Saving Can Be Sexy?

The current financial literacy/capability/empowerment movement isn’t making the impact that had been hoped for. Why not? What’s missing? Savings rates should be higher. Credit card and student loan debts should be lower. Pay Day lenders shouldn’t have any customers. Why aren’t people making better choices when it comes to money?

One young person told me we needed to make saving sexy. Wow…I hadn’t heard that before. And I haven’t seen anything remotely sexy in the world of financial education. Hmmm…maybe “sexy” is the missing link in the financial literacy world. Hard to imagine a girl swooning when her boyfriend tells her he contributed the maximum amount allowed to his retirement account. And would a young man actually care that his significant other had no credit card debt? Probably…but that doesn’t strike me as sexy. But I do think this person is on to something. If nothing else, sexy financial education materials will most definitely get people talking. I wonder if this could become one of those things where any publicity is good publicity.

What do you think?

Alice

Did Bankruptcy Reform Cause the Great Recession?

I’ve always wondered if bankruptcy reform had something to do with the onset of The Great Recession. The timing is pretty interesting. In 2005, driven by the financial services industry, new bankruptcy laws were enacted to make it much more difficult to declare bankruptcy which in turn made it more difficult to survive a business failure, or any type of financial setback for that matter. (See the link below for a more detailed description of bankruptcy reform.) It would take a couple of years for the aftermath of the new bankruptcy laws to play out in our economy, so it’s not that far-fetched that the change in the law had an unintended consequence…like a massive recession that unfortunately came with a price tag of more than a trillion dollars.

Too bad that new law went through. Our country had always been able to absorb a certain amount of failure while continuing to thrive. Part of the “American Story” has been the ability to pick ourselves up after failing…move forward, and ultimately succeed. We all know that innovation is the cornerstone of progress and it requires a leap of faith along with an ability to borrow money to start new businesses. Those new ventures wind up employing a whole lot of tax-paying people. Even if a start-up winds up becoming an unprofitable business that ultimately goes into bankruptcy, something good happened along the way. 

Plenty of American success stories involve people who have failed before only to rise from the ashes and create something magnificent…like Walt Disney. We need visionary people to be able to take and survive risks even if the rate of success can seem relatively low. The strength of our pre-bankruptcy reform economy is proof that more good than bad came out of our old bankruptcy laws.

Still, I’m not sure that I’m quite right about the role that bankruptcy reform played in the Great Recession. What doesn’t line up the way I would have expected is that bankruptcies began to grow in the 1950’s, well before there was any talk of bankruptcy reform. And bankruptcy reform couldn’t have been responsible for the subprime lending that became the downfall for millions of American homeowners. Or could it? It’s interesting to note that the increase in the rates of foreclosures closely follow the timeline one would have expected if bankruptcy reform really was the culprit.

So am I right? Was bankruptcy reform the cause of the Great Recession? The following graphs reflect a timeline of bankruptcy filings and foreclosures. I think what it means is that I’m only partially right. Bankruptcy filings began taking off in the 1950’s and then escalated after 1980. That timeframe happens to coincide with easy access to new credit products, not bankruptcy reform. On the other hand, it’s clear that foreclosures went through the roof after bankruptcy reform, which also happened to be after the rise of loosely regulated easy access to mortgage products. Ah, now we have a common denominator. Loosely regulated easy access to borrowed money. Ben Franklin would have been all over this one.

What do you think?

Alice

http://www.businessweek.com/stories/2007-10-28/bankruptcy-reform-bites-back

According the above referenced article, the old bankruptcy laws were considered debtor friendly, allowing a borrower to be able to afford to keep their home while eliminating their consumer debts like credit cards. There were minor exceptions like child support and student loans which couldn’t be wiped out by declaring bankruptcy. This type of bankruptcy was known as Chapter 7 and it left debtors with more disposable income so they were in a better position to be able to afford to make their mortgage payments. The new bankruptcy laws push most debtors into Chapter 13 which is where a borrower is given a repayment plan to pay down their debts over a period of time. The new bankruptcy law didn't allow a bankruptcy judge any discretion to adjust the terms of a mortgage so mortgage payments often remain unaffordable. Borrowers are also still obligated to make payments on their consumer loans leaving them very little disposable income and very little room for any future financial setbacks. Ultimately, many borrowers felt the only option to survive was to do something that was once considered unthinkable, walk away from their homes. 

Please click on the link above to read the full article.

What's in a Name?

Taking the Megabus from New York to Washington, DC

What's the difference between Financial Literacy, Financial Capability, and Financial Empowerment? I'd like to say that the answer is nothing...there is no difference. But I would be wrong. Perception is everything and many people think the phrase "financial literacy" implies that someone is illiterate so we're going to be hearing less and less about financial literacy.  Financial Capability is now the new buzz phrase in the world of financial education. It's really the same thing as Financial Literacy, it just sounds better. And what about Financial Empowerment? Same thing too, but it sounds even better than Financial Capability.

If you'd like to stay on top of the world of Financial Empowerment you may want to follow the President's Advisory Council on Financial Capability for Young Americans. The group met yesterday at the United States Treasury Department to talk about creating a national cultural shift where being smart with money becomes the norm. It's a pretty monumental task but there were plenty of powerful people in the room determined to make it happen. If you're interested you should check out www.mymoney.gov. It's an incredible resource for anyone interested in learning more about the Financial Literacy Movement...I mean the Financial Capability and Empowerment Movement!

The President’s Advisory Council on Financial Capability for Young Americans Inaugural Meeting including Secretary of Education, Arne Duncan, Secretary of the US Treasury Department, Jacob Lew, and the Director of the Consumer Financial Protection Bureau, Richard Cordray, along with all of the Council members in the Cash Room at the US Treasury Department

John Rogers, Chairman of the President’s Advisory Council

José Cisneros, Vice Chair of the President’s Advisory Council

Inside the Cash Room at the US Treasury Department with Dave Mancl

Leaving the Treasury Department to head home to Naperville

The following individuals have been appointed to serve on the President's Advisory Council:

John W. Rogers, Jr., Appointee for Chair, President’s Advisory Council on Financial Capability for Young Americans

John W. Rogers, Jr., is the Chairman, CEO, and Chief Investment Officer of Ariel Investments.  Mr. Rogers was previously Chair of the President’s Advisory Council on Financial Capability from 2010 to 2013.  Mr. Rogers currently serves as a board member of Exelon Corporation and McDonald’s Corporation.  Additionally, he is a director of the Chicago Urban League, a trustee of The University of Chicago, Chairman of the Board of Directors for The University of Chicago Laboratory Schools, and a member of the board of the Nathan Cummings Foundation, where he serves on the Investment Committee.  Mr. Rogers was previously Chair of the President’s Advisory Council on Financial Capability from 2010 to 2013.  Mr. Rogers served as a Co-Chair for the Obama-Biden Presidential Inaugural Committee in 2009.  He received an A.B. from Princeton University. 

José Cisneros, Appointee for Vice Chair, President’s Advisory Council on Financial Capability for Young Americans

José Cisneros is the Treasurer of the City and County of San Francisco, a position he has held since 2004.  Mr. Cisneros served as Deputy General Manager for the San Francisco Municipal Transportation Agency.  Previously, Mr. Cisneros worked for IBM Corporation and Lotus Development Corporation as a Senior International Product Manager.  Prior to this, he was an Assistant Vice President at Bank of Boston.  He received a B.S. from the Sloan School of Management at the Massachusetts Institute of Technology.

Theodore J. Beck, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Theodore J. Beck is the President and CEO of the National Endowment for Financial Education (NEFE), a position he has held since 2005.  Mr. Beck also serves on the Federal Deposit Insurance Corporation Advisory Committee on Economic Inclusion, and as Chairman of the board of the Jump$tart Coalition for Personal Financial Literacy.  In 2010, he was appointed to the President’s Advisory Council on Financial Capability and was Chair of its Research and Evaluation Committee.  In 2008, he was appointed to serve as a Member of the President’s Advisory Council on Financial Literacy and served as Chair of the Outreach Subcommittee.  Prior to his appointment at NEFE, Mr. Beck served as Associate Dean of Executive Education and Corporate Relations at the University of Wisconsin-Madison School of Business.  Prior to joining the University in 1999, he spent more than 20 years in various positions for Citibank/Citigroup, including Managing Director and Market Manager.  Mr. Beck received a B.A. from the University of Notre Dame and an M.B.A. from the University of Wisconsin School of Business.

Sherry Salway Black, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Sherry Salway Black is the Director of the Partnership for Tribal Governance at the National Congress of American Indians.  Previously, she was the Senior Vice President of First Nations Development Institute.  Ms. Black is a member of the Honoring Nations Board of Governors.  She also serves on the boards of First Peoples Fund, the Johnson Scholarship Foundation, and the Hitachi Foundation.  Ms. Black is a member of the Oglala Lakota Nation in Pine Ridge, South Dakota. Ms. Black was a Member of the President’s Advisory Council on Financial Capability from 2011 to 2013.   She received a B.S. from East Stroudsburg University and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.

John Hope Bryant, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

John Hope Bryant is the Founder, Chairman, and CEO of Operation HOPE, a nonprofit founded in 1992.  He is also the Co-Founder of Global Dignity and a member of the Forum of Young Global Leaders and Global Agenda Council for the World Economic Forum.  He served as Member of the President’s Advisory Council on Financial Capability from 2010 to 2013.  Prior to this, Mr. Bryant served as the Vice Chair of the President’s Advisory Council on Financial Literacy (PACFL) and as the Chairman of PACFL’s Committee on the Underserved. 

Anna Maria Chávez, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Anna Maria Chávez is the CEO of Girl Scouts of the USA.  Prior to her current role, Ms. Chávez served as CEO of Girl Scouts of Southwest Texas.  Before joining Girl Scouts, she held various roles for the State of Arizona, including Deputy Chief of Staff for Urban Relations and Community Development for former Governor Janet Napolitano, Director of Intergovernmental Affairs, in-house Counsel, and Assistant Director for the Division of Aging and Community Services at the Arizona Department of Economic Security.  Before working for the State of Arizona, Ms. Chávez worked as Senior Policy Advisor to former U.S. Secretary of Transportation Rodney E. Slater.  She served as Chief of Staff to the Deputy Administrator at the Small Business Administration (SBA) and Chief of Staff for the Office of Government Contracting and Minority Enterprise Development at SBA.  From 1996 to 1998, Ms. Chávez acted as Legal Counsel for the Federal Highway Administration.  She received a B.A. from Yale University and a J.D. from the James E. Rogers College of Law at the University of Arizona.

Kerry N. Doi, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Kerry N. Doi has served as President and CEO of the Pacific Asian Consortium in Employment since 1976.  Mr. Doi is also a board member of the Los Angeles Housing Partnership and the California Community Economic Development Association.  From 2009 to 2011, Mr. Doi served on the Federal Reserve Board’s Consumer Advisory Council.  He is a founding member of the National Coalition for Asian Pacific American Community Development.  Mr. Doi received a B.S. from California State University, Long Beach.

Ted Gonder, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Ted Gonder is the CEO of Moneythink, an organization he co-founded in 2009.   In 2012, Mr. Gonder served as Entrepreneur-in-Residence at the U.S. Citizenship and Immigration Services at the Department of Homeland Security (DHS).  Prior to serving at DHS, he founded The University of Chicago Entrepreneurship Society and Project Cooldown.  Mr. Gonder has also worked for several startup companies, including Kauffman Foundation.  He received a B.A. from The University of Chicago. 

Richard G. Ketchum, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Richard G. Ketchum is the Chairman and CEO of the Financial Industry Regulatory Authority (FINRA).  Prior to joining FINRA, Mr. Ketchum was CEO of NYSE Regulation, Inc., Chief Regulatory Officer of the New York Stock Exchange (NYSE), and General Counsel of the Corporate and Investment Bank of Citigroup, Inc.  Prior to Citigroup, he served as President of both the National Association of Securities Dealers and The NASDAQ Stock Market, Inc.  He also worked at the U.S. Securities and Exchange Commission for 14 years, where he served as Director of the Division of Market Regulation for eight years.  He served as a Member of the President’s Advisory Council on Financial Capability from 2010 to 2013.  Mr. Ketchum received a B.A. from Tufts University and a J.D. from New York University School of Law.

 Beth Kobliner, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Beth Kobliner currently writes a column about kids and money for The Huffington Post and www.Mint.com.  She has written about a range of personal finance topics for publications including The New York Times, Money,Parade, Reader’s Digest, Glamour, and Redbook.  Ms. Kobliner has been a regular contributor on public radio’s “Marketplace” and “The Takeaway”, and a repeat guest on NBC’s Today show, CNN, and MSNBC.  Ms. Kobliner served as content expert for Sesame Workshop’s financial education initiative, For Me, for You, for Later.  She was a Member of the President’s Advisory Council on Financial Capability from 2010 to 2013.  She received an A.B. from Brown University.

Kilandigalu (Kay) M. Madati, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Kilandigalu (Kay) M. Madati is the Head of Entertainment & Media on the Global Marketing Solutions team at Facebook, a position he has held since 2011.  From 2008 to 2011, Mr. Madati was the Vice President of Audience Experience at CNN Worldwide.  Previously, from 2007 to 2008, Mr. Madati was the Vice President of Marketing at Community Connect, Inc.  Mr. Madati began his career with BMW of North America where he held various positions, including Regional Marketing and Operations Manager from 2002 to 2004, Relationship and Multicultural Marketing Manager from 1999 to 2002, Sales and Marketing Manager from 1997 to 1999, and Management Associate from 1996 to 1997.  Mr. Madati received a B.A. from Georgetown University. 

Marc H. Morial, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Marc H. Morial is President and CEO of the National Urban League.  He has served as a Louisiana State Senator, Mayor of New Orleans, and President of the bi-partisan U.S. Conference of Mayors, where he served during the 9/11 crisis.  Earlier in his career, Mr. Morial practiced law and taught Constitutional Law and Business Law at Xavier University.  He served as a Member of the President’s Advisory Council on Financial Capability from 2012 to 2013.  Mr. Morial received a B.A from the University of Pennsylvania and a J.D. from Georgetown University Law Center.

Carol E. Quillen, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Carol E. Quillen is the President of Davidson College, a position she has held since 2011. Previously, Dr. Quillen was Vice President for International and Interdisciplinary Initiatives at Rice University.  At Rice University, Dr. Quillen was also a member of the history faculty, Director of the University’s Boniuk Center for the Study and Advancement of Religious Tolerance, and Vice Provost for Academic Affairs.  She received a B.A. from The University of Chicago and a Ph.D. from Princeton University.

Amy Rosen, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Amy Rosen is President and CEO of the Network for Teaching Entrepreneurship, a position she has held since 2008.  She is the Vice-Chair of the World Economic Forum’s policy council on youth unemployment and a member of the Council on Foreign Relations.  Ms. Rosen was the Vice Chair of the President’s Advisory Council on Financial Capability from 2011 to 2013.  Ms. Rosen served as a Fellow at the Broad Urban Superintendents Academy and as the Chief Operating Officer for New Visions for Public Schools.  Ms. Rosen also served as a Director of the Amtrak Board of Directors, Vice Chairman of the NJ Transit Board of Directors, Deputy Commissioner of the NJ Department of Transportation, and Senior Vice President of Lockheed Martin Information Management Services.   Ms. Rosen received a B.A. from Pitzer College. 

Charles W. Scharf, Appointee for Member, President’s Advisory Council on Financial Capability for Young Americans

Charles W. Scharf is the CEO and a Corporate Director of Visa Incorporated.  From 2011 to 2012, Mr. Scharf was a Managing Director of One Equity Partners, the private investment arm of JPMorgan Chase & Co.  From 2004 to 2011, Mr. Scharf served as CEO of Retail Financial Services at JPMorgan Chase & Co.  He was CEO of the retail division of Bank One Corporation from 2002 to 2004.  Mr. Scharf also served as Chief Financial Officer (CFO) of Bank One Corporation from 2000 to 2002.  Prior to Bank One, he was CFO of the Global Corporate and Investment Bank division at Citigroup, Inc. from 1999 to 2000.  From 1995 to 1999, he was the CFO of Salomon Smith Barney and its predecessor company.  Mr. Scharf received a B.A. from The Johns Hopkins University and an M.B.A. from New York University. 

And The Winner Is.....

Alice Wood with City of Naperville Mayor, George Pradel in 2007

The “Wealth Watchers Financial Literacy Advocate Award” began in 2007 to recognize an entity or an individual who made a significant contribution to the field of financial literacy at a national level. Doug Tillett, from the Federal Reserve Bank of Chicago, nicknamed the award “The Benny” and the rest is history. Wealth Watchers has proudly presented ten "Benny" Awards to several well known financial literacy advocates throughout the past several years.

2007 Award Winners

Oprah Winfrey for her series of shows called “The Great American Debt Diet” where Oprah used her star-power to put a spotlight on the fact that too much debt is ruining people. Oprah introduced her audience to three financial experts who showed us that we have hope as long as we face our problems and take action.

Susan Beacham, Founder and President of The Money Savvy Generation. Susan created a piggy bank with four slots as a means of teaching children about the four choices they can make with money: Spend, Save, Donate, and Invest. Her program has been used around the world.

2008 Award Winners

United States Treasury Department for their work in coordinating the creation of The National Strategy for Financial Literacy. The Honorable Anna Escobar Cabral, Treasurer of the United States of America, received the award on behalf of the Treasury Department during a Money Smart Week event, which was held at The Federal Reserve Bank of Chicago.

The Federal Reserve Bank of Chicago for their ground breaking work creating a financial literacy movement known as Money Smart Week. The Money Smart Week model has been used by different communities around the country and serves as an umbrella to bring together members of the financial services industry and other interested parties dedicated to financial literacy.

2009 Award Winners

Visa U.S.A. and McDonald’s U.S.A. for their work in bringing a financial literacy program to 500,000 McDonald’s restaurant employees around the country. The program became known as America’s largest financial literacy initiative in the workplace. The program put a spotlight on the challenges faced by minimum wage workers.

2010 Award Winners

The Honorable Peter G. Peterson, Founder of the Peter G. Peterson Foundation, for his personal and financial commitment to increase public awareness of the fiscal challenges threatening America’s future. Mr. Peterson created his foundation with a billion dollar commitment to successfully address these challenges while finding and implementing sensible solutions.

David M. Walker, former Comptroller General of the United States, former President and CEO of the Peter G. Peterson Foundation, and current CEO of the Comeback America Initiative, for his relentless passion for helping our country become financially sound. Mr. Walker was instrumental in the creation of I.O.U.S.A. and I.O.U.S.A. Solutions, educational and entertaining documentaries that have engaged audiences of every age and ideology while serving as a national call to action.

Alice Wood Presenting the award to Dave Walker

2011 Award Winners

Operation Hope for making financial empowerment a global cause through their Silver Rights Movement reaching underserved communities and individuals around the world. John Hope Bryant and the Operation Hope team are leading the mission to eradicate poverty around the world.

The Jump$tart Coalition for Personal Financial Literacy for their work in bringing meaningful financial education opportunities to students and teachers around the country. Their national coalition of members play a critical role in the much needed effort to give students the information they need to gain financial independence.

Ken McDonnell receiving the 2011 Financial Literacy Advocate Award on behalf of The Jump$tart Coalition for Personal Finance at the US Treasury Department in Washington DC on September 27, 2011.

Congratulations to all of the winners...which by the way happens to be all of us since we're the beneficiaries of the financial literacy  movement!