Federal Reserve Chairwoman Janet Yellen has a sobering view of American families’ finances.
“The financial crisis and the Great Recession demonstrated, in a dramatic and unmistakable manner, how extraordinarily vulnerable are the large share of American families with very few assets to fall back on,” Yellen said Thursday in a videotaped message to a Washington conference on wealth building.
Yellen noted that families are still struggling in the wake of the recession, even though the economy has steadily, if slowly, improved.
The central bank head cited two statistics from recent surveys conducted by the Fed to make her point that most U.S. families don’t have a financial buffer. The first is that the median family in the bottom fifth of income had just $6,400 in wealth in 2013 — and many had no net worth at all. That number, which has declined since 2010, largely reflects lost housing equity, which is the “lion’s share” of wealth for most families, Yellen said.
The second statistic Yellen mentioned is that a majority of respondents to a separate Fed survey said that they do not have enough cash on hand to meet an unexpected expense of $400, and would have to borrow money or sell something to raise funds.
Those findings, Yellen said, indicate that “for many lower-income families without assets, the definition of a financial crisis is a month or two without a paycheck, or the advent of a sudden illness or some other unexpected expense.”
Yellen did not give specific details about policies to encourage savings, which she said is important for families in case of another crisis. But she did tell the audience at the Corporation for Enterprise Development event on asset-building that the Fed would continue to promote individual saving, including through its 12 regional banks.
