Deposit insurance is a subsidy for debt

Deposit insurance makes taxpayers liable for (bad) bank loans. If the bank doesn't make any loans and operates as a full-reserve bank then clearly deposit insurance has no function since all the deposits are fully backed. If the bank does make loans and they are returned to the bank prior to withdrawals then again deposit insurance has no role. It is only when the bank makes loans and these are not returned in time for all withdrawals that there is a problem and the deposit insurance comes into effect. It is when the bank makes bad loans that deposit insurance matters. Deposit insurance is to protect bank customers form the lending decisions of the bank. It is a subsidy for bank loans.