The 1825 Crisis and Bank of England as Lender of Last Resort

The actions of the Bank of England at the height of the financial crisis of 1825 are presented in more detail than has been available before. The credit for some of the novel steps the Bank took at that time that has been given to outsiders is exaggerated, as the directors had been experimenting with them surreptitiously before. Evidence is also presented that Bank directors had stronger incentives to engage in Lender of Last Resort (LOLR) operations than is usually thought. On the other hand, they appeared to be constrained by informal unwritten rules of acceptable banking behavior, and failed to engage in some simple transactions that would have been very profitable for the Bank and would also have helped mitigate the crisis.