As you note, part of the problem is that many years ago, it was decided that nobody should suffer in the banking/lending system from failures. Not the customers, not the owners, nobody.

A "free market" where success is happily pocketed, but failure is just dumped on the taxpayer, isn't really a free market, is it?

This was amply demonstrated when the banking system was deregulated, but failures were still insured by the FDIC and other safety nets. With no incentive not to take stupid risks, many did.

First time I really paid close attention to this was the Chrysler "bailout" back in the 1970s. Sure they paid the "loans" back, but it's not like the taxpayers had a choice to make the loan in the first place.

Maybe such bailouts sometimes prevent worse things down the road. Who knows? I suspect most government assistance to put a thumb on the balance of supply and demand is politically motivated, not economic in nature.