The first banks would have dealt mostly with physical money / gold, so it would be a lot harder to pull off this kind of fraud.
Not if the government intervention is a smart contract. Why do we fear government intervention?
- (individual) errors - (individual) misconceptions - corruption ( individual incentives )
What if we had direct democracy and your case would be reviewed by every citizen? Would you still fear to be spyed upon? Would you fear to be detained without reason?
That's what Cryptography promises. A uncorruptable system which serves society with incentives correctly alligned.