An interesting bit from Michael Mandel, an economist for Businessweek. He also has his own blog:

“Beefing up deposit insurance will reassure average Americans that their money is safe, no matter what happens. It will prevent runs on commercial banks and keep the banking system as a bulwark of stability in troubled times.

Ironically, Wall Street firms used to be the main opponent of raising deposit insurance limits. They would argue—backed up by big lobbying dollars—that such a move would give commercial banks an unfair advantage against investment banks and stock brokers. But now Lehman and Bear Stearns are gone, Merrill has been bought up by Bank of America (BAC), and Goldman Sachs (GS) and Morgan Stanley (MS) have transformed themselves into commercial banks. There is no organized opposition to a perfectly reasonable change.

Expanding deposit insurance would solve the immediate problem. It would attract more funds to the banks, which would then have more money to lend. And it would calm down the note of hysteria that hit last week.

This is Exhibit A of the type of power lobbyists can reign over a system - now all we need is for oil lobbyists to disappear.