The difference was that the larger behemoths were required by law to manage risk better. They were subject to a stricter ongoing regulatory regime. The medium b

The difference was that the larger behemoths were required by law to manage risk better. They were subject to a stricter ongoing regulatory regime. The medium banks convinced the corrupt Trump administration and a bunch of corrupt law makers to pass a law that subjects them to a much lighter regulatory regime. Their reasoning was that if a bank with "only" 250 billion of deposits fails it will not have a systemic effect on the economy. That reasoning was really dumb and now that a couple of medium banks failed the stupidity of that reasoning is obvious for everyone to see. Of course wiping out 250 billion dollars of deposits will cause a bank panic and will have an overall negative effect on the economy, and the fed is working hard to make sure this does not happen. But generally speaking smaller banks are not by nature riskier. They only got riskier because they passed themselves this law that allowed them to get riskier. And now they will get a reputation for being riskier, and since in banking reputation is everything, they will become riskier.