The Fed should have provided liquidity to the banks, and that would have prevented most or all of the failures. But they raised the discount rate and made it more expensive for banks to borrow.
I've read that the Fed thought they were defending the gold standard, and that might explain their actions.
“The Fed should have provided liquidity to the banks, and that would have prevented most or all of the failures.”
It certainly would have helped. A lot of the banks that collapsed would have survived if the Fed had simply acted as lender of last resort.
With no FDIC a bank collapse wiped out its depositors. So the public panicked when they saw the first banks begin to fail, and then healthy banks were hit with runs which collapsed them, creating a vicious spiral. This went on for three years.
“I’ve read that the Fed thought they were defending the gold standard, and that might explain their actions.”
That could be. Another reason for the Fed’s lack of action was the fact that their leader, Benjamin Strong, died on the eve of the Depression. There was no dominant personality to take his place and the Fed was rudderless at the worst possible moment.