Abstract Although much discussed in both the economic and banking literature, the lender of last resort (LLR) has always been a vague concept. Apparently first discussed by Sir Francis Baring in 1797 and refmed by Henry Thornton (1802) and Walter Bagehot (1873), among others, the lender of last resort’s function was to prevent fmancial panics and crises from being ignited by problems at individual institutions or markets. This has generally been interpreted as preventing the individual problem from causing a decline in the aggregate money supply.