> Many private banks with unlimited deposit insurance would simply play more fast and loose with your money because there's basically no risk. Why wouldn't you

> Many private banks with unlimited deposit insurance would simply play more fast and loose with your money because there's basically no risk. Why wouldn't you choose the bank that offers more % return on your money? You're totally insured. You overstate the case for moral hazard here. Most of the risk to the bank remains, even if the FDIC covers larger deposits than the normal limit of $250,000. 100% of a bank's capital remains at risk - that is the bank can lose everything it owns and its backers have invested in it, even if its depositors are protected. And, if what I have been able to read about it is correct, SVB wasn't really playing fast and loose with depositors' money. Any bank can be destroyed by a drastic enough bank run, because a banks assets - it's loans to customers and investments it makes with deposits, are never completely liquid. SVB's situation was worse than that, since its non-loan investments (in the form of purchased bonds) were under water, but by all account, it wasn't by a lot.