As long as banks that miscalculate go out of business, over time, the survivors will have much more sound financial practices. Also, without the Fed, there is no single point of failure. This makes it much easier to diversify away risks. Further, note that a lot of the bad banking practices of the late 1800's were not the result of a free market, but of federal and state banking laws. The Fed and other government intervention is almost certainly a proximate cause of the problem. Perhaps, though, the ultimate problem of bad government is an inevitable part of the human condition.