We are victims of the banking system in the sense that banks are trusted even if they have bad credit. Fractional reserve banking (frb) means banks are trusted when they shouldn’t be. Since this is possible it is reasonable for the government to intervene to prevent inflation. Other customers and savers should be protected from frb by making the practice illegal. The human psyche is vulnerable to trusting banks (the unconscious dominates the conscious) and so frb should be illegal.
Fractional reserve banking should be illegal to protect people from inflation. Free market banking is impossible bank deposits are always government deposits... and even if they are not frb is fraudulent and creates private sector inflation... see below.
The problem (with deposit insurance for full reserve banking) would be that once the bank has gone slightly bust there is no reason not to go completely bust. Then (without deposit insurance) the government has no role in helping (guaranteeing) the customer... other than to make frb illegal.
Even if there is no deposit insurance frb should still be illegal because it is (fraudulent and) inflationary. If it is not fraudulent it is not frb. Frb is not possible without fraud. Fraud (in banking) causes inflation. There would be no inflation if there is not fraud.
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