Where logic takes over, it would be reasonable to assume that the entire banking and financial sector, and related shares and exchange traded funds (ETFs), would be battered alike.

The majority of the banking beating took place in 2007, but Gary Gordon for ETF Expert thinks that KBW Regional Banks ETF (KRE) could actually be the third-best stock segment, after consumer staples and biotech.

The safety of toilet paper and soap stocks can actually be found amongst the under-capitalized, over-leveraged, sub-prime lending offending stocks.

Although financial stocks in general did take a hit, the regional bankers slipped under the radar barely scathed.

SPDR Financial (XLF) has the same top 10 holdings as KRE. But the difference is that KRE does have the smaller bank players while XLF has the biggest names in the business, such as Goldman, Merrill, AIG and Morgan Stanley, which is now beginning to answer the above question.

The smaller banks are the ones that didn’t get in over their heads,  and if they did, they didn’t get buried.

Tags: Financial, KRE, Regional Banks, Sector ETFs, XLF