[swatcoder]

> Depositors have a reasonable expectation that when they choose a bank (especially a publicly traded bank that is regulated) that their deposits are safe.

Not if they know how banks work, and plenty of those depositors do. They know that there’s a risk to their uninsured deposits (that’s why the insurance exists!) and so they either account for that risk or play dirty and pretend, after the fact, that they didn’t know better and that the government should pretty please make them whole.

> If this is not true, then most people will only bank with the largest banks. That's not a good situation.

No. They’ll do what they’ve doing for a century: diversify banks and asset classes, sweep accounts, buy private insurance, etc.

Deposits are a loan to the bank. If the bank doesn’t have any risk of default on those loans, that’s no free and efficient market. That’s the government giving bankers free money to play with. We already do that for small accounts held by naive investors because the stability is worth it and they can’t be expected to afford the inherent risk themselves, but that can’t extend to all accounts.