The bank sector does not crash in a vacuum. If it crashed it would have a massive impact on your life, regardless of how much you hold in your personal account. The last paragraph from this very article gets at that: "Why do I believe (disclosing investment in any banks) is an irrational disclosure, despite general support for this ritual? Because I live in a society, which is sufficient information for you to know that I’m structurally levered long to the stability of the banking system, much like you are."

I replied to jnwatson's comment to explain why I don't think retail banks (from your single-branch local to Wells, Fargo) are that important to the financial system any more.

I am so confused haha. We just saw a large-but-not-that-large bank fail, and got a small glimpse of the chaos it might cause if the government had not stepped in to backstop deposits above and beyond the $250k FDIC limit -- missed payroll, companies going out of business, mass layoffs, etc. And you don't think the entire sector crashing would impact you? I guess I'd ask, do you recognize that's a tiny minority opinion, and if so what insight do you think you have that everyone else (including experts who are well aware of all the facts about how the industry has evolved that you laid out in your other comment) is missing?

> small glimpse of the chaos it might cause if the government had not stepped in to backstop deposits above and beyond the $250k FDIC limit

Yes, that's my point: the government now has a policy of backstopping all deposits, thus the primary function (for almost the entirety of the population) of retail banks is guaranteed to be safe no matter what banklike entity anyone chooses. And because of unbundling, that primary function is essentially the only function of retail banks any more, besides marketing other, unbundled, services.

Thus if all the retail banks went bust tomorrow (except the money center ones, that are subject to much tighter regulation, many of whom have retail arms too) there might be a transient fear just because people don't like change, but actually life would go on essentially unchanged. Retail banking has essentially done a Wile E Coyote of the top of cliff, but hardly anyone is looking down yet.

Most of the "experts" from Jim Cramer to David Sachs (and let's not forget all the people screaming about how SVB was "bailed out") don't appear to have even understood how banking works in the first place.

Enough of people do understand it (and "look down off the cliff"), of course, which is why I don't expect retail bank stocks to recover, except as I said above, those too-big-to-fail entities which were already fully backstopped by the feds.

Meanwhile I am happy to have my cash in First Republic -- even if they do collapse, which I doubt will happen any time soon, this episode has shown I won't lose access to my funds. I almost never go into the bank of course but if I want to it's nice and close, which is as good a reason to use them as any other.

So you’re making the argument that because you don’t personally care, it doesn’t matter?

Good question. My example of a car factory closing is also one where I don't personally care but do care about the jobs loss and (less so but for that matter) the size of its impact on the economy. There are many such.

But banks specifically are no longer that important. The US federal government now backstops all deposits, as they have (for almost a century) underwritten all residential mortgages. I don't think that's a bad thing at all; overwhelmingly most people's interaction with the bank is a current account (checking/savings); and overwhelmingly most peoples' liquidity is less than the FDIC limit, not that that limit may be meaningful any more. The development of the FDIC was a crucial and early product of the New Deal and stabilized the system significantly. Thus, for this crucial function, I couldn't care less if banks themselves succeed or fail. Like food safety, judging the risk profile of a deposit taking institution is beyond the capability of most people to evaluate.

But what about the residual functions of banks? They are mostly unbundled at this point. You don't need to get a credit card from your bank and most people carry such cards that don't come from their bank. In consumer loans (mortgages and small business loans) a local bank arguably knows the local market better than a megabank, and credit unions demonstrate this. But these days banks operate more like mortgage origination companies since the mortgages are bundled into MBSs. That's a function that need not be provided by banks at all! Instead have them be sold by brokerages the way insurance is sold. Safe deposit boxes, to the point they still exist, are outside banks these days. And so on.

Of course there are jobs, but retail banks only employ a couple of million in the US (about 20% of the whole financial sector, which is smaller than manufacturing, constuction, and other fields). An unbundling as I'm talking about would probably not affect employment much.

So yes, I don't care much about the banking sector at all.