One lesson learned from the bank panics of the early 1930's is:
A)The lender of last resort function almost guarantees that bank panics are a thing of the past
B)The mere existence of a lender of last resort will not keep the financial system from collapsing
C)Only the U.S.Treasury can be a true lender of last resort
D)The financial system will collapse without a lender of last resort

Question

Quizplus · Accepted Answer

The bank panics of the early 1930s showed that the mere existence of a lender of last resort (in this case, the Federal Reserve) did not prevent a collapse of the financial system. The Fed failed to act as a lender of last resort when it could have, causing many banks to fail and amplifying the economic downturn of the Great Depression. This shows that having a lender of last resort is not enough, and that effective action is required when needed.

One Lesson Learned from the Bank Panics of the Early