Ⅰ. Introduction
According to Buiter & Sibert ,

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‘lender of last resort’ refers to the financial support responsibilities that central bank should take in financial crisis, which means ‘Lender of last resort’ should satisfy the market requirement for currency with high quality to prevent money stock contraction because of financial panic. Once commercial banks are temporary lack of liquidity, central bank can grant emergency loans to these bans through discounting or market purchasing on the condition that commercial banks can provide good collateral with punitive interest rates . Once ‘Lender of last resort’ pronouncing financial support for commercial banks when they are lacking in liquidity, it can help alleviating public panic on cash shortage, which can prevent possible public panic behaviour to trigger serious social problems . Actually, ‘Lender of last resort’ is the institution being responsible for social capital requirement especially under the conditional of social panic or financial crisis, and this role is always played by the central bank. This essay is going to discuss the rational for the effectiveness of ‘Lender of last resort’ as a mechanism for financial crisis management. First of all, this essay is going to discuss the necessity and operation model of ‘Lender of last resort’ to show the rational. Following that, arguments on ‘Lender of last resort’ as a mechanism for financial crisis management will be discussed to show different opinions on the mechanism of ‘Lender of last resort’. Consequently, effectiveness of ‘Lender of last resort’ as a mechanism for financial crisis management in US and ethical issue of ‘Lender of last resort’ to show the effectiveness of ‘Lender of last resort’ as a mechanism for.  financial crisis management
Ⅱ. Rationale for ‘Lender of last resort’ as a mechanism for financial crisis management
‘Lender of last resort’ is providing important support for modern banking system especially stopping the spreading of panic in banking crisis period. Advocators of free banking such as Repullo and Kuttner are denying the necessity that government playing the role of ‘Lender of last resort’. Buiter & Sibert state that the only reason for banking panic is the legal limitation on banking system, without which the market with free competition can form the banking system to prevent panic existing. Bernstein & Hughson explore the limitation from two aspects: on the one hand, national limitation of bank branches; on the other hand, limitation on commercial banks issuing currency. The former can help in realizing diversified investment of capitals to avoid banking crisis because of the relatively decreasing price of asset; while the later can help providing commercial banks authorities satisfying currency demands at any time. #p#分頁標(biāo)題#e#
Meanwhile, Brown et al are showing their opinion that under the free banking system, the contagious bank runs will never happen because of incomplete information, which is because all information has been contained in

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demand deposit contract. Moreover, Ratnovski is also insisting that clearance will be effective in solving information asymmetry in deposit-taking banks. Barros and Bernanke & Gertler ’s researches are both finding out that structure of clearing house (being built since 19th century) is similar as Cartel organization being consist of all banks to form a common system of issuing currency. In doing so, public people can hardly