Greenspan says education needed to combat fraud

WASHINGTON — Improved education in financial literacy is critical if the country is to combat financial fraud, Federal Reserve Chairman Alan Greenspan said Friday.

Greenspan, delivering a speech on financial education to the Congressional Black Caucus, said the financial marketplace has grown increasingly complex since four decades ago, when all Americans needed to know was how to write a check and open a savings account.

Americans now have more choices than ever on where to invest their money, and more places where they can obtain loans, Greenspan said.

He said this increased competition was good for consumers, but with the larger array of choices comes a need for more financial education so consumers can avoid falling victim to unscrupulous practices.

"Consumers empowered with the information to make educated financial choices are less susceptible to fraud and less likely to become entangled in financially devastating credit arrangements," Greenspan said.

He called financial education critical in the fight to halt such fraudulent practices as abusive home mortgage lending practices that target vulnerable populations.

Greenspan voiced some concerns about the rising level of household debt.

"While analyses suggest that, overall, the level of debt is being serviced adequately, a record number of nonbusiness bankruptcy filings reveals that many consumers are experiencing significant financial distress," he said.

In his prepared remarks, Greenspan made no comments about the current state of the economy or possible future actions by the Fed on interest rates.

The central bank at its last two meetings in August and September kept the target for the federal funds rate — the interest that banks charge on overnight loans — at a 45-year low of 1 percent.

Analysts believe the Fed will keep rates low perhaps for another year as officials wait to see evidence that the economy has rebounded to a growth rate strong enough to convince businesses to begin rehiring laid-off workers.