c2 Liquidity, Bank Deposits and FDIC insurance

Banks provide a safe place to park money and withdraw as needed. Liquidity offered by bank deposits are very important to manage unforeseen personal financial or market economic challenges. Probably, one likes to avoid liquidating stocks or mutual fund during economic downtime. Good financial advice is typically have 3-6 months cash in hand (this risk management level may vary for individuals) to manage shor-term financial risk like job loss or medical issues etc

At the same time, the text (page 46 liquidity section foot note) also mentions that banks can't repay all depositors simaltaneously because deposits are loaned out. There is FDIC insurance in place to protect from bank run. Is that the only reason for FDIC insurance?

If you deposit $10,000 in bank, does it lead to only $10,000 loan to someone who needs cash?

Can you think of other reasons FDIC insurance put in place based on what happens to original deposit and how it goes to many hands? Hint: from your economics class