The 20th-century railroad revolution that 21st-century banking needs

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Michelle Bowman, a fifth-generation community banker, is poised to become the Federal Reserve’s top banking regulator. This appointment, alongside shifts at the Consumer Financial Protection Bureau, signals a chance to transform our financial system in ways that could democratize access and foster innovation — much like transportation deregulation did forty years ago.

The parallels are striking and urgent. Today’s financial landscape operates under regulatory frameworks designed for massive institutions with billion-dollar balance sheets. The casualties are everywhere: Community banks have collapsed from 18,000 in the 1980s to fewer than 5,000 today, while nearly one in five Americans remains underbanked, paying exorbitant fees for basic services because traditional institutions find them unprofitable under our current regulatory calculus.

Our binary thinking about financial regulation — that more oversight equals more protection, and less oversight equals consumer harm — misses history’s most powerful lesson: The most effective regulatory reforms aren’t simply additive or subtractive, but transformative. They reimagine frameworks to expand access, unleash creativity and redistribute power away from entrenched interests.

Look back to 1980. President Carter, with Senator Ted Kennedy’s critical support, championed the deregulation of surface freight transportation against conventional political wisdom. These Democratic reformers weren’t surrendering to industry interests — they were democratizing essential services that touched every American’s life.

The pre-reform landscape was a study in regulatory capture. Interstate trucking functioned as a protected cartel maintaining artificially inflated prices. Railroad rules suffocated innovation, mandating unprofitable routes while preventing efficient pricing models. This system enriched incumbents while impoverishing consumers and entrepreneurs alike.

The results of deregulation were revolutionary. Within five years, consumers saved $15.4 billion annually on faster, more efficient shipping. Railroad costs plummeted by half. Delivery times compressed by 30%. The benefits cascaded throughout the economy, touching virtually every product and service Americans consumed.

But the most profound impacts were distributional. Deregulation doubled the percentage of owner-operators in trucking, creating entrepreneurial opportunities for thousands who had been locked out of the market. Black truck drivers increased their representation by more than 50% in the high-paying interstate segment. Consumers nationwide enjoyed lower prices for nearly everything moved by truck or rail. What had been portrayed as consumer protection turned out to be a barrier to economic…