Thank you, Mr. Chairman. I want to express my deep appreciation to you for conducting this hearing. I appreciate your willingness to work with me on this important issue. I am also pleased to be joined today by some of our colleagues who are important advocates for financial literacy. I am grateful for my colleagues' efforts, which were essential in the creation of the Financial Literacy and Education Commission, and their work with me on financial literacy legislation and funding.
As Chairman of the Senate Banking Committee, Senator Sarbanes held a series of hearings on financial literacy and related topics like remittances and bringing unbanked individuals into mainstream financial institutions. I enjoyed participating in those hearings as a member of the Banking Committee. Senator Sarbanes has been an outstanding leader on this issue, and we have worked extensively on a number of initiatives such as the Commission, the authorization for the financial literacy multimedia campaign, and funding for the Excellence in Economic Education Act.
Senator Enzi has also been a staunch ally on financial literacy efforts in addition to his role in the creation of the Commission. Together, we introduced the Financial Literacy in Higher Education Act, S. 1968, which seeks to improve the financial literacy of college students.
I also welcome Senator Stabenow, who is a strong voice for the need for improving financial literacy and the creation of the Commission.
I also want to briefly recognize the efforts of a couple of our colleagues–Senators Corzine and Allen–who will not be here today but who are also champions of financial and economic literacy.
Mr. Chairman, my interest in financial literacy dates back to when I was in the 4th grade. My teacher made sure that we each had a piggy bank. She made us save our pennies and count what we saved. We were made to understand how money saved, a little at a time, can grow into a large amount – enough to buy things that would have been impossible to obtain without savings. My experience with a piggy bank taught me important lessons about money management that have stayed with me throughout my life. More people need to be taught these important lessons so that they are better able to manage their resources.
Americans of all ages and backgrounds face increasingly complex financial decisions as members of the nation's workforce, managers of their families' resources, and voting citizens. Many find these decisions confusing and frustrating because they lack the tools necessary that would enable them to make wise, personal choices about their finances. Now, statistics show that there is an even greater need for improved financial literacy.
For instance, last year, consumer debt increased for the first time to more than 2 trillion dollars, the rate of FHA foreclosures was the highest ever recorded, and the percentage of income used for household debt payments, including mortgages, credit cards, and student loans, rose to the highest level in more than a decade in 2001, and remained above 13 percent. Personal bankruptcies nearly doubled in the past decade, including more than 1.6 million people who filed for personal bankruptcy in fiscal year 2003. And despite technological advances that make it even more convenient and less costly to manage money through accounts at banks and credit unions, between 25 million and 56 million adults are "unbanked," or not using mainstream, insured financial institutions. All of this tells me that we cannot overlook the need for financial literacy and education in this country, starting with early years in school and continuing throughout life.
My colleagues and I have worked on several important initiatives for financial literacy. My legislation, the Excellence in Economic Education Act or Triple-E Act, was enacted as part of the No Child Left Behind Act, and was finally funded in FY04. Although the $1.49 million appropriation is a relatively small amount when compared to amounts for federal programs emphasizing other basic educational subjects, it is a start. The competitive grant process for this funding recently started, and I hope the program is given time to work. As some of you know, the Triple-E is intended to fund a range of activities such as teacher training, research and evaluation, and school-based activities to further economic principles. I was disappointed that the Administration recommended no funding for this program in its FY05 budget, but I am committed to ensuring that funding is included for this important program in the FY05 appropriations process.
In another example–and Senator Enzi may touch on this as well–last year we introduced S. 1968, the Financial Literacy in Higher Education Act. This was a compromise version of legislation I had introduced earlier as S. 1800, the College LIFE, or Literacy in Finance and Economics, Act, in preparation for the Higher Education Act reauthorization. The legislation includes financial and economic education and counseling as allowable activities within existing programs such as TRIO, GEAR-UP and minority-serving institutions. It also proposes a pilot program involving annual credit counseling and personal financial literacy courses, and measuring these efforts' effectiveness in, hopefully, positive behavioral change. The reasons for these and other provisions in the bill are simple. Many students start college with little understanding of economic concepts like supply and demand or benefits versus costs, or personal finance concepts like money management or the importance of maintaining good credit history. The result is that college students are not effectively evaluating credit alternatives, managing debt, and preparing for long-term financial goals. I am hoping that this legislation will move forward, whenever the Higher Education Act reauthorization proceeds.
Mr. Chairman, for students and adults alike, many federal agencies have already been working to improve financial literacy and have attempted to engage in innovative programs to better inform students, consumers, and investors. The Securities and Exchange Commission (SEC) has been extremely creative in its efforts to protect investors despite being challenged with limited resources. I am pleased that as a result of the Global Settlement a nonprofit organization will be created and provided with $52.5 million over five years to equip Americans with the knowledge and skills necessary to make informed investment decisions. The Federal Reserve, U.S. Department of Agriculture's Cooperative Extension, FDIC, and many other agencies also have financial education programs for their various constituencies. We can improve the effectiveness of these programs through increased collaboration and coordination between agencies.
Title V of the Fair and Accurate Transactions Act created the Financial Literacy and Education Commission in December of last year. The Commission is charged with developing a national strategy to promote financial literacy and education among all American consumers. It will review financial literacy and education efforts throughout the federal government; identify and eliminate duplicative financial literacy efforts; and coordinate the promotion of federal financial literacy efforts including outreach partnerships between federal, state, and local governments, non-profit organizations and enterprises. I have great expectations for the Commission. I will be closely monitoring its development and activities.
We must continue to work together to encourage better economic and financial literacy, which, in turn, will result in stronger families, better-functioning markets, and a more secure future for our nation. I thank our witnesses for being with us today. I look forward to your testimony and to working with all of you to ensure that the Commission is effective and that the financial literacy of our country increases.
