Saying the money appears to be there is very different from the reality of it, and in the context of whether customers consent to how the system works its also feels disingenuous IMO.
Can people spend the money as though it were there? Sure. Is the money they deposited there or are they aware that 90-100% of the money was immediately allocated to something else? Almost certainly no.
Last year a few banks went tits up, all the deposits were paid.
Is it consent if you aren't made aware or given reasonable access to information that the average person could be expected to understand?
Can you clarify what you mean by "covering the failure of a moderately sized bank"? Bank is almost never "all the money is missing". Instead, it's usually something like "we have assets > deposits, but they're long term assets that can't be liquidated immediately so we can't pay all the depositors right this second", or "we have assets < deposits, but the gap isn't big enough that FDIC can't handle it".
At the end of 2022 the fund had $128.2 billion. I can't find a solid number on domestic deposits that are covered by FDIC based on the maximum deposit amount, but their Q2 2023 report showed $17.2 trillion in total domestic deposits across all FDIC institutions.
I'd expect that more than 0.7% of all deposits are under the $250k deposit limit. Let's just say 30% is actually covered, SVB had 89% of deposits above the limit when it failed, the insurance fund couldn't cover the failure of a bank with more than 3% of the market share of deposits.
The caveat there is that bank assets can be liquidated, but if the failure is fast enough that becomes really hairy. I haven't yet seen clear details on what strings they pulled and what sweetheart deals they gave when SVB was sold at the last minute, but that really means the fund isn't funded to cover enough and the hope really lies in market manipulation and a forced sale (likely funded in part by tax payers).
