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References in periodicals archive ?
Myths about the Lender of Last Resort," International Finance, 2(3), 339-360.
Because El Salvador is a legally dollarized economy without a lender of last resort, the Ba2 deposit rating does not benefit from government support.
Moreover, charging below market rates has, once again, shown that the Fed tends to stray from the classic prescription for a lender of last resort.
To the degree that a central bank is viewed as being a lender of last resort, plans must consider the contingency that insolvency may render the bank ineffective at providing this function, with alternatives identified.
No decisions have been taken so far because we don't know the final results of the discussions in Cyprus, but given the present legal background, the ECB will be prepared to fulfil this task of a lender of last resort," Nowotny told Dow Jones in an interview.
And then there's the Federal Reserve offering itself as the lender of last resort, announcing last week that it will continue to buy at least half of the government's deficit for the foreseeable future.
Overall, despite the establishment of the European Stability Mechanism, it seems inevitable that the only real rescue mechanism for any big Euro-area member state in serious financial strain would be the European Central Bank acting as a hidden lender of last resort.
We will critically examine the nature of a central banking system in its operation as a lender of last resort, and contrast this operation with lending mechanisms that would be likely to exist under a free-market system allowing fractional-reserve banking but without a central bank.
Ahamed lists intractable conditions for both sets of bankers: a crisis of global proportions, undercapitalized institutions, fears that any actions could undercut confidence and "the lack of an institution within Europe with a clear mandate to act as lender of last resort to the financial system.
He added: "This newly discovered but elemental characteristic of an economic union - that a lender of last resort is essential - will have to be acknowledged for Spain, Italy and possibly even France as well as for Portugal and Ireland and for Greece, too, if they stay in the euro.
By announcing to the world that it would serve as the lender of last resort, the federal government prevented a banking collapse, and, quite possibly, a depression.
The real problem with the ECB is that it is not the lender of last resort for the member states.