“Moral hazard”

How many things are out there that the government, essentially the tax payers, are going to have to cover in the event of a disaster? Fannie and Freddie are but two.  The underlying issue is encompassed by “moral hazard”. Essentially, if you have put the downside risk on others, you are prone to take more chances. The common example is the insurance that covers a rental car. Once a driver has it, they tend to take more risks and don’t take the care they would if they had to pay for any damage. If the government will bail them out, why not take on risk?

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