Monday, August 25, 2014
Moral Hazard and the S&L Crisis
While we will consider moral hazard even in the first class session, we will take a deeper look at it during the second half of the course. Your textbook has a very nice example of the moral hazard entailed in making bank loans when the deposits are covered by Deposit Insurance provided by the Federal Government. The piece linked below, illustrates the practical reality of the situation.