Prior to the recent crisis, in contrast, credit extension had progressively migrated outside of traditional banking to so-called shadow banking entities, which relied heavily on short-term wholesale funding that proved vulnerable to runs.7 Accordingly, to help calm the panic, the Federal Reserve provided liquidity not only to commercial banks, but also to other types of financial institutions such as investment banks and money market funds, as well as to key financial markets such as those for commercial paper and asset-backed securities.8 Because  5  For more on the recent financial crisis as a classic financial panic, see Bernanke (2013).
6  As noted in Lombard Street, by Bagehot ([1873] 1897). For a more extensive discussion of the manner in which the Federal Reserve’s actions during the crisis followed traditional prescriptions regarding the proper response to liquidity strains, see Madigan (2009).