Nice piece by Charles Calomiris and Matthew Jaremski.
Many of us might no know that India was the second country after US to introduce deposit insurance. US introduced it in 1934 and India in 1961. In both countries, central banks primarily came up to look at the banking crises. Paradoxically, bank failures only grew post central banks coming up int eh two countries. It actually boiled down to introducing this deposit insurance scheme which stabilised the system and prevented bank runs.
One can always argue over costs and benefits of deposit insurance. But the kind of drama we have over central banks role in financial stability, much credit goes to these deposit insurance schemes as well. Though, this insurance bit has obviously interfered with market mechanisms. Earlier depositors had atleast some incentives to try and figure good banks from bad ones. There was some process for that weeding to happen. Now there is…
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Utopia, you are standing in it! 
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