The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
5/12/2020 Remarks by Assistant Secretary for Financial Institutions Cyrus Amir-Mokri on “Building Americans’ Financial Capability to Support a Stro… U.S. DEPARTMENT OF THE TREASURY Press Center Remarks by Assistant Secretary for Financial Institutions Cyrus Amir-Mokri on “Building Americans’ Financial Capability to Support a Strong and Stable Economy” at the NYSE Financial Capability Event 4/13/2012 As Prepared for Delivery NEW YORK - Thanks Michelle for that introduction. I am delighted to be here on the final day of Financial Literacy week at the New York Stock Exchange. Today, I plan to discuss how the Treasury Department thinks about financial education and capability, and particularly how technology can increase the impact and reach of our efforts. My message is twofold: First, empowering individuals to make informed financial decisions is essential to our economic recovery. Too often, this topic is treated as separate and distinct from promoting the stability of our financial system. I believe it should be considered as part of a holistic approach to securing financial stability and sustainable economic growth. To improve financial literacy, we should use all means at our disposal, old and new. One such means, which I find intriguing and promising, is technology. Second, financial capability is not just about financial stability. It is a basic matter of human dignity. Helping individuals to understand their finances allows them to make responsible choices. Responsible choices make for better lives. Financial capability, therefore, is important to delivering on the promise of hope and opportunity that America offers. Lessons from the Financial Crisis To put this discussion into context, it is important to reflect on the state of the economy and how we got here. When this Administration came into office a little more than three years ago, the recession was well underway. Unemployment was rising. Businesses were failing at a record rate. Home prices were falling. Capital markets were in a state of shock. The President, working with Congress and the Federal Reserve, took a series of swift and bold actions to stop our economy from falling off a cliff and to jumpstart growth. Our economy gradually has been getting stronger: over the past two and a half years, it has grown at an average annual rate of 2.5 percent. Businesses have added nearly 4.1 million new jobs in the last twenty-five months—including 466,000 manufacturing jobs. While the economy is regaining momentum, we still have more work to do to repair the damage caused by the financial crisis. Although the economy has been improving, it is important to remember what set the crisis into motion. Financial institutions and investors assumed too much risk that they did not properly understand. Regulators did not have the tools to monitor those risks, the authority to manage them, and thus, the ability to appreciate them. And, in communities across the country, Americans made ill-advised and unfortunate financial decisions that they, too, did not fully understand. We must promote a financial system that is fair and sound for all. That means we must remove barriers that keep consumers from successfully navigating today’s complicated financial world. Building Americans’ Financial Knowledge Communities are more stable and have a better chance to prosper when their residents have the capability to understand financial decisions. Such empowerment brings responsibility, and responsible financial choices bring community stability. At a minimum, these principles mean that we should help our student to graduate from high school with a better understanding of economics and finance, including personal finance. The world is increasingly complex, which means that decisions about personal financial matters – from borrowing money for college, to deciding how much to pay as down-payment for a house, to determining what amount to set aside for retirement, to avoiding unnecessary fees and charges – are not always straightforward calculations. An https://www.treasury.gov/press-center/press-releases/Pages/tg1533.aspx 1/3 5/12/2020 Remarks by Assistant Secretary for Financial Institutions Cyrus Amir-Mokri on “Building Americans’ Financial Capability to Support a Stro… understanding of the elements of finance is necessary to better equip our next generation to manage their finances and to navigate the sometimes vast array of financial products and services they will encounter during their lifetime. In 2009, the Administration launched the National Financial Capability Challenge with the purpose of boosting financial literacy among high school students. This awards program runs for one month each year –this year from March 8 to April 8 – and is administered by the Treasury Department together with the Department of Education. The Challenge casts a much needed spotlight on the commitment of many students, parents, and teachers to this goal. Informing Financial Decisions with Better Information & Resources Improving financial education is only one aspect of financial capability. We must also improve the ways consumers interact with the financial system. We must give consumers better information and tools to make financial decisions. Even seemingly minor decisions – whether to pay with a debit card or a credit card or whether to contribute the maximum to the employermatched retirement plan – have long-term implications for family budgets. Big decisions – how to safely borrow for college, buy a car, or purchase a home – have tremendous importance in family stability. Yet, millions of Americans’ make these decisions with limited information and an incomplete understanding of how to organize and process the relevant information. Much of the available information, moreover, is not presented or organized in a way that will allow for efficient understanding. By requiring disclosures and making information available itself, the government plays an important role in empowering consumers to make responsible financial decisions. However, this is by no means a job for the federal government only. Local governments, communities, and the financial services sector are also in a position to make significant contributions and to support families with financial tools and resources to make informed financial decisions. Mayors and state officials recognize that economically vibrant and stable communities depend upon financially stable households. These are communities where families are able to safely and successfully own homes and local businesses, and invest in their children’s education. These are communities where families are able to withstand the normal financial ups and downs, access affordable financial products and services, and build savings for short and longer term financial goals. Many notable local and community-based initiatives from around the country have emerged to empower Americans by providing them with access to financial information and products. Bank On programs, for example, first pioneered in San Francisco, connect individuals with an affordable bank and credit union accounts while also providing money management guidance. Only two weeks ago, I visited Seattle and heard about its Bank On program. In the past three years, Bank on Seattle-King County has opened over 50,000 bank accounts in Seattle’s most distressed communities. In a similar vein, community development financial institutions (CDFIs) provide financial counseling to help first time homebuyers, small business entrepreneurs, and underserved individuals. These efforts are helping Americans build and repair their credit, while also providing financial product alternatives to high-cost loans. Government agencies at all levels recognize the far-reaching benefits of incorporating financial education into government programs. Within the federal government, the Department of Health and Human Services is connecting parents of Head Start’s early childhood education program with financial education resources. Nearly 100,000 families with very low incomes have benefitted from a combination of financial education, coaching, and access to matched savings accounts. And at the local level, New York City is linking personalized financial counseling with bank accounts to provide municipal employees an affordable account, while also delivering critical money management skills. I want to commend New York City in its efforts, and note my view that this initiative is consistent with the Council’s January recommendation to use Government as a model employer in promoting financial capability. We are supporting an analysis of this project, and we expect the findings to inform policy and help to spur similar initiatives nationwide. The Impact of Technology However, we must not stop with traditional methods of promoting financial capability. As everyone in this room knows, important developments in technology have the potential to introduce significant advances in this area. They can also influence the way in which consumers interact with the financial system. The mobile phone, and particularly the smart phone, has great potential to affect the provision of financial services. These devices enjoy widespread use and have penetrated all communities, not just higher income consumers. Smartphone applications, or apps, are being developed to help individuals manage their spending and to achieve their financial goals. One application allows customers to check their spending against preset budgets. Other tools provide consumers with daily balance alerts and warnings when monthly spending limits are about to be surpassed. These applications allow individuals to manage their day-to-day financial transactions and to protect their earnings – a goal that is critically important to families across America. There are also new applications that prompt and enable consumers to make real-time savings decisions. PiggyMojo is one such program that you will hear about later today. That tool allows individuals to make in-the-moment savings decisions in place of spending decisions. https://www.treasury.gov/press-center/press-releases/Pages/tg1533.aspx 2/3 5/12/2020 Remarks by Assistant Secretary for Financial Institutions Cyrus Amir-Mokri on “Building Americans’ Financial Capability to Support a Stro… Every time a user decides not to make a purchase, he or she can send a text message which prompts that “saved” amount to move from the person’s checking account to their savings account. In addition to improving financial capability, technology can also improve access to basic financial services. If individuals do not have access to basic financial services, financial training or capability may not have the desired impact. More than one out of every four U.S. households is “unbanked” or “under-banked.” The under-banked often pay high costs for financial services, such as overdraft fees, check-cashers and payday lenders. They do not have a proper vehicle to save and grow their assets. They often have few or no mechanisms to improve or maintain credit scores. Recently, Deputy Secretary Wolin witnessed this first-hand on his visit to the Kamuning neighborhood of Quezon City in the Philippines. Despite the fact that there is not a single ATM or bank branch in that neighborhood, he saw local residents and vendors in the public market gain access to banking services using their mobile phones. Their phones served as vehicles to deposit, withdraw and transfer funds, and even to apply for micro-loans and insurance. Technology will be increasingly important to furthering the goals of financial capability and access. The field is witnessing much innovation. Many of you are responsible for these innovations. I can also say this is an area that we will be taking a much closer look at though our Office of Financial Access, Education, and Consumer Protection, led by Melissa Koide who is here with me today. We encourage you to continue developing technologies that will empower consumers and strengthen our financial system. Conclusion Last week, Treasury hosted the President’s Advisory Council on Financial Capability for its quarterly meeting. I am grateful for the dedication and hard-work of the committee. They have brought great energy to their task, and they have made important contributions. But what perhaps struck me most was the underlying message that financial education is not simply a way to improve our country’s longterm financial stability. Rather, it is a deeply personal topic that has implications for how we interact with and relate to our families, friends, and communities. Whether we understand personal finances influences our self-confidence. The shame that compels our reluctance to admit to others that we do not understand personal financial matters can lead us not only to miss significant life opportunities, but it can also take away the ones we already enjoy. Financial capability thus becomes not a question of economic growth and stability, but of personal dignity. Therefore, it is vital that Americans be empowered with financial information, tools, and resources. A successful economic recovery is contingent on families knowing how to manage their budgets, rein in debt, rebuild and maintain strong credit scores, and avoid unnecessary fees and charges. Incorporating financial education early into our schools is an essential first step. Ensuring families have support systems and information to draw on when making financial decisions is also critical. And leveraging technology to deliver timely, personalized financial information and advice is a powerful way to help families move towards financial stability. There are an increasing number of financial tools, with promising potential for helping Americans become better, more capable financial stewards. Treasury is committed to taking a deeper look at these types of innovations. We will also look to you for your help as leaders in this field. Thank you. ### https://www.treasury.gov/press-center/press-releases/Pages/tg1533.aspx 3/3
@FedFRASER