One of the best adjustments during the recent economic collapse was the increase in Federal Deposit Insurance per account. The amount was raised from $100,000 to $250,000 per account. What does that do? It calms the big money accounts down and prevent the biggest run on banks, which in turn would destroy banks capitalization, which was one of the primary drivers of the collapse- the lack of proper loan-to-capital ratios.
Quick point- when banks make a loan it is an Asset, when they take a deposit it is a Liability. It is the reverse for all business and people like you and me. It is in their best interest to maximize the loans over the deposits, but at some point the lack of deposits versus the totality of loans (and quality of those loans) becomes a precursor to disaster.
Picture a boulder on top of a hill, overlooking a town. At some point, the ground softens due to rain, and the boulder comes rushing toward the town and people hate living in that town at that moment- but right up until then, people loved living in that town a lot.
Timing is everything might apply, but it also has to do with good solid decision making based in reality. Can people afford to truly carry the mortgage? IF they can’t what pressure will that put on the lending institution?
If the FDIC hadn’t increased this level, we would have experienced more pressure on the banks at the worst possible time.