The financial crisis led to a "re-discovery" of emergency liquidity, a critical part of a central bank's lender-of-last-resort (LOLR) function that was first outlined by Walter Bagehot in his 1873 classic work Lombard Street, as New York Fed vice-president Thomas Baxter told an audience in Madrid last week.

During the crisis, central banks used "Bagehot's old saw", lending freely into a panic "at a very high rate of interest" and against good collateral, Baxter said, invoking the Fed's $85