answer everybodys
questions, and they cant.
For years, talking to the bankers, talking to the credit unions,
talking to many other financial institutions, saying we need financial literacy, and they said, We are doing it, and I said, Where?

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because I have never really seen that much out there. I am seeing
it now, to be honest with you. There is more out there. I hope that
we can continue to do that.
But how do we work withhow does the government work with
a private enterprise, whether it is our bankerswe cant mandate
them to do this with us. Maybe we can, I guess the way we are
going today. But how do we bring those two together so that we
can also not only reach all the young students for the future generations, but how do we also reach out to the families?
One thing I found out, especially with all the foreclosures, people
knew they were in trouble, and they didnt know who to go to. They
could have prevented half the foreclosures out there if they had
found out who to go to.
If you could just give me a quick answer, because I see my time
is up.
Mr. SALISBURY. I will give you one quick example, which could
be dealt with by an amendment to the FACT Act or by this new
agency. FLEC put together a Web site called MyMoney.gov. Under
Treasury regulations, MyMoney.gov cannot have anything on it
that relates to nongovernmental organizations. So it cant be a onestop shop across for-profit, nonprofit, government, or noncommercial.
So there are relatively simple things that could be done to bring
information together just by making some changes in regulation.
Mrs. MCCARTHY OF NEW YORK. Thank you.
Mr. HINOJOSA. At this time, I would like to recognize the Congressman from Texas, Mr. Marchant.
Mr. MARCHANT. Thank you, Mr. Chairman.
I would like to follow a line of questions based on the number
of groups that are attempting to accomplish the same thing. And
would any of you venture to say how many different groups in the
United States have their sole focus on the financial literacy of
America? There are about seven here, so
Mr. SALISBURY. The American Savings Education Council Program has partners from all 50 States, and there are State banking
agencies and various others across the United States working on
this.
What is lacking is as much of a coordination mechanism as
would be desirable and, frankly, a place to go in the Federal Government to work broadly with the Federal Government. I think
this was the intention of what FLEC would become, but it hasnt
gotten there yet.
Ms. JONES. Also, I want to clarify the National Urban League,
while financial literacy and housing counseling is an important
part of what we do, it is certainly not our sole focus. We provide
all manner of training.
I do think, though, that the fact that there are so many entities
out here doing it shows the extent of the need. And I know, at least
from the National Urban Leagues perspective, we could serve exponentially more people if we had the capacity. People are beating
down our doors trying to get help, because the need is so great out
in the community.
Ms. LEVINE. And I might add that my organization, the
Jump$tart Coalition, is a coalition of about 180 organizations na-

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tionally over a network of 48 affiliated State coalitions, each with
their own partners. And we know we dont have all of them, but
there is an effort to work together. And the Coalition members do
come from the private and the public and nonprofit sectors. And so
I think that it is a step in the right direction and we need to do
more.
Mr. MARCHANT. Was there an expectation that, under FLEC,
there would be a national coordinator of this, someone that is responsible for giving all government grants out, and that there was
a place to go to get funding for this?
And I know HUD funds it. Every entity probably has some kind
of a funding mechanism for this, correct? Some of you are saying
yeah.
Mr. DIAZ. I will take that.
Financial literacy education is funded through a variety of mechanisms and different types of institutions.
But I would also say that it is something that iswe dont treat
it as a stand-alone product, generally. Because, as someone said before, you dont learn unless you do, to some degree. And so, our experience with financial education is it does increase awareness of
certain aspects of financial transactions; it doesnt change their
ability to transact well.
And so, what we have done, we have embedded the tools of financial literacy inside other programs as they are practicing something
that they want to achieve in their lives.
Mr. MARCHANT. I am going to lose my time, sir.
I want to ask Mr. Salisbury, you are the one who talked about
the new CFPA. How would you make the new CFPA independent
of financial institutions influence?
Mr. SALISBURY. I would say it is not as much totally independent
as making sure that consumers are included. That is, if there is a
board of five, a majority of that board is made up of people who
view themselves principally as financial consumers, as opposed to,
for example, members of the regional Federal Reserve banks.
Six of the nine board members are appointed by the banks, who
own the Fed. The Federal Reserve Board banks are basically selfregulatory organizations, the banks regulating the banks. If that
was what this agency was, I would argue a consumer agency that
is run by the financial services organizations definitionally cant be
a consumer protection agency.
So it would be that, if there is a board of five, making sure a majority of that board are actually financial consumers, not those who
basically have come out of the financial services industry and, if
history is a guide, would go back to work for the financial services
industry after service on the board.
Mr. MARCHANT. Thank you.
Mr. HINOJOSA. I have just been informed that in 10 minutes, we
are going to start another long series of votes. And I would like to
give all the members present an opportunity to ask questions. And
I ask unanimous consent that we shorten the time to 212 minutes
so that everybody can ask questions.
Hearing no objections, I would like to recognize the gentleman
from Texas, Congressman Al Green.
Mr. GREEN. Thank you, Mr. Chairman.

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Friends, to properly understand why these contracts that we are
talking about are written in such legalese, I think we have to understand what they are designed to do. Are they designed to inform
the consumer, or are they designed to protect one of the parties?
And if they are designed to protect one of the parties, then we
have one set of circumstances to deal with. But lets just assume
it is designed to inform the consumer, then we have to ask ourselves, will this contract in some way entrap the consumer?
Because there are many who would have language somehow associated with a contract that would indicate, I have read this, I
understand what I have read, and once you indicate you have read
it and you understand, at some point later on the party who designed the contract to protect himself or herself uses that language
against you by saying, You knew, or should have known, because
you read, and we assume that you understood because you said you
understood.
So I am mentioning this to you in my 212 minutes simply because I think that we do have to give a lot of thought to what we
want these contractsand that is what they areto do.
When we close on a homeand I am sure all of you have closed
on a homewhen you close on a home, you are sitting there, it is
a great, happy occasion, and somebody brings in a stack of documents with no blanks filled in, saving the one that you will sign
on, and your name is typed there perhaps, and then, Sign here,
you sign, and later on you find out that you may have signed something that was not in your best interest.
So the question becomes this, friends: How do we get to a point
where we can have these documents inform the consumer and work
to benefit the consumer, as opposed to the person who drew the
contract and is trying to protect himself? That is what we have to
do now.
If anybody would give me a quick response, I think my time is
almost up.
Mr. LAUBER. Quick response. I think it is important that, whatever documentation is presented, that the consumer demonstrates
that they understand it. Someone saying, Do you understand it?
and them saying, Yes, does not prove they understand it.
Mr. GREEN. Quick question. Do we need to let the consumer take
it home?
Mr. LAUBER. They can take it home. They can do it online. In
New York, when I wanted to take get a reduction on my insurance,
I take a driving test online.
Mr. GREEN. Just quickly, should the consumer have the opportunity to peruse it for some period of time before signing it?
Mr. LAUBER. Absolutely.
Mr. GREEN. Should there be some opportunity for the consumer
to perhaps rescind the contract if the contract is one that proves
to be adverse to the consumers best interests and the consumer
doesnt have time to peruse it, a take-it-or-leave-it kind of deal?
Mr. LAUBER. Yes.
Mr. GREEN. And finally, let me just ask this with the 212 minutes, or maybe it is just a comment that I would make.
I am concerned about this agency. Is it going to be a watchdog,
as some have said, which means that it would have some bark,

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maybe some bite? Is it going to be a guard dog that would have
a lot of bite, maybe some bark? Or is it going to be one of these
dogs with no bark, no bite, which is really a dog to watch as opposed to a watchdog?
I am very concerned about what this agency will ultimately become. Because if it becomes a watchdog with no bark, no bite, then
we have done the consumer a disservice.
Thank you. I yield back.
Mr. HINOJOSA. Thank you.
At this time, I would like to recognize the gentleman, Congressman Cleaver.
Mr. CLEAVER. Thank you, Mr. Chairman.
Mr. Salisbury, I just have one question. In your comments, in
your written statement, you said that you believe that financial literacy ought to be mandated for K through 12 and that it ought to
be tested. I happen to agree with you. I think there is anecdotal
evidence aplenty that would support your position.
My question is that the critics, I think, would say that if we
mandated such a curriculum and teachers realize that they would
be measured by the ability of the students to regurgitate the information, that they may do what many of them are doing all across
the country now, which is teaching the test. And teaching the test
doesnt always equate to teaching the student, and the student, in
the long run, turns out not to have accomplished much.
What would you say to the critics?
Mr. SALISBURY. I would basically play off of what Dr. Lauber
said, with which I totally agree, which is: Part of this can simply
be to, by mandate, require that the equivalent of the financial literacy education be built into the existing curriculum through examples, etc., which, to his point, can be 4 and 5 minutes here and
there, with some type of quiz to follow.
I think that I am hopeful vis-a-vis the current situation because
the President himself had extensive exposure to this in Chicago
through the Ariel Academy. The current Education Secretary was
involved with the Ariel Academy and recognizes and has stated in
his confirmation hearings and elsewhere his view that that basic
financial literacy education is absolutely essential.
And so I think, if you can do it by building it into curricula, and
if what you are trying at the earliest grades to teach are very basic
concepts such as what is money, what is interest, what is compound interest, if one is going to be critical of testing to that or
teaching to that, as long as it ispick a number, if it is 15 simple
critical elements of knowledge for people to have, then my response
would be, so be it. If they teach to that test, that it is 15 key things
that will help everyone get more successfully through life, hey, fine.
Mr. CLEAVER. Thank you, Mr. Chairman. I yield back the balance of my time.
Mr. HINOJOSA. Thank you.
At this time, I would like to recognize the Congressman from
Georgia, Congressman Scott.
Mr. SCOTT. Thank you, Mr. Chairman.
And thank you all for coming.
I cant think of really any more important thing we can do than
financial literacy to deal with what has happened in this financial

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crisis. Because, quite honestly, if we had had an informed, educated constituency consumer base, we wouldnt be in this situation
we are in now, where we are literally having to spend trillions of
dollars just to find our way back to shore.
And education is important; K through 12 is important. But this
financial system of ours is so complicated, it is so complex, and
even as we are dealing with trying to fix it now, it is getting even
more complex and more complicated, for the public not only lacks
the education to understand how we got into this situation, they
are lacking the education as to what we are doing to fix it.
So financial literacy has to come front and center. And I am so
glad, Mr. Chairman, that we are hosting this hearing. And I hope
that we will be able to lift financial literacy up to the proper level
it needs to be as a major component of our financial regulatory reform.
So the question that we have to ask is, how can we incorporate
financial literacy into our new financial regulatory system in a way
that can certainly protect the consumer today, as they stand? And
I dont see how we can do this without having some infrastructure
and money and resources behind it connecting the Federal Government to this.
By that, I mean this: I believe that we have to have something
out there, right now, as a part of our reform, to have the consumer
to say, Here is somewhere I can call to get information now. Our
system is complex. There are credit cards coming, we have credit
card reform; there is banking coming.
Plus, we need a monitoring system to make these loan originators, these credit card companies behave themselves. Because if nobody is monitoring them, we are going to be right back in the situation that we have now.
So I would like for us to give some thought to trying to come up
with a monitoring system, a toll-free 1800 number with human
beings at the end of it anchored here in the government, at the
Treasury Department, not a counseling program, but folks like the
Urban League and the NAACP and ACORN and the senior citizens
group, people who have a relationship with the most vulnerable out
there. Because the damage is that these folks out there target people, and we need something that we have that targets them to give
a help line. Therefore, we can have a way for people to call in and
ask questions about what that situation is. And I am hopeful we
can put something like that together and probably put it in Treasury in the reform.
I know my time is up, Mr. Chairman, but I just wanted to say
that, and commend everybody for coming, and I look forward to
working on this going forward.
Mr. HINOJOSA. I thank you for your remarks and especially your
recommendations.
I would like, at this time, to call on the gentleman from California, Mr. Brad Sherman.
Mr. SHERMAN. Thank you very much.
First, a comment about this new protection agency, consumer
protection agency. I think it is important that it be a law enforcement agency, not a law-making agency. I have seen a tendency to
think in terms of, We will have the Fed take care of investment

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in the economy, and we will have this new agency take care of consumers and make all the rules for consumers, and then we can go
out of business here in the Financial Services Committee. I think
lawmaking should be done here in Congress.
Second, as to this education program, I couldnt agree with it
more. And I think that a use of Quicken or similar software would
be an important part of this. Financial literacy should be for the
21st Century, not what I learned when I had hair.
As to Mr. Gannon, I will ask you to just respond for the record,
but one thing we have to educate consumers about is the fact that
FINRA is not really a government agency. And the name implies
that it is. So I hope that either FINRA would change its name or
add something to all of its communications or that its foundation
would get the word out that it is wonderful private association but,
in spite of the word regulatorymost regulatory authorities are
government agencies.
I will let you respond very briefly.
Mr. GANNON. Congressman, thank you for that comment.
I think that we try to make sure that people understand that we
are a private-sector regulator. Most of our messaging goes to that.
But that is a very good point.
Mr. SHERMAN. I hope that you would do that. And you might
even think of a name change, although you are a relatively new organization.
Now, for the one question. The fact is consumers in mortgage
transactions often dont see their loan documents until they arrive
at the closing and they are presented them. In April of this year,
in the mark-up of H.R. 7028, an amendment was offered to amend
RESPA to give borrowers at least 24 hours to review their closing
documents, which, with the exception of extenuating circumstances, would be complete and finalized by the lender and the
settlement agent 24 hours before the closing.
And I will ask whoever wants to to respond to this: Would providing key closing documents to consumers in advance help consumers to understand the closing process better and to help ensure
that they do not enter into an unsuitable loan transaction, which
so often leads to unpleasant surprises, frustration, potential nonperformance, which then can collapse an entire free world economy?
Mr. SALISBURY. It would have helped me.
Mr. SHERMAN. It would have?
Mr. NEISER. I would say, Representative, it would prompt a
kitchen table conversation, if there is a spouse or a partner involved, where two or more can counsel each other as to, are we
doing this, are we in agreement. And if they are not, it gives them
an out.
Mr. LAUBER. I think, providing they were given the right questions to ask. I think two people not knowledgeable about a mortgage statement talking to each other could be very humorous at
times. They must have structured questions and understand the
concepts of what they are asking, perhaps with assistance of some
of the organizations that were represented here today.
Mr. SHERMAN. And the documents would have to disclose, Here
is the check you are going to have to write at closing; here are your

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monthly payments. Because those are the two most basic questions. Honey, can we afford this house?
Mr. Salisbury?
Mr. SALISBURY. The reason I made my commentand so I dont
disagree with the doctor, but I sort of do, in that my wife and I,
over the years, walked out of three different settlements because
what was put in front of us at the settlement table was not consistent with what we told were told beforehand the deal was.
Mr. SHERMAN. Mr. Salisbury, you are so much stronger than the
average consumer. Every other average consumer signed the papers in those three closings.
Mr. SALISBURY. Fair enough. They are not married to my wife.
Mr. SHERMAN. I believe my time has expired.
Mr. HINOJOSA. Thank you, Mr. Sherman.
I wanted to ask unanimous consent that a December 2008 report
prepared by the Washington State Financial Literacy Work Group
entitled, Putting the Pieces Together, be entered into the record.
Without objection, it is so ordered.
Also, I would like to ask on behalf of other members of this committee for unanimous consent that the following six written statements be entered into this hearing record: a statement by Dr.
Annamaria Lusardi, professor of economics at Dartmouth College;
second, the testimony of Dr. Camille Busette, vice president of
EARN organization; the third one is the statement by Dr. Rickie
Keys on behalf of the National Indigenous Literacy Association; the
fourth is a statement by J. Bradley Jansen, executive director of
the Center for Financial Privacy and Human Rights; the fifth is the
testimony of the SIFMA Foundation for Investor Education; and
lastly, unanimous consent for the testimony from the Financial
Services Roundtable.
Without objection, it is so ordered.
I would like to make some closing remarks and simply say that
it is very helpful to listen to the presentation made by each of the
witnesses and that I hope, when this is all finished, that we would
consider having some of the methods that are now being used in
classroomsa congressional hearing on the Education Committee
that I sit on was held here 2 weeks ago, showing us what 16 percent of schools in our country are now using to keep students from
getting bored by what is being taught, how to keep their interest
in math and science and many other courses being taught.
And it is blackboard where they use cell phones, they use
texting, they use what the weathermen use on television where
they can touch the screen and move things around, making it very
interesting, particularly for K12 students. They must get this kind
of education. But let me tell you, what works for them will also
work for adults, because it can be interesting.
And there should be tests like the ones that are now being given
to high school students, who are only passing, I think, with a 48
percent passing percentage, or college students. It doesnt matter
that they pass it or dont pass it; it is just so that they will know
just how much they know and understand about financial literacy.
I think that we are going to have to think out of the box and
have a way in which to progress on what has already been built
on the last 4 years.

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I want to particularly thank the group that was responsible for
helping us start the Financial Caucus. And I will just do it very
shortly. I want to say thank you to Ms. Levine, because Jump$tart,
Junior Achievement, and the Council for Financial Education coordinated with me on several Financial Literacy Day fairs in the
Cannon Caucus Room, and have been very successful. And I think
that it has proven one thing: that even the people who work here,
Members of Congress and staff, want to have this kind of financial
literacy. And so we are going to have to really build on it.
Time has run out, and I have to have some parts to close out this
hearing. And I want to thank the witnesses and the members for
their participation in this hearing.
The Chair notes that some members may have additional questions for these witnesses, which they may wish to submit in writing. Therefore, without objection, the hearing record will remain
open for 30 days for members to submit written questions to the
witnesses and to place their responses in the record.
This subcommittee hearing is now adjourned. And I thank you.
[Whereupon, at 5:20 p.m., the hearing was adjourned.]

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APPENDIX

June 25, 2009

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