Quote 32 from Gordon's "An Empire of Wealth" (On the Federal Reserve and the Depression)

Here's a series of quotes from Gordon's Empire of Wealth: The Epic History of American Economic Power about the behavior of the Federal Reserve before and after the crash:

Banks began borrowing money from the Federal Reserve through the discount window at 5 percent and lending it to brokers. The Federal Reserve could have stopped this any time it wanted to, and there is little doubt that Benjamin Strong would have done exactly that. But, leaderless, the bank used only what it called "moral suasion" to urge the commercial banks to end the practice. [pg. 313]

All markets, however, bear and bull alike, finally run out of steam, and by December stocks were moving upward, although on much reduced volume. By year's end, while many of the high-flying stocks had been savaged, some market sectors — such as airplane manufacturers, department stores, and steel companies — actually showed gains for the year. It was widely thought the crash had been only a severe correction for a much overbought market. In January 1930 the New York Times thought the biggest news story of 1929 had been Admiral Byrd's flight over the South Pole. [pg. 318]

George Harrison, who had succeeded Benjamin Strong as governor of the New York Federal Reserve, had followed his predecessor's advice on dealing with such a situation when Strong had noted that "we have the power to deal with such an emergency instantly by flooding the Street with money." [pg. 319]

But George Harrison did not have anything like the influence Strong had had with the other Federal Reserve banks, and he was criticized by the chairman of the Federal Reserve Board in Washington, among others, for overstepping his bounds. The Federal Reserve as a whole did not move decisively to add liquidity to the banking system nationally, a serious mistake. [pg. 319]