The Utility of Banking: Regulation, Inequality, and the Public Option

What is the effect of public utility banking regulation on inequality and access to basic banking services? In this paper, I will examine banking during three periods of American history. The first period, stretching from 1865 to 1911, was marked primarily by private banking which led to severe financial crises and the rise of unbanked and underbanked Americans. The second period, stretching from 1911 to 1967, marks a fundamentally unique period in American banking wherein banking was largely treated as a public utility rather than as solely a private enterprise. This period saw the implementation of postal banking, public banking, the Federal Reserve, the FDIC, and the Bretton-Woods system along with an overall reduction in inequality. The third period, stretching from 1967 to today, sees a shift from public utility regulation toward the unregulated approach of the first period from 1865 to 1911. Consequently, this third period has seen an increase in inequality, financial crises, and the number of unbanked and underbanked Americans. Finally, this paper will explore modern reforms to reduce the number of unbanked and underbanked Americans through the revival of the public utility management approach for banking regulation.