TAILIEUCHUNG - The Role of Community Banks in the U.S. Economy

Notwithstanding persistent press reports to the contrary, there is no evidence that the Spanish al Qaeda cell, led by Barkat Yarkas and including al Qaeda European financier Mohammed Galeb Kalaje Zouaydi, provided any funding to support 9/11 or the Hamburg plotters. Zouaydi may have provided funds to Mamoun Darkazanli, who knew the Hamburg plotters as a result of being a member of the Hamburg Muslim community, but there is no evidence that he provided money to the plot participants or that any of his funds were used to support the plot. Mounir Motassadeq, the Hamburg friend of the hijackers, held power. | The Role of Community Banks in the . Economy The . banking system is unusual in consisting not only of some very large banks but also a large number of relatively small community banks. This bifurcated banking structure resulted largely from a legal framework that in the past restricted banks abilities to diversify geographically. This institutional structure in turn reflected a long-standing concern in the United States about the concentration of banking power in a few very large institutions located far away from many of the customers they serve. The bifurcated banking system in the United States has served the economy well. Over time with regulatory change and financial innovation large banks have become complex organizations engaged in a wide range of activities. They provide a variety of services to their customers but often rely on hard financial information computer models and centralized decision-making as the basis for conducting business. In contrast small banks have focused more on relationship banking This article was prepared under the direction of a bank wide work group headed by George A. Kahn vice president and associate director of research in the Economic Research Department Linda Schroeder vice president in the Supervision and Risk Management Division and Stuart Weiner vice president and economist in the Payments System Research Department. William Keeton senior economist in the Pciiniimic Research Department was the principal author. Jim Harvey and Paul Willis policy economists in the Banking Studies and Structure Department also contributed to the article. This article is on the banks website at . 15 16 FEDERAL RESERVE BANK OF KANSAS CITY basing decisions on personal knowledge of customers creditworthiness and a keen understanding of business conditions in the communities they serve. In this way the bifurcated banking system has served the needs of a diverse . economy composed of businesses of all shapes and sizes and .

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