The mythical free market capitalism

While reflecting on Bear Stearns and Northern Rock, we had a debate at work on "weak banks should be left to fall vs. systemic risk means they should get govt support". My argument was that the Brits in their understated way and the US in their loud way shouldn't be going around asking everybody to open their markets, practice free market ethos, yet in their own backyards, they drink wine.
So is free market capitalism only practiced in textbooks. The last 15 months probably present a good case for thinking this is so. Northern Rock required a bail-out of £50bn to avoid a full bank-run on it and Bear Stearns around £30bn. Prior to this, both operated highly-leveraged but nevertheless very successful businesses that earned shareholders and employees fat checks. Shouldn't both these stakeholders have been left to take the downside as well? Because if your answer is no, then the government must become an active stakeholder to limit or reduce the likelihood that it has to step in and save a bank. Moreover the LIBOR-base rate differentials caused by this issues shows that there are multiplier effects.
Thus regulation must become much more thorough (Northern Rock and peer banks used to get a visit from the FSA about once every 3 years under its "light touch" regulatory regime) and much more knowledgeable (a lot of the FSA supervisors were treated in a similar manner to auditors i.e. fed a little BS to keep them happy).

Another e.g. of the free market myth that has been busted is in the agriculture market. If you follow the futures market for commodities, you'll notice that wheat futures have been on the up since 2006, yet there is a shortage of the same. In theory, there should be glut because farmers would seamlessly have increased production to chase the anticipated higher prices. Again govt intervention is needed to subsidize higher grain/staple food farming to prevent food riots and agflation. This can't happen if you are busy buying into IMM/World bank prescriptions that are based on mythical free market capitalism that doesn't exist anywhere but in their well-paid heads...