Why The “Financial Literacy” Push Is A Sham

financial literacyApril was national financial literacy month, promoted heavily by major banks and other debt-producing institutions who want you to believe that poverty, the financial crisis, and mounting student debt are the result of ordinary people’s ignorant refusal to discipline themselves and budget properly. Via the Guardian, Helaine Olen writes:

Companies and colleges say that if we all understand our finances, financial crises won’t happen. This is simply untrue.

April is National Financial Capability Month. Federal Reserve chairman Ben Bernanke says: “Among the lessons of the recent financial crisis is the need for virtually everyone – both young and old – to acquire a basic knowledge of finance and economics.” Sounds great.

But it promotes the false equivalence that the victims of the financial shenanigans of the past several years are as responsible for the financial crisis as the financial services sector, the ultimate creator of all those financial products of mass destruction. Think about it this way: did you take on a collateralized debt obligation? Did your neighbor?

So you get outfits like Bank of America, which debuted a financial literacy series created with the Khan Academy. From the press release announcing the effort: “Bank of America recognize[s] that no matter where you are starting from, the best way to improve long-term financial success is by changing habits slowly, step by step.”

This is the same Bank of America where a few years ago an executive named Ric Struthers blamed the housing crisis not on the organizations like Countrywide Financial, which BoA bought in 2008 despite the fact that it was at the epicenter of such mortgage practices as liar loans and deceptive marketing to consumers, but on the people who fell victim to the housing crisis.

Colleges [such as] Penn State, one of the most expensive public four-year colleges in the country, are also getting in on the financial literacy movement because, after all, one needs to do something about all that student debt, all $1 trillion of it.

You set up a new office devoted to financial literacy, where students can learn how to “make better decisions about budgeting, borrowing and loan repayment”. When I emailed Penn State to ask about how financial literacy could compensate for such things as the fact that college tuition nationwide has more than doubled since 1980, this is the response I got from Daad Rizk, the head of the program:

“Financial literacy helps students to treat education as an investment in their future. The real problem is not the rising cost of education, it is in the lack of financial planning and lack of financial literacy skills.”

No mention at Bank of America or the National Financial Educators Council that median income in the United States fell by more than 12% between 2000 and 2012, according to the Center for Budget and Policy Priorities. If there is a class in how to fix this one, sign me up.

29 Comments on "Why The “Financial Literacy” Push Is A Sham"

  1. Liam_McGonagle | May 21, 2013 at 9:30 am |

    Shouldn’t the notion of financial literacy include actually verifying applicant data before approving loans? Or requiring that payment data be reviewed before filing foreclosure proceedings?

    Or is it the case that if you have a bench full of lawyers on your payroll that it doesn’t matter that you yourself are financially illiterate?

    • Simon Valentine | May 21, 2013 at 10:00 am |

      “..justice, fairness, and freedom are more than just words..”

    • Hadrian999 | May 21, 2013 at 12:46 pm |

      there is a difference between not knowing and making a calculated decision

      • Liam_McGonagle | May 21, 2013 at 5:40 pm |

        Well, the companies I worked for in 2007 and 2008 showed real fear. I don’t think even they were fully aware of just how completely they had captured the policy aparatus.

        So while I agree that, in retrospect, that is the obvious answer, I don’t think anyone at the time would have given more than a 30% probability of acheiving this result. People were literally sh*tting themselves with fear.

  2. emperorreagan | May 21, 2013 at 9:36 am |

    You set up a new office on financial literacy, to prepare students for their future as debt serfs. You will need to prioritize your debt payments above all other living expenses.

  3. Financial literacy should begin with the fact that money is an invention to facilitate exchange, not the foundation of wealth but a placeholder.

  4. Archie Dux | May 21, 2013 at 10:52 am |

    What students need to learn is that you don’t have to go to a fancy, expen$ive college to get an education. They also need to learn that a degree from an expensive college does not guarantee them a prosperous and secure future.

    • mannyfurious | May 21, 2013 at 11:29 am |

      Yeah, what I wish I would’ve learned earlier in life is that I didn’t HAVE TO go to college. I mean, if I had decided that I REALLY wanted to become a doctor or an architect or some other profession where it is literally impossible to get into without certain degrees, then going to college would’ve made sense. But in all other situations, there’s really no need for it.

  5. howiebledsoe | May 21, 2013 at 11:47 am |

    If we understood finance, crisises wouldnt happen…. Well, more people would be privvy to Wall Street and the Feds screwing us, and therefore they would have to be a bit less OTT when it comes to pillaging our coffers. Maybe a crisis, but not as overwhelming…

    • Liam_McGonagle | May 21, 2013 at 6:05 pm |

      I think there’s a difference between “not understanding” and “willful ignorance”. I place the blame for the current f*ckup squarely on the shoulders of the shoulds of the business, academic and policy elites who really have no excuse for not seeing this coming a mile away, but chose to sweep it under the rug instead.

      As a culture, we have long ago identified the conditions that lead to the dysfunction of capital markets. Marx clearly warned us, centuries and many multiples collapses ago, that capitalism’s fundamental structure made it liable to exactly these sorts of crises. It’s just that nobody in a position of power cares.

      • Hadrian999 | May 21, 2013 at 6:45 pm |

        even the dysfunction is profitable if you have enough capital. The real players will make money in the long run.

        • Liam_McGonagle | May 21, 2013 at 7:02 pm |

          The problem is that your capital will eventually become useless unless supported by the state.

          • Hadrian999 | May 21, 2013 at 7:13 pm |

            not if done right, you engineer the “disaster” to last long enough to bankrupt the small time guys, acquire their holdings at a fraction of their worth then wait out til the rebound. It’s a game only the very wealthy can play

  6. smooth_operator | May 21, 2013 at 4:57 pm |

    So if I become financially literate, does that mean I get to launder money for drug cartels and terrorist organizations like the big banks?

  7. BuzzCoastin | May 21, 2013 at 6:43 pm |

    most Americans are not even literate
    haven’t read diddly squat and are most are only functionally literate
    (they can read the Mickey D’s menu but can’t figure out why they’re fat)
    so financial literacy is way beyond Joe Sixpak’s scope

    • InfvoCuernos | May 21, 2013 at 10:15 pm |

      and add to that the fact that every single contract is written in arcane legaleze that no one save a lawyer could understand and its a wonder we aren’t all wearing chains and working 7 days a week.

      • BuzzCoastin | May 21, 2013 at 10:32 pm |

        interesting reading, contracts
        for example
        the contract people signed with their bank
        which they never read
        basically gives the bank
        several rights & privileges with people’s money
        and a one sided legal indemnification clause in their favor
        and almost nothing in return
        except the convenience of storage & exchange

    • most PEOPLE aren’t literate and americans aren’t much worse than the rest of the people of the world. they tend to be a bit more arrogant b/c they’ve had it easier. but other nationalities would be as well. I think you are perpetuating nationalistic feelings by bashing americans so much.

      • BuzzCoastin | May 22, 2013 at 7:27 am |

        I was born in the US before it became Der Homeland
        because it’s the world’s imperial power
        and because it’s democratic sham has been tolerated by Homelanders
        I single them out
        but my experience is
        Europeans in general are
        more literate, better educated & well traveled

  8. we want too much crap to fill our hollow lives.

  9. InfvoCuernos | May 21, 2013 at 10:16 pm |

    That illustration has the hoses of those enema bags going to the wrong place.

    • Calypso_1 | May 21, 2013 at 11:36 pm |

      Perhaps they are stomas to allow multi-stage bowel irrigation by the International Bank of Settlements.

  10. “Financial Literacy” is a good idea, on the face of it…
    However, there’s a few things that seem to be missing,
    such as “ability to earn enough in the first place”
    and the issue of starting one’s career with massive debts
    because everyone was saying “Go To College(tm).”

    And, of course, there’s the issue
    of people being rejected for jobs because of all the school debts
    that were forced upon them in the first place when they chose
    to “chase after their dream, no matter the cost” (another item
    that’s missing from the “Financial Literacy” playbook…).

    The fact is, “Financial Literacy” isn’t going to help
    the person who lives paycheck to paycheck
    when those paychecks are expected to cover food, rent,
    gas, electricity, and food from Aldi’s or MacDonald’s –
    never mind save up for the rainy day that seems to hover around
    ready to strike – especially when you start trying to save for it…

    So yeah, while I like the idea,
    presently it’s nothing but a tool to punish those
    who’ve been barred from the American Dream.

  11. Literacy is a skill that lets people learn what they want. “Financial Literacy” amounts to training in one way of how to see the world – specifically a way that presents the modern financial system is as almost as immutable as gravity. For a deconstruction of this, see Why Strict Fathers teach “Economic Literacy” at http://www.unwelcomeguests.net/505

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