And they do it without immediate feedback. So they only discover they are doing it wrong when they are in pretty deep. That said, more banks than necessary seem to fail. Lending officers and senior management get carried away with the excitement and career benefits of rapid growth. They lose their skepticism.
Politicians get effective control of the credit-granting function and favor key constituencies.
Owners of other businesses get control of banks and use them as captive financing vehicles. Access to credit confers wealth. Easy access to credit is wonderful . So ambitious people will always try to capture a country's credit-granting function. You will hear people say that countries would be better off, and the world a safer place, if there were sounder banks, if they were more transparent, with better governance, and so forth.