One of the most under covered topics related to the recent financial crisis involves the expectation of consumer responsibility in their financial decision making.  With April being deemed "Financial Literacy Month," Federal Reserve Chairman Ben Bernanke spoke to a joint committee hearing in the Senate to discuss the importance of financial literacy  and decision making for both the welfare of individual households and the system as a whole.

In his remarks, Bernanke highlighted the positive outcomes when consumers become educated about their choices.  "Educated consumers not only achieve better outcomes for themselves," he said. "But, through careful shopping for and use of financial products, help to increase market efficiency and innovation."

To this end, the Federal Reserve (Fed) has taken a three-pronged approach to increasing financial literacy.  First, has been to drive consumer education.  The Fed provides a "What You Need to Know" series that provides user friendly tools and information for consumers about financial products and services.  Resources are available in both print and web based formats.  Additionally, an initiative seeks to provide a wide variety of resources to teachers to help promote youth financial literacy education in schools.

Second, the Fed conducts research related to consumer decisionmaking with a focus on understanding how education and regulation can support improved decision making ability for consumers.  A key example of this research is the Fed's "Survey of Consumer Finances" that examines the assets, debts and wealth of American households.

The third approach to promoting financial literacy is the promulgation of strong consumer protection rules, especially as related to disclosure, to eliminate unfair and deceptive practices and to ensure that the information provided to consumers about financial products are clear and straightforward.

"The recent crisis demonstrated the critical importance of financial literacy and good financial decision making, both for the economic welfare of households and for the soundness and stability of the system as a whole," Bernanke stated.  "Good financial choices depend on reliable and useful information, presented in an understandable way. Essential components of personal financial management include an understanding of how to budget strategically, use credit, save to build personal wealth, and shop for and choose suitable financial products."

Even as the structure of regulatory and supervisory responsibilities change, such as the launch of the Consumer Financial Protection Bureau, Bernanke stated his belief that financial literacy, supported by these three prongs, are "essential to ensuring that consumers receive adequate protections and that markets for consumer financial products function well."

Chairman Bernanke's comments underscore the importance of consumer responsibilities for making sound decisions related to financial products and services and supporting a strong stable market.  Regulations can only go so far in providing sufficient protects for consumers.  A healthy market place requires responsible, engaged interaction between all participants.  Businesses must maintain practices that are ethically sound, regulations must provide the ground rules for consistent and clear disclosure to allow consumers to reasonably compare offerings, and consumers must be responsible for understanding the products and services prior to making decision.