The Federal Reserve Bank of Minneapolis will start a national center to spur economic development on Indian reservations.

Persistent poverty in American Indian communities, passed down through generations, shows the need for more research and energy toward community development on Indian reservations, Narayana Kocherlakota, the president of the Minneapolis Fed, said in a speech in Washington last week.

"It's not just that incomes have been very low on reservations for decades," Kocherlakota said in his prepared remarks. "We now have large-scale and very current evidence of poverty persisting across generations within individual families. … This persistence represents a social and economic failure to develop the full productive and human potential of many of our children."

The bank, whose region from northern Wisconsin to Montana includes several large reservations, will establish a Center for Indian Country Development.

Sue Woodrow, a Fed official in Helena, Mont., will be co-director of the center, and the Minneapolis Fed will search for another co-director. The bank will also set up a leadership council of 10 to 12 regional and national experts on Indian Country development matters. Kocherlakota said the plan is to have the center up and running by midsummer.

The stage for poverty among American Indians was set in the 19th century, Kocherlakota said in the speech Friday at the Federal Reserve System Community Development Research Conference. Indians were forced to move to remote areas, their cultures were suppressed, their land taken away and their affairs controlled by federal bureaucrats.

"Not surprisingly, economic development lagged on most reservations, leaving them as pockets of extreme rural poverty and underdevelopment," Kocherlakota said.

Real per capita income growth has accelerated on Indian reservations since the 1990s, even on reservations without large casinos, but "income remains disturbingly low on Indian reservations relative to the rest of the country," Kocherlakota said.

Recent research on intergenerational mobility, headed by Raj Chetty at Harvard, shows that children in commuting zones with high Indian populations typically are less likely than most Americans to rise in the national income distribution compared to their parents. For them, the American dream is almost impossible to attain.

Four commuting zones in the Dakotas with huge reservations — Rosebud, Pine Ridge, Cheyenne River and Standing Rock — rank in the lowest 25 of all 709 commuting zones in the country, according to Fed analysis of Chetty's research.

The research on intergenerational poverty calls out for further investigation into the effects of factors like segregation, low-quality schools and single-parent households, Kocherlakota said. It also calls for sustained and well-coordinated work on community development in Indian Country.

"We are responding to these calls and intend to take the Federal Reserve System's long-standing work with tribal communities to a new level," said Kocherlakota, who is stepping down as president of the Minneapolis Fed at the end of the year. "I expect to look back on the establishment of the Center for Indian Country Development as an important part of my legacy and am happy to say that it has the strong support of our management team and board of directors."

Adam Belz • 612-673-4405 Twitter: @adambelz