Promoting Economic Resilience and Mobility in the Eighth District
By Julie Stackhouse
March 1, 2020
As I bring my career to a close at the Federal Reserve, I feel fortunate to have been part of a mission-based organization that is true to its values. Growing up in a working-class family in a small town in Minnesota, it was not clear what career opportunities would be available to me. Neither of my parents went to college—in fact, my father left school after eighth grade—and my parents lived paycheck to paycheck while doing their best to provide stability for our family. In part due to my background, I have taken a special interest in our community development activities at the Federal Reserve Bank of St. Louis. And I am pleased that this year’s annual report is directed at those efforts.
A good part of what we do in the community development function is grounded in the philosophy of the Community Reinvestment Act (CRA). Enacted in 1977, the CRA affirmed the obligation of federally insured depository institutions to help meet the credit needs of communities in which they have branches, consistent with safe and sound banking practices and in return for the privilege of deposit insurance protection and access to the Fed’s discount window.See Bernanke, Ben S. “The Community Reinvestment Act: Its Evolution and New Challenges,” Federal Reserve Community Affairs Research Conference, Washington, D.C., March 30, 2007.
Did You Know?
The CRA was only one of a series of laws passed during the 1970s intended to expand access to credit. In addition to being a focal point of the CRA, discrimination in lending was addressed through the Equal Credit Opportunity Act of 1974 and the expansion of the Fair Housing Act of 1968 to include discrimination based on sex. Additionally, the Home Mortgage Disclosure Act was enacted in 1975 to increase transparency in mortgage lending. Later, in 1989, the Financial Institutions Reform, Recovery, and Enforcement Act required public disclosure of institutions’ CRA ratings and performance evaluations.
Actions taken by banks under the CRA—combined with community leadership, financial partnerships between public and private sector participants, and a shared vision for change—have had positive, lasting effects for communities. However, challenges persist.
While the official poverty rate has fallen over the last four years, approximately 30% of American households are cost burdened, with low-income households disproportionately affected.U.S. Census Bureau. Income and Poverty in the United States: 2018. The U.S. Department of Housing and Urban Development defines “cost burdened” as families who pay more than 30% of their income for housing, as they may have difficulty affording other necessities such as food, clothing, transportation and medical care. Also, data show that employment among prime-age and younger workers has declined over time.See Kearney, Melissa S. “The Decline in Prime Age Employment,” Federal Reserve Community Development Research Conference, Washington, D.C., May 9, 2019. Some evidence shows that factors for this decline include increases in disability benefits, incarceration rates, child care costs and opioid addiction rates.See Abraham, Katharine G.; and Kearney, Melissa S. “Explaining the Decline in the U.S. Employment-to-Population Ratio: a Review of the Evidence.” Working Paper No. 24333, National Bureau of Economic Research, revised August 2019. These issues and others pose deep challenges for some communities.
The Role of the Federal Reserve
Following passage of the CRA, Fed banks responded in support of its enactment by creating a community development function at each bank. The Fed is not permitted to contribute funds to banks or communities. However, Reserve banks are permitted to staff functions to support banks in their implementation of the CRA.
Much as the landscape of issues facing low- and moderate-income (LMI) communities has changed, so have the community development functions at Reserve banks. Functions today focus on implementation of the CRA and on communities' efforts to promote community development.
Community Development at the St. Louis Fed
Understanding the vast needs of regional communities requires staying in touch and providing resources that help communities focus on high-value initiatives. The Community Development team at the St. Louis Fed provides this support by:
- Conducting research, performing analysis and contributing data on trends that present specific challenges and opportunities for communities in the Eighth Federal Reserve District, which is the St. Louis Fed’s district
- Fostering partnerships among financial institutions, nonprofits, government agencies, public officials, researchers and practitioners
- Increasing the capacity and effectiveness of those working to create a more inclusive economy by sharing evidence and encouraging ideas that could lead to positive, sustainable change
To ensure the Bank’s community development programs and practices are rooted in evidence, staff round out their research and analysis with industry outreach. An example is our regular interaction with the Bank’s Community Development Advisory Council (CDAC), which comprises leaders from nonprofit organizations, financial institutions, universities, government entities and foundations across the District.
These leaders’ Main Street perspectives help inform St. Louis Fed President James Bullard and Bank staff of emerging trends, market conditions and relevant issues, while suggesting ways to support local development efforts. To expand upon the insights shared by CDAC members, staff also conduct the Community Development Outlook Survey. Findings from this survey help inform community development practitioners about the economic factors impacting LMI and underserved communities across the District.
The African proverb “It takes a village” is true not only in raising children, but also in efforts to support our LMI communities. I am proud of the role played by the Fed in promoting economic resilience and mobility and of the many successful outcomes that have resulted thus far.
Julie Stackhouse retired from the Federal Reserve Bank of St. Louis in early 2020 after a nearly 35-year career with the Federal Reserve. She served as executive vice president and managing officer of Supervision, Credit, Community Development and Learning Innovation for the St. Louis Fed. Previously, she held officer roles at the Kansas City Fed and the Minneapolis Fed.
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1 See Bernanke, Ben S. “The Community Reinvestment Act: Its Evolution and New Challenges,” Federal Reserve Community Affairs Research Conference, Washington, D.C., March 30, 2007.
2 U.S. Census Bureau. Income and Poverty in the United States: 2018. The U.S. Department of Housing and Urban Development defines “cost burdened” as families who pay more than 30% of their income for housing, as they may have difficulty affording other necessities such as food, clothing, transportation and medical care.
3 See Kearney, Melissa S. “The Decline in Prime Age Employment,” Federal Reserve Community Development Research Conference, Washington, D.C., May 9, 2019.
4 See Abraham, Katharine G.; and Kearney, Melissa S. “Explaining the Decline in the U.S. Employment-to-Population Ratio: a Review of the Evidence.” Working Paper No. 24333, National Bureau of Economic Research, revised August 2019.