We can't eliminate crises, but we can limit their severity.
In the model, the mismatch between assets (loans) and liabilities (deposits) is simply a liquidity issue, which deposit insurance can help address.
Merton H. Miller liked to tell a joke about Yogi Berra, the famous baseball catcher. Berra once told his trainer that he was particularly hungry, and he instructed him to cut his pizza into 12 pieces instead of six.
About half the time, a bank monitors a small private company by requesting financial statements, and in other cases it asks for tax returns or proof of creditworthiness.