frederic s mishkin : the importance of economic education and financial literacy speech by mr frederic s mishkin, member of the board of governors of the us federal reserve system, at the third national summit on economic and financial literacy, washington dc, 27 february 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * as an educator myself, it's a pleasure to be here today to take part in this important event that brings people together from educational organizations all over the country, with the common goal of educating students and citizens in the fundamentals of economic and financial literacy. as many of you know, the federal reserve has had a long and fruitful relationship with the national council on economic education ( ncee ), through our many reserve bank collaborative efforts around the country, and through leadership at the national level. this leadership is evidenced, in part, by the involvement of my former and present colleagues on the federal open market committee, cathy minehan and gary stern, who currently serve as ncee board members. cathy, of course, is the former president of the federal reserve bank of boston, a bank that under her leadership has played a key role in furthering economic education in our new england states. gary is president of the federal reserve bank of minneapolis, from where he has served not only as a long - time member on ncee's board, but also as its chair. and they are just two of the many federal reserve bank presidents and officials who have worked to foster and improve economic education with the national council over the years. there can hardly be a better time to make the case for economic and financial literacy than right now. others have doubtless stood before an audience like you in years past and made the same case, but now we face a downturn in our housing industry fueled, at least in part, by unwise mortgage borrowing and, at times, abusive lending practices. improving consumers'knowledge of the home mortgage process will better equip them to avoid unsuitable mortgages in the future. our national economy has been strained by this housing slowdown and other forces, causing policymakers and others to debate what response is necessary. also, during this election season, we are reminded of the importance of economic issues. just a brief consideration of these three cases shows that a better - educated citizenry can not only contribute to a better functioning economy, but also to a more

the banner of apec is seeking to promote securitisation and credit guarantee markets, in order to try to narrow the perceived credit and liquidity mismatch between borrowers in the region and institutional investors. this is helpful, so long as it does not amount to governments taking on large contingent liabilities which weaken their own credit rating. then we have the asian bond fund being developed by the eleven central banks in the asia pacific region known as emeap. 1 the first step ( abf i ) was the creation of a fund which pooled a small portion of the us dollar reserves held by the member central banks to invest in us dollar denominated bonds issued by east asian governments, as opposed to the us government. this fund commenced operations last july. 2 the second and more difficult, but more fundamental, step will be the creation of abf ii, to invest in local currency - denominated sovereign and quasi - sovereign bonds in the region. progress in developing the overall structure of this fund is well - advanced. the emeap central banks are now in the process of detailed study of design. as it happens, there was earlier today a press release informing markets and other observers of progress. 3 while this work obviously adds slightly to demand for asian bonds, the objective is not to lower artificially the funding costs for governments in the region by trying to divert major sums of central bank or other official money. rather, it is to identify and remove where possible impediments to bond market investment, to develop some useful infrastructure for investors, and to show the way with a small investment by official institutions. once established, the abf ii will hopefully be emulated by the private sector, and some parts of the abf ii infrastructure itself will be available for use by private investors looking to acquire an exposure to asian local currency debt. a well functioning market will, of course, surely deliver lower cost borrowing to well run government programs and to private borrowers over time. apart from apec and emeap mentioned above, there is also work being done under the auspices of asean plus 3, and the asian cooperation dialogue. so clearly there is a lot of work going on. to date, these groups have managed to avoid working at cross purposes. as the various initiatives actually take more concrete form, it will be important to continue that parallel and complementary development - hence a degree of information sharing will be useful. but ultimately, after all the facilitation efforts