> The cynic in me says this letter is less about bailing out the small companies trying to make payroll and more about the VC's not wanting to lose massive investments.

It's both. VCs don't want to lose their cash accounts and see their investments become insolvent. At the same time, it doesn't help society if all these workers suddenly find themselves jobless. There's also a risk of contagion. If companies suddenly discover their deposits aren't de-facto safe, they'll flee other banks with similar risk profiles, causing more bank runs.

Banks going under and taking lots of funds with them is bad because it undermines confidence in the system. It's financial infrastructure that's supposed to always work. Sure, if it doesn't, you can work around it, but it becomes a drag on the economy, and things start looking like a developing country.