Buffett: Taxpayers Have Not Bailed Out Anyone Oct 31, 2009
Buffetts also not too worried about the moral hazard issue ... I would say moral hazard is not a huge problem when the people on the equity side lost 90 percent of their money or in Freddie Mac and Fannie Mae more than 90 percent of their money ... Former Federal Reserve Chairman Paul Volcker disagrees with Buffett on moral hazard. (Newsmax)
IRDA may relax life cover norms Oct 31, 2009
The insurance regulator had asked insurers to ensure that renewals were not turned down, except on the grounds of fraud, moral hazard or misrepresentation. Furthermore, the companies had been asked to furnish a note explaining the reasons for increasing the premiums and also, how the rise was in line with the charge structure mentioned in the policys prospectus. (India Times)
Time to go Dutch Oct 31, 2009
Stock markets have been debating the effects of the outburst by Bank of England governor, Mervyn King (which I highlighted in my previous article ", Asia Times Online, October 24, 2009), when he echoed the comments made by the well-known business economist, John Kay, on the subject of narrow banking: the fashion of separating the public utility side of banking (retail deposits, check and draft facilities, commercial lending, mortgages and so on) from the more risky "casino" type activities... (Asia Times Online)
Fed Should Lose AIG-Style Bailout Powers: Geithner Oct 30, 2009
It is a "comprehensive coordinated answer to the moral hazard problem" and does not provide any implicit guarantees for financial institutions, he said. "We cannot put taxpayers in the position of paying for the losses of large private financial institutions," Geithner said. (ABC News -- Wire)
Only EU is big enough to take on giant banks Oct 28, 2009
It is moral hazard at its most chilling. At the World Economic Forum in Davos early this year, a director of American International Group (AIG) replied, when asked why he didn't attempt to stop all the risk business being written out of the company's London office, that he hadn't really understood what they were doing. (Business Report, South Africa)
Home debt plan 'rogues' charter' Oct 28, 2009
Wilson Andrews insolvency partner, Barry Stewart, warned: "There is a very real danger of moral hazard if the family home is completely withdrawn as an asset. "It is not difficult to imagine a situation in which an unscrupulous debtor buys an expensive property partly funded by unsecured debt whilst failing to pay his creditors in the full knowledge that the unsecured creditors will not be able to rely on the equity in the house towards settlement of their claims. "It could result in the... (BBC News -- UK)
Carney Says Banks Should Use Profits to Rebuild Capital, Not for Bonuses Oct 27, 2009
Awash in Moral Hazard. Because of government intervention to prevent the global financial system from collapsing, we are now awash in moral hazard, Carney said. (Bloomberg -- Canada)
Executive Decision Oct 27, 2009
Barofsky was referring to the cost of government borrowing and the potential cost of rewarding risky behavior: With the potential of moral hazard and too big to fail, the government could be setting itself up for an even more dangerous crisis in the future, he said. 2009 The Freeman. (The American Conservative)
The truth about banks and dogs Oct 24, 2009
That is what economists mean by 'moral hazard. The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history. (Asia Times Online)
King moots breaking up banks Oct 22, 2009
"The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history," he said in a speech late on Tuesday. King said that a solution could be to split up banks and separate riskier activities from more stable businesses such as taking deposits. (Business Report, South Africa)
US rescue averted meltdown, but problems remain: report Oct 21, 2009
The report by inspector general Neil Barofsky said assessing the costs is complex because there are not only direct financial costs, but also the so-called "moral hazard" costs of bailouts and the cost to US government credibility ... On moral hazard costs, the report said that some of the funds may be bailing out "the very institutions that caused the crisis" and "homeowners who may have borrowed irresponsibly.". (Yahoo! Asia News)
Governor warns bank split needed Oct 21, 2009
And he added that measures taken by the government and world leaders had so far failed to tackle the key "moral hazard" that if banks and financial institutions knew that they were too big to fail, and that the taxpayer would help them out if they got into trouble. G20 plans for tighter regulations may not be enough, because if banks knew they would be bailed out if they hit difficulties, they would continue to take risks, he hinted. (BBC News -- UK)
Obama Tries to Bribe Seniors With COLA Oct 20, 2009
The moral hazard of Obama s attempted health care payoff is enormous. Social Security COLAs have been a matter of formula rather than politics for more than 3 decades, precisely to keep the issue out of politicians hands. (Human Events Online)
Understanding business aids journalists’ bottom line Oct 19, 2009
The class is fun (at least for me), and often we learn together as business or the economy turns up new or timely issues (derivatives, the limits of Fed authority, moral hazard, the role of regulation). But I m left with the impression that for the vast majority of young people (in a circle much larger than my class or even university) business and the economy are mysterious subjects. (Boston Globe)
Deny nuclear materials to would-be bomb makers Oct 15, 2009
This last provision made sense to Baruch and Truman: The Soviets were the most likely to violate the agreement, so allowing them to veto sanctions against themselves would surely be a case of moral hazard. That change doomed the plan. (Atlanta Journal-Constitution -- Opinion)
S Korea's experiment for helping low income earners Oct 14, 2009
Moral hazard adds to market worries as inappropriate, insufficient screening on those who apply for loans may lead to massive defaults. Amid lingering controversy, six business conglomerates on Oct. 13 settled an MOU to donate 1 trillion won (856 million U.S. dollars) over the next ten-year period, solidifying their previous promise. (Xinhuanet, China)
Fire commission a smokescreen Oct 14, 2009
By effectively isolating government from the consequences of incompetence, the royal commission has blithely turned the doctrine of moral hazard on its head. Past and future responsibility is buried in a political Ponzi scheme while the commission achieves little more than self-aggrandisement. (Sydney Morning Herald -- Business)
Sensibly done, government regulation of the financial markets can work a treat. Oct 12, 2009
But the surviving moneybags of Wall Street and the City retain a powerful vested interest in ensuring governments do little to correct the ''moral hazard'' their earlier foolishness left them with no choice but to create when their under-regulated markets tottered on the edge of the abyss, threatening to wreak havoc on millions of innocent bystanders. If the big-money interests put enough money into their lobbying efforts, they could gain the best of all worlds: untrammelled profit-making during... (Sydney Morning Herald -- Business)
Finding reform among smoke, mirrors Oct 10, 2009
In the end, it is something that looks good on paper, but does little to constrain risk-taking and recognition of the idea of moral hazard. That leaves financial services firms free to do and say anything to entice investors into the market with little regard to the potential consequences -- and that could make the subprime mortgage meltdown a mere blip on the economic radar. (Daytona Beach News Journal -- Local)
Moral Hazard Lights Go Out Oct 7, 2009
In reality, it was born of a highly distorted financial market, in which excessive concentration, excessive leverage, spurious theories of risk management and, above all, moral hazard in the form of implicit state guarantees, combined to create huge ticking time-bombs on both sides of the Atlantic. The greatest danger we currently face is that the emergency measures adopted to remedy the crisis have made matters even worse. (The American Conservative)
Dollar fears stalk IMF-World Bank meet Oct 7, 2009
" The market turbulence came as the United Nations called for a new global reserve currency to end dollar supremacy, which it said had contributed to global imbalances that helped stoke the global economic crisis. Top UN official Sha Zukang said that "greater use of a truly global reserve currency, such as the IMF's special drawing rights (SDRs)," the fund's international reserve asset, would benefit global development. Strauss-Kahn meanwhile called on the 186 member states of the IMF and World... (Channelnewsasia.com)
Canada's Bank Regulator Rejects `Systemically Important' Rule on Big Banks Oct 6, 2009
Dickson said such a move could increase moral hazard, a phenomenon where risky behavior is encouraged because investors deem companies as too big to fail. The measure may also generate a lack of market discipline, and create winners in the system that would reduce competition and efficiency, said Dickson, the superintendent of the Ottawa-based Office of the Superintendent of Financial Institutions. (Bloomberg -- Canada)
Our system still needs some fixing Oct 4, 2009
This, together with the consolidation of large financial services organisations, has arguably increased moral hazard in the system. In many ways the market response to this crisis is more interesting and potentially more relevant to the long-term shape of the investment banking industry than the regulatory response. (Sydney Morning Herald -- Business)
Experts discuss financial reform measures with lawmakers Oct 4, 2009
Volcker called for an enhanced role for the Federal Reserve Board to regulate the financial system and provide a greater sense of moral hazard for banking and other financial services institutions ... Volcker said any financial reforms must find a balance between the idea of moral hazard -- that risks should have consequences -- and the need for government to protect the overall financial system. (Daytona Beach News Journal -- Local)
The Democrats' Phantom Fix on Health Care Oct 3, 2009
Back then there was a moral hazard. If someone with insurance dinged your bumper, you could collect. (Time.com)
One man's terrorist ... Oct 3, 2009
If all actions have an equal and opposite reaction, then for India, the cost of its action (ie actively doing nothing) was the "moral hazard" of being seen as the key supporter of a terrorist organization. A few years of mounting international criticism is all it took for the country to try to make amends, helping to push through a peace accord in Sri Lanka that would be implemented by Indian armed forces, in 1987. (Asia Times Online)
Some seniors selling life insurance policies for cash Oct 1, 2009
"Personally, I think there is concern about the moral hazard issue," said Scott Gilbert, chairman of Gilbert LLP, a Washington, D.C, law firm that specializes in insurance. "There's something that is troubling to many who look at this, about the notion that investors only do better the more quickly people die.". (Pittsburgh Post-Gazette, PA)
Ending Central Bank Secrecy Sep 30, 2009
He was concerned that the Fed was both contributing to the moral hazard problem, which it obviously is, and setting interest rates too low and thereby feeding into asset bubbles. I in turn elaborated on these points, noting that although we hear a great deal about the need for higher capital requirements, no one asks the more fundamental question: why are equity ratios so low in the financial sector. (The American Conservative)
Survival of Fittest Becomes Survival of Fattest Sep 25, 2009
The so-called moral hazard that tends to result from governments providing support during financial meltdowns isnt being addressed seriously ... Also, Korea experienced four things with which the U.S. is currently dealing: denial, waning investor confidence, dangerously low interest rates and the risk that moral hazard would encourage irresponsible behavior. (Bloomberg -- Columnists)
Backgrounder: Major topics of G20 Pittsburgh Summit Sep 25, 2009
On the international financial regulatory reform, the leaders will talk a wide range of issues, including strengthening the global capital framework, making global liquidity more robust, reducing moral hazard and strengthening capacity for cross-border resolution, strengthening accounting standards, improving compensation practices, expanding oversight of the financial system, and adherence to international standards. German Chancellor Angela Merkel said on Thursday before departing for the... (Xinhuanet, China)
Autopsies miss Lehman lesson Sep 22, 2009
The resulting moral hazard decreased the financial stability of the banking system and exposed taxpayers to open-ended risks ... As a result, the moral hazard that they had sought to avoid now exists on a scale unprecedented in our history. (Asia Times Online)
Braking the Banks Sep 20, 2009
Bonuses are just one aspect of the larger issue of moral hazard that has been raised over the past year, as governments and central banks have spent tens of billions of dollars of taxpayers' money to rescue financial institutions whose recklessness in the name of short-term profiteering is at the root of the trouble. For all the recent signs of improvement, the financial situation is still far from normal. (Time.com)
Wall Streets mixed-up take on risk, return and rewards Sep 19, 2009
Wall Streets mixed-up take on risk, return and rewards (The Star Online, Malaysia)
Moral hazard is back Sep 19, 2009
The net result is stunning levels of corruption (see my article ", Asia Times Online, August 19, 2006) as well as, perhaps more importantly, rising criminality. China's ruling classes are the very epitome of corruption and petty theft from government coffers; while in India the selective application of laws has resulted in politics becoming the archetypal dirty profession. When looking at the political classes of both China and India today, I am reminded of Mark Twain's eternal quote, "There is... (Asia Times Online)
Risky business Sep 16, 2009
The risk is that this creates a moral hazard on Wall Street ... Moral hazard has to be a concern for anyone involved with financial policy, says Lawrence Summers, director of the White House National Economic Council. (MSNBC -- Business)
No dialing back Sep 15, 2009
As much as moral hazard and "too big to fail" are recognized as fundamental facets of previous bubble excess, our policymakers have nonetheless been compelled to expand only further toward backstopping the entire credit system (and economy). Obviously, the GSE's were too big to really fail, while markets appreciate that policymakers now believe it was a mistake to allow Lehman to collapse. (Asia Times Online)
Obama Says U.S. Job Losses Ending, Vows to Push on Wall Street Regulations Sep 15, 2009
And thats the culture I think that weve got to reverse, not to squelch innovation or creativity, but to make sure that we dont get into whats called a moral hazard problem, where people assume that governments there as a backstop, Obama said. Wall Street Compensation. (Bloomberg -- US)
Economics focus: What if? Sep 15, 2009
When the Treasury and the Federal Reserve bailed out Bear Stearns in March 2008, they drew criticism in Congress and elsewhere for creating moral hazard. At the same time their intervention led other firms, including Lehman, to believe that when push came to shove, they too would be spared. (The Economist)
Economists are calling for major reform while we still have the opportunity. Sep 15, 2009
How to handle the problem of moral hazard, now that is it clear that the Government would never allow a serious financial failure. How will Australia handle competing reform agendas from overseas. (Sydney Morning Herald -- Business)
Wheeler-dealers laughing all the way to the bank Sep 15, 2009
The greater ramifications of the collapse of Lehman, however, lie in the new ''moral hazard''; that is, the dilemmas thrown up by deploying taxpayer dollars to bail out failed corporations. Unlike its rival Bear Stearns, not to mention AIG and a raft of other financial institutions, Lehman was not deemed ''too big to fail. (Sydney Morning Herald -- Business)
Financial sector needs to take its medicine Sep 14, 2009
We need to deal with the ''moral hazard'' problem - the temptation to do risky things because you know you'll be bailed out - that arises when banks or other financial institutions are ''too big to [be allowed to] fail'', which is most of them. If the idea of breaking up big institutions is unthinkable, the alternative is a regime of tight prudential supervision of all institutions, with clearly stated rules about how the managers, shareholders and possibly major creditors of institutions will... (Sydney Morning Herald -- Business)
Many Americans seem unaware of health care facts Sep 13, 2009
TRUTH No. 3 -- Universal health insurance of the sort we have now will do nothing to lower costs because it will not eliminate the moral hazard inherent in providing services at a small fraction of their cost. Universal health insurance will almost certainly expand coverage, but costs will soar. (Anchorage Daily News)
NJIT expert on market failure says letting Lehman go was good thing Sep 11, 2009
The previous government rescues encouraged the moral hazard of imprudent risk-taking by financial managers because they signaled that risky behaviors will be bailed out. To encourage firms to reduce their leverage and financial risk, government regulators had to change market expectations. (EurekAlert!)
From Huffington Post Sep 10, 2009
We also argued that moral hazard was a cost of banking intervention. "Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other... (Harper's Magazine)
City Diaries Sep 10, 2009
The government has jettisoned moral hazard by bailing out terrible lenders with universal quantitative easing. Business failure, the ultimate sanction of the free market, has been removed. (BBC News -- Business)
'Independent' directors just a myth Sep 8, 2009
Management fees based on a percentage of debt represent a clear moral hazard. The concept is at the core of the discrediting of the Macquarie/Babcock model. (Sydney Morning Herald -- Business)
UK, France and Germany release joint letter on G20 Sep 6, 2009
The G20 should address the moral hazard problem posed by systemically relevant financial institutions. The Finance Ministers should examine ways to enhance supervision requirements for systemically relevant financial institutions to reflect the level of systemic risk that these banks pose to the financial sector, and how such banks could be wound up if necessary without shaking the financial system. (10 Downing Street)
Wrong Swiss city Sep 2, 2009
On examination of the recent unpleasantness, it becomes clear that, given the environment of easy money and moral hazard in which we live, not every financial technique that can be invented should be. Techniques that may be harmless or even beneficial in the theoretical perfect market prove highly destructive in the world of real finance. (Asia Times Online)
Bias against innovation Sep 2, 2009
Insurance is essential to modern life, but involves moral hazard whereby a safety net encourages people to indulge in more risky behaviour. In capital markets, equity within a limited liability framework has facilitated capital formation on a scale that would have been unthinkable without it. (FT.com -- Markets)
Bank bailout: success comes with moral hazard Sep 1, 2009
The cloud hovering around this silver lining might be this: Moral hazard. Because former Treasury Secretary Henry Paulson forced shotgun marriages between healthy banks and debt-ridden banks, some of the nation s financial behemoths are bigger than ever. (Atlanta Journal-Constitution -- Opinion)
Ruling Conservatives Crushed in Japan Vote Aug 31, 2009
TOKYO, Aug. 30, 2009. Worst Economic Slump Since WWII Drives Opposition to Landslide Win, After Half-Century of Near-One-Party Rule. (CBS News)
Read the story Aug 31, 2009
Ruling Conservatives Crushed in Japan Vote - CBS News. TOKYO, Aug. 30, 2009. (CBS News -- Evening News)
Today's economic situation is ironic paradox Aug 30, 2009
Rescuing folks from the consequences of their bad or foolish behavior makes them more prone to that kind of behavior in the future -- what economists call moral hazard. Moral hazard is a real issue, but focusing blame on financial institutions is a mistake. (Anchorage Daily News)
Banks 'Too Big to Fail' Grow Even Bigger Aug 29, 2009
Washington Post: Behemoths Born of the Bailout Reduce Consumer Choice, Tempt Corporate Moral Hazard ... This problem, known as "moral hazard," is partly why government officials are keeping a tight rein on bailed-out banks - monitoring executive pay, reviewing sales of major divisions - and it is driving the Obama administration's efforts to create a new regulatory system to prevent another crisis ... "The dominant public policy imperative motivating reform is to address the moral hazard risk... (CBS News)
Mr. Market Chokes on Obama-Style Health Care: Caroline Baum Aug 25, 2009
What we have to do -- what every system has to do -- is deal with the problem of moral hazard, he says. Once you have insurance, theres no incentive to use less care. (Bloomberg -- Columnists)
Public Option's Winding Road to Spotlight Aug 22, 2009
You also have a 'moral hazard' problem where people tend to care less about their health and engage in riskier behavior because they know they have health insurance (provided by the Gov't. . (CBS News)
Who's Watching the Watchers Aug 21, 2009
But theyve raised a new moral hazard. These days, having invested so much in so many formerly private businesses, lawmakers in the federal government seem to believe theyre entitled to meddle in any company at any time. (Townhall.com)
Why was Lehman Brothers allowed to collapse? Aug 20, 2009
If moral hazard was the reason for not rescuing Lehman Brothers, why then rescue so many others at about the same time. We do not know why Lehman Brothers was not rescued. (The Star Online, Malaysia -- Business)
Public Information Notice: IMF Executive Board Concludes 2009 Article IV Consultation with Cyprus Aug 18, 2009
The government s recent initiative in this area could be further enhanced by monitoring contingent liabilities and minimizing the possibility of moral hazard and adverse selection in public sector aid programs. Directors were reassured that financial sector risks appear to be manageable. (IMF News)
An ideal deposit insurance system to protect depositors Aug 18, 2009
Principle 2 Mitigating moral hazard. Moral hazard should be mitigated by ensuring the deposit insurance system contains appropriate design features and through other elements of the financial system safety net. (India Times)
Looking for new wine in a new bottle Aug 15, 2009
The lack of "moral hazard" exemplified by so many financial firms that eventually went belly up because for one reason or another they were not too big to fail is also at the heart of the risk issue. But there is a larger issue here as well. (Daytona Beach News Journal -- Local)
Let's Have Consumer-Driven Healthcare Aug 15, 2009
There is a massive moral hazard problem. Patients have little direct financial incentive not to request whatever expensive treatments they see on TV, and doctors have clear financial incentives to provide them. (The American Conservative)
Letters to the Editor: On economics Aug 13, 2009
SIR The discipline of institutional economics holds that the more complex a market becomes, the more it is beset with transaction costs, information asymmetries, moral hazard, opportunism, and even predatory behaviour. This leads to short-term perspectives and excessive risks, all of which have disequilibrating consequences that can lead to market collapse. (The Economist)
Remittances savethe Philippines Aug 11, 2009
An IMF-commissioned study recently said that foreign remittances foster dependency and "moral hazard", where many people lose the incentive to work because of funds sent by their kith and kin. It's a dependency that drives the Philippine economy and one that the current receding global economic crisis has clearly failed to break. (Asia Times Online)
Roubini: from Cassandra to superstar Aug 6, 2009
" Today Banerji remains great and famous. His yea-sayer "thoughts" can be found at Quotes Daddy, he is loved by the marketeers and has just delivered his latest major "work", The Recession Is Over. The message is very different from Roubinis assessment. Roubinis great sin in 2006 was not his math but his position, for to defy the boomers brought classification as a "doomer" and vilification. It was not until 2007 that people paid any heed to his views. By then the housing-credit boom that... (Sydney Morning Herald -- Business)
