It is inconsistent not to extend the advantage of deposit insurance to other firms

The existence of deposit insurance in banking means reserves are irrelevant, as far as solvency is concerned. It is still helpful to have reserves so that actual cash loans can be issued and demands for cash can be met as they fall due, for liquidity, but there is no need (for reserves) from a 'balance sheet' solvency perspective. The value of bank receipts (trading at par with cash) is unaltered by the quantity of reserves held by the bank, even customers who are aware of the discrepancy don't care (have no reason to care) because of deposit insurance, so in this respect the high value of bank credit is not explained by ignorance. If bank deposits are insured it means that the Government would be a hypocrite to refuse bank receipts to settle a debt. There is no reason to give banks deposit insurance and there is no reason for the State to protect depositors of fraudulent or profligate banks.

The Government punishes people who do not turn over a sufficient (in the eyes of themselves) quantity of cash. If the Government will too (as well) accept bank receipts then automatically they will have value since they can be used instead. Fiat currencies, in their nature, are protection money. People don't care about the intrinsic merits of owning either cash or credit because it is not for themselves that they value it, but for the Government. Only if the Government eventually will (might) come to express a preference will there be a reason to differentiate. It only matters if the banks are insolvent if the Government cares about this fact, since the banks are insured by the Government, in reality people value neither cash nor bank credit. It is not a contradiction for a normal person (does not contradict their self-ownership) that the banks are insured by the Government because it doesn't make sense that taxes are owed to the Government either, in the first place. Deposit insurance is stupid but not surprising, we do not always complain if the despot tyrant chooses to pardon others, in this case the banks. But it is inconsistent to give banks this advantage and not to extend it to others, or everyone.