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4min chapter
A Masterclass In Central Banking | Professor Jane Knodell
Forward Guidance
What Is the Difference Between the Second Bank and the Federal Reserve?
It was a lot cheaper to move goods around with bills of exchange and drafts on the second bank than with specie. So, how is that different from the discount of the commercial paper? Because the discounts are more like personal IOUs. The second bank didn't really step in to help banks that were in trouble. They actually profited from the rising value of the species that they held. It certainly stabilized the monetary system. But you know, if you think a key characteristic of a central bank is that it is a lender of last resort, it doesn't seem to me that it was.
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