The Federal government didn't "allow" this consolidation as much as it just let history run its inevitable course. The consolidation of the railroad industry in the post-WW2 era was driven by the industry's desperation to stay solvent in a heavily regulated environment where competition from the trucking industry was growing exponentially.
This consolidation reached its zenith in the late 1960s and early 1970s with the successive bankruptcies of the six major Northeastern U.S. railroads, starting with the Central Railroad of New Jersey in 1967. The collapse of the Penn Central in 1970 (which had just been created out of the merged Pennsylvania and New York Central Railroads in 1968) sealed the fate of the railroad industry. By 1973-76 the Federal government had intervened and created two government-run railroads -- Amtrak (passenger) and CONRAIL (freight) out of the wreckage.
The industry was more or less back on its feet when CONRAIL became profitable by the early 1980s and privatized. The rapid consolidation in the industry since the 1980s has been done in a way that keeps competition in place as much as possible. The four major Class I railroads in the U.S. operate on two overlapping networks (CSX and Norfolk Southern in the east; Union Pacific and Burlington Northern Santa Fe in the west), and the industry is far more efficient today than it has been at any time in its history.
Thank you for filling in the blanks.
It’s rather refreshing to read a thread with so little contention!
Perhaps, but if that efficiency has been gained by reducing required inspections, slacking off on maintenance, or reducing crew size to unsafe levels then the increase in efficiency is profiting executives and shareholders at everyone else's expense.
It used to be that US companies got bigger by mainly expanding operations. But regulatory strangulation and taxes have made it easier to increase profits by cost-cutting.