Wednesday, October 15, 2008

Financial Crisis and Financial Literacy... (3)

During the last months, we've witnessed an increasing (and still counting) flow of discussions between analysts, investors, businessmen, bankers (current and former ones), politicians, government officials and specially between "common" people like you and me as to who should be held accountable for the meltdown the global financial industry is dealing with despite efforts to prevent an even more serious damage even to economies all over the world.

In this regard, although Mr. Richard Fuld (Lehman Brothers' last CEO) declared during his recent congressional hearing (the gentleman took more than 400 million dollars for his "early" retirement) that Lehman's bankruptcy "wasn't his fault" but SEC's fault, there are other unpleasant facts that arise from this mess: greedy and even incompetent bankers who took too many risks, authorities that couldn't (at least?) try to stop this mess, credit rating agencies that also failed (?) to warn on a more timely basis about it and... a growing trend showing another unpleasant fact: the common people suffering because of a serious financial illiteracy causing an equally serious financial -an human- drama as a result of this mess and its impact on many consumers who -after losing their jobs- are already unable to pay their bills...

OK, I'd like to be a bit more optimistic while reading that many people are already becoming aware about a key issue: teaching and learning a basic financial literacy (it doesn't matter if its "basic", learning about how to use a credit card responsibly, will be another issue to discuss... don't worry).

Let's consider the following article (first of many similar references already available):

Gaining financial savvy
Wednesday, October 01, 2008

Many Americans are getting a crash course in high finance.

The ways of Wall Street have found themselves into daily conversations at diners and taverns.

But while highly intricate and playing out on a level that even financial experts sometimes struggle to grasp, the mess on Wall Street is in many ways indicative of what has happened on Main Street and in Washington: Living beyond one's means by racking up huge debt.

Banks that offered loans to unqualified buyers and credit card companies inundating just about anyone with offers regardless of financial and credit histories bear a lot of responsibility.

But too many consumers have been more than willing to extend to maximum limits on several credit cards, or to purchase homes and other items they couldn't afford.

They are learning a hard lesson, one that should be driven home to future generations. The current crisis underscores a point we and others have made for bringing financial literacy into the mainstream of public education.

Financial literacy in schools doesn't mean just high school courses related to business, accounting and investments, though those are worthy electives even for students not pursuing careers in those fields.

What needs to happen, and what the Rendell administration has been pushing through creation of the Office of Financial Education, is incorporation of financial education into lesson plans across the K-12 curriculum. The office, a component of the Banking Department that works with the Education Department, has put together great resources to help teachers and school districts adapt numerous opportunities to teach financial literacy in various subject areas.

As painful as the current crisis is, it also provides a great teaching moment.

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