The original intention of the Fed's role as lender of last resort was to make loans to banks that were

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The original intention of the Fed's role as lender of last resort was to provide loans to banks that were illiquid but not insolvent. The purpose was to prevent a bank from failing due to a temporary shortage of liquidity, thereby avoiding a potential contagion effect on the broader financial system. By providing temporary financing, the Fed could help banks meet their short-term obligations and avoid a fire-sale of assets that would further depress asset prices and exacerbate the problem.

The Original Intention of the Fed's Role as Lender of Last