A certain segment of the media is busily peddling fear and angst about the banking sector. One headline asks, “Fed says don’t worry about banks, but why should anyone believe them?”

Well, mostly because the Fed is doing precisely what it’s supposed to do when a bank finds itself teetering on the edge of collapse. Most recently, with First Republic Bank being seized by regulators and mostly sold off to JPMorgan. Depositors – the mom and pop Mr. and Mrs. Mainstreet that reporters are so fond of citing – were protected up to their federally insured limit and FRB’s investors were left with their dicks in their hands. This morning, FRB’s branches opened as scheduled and depositors had full access to their funds. That the system is working as advertised is precisely why the vast majority of depositors shouldn’t be worried about their chosen bank.

I’m not entirely sure what else we should reasonably expect the Federal Reserve and the whole laundry list of financial regulators to do under the circumstances. Protecting depositors while allowing the market to punish corporate officers and investors feels like the right approach. That’s the “risk” part of the risk and reward dynamic of the market at work. 

By all means, improve the financial stress tests imposed on banks and change the rules to discourage managerial incompetence in the executive suite. Beyond that. I’m not sure what financial reporters are up to beyond trying to gin up panic and worry where none appears to be justified.