Creating Financially Capable Communities at Home in DC and across the US

Yesterday’s President’s Advisory Council on Financial Capability meeting sharpened the case for making financial capability building a top priority in the US.  Treasury Deputy Secretary Neal Wolin set the stage by stating that, “The economy is regaining momentum.  But we still have more work to do to repair the damage caused by the worst financial crisis in our lifetimes.”  A following panel discussion affirmed the Obama administration’s view that a critical part of this repair work includes building household financial capability.  Racquell Russell from the Domestic Policy Council  identified strengthening the safety net, improving education, and building financial capability as keys to developing self-sufficiency in the White House social mobility and economic opportunity agenda.  She recognized the Family Self Sufficiency and Assets for Independence programs as small, but successful programs, and encouraged more innovation in financial capability building programs.  Brian Deese from the National Economic Council emphasized that the President’s vision for an “economy built to last” cannot be achieved without addressing whether families have the ability and tools to become self-sufficient, justifying the Administration’s focus on financial reform at the height of the recession.  Peter Franchot, the Comptroller of Maryland, and Otis Johnson, the Former Mayor of Savannah, GA, both testified to gaining cross-political and cross-sector support for community financial empowerment initiatives in their respective locales. 

PACFC Resource Guide for Creating Financially Capable Communities

At the meeting's close, the PACFC’s Partnerships Subcommittee distributed their new resource guide, “Creating Financially Capable Communities” which establishes a six step path to create local financial capability initiatives based upon lessons learned from financial empowerment initiatives across the country.  The six steps listed are:

Step 1: Evaluate the local landscape and make a case for addressing financial capability

Step 2: Create a Local Council

Step 3: Focus the work

Step 4: Articulate clear goals and metrics

Step 5: Develop and launch programs that address the stated goals

Step 6: Measure your impact and adjust your programs accordingly 

PACFC Mayoral Outreach & DC Financial Capability Activities

The subcommittee also reported that their outreach to mayors across the country to start up local councils was successful and likely to be one of the most long-lasting impacts of the PACFC.   Most notable for us in the DC-metro area, Mayor Vincent Gray, one of the mayors advised by the subcommittee, announced his administration’s efforts to improve financial literacy last week by swearing in a new Financial Literacy Council and proclaiming April as “Financial Literacy Month.”  The mayoral pronouncements complement a recent convening of DC human service providers, government officials, and affiliated community based organizations which laid the foundation to look at the resources available in DC and make a case for adding financial capability building programs to existing services.  New America enjoyed the privilege of hosting the meeting in March.  It’s awesome to see that DC is starting to take the steps to make a district-wide push for coordinated financial empowerment programs.        

Federal Government Activities for a Creating a Financially Capable Nation

Beyond the community-based financial empowerment initiatives highlighted in the PACFC meeting, I think it’s important to also give props to the various actors across the federal government that are doing their part to mirror the recommended steps to creating financially capable communities at the federal level. For example, the FDIC, Treasury, and Fed have done research to identify the need for economic inclusion, help evaluate the landscape of access to financial services, and provide household data demonstrating the frailty of household balance sheets (mirrors step 1).  The Financial Literacy and Education Commission (FLEC) and the PACFC are two councils coordinated by Treasury to help articulate a national strategy on financial education and build visibility and cross-sector engagement around financial capability (mirrors step 2).  To focus the work and develop programs targeted to specific segments in communities, ACF has made it a core initiative to integrate asset building programs with community human services through its public benefits network, the Department of Education, in partnership with the FDIC and the National Credit Union Association, is  working to increase financial literacy and access among students, and the Office of Personnel Management is considering how to set an example to private employers by investigating  financial capability building benefits for employee (mirrors steps 3 & 5). 

These examples are just the start of the work being done across the federal government to support an inclusive and economically empowered nation.  Lots more need to be done on articulating goals and metrics for national financial capability building efforts, further identification of connection points for vulnerable and underserved communities, and impact measurement techniques.  Jumping into the ring as the newest player in town, the Consumer Financial Protection Bureau (CFPB) will continue its projected path to step up as a formidable stakeholder in these ongoing efforts. 

Asking the Right Question to Sustain the Momentum

While it is impressive to see all this energy and momentum starting to build around financial capability building, empowerment, and development, I’m cautiously optimistic about the effects this flurry of activity within government will have on the individuals and families who have and continue to struggle in our evolving economy.  The Government Accountability Office held a convening in February to compile priorities and challenges in strengthening financial literacy partnerships in challenging times.  Out of the convening came seven key highlights compiled through participant discussion.  These highlights could be categorized as substantive issues (e.g. identification of key focus populations, effective approaches, and program designs based on consumer behavior) and organizational issues (e.g. promoting financial literacy through federal government channels and coordination and partnerships across levels of government and sectors).  The brief catalogue of federal-level financial capability building activities described above suggest that so far, there is more headway being made into the substantive issues.  The organizational issues may be hard to sustain despite the well-intentioned efforts of the FLEC and the PACFC. 

The fact is that policy making is really hard and - in the sexy behavioral economics terminology -  policy makers and those that advise them are subject to the bounded rationality limitation all humans have, making it extra hard to break downs those information and resource silos that are engrained in governmental organizations.  So, I encourage of all us who are interested in seeing the momentum around strengthening Americans’ financial capability carry through also get innovative in thinking about how to build the capacity of government to help sustain the activities in addition to what the government needs to do for individuals and families.  Examples of these how questions are, “how can there be better infrastructure to bring private (for- and non-profit) innovation to scale through public channels?” and “how can the continuous research on consumer financial behavior and best practices for program and product design be communicated from financial regulators to human service providers?”          

Congratulations, Melissa on the Transition to Treasury!     

Finally to wrap up these updates on financial capability efforts, the PACFC meeting introduced Melissa Koide as the newly appointed Deputy Assistant Secretary for Financial Education, Financial Access and Consumer Protection.  Her blog post on Treasury Notes yesterday lays out her prescriptions to strengthen Americans’ financial capability by bringing more financial education to classrooms, ensuring families have trusted information and resources, and taking advantage of new technology to enable real-time decision-making.  For long time followers of the Asset Building Program, you will know that Melissa has been a critical voice in bringing big ideas to the financial access and education world.  Prior to her tenure as VP of Policy for CFSI, Melissa was a vital part of the New America team where she honed and championed The Safe-T Account, which served as the model for Treasury’s MyAccountCard pilot, and also the Financial Services Corps, which envisions creating a national network of expert financial advisors, for low- and moderate-income families.  Congratulations to Melissa on this new role!  I look forward to seeing Treasury’s continued leadership in providing pathways to financial access and financial development for all Americans.