I'm not sure we can accurately assess any institutions/soundness/trustworthiness. I know lots of the smaller banks got hit with outrageous demands from FDIC premiums to cover bad decisions made by lots of these bigger banks. Some of the smaller community banks and credit unions only deal locally within a narrow range of physical locations. So they are more in tune with locals needs and have a better understanding of what is going on. They don't lend to people from out of state or out of their region who may be looking to finance something sketchy. Does this make them safer or less risky maybe yes in that they have a better handle on who they are dealing with and what they are involved in but on the same hand they are still vulnerable to the perception that there is no trust or credit worthiness if a larger event of no confidence happens in all banks.

The thing with a local bank or member owned credit union you can often talk to the president or people in charge and get an issue resolved or let them know about what is troubling you. I recently talked to the VP of local bank about a problem I was having with some of their tellers. She was right on top of it and got the situation resolved immediately. Your not going to get that sort of customer service out of one of the huge banks.

Will banks fail if their is a crisis of confidence ? Yes but others will fill that void and the world will go on there will still be banks just not the ones we have today. Confidence is all they have to sell but they undermine that confidence with depositors on almost a continuous basis by their greed and schemes to manipulate money for obscene profits. They also work diligently to privatize the profits and socialize the losses to the taxpayers. They have found new and creative ways to dump off liability for bad and sketchy investments off on to the govt which is really the US taxpayer.

Bring back the simple 17 pages of Glass Steagall. You want to play risky games and have chances at vast profit ? Fine you can do that but at your own risk with no govt, FDIC, taxpayer backstop. You lose big you eat your losses just like everybody else does.

This was referenced earlier by Mr. Denninger thankfully it is still available to view.

One Dollar of Capital 

Next put all the derivatives on an open exchange that is marked to market nightly.This puts an end to all the games and schemes and immediately de-fangs the derivatives monster that is out there which at some point will blow up. Give them 15-30 days to get all of this stuff cleaned up and marked accurately to market. If at the end of that period they still can't figure out what they have or who owes what it is all torn up and declared worthless paper. If I claim to have ownership of  a bridge or claim to have the ability to jump over buildings but cannot deliver on either then it was fraudulent to begin with. Will they scream and yell oh yeah you bet. At the cut off date though, they can either quietly void all this paper and walk away from it or immediately be brought up on fraud ,conspiracy, and corruption charges and expect excruciatingly long prison time

I agree this subject should cause fear in everyone but most seem too paralyzed to realize or understand what is really going on believing that somehow it will all sort itself out and continue on. Continuous exponential growth is not possible in a finite world.