Question

Why is the Fed often referred to as a “lender of last resort,” or the last lender to turn to in a crisis?
Responses

It helps finance and stabilize central banks internationally.
It helps finance and stabilize central banks internationally.

It lends consumers money when other banks will not.
It lends consumers money when other banks will not.

It keeps all failing banks afloat to avoid economic disruption.
It keeps all failing banks afloat to avoid economic disruption.

It offers banks financial protection to keep consumers from panicking.

Answer 1

It offers banks emergency liquidity to prevent runs and restore confidence so depositors don't panic. The Fed provides short‑term funding to solvent but illiquid banks (not consumer loans, and not a guarantee to save insolvent banks).