2014 CD Perspectives Report

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Federal Reserve Community Development Perspectives • promoting the financial capability of lower-income individuals, and those with limited financial resources, by improving access to quality, competitively priced financial services that foster wealth creation; • strengthening family balance sheets, especially among households deeply affected by the financial crisis and the Great Recession; and • supporting human capital initiatives and informing national, state, and local policy responses to unemployment and underemployment. Background The financial crisis and the Great Recession exacerbated the economic fragility of lower-income households and individuals. Many families already vulnerable to an economic downturn—including those lacking education and marketable skills, stable employment, and the cushion of financial assets—were significantly affected by the decline of the housing market. With many families still rebuilding their wealth since the onset of the recovery in 2009, financial instability remains a critical issue that has impeded overall economic recovery. Some demographic groups have been especially hard hit. For example, according to one analysis, Americans under age 40—many of them hampered by student loans and a tough labor market—lost the most wealth from the recession and have been slower to recover than middle-age and older Americans (see "Housing Crash Continues to Overshadow Young Families' Balance Sheets"). Additionally, growth in the number of long-term unemployed persons and discouraged workers has led to a number of pervasive and wide-ranging socioeconomic challenges. Many of these issues are interrelated and compound one another. For example, poor education may limit employment opportunities to higher-wage and/or full-time jobs. Limited employment opportunities can restrict individuals' access to quality day care and transportation, which further limits their ability to secure a job and experience career advancement. Similarly, a thin or nonexistent credit history can prevent individuals from accessing capital that might otherwise help them build assets, such as a loan for starting a small business, pursuing additional educational opportunities, or purchasing a first home. Entrepreneurship has historically offered an alternative to a salaried job but for early-stage businesses, access to bank financing often depends on the entrepreneur's ability to secure a loan with home equity, which is in shorter supply post-crisis. People The Federal Reserve's community development (CD) function helps sustain and promote policies that improve the financial stability and economic mobility of lower-income communities and individuals. CD staff around the country support a range of activities, including: 12

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