None of this is inevitable. Loosening lending will go a long way towards fixing it, and since private banks would rather waste cash on end-of-the-world bonus payments than lend it sensibly, government intervention is the only rational option.
Looseninig lending would go a long way toward helping that, but it is not a sufficient, or even necessary, condition any longer. Also, except for economists, political authorities of all stripes are calling for more conservative lending, as well as most people commenting here. That means high capital ratios like we have now, and high lending criteria even under government management. Only a re-establishment of markets for money and credit through increasing confidence in future income streams can solve the crisis at this late stage.
During boom times of irrational exuberance bad companies are funded because risk is underestimated.
During recessions of irrational pessimism and paranoia, good companies aren't funded because risk is overestimated.
Neither is optimal.
These boom/bust cycles are a kind of social illness - an economic plague which reappears cyclically.
Rather than trying to recreate traditional forms of banking, which at best are only barely stable and are likely to react to the present situation by being excessively conservative, what's needed is a distributed organic economy in which credit isn't monopolised and parasitic speculation is illegal.
