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.