Reconciling Bagehot with Fed's response to Sept 11

Walter Bagehot, an elder statesman of central banking theory, stated that central banks should lend money at penalty rates to prevent bank panics. Yet the Fed lent for next to nothing following 9/11. Why this departure from received central banking wisdom? A paper by Antoine Martin of the Kansas City Fed suggests that the solution to this lies in the type of money on offer and that the two theories can be reconciled.

Reconciling Bagehot with the Fed's response to Sept. 11

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