Stocks have shrugged off the banking turmoil. Haven’t they?

are usually bad for business. A sickly banking system will lend less and at higher interest rates to companies in need of capital. A credit crunch will crimp economic growth and therefore profits. On occasion, a bad bank can blow up the financial system, causing a cascade of pain. Investors know this. They have dumped stocks when banks have failed before. In May 1984, the month that Continental Illinois, a large bank in the Midwest, failed and was rescued by the Federal Reserve, the Dow Jones, then the leading index of American stocks, dropped by 6%. In September 2008, when Lehman Brothers, an investment bank, went bust, stocks slid by 10%. During the Depression, as one bank after another failed, the stockmarket shed 89% between its peak in September 1929 and its trough in July 1932.