Without the Fed, who is going to be the lender of last resort? We could revert to the situation to what it was before the Fed was created, but that would just mean that there would be a handful of big banks, all of them probably in New York, being the lenders of last resort, and with that, controlling the monetary policy. In fact, the Fed was created in part to break that clique of power.
At least now the government has some kind of check on the central bank system, by being able to appoint the governors, set their salaries, and impeach them.
Or we could bring the Fed under direct government control, but that would mean that politics would play a greater role in the monetary policy. Congressmen and the president realize that economy experiences cycles, and they could use the interest rate "lever" to make the cycles of boom correspond to election times.
Not that they don't try -- both Carter and Nixon both appointed "team players" as chairmen, loyal supporters that argued against the majority to push for lower interest rates when the president was in trouble. Current 14 year appointment terms reduce those effects.
The reason Friedman Milton's book is out of date on the Fed is because since the 60s, Milton's "monetarist" philosophy has grown more accepted in the economic community, and even tried by the Fed. Milton was essentially saying that instead of complicated deliberations on when to speed the economy up, and when to cool it down (something that the Fed governors undoubtedly did just because it made them feel important), the Fed should just be there to make sure that money supply grows at fixed rate, so to take more of an accounting role. In fact, when Reagan was elected, and Milton Friedman became the president's economic advisor, the Fed did just that -- instead of working to "take away the punch when the party gets going", it changed it policy to
United States uses IMF and the World Bank to lend money to developing countries, not the other way round.