Comment by opo

This is a complex topic and I think you have done a good job of summarizing the main issues. To add a little context:

>...that the Fed did not really have the tools to fix, because of Gold Standard and lack of legal authorization.

This was just bad policy by the Fed. The Fed had the legal authority to be the lender of last resort and could have prevented the bank failures. Many explanations have been given over the years as to why the Fed didn't provide liquidity. Because the Fed failed to supply emergency liquidity, the U.S. money supply plummeted by nearly 30% over the next couple of years, which essentially turned what likely would have been a recession into the Great Depression.

This is not to say the gold standard was not a problem. During the 1930's, leaving the gold standard was one of the few good moves done to help the economy by the federal government.