Because people have lost faith. They don't care about Insurance they care if there will be a bank freeze or holiday. What do you think will happen, if the collapse accelerates and we wake up Monday where all banks are collapsing. So far there have been no bank runs because FDIC has stepped in prior to the collapse, because we have been fortunate and skilled that the collapses are happening bit by bit. Lets say next weekend the panic flies and People start hitting all their banks, maybe 3000 institution in 48hrs (8541 FDIC insured banks) are threatened with Insolvency. The FDIC is overwhelmed and cant step in fast enough. The government will either allow depositors to take their money collapsing the institutions or freeze the accounts which one do you think Paulson will do.
All he cares about is Goldman. He will take all the deposits and give them to Goldman. This guy is not to be trusted, congress has made a bad situation worse.