By Robert Lenzner, Forbes Staff This nation’s wealth disparity widened more than ever before over the last 5 years because of the steep decline in the value of residential homes and stagnant wages for the lower and middle income groups in the U.S., explained a member of the Federal Reserve Board, Sarah Bloom Raskin, in a speech that explored for the first time a fresh explanation about the obstacles holding back economic growth. This “financial vulnerability and marginal ability” to recover from the decline in the wealth of lower income and middle income Americans is “undermining our country’s strength,” Governor Raskin emphasized in New York yesterday at an economic conference sponsored by the Levy Institute at Bard College and the Ford Foundation. Raskin admitted to a feeling of frustration at the central bank about the inability of the Fed’s low interest rate policy together with the expansion in the money supply to alleviate this growing disparity between the wealthy and the rest of American families. She admitted there was current exploration at the Board level of the central bank that “our macro models should be adjusted,” because 4 years into the recovery a confluence of factors have contributed to a weak recovery. “Inequality contributed to the severity of the recession,” Raskin said flatly, and blamed this inequality- for the “differential expectations” in the future between well-off families– those not so well off, who were battered by a plunge in the value of their homes, a high level of debt and as continuation of lower wages. I had never heard that theme so expressed as the blame for the mediocre rate of growth we are experiencing. Here are the Fed’s latest breakdown on the disparity in wealth. The top 20% of the population own 72% of the nation’s wealth in large part due to their vast holdings in the common shares of publicly held companies. By comparison, the poorest 20% of the U.S. population only own 3% of the wealth, and so were unable to shelter themselves when their homes declined in value, often below the face value of their mortgage and their take-home pay was not growing– or they lost their jobs. The distribution of wealth inequality is far worse than thew disparity in incomes. Nonetheless, the Fed Governor suggested it does explain the lower levels of consumer spending. As to income disparity between 1979 and 2007, the Federal Reserve figures shows the highest income cohort doubled their annual compensation when adjusted for inflation. The top 1% of earners in the nation saw their share of the national income rise from 10% to 20%. Meanwhile the bottom 40% of the nation’s workers saw their share of the national income decline slightly from 13% to 10%. The middle class average income rose in those 30 year to 2007 by only 20% or less than 1% a year, underscoring just how much middle income Americans have fallen behind their wealthier brethren. Fed Governor Raskin called this performance “sluggishness.” One hopeful sign is the gradual increase in prices

From: http://www.forbes.com/sites/robertlenzner/2013/04/19/the-growing-disparity-in-wealth-made-the-great-recession-worse-and-the-recovery-weaker-than-ever-before/