Financial Literacy, Literally

September 15, 2008.  While this date might not ring a bell for some, what happened on that day certainly holds a place in history that will not be forgotten by most.  Lehman Brothers had over $630 billion in assets when the company filed for Chapter 11 bankruptcy protection in 2008, making it the largest bankruptcy in U.S. history to date.  To put things into perspective: Washington Mutual had nearly $330 billion when they filed for bankruptcy just two weeks
after Lehman’s financial failure; General Motors had roughly $82 billion in assets when they filed for Chapter 11 protection in 2009; MCI WorldCom and Enron had $104 billion and $65 billion respectively.  The Lehman bankruptcy and the market’s reaction, while significant, were only a small contribution to a multitude of issues this country has had to deal with over the past few years.  The recent financial crisis not only exposed crippling vulnerabilities within the financial sector of the U.S. economy, it also exposed the financial vulnerabilities of many individual consumers.  As the economy dropped off the edge of a
cliff, businesses and individuals who did not have a solid financial foundation in place were impacted, and many were destroyed.

Following the financial crisis and the debilitating recession that this country recently went through, Congress passed the Dodd-Frank Act with a significant goal of overhauling the financial system and rebuilding consumer confidence.  Among other things, the Act established the Consumer Financial Protection Bureau (CFPB).  This independent agency was delegated the arduous task of protecting the financial well-being of American consumers.  The CFPB plans to provide this protection by regulating consumer financial products and services which should significantly reduce problematic lending practices and make
financial products easier to understand.  While this type of protection is warranted, it is unlikely any government agency will be able to provide adequate protection for consumers who do not understand how to make appropriate financial decisions.  Regardless of how clear a loan document is, if a person does not know how to calculate the amount of debt they can afford to take on, that loan document is useless.  Consumers have to learn how to protect themselves.  That part is up to us.

The purpose of this blog is to help add that extra layer of protection by promoting financial literacy.  Future posts will bring awareness to how significant the problem of financial illiteracy is, share information about volunteer opportunities, discuss ways to teach personal finance to children, provide legislative updates and connect you to resources that will prove to be helpful in your own quest of finding ways to improve the financial condition of this country.  If at any point you come across something on this blog that you find interesting or useful, I encourage you to share it with someone you know.

Advertisement