The bond holders and shareholders didn't have insurance nor did the counter parties (mostly other banks)[0] but didn't effectively assess the risks despite thousands of analysts between them. How could/should a retail investor with a few hundred or thousand dollars assessed the bank's creditworthiness? A few analysts, economists and traders saw it coming but most did not.
[0] I know they were largely bailed out but there was no promise in advance (and we probably agree that they shouldn't have been bailed out to the extent that they were.
Simple: You go to a bank that isn't taking these risks to begin with. (Such banks don't exist now because FDIC insurance means there's no money in creating such a bank.)
[0] I know they were largely bailed out but there was no promise in advance (and we probably agree that they shouldn't have been bailed out to the extent that they were.