To fulfill its public role, the Bank of England did not in all cases maximize its profits; notably, it held a larger share of its assets in liquid form than did other banks, thereby foregoing some return.
Nevertheless, in the context of the gold standard, the Bank's stock of liquid assets was relatively modest in size, raising the possibility that even this quasi-public institution could run out of cash should the demand for liquidity become high enough. 2 In this context, Bagehot's advice on how the Bank of England should respond to a generalized liquidity shortage was somewhat counterintuitive.