[avidiax]

Depositors are lending their money to the bank at low interest. They may seek risk in terms of increased yield on their savings account, but FDIC insured banks will have trouble meeting their requirements while offering high yields on their accounts.

Banks provide security for deposits as well as liquidity (velocity of money), and slight inflationary pressure.

Wiping out depositors doesn't prevent much moral hazard since the depositors are unsophisticated, so they are unable to differentiate risk among banks.

[lotsofpulp]

Unsophisticated depositors are not holding more than $250k of cash in bank accounts. The problem is not that depositors were made whole, the problem is that the FDIC insurance prices are based on limited losses, when for all intents and purposes, the depositors' risk is completely based on their political influence.

This type of corruption is antithetical to a strict, rules based system, which is needed for trust in the financial system. Either give everyone the same protection explicitly, or follow the rules.

Also, the rules and lack of centralization might have made sense when cash was a thing, but in a society where electronic money is the primary mode of payment, I see no reason why a non government entity should be involved at all in the simple act of maintaining a record of how much money is an account and adding and subtracting to it.