One of the biggest alarmist arguments for passage of the banking
Really? What credit crisis? We've been getting bombarded with credit card solicitations. These came on the day the bailout passed. Perhaps I'm being cynical, but to me the bailout looks a lot like a greedy financial system simply pulling up to the pump and refilling their tanks with $700 billion of taxpayer money so they can once again race down the credit highway and continue doing business every bit as irresponsibly as usual -- until they create the next crisis, probably a credit card crisis, and they come back looking for more handouts to the tune of a few trillion more. People who know they are insured against the consequences of risky but profitable behavior tend to follow their self-interest and practice that behaior even more. That's called moral hazard.
One of my Flickr commenters, ibm4381, posted some interesting background on moral hazard. An excerpt:
The classic example comes from the invention of insurance in Victorian England. It had a very useful purpose, but also the perverse incentive of ship owners to overload their vessels. More money per voyage while they got away with it, and they got made whole by insurance if it sank. The only cure was government regulation on the loading of ships, championed by an MP named Plimsoll. A case where the 'government is never the solution' guys are simply and profoundly wrong.Has anything really changed? Do we ever learn anything from history? Now that the bailout legislation has passed, moral hazard continues to dominate the financial industry, and the rich keep getting richer. Thanks a lot, Congress!.