a) Yeah, $250K. That won’t do a corporation with $100 million on deposit much good.
b) Yeah, eventually. But if large corporations can’t meet their obligations when they are due, then they are forced out of business. It would have been a catastrophic collapse of the economic system, with the entire Fortune 500 having to shut down.
The guys at the Fed understood what they were doing. They didn’t like to have to do it, but they did what was necessary to keep the financial system afloat.
Their mistake was not punishing egregious wrongdoers as individuals after it was over.
The Fed didn’t know their ass from a warm rock. That’s why they got blind-sided by the ARS scandal, the AIG blow-up, the Reserve Fund, you name it.
They were (and still are) flailing around in the dark.
The fact that GE would/could have had their deposits wiped out would have served GE as a warning notice to quit playing at being an industrial company in banker drag.