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Gaining Control of Economic Debt with Family Balance Sheets


The St. Louis Fed’s Ray Boshara gives a presentation on the importance of healthy family balance sheets during an event in Louisville.

By Bianca Phillips

Though the United States economy’s current boost in employment and opportunity has prompted hope of a recovery, the effects of the Great Recession remain heavy for a large number of American families.

On July 17, Ray Boshara, director of the Federal Reserve Bank of St. Louis’ Center for Financial Stability, gave a presentation to the greater Louisville, Ky., community about the importance of healthy finances for all Americans in today’s economy.

The crowd of more than 70 at The Olmstead was given an in-depth overview of Boshara’s research, which was the basis for “After the Fall,” an essay written with co-author William Emmons and published in the Federal Reserve Bank of St Louis’ Annual Report 2012.  The research found that Americans have yet to recover the wealth lost during the recession; therefore, the spending power necessary to fuel a powerful economy has decreased.

In his speech, “Great Expectations: The Rise, Fall and Future of Family Balance Sheets,” Boshara stated that the significant gap that exists between the demographic most likely to rebound from the recession (Caucasian and Asian adults over age 55) and the group least likely to recover (young African-Americans and other minorities) is a large red flag.  He noted that more emphasis should be placed on institutions, where the majority of wealth in this country is built and saved.

“Individuals with low income don’t have pro-wealth-building institutions to depend on within their communities.  Institutions matter way more than we thought.  There needs to be more institutional support offered to people with low income,” said Boshara.  He also stressed that the older mentality of saving via “easy access to credit” and reliable housing equity is long gone, and cited balance sheets as the way to promote economic consistency.  “Balance sheets have been relatively understudied,” he said, “but are increasingly recognized as important.”

Bianca Phillips is a graduate student at Kentucky State University and an intern at the Louisville Branch of the Federal Reserve Bank of St. Louis.