What the hell is going on with the stock-market right now?!?!?!?

I am not economic, or stock-market savvy, so please try and explain in layman's terms as much as possible. I had a friend try to explain to me that the great depression was the fault of the government forcing banks to loan unlimited amounts of money to anyone, no matter how incompetent or likely to completely blow it with what they wanted to use the money to invest in. As I understand it, originally banks had a certain amount of gold stored in them, and the amount of loans they could give out, could not exceed the value of the gold they had- this was the gold standard, right? But the government told them it wasn't fair for them to refuse anyone a loan, and thus got rid of the gold standard and told them it was illegal to refuse anyone a loan, right? Correct me if I'm wrong (or really if my friend was wrong, as I'm just repeating to you what he told me). And apparently now the same thing is happening and all these home loans and other kinds of loans that the government has forced private companies to give out to people, are now causing a back-lash, since many of the people that should not have been given loans in the first place, are unable to repay them now, and these companies that were forced to give the loans out are going bankrupt? Is that basically what it is. For the love of god, someone who understands how all this S*%# works please clarify it all for me!!