Banking System, Canada & US Why are the way banks are established and spread out in Canada and US so different?

Canada:
There are only six major banks and most products offered are very competitive. Its almost unusual to hear or see any other minor or regional bank.

US:
Literally, there are thousands of banks. Although there are few big ones, like BoA, Wells Fargo, Chase, there are thousands of regional banks, even down to county levels. 

What are the advantages of having multiple individual banks? 

Why did US encourage this type of proliferation of banks while it did not happen in Canada?
Limiting the scope to the question of why the US encouraged the proliferation of many banks, one important contributor was the 1927 McFadden act, which placed significant restrictions on interstate banking (rolled back through state laws in the 1980s-90s, and eventually substantially repealed by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994).

The reasons for this were primarily concerns about concentration in the financial services sector, and concerns about the ability of state banking supervisors to monitor across state lines the activities of institutions for which they were responsible.

The trend in the US since at least the 1980s has indeed been towards consolidation: http://research.stlouisfed.org/fred2/series/FREQ



Finally a (dated, but good) review of the effects of branch banking reform is available from the FRBNY: http://www.newyorkfed.org/research/current_issues/ci1-2.pdf