Fine, but let's talk about the other side of the equation: who should pay to make the depositors whole? Did the depositors do everything in their power to insure against their risk? Is there something in place already to help depositors get some of their money back immediately, and likely more as legal proceedings complete?
It's certainly not clear to me why the depositors, as crappy a deal as they got, should be bailed out by unaffected banks that are financially healthy or, as is the case no matter what, the rest of the citizenry should pay.
The short-term case for other banks bailing out depositors is that any systemic risk affects all banks and the rest of the citizenry, albeit indirectly.
But I think it's probably economically sound in the long-term as well. That is, asking every depositor with $250K+ to assess the financial health of each bank they use and maybe buy insurance is collectively more expensive than just having the FDIC implicitly insure all deposits.
That's different than asking if it's "fair". But I would wager it's probably more efficient.
Insurance always has a cap in the payout at some dollar amount, usually directly related to the amount one is willing to pay for the insurance. It's usually up to the insured to balance those two factors to get adequate, but not excessive, insurance for the risks they are exposed to.
Most of the arguments I've seen are effectively arguing that 250K is too low an amount. While that may be true, that was the well-established 'rule of the game'. The FDIC limit was no doubt chosen, as most insured amounts are, to cover the majority of damaged parties, for an acceptable cost.
This isn't grandma or Joe/Jane Public losing their life savings; the FDIC insurance easily covers the vast majority of individuals depositing cash. These are businesses that have, or should have, the financial wherewithal and resources to mitigate their risk beyond the FDIC baseline.
The way insurance works is that you pay a premium so you don’t need to worry about a risk, whether or not disaster happens to you personally. The timing is a bit irregular, but morally it seems similar?
If paying for deposit insurance were available for large accounts, I expect many businesses would choose it. Might as well make it the default?
I think it is also necessary to consider that many of the regional banks have more diverse clients - individuals, small business and some mid/larger business dealings.
Perhaps I'm wrong but I suspect a much higher share of deposits are under $250K than the 3% at SVIB. The larger deposits are likely from companies doing a much better job of spreading counterparty risk around, ie traditionally managed companies.
It's certainly not clear to me why the depositors, as crappy a deal as they got, should be bailed out by unaffected banks that are financially healthy or, as is the case no matter what, the rest of the citizenry should pay.