Government-Subsidized Risk Is a Bad Idea

January 12, 2010 by Dan Mitchell

Kudos to Nicki Kurokawa, a former Cato employee, for this short but substantive video explaining “moral hazard.” She notes that government-subsidized risk played a pernicious role in the housing bubble and financial crisis, and warns that “too big to fail” may create similar problems in the future.

Posted in Fannie Mae, Financial Crisis, Freddie Mac | Tagged Bailout, Fannie Mae, Freddie Mac, Moral Hazard | 37 Comments

37 Responses

on December 10, 2022 at 8:44 pm Dan Mitchell: Biden Rewards Misbehavior and Encourages Future Problems by Bailing Out Union Pension Plans | The Daily Hatch

[…] was amusing, of course, but also made a serious point about “moral hazard,” which is what happens when government policy rewards bad […]
on December 10, 2022 at 10:23 am Biden Rewards Misbehavior and Encourages Future Problems by Bailing Out Union Pension Plans | International Liberty

[…] was amusing, of course, but also made a serious point about “moral hazard,” which is what happens when government policy rewards bad […]
on August 21, 2022 at 10:53 pm Dan Mitchell: The obvious moral of the story is that we should not have government-subsidized moral hazard.That’s not a proper role of the federal government, and it’s not a proper role of state governments! | The Daily Hatch

[…] obvious moral of the story is that we should not have government-subsidized moral hazard.That’s not a proper role of the federal government, and it’s not a proper role of state […]
on August 21, 2022 at 11:47 am The Volcanic Version of Government-Subsidized Moral Hazard | International Liberty

[…] The obvious moral of the story is that we should not have government-subsidized moral hazard. […]
on January 24, 2022 at 12:32 pm IMF Bailouts and Moral Hazard | International Liberty

[…] other words, IMF policy is a glaring example of “moral hazard.” By shielding politicians from the consequences of bad policy, the bureaucracy is actually […]
on October 11, 2021 at 11:23 am The IMF Should Be Eliminated, not Expanded | International Liberty – Additional survival tricks

[…] get lavish, tax-freesalaries). But the biggest problem with the IMF is that it promotes “moral hazard.” More specifically, it provides bailouts for irresponsible governments and for those who […]
on October 11, 2021 at 11:09 am The IMF Should Be Eliminated, not Expanded | International Liberty

[…] the biggest problem with the IMF is that it promotes “moral hazard.” More specifically, it provides bailouts for irresponsible governments and for those who […]
on November 11, 2020 at 12:21 pm State and Local Governments Should Not Get a Bailout – either from Congress or the Federal Reserve | International Liberty

[…] Which is very unfortunate since it will reward the jurisdictions that behaved recklessly. A classic example of “moral hazard.” […]
on June 24, 2020 at 1:03 pm Everything You Need to Know about Blue State Fiscal Problems in One Chart – DonnyFerguson.com

[…] I’ve shared two videos (here and here) for those who want more information about how bailouts encourage “moral hazard.” And this is […]
on June 3, 2020 at 7:51 am In One Image, Everything You Need to Know about Blue State Fiscal Problems | International Liberty

[…] I’ve shared two videos (here and here) for those who want more information about how bailouts encourage “moral hazard.” And […]
on April 29, 2020 at 9:34 am Coronavirus and the Risky Mix of Bailouts, Big Business, and Big Government | International Liberty

[…] If you want more information on the economic damage caused by bailouts, watch this video and this […]
on September 9, 2019 at 11:48 am Bernie Sanders, Common Sense, and Moral Hazard | International Liberty

[…] insurance encourages people to take on excessive risk (i.e., it creates moral hazard). And the subsidies often benefit rich people with beachfront homes (which may explain why Senator […]
on October 25, 2018 at 12:55 pm A Helpful Solution to Italy’s Budget Standoff with the European Commission | International Liberty

[…] perspective, this is a far superior approach, mostly because it begins to unwind the “moral hazard“that undermines sound financial decision making in […]
on October 10, 2018 at 12:54 pm The Bigger the IMF, the Greater the Risk of Profligacy, Debt, and Crisis | International Liberty

[…] about the IMF’s bailout policies. For all intents and purposes, the IMF subsidizes “moral hazard” by reducing the perceived cost (to financial institutions) of lending money to dodgy […]
on September 13, 2018 at 12:38 pm Everything You Need to Know about the Harmful Effects of FEMA and Federal Disaster Relief | International Liberty

[…] Shughart explains that “public choice” and “moral hazard” play a […]
on May 23, 2018 at 6:35 am Laws that Wipe Out Jobs in the Name of Protecting Them ·

[…] a good economist recognizes that such policies impose considerable unseen damage by promoting moral hazard and undermining the efficient allocation of labor and […]
on December 17, 2016 at 2:26 pm Shut Down Fannie Mae and Freddie Mac and Unleash the Free Market | International Liberty

[…] bottom line is that government-subsidized risk is not a good […]
on September 9, 2016 at 2:49 pm Another Lesson from Bastiat: So-Called Employment Protection Legislation Is Bad News for Workers | International Liberty

[…] a good economist recognizes that such policies imposes considerable unseen damage by promoting moral hazard and undermining the efficient allocation of labor and […]
on January 25, 2016 at 5:40 pm Trump is Wrong on TARP (like Romney, McCain, Bush, and the Rest of the Establishment) | People's Pundit Daily

[…] I fully agree. To the extent that we have private profits and socialized losses, we’ll have bigger and bigger problems with moral hazard. After all, if you’re in Las Vegas and someone else is covering your losses, why not make […]
on January 25, 2016 at 2:25 pm Trump Is Wrong on TARP (like Romney, McCain, Bush, and the Rest of the Establishment) | Lex Rex for All

[…] I fully agree. To the extent that we have private profits and socialized losses, we’ll have bigger and bigger problems with moral hazard. After all, if you’re in Las Vegas and someone else is covering your losses, why not make […]
on January 25, 2016 at 12:32 pm Trump Is Wrong on TARP (like Romney, McCain, Bush, and the Rest of the Establishment) | International Liberty

[…] I fully agree. To the extent that we have private profits and socialized losses, we’ll have bigger and bigger problems with moral hazard. After all, if you’re in Las Vegas and someone else is covering your losses, why not make […]
on June 25, 2015 at 11:03 am New Video Shows Bailouts Are a Recipe for Moral Hazard and Cronyism | International Liberty

[…] Bailouts encourage very bad behavior – There’s a saying that capitalism without bankruptcy is like religion without hell, which is simply a clever way of pointing out that you need both profit and loss in order for people in the economy to have the right set of incentives. Bailouts, however, screw up this incentive structure by allowing private profits while simultaneously socializing the losses. This creates what’s known as moral hazard. […]
on October 2, 2013 at 1:11 am Open letter to President Obama (Part 420) Bailouts are legal corruption | The Daily Hatch

[…] examples involve huge amounts of money, and both private-sector and public-sector bailouts have perverse long-run effects, but which is […]
on June 28, 2013 at 8:39 am Stop the Presses, Europe’s Doing the Right Thing on Failed Banks! | International Liberty

[…] The last people to bear any costs should be taxpayers. They don’t own the bank. They don’t invest in the bank. And they don’t have big bucks. So why should they bear the cost when the big-money people screw up?!? Especially when TARP-style bailouts promote moral hazard! […]
on March 12, 2013 at 12:56 am Open letter to President Obama (Part 264) | The Daily Hatch

[…] Simply stated, bailouts reward past bad behavior and make future bad behavior more likely (what economists call moral hazard). […]
on January 23, 2013 at 8:35 am Bailouts are legal corruption « HaltingArkansasLiberalswithTruth

[…] examples involve huge amounts of money, and both private-sector and public-sector bailouts have perverse long-run effects, but which is […]
on January 13, 2013 at 11:18 am Bailout Nation « International Liberty

[…] examples involve huge amounts of money, and both private-sector and public-sector bailouts have perverse long-run effects, but which is […]
on December 29, 2012 at 10:55 am Dan Mitchell: “Bailouts reward past bad behavior” « HaltingArkansasLiberalswithTruth

[…] Simply stated, bailouts reward past bad behavior and make future bad behavior more likely (what economists call moral hazard). […]
on September 17, 2012 at 11:21 am In the “Opposing View” Column, I Explain Why USA Today Is Wrong about Bailouts « International Liberty

[…] Simply stated, bailouts reward past bad behavior and make future bad behavior more likely (what economists call moral hazard). […]
on May 23, 2012 at 1:21 pm Atenção ao crescimento desenfreado português, europeu, universal « O Insurgente

[…] Government-subsidized risk, though, is just as foolish as government-subsidized success. Classificar isto: Share this:FacebookTwitterStumbleUponEmailMaisPrintDiggLinkedInGostar disto:GostoBe the first to like this artigo. Deixe um Comentário […]
on May 23, 2012 at 12:26 pm In the Lake Wobegon Fantasy World, all Investments Make Money « International Liberty

[…] Government-subsidized risk, though, is just as foolish as government-subsidized success. Rate this: Share this:PrintEmailFacebookTwitterMoredeliciousDiggFarkLinkedInRedditStumbleUponLike this:LikeBe the first to like this post. […]
on May 23, 2012 at 8:33 am Eurobonds: The Fiscal Version of Co-Signing a Loan for Your Unemployed Alcoholic Cousin Who Has a Gambling Addiction « International Liberty

[…] At the risk of stating the obvious, there’s a reason for the second word in the “moral hazard” […]
on March 23, 2012 at 8:42 am Romney’s Big Gaffe Is TARP, not Etch-a-Sketch « International Liberty

[…] approach would have recapitalized the banking system without the corruption, favoritism, and moral hazard that characterized the TARP bailout. "Which one of us is […]
on September 26, 2011 at 8:51 am Hell No, American Taxpayers Should Not Bail out the IMF « International Liberty

[…] how is this system working? Well, if you understand the principle of moral hazard, you won’t be surprised to learn that it’s a big flop. Giving bailouts is like trying […]
on January 20, 2011 at 5:25 pm A Two-Part Quiz for Libertarians and other Advocates of Limited Government « Sago

[…] first quiz deals with how to spend taxpayer money, combined with a bit of moral hazard analysis. Which option would you […]
on January 10, 2011 at 2:48 am A Two-Part Quiz for Libertarians and other Advocates of Limited Government « The Market Center Blog

[…] first quiz deals with how to spend taxpayer money, combined with a bit of moral hazard analysis. Which option would you […]
on January 9, 2011 at 9:05 am A Two-Part Quiz for Libertarians and other Advocates of Limited Government « International Liberty

[…] first quiz deals with how to spend taxpayer money, combined with a bit of moral hazard analysis. Which option would you […]

Comments RSS

This site uses Akismet to reduce spam. Learn how your comment data is processed.

	SL S on Student Loans = Higher Tuition…
	Student Loans = High… on Education Week, Part III: How…
	Student Loans = High… on The Higher Education Racket, P…
	Student Loans = High… on Student Loan Humor
	Student Loans = High… on Who Should Be Blamed for the R…

International Liberty

Restraining Government in America and Around the World

Government-Subsidized Risk Is a Bad Idea

37 Responses

Leave a Reply

Email Subscription

Recent Posts

Pages

Visitors (beginning December 23, 2010)

Archives

Recent Comments

Categories

International Liberty

Restraining Government in America and Around the World

Government-Subsidized Risk Is a Bad Idea

Rate this:

Share this:

Like this:

Related

37 Responses

Leave a Reply

Email Subscription

Recent Posts

Pages

Visitors (beginning December 23, 2010)

Archives

Recent Comments

Categories