Deposit insurance and lender-of-last-resort functions

We consider issues concerning the design of a banking system "safety net" w hen both a deposit insurer and a lender of last resort are present. In our model both entities have a role to play, Moreover, issues related to deposi t insurance pricing are relatively unimportant in this context, whereas iss ues related to discount window access and pricing are not. We discuss when and why (or why not) a lender of last resort should lend liberally but char ge high rates of interest. And, we raise the possibility that discount wind ow policy may enhance or reduce the scope for multiplicity of equilibria.