Ben Bernanke and Bagehot 's Rules

27 Pages Posted: 27 Aug 2013 Last revised: 1 Mar 2016

Thomas L. Hogan

Rice University - Baker Institute for Public Policy

Linh Le

University of New Orleans

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Date Written: December 1, 2013

Abstract

Federal Reserve Chairman Ben Bernanke has claimed that the Fed's bank bailouts during the 2008 financial crisis were consistent with Walter Bagehot's rules for a lender of last resort. This paper demonstrates Bernanke's claims to be mistaken. First, we outline Bagehot's doctrine for a classical lender of last resort. Next, we discuss Bernanke's theory of bank bailouts and his statements regarding the Fed's role in the 2008 bank bailouts. Finally, we examine the bailouts and demonstrate that, in contrast with Bernanke's claims, the Fed's actions were not consistent with Bagehot's rules for a lender of last resort.

Keywords: Ben Bernanke, Walter Bagehot, bank bailouts, lender of last resort

JEL Classification: G21, G32, D8, E42

Suggested Citation

Hogan, Thomas L. and Le, Linh and Salter, Alexander William, Ben Bernanke and Bagehot 's Rules (December 1, 2013). Journal of Money, Credit, and Banking, Vol. 47, No. 2-3, 2015. Available at SSRN: https://ssrn.com/abstract=2316832 or http://dx.doi.org/10.2139/ssrn.2316832

Thomas L. Hogan (Contact Author)

Rice University - Baker Institute for Public Policy ( email )

6100 Main Street, MS-40
Houston, TX 77005
United States

Linh Le

University of New Orleans ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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