However, studies of the dynamic effects of bank mergers and acquisitions suggest that while mergers are apt to reduce small business lending by the participants, this decline appears to be offset in part, or even in whole, by an increase in lending by other institutions in the same local market. With the benefits of improving technology, well-managed regional institutions will seize the opportunity to increase their customer base in markets where large institutions have acquired local competitors. I think it is safe to say that, whatever their cost advantages, large automated systems can never fully displace the value of personal contact and familiarity with local economic circumstances, which are the keystone of community banking. Potential Impediments to Efficient Resource Utilization Overall, our evolving financial system has been highly successful in promoting growth and higher standards of living. However, much work remains to be done to improve the process.
Barriers still prevent the free flow of capital and people to their most productive employment.
Not all of these differences are readily explained by income, balance sheet factors, or credit histories, although considerably more work needs to be done to take account of possible explanatory factors not included in the studies to date. But, if after such examination the gap persists, it raises disturbing questions. In the end, costs are higher, less real output is produced, and national wealth accumulation is slowed. By removing the non-economic distortions that arise as a result of discrimination, we can generate higher returns to human capital and other productive resources. It is important for lenders to understand that failure to recognize the profitable opportunities represented by minority enterprises not only harms these firms, it harms the lending institutions and, ultimately, robs the broader economy of growth potential.