The Spectacle Blog

No Moral Hazard

By on 8.9.07 | 3:00PM

Philip, where should I start? I guess I will start by agreeing with you about moral hazard. If my goal were to "bail out the lenders," that would indeed be objectionable. But nowhere did I say that was my goal. My goal is to help the homeowners and potential home buyers -- the individuals, not the lender/profiteers -- AND to guard against a generalized panic that would harm not just the lenders, but the fairly innocent bystanders such as the builders and construction workers who they employ, and, from there, all the others down the line who would be affected. Also, note that I am not suggesting a bailout of the lenders -- the typical Democratic response, which is what Bush in the past two days has so rightly rejected -- but a VERY modest move by the Fed to stabilize the economy as a whole. That is NOT an example of the moral hazard problem you warn against.

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