Question

What does “lender of last resort” mean with respect to the Federal Reserve?

Answer 1

The fact that the Fed is the "lender of last resort" means that it grants loans to banks when they experience financial difficulty which threaten their collapse.

What does a lender of last resort do?

When banks are going through financial difficulty that is bad enough to threaten their existence, they will turn to the Fed.

This is because the Fed is considered the lender of last resort and loans money to banks to prevent a system collapse. They only step in however, whn things are bad.

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