It's a root cause of bank irresponsibility. If not for free FDIC insurance, a bank making risky loans would cause the cost of insuring an account at that bank to rise. Securitization does change this, but all the CDSs on AIG's mispriced insurance on CDOs were ultimately taking place against a background of too-big-to-fail and flat-priced government insurance.
Why would a bank spend any money on insurance to cover accounts in the event that they run out of money? That's just the end of the bank, they don't care at that point. It's not like the executive officers would have a chance of going to jail over it.
