> And then a bunch of small business fail, then everyone else looks at 20 other small and middle-tier banks and realizes they don't want to end up the same way

> And then a bunch of small business fail, then everyone else looks at 20 other small and middle-tier banks and realizes they don't want to end up the same way and pull their money out, then they fail Why the hell should a bank fail if people take their money out of it? THAT's the problem. It's just not a thing in other parts of the world _even with fractional banking_. The fact a "bank run" can generate losses for depositors is simply a consequence of a lack of regulation. The further fact this can generate a "contagion" is a consequence of the banking system simply not hedging their investments correctly and not applying simple risk-management mechanisms, and they do it for the same reason: lack of regulation that keeps the accountable. Again, this kind of problem simply doesn't exist elsewhere. Just look outside the United States and the solution is simple: either you deregulate or you regulate, you can't have your cake and eat it too.