Modern banking practice

Barry Ritholtz is a well-known financial blogger.  He does a great job of explaining the asymmetrical risk involved in modern banking.  (see here)  He explains:  

"Consider your basic bank account — checking, savings, passbook, etc. We go through massive contortions to create an illusion that your money is yours, that its safe and sound in a bank with your name on  it, in your own virtual safe deposit box. But that is simply not the reality of modern banking. What you perceive as “your money” is little more than an electronic journal on the banks accounting ledgers.  Fractional reserve banking means that the $100 you deposit is lent out — only $10 of your $100 is kept in reserve. Under normal circumstances, with thousands of depositors and millions of dollars, the banks have no trouble giving customers who ask for their money back the full amount at anytime. But it is not as if your money is sitting in an account waiting for you — you merely have a claim on those monies, and that claim is insured by the FDIC, and backed by taxpayers (theoretically)....

When the next bank blows up — note I said when and not if — their depositors will become counter-parties. Those depositors are you, just like MF Global’s. Only, you as counter-part are not first in line with a claim on the monies — the folks on the other side of the trade get first dibs.
So this bank blows up, the trades settle, the counter party banks/brokers get paid, and whatever is left (if anything) goes to depositors. The FDIC will make good up to $250,000. FDIC’s budgets comes from a small fee on banks. If the losses are great enough, it will exceed their budget and so the taxpayer than makes up the difference.  You are, in fact, a counter-party to your bank."

Legislative changes in the 1990's led to this situation; the Frank-Dodd bill could help soften the risk to the taxpayer and depositor but the banks and large corporations are fighting against the enactment of this law.  Most of the American public isn't following/doesn't understand the issue and so the banks are winning in Congress.