Yellen says poor Americans live in ‘sobering’ conditions

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Yellen says poor Americans live in ‘sobering’ conditions
By Greg Robb
Published: Sept 18, 2014 10:02 a.m. ET

Reuters
WASHINGTON (MarketWatch) — The condition of lower-income families in America is “sobering” even as the economy recovers, Federal Reserve Chairwoman Janet Yellen said Thursday.

“We have come far from the worst moments of the crisis and the economy continues to improve, but the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand,“ Yellen said in a speech she prepared for delivery at a conference sponsored by the Corporation for Enterprise Development.

The Fed must continue its efforts to help Americans build assets, she said.

The financial crisis showed that many American families are economically vulnerable, with few assets to fall back on in times of distress, Yellen said.

Families with assets are able to deal with unexpected expenses as bumps in the road but “families without these assets can end up, very suddenly, off the road,” Yellen said.

Coming one day after the Fed’s latest policy meeting, Yellen did not discuss interest rates or the economic outlook, instead focusing on the effects of the recession on lower-income families.

The Fed chairwoman cited the Fed’s 2013 Survey of Consumer Finances, published earlier this month, which showed that the bottom half of families by income held only 8% of all financial assets.

The median net worth reported by the bottom fifth of households by income, about 25 million Americans, was only $6,400 in 2013, the Fed survey found.

The next fifth of households by income had median income net worth of just $27,900. These numbers are down from the prior survey in 2010 because income has continued to fall for these families, Yellen said.

Another Fed survey found that the majority of American households would be in jeopardy after an unexpected expense of only $400, she added.

“The Fed’s mission is to promote a healthy economy and strong financial system, and that is why we have prompted and will continue to promote asset building,” Yellen said.