Banks should be allowed to decide who they lend to, they can then ensure that they do not get caught the way they did last time.

Just as a matter of information you understand. Now you believe banks should be allowed to decide who they lend to.

Who decided to whom they should be allowed to lend before? Because for sure they got caught? I don't remember seeing any government saying "You should lend to people who can't afford to pay you back".