[mrchucklepants]

Guaranteeing the big banks can't fail is a source of moral hazard, removing the cost of being wrong from those taking the risk and transferring it to the general public. Make the banks responsible for the negative consequences of their actions with no potential for bailout, and watch their behavior change.

[mowenz]

This is exactly right.

Just to address the above poster: vanilla banking could still be guaranteed. By contrast, in essence the Fed is guaranteeing the banks' risky investments.