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I N E Q U A L I T Y,
R E C E S S I O N S A N D R E COV E R I E S
2013 ANNUAL REPORT / FEDERAL RESERVE BANK OF MINNEAPOLIS

2013 ANNUAL REPORT • FEDERAL RESERVE BANK OF MINNEAPOLIS
PRES IDENT’S MESSAG E

3

INEQUALITY,
REC ESS IO NS AND R ECOVER IES

5

MESSAGE FRO M
THE FIRST VIC E PRE SID EN T

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HELENA BRANC H BOA R D O F D IR ECTO R S

36

MINNEAPO LIS BOAR D O F D IR ECTO R S

37

ADVISO RY CO UNC IL O N SM A LL B USIN ESS
AND LABO R

38

ADVISO RY CO UNC IL O N AG R ICULT UR E

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CO MMUNITY DEPOSITO RY IN ST IT UT IO N S
ADVISO RY CO UNC IL

40

S ENIO R MANAGEME N T

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O FFIC ERS

42
THE REGION
FEDERAL RESERVE BANK OF MINNEAPOLIS
PO BOX 291
MINNEAPOLIS MN 55480-0291
EMAIL: LETTERS@MPLS.FED.ORG
WEB: MINNEAPOLISFED.ORG

EXECUTIVE EDITOR: KEI-MU YI
SENIOR EDITOR: DAVID FETTIG
EDITOR: DOUGLAS CLEMENT
MANAGING EDITOR: JENNI SCHOPPERS
DESIGNER: MARK SHAFER

The Region is published by the Federal Reserve Bank of Minneapolis.
The views expressed here are not necessarily those of the Federal Reserve Bank of Minneapolis
or the Federal Reserve System. Articles may be reprinted if the source is credited and the
Public Affairs Department of the Minneapolis Fed is provided with copies.
Permission to photocopy is unrestricted.
Volume 28 Number 1, ISSN 1045–3369
April 2014

1

ACKERMAN+GRUBER PHOTOGRAPHY

THIS YEAR’S ANNUAL REPORT ESSAY IS ABOUT
THE EVOLUTION OF INEQUALITY IN THE UNITED
STATES —specifically, inequality in terms of market income (income measured before
taxes and transfers), expenditures, and disposable income (income measured after taxes and
transfers are taken into account). The essay focuses on the behavior of inequality during the
Great Recession and the subsequent slow economic recovery. As the essay notes, there is a vigorous public policy debate about inequality. The essay contributes to the debate by establishing
solid facts and empirics.
There are a host of interesting findings within the essay. Let me emphasize three aspects of
the analysis that I think are particularly important.
• It documents key facts about inequality in disposable income, which allows us to have
a better understanding of the effectiveness of the tax/transfer system in mitigating inequality.
• It documents the evolution of inequality among the bottom half of the income distribution, in addition to the more typical focus on the very top end of the income distribution.
This gives us a better understanding of how inequality affects a wide swath of Americans.
• It documents the importance of the tax/transfer system in protecting households against
some of the consequences of unemployment and a sharp drop in market income. This
provides a clearer perspective on how the most severely hit households fared during the
Great Recession and its aftermath.
The Federal Reserve’s engagement in public policy debates is always grounded in our strict
code, and general ethos, of political neutrality. But we can still play a useful role in even highly
passionate debates by providing dispassionate analysis and empirics. I believe this year’s essay
is an outstanding example along those lines.

Narayana R. Kocherlakota
President

3

NIEDORF VISUALS

INEQUALITY,
RECESSIONS
AND
RECOVERIES
FABRIZIO PERRI
MONETARY ADVISOR
FEDERAL RESERVE BANK
OF MINNEAPOLIS

I BELIEVE THIS IS THE DEFINING CHALLENGE
OF OUR TIME: MAKING SURE OUR ECONOMY
WORKS FOR EVERY WORKING AMERICAN.
—PRESIDENT OBAMA
DEC. 4, 2013

NCOME INEQUALITY is at the center of recent economic and political
debate in the United States. President Obama spoke recently of “a dangerous and growing
inequality and lack of upward mobility” and stated that “making sure our economy works
for every working American” is “the defining challenge of our time.”1
There are at least two reasons for the prominence of inequality in political and economic
discourse today: First, a widespread perception that U.S. income inequality is at a historical high.
Second, a sense that this unprecedented inequality is—somehow—associated with the persistent
fragility of the U.S. economy since the Great Recession of 2007-09.
Establishing a clear link between high inequality and weak recovery has been extremely difficult, and established economists disagree fundamentally on the direction of causality. Some
scholars believe high inequality is a prime reason for the slow recovery, while others believe
that increased inequality is a consequence of the slow recovery, which they contend is due instead to various structural changes.2
This essay hopes to contribute to this debate with a careful examination of a few empirical
issues regarding inequality during and after the Great Recession:
• How does the current level of inequality compare with inequality over the past 45
years? Is it indeed true that U.S. inequality is at a historical high? How important are
taxes and public transfers in shaping the evolution of inequality?
• How does the path of inequality during recovery from the Great Recession of 2007-09
differ from patterns seen in previous U.S. recoveries?
• How do current patterns of inequality relate to the distribution of expenditures across
U.S. households? And how do they relate to the well-being of potentially vulnerable
households?

INEQUALITY IN THE UNITED STATES: 1967-2012
The analysis begins with a look at patterns of U.S. income inequality from 1967 to 2012, a
45-year span that includes, of course, the Great Recession and subsequent recovery. Our data
source is the March supplement to the Current Population Survey (CPS), an annual survey of
about 60,000 households selected to represent the U.S. civilian noninstitutional population.3
Because of current interest in the Great Recession and recovery, which mostly affected
households active in labor markets, the analysis selects all those households with at least one
member between the ages of 22 and 60 years—an age group that comprises the greatest portion
of the labor force. These households constitute about 80 percent of the total.4
The author thanks Doug Clement and Kei-Mu Yi for very useful comments and Simone Civale for excellent
research assistance.

7

Two key indicators of inequality are reported: the 50/20 ratio, which summarizes inequality
at the bottom levels of U.S. household income, and the 95/50 ratio, which looks at inequality
at the top of the income range.5
These two ratios measure—albeit in simplified fashion—two key dimensions of the income
gap. The 50/20 ratio captures the gap between the middle and poorest sections of the distribution; a high value for this ratio signals that the poorest fraction of the population is far from
the average, and it could be a worrisome signal for policymakers since it indicates that a large
number of households are in serious economic distress.
The 95/50 ratio, in contrast, measures the gap between the high echelons of the income
spectrum and the median. An increasing value for this ratio indicates growing economic differences between “average,” or “middle-class,” households, on one hand, and those with significantly greater income, on the other. Significant movements in this ratio might lead to lower
social cohesion and greater political tension, and could be affecting social mobility.
The focus is on two measures of income. The first is labeled market income, which includes
wages, salaries, business and farm income, interest, dividends, rents and private transfers (such
as alimony and child support), of all household members. This is a measure of income that
would be available to the household, absent any government intervention.
The second is labeled disposable income; it includes market income, but adds in all government transfers (such as Social Security, unemployment insurance and welfare) and subtracts tax liabilities.6 This is a measure of resources actually available to household members
for spending. Differences in inequality between market income and disposable income capture
the direct effect of government policies on resource distribution. Figures 1 and 2 report the
evolution, from 1967 to 2012, of the 95/50 ratio (inequality at the top) and the 50/20 ratio (inequality at the bottom) for these two measures of household resources.

INEQUALITY AT THE TOP
This analysis first examines trends in income inequality at the top, the 95/50, and focuses initially on market income. The blue line in Figure 1 shows that since the early 1980s, there has
been a sharp increase in market income inequality at the top. That is to say, market income for
the high part of the U.S. household distribution (the 95) has been growing much faster than
market income for the middle (the 50).
More concretely, the median market income (in constant 2012 dollars) for a household of
two adults and two children was around $68,000 in 1980, rising to $74,000 by 2012—an unimpressive growth rate of around 9 percent over the entire period.
The same measure of income for the 95th percentile went from around $180,000 in 1980 to
$270,000 in 2012—greater than 50 percent growth during the same period. This dramatic difference between low growth in market income for the middle class and far greater growth for
upper-class households is well-known and is a central reason inequality trends are so promi-

8

FIGURE 1
INEQUALITY AT THE TOP HAS BEEN GROWING SINCE THE EARLY 1980S,
BUT LATELY TAXES AND TRANSFERS HAVE MODERATED ITS GROWTH
3.8
3.6

MARKET INCOME

95/50 ratio

3.4
3.2
3
2.8

DISPOSABLE INCOME
2.6
2.4

2011

2007

2009

2003

2005

1999

2001

1997

1995

1991

1993

1987

1989

1985

1983

1981

1977

1979

1 975

197 1

1973

1969

1967

2.2

Note: Shaded areas represent years that contain at least one quarter classified as recession by
the National Bureau of Economic Research.
Source: Author’s calculation on data from Current Population Survey, U.S. Census Bureau

nent in current public discussion.
Less well-known are the dynamics of disposable income at the top, depicted by the red line
in Figure 1. This line shows that over the 1980-96 period, disposable income inequality and
market income inequality tracked quite closely.
After 1996, however, the two series started diverging: Market income inequality kept increasing
at a steady pace, but disposable income inequality remained roughly flat. Indeed, over 1996-2012,
market income of the top grew a total of 8 percent, while market income of the middle actually
fell a total of 3 percent. Over the same period, however, disposable income of the top and the
median displayed more similar growth rates of 8 percent and 5 percent, respectively.
This all suggests that despite increasing inequality in market income since the early 1980s,
substantial government redistribution beginning in the mid-1990s, through taxes and transfers, has kept inequality levels in disposable household income quite stable. Interestingly, a
big part of this redistribution appears to have taken place exactly during the Great Recession.
Figure 1 displays this in the gap between the blue and the red lines; the market-disposable gap
begins to open up in 2007 and has stayed at historical highs ever since.
Overall, the picture shows that there is always redistribution between the top and the mid-

9

DESPITE INCREASING INEQUALITY IN MARKET
INCOME SINCE THE EARLY 1980S, SUBSTANTIAL
GOVERNMENT REDISTRIBUTION BEGINNING IN
THE MID-1990S, THROUGH TAXES AND TRANSFERS,
HAS KEPT INEQUALITY LEVELS IN DISPOSABLE
HOUSEHOLD INCOME QUITE STABLE.

dle (the blue line is always above the red one) and that this redistribution has been increasing
over time, especially after 1996 (the gap between the blue and the red lines is increasing).
Moreover, the data suggest that although inequality at the top in market income is currently
at its historical high, inequality in disposable income has actually been flat or slightly falling
over the past 15 years. This is because government redistribution between the top and the
middle (the distance between the blue and the red lines) is also at its historical high.

INEQUALITY AT THE BOTTOM
Shifting now to inequality at the bottom of the income range, focus first on market income
inequality, represented by the blue line in Figure 2. The line shows strong cyclicality, meaning
that in every economic recession during this period, the 50/20 ratio increased. Why? Recall
that the defining feature of a recession is a sharp increase in the fraction of households with
members facing job losses. These households experience large drops in earnings, while households whose earners keep their jobs experience little change in earnings during the recession.
This implies that earnings (and thus market income) at the bottom fall relative to the median,
and so the gap between median and bottom rises.
Possibly the most remarkable feature of the figure is that during the Great Recession, market
income of the bottom of the distribution took, relative to the median, an unprecedented hit—a
shock from which, so far, there are no signs of recovery. The 50/20 ratio—that is, inequality at
the bottom of the distribution—in market income is still, three years after the recession’s end,
very close to its historical high.
Moving now to the inequality in disposable income (the red line), it is apparent that this
measure of inequality is also cyclical: rising during recessions, declining in recoveries. But cyclicality in disposable income inequality is far less dramatic than it is for market income. This
suggests that government programs, such as unemployment benefits, partially shield the bottom part of the income distribution from the loss of resources experienced during recessions.

10

FIGURE 2
INEQUALITY AT THE BOTTOM HAS JUMPED FOR MARKET INCOME,
NOT FOR DISPOSABLE INCOME
3.1
2.9
2.7

50/20 ratio

MARKET INCOME
2.5
2.3
2.1
1.9

DISPOSABLE INCOME
1.7

201 1

20 07

20 0 9

20 03

20 0 5

1999

20 01

1 9 97

1 9 95

1991

1 9 93

1 9 87

1 9 89

1985

1983

1981

1 979

1975

1 97 7

1 97 1

1 973

1 9 67

1 9 69

1.5

Note: Shaded areas represent years that contain at least one quarter classified as recession by
the National Bureau of Economic Research.
Source: Author’s calculation on data from Current Population Survey, U.S. Census Bureau

THE IMPACT OF LONG-TERM UNEMPLOYMENT
One important question that Figure 2 raises is, why has the fall in market income of the bottom
part of the distribution been so large? After all, peak unemployment during the Great Recession was not higher than the 1980-82 recession peak. Yet the income of the 20th percentile of
the distribution dropped from around $33,000 in 2006 to about $25,000 in 2012, a fall of over
25 percent!
As a consequence, in 2012, the market income (in real terms) of the 20th percentile is the
lowest it has ever been in the 45-year span of this analysis, 1967-2012.
To better understand this, the analysis compares the fraction of the population that is longterm unemployed (more than 27 weeks) to the 50/20 ratio in market income (the blue line
from Figure 2). Note, in Figure 3, how the two lines track each other closely—they spike at the
same time and decline over similar periods. Both data series display an unprecedented peak in
the Great Recession, and both are still, three years out of the recession, well above their respective pre-2007 peaks.
The figure suggests that the dramatic income decline for the bottom part of the distribution

11

FIGURE 3
LONG-TERM UNEMPLOYMENT TRACKS INEQUALITY AT THE

3

3

2.5

2.8

MARKET INCOME 50/20 RATIO

2

1.5

2.4

1

2.2

0.5

50/20 ratio

2.6

2

2 01 1

2 0 07

2009

2005

2 0 01

2 0 03

1 9 97

1999

1 9 93

1 9 95

1991

1 9 87

1 9 89

1985

1981

1983

1 979

1 975

1 97 7

1 97 1

1 973

1 9 67

LONG-TERM UNEMPLOYMENT
0

1 9 69

Long-term unemployment (% of population)

BOTTOM

1.8

Note: Shaded areas represent years that contain at least one quarter classified as recession by
the National Bureau of Economic Research.
Source: Author’s calculation on data from Current Population Survey, U.S. Census Bureau and
Bureau of Labor Statistics

is not simply related to unemployment in its broadest sense, but more directly to long-term
unemployment. Why is that the case? High rates of long-term unemployment mean that many
households experience extended periods of time with little or no labor income, and this has a
large impact on the yearly income of households at the bottom of the distribution.

THE ROLE OF TAXES AND TRANSFERS
The data presented thus far suggest that taxes and transfers have played an important role
in preventing inequality in disposable income from rising during the Great Recession. As
discussed above, many households experience income losses during recessions. These losses
simultaneously reduce tax liabilities of the households involved and, furthermore, trigger government transfers, such as unemployment insurance benefits, to these households. Lower taxes
and increased benefits during recessions thus imply that disposable income of the households
suffering income losses will not fall as much as market income declines. Therefore, inequality
in disposable income will not go up as much as inequality in market income.
Which of these policies, transfers or taxes, had the greatest impact on reducing inequality in
disposable income during the Great Recession? And is it the mere fact that these policies were

12

ALTHOUGH INEQUALITY AT THE TOP IN MARKET INCOME
IS CURRENTLY AT ITS HISTORICAL HIGH, INEQUALITY
IN DISPOSABLE INCOME HAS ACTUALLY BEEN FLAT OR
SLIGHTLY FALLING OVER THE PAST 15 YEARS. THIS IS
BECAUSE GOVERNMENT REDISTRIBUTION BETWEEN THE
TOP AND THE MIDDLE IS ALSO AT ITS HISTORICAL HIGH.

in place, or the fact that policy changes were implemented during the Great Recession, that has
caused the increase in redistribution?
Figure 4 shows the impact of taxes, of transfers and of changes in tax codes implemented
after 2006 on disposable income inequality. The left panel shows this impact at the top (the
95/50); the right panel shows the impact at the bottom (the 50/20).7
Several features are worth mentioning.
First, relative to transfer programs, the tax system is responsible for the largest inequality
reduction, both at the top and at the bottom, and it plays a bigger role in reducing inequality at
the bottom than at the top. This is because the U.S. tax system is very progressive at low levels of
income, due to the Earned Income Tax Credit (EITC). This implies that households that fall, say,
from the middle to the bottom of the distribution experience large reductions in tax liabilities.
Second, though their overall impact is smaller than that of taxes, transfers also play a larger role
in reducing inequality at the bottom than at the top, and this is also due to the fact that the transfers that increased during the Great Recession were mostly received by lower-income households.
Finally, tax code changes play a bigger role in reducing inequality at the top than at the bottom. This is not surprising since eligibility for the tax rebate included in the 2008 stimulus plan
was set at a high income point. This meant that both median- and bottom-income households
(the 50 and the 20) but not the top (the 95) received the rebate; hence, the policy reduced inequality between the top and the middle but not between the middle and the bottom.

ASSESSING LONG-RUN TRENDS
One clear conclusion from this discussion is that inequality in market income at both the top
and the bottom has been trending up and is, indeed, close to its postwar high. But the top and
bottom trends have very different natures.
Inequality at the top has increased steadily through recessions and recoveries, suggesting

13

FIGURE 4
TAXES DIMINISHED INEQUALITY MORE THAN TRANSFERS; BOTH HAD
GREATER IMPACT AT LOWER INCOME LEVELS

0.3

0.3

0.25

0.25

0.2
0.15
0.1
0.05

0.2

TAXES
0.15

TRANSFERS

0.05

TAX CODE
CHANGES

0
2006

-0.05

0.1

2007 2008

2009

2010

2011

TAXES

Reduction in 50/20

0.35

Reduction in 95/50

0.35

TRANSFERS

TAX CODE
CHANGES

0
2012

2006

2007 2008

2009

2010

2011

2012

-0.05
Note: A positive value indicates reduction in inequality—a value of 0.3, for example, means that a
given policy is responsible for a reduction of 0.3 in the inequality index relative to its 2006 value.
Source: Author’s calculation on data from Current Population Survey, U.S. Census Bureau

that structural changes in the economy have amplified the difference in returns to labor between the top and the middle.8
Market income inequality at the bottom has instead increased mainly during recessions,
not recoveries, and is now at its historical high mainly because of a historically high level of
long-term unemployment.
Disposable income trends tell a different story. At the top, inequality in disposable income
appears stable over the past 15 years, due mostly to more highly redistributive U.S. tax policies
since the mid-1990s. At the bottom, disposable income inequality also appears stable over the
1983-2009 period, due to transfers that have supported income of households in the bottom
part of the distribution.
However, in the last two years of the sample—the 2010-to-2012 period of recovery since the
Great Recession—inequality at the bottom has been increasing, and it is now as high as it has
ever been over the past half century. This will be an important trend to monitor in coming years.

INEQUALITY IN RECESSIONS AND RECOVERIES:
TWO CYCLES COMPARED
During the postwar period in the United States, the two largest business cycles were undoubtedly the 1980-82 recession and recovery, and the Great Recession of 2007-09 and its recovery.

14

IN THE 2010-TO-2012 PERIOD OF RECOVERY SINCE
THE GREAT RECESSION, INEQUALITY AT THE BOTTOM HAS
BEEN INCREASING, AND IT IS NOW AS HIGH AS IT HAS
EVER BEEN OVER THE PAST HALF CENTURY. THIS WILL BE
AN IMPORTANT TREND TO MONITOR IN COMING YEARS.

In both recessions, unemployment peaked at around 10 percent, but unemployment since the
2007-09 recession has displayed a slower recovery. In 1985, five years after the start of the 198082 recession, unemployment had fallen from 10 percent to 7.2 percent, while in 2012, five years
after the start of the Great Recession, unemployment was still quite high, at 8.1 percent. This
section assesses how the two business cycles compare in terms of household resources and
their distribution.
Table 1 compares market income and disposable income for three points of the distribution
(bottom 20 percent, median and top 95 percent) at three points in time: before the recessions
(1979 and 2006), at the peak of the recessions (1982 and 2009) and three years into the recoveries (1985 and 2012).

MARKET INCOME
The first three columns of panels A and C show that the two recessions had similar impacts on
the distribution of market income. The top was little affected (1 percent less market income in
1982, 4 percent less in 2009), the middle was affected significantly (down 10 percent in 1982
and 9 percent in 2009) and the bottom took the biggest hit (minus 20 percent in both recessions). Consequently, inequality in market income rose significantly, both at the bottom and
at the top.
But the fourth and fifth columns of each panel show an important difference between the
two recovery periods. In the post-2009 recovery, all three points of the market income distribution experienced further decline, with the bottom experiencing the largest fall. In marked
contrast, the post-1982 recovery benefited all three points of the distribution similarly, with
income increases of about 10 percent.
So, the two cycles display remarkably similar patterns for the evolution of inequality in
market income during the recession, but not during the recovery phase. After the 1980-82
recession, market income grew and inequality stabilized, while after the 2009 recession, most
incomes have stagnated, with the bottom of the distribution continuing to lose ground relative
to the median.

15

TABLE 1

INCOME DISTRIBUTION IN TWO RECESSIONS AND RECOVERIES

2007–09 RECESSION AND RECOVERY
A. MARKET INCOME

2006

2009

2006–09
Change

2012

2009–12
Change

Overall
Change

95th Percentile

$289.7

$277.8

-4%

$270.2

-3%

-7%

Median

$ 83.2

$ 76.0

-9%

$ 74.5

-2%

-11%

20th Percentile

$ 33.6

$ 26.9

-20%

$ 25.0

-7%

-26%

B. DISPOSABLE INCOME

95th Percentile

$220.1

$ 211.8

-4%

$208.6

-2%

-5%

Median

$ 74.2

$ 72.6

-2%

$ 70.6

-3%

-5%

20th Percentile

$ 39.4

$ 38.4

-3%

$ 35.9

-6%

-9%

1980–82 RECESSION AND RECOVERY
C. MARKET INCOME

1979

1982

1979–82
Change

1985

1982–85
Change

Overall
Change

95th Percentile

$191.8

$189.6

-1%

$209.5

11%

9%

Median

$ 71.9

$ 65.0

-10%

$ 71.1

9%

-1%

20th Percentile

$ 33.1

$ 26.3

-20%

$ 29.1

11%

-12%

D. DISPOSABLE INCOME

95th Percentile

$150.7

$141.9

-7%

$157.2

11%

4%

Median

$ 64.0

$ 56.8

-11%

$ 60.4

6%

-6%

20th Percentile

$ 36.7

$ 30.8

-16%

$ 32.2

5%

-12%

Note: All figures are in thousands of 2012 dollars and refer to income of a household with two adults and two
children.
Source: Author’s calculation on data from Current Population Survey, U.S. Census Bureau

16

THE TWO CYCLES DISPLAY REMARKABLY SIMILAR PATTERNS
FOR THE EVOLUTION OF INEQUALITY IN MARKET INCOME
DURING THE RECESSION, BUT NOT DURING THE RECOVERY
PHASE. AFTER THE 1980-82 RECESSION, MARKET INCOME
GREW AND INEQUALITY STABILIZED, WHILE AFTER THE
2009 RECESSION, MOST INCOMES HAVE STAGNATED, WITH
THE BOTTOM OF THE DISTRIBUTION CONTINUING TO LOSE
GROUND RELATIVE TO THE MEDIAN.

DISPOSABLE INCOME
The two recessions differed even more dramatically in the evolution of disposable income
(panels B and D). In the first phase of the 2007-09 recession, disposable income of all three
points of the distribution fell by about the same amount (4 percent for the top, 2 percent for
the median, 3 percent for the bottom), suggesting that government redistribution policies significantly softened the blow of the recession for the middle and the bottom.
In the 1980 recession, government redistribution had far less impact: Disposable income of
the median declined by 11 percent, the same drop as in its market income, and disposable income of the bottom fell 16 percent, slightly less than the fall in its market income (20 percent).
The lesson: Government redistribution through taxes and transfers kept disposable income
inequality in the Great Recession basically stable, while this did not happen in the earlier recession, when inequality went up significantly.9
During the post-2009 recovery, disposable income of all sections of the distribution is still well
below prerecession levels. But disposable income of the bottom has fallen further behind (-6 percent)
relative to the median and the top (-3 percent and -2 percent), suggesting that government redistribution policies, while mitigating inequality, have not completely prevented the dramatic fall in
the bottom of market income distribution from affecting the distribution of disposable income.
During the post-1982 recovery, by contrast, government policies induced more disposable
income dispersion than that arising from market income. Comparison of column 5 in panels C
and D of Table 1 shows that, even though during the recovery all segments of the distribution
experienced similar recovery rates in market income (around 10 percent), the distribution of

17

disposable income grew more unequal. The top experienced faster growth (11 percent) than
the bottom (5 percent) or the median (6 percent).
Overall, two main differences between these business cycles are highlighted.
The first central difference concerns market income: The Great Recession has been followed
by a diffused decline or stagnation in market income, while the 1980-82 recession was followed
by robust growth (over 10 percent) throughout the market income ranges.
The second key difference relates to disposable income. Throughout the early 1980s recession and recovery, the distribution of disposable income of U.S. households grew significantly
more unequal, both at the top and at the bottom. In contrast, during the 2007-12 cycle, the
disposable income distribution has been more stable because government policies have supported the income of median and bottom households.
From a policy perspective, a worrisome feature of the recent business cycle is that the bottom part of the disposable income distribution is still, six years since the start of the Great
Recession, 9 percent below the prerecession level (see the entry in panel B’s bottom row, last
column). But perhaps an even more disturbing fact is that nearly the entire distribution is still
5 percent below the prerecession level (last column of panel B), suggesting a generalized stagnation of resources available to the majority of U.S. households.

HOUSEHOLD EXPENDITURES DURING AND SINCE
THE GREAT RECESSION
This section moves beyond the concept of income and looks at the distribution of expenditures.
There are two reasons to do so. First, spending could be a better gauge of true economic wellbeing than current income because it may best reflect (more closely than income flows) the lifetime resources available to a household. Expenditures respond to changes in household wealth
and future income prospects, variations not captured by current income flows. Since asset prices and labor market prospects declined significantly during the Great Recession, expenditure
patterns might therefore give us better information on the recession’s true distributional impact.
A second reason is the argument made by many that weak spending by low- and middleincome households in particular has been an important factor in the weak recovery since
2009.10 A close look at the distribution of expenditures can clarify the degree to which these
two groups account for overall spending declines.
Our analysis is based on household-level data from the Consumer Expenditure (CE) survey.11 Quarterly data are grouped into top, middle and bottom expenditure groups, similar to
the income analysis.12 For each group, average total quarterly expenditures are computed.13
The top panel of Figure 5 reports the average real expenditures (in 2012 dollars) of households in the bottom part of the disposable income distribution. Not surprisingly, expenditures
fell during the Great Recession, and similar to the pattern of disposable income, they are still,
in the first quarter of 2013, about 10 percent below their prerecession level.

18

TWO MAIN DIFFERENCES BETWEEN THESE BUSINESS
CYCLES ARE HIGHLIGHTED.

THE FIRST CONCERNS MARKET INCOME: THE GREAT
RECESSION HAS BEEN FOLLOWED BY A DIFFUSED DECLINE
OR STAGNATION, WHILE THE 1980-82 RECESSION WAS
FOLLOWED BY ROBUST GROWTH.

THE SECOND DIFFERENCE RELATES TO DISPOSABLE INCOME.
THROUGHOUT THE EARLY 1980S RECESSION AND RECOVERY,
THE DISTRIBUTION OF DISPOSABLE INCOME OF U.S. HOUSEHOLDS GREW SIGNIFICANTLY MORE UNEQUAL.

IN CONTRAST, DURING THE 2007–12 CYCLE,
THE DISPOSABLE INCOME DISTRIBUTION HAS BEEN MORE
STABLE BECAUSE GOVERNMENT POLICIES HAVE SUPPORTED
THE INCOME OF MEDIAN AND BOTTOM HOUSEHOLDS.

NEARLY THE ENTIRE DISTRIBUTION IS STILL 5 PERCENT BELOW
THE PRERECESSION LEVEL, SUGGESTING A GENERALIZED
STAGNATION OF RESOURCES AVAILABLE TO THE MAJORITY
OF U.S. HOUSEHOLDS.

19

The bottom panel shows average consumption expenditures for the middle and the top as a
ratio of the average expenditures of the group immediately below. Both ratios are bigger than 1,
showing, as expected, that the middle spends more than the bottom and that the top has higher
expenditures than the middle.
But one remarkable feature of the figure is that the gap across the three groups—that is,
inequality in consumption expenditures—is stable across the Great Recession and recovery.14
In sum, the figure certainly displays stagnation of U.S. spending over the past six years,
but it also suggests that the stagnation is accounted for by all segments of the income distribution, including the top 5 percent.15 In essence, then, it appears to contradict the argument
that spending declines by the least well-off have contributed disproportionately to the weak
economic recovery.

RECESSION’S IMPACT ON INDIVIDUAL
HOUSEHOLD DYNAMICS
So far, the analysis has focused on repeated cross-sections of the U.S. household income distribution—that is, “snapshots” of the nation’s resource distribution at different points in time.
These snapshots are important indicators of economic disparity, but they do not tell us how
individual households are faring over time, which is important information, particularly during times of instability, like the Great Recession.
This is because the households in a given group of the income distribution change every
year. For example, when the market income of the bottom 20 percent of the population falls,
the identity of households that actually experienced the income drop is unknown, and thus an
assessment of the consequences of that decreased income on a specific household’s well-being
cannot be made. The use of panel data—data sets that collect information from the same set of
families for many years—can overcome this problem. Unlike cross-sectional data with broad
categories whose members change when their characteristics change, panel data allow us to
understand how individual households are faring.
This section uses data from the Panel Study of Income Dynamics (PSID), the longestrunning representative household panel study in the United States.16 To study the impact of
the Great Recession on individual households, a group of households that are particularly
vulnerable to recessionary shocks is selected: households whose head was unemployed when
surveyed and that also reported a drop in market income (relative to the previous survey) of
at least 10 percent. For these “vulnerable” households, several economic statistics are reported
(see Table 2).
Starting with the second column, notice how the group of vulnerable households was only
2.3 percent of the sample in 2006 (before the start of the 2007-09 recession), but it more than
doubled in size by the end of the recession in 2010. The third column shows how the size of the
drop in market income of this vulnerable group increased over time, from -46.1 percent pre-

20

FIGURE 5

HOUSEHOLD EXPENDITURES DURING THE GREAT RECESSION
AND RECOVERY

Expenditures of bottom 20% of disposable income distribution
11,000

2012 dollars

10,500

10,000

9,500

BOTTOM
9,000

8,500

2 01 3 q 1

2 01 2 q 3

2 01 2 q 1

2 01 1 q 3

2 01 1 q 1

2 01 0 q 3

2 01 0 q 1

2009q3

2009q1

2 0 0 8q 3

2 0 0 8q 1

2 0 07 q 3

2 0 07 q 1

2006q3

2006q1

8,000

Relative expenditures of top, middle and bottom of disposable income
distribution
3.5

3

TOP/MIDDLE

Ratio

2.5

2

MIDDLE/BOTTOM
1.5

2 01 3 q 1

2 01 2 q 3

2 01 2 q 1

2 01 1 q 3

2 01 1 q 1

2 01 0 q 3

2 01 0 q 1

2 0 0 9 q3

2 0 0 9 q1

2 0 0 8 q3

2 0 0 8 q1

2 007 q3

2 007 q1

2 0 0 6 q3

2 0 0 6 q1

1

Notes: Shaded areas represent quarters classified as recession by the National Bureau of Economic
Research.
See endnote 12 for exact definitions of top, middle and botttom.
Source: Author’s calculation on data from Consumer Expenditure Survey, Bureau of Labor Statistics

21

TABLE 2

VULNERABLE HOUSEHOLDS DURING THE GREAT RECESSION

Unemployed head of household, and at least 10% market income decline

% Change

Level
(2012 $)

Disposable
Income

Expenditures

Last
Disposable
Income

Year

% of Sample

Market
Income

2006

2.3%

-46.1%

-35.9%

-4.2%

$35,000

2008

3.6%

-44.6%

-21.2%

-9.2%

$45,000

2010

5.1%

-57.4%

-25.6%

-15.5%

$51,000

Source: Author’s calculation on data from the Panel Study of Income Dynamics

recession to -57.4 percent at the end of the recession. In sum, the vulnerable group grew larger
(not surprisingly, with increased unemployment) and was also hit by bigger income shocks.
The next columns show how disposable income also dropped, but by much less than market
income, suggesting that government redistribution reduced the resource losses of vulnerable
households. Notice also how, over the course of the recession, the size of disposable income
shocks is reduced (-35.9 percent to -25.6 percent), despite the increase in the size of market
income shocks. This shows once again the growing role of government redistribution policy
during the Great Recession.
Perhaps the most interesting finding here is the response of expenditures. The next-to-last column shows that in 2006, a 35.9 percent drop in disposable income resulted in a mere 4.2 percent
decline in expenditures. As noted in Perri and Steinberg (2012), one possible reason for the small
response of expenditure to income drop is that the wealth of U.S. households was high in 2006, so
even vulnerable households could borrow or run down their assets (e.g., not fully maintain their
houses or cars) to keep their expenditures relatively smooth despite the income drop.
In 2010, however, a smaller 25.6 percent drop in disposable income was associated with a
much more significant 15.5 percent drop in spending, suggesting that after the Great Recession,
U.S. households no longer had a wealth buffer against income shocks. It is also conceivable that
the increasing duration of unemployment over the course of the recession for U.S. households
made job loss appear to be more permanent, on average; this perception would induce households to reduce expenditures more, as a precaution, in response to an unemployment spell.

22

CONCLUSIONS
This analysis has shown that inequality in market income among U.S. households is, in the
aftermath of the Great Recession, at its postwar highs, at both the bottom and the top of the
distribution. The increase in inequality at the bottom seems tightly linked to the very large
increase in long-term unemployment, which has depressed income for the bottom.
The analysis has also shown that, exactly during the Great Recession, the redistributive
scope and impact of government tax and transfer policies have increased to historic highs,
again at both the bottom and the top, so that over the past five years, disparities in disposable
income have not grown as much as disparities in market income.
The Great Recession and its aftermath were then compared with the 1980-82 recession and
recovery: The recent recession has had a bigger impact on average income growth but, because
of the stronger role played by government redistribution policies, a smaller impact on income
inequality.
After the 1980-82 recession, incomes of U.S. households recovered quickly but in an uneven
fashion, with the top recovering much faster than the bottom. In contrast, the Great Recession
has left U.S. households only marginally more unequal—due to the mitigating effect of redistribution policies—but uniformly poorer.
Generalized stagnation during and since the Great Recession is apparent also in the distribution of expenditures, which fell uniformly for all income levels.
The final part of this report followed households through time to ask whether redistribution shielded individual households from adverse shocks to market resources. The answer is
no. As the Great Recession and its recovery progressed, there was more redistribution, but
households appear to have lost their ability to self-insure against shocks, declines in disposable income have been more frequent and these declines have adversely affected households’
spending and, hence, their standard of living.
Obviously, the data and analysis conducted here do not tell us whether current U.S. redistribution through taxes and transfers is too high or too low. They tell us that the disposable
income of the bottom 20 percent is now, relative to the rest of U.S. society, at its lowest level in
the past 45 years. Yet they also tell us that the U.S. system of taxes and transfers currently does
much more redistribution across households than ever before in that same period.
These facts might prove useful to policymakers in the difficult decisions that lie ahead in
the design, implementation and evaluation of economic policies, such as fiscal expenditures,
tax reforms and possible changes to long-term unemployment benefits and other transfer programs, in their efforts to revitalize economic growth and ensure its broad diffusion across U.S.
households.

23

APPENDIX
INEQUALITY AT THE VERY TOP OF THE INCOME
DISTRIBUTION
An important caveat is that the measures of income inequality at the top presented in Figure 1
are conceptually different from measures that focus on inequality at the very top of the distribution, such as those computed by Piketty and Saez (2003), and very often cited in the popular
press. There are three key differences. The first is that Piketty and Saez focus on inequality
in income of “tax units,” while this analysis focuses on inequality of size-adjusted household
income.17 As explained by Burkhauser, Larrimore and Simon (2012), using tax units instead
of households tends to give a bleaker picture of the performance of the middle class relative to
the top. This is because, over the period considered here, there has been a significant increase
in the fraction of households in which adult members live together (and share resources) but
are not married. Treating adult members of these households as separate tax units tends to
overstate the true increase in inequality of resources.
The second difference is that Piketty and Saez focus on differences between tax units at
extremely high income levels (e.g., the top 0.1 percent) and the rest of the population. “Top
coding” restrictions in the CPS data—meaning that these data are grouped in a broad “$X
thousand and above” category that doesn’t specify an exact dollar figure for that top household—prevent analysis of these differences. Therefore, the focus here is only on the differences
between the top 5 percent and the median—also a relevant measure of income polarization in
a population.
The last difference is that Piketty and Saez focus on market income, while this analysis looks
at both market income and disposable (post-government-policy) income, which includes taxes and transfers. Although transfers do not play a very important role in redistribution of
resources at the top, taxes definitely do, and, as discussed here, they have done so increasingly
since the Great Recession.

24

ENDNOTES
1

See the president’s remarks at whitehouse.gov/the-press-office/2013/12/04/remarks-president-economic-mobility.

2

See Stiglitz (2013) for an example of the former. Taylor (2013) is representative of the opposite perspective.

3

This term, defined by the Bureau of Labor Statistics, refers to “persons 16 years of age and older residing in the 50

states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for
the aged), and who are not on active duty in the Armed Forces.”
4

To account for different household sizes, this analysis divides both measures of household income by the number of

adult equivalents in the household. Following the commonly used OECD scale, the number of adult equivalents in
a household is a weighted sum of household members in which the first adult is given a weight of 1, each additional
adult has a weight of 0.7 and each member under the age of 17 has a weight of 0.5.
5

To understand the meaning of 20, 50 and 95, list the dollar incomes of all U.S. households from lowest to highest.

The 20 refers to the income of the household that is higher than 20 percent of all households. Similarly, the 50 is the
income of the household that is higher than 50 percent of households (i.e., the median income), and the 95 is the
income of that household that exceeds 95 percent of all U.S. households.
6

The CPS does not provide data for tax liabilities for all years in the sample. Therefore, tax liabilities are here com-

puted for each household using TAXSIM, a widely used tax simulation program provided by the National Bureau of
Economic Research. In years for which tax liabilities from the CPS are available, summary measures of tax liabilities
in the CPS are very similar to the measures computed using TAXSIM.
7

The figure is derived by first computing disposable income excluding all government transfers. The difference

between inequality in disposable income with and without transfers pinpoints the separate impact of transfers. The
difference between disposable income inequality without transfers (but after taxes) and market income inequality
(which examines income before taxes) isolates the role of the tax system. Second, disposable income is computed
using an alternative tax policy. In particular, the 2006 tax code is used to compute tax liabilities by households from
the 2007 start of the Great Recession up through the end of 2012. Several changes to the U.S. tax code after 2006
likely affected disposable income inequality. Possibly the most significant was the tax rebate included in the stimulus
plan of 2008, which rebated $600 (for a single person) or $1,200 (for a married couple filing jointly) to households
with income below $75,000 ($150,000 for couples filing jointly). The difference between actual inequality in disposable income and in disposable income calculated using the 2006 tax code identifies the inequality impact of tax code
changes since the recession’s start. To highlight the change of the impact of the policies during the Great Recession,
their impact is set at 0 in 2006.
8

For the early part of the sample, researchers (see, e.g., Krusell et al. 2000) have assessed an important role of in-

creasing returns to education, possibly due to skill-biased technical change—that is, greater use of technologies that
require more worker education and training. For later periods, researchers have suggested the disappearance of routine jobs as a reason for the poor performance of middle part of the distribution (see, e.g., Jaimovich and Siu 2012).
9

In terms of policies, perhaps the most important difference between the two recessions is the EITC, which was not

present during the 1980-82 period.
10

See, for example, Stiglitz (2013) and Cynamon and Fazzari (2014).

25

11

The CE is a survey of households selected as representative of the U.S. population. Each quarter the survey reports,

for the cross-section of households interviewed (about 6,000), detailed demographic characteristics for all household
members, detailed information on consumption expenditures for the three-month period preceding the interview
and information on income, hours worked and taxes paid over a yearly period. The focus here is on a sample that
starts in the first quarter of 2006 (before the start of the Great Recession) and ends in the first quarter of 2013, the
most recent available from the CE.
12

The “top” is households with disposable income above the 95th percentile of the distribution; the “middle” is

households with disposable income between the 45th and 55th percentile and the “bottom” is households with
disposable income below the 20th percentile. (All income figures are household-size adjusted.)
13

Specifically, this analysis includes expenditures on nondurable goods and services (food and beverages, utilities

and fuels, education, medical supplies, clothing and personal care, reading, transportation, entertainment and shelter
services) and on durables (transportation equipment, housing, furniture, jewelry and durable entertainment goods).
14

This result is robust to different ways of dividing the three groups. When the analysis divides the sample using

market income or consumption expenditures, a fall in overall expenditures is still observed, but with stability of
inequality in expenditures.
15

All segments here means all households represented in the CE survey. Ultra-high-income households are not well-

represented in the survey, so little is known about how their expenditure patterns compare with the rest of society.
16

The PSID data sets provide a wide variety of information on income, employment and expenditures for many

households that are followed at a biannual frequency. The analysis concentrates on the years 2004, 2006, 2008 and
2010 to study the impact of the Great Recession on individual households. As for the CPS data set, the analysis
selects only households that have at least one member between the ages of 21 and 60. Inequality statistics computed
on the PSID are similar to those computed on the CPS and CE data (see Heathcote, Perri and Violante 2010). We use
the PSID in this section not because it has a different coverage, but simply because it has the panel dimension that
CPS and CE lack.
17

A household with two nonmarried members living together is entered as a single unit in CPS data, but as two

units in the Piketty-Saez data.

26

REFERENCES
Burkhauser, Richard V., Jeff Larrimore and Kosali I. Simon. 2012. A “Second Opinion” on the Economic
Health of the American Middle Class. National Tax Journal 65 (1), 7-32.
Cynamon, Barry Z., and Steven M. Fazzari. 2014. Inequality, the Great Recession, and Slow Recovery.
Working paper. Washington University at St. Louis.
Heathcote, Jonathan, Fabrizio Perri and Giovanni L. Violante. 2010. Unequal We Stand: An Empirical
Analysis of Economic Inequality in the United States: 1967-2006. Review of Economic Dynamics 13 (1),
15-51.
Jaimovich, Nir, and Henry E. Siu. 2012. The Trend Is the Cycle: Job Polarization and Jobless Recoveries.
Working Paper 18334. National Bureau of Economic Research.
Krusell, Per, Lee E. Ohanian, José-Víctor Ríos-Rull and Giovanni L. Violante. 2000. Capital-Skill
Complementarity and Inequality: A Macroeconomic Analysis. Econometrica 68 (5), 1029-53.
Perri, Fabrizio, and Joe Steinberg. 2012. Inequality and Redistribution During the Great Recession.
Economic Policy Paper 12-1. Federal Reserve Bank of Minneapolis.
Piketty, Thomas, and Emmanuel Saez. 2003. Income Inequality in the United States, 1913-1998.
Quarterly Journal of Economics 118 (1), 1-39.
Stiglitz, Joseph E. 2013. Inequality Is Holding Back the Recovery. New York Times. Jan. 19.
Taylor, John B. 2013. The Weak Recovery Explains Rising Inequality, Not Vice Versa.
Wall Street Journal. Sept. 9.

27

FEDERAL RESERVE BANK OF

MINNEAPOLIS

2013
OPERATIONS

REPORT

MESSAGE FROM THE
FIRST VICE PRESIDENT
As 2013 drew to a close, we observed the 100th
anniversary of the signing of the Federal Reserve
Act. A centennial is a remarkable achievement for
any organization, particularly one as important and
unique as the Federal Reserve. Over its first 100 years,
the Fed has changed dramatically in many respects,
particularly in terms of the scope and composition of its operations. But at the same time, at a
deeper level, the Fed has evidenced remarkable constancy.
The basic organizational framework of the Federal Reserve System, consisting of the Board
of Governors and 12 regional Reserve Banks, has remained unchanged. This complex blend of
national and regional perspectives, along with public and private institutional attributes that
define our organizational structure, has proved remarkably durable at the most fundamental
level. But within this basic framework, there have been enormous changes in the scope and
character of the Federal Reserve’s operations and the structure of its governance mechanisms.
Moreover, the System’s operations and business practices have continued to evolve and adapt
to new demands and new opportunities.
While much has changed over the past 100 years, what hasn’t changed and will not change
is the Fed’s unwavering commitment to always act in the public interest. At the Minneapolis
Federal Reserve Bank, we work hard every day to put our core values into practice as we strive
to contribute to the System’s fulfillment of its mission to foster the stability, integrity, and
efficiency of the nation’s monetary, financial, and payments systems.
In terms of its operating results, the Bank had a strong year in 2013. We achieved our
strategic objectives and our operational metrics. Our expenses were below budget, and we
had no significant compliance issues. Last year, the Board of Governors commended the Bank
as a model for the System in achieving both strong controls and operational efficiency. The
attached “2013 by the Numbers” highlights the scope of some of the Bank’s operations. In a
variety of areas, such as the FedACH, the Customer Contact Center, and the National Service
Desk, we have operational responsibilities that support the System more broadly. In a similar
vein, as the Federal Reserve Treasury Retail Securities site, we support the Bureau of the Public

30

2013
BY THE NUMBERS
IN 2013
THE FEDERAL RESERVE BANK
OF MINNEAPOLIS PROCESSED
n 12.8 billion ACH (Automated Clearing House) payments worth approximately
$24.4 trillion. FedACH is a nationwide system, developed and operated by Minneapolis
staff on behalf of the entire Federal Reserve System, which provides the electronic
exchange of debits and credits.

n $10.9 billion of currency deposits from financial institutions, destroyed $1.5 billion
of worn and torn currency, and shipped $12.7 billion of currency to financial institutions.

n 162,000 transactions for the 50 million investors who hold $172 billion in U.S.
Savings Bonds and answered 464,000 calls and written inquiries from investors as
the Treasury Retail Securities site for the Federal Reserve System.

n 240,000 customer support calls and issued 78,000 credentials for Federal Reserve
payment and information services as one of two national Customer Contact Centers.

n 337,800 calls and created 356,000 tickets by the National Service Desk; Minneapolis
is one of two sites that provide frontline IT support for the Federal Reserve System.

Debt’s retail program by servicing electronic and paper U.S. Savings Bonds, and Treasury
marketable securities. Managing these consolidated operational responsibilities requires effective
coordination and collaboration with numerous stakeholders across the System and beyond.
In 2013, we met all of our supervision and regulation mandates and conducted a robust
industry outreach program. In the policy arena, our research staff showcased their scholarship
through numerous publications and conference presentations. In addition, Bank officers and
staff made material contributions to the development of various System supervisory policies.
Effective outreach efforts throughout the Ninth District allow us to maximize the benefits
afforded by the regional structure of the Federal Reserve. Last year, we continued to work
with communities, nonprofit organizations, lenders, educators, and others in the district and
across the nation to encourage financial and economic literacy, address housing problems,
promote equal access to credit, and advance economic and community development. We also
redesigned our advisory groups to strengthen this valuable input and expanded our “Conversations with the Fed” series of town hall meetings.
The Bank’s Office of Minority and Women Inclusion established under Section 342 of the
Dodd-Frank Act continues its work to ensure equal opportunity and racial, ethnic, and gender
diversity in our workforce and senior management and the participation of minority- and
women-owned businesses in our procurement activities. These efforts reinforce the Bank’s longstanding and ongoing commitment to diversity and inclusion in our workforce and suppliers.
As we embark on the second 100 years of the Federal Reserve, there is no way to know with
certainty what new challenges we will face. But whatever the future holds, we will respond
with the same commitment to our core mission and values that has guided us successfully to
this point.

James M. Lyon
First Vice President

32

2013
FINANCIAL STATEMENTS
FEDERAL RESERVE
BANK OF MINNEAPOLIS
federalreserve.gov/monetarypolicy/files/BSTMinneapolisfinstmt2013.pdf
federalreserve.gov/monetarypolicy/bst_fedfinancials.htm

AUDITOR INDEPENDENCE
The Board of Governors engaged Deloitte & Touche LLP (D&T) to audit the 2013 combined
and individual financial statements of the Reserve Banks and those of the consolidated
LLC entities. 1 In 2013, D&T also conducted audits of internal controls over financial reporting
for each of the Reserve Banks. Fees for D&T’s services totaled $7 million, of which
$1 million was for the audits of the consolidated LLC entities. To ensure auditor independence,
the Board requires that D&T be independent in all matters relating to the audits. Specifically,
D&T may not perform services for the Reserve Banks or others that would place it in a
position of auditing its own work, making management decisions on behalf of the
Reserve Banks, or in any other way impairing its audit independence. In 2013, the Bank
did not engage D&T for any non-audit services.
1

In addition, D&T audited the Office of Employee Benefits of the Federal Reserve System (OEB), the Retirement Plan

for Employees of the Federal Reserve System (System Plan), and the Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The System Plan and the Thrift Plan provide retirement benefits to employees of the Board, the
Federal Reserve Banks, and the OEB.

1

FEDERAL RESERVE BANK OF

MINNEAPOLIS

2013
DIRECTORS

ADVISORY
COUNCILS
SENIOR
MANAGEMENT
OFFICERS

2013 HELENA BRANCH BOARD OF DIRECTORS

DUANE
KUROKAWA

THOMAS
SWENSON

DAVID
SOLBERG

MARSHA
GOETTING

BARBARA
STIFFARM

DAVID SOLBERG, CHAIR

MARSHA GOETTING, VICE CHAIR

MARSHA GOETTING
PROFESSOR AND EXTENSION FAMILY
ECONOMICS SPECIALIST
DEPARTMENT OF AG ECONOMICS
& ECONOMICS
MONTANA STATE UNIVERSITY
BOZEMAN, MONTANA
DUANE KUROKAWA
PRESIDENT
WESTERN BANK OF WOLF POINT
WOLF POINT, MONTANA

DAVID SOLBERG
OWNER
SEVEN BLACKFOOT RANCH CO.
BILLINGS, MONTANA
BARBARA STIFFARM
EXECUTIVE DIRECTOR
OPPORTUNITY LINK INC.
HAVRE, MONTANA
THOMAS SWENSON
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
BANK OF MONTANA AND
BANCORP OF MONTANA HOLDING CO.
MISSOULA, MONTANA

36

FEDERAL ADVISORY
COUNCIL MEMBER
PATRICK DONOVAN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
BREMER FINANCIAL CORP.
ST. PAUL, MINNESOTA

2013 MINNEAPOLIS BOARD OF DIRECTORS

HOWARD
DAHL
RANDALL
HOGAN

CHRISTINE
HAMILTON

MAYKAO
HANG

LAWRENCE
SIMKINS

KENNETH
PALMER

MARY BRAINERD, CHAIR

MARY
BRAINERD
JULIE
CAUSEY

RANDY
NEWMAN

RANDALL HOGAN, DEPUTY CHAIR

CLASS A DIRECTORS

CLASS B DIRECTORS

CLASS C DIRECTORS

(ELECTED BY MEMBER BANKS TO REPRESENT MEMBER BANKS)

(ELECTED BY MEMBER BANKS TO REPRESENT THE PUBLIC)

(APPOINTED BY THE BOARD OF GOVERNORS
TO REPRESENT THE PUBLIC)

JULIE CAUSEY
CHAIRMAN
WESTERN BANK
ST. PAUL, MINNESOTA

HOWARD DAHL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMITY TECHNOLOGY LLC
FARGO, NORTH DAKOTA

RANDY NEWMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ALERUS FINANCIAL NA & ALERUS FINANCIAL CORP.
GRAND FORKS, NORTH DAKOTA

CHRISTINE HAMILTON
MANAGING PARTNER
CHRISTIANSEN LAND AND CATTLE LTD.
KIMBALL, SOUTH DAKOTA

KENNETH PALMER
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
RANGE FINANCIAL CORPORATION
& RANGE BANK N.A.
MARQUETTE, MICHIGAN

LAWRENCE SIMKINS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WASHINGTON COMPANIES
MISSOULA, MONTANA

37

MARY BRAINERD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEALTHPARTNERS
MINNEAPOLIS, MINNESOTA
MAYKAO HANG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMHERST H. WILDER FOUNDATION
ST. PAUL, MINNESOTA
RANDALL HOGAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PENTAIR
MINNEAPOLIS, MINNESOTA

PHOTOGRAPHY: PAGES 37–41 NIEDORF VISUALS

2013 ADVISORY COUNCIL ON SMALL BUSINESS AND LABOR

JIM
PLEWACKI

BRETT
RIDDLE

RUSTY
HOGLUND

MELISSA
HINKSON

DOUG
MELBY

ARLON
FRANZ
BRIAN
HITI

CHRISTINE
HAMILTON

LEM
AMEN

CHRISTINE HAMILTON, CHAIR
MANAGING PARTNER
CHRISTIANSEN LAND AND CATTLE LTD.
KIMBALL, SOUTH DAKOTA

PETER HEGG
CHAIRMAN
HEGG COMPANIES
SIOUX FALLS, SOUTH DAKOTA

DOUG MELBY
TRUST OFFICER
HEARTLAND TRUST COMPANY
FARGO, NORTH DAKOTA

LEM AMEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIKING ENGINEERING & DEVELOPMENT INC.
FRIDLEY, MINNESOTA

MELISSA HINKSON
MANAGER
MILL CREEK ASSISTED LIVING AND
MEMORY CARE CENTERS
MARQUETTE, MICHIGAN

JIM PLEWACKI
CHIEF FINANCIAL OFFICER
BERGQUIST COMPANY
CHANHASSEN, MINNESOTA

SCOTT CRUMP
CHIEF EXECUTIVE OFFICER
STRATASYS
EDEN PRAIRIE, MINNESOTA
ARLON FRANZ
OWNER
FRANZ CONSTRUCTION INC.
SIDNEY, MONTANA

BRIAN HITI
MINING COORDINATOR
IRON RANGE RESOURCES AND
REHABILITATION BOARD
EVELETH, MINNESOTA
RUSTY HOGLUND
PRESIDENT
SUPERIOR STEEL INC.
SUPERIOR, WISCONSIN
38

BRETT RIDDLE
CHIEF EXECUTIVE OFFICER
RIDDLE’S GROUP
RAPID CITY, SOUTH DAKOTA
CARLEEN SHILLING
TAX PARTNER
EIDE BAILLY LLP
BISMARCK, NORTH DAKOTA

PETER
HEGG

CARLEEN
SHILLING
SCOTT
CRUMP

2013 ADVISORY COUNCIL ON AGRICULTURE

PAT
KLUEMPKE

JOHN
CORDES

PAUL
BAU ER

DAVID
SOLBERG

GARY
LEE

CLARK
COLEMAN

JOHN
MCDONNELL

SCOTT
RYSDON
JIM
KIELKOPF

TOM
HEINE

DAVID SOLBERG, CHAIR
OWNER
SEVEN BLACKFOOT RANCH CO.
BILLINGS, MONTANA

RUSSELL DERICKSON
HIGHWATER ETHANOL LLC
MINNESOTA SOYBEAN PROCESSORS
LAMBERTON, MINNESOTA

GARY LEE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RAHR CORP.
SHAKOPEE, MINNESOTA

PAUL BAUER
CHIEF EXECUTIVE OFFICER
ELLSWORTH CREAMERY COOPERATIVE
ELLSWORTH, WISCONSIN

TOM HEINE
OWNER
TOM HEINE CATTLE CO.
YANKTON, SOUTH DAKOTA

JOHN MCDONNELL
VICE PRESIDENT
CIRCLE S SEEDS
THREE FORKS, MONTANA

CLARK COLEMAN
PRESIDENT
D.J. COLEMAN INC.
BALDWIN, NORTH DAKOTA

JIM KIELKOPF
GRADUATE STUDENT
FORMERLY WITH INFORMA ECONOMICS

SCOTT RYSDON
CHIEF EXECUTIVE OFFICER
SIOUX STEEL COMPANY
SIOUX FALLS, SOUTH DAKOTA

JOHN CORDES
OWNER
CORDES CROP INSURANCE
COMSTOCK, WISCONSIN

PAT KLUEMPKE
EXECUTIVE VICE PRESIDENT
CHS INC.
INVER GROVE HEIGHTS, MINNESOTA

39

RUSSELL
DERICKSON

2013 COMMUNITY DEPOSITORY INSTITUTIONS ADVISORY COUNCIL

MARK
BRAGELMAN

GREG
BORMANN

KEVIN
MANLEY

STEVEN
GROOMS

CRYSTAL
HATCHER

KEVIN
MAYER

ERIC
HARDMEYER

BRIAN
JOHNSON

BRIAN JOHNSON, CHAIR
CHIEF EXECUTIVE OFFICER
CHOICE FINANCIAL
GRAND FORKS, NORTH DAKOTA

JEFF FULLERTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST WESTERN FEDERAL SAVINGS BANK
RAPID CITY, SOUTH DAKOTA

GAIL KRALL
PRESIDENT
MINNESOTA POWER EMPLOYEES CREDIT UNION
DULUTH, MINNESOTA

GREG BORMANN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FARMERS STATE BANK
STICKNEY, SOUTH DAKOTA

STEVEN GROOMS
CHIEF EXECUTIVE OFFICER
1ST LIBERTY FEDERAL CREDIT UNION
GREAT FALLS, MONTANA

KEVIN MANLEY
PRESIDENT
STATE BANK OF ARCADIA
ARCADIA, WISCONSIN

MARK BRAGELMAN
PRESIDENT
LIBERTY SAVINGS BANK
ST. CLOUD, MINNESOTA

ERIC HARDMEYER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BANK OF NORTH DAKOTA
BISMARCK, NORTH DAKOTA

KEVIN MAYER
CHIEF EXECUTIVE OFFICER
RICHLAND FEDERAL CREDIT UNION
SIDNEY, MONTANA

CRYSTAL HATCHER
SENIOR VICE PRESIDENT
VENTURE BANK
GOLDEN VALLEY, MINNESOTA		

40

2013 SENIOR MANAGEMENT FEDERAL RESERVE BANK OF MINNEAPOLIS

DUANE
CARTER

RON
FELDMAN
DOROTHY
BRIDGES

LINDA
GILLIGAN
JAMES
LYON

NARAYANA KOCHERLAKOTA
PRESIDENT
JAMES LYON
FIRST VICE PRESIDENT
DOROTHY BRIDGES
SENIOR VICE PRESIDENT

NARAYANA
KOCHERLAKOTA

NIEL
WILLARDSON

DUANE CARTER
SENIOR VICE PRESIDENT, DIRECTOR OF OFFICE
OF MINORITY AND WOMEN INCLUSION, AND
EQUAL EMPLOYMENT OPPORTUNITY OFFICER
RON FELDMAN
EXECUTIVE VICE PRESIDENT
LINDA GILLIGAN
SENIOR VICE PRESIDENT AND GENERAL AUDITOR

41

SAMUEL
SCHULHOFER-WOHL

CLAUDIA
SWENDSEID

SAMUEL SCHULHOFER-WOHL
SENIOR VICE PRESIDENT AND
DIRECTOR OF RESEARCH
CLAUDIA SWENDSEID
SENIOR VICE PRESIDENT
NIEL WILLARDSON
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
AND CORPORATE SECRETARY

2013 OFFICERS
PETER BAATRUP
VICE PRESIDENT,
ASSISTANT GENERAL COUNSEL &
SYSTEM PRIVACY COORDINATOR
KELLY BERNARD
VICE PRESIDENT
SHERYL BRITSCH
VICE PRESIDENT &
ASSISTANT CORPORATE SECRETARY
MICHELLE BRUNN
VICE PRESIDENT
BARBARA COYLE
VICE PRESIDENT
TIMOTHY DEVANEY
VICE PRESIDENT
R. PAUL DRAKE
VICE PRESIDENT AND BRANCH
MANAGER
DAVID FETTIG
VICE PRESIDENT &
DIRECTOR OF PUBLIC AFFAIRS
TERRY FITZGERALD
VICE PRESIDENT
MICHAEL GARRETT
VICE PRESIDENT
JEAN GARRICK
VICE PRESIDENT
JACQUELINE KING
VICE PRESIDENT
DEBORAH KOLLER
VICE PRESIDENT
MARIE MUNSON
VICE PRESIDENT
MARK RAUZI
VICE PRESIDENT
PAUL RIMMEREID
VICE PRESIDENT &
CHIEF FINANCIAL OFFICER

RICHARD TODD
VICE PRESIDENT

ELIZABETH KITTELSON
ASSISTANT VICE PRESIDENT

DIANN TOWNSEND
VICE PRESIDENT

DEBRA KNILANS
ASSISTANT VICE PRESIDENT &
INFORMATION SECURITY OFFICER

MARY VIGNALO
VICE PRESIDENT

AMY KYTONEN
ASSISTANT VICE PRESIDENT

JOHN YANISH
VICE PRESIDENT &
DEPUTY GENERAL COUNSEL

CHAD LAUBER
ASSISTANT VICE PRESIDENT

KARIN BEARSS
ASSISTANT VICE PRESIDENT

TODD MAKI
ASSISTANT VICE PRESIDENT

KENNETH BEAUCHEMIN
ASSISTANT VICE PRESIDENT

FREDERICK MILLER
ASSISTANT VICE PRESIDENT

BRADLEY BEYTIEN
ASSISTANT VICE PRESIDENT

KINNEY MISTEREK
ASSISTANT VICE PRESIDENT

JACQUELYN BRUNMEIER
ASSISTANT VICE PRESIDENT

BARBARA PFEFFER
ASSISTANT VICE PRESIDENT

MESUDE CINGILLI
ASSISANT VICE PRESIDENT

RANDY ST. AUBIN
ASSISTANT GENERAL AUDITOR

GREGORY CUTSHALL
ASSISTANT VICE PRESIDENT

ROBERT SAUVE´
ASSISTANT VICE PRESIDENT

MATTHEW DIETTE
ASSISTANT VICE PRESIDENT

SHARON SYLVESTER
ASSISTANT VICE PRESIDENT

JOSEPH FAHNHORST
ASSISTANT VICE PRESIDENT

THOMAS TALLARINI
ASSISTANT VICE PRESIDENT

SCOTT THOMAS-FORSS
ASSISTANT VICE PRESIDENT

DARIAN VIETZKE
ASSISTANT VICE PRESIDENT

CHRISTINE GAFFNEY
ASSISTANT VICE PRESIDENT

MARK VUKELICH
ASSISTANT VICE PRESIDENT

PETER GAVIN
ASSISTANT VICE PRESIDENT

CHRIS WANGEN
ASSISTANT VICE PRESIDENT

MICHAEL GROVER
ASSISTANT VICE PRESIDENT
KENNETH HEINECKE
ASSISTANT VICE PRESIDENT

42

DECEMBER 31, 2013

FOR MORE INFORMATION ABOUT THE MINNEAPOLIS FED
AND THE FEDERAL RESERVE SYSTEM, GO TO

minneapolisfed.org
USEFUL TELEPHONE NUMBERS
(612 AREA CODE UNLESS OTHERWISE INDICATED):

FOR THE PUBLIC
CONSUMER AFFAIRS HELP LINE: 204-6500
MEDIA INQUIRIES: 204-5261
RESEARCH LIBRARY: 204-5509
TREASURY ACTION RESULTS, CURRENT OFFERINGS, BILLS, NOTES,
BONDS: 1-800-722-2678

FOR FINANCIAL INSTITUTIONS
CASH SERVICES HELP LINE: 204-5227 OR 1-800-553-9656
CHECK SERVICES SUPPORT: 1-877-FRB-CHKS OR 1-877-372-2457
ELECTRONIC ACCESS CUSTOMER CONTACT CENTER
FEDLINE SUPPORT: 1-800-333-7010
FEDLINE DIRECT COMMAND: 1-888-881-6700
FEDACH CENTRAL OPERATIONS SUPPORT: 1-886-234-5681
FEDWIRE OPERATIONS SUPPORT: 1-800-333-2448
SAVINGS BOND CUSTOMER SERVICE: 1-800-553-2663

43

The Region

Public Affairs
Federal Reserve Bank of Minneapolis
P.O. Box 291
Minneapolis, Minnesota 55480-0291

I N E Q U A L I T Y,
R E C E S S I O N S A N D R E COV E R I E S
2013 ANNUAL REPORT / FEDERAL RESERVE BANK OF MINNEAPOLIS