In the late twentieth century a number of forces converged to create pressure for profound change in the U.S. commercial banking industry. Changes in the global economy created monetary pressures. A financially sophisticated baby boom generation fuelled the demand for investment alternatives to bank deposits and less expensive investment capital. Expanding local and cross-border economic activity stimulated demand for new financial products, services, organizational structures, and regulation. Finally, technological innovation made it possible to compete in financial services in novel ways, creating new competition and relentless pressure to improve performance. In response to these forces, the commercial banking industry in the United States has dramatically restructured. While concentration has increased, banks no longer dominate financial services. Instead, they have become part of holding companies that own a broad range of closely related financial services companies that are both complementary and competitive. Historical prohibitions against interstate banking have been liberalized as have the regulatory barriers that strictly separate banking, insurance, and securities market activities. As risk and complexity in the financial system increases and traditional sources of returns in banking diminish, pressure for further change will mount. While the facts of regulatory change in U.S. commercial banking are not entirely new, we have a limited understanding of how it actually happened. And how it happened holds important lessons for future change as well as for other banking systems that are facing similar pressures. The Invisible Hands of U.S. Commercial Banking Reform shows how to analyze incentives for economic and institutional change and then demonstrates how incentives shape beliefs and choices. Contrary to commonly held assumptions, U.S. commercial banking is governed by a closely integrated combination of markets and governments and large- scale adaptati