The economy is pulling out of its slump. The stock market is at two-year highs. But have you looked at the banking industry lately?                                         

143 banks have failed year to date. That's already more than the 140 that failed last year, and more than quadruple the 30 failures of 2008.


But look at that number in historical perspective:                                      

Source: FDIC, author's calculations. *Year to date.

Interesting, no? As miserable as the last two years have been, we haven't come close to the number of bank failures that took place during the savings and loan crisis of the early '90s. Not by a mile.

But there's a key difference between the two periods. In the early '90s, most banks were tiny, local community servicers. And there were a lot of them. The landscape today is dominated by fewer, larger banks. There were 15,158 banks in 1990, each with an average deposit base of $182 million. Today, there are 7,830, with an average deposit base of $694 million. (For comparison, there were 25,568 banks at the start of the Great Depression in 1929).  

Rapid consolidation. That's what time has done to the banking industry, and it's made the average bank failure a much bigger threat than it was in the past.

This isn't a shocking insight -- it's simply the acknowledgement of "too big to fail." But the disparity of our current situation compared with the past is, I think, shocking. During the savings & loan crisis, the average failing bank had total assets of $343 million. That number jumped to over $12 billion during the past three years, skewed primarily by the failure of Washington Mutual, and the assisted bailouts of Citigroup (NYSE: C) and Bank of America (NYSE: BAC).

This raises the question: Are a small number of large failures more costly than a large number of small ones?

Hard to say definitively. Resolution Trust, the 1989 savings and loan bailout program, ended up costing 2.5% of GDP. TARP, the 2008 bailout program, is expected to cost less than 1% of GDP, with all losses coming from either General Motors or assistance for homeowners. You could use (and some have) this measure to argue that a consolidated banking system has actually proven better than a scattershot one.

But I doubt it, if only because consolidation has increased the odds of future banking crises. Due to consolidation, there are now probably a dozen or so banks that could singlehandedly bring down the financial system. A rogue trader at Goldman Sachs (NYSE: GS)? That could do it. A bad acquisition at Wells Fargo (NYSE: WFC)? That could throw us over the edge. Poor management at JPMorgan Chase (NYSE: JPM), or even General Electric (NYSE: GE)? That, too, could singlehandedly cause a financial crisis.

With a scattershot financial industry, large groups of disparate banks have to simultaneously make stupid mistakes (which does happen) for the financial system to be in jeopardy. In a concentrated one like we have now, a few people screwing up is all you need. AIG's (NYSE: AIG) derivatives unit consisted of a mere 400 employees. And look at the mayhem they created.

The solution to this is to end too big to fail. Alas, even after the financial regulatory overhaul bill, the industry is still more concentrated than ever. So we wait for the next crisis.

Fool contributor Morgan Housel owns Bank of America preferred. The Fool owns shares of Bank of America and JPMorgan Chase &. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.