Bagehots Lender of Last Resort
A Hollow Hallowed Tradition
By John H. Wood
This article appeared in the Winter 2003 issue of The Independent Review
Nineteenth-century financial writer Walter Bagehot is often credited for recommending that central banks shore up the banking system by acting as lender of last resort to troubled banks. Contrary to the conventional wisdom, however, the Bank of England helped foster British financial stability in the late nineteenth and early twentieth centuries by ignoring that piece of advice.