sarah bloom raskin : focusing on low and moderate - income working americans speech by ms sarah bloom raskin, member of the board of governors of the federal reserve system, at the national community reinvestment coalition annual conference, washington, dc, 22 march 2013. * * * i am delighted to be here at the national community reinvestment coalition ( ncrc ) annual conference today, and to be gathered with so many people who have been working for decades to strengthen communities and the integrity of our nation ’ s economic institutions and financial practices. those of you involved in community development and community reinvestment know all too well the trauma and hardship experienced by low - income communities over the last several years. you know it in a way that is lost on people whose communities have not been so badly battered by these economic storms. that ’ s why i ’ m looking forward this morning to sharing with you my perspective on the importance of focusing on the situation and prospects of low - and moderate - income working americans. in my remarks, i will start by discussing the types of jobs being generated in the current recovery. certainly, the pace of recovery in employment has improved, but it ’ s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery. i will then suggest that we think about how the absence of a substantial number of new high - paying jobs, when combined with changes in the landscape for financial services, affects access generally to affordable, sustainable credit. finally, i will explore some of the monetary, supervisory, and regulatory touchpoints in which the situation and prospects of low - and moderate - income working americans can be addressed. challenges posed by labor market conditions the great recession stands out for the magnitude of job losses we experienced throughout the downturn. these factors have hit low - and moderate - income americans the hardest. the poverty rate has risen sharply since the onset of the recession, after a decade of relative stability, and it now stands at 15 percent – significantly higher than the average over the past three decades. 1 and those who are fortunate enough to have held onto their jobs have seen their hourly compensation barely keep pace with the cost of living over the past three years. 2 while today ’ s 7. 7 percent unemployment rate is a marked improvement from the 10 percent rate we reached in late 2009, it is still higher than the unemployment rate for the 24 years before the great recession

real time ; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending. the federal reserve, in cooperation with the other supervisors, encouraged improvements in market infrastructure and conducted a series of targeted reviews designed to improve risk - management practice with respect to derivatives, exposures to hedge funds, leveraged lending, and other areas. and, in preparation for the new basel ii capital regulations, supervisors required more - demanding standards for the measurement and management of risk. despite these efforts, however, the risk - management systems of many financial institutions proved inadequate in the face of a major housing downturn and substantial disruptions in market liquidity. the current economic and financial situation reflects, in significant part, the unwinding of two of these longer - term developments – the housing boom and the credit boom – and the continuation of the pressure of global demand on commodity prices. the housing boom came to an end because rising prices made housing increasingly unaffordable. the end of rapid house price increases in turn undermined a basic premise of many adjustable - rate subprime loans – that home price appreciation alone would always generate enough equity to permit the borrower to refinance and thereby avoid ever having to pay the fully - indexed interest rate. when that premise was shown to be false and defaults on subprime mortgages rose sharply, investors quickly backpedaled from mortgage - related securities. the reduced availability of mortgage credit caused housing to weaken further. the losses from subprime mortgages have been significant in themselves, but their greater impact was to trigger the end of the broader credit boom. notably, as subprime losses forced the credit rating agencies to downgrade what had been highly rated mortgage - backed securities, investors also came to doubt the reliability of ratings that had been awarded to other highly complex securities. as a result, investors became much more cautious and reversed their aggressive risk - taking of the credit boom period. the resulting pullback affected a much broader range of securities, including leveraged and syndicated loans, asset - backed commercial paper, commercial mortgage - backed securities, and a variety of structured credit products. large financial institutions, especially in the united states and europe, were particularly affected by these events, having reported a total of roughly $ 300 bernanke ( 2005 ). billion in writedowns and credit losses. these institutions have also been forced to bring onto their balance sheets the assets of sponsored investment vehicles that can no longer be