BROOKLINE, MASS. -- I bank at Bank of New England. I bank there because Brookline Trust, where I used to bank, was taken over by Patriot Bank, which was then taken over by Bank of New England. And I bank there because it's near my house. In this respect, my banking habits are not unlike those of most Americans.

Last week, as word spread of the bank's impending collapse, nervous depositors lined up to take their money out. The FDIC fully insures accounts up to $100,000, but most of the people who lined up did not look like large depositors. They simply looked like confused, risk-averse consumers who no longer knew whom or what they could trust.

At one point my own family inquired whether we shouldn't join the line and take out our money (which, believe me, totals far below the $100,000 cutoff). I patiently explained the FDIC, the $100,000 guarantee and that other f-word -- FDR, the man who sponsored deposit insurance.

After all, if even economic writers join irrational runs on banks, shame on us, and heaven help the economy. Then I had a moment's hesitation. Smarter people than I have lost their shirts. What if . . . ?

Monday morning, the paper announced that the Bank of New England was, in fact, broke. The FDIC was taking over the place until new management could be found. In the meantime, the FDIC was pumping in money to cover bad loans, and the bank was still operating normally.

I imagined for a moment what the scene might have been without federal deposit insurance. Instead of people lined up out the door, they would have been lined up halfway to the next town.

Instead of an orderly, if expensive, transition, the collapse of a major regional bank would have sent the local economy into an artificial collapse. This is just how financial panics triggered real depressions, prior to the New Deal.

Incredibly, some supposedly smart economists are now arguing that the banking system and the real economy would be better off without deposit insurance. In this view, rational consumers -- the kind found mostly in economics textbooks -- will differentiate between risky banks and more prudent ones. The riskier banks, appropriately, will pay higher interest rates. The more conservative banks will pay less.

Consumers with a taste for risk will keep their money at the fast-and-loose banks. Those more concerned about safety will settle for lower yields and safer banks. After all, these are financial transactions "between consenting adults" -- so who needs the government?

If you believe this story, you might as well invest in the Brookline Bridge.

First fact: Nobody has perfect foresight. Perfectly good loans go bad when events beyond local control savage local economies. Innocent bystanders get hurt.

Second fact: Nobody, not even economists, has the time to spend making these minute calculations. The people wiped out in the collapse of small, uninsured Rhode Island credit unions were not high rollers but unsophisticated, innocent souls who needed the extra half-point interest and believed somebody's assurance that their money was perfectly safe.

Third fact: The government insures deposits not to get in the way of transactions between consenting adults but to prevent runs on the entire system. That's why the FDIC will keep the Bank of New England operating pending some kind of orderly transition. That's why in October 1987, even though Wall Street brokerage houses had no federal insurance, Gerald Corrigan, president of the New York Federal Reserve, called in the heads of the money-center banks and told them they would damned well keep lending to brokerages lest the system collapse.

To be sure, the flip side of deposit insurance is careful bank examination. The system works only to the extent that bankers are not given free rein to speculate with federally insured money, as the Bank of New England did when the bank's now departed chairman, Walter Connolly, was building his rickety empire on high-risk real estate loans.

There will always be bankers who speculate with other people's money, and there will always be innocent souls. The same deregulation gang that created a regulatory climate indulgent of bankers like Connolly now wants to compound the damage by getting rid of deposit insurance entirely. But the solution is not to turn the whole economy into a casino. It's to throw out the deregulators and get serious about bank supervision.

So my account is still at Bank of New England. And my money is still on the FDIC.