Worse, it is also a lie that the cost will not be paid by taxpayer. Of course it will be - the remaining banks are going to pass the cost on via fees, higher loan rates and lower deposit rates?

Yellen is not clueless. She knows exactly how this will play out but as it will be spread over time and to many counterparts she simply does not care.

This is terrible moral hazard. Uninsured depositors should have taken whatever haircut would result after the auction. That is, after all, the meaning of uninsured.