The model of the lender of last resort (LOLR) suggests that central banks should only rescue banks above a certain size, known as "too big to fail." The optimal LOLR policy varies over time and depends on the likelihood of bank failure and insolvency. If the main concern is contagion, central banks may be more inclined to rescue large banks. However, if moral hazard is the main worry, central banks may be less likely to rescue banks. When both contagion and moral hazard are considered together, central banks have a stronger incentive to rescue banks compared to a single period setting, but weaker than in a dynamic setting with only contagion.