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SaveNOW News Conference
April 8, 2008
We are here today to talk about personal savings, why they are so important to Ohioans, and what we can and should do about them.
Over the last three years, our personal savings rate in the United States has approached zero, reaching the lowest levels that we have seen since the Great Depression.
In the early 1930’s, the last time such low personal savings rates were recorded in this country, it was a time of devastation and turmoil. One in four Americans was unemployed. The U.S. Banking Act was passed to stop widespread panic. That economic earthquake known as the Great Depression shaped the policies of our nation and the habits of its people for generations to come.
I do not think that we are in the throes of a Great Depression today—not by any means. Still, our problems seem to reflect some features of that crisis, enough so to prompt serious reflection upon our economic situation and what we should do about it.
So, what do these unusually low personal savings rates mean today?
For one thing, it means that many families are living from paycheck to paycheck, in an extremely precarious position.
It also means that a great many of us have little or no control over the future—no cushion, no money for a rainy day, no emergency fund. Too many of us are at the mercy of hoping that our luck will hold or that things will change in the very near future. Economically, we live in highly uncertain times. Families need to have a financial anchor, and too many of them have none. Just last week, the American Bankers Association reported that overdue consumer loans are the highest they have been since 1992. Clearly, many people are running almost on empty.
Although I am optimistic that conditions will improve, because economies run in cycles, it is obvious that the current climate is difficult, complex, and volatile. The chairman of the Federal Reserve has conceded that we may be experiencing a recession. The mortgage foreclosure crisis is taking a substantial toll on our families and communities here in Ohio.
Ohio’s leaders have recognized these problems and taken action to address them:
• The legislature passed SB 185, which took Ohio from having practically no consumer protection against predatory lending to having one of the strongest laws in the country.
• Legislators also passed SB 311, including a requirement that all high school students must receive personal finance education before graduating, beginning in 2010.
• Over the past six months, the Governor, the Chief Justice, the Attorney General, and I have worked together to develop a substantial array of measures to address and mitigate the mortgage foreclosure problem that currently plagues Ohio communities.
• The legislature enacted and Governor Strickland has implemented tax reforms to improve Ohio’s competitiveness for new and existing businesses, and this month they have agreed to a substantial jobs package that I fully support and feel confident will move us forward.
As a result we are on much stronger footing, but we are also up against considerable forces that hold Ohio’s families back as they are stuck on a dangerous financial treadmill.
Consumers are bombarded every day with pervasive advertising to spend, spend, spend, but they do not hear messages from anyone about the important reasons why they also need to save. The marketing of credit is big business that uses state-of-the-art research into behavioral science and sophisticated targeting.
I do not intend to villainize any company doing business in an honest and straightforward manner. I believe in free markets and understand the brutal competition that goes along with them. However, unlike many tangible consumer products like toasters, financial products like Subprime mortgages are not tested for safety. Not all financial services have the consumer’s best interest in mind, and as we deplete our savings and live on borrowed money, our lives become increasingly expensive.
Consumer Reports estimates that hidden fees, penalties, and interest on borrowed money costs American families some $215 billion a year. Meanwhile, we are not putting money in the bank and I seriously doubt that, perhaps like your grandparents and mine, much is hidden under the mattress, between the pages of books, or sewn into the lining of curtains.
Educating and protecting consumers is more important today than ever before. The SaveNOW initiative we are announcing today will be another tool to accomplish that.
Because marketing and financial influences are all around us in our society, the ideal financial education resource would be real-time—24/7/365—and relevant to your situation right now, today. My office is building that kind of resource through our online financial education website that can be found at www.YourMoneyNowonline.org. We are also working hard to bring workshops and training to seniors, students, and employees in the workplace. We have formed private-public partnerships to bring education into domestic violence shelters, churches, community centers, and libraries. We will work with anyone who shares our belief that people must have the tools to make good financial decisions and be prepared to cope with the future.
The program we announce today, SaveNOW, is yet another way to help level the playing field. We believe it does that by drawing on the Treasury’s existing linked-deposit authority to incentivize personal savings and foster access to financial education tools for Ohioans:
• It will make available to small and first-time savers the same jumbo interest rates that the state itself gets on much larger deposits, plus an additional 3%, all of which creates a meaningful incentive to access banking services by opening an account and discovering the power of compound interest;
• Because it is tied to a real-time financial education resource in YourMoneyNOW, it will offer participants a neutral safe harbor in the maelstrom of messages to spend rather than to save;
• It will provide an additional tool for educators and community groups throughout Ohio who are addressing the issue of personal savings and whose efforts deserve our support, including United Way of Ohio and the O.S.U. extension agents in all 88 counties that are working with the Treasury to add Ohio to the list of 12 states that are already part of the America Saves network;
• Finally, SaveNOW will help to initiate and encourage that old-fashioned habit and discipline of saving money for a rainy day rather than perpetuating the downward spiral of borrowing from tomorrow to spend today.
I want to express my special thanks to leaders in the Ohio Senate and the Ohio House and the sponsors of this legislation introduced today—Senator John Carey, Representative Jay Hottinger, and Representative Dan Dodd. My staff and I look forward to working diligently with them and their colleagues to see that this measure moves quickly to be enacted into law.
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Your Money NOW 
