The need for a lender of last resort was identified as far back as:
A) the start of the Great Depression in 1929.
B) 1913, when the Federal Reserve was created.
C) 1873, by British economist Walter Bagehot.
D) 1776, by the first U.S. Secretary of the Treasury, Alexander Hamilton.

Question

Quizplus · Accepted Answer

The need for a lender of last resort was identified by British economist Walter Bagehot in 1873 in his book "Lombard Street: A Description of the Money Market." Bagehot argued that in times of financial crisis, banks that were otherwise solvent and creditworthy might still suffer from a shortage of liquidity. A lender of last resort, typically a central bank, could provide loans to such banks to prevent a systemic collapse of the banking system. While the concept of a lender of last resort was not new, Bagehot's work provided a framework for how such an institution could function effectively.

The Need for a Lender of Last Resort Was Identified