Rubber Bands on MTH PS2 motors?

Typically they were used just to hold the motor's power wires in place. If the engine has the motors mounted to the trucks (as most diesels do), the motor will turn as the trucks turn, and it's better if the wires flex in their body section to accomodate that movement than for it to occur at the ends soldered to the motors' terminals.  Less chance of failure that way.  You're right, that's not the source of your problem, but if you're going to run the engine frequently, be sure to secure the wire leads to the motor body somehow so the the solder connnection is not the location of movement when the loco enters a turn.

^^^ correct. They’re just for strain relief on the solder joints to the motor tabs.  Replace with any rubber band/zip tie, etc….

Thanks!

Although now I wonder- if the rubber bands were degraded and not doing their job supporting the wires and I am having some motor / short issue, maybe I should check those motor wires more carefully and see if they are the cause of the primary problem.

Check to be sure the connections at the motor are not shorting to the case, but my guess is a red pickup lead rubbing through the heat shrink and shorting to the frame.