Deposit insurance is bad for the government

Deposit insurance is bad because it means that a private entity (such as a bank) is able to inflate the money supply. It's bad if banks can print money because then wealth is transferred to people who have not earned it in any meaningful sense. Inflation is bad because it destroys the currency which is a problem for people who need to use it. Since the economy is reliant on the currency being stable then deposit insurance is threatening to the economy. Deposit insurance is bad for the economy. The fiat economy relies on money holding its value so deposit insurance is bad.

The banks can default on the state

If the banks default on the state by refusing to accept fiat money then this would lead to a failure of the state. We can see from the manner in which the state has protected the banking institutions in history that it is the banks which offer more security than the state. We can say that the state fears the banks because there is no other reason for the state to perpetually give the banks socialist handouts. Because the state is weaker than the banks it relies on the banks accepting its currency. If the banks default on the state by refusing to accept fiat deposits and accepting only non-fiat currencies then this will lead to the end of the state as we know it. If the state relies on there being a fiat currency then if the banks reject this currency this will lead to anarchy and the end of the state.

Fractional reserve banking causes poverty

Fractional reserve banking is a leading cause of poverty because it affects everyone. Everyone values money and cannot live without it... people will sell food to get money even if they are on the verge of starvation so we know that money is important in the context of poverty. Fractional reserve banking causes poverty because it enables the banking institutions to increase the money supply. Because of this they can effectively print money which means that everyone else has relatively less money. The financial institutions would not be able to practice fractional reserve banking without deposit insurance because there would be a bank run. The only purpose of deposit insurance is to prevent a bank run so we can deduce that in a free market there would be no fractional reserve banking. The term 'fractional reserve banking' in itself is a misnomer because if the money has been loaned out then the institution is not acting as a bank... it is acting as an intermediary between lenders and borrowers.