Yes, the only moral thing was to let banks compete with same terms as the other companies do. You know, it is considered fraud, if you sell something you don't have, eg. banks are doing with their fractional reserve deposits.
Fraud requires deception. Nobody thinks the bank takes their money and locks it in the vault.
This seems to me like the government is defaulting on their deposit insurance obligations. Of course, you can never trust an agreement with the government since the only place you can go to enforce it is ... the government.