Walter Bagehot, a 19th-century British journalist and economist, had reservations about central banks' potential to encourage risky behavior in financial markets, particularly through their role as a "lender of last resort." He was concerned that by stepping in to prevent financial institutions from failing, central banks could inadvertently promote moral hazard. This is because banks might take on excessive risks, assuming they'll be bailed out in times of crisis.

In his classic work, Lombard Street: A Description of the Money Market (1873), Bagehot proposed that central banks should lend freely in a crisis but only to solvent institutions, at a high interest rate, and against good collateral. This was intended to deter banks from relying on central bank support as a routine part of their operations.