I love education, but… | Feb 13th at 3:11pm
As always in conversations about the financial crisis, this panel has talked quite a bit about financial literacy education.
I love education and I think everybody should understand the terms of their mortgage, but calling financial literacy education a savior of the financial system is smoke and mirrors.
Indeed, in the past year, one of the federal government’s most apparent foreclosure mitigation techniques has been…financial literacy initiatives. President Bush appointed the President’s Advisory Council on Financial Literacy way back in February of last year and created a 1-800 number that homeowners could call for financial advice. Congress stuck financial education initiatives into two major pieces of legislation (legislation reauthorizing the higher ed act and housing legislation).
First, financial literacy education just doesn’t work that well (just see the past results of the financial education survey of the Jump$tart Coalition for Personal Financial Literacy). Second, there are powerful forces at work that make acting against your better financial judgment just plain difficult.
Robert Schiller has proposed a bit more intimate measure: a subsidized personal financial advisor with a fiduciary duty to look after a homeowner’s best interest, as Ryan notes below. This sounds like a more effective way to “smarten up” homeowners, but let’s not let the financial literacy education conversation go to far – it’s no response to our current financial woes.
Harry Moroz is a research associate at the Drum Major Institute for Public Policy, where he analyzes congressional legislation for TheMiddleClass.org. Harry is a weekly contributor to the The HuffingtonPost, OpenLeft, and DMIBlog where he writes frequently about housing and urban policy.
