The falsetto voice is developed, as the muscle system responsible for producing this texture of sound (crico-thyroid) begins to engage with the muscle system responsible for producing the chest voice (arytenoid). Development happens as we use exercises with an increase in volume. Development happens as we progress from the usage of [i] and [oo] vowels to [e] and [o], then finally [ah], [ae], and [eh].
This process is like going to the gym and focusing on a specific muscle system in a workout, and then adding a bit more reps and weight as one becomes stronger. This falsetto voice uses the arytenoid muscle system to a certain extent as it must for development, but it is worked more in isolation.
In number one, complete closure of the cords can never be achieved. At some point the "back" of the cords opens allowing excessive breath expenditure. Ever increasing use of volume is needed to attempt approximation. Finally, due to forcing, the cords dilate and bow out. The singer loses the voice.
In number two, there is too much weight added as overdevelopment takes place. Again, breath and volume blasting becomes the norm with the cords dilating, and the voice disappearing.