Comment by 0xB31B1B

The decisions about "is this bank adequately capitalized to serve its depositors" should be made by the regulators, not by the market. We know what it takes to run a bank safely, and its really easy to both quantify and test. This is how the "too big to fail" banks are run today. No one talks about the moral hazard of elevators (make sure you inspect it before you get on) or airplanes (make sure you do your own pre flight check) we trust that the regulators have set up processes that make this infrastructure safe for the public to use. Even with a deposit guarantee, a poorly run bank can still be closed by regulators, a bank run doesn't need to happen for a bank to be shut down, just like an elevator accident doesn't need to happen to decertify an elevator in a building.