Milton Friedman blamed the Fed for not acting aggressively enough as opposed to its existance.
Friedman did indeed argue that the Fed should have acted more aggressively--but that was in the context of an economy where the Fed did exist and was the lender of last resort. He explicitly states elsewhere (in *Free to Choose*) that it would have been better in the early 1930's if the Fed had not existed at all rather than exist and carry out faulty policies:
Had the Federal Reserve System never been established, and had a similar series of runs started, there is little doubt that the same measures would have been taken as in 1907 — a restriction of payments. That would have been more drastic than what actually occurred in the final months of 1930.
The existence of the Reserve System prevented this drastic therapeutic measure: directly, by reducing the concern of the stronger banks, who, mistakenly as it turned out, were confident that borrowing from the System offered them a reliable escape mechanism in case of difficulty; indirectly, by lulling the community as a whole, and the banking system in particular, into the belief that such drastic measures were no longer necessary now that the System was there to take care of such matters.
http://books.google.com/books?id=F5z1B5SwGUEC&pg=PT233
http://books.google.com/books?id=F5z1B5SwGUEC&pg=PT233