Venustiano Carranza Garza was one of the main leaders of the Mexican Revolution, whose victorious northern revolutionary Constitutionalist Army defeated the counter-revolutionary regime of Victoriano Huerta and defeated fellow revolutionaries after Huerta's ouster. He secured power in Mexico, serving as head of state from 1915–1917. With the promulgation of a new revolutionary Mexican Constitution of 1917, he was elected president, serving from 1917 to 1920. Known as the "Primer Jefe" or "First Chief" of the Constitutionalists, Carranza was a shrewd politician rather than a military man, he supported Francisco I. Madero's challenge to the Díaz regime in the 1910 elections and Madero's Plan de San Luis Potosí to nullify the elections and overthrow Díaz by force, he was appointed the governor of his home state of Coahuila by Madero. When Madero was murdered in February 1913, Carranza drew up the Plan de Guadalupe, a purely political plan to oust Huerta. Carranza became the leader of northern forces opposed to Huerta.
He went on to become president of Mexico. Carranza was from a northern landowning family, he was far more conservative than either Southern peasant leader Emiliano Zapata or Northern revolutionary general Pancho Villa. Once in power in Mexico, Carranza sought to eliminate his political rivals. Carranza won recognition from the United States but took nationalist positions. During his administration, the current constitution of Mexico was adopted. Carranza did not implement its most radical elements, such as empowerment of labor, use of the state to expropriate foreign enterprises, land reform in Mexico, or suppression of the Roman Catholic Church in Mexico. In the 1920 election, in which he could not succeed himself, he attempted to impose a unknown, civilian politician, Ignacio Bonillas, as president of Mexico. Northern generals, who held real power, rose up against Carranza under the Plan of Agua Prieta, Carranza was assassinated fleeing Mexico City. Carranza was born in the town of Cuatro Ciénegas, in the state of Coahuila, in 1859, to an upper middle-class cattle-ranching family.
His father, Jesús Carranza Neira, had been a rancher and mule driver until the time of the Reform War, in which he fought against the Indians and on the Liberal side. During the Franco-Mexican War, Jesús Carranza became a colonel and was Benito Juárez's main contact in Coahuila. A strong personal connection existed between the two, with Carranza lending Juárez money while Juárez was in exile. Following the ouster of the French, Juárez rewarded Carranza with land, which became the basis of his fortune in Coahuila; because of his family's wealth, the 11th of 15 children, was able to attend excellent schools in Saltillo and Mexico City. Venustiano studied at a famous Liberal school in Saltillo. In 1874, he went to the Escuela Nacional Preparatoria in Mexico City, where he had aspirations to be a doctor. Carranza was still there in 1876 when Porfirio Díaz issued the Plan of Tuxtepec, which marked the beginning of Porfirio Díaz's rebellion against President Sebastián Lerdo de Tejada under the slogan "No Re-election".
Díaz's troops defeated Lerdo's, Díaz and his armies marched into Mexico City in triumph. Upon completion of his studies, Carranza returned to Coahuila to raise cattle, since he had an eye disease that prevented him from becoming a doctor, he married Virginia Salinas in 1882, the couple had two daughters. The Carranzas had high ambitions for Venustiano, who would use the family money to advance his political career. In 1887, at age 28, he became municipal president of Cuatro Ciénegas. Carranza remained a Liberal. At the same time, he grew disillusioned with the authoritarian character of the rule of Porfirio Díaz during this period. In 1893, 300 Coahuila ranchers organized an armed resistance to oppose the "re-election" of Porfirio Díaz's supporter José María Garza Galán as Governor of Coahuila. Venustiano Carranza and his brother Emilio participated in this uprising. Porfirio Díaz dispatched his "man in the north", Bernardo Reyes, to defuse the situation. Venustiano Carranza and his brother, who had now gained power and influence in the area, were granted a personal audience with Reyes in order to explain the justification for the uprising and the ranchers' opposition to Garza Galán.
Reyes wrote to Díaz recommending that he withdraw support for Garza Galán. Diaz appointed a different governor; the events of 1893 allowed Carranza to make some friends including Bernardo Reyes. After winning a second term as municipal president of Cuatro Ciénegas, Reyes had Carranza "elected" to the legislature. In 1904, Bernardo Reyes's protégé Miguel Cárdenas, Governor of Coahuila, recommended to Porfirio Díaz that Carranza would make a good senator; as such, Carranza entered the Senate of Mexico that year. Although Carranza was sceptical of the Científicos whom Porfirio Díaz was relying on to run Mexico, Carranza was a dutiful Porfirian senator. By 1908, it was assumed that Carranza would be the next governor of Coahuila. In 1909, Carranza received Porfirio Díaz's permission to declare himself as the candidate to replace Miguel Cárdenas as Governor of Coahuila. Miguel Cárdenas supported Carranza's candidacy, as did the wealthiest landowner in the region, Evaristo Mader
Grupo Financiero Banamex
Grupo Financiero Banamex S. A. de C. V. is the owner of the Banco Nacional de México or Citibanamex. It is the second largest bank in Mexico; the Banamex Financial Group was purchased by Citigroup in August 2001 for $12.5 billion USD. It continues to operate as a Citigroup subsidiary. Banamex was formed on 2 June 1884 from the merger of two banks, Banco Nacional Mexicano and Banco Mercantil Mexicano, which had operated since the beginning of 1882; the newly founded bank had branches in Mérida, Puebla and San Luis Potosí, opened a branch in Guadalajara. The bank was reorganized in 1926, becoming a financing bank and establishing the first agency of a Latin American bank in New York City. Banamex introduced several financial product innovations to the Mexican market including savings accounts, personal credit lines, credit cards, ATM banking. In 1981, Banamex acquired the California Commerce Bank. In the midst of a severe economic crisis, President José López Portillo announced a major devaluation of the peso and nationalized all private banks in Mexico.
For the next nine years Banamex operated. In 1991, Banamex was reprivatized and it established Grupo Financiero Banamex–Accival with the investment bank Acciones y Valores de México. For the next four years Banamex and the rest of the Mexican private banks presided over an unprecedented expansion of private credit in Mexico; this expansion occurred in an environment characterized by: i) the lack of a credit culture at the newly privatized banks, bought at rich multiples by individuals and organizations without lending experience, ii) lax oversight by regulatory authorities, which led in some instances to the occurrence of irregular transactions. The result of this aggressive expansion of credit was to strain the bank's balance sheet; the December 1994 macro-devaluation of the Mexican pesos and the ensuing significant increase in domestic interest rates coupled with a dramatic economic recession, caused Banamex's and much of the rest of the privatized banks to become insolvent. In order to avoid the catastrophic effects of generalized bank bankruptcies, the Ernesto Zedillo administration decided to rescue the troubled banks through a government fund.
IPAB enticed the banks' shareholders to inject fresh equity into the banks by pledging to buy from the banks non-performing loans in a two to one ratio with respect to the newly injected fresh capital in exchange for a long-dated government note with capitalized interest. Banamex sold $_ worth of non-performing loans to IPAB, its shareholders injected $_ of fresh equity; the combination of these measures coupled with a recovery of the Mexican economy helped clean up the bank's balance sheet. From 1997 to 2001 Roberto Hernández Ramírez was the CEO. In 1997, Afore Banamex was created to access the newly created private pension fund market. On August 6, 2001, Citigroup Inc. acquired Grupo Financiero Banamex-Accival for US$12.5 billion, which became Grupo Financiero Banamex. This was the largest-ever U. S.-Mexico corporate merger. Grupo Financiero Banamex's operations were integrated with Citibank's small existing Mexico business under the Banamex brand name. In October 2014, allegations were made that employees had taken millions of dollars in kickbacks from vendors.
Authorities in Mexico and the United States are investigating the allegations. Citigroup encouraged Manuel Medina-Mora to resign; the following are subsidiaries of Grupo Financiero Banamex: Banamex Accival Afore Banamex Seguros Banamex Arrendadora Banamex Operadora e Impulsora de Negocios Acción Banamex Pensiones Banamex Fomento Cultural Fomento Social 1884 in Mexico Amero Citibanamex Accival Arrendadora Banamex Afore Banamex Seguros Banamex Fomento Cultural Fomento Social
A mortgage loan or mortgage is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property through a process known as mortgage origination; this means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms. The word mortgage is derived from a Law French term used in Britain in the Middle Ages meaning "death pledge" and refers to the pledge ending when either the obligation is fulfilled or the property is taken through foreclosure. A mortgage can be described as "a borrower giving consideration in the form of a collateral for a benefit". Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property.
The lender will be a financial institution, such as a bank, credit union or building society, depending on the country concerned, the loan arrangements can be made either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, other characteristics can vary considerably; the lender's rights over the secured property take priority over the borrower's other creditors, which means that if the borrower becomes bankrupt or insolvent, the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first. In many jurisdictions, it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed. Mortgages can either be funded through the banking sector or through the capital markets through a process called "securitization", which converts pools of mortgages into fungible bonds that can be sold to investors in small denominations.
According to Anglo-American property law, a mortgage occurs when an owner pledges his or her interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on the right to the property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property; as with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time 30 years. All types of real property can be, are, secured with a mortgage and bear an interest rate, supposed to reflect the lender's risk. Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential and commercial property. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar: Property: the physical residence being financed; the exact form of ownership will vary from country to country, may restrict the types of lending that are possible.
Mortgage: the security interest of the lender in the property, which may entail restrictions on the use or disposal of the property. Restrictions may include requirements to purchase home insurance and mortgage insurance, or pay off outstanding debt before selling the property. Borrower: the person borrowing who either has or is creating an ownership interest in the property. Lender: any lender, but a bank or other financial institution. Principal: the original size of the loan, which may or may not include certain other costs. Interest: a financial charge for use of the lender's money. Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan. Completion: legal completion of the mortgage deed, hence the start of the mortgage. Redemption: final repayment of the amount outstanding, which may be a "natural redemption" at the end of the scheduled term or a lump sum redemption when the borrower decides to sell the property.
A closed mortgage account is said to be "redeemed". Many other specific characteristics are common to many markets, but the above are the essential features. Governments regulate many aspects of mortgage lending, either directly or indirectly, through state intervention. Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system. Mortgage loans are gen
Álvaro Obregón Salido was a general in the Mexican Revolution, who became President of Mexico from 1920 to 1924. He supported Sonora's decision to follow Governor of Coahuila Venustiano Carranza as leader of a revolution against the Huerta regime. Carranza appointed Obregón commander of the revolutionary forces in northwestern Mexico and in 1915 appointed him as his minister of war. In 1920, Obregón launched a revolt against Carranza. Obregón's presidency was the first stable presidency since the Revolution began in 1910, he oversaw massive educational reform, moderate land reform, labor laws sponsored by the powerful Regional Confederation of Mexican Workers. In August 1923, he signed the Bucareli Treaty that clarified the rights of the Mexican government and U. S. oil interests and brought U. S. diplomatic recognition to his government. In 1923–24, Obregón's finance minister, Adolfo de la Huerta, launched a rebellion in part protesting the Bucareli Treaty. In his victory, he was aided by the United States with arms and 17 U.
S. planes that bombed de la Huerta's supporters. In 1924, Obregón's fellow Northern revolutionary general and hand-picked successor, Plutarco Elías Calles, was elected president, although Obregón ostensibly retired to Sonora, he remained influential under Calles. Having pushed through constitutional reform to once again make reelection possible, Obregón won the 1928 election, but was assassinated by José de León Toral, a Mexican offended by the government's anti-religious laws, before he could begin his second term. Toral's subsequent trial led to his execution by firing squad, it involved a Capuchin nun named María Concepción Acevedo de la Llata, "Madre Conchita", thought to be the mastermind behind Obregón's murder. Obregón was born in Siquisiva, Municipality of Navojoa, the son of Francisco Obregón and Cenobia Salido. Francisco Obregón had once owned a substantial estate, but his business partner supported Emperor Maximilian during the French intervention in Mexico, the family's estate was therefore confiscated by the Liberal government in 1867.
Francisco Obregón died in 1880, the year of Álvaro Obregón's birth, leaving Álvaro to be raised in poverty by his mother and his older sisters Cenobia, María, Rosa. During his childhood, he worked on the family farm and became acquainted with the Mayo people who worked there, he attended a school run by his brother José in Huatabampo and thus received an elementary education. He spent his teenage years working a variety of jobs, before finding permanent employment in 1898 as a lathe operator at the sugar mill owned by his maternal uncles in Navolato, Sinaloa. In 1903, he married Refugio Urrea and in 1904, he left the sugar mill to sell shoes door-to-door, to become a tenant farmer. By 1906, he was in a position to buy his own small farm; the next year was tragic for Obregón as his wife and two of his children died, leaving him a widower with two small children, who were henceforth raised by his three older sisters. In 1909, Obregón invented a chickpea harvester and soon founded a company to manufacture these harvesters, complete with a modern assembly line.
He marketed these harvesters to chickpea farmers throughout the Mayo Valley. Obregón entered politics in 1911 with his election as municipal president of the town of Huatabampo. Obregón expressed little sympathy for the Anti-reelectionist movement launched by Francisco I. Madero in 1908–1909 in opposition to President Porfirio Díaz. Thus, when Madero began the Mexican Revolution in November 1910 by issuing his Plan of San Luis Potosí, Obregón did not join the struggle against Porfirio Díaz. Madero succeeded in defeating Porfirio Díaz and thus became President of Mexico in November 1911. Obregón became a supporter of Madero. In March 1912, Pascual Orozco, a general who had fought with Madero during the Mexican Revolution, but had grown disaffected with Madero, launched a revolt against Madero's regime in Chihuahua with the financial backing of Luis Terrazas, a former Governor of Chihuahua and the largest landowner in Mexico. In April 1912, Obregón volunteered to join the local Maderista forces, the Fourth Irregular Battalion of Sonora, organized under the command of General Sanginés to oppose Orozco's revolt.
This Battalion supported federal troops under the command of Victoriano Huerta sent by Madero to crush Orozco's rebellion. Within weeks of joining the Battalion, Obregón displayed signs of military genius. Obregón disobeyed his superior's orders but won several battles by luring his enemy into traps, surprise assaults, encircling maneuvers. Obregón was promoted through the ranks and attained the rank of Colonel before resigning in December 1912, following victory over Orozco. Obregón had intended to return to civilian life in December 1912, but in February 1913, the Madero regime was overthrown in a coup d'état orchestrated by Victoriano Huerta, Félix Díaz, Bernardo Reyes, Henry Lane Wilson, the United States Ambassador to Mexico. Huerta assumed the presidency. Obregón traveled to Hermosillo to offer his services to the government of Sonora in opposition to the Huerta regime; the Sonoran government refused to recognize the Huerta regime, in early March 1913, Obregón was appointed chief of Sonora's War Department.
In this capacity, he set out on campaign, in a matter of days had managed to drive federal troops
Mexico the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States. Covering 2,000,000 square kilometres, the nation is the fifth largest country in the Americas by total area and the 13th largest independent state in the world. With an estimated population of over 120 million people, the country is the eleventh most populous state and the most populous Spanish-speaking state in the world, while being the second most populous nation in Latin America after Brazil. Mexico is a federation comprising 31 states and Mexico City, a special federal entity, the capital city and its most populous city. Other metropolises in the state include Guadalajara, Puebla, Tijuana and León. Pre-Columbian Mexico dates to about 8000 BC and is identified as one of five cradles of civilization and was home to many advanced Mesoamerican civilizations such as the Olmec, Teotihuacan, Zapotec and Aztec before first contact with Europeans. In 1521, the Spanish Empire conquered and colonized the territory from its politically powerful base in Mexico-Tenochtitlan, administered as the viceroyalty of New Spain.
Three centuries the territory became a nation state following its recognition in 1821 after the Mexican War of Independence. The post-independence period was tumultuous, characterized by economic inequality and many contrasting political changes; the Mexican–American War led to a territorial cession of the extant northern territories to the United States. The Pastry War, the Franco-Mexican War, a civil war, two empires, the Porfiriato occurred in the 19th century; the Porfiriato was ended by the start of the Mexican Revolution in 1910, which culminated with the promulgation of the 1917 Constitution and the emergence of the country's current political system as a federal, democratic republic. Mexico has the 11th largest by purchasing power parity; the Mexican economy is linked to those of its 1994 North American Free Trade Agreement partners the United States. In 1994, Mexico became the first Latin American member of the Organisation for Economic Co-operation and Development, it is classified as an upper-middle income country by the World Bank and a newly industrialized country by several analysts.
The country is considered both a regional power and a middle power, is identified as an emerging global power. Due to its rich culture and history, Mexico ranks first in the Americas and seventh in the world for number of UNESCO World Heritage Sites. Mexico is an ecologically megadiverse country, ranking fourth in the world for its biodiversity. Mexico receives a huge number of tourists every year: in 2018, it was the sixth most-visited country in the world, with 39 million international arrivals. Mexico is a member of the United Nations, the World Trade Organization, the G8+5, the G20, the Uniting for Consensus group of the UN, the Pacific Alliance trade bloc. Mēxihco is the Nahuatl term for the heartland of the Aztec Empire, namely the Valley of Mexico and surrounding territories, with its people being known as the Mexica, it is believed to be a toponym for the valley which became the primary ethnonym for the Aztec Triple Alliance as a result, although it could have been the other way around.
In the colonial era, back when Mexico was called New Spain this territory became the Intendency of Mexico and after New Spain achieved independence from the Spanish Empire it came to be known as the State of Mexico with the new country being named after its capital: the City of Mexico, which itself was founded in 1524 on top of the ancient Mexica capital of Mexico-Tenochtitlan. Traditionally, the name Tenochtitlan was thought to come from Nahuatl tetl and nōchtli and is thought to mean "Among the prickly pears rocks". However, one attestation in the late 16th-century manuscript known as "the Bancroft dialogues" suggests the second vowel was short, so that the true etymology remains uncertain; the suffix -co is the Nahuatl locative, making the word a place name. Beyond that, the etymology is uncertain, it has been suggested that it is derived from Mextli or Mēxihtli, a secret name for the god of war and patron of the Mexica, Huitzilopochtli, in which case Mēxihco means "place where Huitzilopochtli lives".
Another hypothesis suggests that Mēxihco derives from a portmanteau of the Nahuatl words for "moon" and navel. This meaning might refer to Tenochtitlan's position in the middle of Lake Texcoco; the system of interconnected lakes, of which Texcoco formed the center, had the form of a rabbit, which the Mesoamericans pareidolically associated with the moon rabbit. Still another hypothesis suggests that the word is derived from Mēctli, the name of the goddess of maguey; the name of the city-state was transliterated to Spanish as México with the phonetic value of the letter x in Medieval Spanish, which represented the voiceless postalveolar fricative. This sound, as well as the voiced postalveolar fricative, represented by a j, evolved into a voiceless velar fricative during the 16th century; this led to the use of the variant Méjico in many publications in Spanish, most notably in Spain, whereas in Mexico and most other Spanish–speaking countries, México was the preferred spelling. In recent years, the Real Academia Española, which regulates the Spanish l
International Standard Serial Number
An International Standard Serial Number is an eight-digit serial number used to uniquely identify a serial publication, such as a magazine. The ISSN is helpful in distinguishing between serials with the same title. ISSN are used in ordering, interlibrary loans, other practices in connection with serial literature; the ISSN system was first drafted as an International Organization for Standardization international standard in 1971 and published as ISO 3297 in 1975. ISO subcommittee TC 46/SC 9 is responsible for maintaining the standard; when a serial with the same content is published in more than one media type, a different ISSN is assigned to each media type. For example, many serials are published both in electronic media; the ISSN system refers to these types as electronic ISSN, respectively. Conversely, as defined in ISO 3297:2007, every serial in the ISSN system is assigned a linking ISSN the same as the ISSN assigned to the serial in its first published medium, which links together all ISSNs assigned to the serial in every medium.
The format of the ISSN is an eight digit code, divided by a hyphen into two four-digit numbers. As an integer number, it can be represented by the first seven digits; the last code digit, which may be 0-9 or an X, is a check digit. Formally, the general form of the ISSN code can be expressed as follows: NNNN-NNNC where N is in the set, a digit character, C is in; the ISSN of the journal Hearing Research, for example, is 0378-5955, where the final 5 is the check digit, C=5. To calculate the check digit, the following algorithm may be used: Calculate the sum of the first seven digits of the ISSN multiplied by its position in the number, counting from the right—that is, 8, 7, 6, 5, 4, 3, 2, respectively: 0 ⋅ 8 + 3 ⋅ 7 + 7 ⋅ 6 + 8 ⋅ 5 + 5 ⋅ 4 + 9 ⋅ 3 + 5 ⋅ 2 = 0 + 21 + 42 + 40 + 20 + 27 + 10 = 160 The modulus 11 of this sum is calculated. For calculations, an upper case X in the check digit position indicates a check digit of 10. To confirm the check digit, calculate the sum of all eight digits of the ISSN multiplied by its position in the number, counting from the right.
The modulus 11 of the sum must be 0. There is an online ISSN checker. ISSN codes are assigned by a network of ISSN National Centres located at national libraries and coordinated by the ISSN International Centre based in Paris; the International Centre is an intergovernmental organization created in 1974 through an agreement between UNESCO and the French government. The International Centre maintains a database of all ISSNs assigned worldwide, the ISDS Register otherwise known as the ISSN Register. At the end of 2016, the ISSN Register contained records for 1,943,572 items. ISSN and ISBN codes are similar in concept. An ISBN might be assigned for particular issues of a serial, in addition to the ISSN code for the serial as a whole. An ISSN, unlike the ISBN code, is an anonymous identifier associated with a serial title, containing no information as to the publisher or its location. For this reason a new ISSN is assigned to a serial each time it undergoes a major title change. Since the ISSN applies to an entire serial a new identifier, the Serial Item and Contribution Identifier, was built on top of it to allow references to specific volumes, articles, or other identifiable components.
Separate ISSNs are needed for serials in different media. Thus, the print and electronic media versions of a serial need separate ISSNs. A CD-ROM version and a web version of a serial require different ISSNs since two different media are involved. However, the same ISSN can be used for different file formats of the same online serial; this "media-oriented identification" of serials made sense in the 1970s. In the 1990s and onward, with personal computers, better screens, the Web, it makes sense to consider only content, independent of media; this "content-oriented identification" of serials was a repressed demand during a decade, but no ISSN update or initiative occurred. A natural extension for ISSN, the unique-identification of the articles in the serials, was the main demand application. An alternative serials' contents model arrived with the indecs Content Model and its application, the digital object identifier, as ISSN-independent initiative, consolidated in the 2000s. Only in 2007, ISSN-L was defined in the
Lender of last resort
A lender of last resort is the institution in a financial system that acts as the provider of liquidity to a financial institution which finds itself unable to obtain sufficient liquidity in the interbank lending market and other facilities or sources have been exhausted. It is, in effect, a government guarantee of liquidity to financial institutions. Since the beginning of the 20th century, most central banks have been providers of lender of last resort facilities, their functions also include ensuring liquidity in the financial market in general; the objective is to prevent economic disruption as a result of financial panics and bank runs spreading from one bank to the next from a lack of liquidity in one. Different definitions of the lender of last resort exist in literature. A comprehensive one is that it is "the discretionary provision of liquidity to a financial institution by the central bank in reaction to an adverse shock which causes an abnormal increase in demand for liquidity which cannot be met from an alternative source".
While the concept itself had been used the term "lender of last resort" was first used in its current context by Sir Francis Baring, in his Observations on the Establishment of the Bank of England, published in 1797. In 1763, the king was the lender of last resort in Prussia. Although Alexander Hamilton, in 1792, was the first policymaker to explicate and implement a lender of last resort policy, the classical theory of the lender of last resort was developed by two Englishmen in the 19th century: Henry Thornton and Walter Bagehot. Although some of the details remain controversial, their general theory is still acknowledged in modern research and provides a suitable benchmark. Thornton and Bagehot were concerned with the reduction of the money stock; that was because they feared that the deflationary tendency caused by a reduction of the money stock could reduce the level of economic activity. If prices did not adjust it would lead to unemployment and a reduction in output. By keeping the money stock constant, the purchasing power remains stable during shocks.
When there is a shock induced panic, two things happen: The depositors fear that they will not be able to convert their deposits into high-powered money: in 19th-century Britain, that meant gold or Bank of England notes. They increase the amount of cash they hold relative to deposits. Banks, on the other hand, afraid of becoming illiquid, increase their reserves. Taken together, it reduces the money multiplier which, multiplied by the amount of base money, gives the money stock; this equation shows the relation: M = B where M is the money stock, B is the money base, C/D is the ratio of cash to deposits held by the public, R/D is the ratio of reserves to deposits held by the banks. If the multiplier is reduced from a shock and the amount of base money is constant, the money stock will decrease as a consequence. Thornton and Bagehot, suggested that the lender of last resort should increase the money base to offset the reduction of the multiplier; that was meant to prevent an economic contraction.
Thornton first published An Enquiry into the Nature and Effects of the Paper Credit of Great Britain in 1802. His starting point was that only a central bank could perform the task of lender of last resort because it holds a monopoly in issuing bank notes. Unlike any other bank, the central bank has a responsibility towards the public to keep the money stock constant, thereby preventing negative externalities of monetary instability. Bagehot was the second important contributor to the classical theory. In his book Lombard Street, he agreed with Thornton without mentioning him but develops some new points and emphases. Bagehot advocates: "Very large loans at high rates are the best remedy for the worst malady of the money market when a foreign drain is added to a domestic drain." His main points can be summarized by his famous rule: lend "it most freely... to merchants, to minor bankers, to'this and that man', whenever the security is good". Thomas M. Humphrey, who has done extensive research on Thornton's and Bagehot's works, summarizes their main proposals as follows: protect the money stock instead of saving individual institutions.
Many of the points remain controversial today but it seems to be accepted that the Bank of England followed these rules during the last third of the 19th century. Most industrialized countries have had a lender of last resort for many years. Why it is done can be explained by different models; the various models propose that a bank run or bank panic can arise in any fractional reserve banking system and that the lender of last resort function is a way of preventing panics from happening. The Diamond and Dybvig model of bank runs has two Nash equilibria: one in which welfare is optimal and one where there is a bank run; the bank run equilibrium is an infamously self-fulfilling prophecy: if individuals expect a run to happen, it is rational for them to withdraw their deposits early: before they need it. That makes them lose some interest, but, better than losing everything from a bank run. In the Diamo