I’ve been out of the office the past couple days. Yesterday I was at a professional development program, but the day before I was in Washington, D.C. attending the Third National Summit on Economic and Financial Literacy. The program focused on the results of the Economic Report Card from the National Assessment of Educational Progress released this past summer. The Summit itself was a meeting of concerned organizations (public and private, for profit and charitable) that are concerned with the state of economic and financial literacy in the United States.
There were a wide variety of speakers, and although they were preaching to the choir; many of them left the audience with audience with a lot to speak about, even when speaking what should be obvious. They gave me a lot of material for this blog. I’m not yet sure I’ll use it all, but here are some of the thoughts I walked away with.
The welcoming remarks were by Robert Duvall (not the actor), President and CEO of the National Council on Economic Education. He was followed by Andrew Plepler, President of the Bank of America Charitable Foundation. In his opening remarks, Plepler spoke about current economic conditions and the relation to economic and financial illiteracy. He spoke about the fact that a great many people made a great many errors – in taking out loans, in making loans, and in overseeing the lenders and loan originators. But it was a following comment that spoke the loudest. He said something to the effect of “This is not government’s problem to fix.”
I thought about this, and listened to the rest of his remarks. The meaning I took from his comment was that the decisions that had been made, and the resources that had been loaned, and promised for repayment, were in the realm of voluntary private transactions. Many of them were ill-advised, to be sure. But it was from the same private sector that the best remedy could come. Financial institutions needed to work with borrowers to reschedule, refinance, and refigure how best to keep people in their homes, and keep the loans active. Borrowers needed to look at the loan from the perspective of saving their homes. Neither party should be looking at the situation from a purely balance sheet perspective of asset value vs. liability.
It would be by working together to resolve the problem that all parties would learn the most from it. Expecting an outside agency to rescue both borrower and lender does not teach us anything other than someone will bail out mistakes. Rather, as educators, businesspeople, and bureaucrats concerned with economic and financial literacy, we need to improve economic and financial education so that people in similar situations in the future do not make the same mistakes.
If I understood him correctly, I would have to agree. And I would add one more thing. Economic and financial literacy should include an understanding of the institutions and laws that guide our participation in the marketplace. Too often, those institutions, which include trust, property rights, and redress, are not given enough visibility when we teach. Like many other people, I am impressed by the amount (both numbers and dollars) of transactions that take place on trust in this economy. Events like those of the past few months have the potential to shake that trust. Those who deliberately used deception when they entered the market should face a price above any losses they may be facing. For trust is an institution that we can't afford to lose.
I look forward to your thoughts.