which switched with much acclaim to the market paradigm during the past decade or so. another example of the ascendancy of market - based economics can, i would argue, be found in the realms of corporate governance. at times during the 1970s and 1980s, when the so - called anglo - saxon model of relatively unbridled financial markets was not delivering particularly good results in terms of economic growth, there was some envy of what one might depict as the institutional model of corporate ownership, as evident in germany and japan for example. in this model much of the equity of major businesses is closely held by friendly groups of long - term investors including one ’ s bankers and associate companies. it has been argued that this arrangement provides the best environment for long - term growth and stability, in contrast to the situation where businesses are exposed fully to the cut and thrust of the stock markets, which are characterised as being populated by people seeking only short - term profit and ever alert to opportunities for takeovers, asset stripping and the like. but experience of the 1990s does not support that view. germany and japan have been the laggards of the decade. the true cost to japan of the longstanding cosy relationships between banks, industrial corporations and government ministries has become apparent. and we watch in some amazement the reaction among some sections of the political and business communities in germany to the vodafone / mannesmann takeover battle an almost unprecedented ( for germany ) hostile bid, no more palatable for being from abroad - along with the government ’ s efforts to save the holzmann construction group, not to mention the authorities ’ stout defence of the largely state - owned domestic regional banking network there. thus, the more open and aggressive equity market environment of the anglo - saxon model seems to have delivered ultimately the fitter economy. but we should remember that the stock market doesn ’ t serve everyone who is looking for equity finance. there is a large population of smaller and mediumsized businesses which cannot aspire to access the market. nevertheless they are important contributors to the economy and need equity funding. few, if any, economies have been able to match the usa when it comes to enterprise culture and the relatively abundant sources of funding available to smes. even in hong kong, where we pride ourselves as being highly market - oriented and enterprising, we cannot claim that life is a bed of roses for smes. but i am encouraged by the launch of the growth enterprise market - the stock exchange ’ s

donald l kohn : economic outlook remarks by mr donald l kohn, member of the board of governors of the us federal reserve system, at the bankers and business leaders luncheon, federal reserve bank of kansas city, oklahoma city branch, oklahoma, 13 april 2006. * * * i am pleased to have this opportunity to talk with the business leaders of oklahoma city. the federal reserve has deep roots in this community : the federal reserve bank of kansas city has had a branch here since 1920. consistent with the experience of most other enterprises these days, the federal reserve is having to change the way we do business in response to rapid changes in technology. we can see the effects of these changes on the payment system every day and all around us as we make and receive payments that depend less and less on the use of checks. to hold down costs, we have been required to reduce the number of our offices delivering payments services to banks, including check and cash operations at oklahoma city. but closing those operations by no means implies that we are reducing our commitment to the community. indeed, tom hoenig and his colleagues at the federal reserve bank in kansas city are taking steps to strengthen our roots here. our most important ties to local communities have never been primarily through the services we deliver to their banks. rather they are established through the exchange of information between those communities and the federal reserve, and the oklahoma city branch will remain our eyes and ears in this region. tom will continue to bring to our policy deliberations the information he gathers from tyree minner and his colleagues on the board of directors of the oklahoma city branch, from bob funk and his colleagues on the head office board, and from many other contacts in the region. the federal reserve bank of kansas city and the oklahoma city branch are increasing their efforts to reach out to this community to make sure that we are listening as effectively as possible to your impressions of the current economic circumstances, to explain our policies, to help educate the public in the use of the increasingly complex financial instruments available to them, and to work with community leaders to identify strategies that will help sustain a vibrant economy. the board of governors in washington strongly supports these efforts by kansas city and other reserve banks to deepen their ties to their communities, and i am pleased to be here as tangible evidence of that support. i thought i would take advantage of this opportunity to discuss the u. s. economy and the conduct of monetary policy. we are at an especially interesting jun