Statement by Chairman Bernanke on Financial Literacy

April 20, 2011

The following is an excerpt from Chairman Bernanke’s testimony before the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, Committee on Homeland Security and Governmental Affairs, U.S. Senate:

“Although financial education is a critical first line of defense, it is not a substitute for strong and effective regulations that safeguard consumers against abusive and fraudulent practices. The Board has been the primary federal agency charged with writing rules governing consumer financial products, and in recent years, we have issued rules for mortgages, credit cards, student loans, and overdraft protection programs, among others. We have also maintained a robust compliance program to ensure that banks under our purview adhere to these rules.

As you know, our consumer-protection rulemaking authority and our consumer-protection supervisory and enforcement authority over some of the nation’s largest financial institutions will transfer to the Bureau of Consumer Financial Protection, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Board will retain some relevant rule-writing authorities (for example, under the Community Reinvestment Act) as well as supervisory authorities for smaller financial institutions that we also regulate for safety-and-soundness purposes. We are working closely with the Department of the Treasury and the new Bureau to facilitate the necessary transfers of authorities and personnel.

Regardless of how the regulatory and supervisory responsibilities are distributed, a comprehensive approach–one that includes education, research, and regulation–remains essential to ensuring that consumers receive adequate protections and that markets for consumer financial products function well. The Board will work collaboratively with the Bureau and other agencies to help individuals and families make the best choices for their financial futures.” (Read full testimony)

Source: www.federalreserve.gov