Yellen: Banks must aid poor

The Fed chair says the sec­tor can help in low-wage ar­eas.

The Denver Post - - BUSINESS - By Martin Crutsinger

washington» Fed­eral Re­serve Chair Janet Yellen said Tuesday that U.S. banks must do all they can to pro­mote eco­nomic de­vel­op­ment in low-income ar­eas where high un­em­ploy­ment has per­sisted de­spite the over­all job market’s gains.

Yellen told com­mu­nity de­vel­op­ment groups that banks are needed not just to pro­vide home mort­gages in low- and mod­er­ate-income neigh­bor­hoods but also to sup­port ed­u­ca­tional op­por­tu­ni­ties and to bol­ster the de­vel­op­ment of small busi­nesses.

Yellen noted that this is the 40th an­niver­sary of the Com­mu­nity Rein­vest­ment Act, which re­quires banks to meet the credit needs of the com­mu­ni­ties they serve, in­clud­ing low- and mod­er­ate-income neigh­bor­hoods. Yellen noted that the Fed re­cently re­vised its guid­ance to clar­ify how it and other bank reg­u­la­tors plan to as­sess banks’ sup­port for work­force de­vel­op­ment in low-income neigh­bor­hoods.

The Fed chair said work­force de­vel­op­ment is key to al­low job seek­ers in such com­mu­ni­ties to keep up with eco­nomic changes caused by global com­pe­ti­tion and ad­vances in tech­nol­ogy.

In a speech to the an­nual con­fer­ence of the Na­tional Com­mu­nity Rein­vest­ment Coali­tion, Yellen noted that un­em­ploy­ment av­er­aged 13 per­cent in low- and mod­er­ate-income com­mu­ni­ties from 2011 through 2015 — nearly dou­ble the 7.3 per­cent av­er­age in higher-income com­mu­ni­ties.

Prob­a­bly the best work­force de­vel­op­ment strat­egy, she said, is to im­prove ed­u­ca­tion qual­ity, es­pe­cially given the dis­par­ity in such mea­sure­ments as dropout rates be­tween low- and higher-income ar­eas.

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