Anne Mayhew writes: 
 
>b) Is it likely that the high rate of bank failures during the 1920s 
>(before the autumn of 1929) played a role in the changed ratios of 
>currency to deposits and of reserves to deposits? 
 
Absolutely.  If one wants to assess "blame" for the Depression, I would 
indeed lay much of it on the Fed, but not only for tight monetary 
policy, conventionally understood.  Put simply, the Fed was created, at 
least to a significant extent, to prevent *exactly* the kinds of 
problems that took place from the mid-20s through the late 30s.  It was 
supposed to make the supply of money more elastic.  It was supposed to 
prevent banking run/panics/failures.  It did none of those - perhaps 
because it was the wrong solution to the very real problems of the 
National Banking System. 
 
 
Steven Horwitz 
Eggleston Associate Professor of Economics 
St. Lawrence University 
Canton, NY 13617 
TEL (315) 379-5731 
FAX (315) 379-5819 
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