Although the Fed has been juicing the economy since late 2008, it doesn't feel that way to many people on Main Street. That's because a key part of the process has broken down.
Tight credit and a large number of underwater homeowners means that many middle-class Americans simply haven't been able to benefit from the Fed's low interest rates.
Now that the housing recovery is underway, that could change, said Federal Reserve Governor Sarah Bloom Raskin, speaking at the Levy Economics Institute's Minsky Conference on Thursday. Fed policies could suddenly become "increasingly potent," she said.
"As house prices rise, more and more households have enough home equity to gain renewed access to mortgage credit and the ability to refinance their homes at lower rates," she said.
Raskin pointed to Fed research estimating that when home prices increase 10%, that could be enough to get about 40% of underwater homeowners back into the black.
Raskin also said that if the Fed's policies boost the job market, that could help even the lowest-wage workers. It still won't be enough, though, to change long-term income inequality trends.
Think you know how wealth is distributed in America? Think again.
A YouTube video that's gone viral recently shows that our perceptions of who has money and how much they have is quite skewed. The poor and middle class have a lot less than most people think, while the rich have a lot more. And the Top 1% are off the charts.
The video, which has been viewed more than 3.8 million MORETami Luhby - Mar 8, 2013 8:06 AM ET
More and more Americans are living in neighborhoods surrounded by people who earn about as much as them ... whether they are rich or poor.
Segregation by income is growing, according to a Pew Research Center analysis released Wednesday.
Some 28% of low-income households lived in low-income neighborhoods in 2010, up from 23% three decades earlier. And the number of upper-income households living in upper-income neighborhoods doubled to 18% over that period.
Pew MORETami Luhby - Aug 1, 2012 12:01 PM ET
After being accused of being "out of touch" by his leading Republican rival last week, President Obama trotted out his "middle class experiences" for journalists.
The president said he went through much of college and law school on scholarship, as did his wife, Michelle. Still, they had to take out student loans that they were paying off nine years later. (The couple had $125,000 in debt when they graduated Harvard Law MORETami Luhby - Apr 9, 2012 6:00 AM ET
After two years of declines, Americans' income finally rose in 2010. The Internal Revenue Service provided a first peek at taxpayers' returns and it showed that adjusted gross income totaled $8 trillion, up 5.2% from 2009.
But a closer look at the data reveals that only the wealthiest Americans will be popping the Cristal.
Taxpayers earning more than $250,000 saw their total adjusted gross incomes rise by 13.8%, while those bringing home MORETami Luhby - Mar 5, 2012 12:09 PM ET
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