The Depression was caused by government. It was the result of bad government. It was the result of government actions not working the way they were intended to. The Federal Reserve System was established in 1914 for the purpose of preventing things like the Great Depression. And yet, its existence was responsible, in my opinion, for the depth of the Depression. So that you cannot look at the aftereffect without looking at what came before, given that you made the terrible mistakes that led to the Great Depression.

I have never criticized the remedial actions that were taken immediately thereafter to help the people who were so badly hurt. That was a desirable thing. And it was the reaction to it. The bad things about the New Deal were not those. The bad things about the New Deal was not the Works Progress Administration, which offered temporary jobs, the Civilian Conservation Corps. That was not the bad things. Those were the good.

The bad things about the New Deal were the more permanent changes introduced in the institutions of the country. One of them has recently come home to roost in the Federal Savings and Loan Insurance Corporation. And that’s a strict New Deal consequence. That was established then.

Why was it established? If a private organization makes a mistake, does things badly, it will lose money and it will have to go out of business. If a public organization does things badly and a governmental organization does things variedly and makes bad mistakes, it will be expanded. It will be expanded because they will say, “Well, it’s all because we just didn’t have enough resources.” Or else, it will be allowed to stay and another organization will be set up to do what it was supposed to do.

That is this case. The Federal Reserve System was established to prevent the kind of bank runs and bank failures that happened during the Great Depression.  But they made it worse, much worse, by not doing what they were set up to do. They were supposed to provide the liquidity, and instead they reduced liquidity. The quantity of money in the United States failed by a third between 1929 and 1933. The Federal Reserve System at all times during that period had the power to prevent that decline, and it was established for the purpose of preventing that from happening. It didn’t do it.

And so what happened? The Federal Reserve System wasn’t abolished, unfortunately, but the Federal Deposit Insurance [Corporation] was created to do what the Federal Reserve System was supposed to do, to prevent bank runs.