This work examines the history of U.S. banking
regulations to show how and why current
deregulation is transforming the size,
structure, and geographic range of U.S. banks, the scope of banking services, and the nature of bank-customer relationships. In addition, such history may serve as a helpful guide to the future of banking reform.
Charles W. Calomiris is a visiting scholar at AEI and the codirector of its Financial
Deregulation Project. He is also the Paul M. Montrone Professor of Finance and Economics at Columbia Business School and a consultant to the Federal Reserve Bank of New York.
Deregulation began in the 1980s and involved a combination of changes in federal and state statutes and changes in regulatory and judicial interpretations of existing laws, culminating in the passage of the Banking Act of 1999. Over the past two decades, the characteristics that had made U.S. banks different from other banks throughout the world-the fragmented geographical structure of the industry, which restricted the scale of banks and their ability to compete with one another, and strict limits on the kinds of products and services commercial banks could offer-virtually have been eliminated. Understanding the origins and persistence of the unique banking
regulations that had defined U.S. banking for more than a century lends an important perspective to the economic and political causes and consequences of the current process of deregulation. History helps to define the political constituencies for and against deregulation, the political process through which bank regulations were determined, and the way deregulation is likely to affect future bank performance and stability.