ABSTRACT
Our recent economic crisis was the result of both irresponsible actions on Wall Street, and everyday choices on Main Street. Large banks speculated recklessly … At the same time, many Americans took out loans they could not afford or signed contracts without fully understanding the terms … While our government has a critical role to play in protecting consumers and promoting financial literacy, we are each responsible for understanding basic concepts: how to balance a checkbook, save for a child’s education, steer clear of deceptive financial products and practices, plan for retirement, and avoid accumulating excessive debts. (Obama 2010)
In launching the 2010 National Financial Literacy Month, President Obama made the obvious point that the collapse of sub-prime mortgage lending and the global financial crisis which followed revealed that many banks sold financial products to people who they knew did not have the capacity to meet their repayment obligations. Several lines of response potentially followed from his observation. One was to prosecute bankers and companies for their reckless speculation and predatory lending. Another was to concede that financial markets are flawed vehicles for closing the gap between people’s needs and capacities (and perhaps trigger some sort of social democratic policy response, such as poverty reduction, improving access to education, health care, housing, etc.)
Neither of these alternatives achieved the attention many believed would follow in the midst of crisis.1 Instead, the organizing project of Obama’s reform addressed another ‘capacity’, or rather incapacity – the incapacity of many people to understand and live up to the financial obligations that modern society, and a growing range of financial contracts and commitments, now demands of them.2
