Lend freely at a penalty rate on collateral that is good ...

Lend freely at a penalty rate on collateral that is good in normal times: David Warsh: What Have We Learned Since Bagehot?: "Fighting Financial Crises: Learning from the Past... by Gary Gorton and Ellis Tallman... offer five 'guiding principles' for dealing with financial crises in the future. Find the short-term debt.... Suppress bank-specific information... emergency lending facilities.... Prevent systemically important institutions from failing.... And consider that certain laws and regulations need not be applied during a financial crisis...

...All of these were applied in 2008, though seldom masterfully. ��It took more than two weeks for the Treasury Department to come up with a plan to render opaque the condition of the banking system overall���by forcing healthy banks to accept emergency TARP loans along with the weak. Secrecy had been no part of Bagehot���s playbook, perhaps because discretion was so deeply embedded in British banking traditions as to be taken for granted. ��Regulators had to find a way to reinvent a practices that had been a standard part of the clearing house playbook. With illustration, analysis, and nuance on every page,��Fighting Financial Crises��is one hundred and fifty years better than��Lombard Street...

#shouldread #finance #centralbanking #monetarypolicy #financialcrises