WSJ had a piece this weekend with the excellent title, Bernanke Is Fighting the Last War, taken from an interview with Anna Schwartz, co-author of “A Monetary History of the United States.” That alone gives her credentials as one of the world’s greatest experts on the Great Depression. The entire article is worth a read. Here’s one choice quote (of many):

So even though the Fed has flooded the credit markets with cash, spreads haven’t budged because banks don’t know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is “the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue.”

Ms. Schwartz has a lot of credibility in her critique of the Fed, especially considering that Ben Bernanke has cited her as an expert many times in the past.