Key Takeaways
- Franklin D. Roosevelt rejected a federal takeover of banks during the Great Depression and instead created the Securities Exchange Act of 1934, which established self‑regulatory organizations (SROs) that blend public oversight with private expertise.
- The SRO model, exemplified today by FINRA, has protected investors while allowing competition and innovation to thrive in U.S. capital markets.
- Europe’s reliance on centralized government regulation has yielded slower, less dynamic markets, showing the limits of a top‑down approach.
- Applying Roosevelt’s lesson to artificial intelligence calls for a 21st‑century SRO that sets industry‑wide standards, enforces rules, and polices bad actors without giving the federal government direct control.
- Strong legal guardrails are needed to prevent the SRO from becoming anticompetitive or a shield for cartels, ensuring the model promotes both safety and innovation.
- Such a framework would give consumers and businesses confidence that AI products meet robust standards, much like investors trust FINRA‑covered brokers.
- Fear‑driven calls for a government takeover—e.g., Senator Bernie Sanders’ proposal for a 50 % public stake in the largest AI firms—risk stifling the technology and handing China an unassailable lead.
- By embracing FDR’s balanced approach—neither laissez‑faire nor statist—policymakers can foster AI’s potential as a source of hope and shared progress while curbing its dangers.
Introduction
The article opens with a striking reminder from Franklin D. Roosevelt: “the only thing we have to fear is fear itself.” In the midst of the Great Depression, Roosevelt faced intense pressure to nationalize the banking system, yet he chose a different path—one that combined public oversight with private industry know‑how. That historical decision offers a blueprint for governing today’s rapidly advancing artificial intelligence (AI) sector, where fear of misuse is prompting calls for heavy‑handed government intervention.
Historical Context
When Wisconsin Republican Senator Robert M. La Follette Jr. and Colorado Democratic Senator Edward Costigan urged the Roosevelt administration to “essentially nationalize the banking system,” they argued that reckless industry leaders justified greater federal control. Roosevelt himself was critical of finance, declaring in his inaugural address that “the money changers have fled from their high seats in the temple of our civilization.” Nevertheless, he resisted the statist temptation and worked with Congress to pass the Securities Exchange Act of 1934, which created a novel regulatory mechanism rather than a government takeover.
How Self‑Regulatory Organizations Work
The core of FDR’s insight was that “the government that runs the post office isn’t best suited to regulate much more complicated financial markets.” Instead, the Act authorized Self‑Regulatory Organizations (SROs) to take the day‑to‑lead in devising standards, conducting oversight, enforcing rules, and punishing bad actors, drawing on their members’ unique expertise. The Securities and Exchange Commission (SEC) approves SRO decisions but maintains a critical distance, preserving competition. Today, the Financial Industry Regulatory Authority (FINRA)—formed in 2007 by merging the National Association of Securities Dealers with the NYSE’s member‑regulation operations—embodies this model, protecting investors while fostering innovation that expands accessible and affordable investing.
Comparison with Europe
The article contrasts the U.S. experience with Europe’s approach, where “centralized government regulation is the name of the game.” U.S. capital markets have flourished under the SRO model, whereas European markets have “struggled under the weight of government mandates.” This comparison underscores that the self‑regulatory framework has proven superior both to the largely unregulated capitalism that preceded the Great Depression and to the “strangling bureaucratic leviathan” that threatened to follow it.
Applying the Lesson to AI
Like the 1930s financial industry, the AI sector is currently “largely unregulated,” heightening fears of widespread harm. Simultaneously, there are prominent calls for a de facto government takeover, most notably Senator Bernie Sanders’ June proposal to give the public a “50 % ownership stake in the largest AI companies.” The author warns that putting the federal government in control of this cutting‑edge field would “be the quickest way to squelch its potential and give Communist China an unassailable lead,” jeopardizing American global leadership. Expanding existing bureaucracies or granting the government primary regulatory authority would likely protect incumbent AI giants from new entrants rather than serve the public interest.
Risks of Government Control
The piece argues that a federal takeover would stifle innovation, slow the diffusion of AI benefits, and hand strategic advantages to rivals. It notes that leading AI companies themselves support a lighter‑touch approach, likely because it shields their dominance from competition. Therefore, simply expanding the reach of agencies like the FCC or FTC would not address the core need for a governance system that balances safety with dynamism.
A 21st‑Century Self‑Regulatory Model for AI
Congress should instead craft a modern version of the Securities Exchange Act’s SRO framework tailored to AI. The ideal bill would include “strong legal guardrails to prevent an organization from becoming anticompetitive or a shield for cartels,” ensuring the SRO serves the public good rather than private interests. Drawing on the financial industry’s experience, such an organization could develop technical standards, audit compliance, investigate misuse, and impose sanctions—all while leveraging the deep technical knowledge of AI firms.
Benefits of Industry‑Led Oversight
If AI companies were required to collaborate on industry‑wide rules, they could “check each other’s excesses” and help ensure the technology serves the common good. A robust SRO would also boost consumer and business confidence: just as “no investor would use a securities broker not covered by FINRA,” “no consumer or business would use an AI product developed outside the bounds of a self‑regulatory organization’s standards.” This trust could accelerate adoption, democratize access to AI tools, and spur innovations that benefit everyday users—mirroring how FINRA contributed to the democratization of finance.
Conclusion
Roosevelt’s warning against fear‑driven policy remains profoundly relevant. In the 20th century he rejected bank nationalization to forge a common‑sense securities framework that blended the best of public and private sectors. In the 21st century, presidents and lawmakers would be wise to adopt the same strategy—not fearing AI, but creating a governance system that allows this technology to realize its potential as a source of hope and shared progress. As the article closes, the opinions expressed are solely the author’s, but the historical lesson is clear: a well‑designed self‑regulatory path offers the safest, most innovative route forward for artificial intelligence.
https://fortune.com/2026/10/04/how-fdr-roosevelt-would-regulate-ai/