The fear mongering does have a basis. If there are several more regional bank collapses in the year, the FDIC will be stretched to the point where they cannot prevent collapse. It would make current recession issues look like prosperity. If it happens under the current administration, I think the nation and government would be unable to rally to fix the damage and there would be serious economic hardship.
The problem is that this reporting provides self-fulfilling prophecies. Indymac would have survived without serious problems, except that a massive 1.3 billion in funds were withdrawn in a limited timeframe. Any regional bank facing such a run would have difficulty responding. Many would collapse under such pressure.
Congressman Schumer, whose actions largely prompted the run on Indymac, should be ashamed. There are proper ways to handle these issues. And yes, I do mean that silence may be proper. A small problem that could be handled cheaply and easily can become a big, hairy problem when people overreact. It reminds me of the beer game played in business schools...
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