> the moral hazard The moral hazard in this case is that depositors will feel safer putting all their deposits into a single high-risk bank where they can earn

> the moral hazard The moral hazard in this case is that depositors will feel safer putting all their deposits into a single high-risk bank where they can earn higher interest on deposits, since the implicit insurance is effectively much higher than $250k per individual or company. I think the sensible to solution to this, in the modern age of banking, is for the Federal Reserve to not allow concentrated, high risk banks to exist in the first place. In the same way that the government doesn't allow carnival operators to reduce safety standards in order to make roller coaster rides cheaper or unreasonably fast.