The most obvious impact will be to the thousands of people they employ. They will be without a job.

In more vague terms, it's really difficult to consider how wide-ranging the impacts will be. Banking is actually really important. It allows us to overcome capitalization gaps. In a metaphor that will go over well here: Say you have a great idea, but you need 10, high-quality 2-U physical servers to do it (and the room to put them in). Well, that's going to run you probably around $50,000 - before you have any money. VC steps in and you all get rich.

Likewise, without banking, it becomes hard for you to buy a home because you can't pull the money together. Who cares? You rent? Well, it becomes harder for the person who owns that building you're in to buy it and that causes rent to spike in a way that would seem unimaginable. Likewise, the farmer who needs cash to live on until harvest can't get it and so they have to charge more for their goods, etc.

The price of everything goes up because the cost to cover those capitalization gaps has risen incredibly. Worse, we'd face shortages - large ones.

Beyond that, Banks increase the velocity of money. Basically, the velocity of money is the time it is between when you get $1 in your pocket and when that $1 is spent on something else. At first, this looks like the Republican you should buy to be patriotic argument. That's where Banks come in to actually help. Banks allow you to get that money back into the economy without wasting it on useless things. For example, I inherit $50,000. I could spend it on stupid purchases that I don't want. That might boost things in a very short-term way. OR, I could put that $50,000 in the bank and the bank can then loan the company that needs servers that $50,000 and they are creating real value and growth in the economy. So, banks make the economy more efficient by keeping money circulating even when you have no use for your money. By doing this on a large enough scale (with certain safeguards), banks can guarantee you access to your money while improving economic efficiency (once your server company hits it big, you'll have lots of money you don't know what to do with when I want to remove money).

The issue we're seeing right now is that we got a little too ambitious. We wanted to open home-ownership to people that probably couldn't afford it. Now we're in a bad place where people have deposited money, but where the bank has lent it probably won't be able to pay back - the bank is facing a capitalization gap.

We should all hope that this is just a little blip - and it's unlikely that it will become worse than that. People are panicking right now because there is the potential that we're hitting a, say 10%, gap that can't be covered. When the gap is that small, banks can usually eat it in the long run (rather than go under) because it just isn't enough to kill them. Likewise, the government might help out if it's larger because if the banking system goes under, consumer prices would rise at a rate unimaginable to anyone who didn't live during the gas crisis in the 70s - but this would apply to all goods.

This could be bad, but there is enough strength in these institutions that even as pieces crumble, there is too much good in them to completely die - I hope.