Michael Perelman writes:
> The local monopolies of banking -- especially in rural areas -- also
> tended to make the risks of banking failure more local. Sort
> of like an electricity grid. When it is more local, failures are more
> common, but localized. When a more national system goes down ....
I don't know if this is true or not. Back in the 1930s before the 1933 bank holiday, there was a massive "contagion effect" even though US banking was very localized: if any bank failed, it undermined faith in the entire system, encouraging withdrawal from all banks.
Of course, what happens depends on macroeconomic conditions. In the 1930s, the macro-economy was in really bad shape, encouraging bank failures (which in turn made the macro-situation worse).
Jim
