2008.11.26 21:48:43

John McDaniel

I have a long list of resources I have to keep up with on a monthly basis.  On that list is Money magazine.  In the September 2008 issue Steven Gandel conducted an interview of Loyola Law Professor Lauren Willis.  The topic was the effect of teaching the American public basic financial literacy so that they can adequately evaluate common and basic financial products, such as a home mortgage.  Ms. Willis suggests that financial education is a waste of time and money.  Her stated reason was that “it doesn’t work.  Sellers of financial products spend billions drowning out well meaning messages to consumers from nonprofits or government agencies.”  Also mentioned was the fact that financial products are always changing making it “hard for educators to keep up.”  She additionally states that “studies show that sending people to either high school personal finance classes or adult retirement seminars does not result in better financial behavior.”

What solution does the high minded Ms. Willis propose?  Before I tell you let’s see if you can guess.  One bit of added data might help out.  Her legal specialty is “financial products legislation.”  Have you a guess yet?  You probably got this one: more governmental regulation.  Shocked?  Me too; I could not see that one coming.  What type of regulation does she propose?  She prefers regulation that only allows financial products that “will benefit consumers.”  Ms. Willis actually suggests that sellers of financial products should be “required to offer you a default product that is safe.  Whenever you applied for a mortgage, for example, you would have to be offered a 30-year fixed amortizing loan.”  That sounds wonderful Ms. Willis.  Will the seller also have to provide donuts and crumb cake for my snacking pleasure during the sale?

Now for my opinion on the role of financial education in our society and Ms. Willis’ proposed course of action. 

Are you kidding me?  This may be the most self-serving, arrogant, condescending, short sighted view I have ever seen.  Ms. “Ivory Towers” (it is just a coincidence that my moniker sounds like a strippers name, I promise) is apparently exponentially more cognitively gifted than the rest of us.  So us mere mortals should allow her and her cohorts to make our financial decisions for us?  Not a chance in hell counselor. 

Reading between the lines (as well as reading some of the actual lines) shows that this lawyer wants the government to create all the possible financial packages we dullard consumers can choose from.  She’d also love it if the sales pitch were scripted by her and those of her ilk (aka the chosen few).  I’d laugh at you Ms. Willis if you weren’t so dangerous.  I can just hear the people out there saying “yeah, I only want to be able to pick financial products that are good for me.”  That would be great for the borrower, right?  Maybe not.  What if what is best for you isn’t what is best for me?  Who decides what is “best” for whom?  Ms. Willis?  I sure as heck hope not.  And finally, can you guess what happens when an industry is regulated to the point where differentiation is nearly impossible?  It becomes a government agency such as the Division of Motor Vehicles.  Next time you need a loan have fun at the DMV waiting in line for the greatest customer service on earth.  Or not.

Le meas,

John G. McDaniel, OD, MLHR
President/Founder
Waugoo Consulting Group, LLC
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financial literacy | education | regulation | money magazine | stephen gandel | lauren willis