Yellen: Banks must aid poor

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

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.