The Risk of Putting Money into Banks

Compared to the banks of today, banks during the 1920's were incredibly unstable. They allowed people (especially stock brokers) to easily borrow money from them. In turn, the average person borrowed money from the stock brokers in order to make risky investments in hopes of getting rich (also known as buying on margin). This resulted in lots of debt being acquired. Even before the Great Depression, banks declined at a rate of 2 per day. When the stock market crashed, all of the problems accelerated and loans accumulated, resulting in bank runs which in turn ended with even more banks closing and millions of people losing their money. Of course, hindsight is 20/20, but was it possible to see this coming? What could have been done to reduce the effects, if it was inevitable?