[ChuckMcM]

Actually, what the FDIC does is give the small depositor some confidence that his money will be there, even if the ban fails. This reassurance is enough to keep him from running to the bank when ever he is scared and pulling out all of his money and putting it under a mattress or something. At this, it is quite effective (even during the mortgage meltdown there were no large groups of withdrawals at banks by retail depositors).