Are you truly proposing that every time a bank fails we make everyone who kept money there take the hit?
A return to the 1920s, eh?
Why is the government involved beyond that limit in this case? Could it be they want to give the average person peace of mind while retaining the flexibility to handle a restructuring however they deem best?
I also think that similar to "FDIC insured" labels in bank branches, FDIC should require posting "13% of deposits are FDIC insured" to help assess risk for those clients that have uninsured funds.
This is no different. For example, how many business checking accounts are backed by money market funds to get a little interest on them? Clearly states in offerings that rates aren’t guaranteed and you could even lose capital. Same with the $250k FDIC limit - clear risk with zero forethought from these employers of hedging it with lines of credit, payroll/business continuity insurance, etc.
Those are things “slow” companies do, not move fast and break things companies do (sarcasm intended - I have worked in R&D in both types multiple times).
Why should you get my money?
(In the case of the company I worked for which went bankrupt — we were a fintech startup with a truly innovative and fantastic product. Our management made three bad decisions which led to our demise. Two were technical and would have been recoverable, the last was a strategic move which ultimately proved disastrous.)