- The Washington Times - Wednesday, February 6, 2002

ASSOCIATED PRESS
Federal Reserve Chairman Alan Greenspan told Congress yesterday that Americans must be better educated on managing their finances in the face of a proliferation of ever-more-complicated investment choices.
Testifying before the Senate Banking, Housing and Urban Affairs Committee, Mr. Greenspan said the rapidly changing financial sector has heightened competition, which he said would give Americans more choices at lower cost.
But he deemed it critically important that investors receive timely information with which to make decisions.
"For an increasingly complex financial system to function effectively, widespread dissemination of timely financial and other relevant information among educated market participants is essential if they are to make the type of informed judgments that promote their own well-being and foster the most efficient allocation of capital," Mr. Greenspan said.
He said various studies have found it is important to, at an early age, teach pupils key concepts that will allow them to manage their personal finances.
"Improving financial education at the elementary and secondary school level is essential to providing a foundation for financial literacy that can help prevent younger people from making poor financial decisions that can take years to overcome," Mr. Greenspan said.
Mr. Greenspan, who as a very young child impressed his relatives with his ability to add figures in his head, said an ability to handle math problems is crucial to teaching financial concepts.
Mr. Greenspan appeared on a panel with Treasury Secretary Paul H. O'Neill. He told the committee that boosting financial literacy is a part of the administration's overall effort to improve education in the country.
"Ownership, independence and access to wealth should not be the privilege of a few. They should be the hope of every American. Financial literacy is an essential tool to make that hope a reality," Mr. O'Neill said.
Mr. O'Neill said all the new investment offerings added to the complexity facing investors and represent a dramatic change from the financial world of the past.
"I recall a time not so long ago when, for a large number of Americans, mortgage rates were fixed, savings went into a bank passbook account, consumer goods were bought on a cash-only basis and pensions all had defined benefits for retirement," Mr. O'Neill said.
He said education on managing money must do a better job helping consumers in a complex world where mortgage rates are offered in a variety of ways, the use of credit cards is universal and savings instruments range from certificates of deposits at banks to mutual funds to individual stocks to annuities.
Mr. O'Neill said the need for financial literacy had also increased significantly because so many workers now are offered pension plans in which they make their own investment decisions. The number of companies offering defined-benefit pension plans has declined.
The issue of employee pensions has been one of the key controversies involving the collapse of Houston energy-trading giant Enron Corp. In that case, Enron employees were blocked from selling company stock during a critical time last fall when the price was plunging even though top executives were able to unload their own Enron holdings.


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