While this might have averted a run on other U.S. banks, it also reveals that the deposit insurance system is broken. At this point, the $250,000 cap is illusory. Worse, it is window dressing, part of a tale bankers and others tell about their institutions — that they are more like private businesses than public utilities — which obscures the reality of what banks do and the essential role the government plays in their operation.

The time has therefore come for Congress to scrap the $250,000 cap on deposit insurance coverage, strengthen regulatory oversight accordingly and charge banks much more for operating a government-backed deposit business. Specifically, Congress should say that when the deposit insurance fund is fully funded, banks’ deposit insurance fees go to the Treasury Department as fiscal revenue — rather than being waived as they are under current law.