"It's true that people tend to be less cautious when they know they'll be bailed out. Economists call this 'moral hazard.' But even when they're being reasonably careful, people cannot always assess risks accurately. Many of the mostly poor home buyers who got into trouble did NOT in fact know they couldn't afford the mortgage payments they were signing on to. The banks and mortgage lenders that pulled out all the stops to persuade them to the contrary were in a far better position to know; after all, they had lots of experience at this game. So did the credit-rating agencies that gave these loans solid credit ratings, as did the financiers who bundled them with less-risky loans and sold them to other financial institutions, and the hedge fund managers who quietly tucked them into their portfolios."Regular people are held to a different standard by conservatives. As Reich points out, Donald Trump can declare bankruptcy casually and protect his own personal fortune. Regular people now have a much harder time declaring bankruptcy. The people who clearly knew they were making bad loans get bailed out, while the sometimes ignorant or unlucky who took the loans are told to learn from their mistakes. I am so tired of conservatives.
March 26, 2008
I think Bitebark will enjoy this column by Robert Reich. He suggests that conservatives claim "moral hazard" to avoid helping individual home owners who made bad decisions (how else will they learn?) yet are more than willing to bail out the large Wall Street firms who clearly knew better.