On the contrary, FDIC encourages more reckless banking. Customers chase riskier high interest deposits knowing they cannot lose the deposit and that the 'insurance' is already baked in at a public loss if their gamble loses. The customer has little incentive to monitor underlying banking of these insured funds. This isn't just my words, the fdic has written of the moral hazards themselves. And the same principle applies to the central bank encouraging risky bank behavior by bailing them out as a lendor of last resort.