You can count on one hand the number of people who have had as big of an impact on the U.S. bank industry as Hugh McColl has over the past century. The leading banks in this country as you know them today may not even exist without him, at least not in their current form.

It was a different world when McColl entered banking in 1959, as memories of the Great Depression began to fade in bankers' minds and the post-World War II recovery gained steam. Banks at the time weren't allowed to operate across interstate lines, and with rare exception, they couldn't even have branches within a single state.

Fast-forward to today, and the nation's three biggest banks operate branch networks that span the continent. This may have happened without McColl, just as manned flight may have happened without the Wright brothers. But it's the Wright brothers that we look to as the fathers of the modern airline industry, just as it's McColl one should look to as the father of modern American branch banking.

It was under McColl's watch that a small bank in North Carolina, not far from where the Wright brothers infamously took flight, grew into the banking behemoth known today as Bank of America (NYSE:BAC).

A picture of Hugh McColl, next to the Bank of America logo.

Hugh McColl, the former chairman and CEO of Bank of America. Image source: Falfurrias Capital Partners and The Motley Fool.

The name itself, Bank of America, dates back to the early 1900s, when a man by the name of Amadeo Giannini set out to help small businesses and individual depositors in and around San Francisco, California, who had nowhere else to take their money or get financing. It was originally founded in 1904 as the Bank of Italy, before changing its name not long after.

Bank of America grew to be one of the leading banks on the West Coast. For a short time, it even owned a bank in New York City. But it was McColl who finally realized Giannini's dream of operating a bank that spanned the Atlantic and Pacific Oceans.

To be clear, the Bank of America founded by Giannini makes up only a part of the bank that bears its name today. The rest consists of a consortium of banks from across the country that McColl (and later his successor, Ken Lewis) stitched together while at the helm of North Carolina National Bank, or NCNB, which later changed its name to NationsBank. This was the bank that under McColl's watch in 1998 purchased Bank of America and assumed its name.

The Bank of America you know today, in other words, can more accurately be thought of as NationsBank, or North Carolina National Bank if you're so inclined. This is why its headquarters is in Charlotte, North Carolina, across the continent from where Giannini first set up shop.

McColl's place in the history of American banking was earned through fundamental changes that he helped to push through Congress. Just as Citigroup's (NYSE:C) Sandy Weill convinced legislators in 1999 to once again permit the commingling of commercial and investment banks, following Citicorp's merger with Travelers Group, it was largely McColl's work over the previous decades that culminated in Congress' formal adoption of nationwide branch banking in 1994.

McColl retired from Bank of America in 2001, but he continues to loom large in the minds of anyone with a curiosity about how the current bank industry came to be. I reached out to him recently to talk about his thoughts on banking today. What follows is a transcript of select portions of our conversation, edited for organization and flow.

The Motley Fool: Can you put where the bank industry is at today into perspective?

Hugh McColl: When I started in 1959, the average bank made between 8% and 10% return on equity. That was because banks were conservatively capitalized with about $10 of capital for every $100 of assets.

Profitability more than doubled during the next 15 years, from 1960 to 1974. We had guns and butter -- LBJ's great society and the Vietnam War. So we had runaway inflation and so none of us that had come into the industry at that time felt like we could make any mistakes because inflation bailed out our bad loans. We didn't know they were bad -- we thought we were smart.

We then had the collapse in 1974 caused by rising energy prices and coming off the gold standard. And then we went through another bout of inflation in the 1980s under President Reagan. Banks kept their leverage. Leverage in investment banks went 40:1 to 50:1. It went crazy once other people's money got involved.

Now, after the collapse of 2008, with all the heavy regulation, in my judgment, we're back in the 1960s. We're back where it's going to be hard to make more than 10% to 12% to 13% return on equity. And the reason is that you can't leverage yourself like you used to, not to mention the fact that we've got a flat yield curve.

But just ignoring the yield curve, it seems to me that we're back in a period when banks look more like a public utility than a growth company. We're also more consolidated now, not less consolidated.

The Motley Fool: Given that guns and butter jump-started the economy and the bank industry in the 1960s and 1970s, yet there's little sign of either today, what does that mean for banks and economic growth going forward?

McColl: I'm not an economist, so I want to make clear that this is just an opinion, unencumbered by intellectual study.

The problem is the government has spent money. Everything that I thought I knew, I've been wrong about. I thought if the government ran huge deficits, then we would have runaway inflation. Incidentally, the government thought that, too. It's been trying to reflate the economy now for a long time and it hasn't worked.

So government spending will not take us out of where we are. What we need is credit to be more easily available for more people so that you get the consumer and companies taking risk and creating jobs. So the only thing that will change where we are right now in my opinion is a relaxation of regulation.

The men running banks when I entered the industry were older, they were conservative, and they wouldn't take any risk. They had seen the worst of the worst and didn't want to see it again. The problem now is that we have people not so much running banks, but in the top layer of banks, who are in charge of not doing things. They're in charge of figuring out what's wrong with everything. They check on things and carry out rules, and see nothing but problems. These people are in the ascendency in the industry. Until the personnel changes, until the sales side of the company, the risk takers come back into play, the country itself has got a problem, not just the bank industry.

Stimulation by the government isn't going to help things. We've been printing money for 10 years. What we need is for the government to put people to work. If Trump would do what he said he was going to do, which is spend money on infrastructure, that would help a hell of a lot. But if we're just talking about the banking industry, we really need to relax our attitudes toward loans, particularly with respect to small business and the bottom half of the socioeconomic ladder.

The Motley Fool: You co-founded a private equity fund, yet it doesn't own any banks. Why?

McColl: We were invested in a bank from 2009 to 2013 because we believed in the CEO. He was an ex-Bank of America guy, Gene Taylor. We invested with him because we believed in him. There were other private equity firms in with us. We all ended up making money, but we certainly didn't make money at the level that we made in some of our other investments, like Bojangles'.

Candidly, given the current regulatory and interest rate environments, a private equity firm like ours would not be buying banks today because we don't see how you can make a lot of money in a hurry. You might make a lot of money over 20 years, but not over three years.

The Motley Fool: What does that mean for the bank industry?

McColl: It means that it costs banks more to raise capital because their stocks don't have high price-to-earnings ratios. Banks are instead buying in the stock that they had to issue in the crisis. There are a lot of different reasons for that, but if you buy back stock, you're really destroying capital. And the only reason to destroy capital is if you can't deploy it. So, because banks aren't growing fast enough to support all the capital that they generate through earnings, they use those earnings to buy back stock.

Why can they not deploy that capital? Is it because there's a lack of demand in the country? Or is there a lack of willingness on the part of the banks caused by intense regulation? And I don't mean capital ratios as much as I mean, say, making it difficult to make a mortgage loan. You have to answer so many questions on a mortgage application today that people don't even want to borrow the money. It's too much trouble.

There's an old saying that a cat that sits on a hot stove will never sit on another one. Well, they won't sit on a cold stove, either. That's a damn good description of where we are at right now.

The Motley Fool: Do you see the currently slow economic growth to be a function of what's going on in the bank industry?

McColl: Yes, I do. I think it's got multiple causes, but, yes, I think the restriction on bank lending does in fact negatively impact economic growth.

A certain amount of loan losses are good for the country and for banks. If you're not taking enough risk to have losses -- I'm talking about risk within the framework of reality -- then you're not taking enough risk.

I used to have a director at Bank of America who asked me percentage questions like "What percent of wholesale loans are you losing?" He saw it as an arithmetic problem. In other words, if you're not taking losses, it means your credit restrictions are too tight. So you're trying to find that optimal level where you're lending enough money where you do have a loss ratio that's manageable, yet it allows you to make more money and reach more people. But when you pull back to where you have no losses, because you can't be perfect at that, it means you're probably turning away people who deserve credit.

Let's say you're trying to get a 2% to 3% loss ratio in personal lending and you stop doing it entirely, then 97% of 98% people who deserve credit aren't getting it. And that's what hurts the country.

I don't think any of the small bankers are afraid to take risk. I think they're struggling to find opportunity because they have these constraints in terms of how much they can lend on real estate. It's at the bigger banks, where they're into being more bureaucratic about managing risk, where you maybe have risk managers with too much influence. It's just an unwillingness to take risk.

The Motley Fool: How does today's regulatory environment compare to the environment when you were in the industry, specifically given the fact that banks couldn't operate across interstate lines when you first entered the industry?

McColl: We didn't like the law so we changed it. No question who changed it. It was NCNB, NationsBank. We lobbied for it and got it done. In fact, my in-house lawyer actually wrote the banking legislation for the Southeastern Regional Banking Compact. So, I lived with regulation, but I believe today that it's much worse than anything I ever saw.

It's dumber than a doornail. It's a disincentive to grow. A disincentive to lend money. A disincentive to do anything.

The bank we just sold [Capital Financial Bank] had reached $10 billion and it was experiencing all of these incremental costs. If you're an $11 billion company and not a $50 billion company, you get all the expenses associated with a $50 billion company without the revenue of a $50 billion company. It's an artificial thing and no other industry faces it. It makes no damn sense.

The Motley Fool: What were you thinking as you watched the financial crisis unfold?

McColl: There's no question that the financial collapse was caused by greed. There's no other word to describe it. Both bankers and investment bankers knew that they were selling paper that was no good. They were lending money to people that didn't deserve it.

The people making those decisions were not worried about tomorrow, which means that the incentive systems that were built into the companies were wrong. They rewarded people for doing the wrong thing. I like to think that had I been in the industry at that time that I would have avoided it. But I don't know that.

The Motley Fool: What are your thoughts on the future of banking?

McColl: The real future of the industry is in the payment system. That's where this battle will be fought at the end of the day. And the people who have the capability both financial and technical are going to win that war.

That's why Bank of America is so well positioned, given its presence in the payments space. My grandchildren will never go into a bank. They'll do all their business on a phone or some other handheld device. The payment system is changing dramatically right in front of everybody and the people who can't adapt are going to be out of business in terms of consumers.

The banking system is the payment system of the country. People talk about how the bitcoin industry is going to take over, but then they express the value of bitcoins in dollars. In other words, the dollar is still where everything is at.

What we've really done is give individuals, in effect, the ability to wire money to each other, like we used to do for corporations. It's just a natural evolution.

So then the question is: Why would you have a branch? That's the issue that's being raised. So why would I buy a bank with branches? You wouldn't. You would figure out a way to use social media and other things to go directly to consumers.

We've got a changing landscape and it's changing rapidly. We've got a technological revolution going on one hand, and then we have this problem with too much regulation getting in the way of just running the bank.

The banking business is really very simple. It's buying money from people who have it and selling money to people who don't. The government has interdicted that business. And technology is interdicting it on the supply side. So those are the two challenges for bank leaders today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.