RT Journal Article
SR 00
A1 Ugolini, Stefano
A1 Bignon, Vincent
A1 Flandreau, Marc
T1 Bagehot for Beginners: The Making of Lending of Last Resort Operations in the Mid-Nineteenth Century
JF The Economic History Review
YR 2012
FD 2012
VO 65
IS 2
SP 580
OP 608
AB In this article we develop new tools to survey the development of lending-of-last-resort operations in the mid-nineteenth century. One finding is that free lending and extensive liquidity support against good collateral developed gradually after 1847, and was already a fact of life before Bagehot published Lombard Street. Another is that the extension of the Bank of England's lender-of-last-resort function went along with a reduction of its exposure to default risks, in contrast with accounts that have associated lending of last resort with moral hazard. Finally, we provide a new interpretation of the ‘high rates’ advocated by Bagehot. We suggest they were meant to prevent banks from free-riding on the safety offered by the central bank, and were aimed at forcing them to keep lending during crises so as to maintain a critical degree of liquidity in the money market.
PB Blackwell Publishing
LK https://publications.ut-capitole.fr/id/eprint/10292/