The article actually sugarcoated the whole ordeal. Congress won’t do anything (like make MF Global clients whole) because they put loopholes in legislation or left rule making decisions up to the whim of unelected administrative staff at the behest of lobbyists before bills became law. This is contrary to big banks where Congress made them whole even on losing positions via TARP.
The safe deposit boxes scenario should read that banks take what is in the boxes and use it as collateral and go gambling with clients money.
They got the part right where the little people are third maybe fourth in line to recoup any lost deposits when a bank folds. FDIC get their money first, then major investors, next major bond holders, and finally the little people if the FDIC has any money left in the insurance fund. So, don’t go over the limit of insured deposits at your local bank. Move excess money to other banks to remain properly insured (hopefully).
When the ones who can make the laws are corrupt, it pretty much stays corrupted. They’ll never change that.