An interesting exchange took place at today’s Senate Banking, Housing and Urban Affairs Committee hearing on “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections.” After Senators Tim Johnson, Corker, Reed, Crapo and Menendez had asked about familiar topics such as swaps, derivatives, too big to fail and mortgage foreclosures, Senator Tom Coburn (R-OK) pursued a different line of inquiry. Noting that Consumer Financial Protection Bureau (CFBP) Director (for now?) Richard Cordray had urged Congress to pass legislation on financial literacy in his opening statement at the hearing, Coburn asked:
“You mentioned in your testimony financial literacy and that needs to be approved. I wonder if you are aware of how many financial literacy programs that Congress has running right now.”
Cordray replied that he didn’t know offhand, but made a case for the importance of financial literacy among the population writ large:
“I’ve seen textbooks — mathematics textbooks from the teens and twenties where a lot of the questions asked were put in terms of household budgeting and the types of financial issues that were around particularly farming and other communities. I think that’s something that we’ve lost. It’s something that has weakened our society and it’s something that we need to focus on.”
Coburn, a senator known for denouncing pork-barrel spending and earmarks, and who obviously had prepared for the exchange and had the statistics handy, launched into his point:
“Well, it’s pretty ironic the federal government’s teaching Americans about financial literacy given the state of our economic situation. There are 56 different federal government programs for financial literacy.”
Indeed, Coburn was following on a Government Accountability Office (GAO) report from July 2012 detailing overlap in financial literacy programs administered by the federal government. Cordray ended up agreeing that reforming the other programs should be an important part of congressional action on the subject:
“SEN. COBURN: My only point is with 56, if we start another one or another two or three and don’t change those, we’re throwing money out the door.
MR. CORDRAY: I would agree with that. Thank you.”
Financial literacy among the general population has become more of a concern expressed by regulators in recent years, especially since the financial crisis brought attention to some less-than-optimal decision-making taken by consumers in the face of complicated financial instruments.