Goldman Sachs: How to Spend What They Pay in Fines
Fresh off the biggest settlement in Wall Street history last summer, Goldman Sachs is in the news again with a director accused of inside trading. If only Goldman were a Canadian company. Some good would come of its missteps; money collected from crooked bankers up north helps fund financial education in schools.
They are moving fast to teach kids about money in Canada. Only last month a federal task force recommended that schools begin teaching children how to manage their money as early as elementary school. In Ontario, regulators have already agreed to cough up $2 million in securities fraud settlement money to pay for a personal finance curriculum that will be in place by fall.
Imagine the resources that kind of thinking would generate in the States, where bankers who cross the line are so common that over the years they have paid multiple billions of dollars in penalties, fines and settlements. The Goldman settlement last summer, reached with the Securities and Exchange Commission, was $550 million by itself.
Yes, some of the money plucked from Wall Street bad guys goes to financial education in the States. But this money typically lands under the umbrella of "investor education," from where it usually gets funneled to adults, low-income households and the military -- not financial education for kids in our schools.
Consider the Financial Industry Regulatory Authority (FINRA), which oversees securities firms in the U.S. and runs the largest investor education foundation in the country. FINRA launched an investor education fund in 2004, seeded with $55 million from a $1.4 billion settlement with bankers who, among other things, routinely recommended stocks to customers even though their email showed they did not like the stocks' prospects.
Give FINRA its due. The organization has a K-12 education effort, which consists in part of supporting the development of learning tools like The Stock Market Game and Dollars from Sense. The organization budgets about $5 million a year for investor education. But in its history the Investor Education Foundation has received money directly from only two other Wall Street settlements for a total of $7.2 million. Not a cent of last year's $41 million in FINRA disciplinary action proceeds went directly toward financial education.
This seems like a missed opportunity. The financial literacy movement is global and growing. Other countries are mandating that personal finance be part of their nation's school curricula and funding teacher training with federal dollars.
In these lean times, funding anything is difficult. But requiring that, say, 1% of all settlement money from the likes of Goldman Sachs when they cross the line gets dedicated to school-based financial education would be a painless way to secure the resources we need to make a difference for our kids' financial future.
Photo courtesy Flickr user notionscapital
More on MoneyWatch:
· Should We Be More Like the Folks Down Under?
· 3 Reasons 21 Nations Teach Kids About money
· How Stocks Teach Kids About Money and Math
· Military Money: Saving Private Ryan from Financial Ruin
· Kids and Money: The No. 1 Reason They Don't Learn at School
Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.
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