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.

John H. Wood is Reynolds Professor in the department of economics at Wake Forest University.
Global FinanceInternational Economics and Development
Other Independent Review articles by John H. Wood
Summer 2023 Money and Empire: Charles P. Kindleberger and the Dollar System
Summer 2021 The Cause of the Great Depression: The Decision to Resume the Gold Standard on Prewar Terms