Bagehot revisited

After a number of relatively calm years, the credit crunch that has afflicted the world's major financial markets since August last year, has once again brought to the fore some of the key policy issues pertaining to the central bank's role as lender of last resort. The conventional wisdom, with its origins in writing of Walter Bagehot (1873), is that a central bank should stand ready to provide loans of last resort to a bank experiencing liquidity difficulties, provided that a.) the central