[Wildbill]

I don't know if it would have. Part of the problem then was people didn't understand monetary theory so well. They didn't realize that if you don't work counter to what was considered common sense that you will run into major problems. One of the little talked about issues from that time was the nature of bank loans and margin. Some historians say that high margin on stocks started the problem, margin calls were made and people took out their bank savings to cover them. As the savings withdrawl began picking up, a few banks got into trouble. Then people feared for their money so they started runs on the banks. In the meantime banks started calling people's mortgages to try to cover their loans, but of course just as now, few had cash on hand to pay off their mortgages so the banks took them over. In a time of panic the banks couldn't sell the homes, no banks would give loans on them and no one had the money so the housing market fell apart and the banking system seized up. So I guess in that cascading pattern, the Fed would have been in good shape, almost from day one. They would have prevented the run on the banks as they did in 1987 and 1998 by flooding the banking system with liquidity and guarantees. By avoiding the first domino, everything worked out fine. Now they had the experience of history to tell them what happened before, would a Fed of 1929 had been able to see the disaster? Good question, maybe not. The Fed might have thought let the stock price bubble burst so people stop using margin so much, but only when it got out of hand would they realize the disaster awaiting them.