The money is insured by the FDIC against bank failure. The actual banks holding the money didn't fail. The money is still there. The problem is its in a big unlabeled pile so they don't know whose money is whose and how much each person has.

Note that fail here has a very specific meaning - as in the banks doesn't have the funds to give you your deposit back. Not fail as is "something went horribly wrong".

Your fine parsing of the words does nothing at all about getting the customers access to their money.