If depositors lose money, it would be likely to result in runs on other banks. The mission of the FDIC is to prevent that sort of thing. Deposit insurance is no

If depositors lose money, it would be likely to result in runs on other banks. The mission of the FDIC is to prevent that sort of thing. Deposit insurance is not their mission, it's just a means to an end. When it fails to suffice, other actions will be taken to achieve the mission, like we saw this weekend. But even if other bank runs didn't happen, there would be another consequence that I'm sure you wouldn't like either. People would understand that there are now two tiers of deposit safety: small banks where depositors might lose money above $250k if the bank fails, and "too big to fail" banks where that wouldn't happen (because they can't fail!). Everyone would move their deposits to the "too big to fail" banks, which would make those banks even bigger and more powerful.